LINDAL CEDAR HOMES INC /DE/, SC TO-I/A, EX-99.(A)(1), 2000-12-20

LINDAL CEDAR HOMES INC /DE/
SC TO-I/A, EX-99.(A)(1), 2000-12-20
PREFABRICATED WOOD BLDGS & COMPONENTS

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LINDAL CEDAR HOMES, INC. LOGO

OFFER TO PURCHASE FOR CASH
ANY AND ALL SHARES OF ITS COMMON STOCK
AT A PURCHASE PRICE OF $4.55 NET PER SHARE

THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME ON JANUARY 19, 2001 UNLESS THE OFFER IS EXTENDED.

Lindal Cedar Homes, Inc., a Delaware corporation (the "Company"), hereby
offers to purchase any and all of its shares of Common Stock $0.01 par value per
share (the "Shares"), at $4.55 per Share (the "Purchase Price"), net to the
seller in cash, without interest thereon, upon the terms and subject to the
conditions set forth in this Offer to Purchase and in the related Letter of
Transmittal (which, together with any amendments or supplements hereto or
thereto, collectively constitute the "Offer"). Although the Offer is being made
to all holders of Shares, the Lindal Family Members (as defined below) have
advised the Company that they do not intend to tender any Shares pursuant to the
Offer. See "The Tender Offer -- Terms of the Offer, Expiration Date." Robert W.
Lindal, Sir Walter Lindal, Martin J. Lindal and Douglas F. Lindal, all of whom
are officers or directors of the Company constitute the "Lindal Family Members"
and together own 48.2% of outstanding Common Stock. Bonnie G. McLennaghan, the
daughter of Sir Walter Lindal and the sister of the other Lindal Family Members,
has advised the Company that she intends to tender the 395,668 Shares that she
beneficially owns (approximately 8.8% of the outstanding common stock), other
than Shares subject to options having exercise prices higher than the Purchase
Price.

The Offer is not conditioned upon any minimum number of Shares being
tendered. The Offer is, however, subject to certain other conditions. All Shares
properly tendered and not properly withdrawn will be purchased at the Purchase
Price, upon the terms and subject to the conditions of the Offer.

Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, transfer taxes in connection with the tender of Shares pursuant of
the Offer. The Company will pay all fees and expenses of American Stock Transfer
and Trust Company, which is acting as Depositary (the "Depositary") and
MacKenzie Partners, Inc., which is acting as the Information Agent (the
"Information Agent"), incurred in connection with the Offer.

A SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS OF THE COMPANY (THE "SPECIAL
COMMITTEE") CONSISTING OF THREE DIRECTORS WHO ARE NOT LINDAL FAMILY MEMBERS OR
INVOLVED IN THE BUSINESS OF THE COMPANY, BY UNANIMOUS VOTE, HAS DETERMINED THAT
THE OFFER IS FAIR TO, AND IN THE BEST INTERESTS OF, THE PUBLIC STOCKHOLDERS, AND
RECOMMENDS THAT THE STOCKHOLDERS OTHER THAN THE LINDAL FAMILY MEMBERS ACCEPT THE
OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.

The Shares are traded on Nasdaq SmallCap Market ("Nasdaq") under the ticker
symbol LNDL. On December 13, 2000, the last day the Shares were traded on Nasdaq
before the announcement of the Offer, the last reported sales price of the
Shares on Nasdaq was $2.50 per Share.

THIS TRANSACTION HAS 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
FAIRNESS OR MERITS OF SUCH TRANSACTION OR THE ACCURACY OR ADEQUACY OF THE
INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------

The Information Agent for the Offer is:

MACKENZIE PARTNERS, INC.

December 20, 2000
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CONTENTS

<TABLE>
<CAPTION>
PAGE
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<S> <C>
SUMMARY TERM SHEET.......................................... 1
SPECIAL FACTORS............................................. 8
1. Background and Purpose of the Offer; Certain Effects
of the Offer; Plans of the Company After the Offer.... 8
2. Rights of Stockholders in the Event of the Second-Step
Transaction........................................... 14
3. Position of the Special Committee and Board; Fairness
of the Offer.......................................... 14
4. Opinion of FSVK....................................... 16
5. Interests of Certain Persons in the Offer and the
Second-Step Transaction............................... 21
6. Beneficial Ownership of Shares........................ 23
7. Fees and Expenses..................................... 24

THE TENDER OFFER............................................ 25
1. Terms of the Offer; Expiration Date................... 25
2. Acceptance for Payment and Payment for Shares......... 26
3. Procedures for Accepting the Offer and Tendering
Shares................................................ 27
4. Withdrawal Rights..................................... 30
5. Certain Federal Income Tax Consequences............... 31
6. Price Range of Shares; Dividends...................... 33
7. Certain Information Concerning the Company............ 33
8. Financing of the Offer and the Second-Step
Transaction........................................... 42
9. Dividends and Distributions........................... 43
10. Effect of the Offer on the Market for the Shares;
Nasdaq Listing and Exchange Act Registration.......... 43
11. Certain Conditions of the Offer....................... 44
12. Certain Legal Matters and Regulatory Approvals........ 46
13. Fees and Expenses..................................... 47
14. Miscellaneous......................................... 48

SCHEDULE I DIRECTORS AND EXECUTIVE OFFICERS OF THE
COMPANY................................................... I-1

SCHEDULE II SUMMARY OF STOCKHOLDER APPRAISAL RIGHTS AND TEST
OF SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW.... II-1

SCHEDULE III OPINION OF FIRST SECURITY VAN KASPER........... III-1
</TABLE>

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SUMMARY TERM SHEET

We are offering to purchase all the outstanding shares of our common stock
at a price, net to the seller in cash, of $4.55 per share. Through a question
and answer format, this Summary Term Sheet will explain to you, the common
stockholders of Lindal Cedar Homes, Inc., the important terms of the proposed
transaction. This explanation will assist you in deciding whether to tender your
shares to Lindal Cedar Homes, Inc. This Summary Term Sheet serves only as an
introduction, and we urge you to carefully read the remainder of this Offer to
Purchase and the accompanying Letter of Transmittal in order to fully educate
yourself on the details of the proposed tender offer. Cross-referenced text
refers to sections within this Offer to Purchase, unless otherwise noted.

Q: WHO IS OFFERING TO BUY MY SHARES OF STOCK?

A: Lindal Cedar Homes, Inc., a Delaware corporation, is offering to buy
back its own common stock in a self-tender offer. See "The Tender
Offer -- Certain Information Concerning the Company."

Q: WHAT SECURITIES AND AMOUNTS OF SECURITIES ARE SOUGHT IN THE OFFER?

A: We are making the offer to purchase all the outstanding shares of common
stock of Lindal Cedar Homes, Inc. Although the offer is being made to all
holders of common stock, the Lindal Family Members, who hold approximately 48%
of the outstanding common stock, have advised us that they do not intend to
tender any of their shares pursuant to the Offer. See "The Tender Offer -- Terms
of the Offer; Expiration Date."

Q: HOW MUCH IS LINDAL CEDAR HOMES, INC. OFFERING TO PAY AND WHAT IS THE
FORM OF PAYMENT?

A: We are offering to pay $4.55 per share in cash, without interest. See
"The Tender Offer -- Terms of the Offer; Expiration Date."

Q: WHAT IS THE PURPOSE OF THE OFFER?

A: The offer represents the first step in taking us private. After
completion of the offer, the Lindal Family Members intend to propose a
second-step transaction, either a merger, a reverse stock split or similar
transaction, in which all of the remaining public stockholders would receive
cash for their shares at the same price as is contemplated in the offer. A
second-step transaction may require approval by our stockholders, depending on
the nature of the second-step transaction. Because the Lindal Family Members
currently hold approximately 48% of our outstanding common stock and will hold a
greater percentage after the offer, they will be able to control the outcome of
any second-step transaction.

Q: DOES THE COMPANY HAVE THE FINANCIAL RESOURCES TO PAY FOR THE SHARES?

A: Yes. To the extent we do not have the cash to purchase the shares,
KeyBank will loan us the funds necessary to purchase the shares in the offer.
See "The Tender Offer -- Financing of the Offer and the Second-Step
Transaction."

Q: IS THE COMPANY'S FINANCIAL CONDITION RELEVANT TO MY DECISION ON WHETHER
TO TENDER IN THE OFFER?

A: Because tendering your shares in the offer will end your ownership
interest in Lindal Cedar Homes, Inc., including the chance to receive any
possible future dividends or other payments in respect of the common stock, our
financial condition may be relevant to your decision whether to tender your
shares in the offer. We have provided certain of our summary financial
information in "The Tender Offer -- Certain Information Concerning the Company."

Q: HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER IN THE OFFER?

A: You have until 12:00 Midnight, New York City time, on the expiration
date of January 19, 2001 to tender your shares. We will purchase properly
tendered and not withdrawn shares promptly following the

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expiration date if the conditions to our offer are then met. After making these
purchases, we may continue for a limited period of time to purchase shares
submitted to us. On the other hand, if the conditions to our offer are not met
on the expiration date, we may extend the offer. See "The Tender Offer -- Terms
of the Offer; Expiration Date."

Q: HOW WILL I BE NOTIFIED IF THE OFFER IS EXTENDED?

A: If the Offer is extended past January 19, 2001, we will make a public
announcement of the new expiration date. See "The Tender Offer -- Terms of the
Offer; Expiration Date."

Q: WHAT ARE THE MOST SIGNIFICANT CONDITIONS OF THE OFFER?

A: We are not obligated to purchase any shares which are validly tendered
if, among other things:

- a lawsuit or similar action is threatened or instituted against us
challenging the offer or, in our view, resulting or having the
potential to result in a material adverse effect on us,

- we believe acceptance for payment of the tendered shares would be
illegal,

- any person proposes a tender or exchange offer for any of our shares,
or

- we believe there are events which have or may have a material adverse
effect on us.

We reserve the right to waive any of the above conditions. Other conditions
are set forth in See "The Tender Offer -- Certain Conditions of the Offer."

Q: CAN LINDAL CEDAR HOMES, INC. AMEND THE TERMS OF THE TENDER OFFER?

A: We reserve the right in our sole discretion to amend the tender offer in
any respect. See "The Tender Offer -- Terms of the Offer; Expiration Date."

Q: HOW DO I FIND OUT IF LINDAL CEDAR HOMES, INC. AMENDS THE TERMS OF THE
TENDER OFFER?

A: We will announce any amendment to the tender offer by making a public
announcement of the amendment. We will announce any extension no later than 9:00
a.m., New York City time, on the next business day after the last previously
scheduled or announced expiration date. In the event of a termination or
postponement of the tender offer, we will also give written or oral notice to
the Depositary.

Q: HOW DO I TENDER MY SHARES?

A: If you hold your shares "of record," you can tender your shares by
completing and sending the enclosed Letter of Transmittal along with any other
documents required by the Letter of Transmittal, and your stock certificates to
the Depositary, American Stock Transfer and Trust Company, at the address listed
on the enclosed Letter of Transmittal. See "The Tender Offer -- Procedures For
Accepting the Offer and Tendering Shares." If your broker holds your shares in
"street name" for you, you must direct your broker to tender. Please contact
your broker.

Q: UNTIL WHAT TIME CAN I WITHDRAW PREVIOUSLY TENDERED SHARES?

A: You can withdraw tendered shares at any time prior to the expiration
date of January 19, 2001. If the expiration date is extended, you can withdraw
tendered shares at any time prior to the new expiration date. See "The Tender
Offer -- Withdrawal Rights."

Q: HOW DO I WITHDRAW PREVIOUSLY TENDERED SHARES?

A: You can withdraw shares that you have already tendered by sending a
timely notice of withdrawal to the Depositary at the address listed on the
enclosed Letter of Transmittal. See "The Tender Offer -- Withdrawal Rights."

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Q: WHAT DOES THE BOARD OF DIRECTORS AND THE SPECIAL COMMITTEE THINK OF THE
OFFER?

A: The Board of Directors unanimously approved the offer. Because the Board
consists of eight directors, four of whom are Lindal Family Members and one of
whom is a Lindal dealer, the Board formed a Special Committee, consisting of the
three remaining independent directors and relied on the unanimous recommendation
of the Special Committee in approving the offer.

The members of the Special Committee unanimously concluded that the offer
is advisable and that the terms of the offer are fair to, and in the best
interests of, our company and its shareholders. In coming to its conclusion, the
Special Committee took into account, the costs of remaining a public company,
the fact that we were not able to realize the benefits associated with being a
public company, the difficulty in obtaining viable proposals for the purchase of
our company, the interest and stated intent of the Lindal Family Members in
taking the company private, based on an offer at a price significantly higher
than the recent market price of our common stock and second-step transaction at
the same price. See "SPECIAL FACTORS -- Position of the Company's Board;
Fairness of the Offer" and "SPECIAL FACTORS -- Background and Purpose of the
Offer; Certain Effects of the Offer; Plans of the Company after the Offer."

Although the Board and the Lindal Family Members also believe that the
offer is fair to the public stockholders, they did not make a recommendation to
the stockholders because of their conflict of interest.

Q: DID THE SPECIAL COMMITTEE RECEIVE ANY OPINIONS, APPRAISALS, OR REPORTS
REGARDING THE FAIRNESS OF THE OFFER?

A: Yes. The Special Committee received a written opinion, dated December
13, 2000, from First Security Van Kasper, Inc. to the effect that, as of that
date and based on and subject to the assumptions and limitations contained in
the opinion, the price per share of $4.55 to be received in the offer was fair,
from a financial point of view, to the holders of shares of our company's common
stock.

Q: WILL LINDAL CEDAR HOMES, INC. CONTINUE AS A PUBLIC COMPANY?

A: No. The offer is the first step in a two-step going-private transaction.
The Lindal Family Members have advised us that, if the offer is consummated,
they intend to pursue a second-step transaction in which the remaining public
shareholders would receive cash for their shares and the Lindal Family Members
would own 100% of the company. As a result, we will no longer be publicly owned.

If, for some reason, the second-step transaction does not occur, it is
nevertheless likely that the shares will no longer be listed on Nasdaq and that
the company will no longer file reports with the Securities and Exchange
Commission. Under these circumstances, we would become a private company with
all remaining stockholders other than the Lindal Family Members holding a
minority equity position. See "SPECIAL FACTORS -- Background and Purpose of the
Offer; Certain Effects of the Offer; Plans of the Company after the Offer" and
"SPECIAL FACTORS -- Rights of Stockholders in the Event of the Second-Step
Transaction."

Q: IF I DECIDE NOT TO TENDER, HOW WILL THE OFFER AFFECT MY SHARES?

A: Stockholders not tendering in the offer will receive in the second-step
transaction, if it occurs, the same amount of cash per share which they would
have received had they tendered their shares in the offer. Therefore, if the
second-step transaction takes place, the difference to you between tendering
your shares and not tendering your shares is that you will be paid earlier if
you tender your shares in the offer. If the offer is consummated, and the number
of shares owned by the Lindal Family Members, is greater than 90% of the then
outstanding shares (excluding those shares purchased by the Company in the Offer
and either held as treasury shares or cancelled), then a second-step transaction
could immediately commence between Lindal Cedar Homes, Inc. and an entity to be
formed, which will be wholly owned by the Lindal Family Members, without
soliciting approval of the stockholders. See "SPECIAL FACTORS -- Rights of
Stockholders in the Event of the Second-Step Transaction."

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Q: WHAT IS THE MARKET VALUE OF MY SHARES AS OF A RECENT DATE?

A: On December 13, 2000, the last trading day before the announcement of
the tender offer for $4.55 per share, the closing market price of our common
stock on The Nasdaq SmallCap Market was $2.50 per share. We advise you to obtain
a recent quotation for our common stock in deciding whether to tender your
shares. See "TENDER OFFER -- Price Range of Shares; Dividends."

Q: IF I OBJECT TO THE PRICE BEING OFFERED, WILL I HAVE APPRAISAL RIGHTS?

A: Yes, if the second-step transaction is a merger. You may elect not to
tender your shares, dissent from a merger and have the fair value of your shares
paid to you in cash provided that you comply with the applicable provisions of
the Delaware General Corporation Law. See "SPECIAL FACTORS -- Rights of
Stockholders in the Event of the Second-Step Transaction."

Q: WHO CAN I TALK TO IF I HAVE QUESTIONS ABOUT THE TENDER OFFER?

A: If you have more questions about the tender offer, you should contact:
MacKenzie Partners, the Information Agent for the tender offer at (800)
322-2885.

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IMPORTANT

Any stockholder desiring to tender all or any portion of such stockholder's
shares should either (1) complete and sign the Letter of Transmittal (or a
facsimile thereof) in accordance with the instructions in the Letter of
Transmittal and mail or deliver it and any other required documents to the
Depositary and either deliver the certificate(s) evidencing the tendered shares
to the Depositary along with the Letter of Transmittal or deliver such shares
pursuant to the procedure for book-entry transfer set forth in "The Tender
Offer -- Procedures for Accepting the Offer and Tendering Shares" or (2) request
such stockholder's broker, dealer, commercial bank, trust company or other
nominee to effect the transaction for such stockholder. Any stockholder whose
shares are registered in the name of a broker, dealer, commercial bank, trust
company or other nominee must contact such broker, dealer, commercial bank,
trust company or other nominee if such stockholder desires to tender such
shares.

Any stockholder who desires to tender shares and whose certificates
evidencing such shares are not immediately available, or who cannot comply with
the procedure for book-entry transfer on a timely basis, may tender such shares
by following the procedure for Guaranteed Delivery set forth in "The Tender
Offer -- Procedures for Accepting the Offer and Tender Shares."

TO PROPERLY TENDER SHARES, STOCKHOLDERS MUST VALIDLY COMPLETE THE LETTER OF
TRANSMITTAL.

Questions or requests for assistance may be directed to the Information
Agent at its address and telephone number set forth on the back cover of this
Offer to Purchase. Additional copies of this Offer to Purchase, the Letter of
Transmittal and the Notice of Guaranteed Delivery may also be obtained from the
Information Agent or from brokers, dealers, commercial banks or trust companies.

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED IN THIS
OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL. IF MADE OR GIVEN, SUCH
RECOMMENDATION AND SUCH INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE COMPANY.

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INTRODUCTION

All Shares properly tendered and not properly withdrawn will be purchased
at the Purchase Price, upon the terms and subject to the conditions of the
Offer. All Shares acquired in the Offer will be acquired at the Purchase Price.
See "The Tender Offer -- Terms of the Offer; Expiration Date."

THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE "THE
TENDER OFFER -- CERTAIN CONDITIONS OF THE OFFER," WHICH SETS FORTH IN FULL THE
CONDITIONS OF THE OFFER.

As of October 31, 2000, there were (a) 4,136,622 Shares issued and (b)
476,668 Shares reserved for future issuance to employees pursuant to outstanding
employee stock options. Prior to the announcement of the Offer, there were
approximately 335 holders of record of the issued and outstanding Shares.
Pursuant to the Offer, the Company seeks to acquire all Shares not owned by the
Lindal Family Members. The Lindal Family Members, who beneficially own in the
aggregate 1,994,591 Shares (excluding options), or approximately 48.2% of the
issued and outstanding Shares, have advised the Company that they do not intend
to tender any Shares owned by them pursuant to the Offer. Because the Lindal
Family Members will benefit from the Offer and because they hold four of eight
positions on the Board of Directors (the "Board"), the Board formed a special
committee (the "Special Committee") consisting of the three directors who are
not Lindal Family Members or involved in the business of the Company, to
consider the sale of the Company to third parties and possible going-private
transactions proposed by the Lindal Family Members.

The Company believes that the public trading market for the Shares has been
and will continue to be characterized by low prices and low trading volume. For
these reasons, and because of the small stockholder base and other factors
described in this Offer to Purchase, the Company currently intends, to the
extent possible, to seek to delist its common stock from trading on Nasdaq
SmallCap Market ("Nasdaq") and terminate the registration of the Shares under
the Securities Exchange Act of 1934, as amended (the "Exchange Act") following
consummation of the Offer and the Second-Step Transaction (as defined below). In
addition, although the Special Committee, through FSVK, made an extensive search
for potential buyers of the Company, it was unsuccessful in obtaining offers at
prices acceptable to the Lindal Family Members. The purpose of the Offer is
therefore (a) to provide the holders of the Shares not owned by the Lindal
Family Members with liquidity for their Shares in light of the Company's
intentions at a price which the Special Committee has determined to be fair, and
(b) to enable the Lindal Family Members to retain a larger proportionate
interest in the Company and, if a second-step transaction (as defined below)
occurs, the entire equity interest in the Company. See "The Tender
Offer -- Effect of the Offer on the Market for Shares; Nasdaq listing and
Exchange Act Registration."

Pursuant to the Offer, the Company seeks to acquire all Shares that are not
held by the Lindal Family Members. The Lindal Family Members have advised the
Company that, if less than all such Shares are tendered pursuant to the Offer,
they would seek a transaction in which the Company would merge, consolidate or
otherwise combine with an entity to be formed and wholly owned by the Lindal
Family Members, or effect

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some other form of corporate transaction such that the Shares not owned by the
Lindal Family Members would be converted into only the right to receive the
Offer Price in cash (the merger or such other form of corporate transaction, the
"Second-Step Transaction"). If necessary, the Company will seek stockholder
approval of the Second-Step Transaction in accordance with applicable laws. The
Lindal Family Members, who currently own 48.2% of the outstanding Shares, intend
to vote all of their Shares in favor of the Second-Step Transaction if a
stockholder vote is required. Following completion of the Second-Step
Transaction, the Lindal Family Members would own the entire equity interest in
the Company.

As part of the Offer, the Company accelerated the vesting of outstanding
stock options so that all such options are fully exercisable and will provide
optionees with the opportunity to surrender such options in exchange for payment
from the Company (subject to any applicable withholding taxes) in cash equal to
the product of (x) the total number of Shares subject to any such stock option
and (y) the excess of the Purchase Price over the exercise price per Share
subject to such stock option, without any interest thereon. None of the Lindal
Family Members will be exercising stock options owned by them in connection with
the Offer.

In determining whether to approve the Offer, the Special Committee
considered a number of factors, several of which are listed below (see "Special
Factors -- Position of the Company's Board and Special Committee; Fairness of
the Offer"):

- The Company currently has a small stockholder base for a public company
as indicated by its stockholders of record, a number near the 300 minimum
that requires continued filing of periodic financial reports and other
information pursuant to the Exchange Act.

- The market for the Company's common stock provides limited liquidity for
stockholders to liquidate or add to their investments. Additionally,
because of the limited liquidity available, the Company has been unable
to utilize effectively the public equity capital markets as a source of
financing.

- There are considerable costs associated with remaining a public company.
In addition to the time expended by the Company's management, the legal,
accounting and other expenses involved in the preparation, filing and
dissemination of annual and other periodic reports are considerable.

- The reporting requirements of public companies can lead to disclosure of
sensitive information, resulting in a competitive disadvantage in the
marketplace.

- The inability of the Company to obtain viable proposals for the purchase
of the Company at prices acceptable to the Lindal Family Members despite
an extensive search conducted by FSVK at the request of the Special
Committee.

- The Lindal Family Members' interest and stated intent to take the company
private, based on the Offer, in which the Purchase Price is significantly
higher than the recent market price of the Shares, and the Second-Step
Transaction at the same price.

In determining whether the Offer Price to be paid to the Company's public
stockholders is fair, the Special Committee relied on the written opinion dated
December 13, 2000 rendered by FSVK, to the effect that, subject to the
limitations contained therein, the cash consideration of $4.55 net per share to
be received by the public stockholders in the Offer is fair to the public
stockholders from a financial point of view. See "Special Factors-Opinion of
Financial Adviser" for further information concerning the opinion of the
Financial Adviser.

THE SPECIAL COMMITTEE HAS DETERMINED THAT THE OFFER IS FAIR TO, AND IN THE
BEST INTERESTS OF, THE PUBLIC STOCKHOLDERS, AND RECOMMENDS THAT THE STOCKHOLDERS
OTHER THAN THE LINDAL FAMILY MEMBERS ACCEPT THE OFFER AND TENDER THEIR SHARES
PURSUANT TO THE OFFER.

The Company has filed with the Securities and Exchange Commission (the
"Commission") pursuant to the Exchange Act an Issuer Tender Offer Statement on
Schedule TO ("Schedule TO"). The term, "Expiration Date," means 12:00 midnight,
New York City Time, on January 19, 2001, unless and until the Company, in its
sole discretion, shall have extended the period during which the Offer is open,
in which event

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the term "Expiration Date" shall mean the latest time and date at which the
Offer, as so extended by the Company, shall expire. See "The Tender Offer -- 1.
Terms of the Offer; Expiration Date."

The Purchase Price will be paid net to the tendering stockholder in cash,
without interest thereon, for all Shares purchased. Tendering stockholders who
hold Shares in their own name and who tender their Shares directly to the
Depositary will not be obligated to pay brokerage commissions, solicitation fees
or, subject to Instruction 6 of the Letter of Transmittal, stock transfer taxes
on the purchase of Shares by the Company pursuant to the Offer. Stockholders
holding Shares through brokers or banks are urged to consult the brokers or
banks to determine whether transaction costs are applicable if stockholders
tender Shares through the brokers or banks and not directly to the Depositary.
HOWEVER, ANY TENDERING STOCKHOLDER OR OTHER PAYEE WHO FAILS TO COMPLETE, SIGN
AND RETURN TO THE DEPOSITARY THE SUBSTITUTE FORM W-9 THAT IS INCLUDED AS PART OF
THE LETTER OF TRANSMITTAL MAY BE SUBJECT TO REQUIRED UNITED STATES FEDERAL
INCOME TAX BACK-UP WITHHOLDING OF 31% OF THE GROSS PROCEEDS PAYABLE TO THE
TENDERING STOCKHOLDER OR OTHER PAYEE PURSUANT TO THE OFFER. See "The Tender
Offer -- Certain Federal Income Tax Consequences."

On December 13, 2000, the last day the Shares were traded before the
announcement of the Offer, the last reported sales price of the Shares on Nasdaq
was $2.50 per Share. See "The Tender Offer -- Price Range of Shares; Dividends."

THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION THAT SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.

SPECIAL FACTORS

1. BACKGROUND AND PURPOSE OF THE OFFER; CERTAIN EFFECTS OF THE OFFER; PLANS OF
THE COMPANY AFTER THE OFFER

Background of the Offer. Although the Company has been public for more than
25 years, it has been disappointed for some time by the performance of its
common stock in the public market and, from time to time, has considered various
approaches to enhancing stockholder value and liquidity. These approaches have
included, among other things, stock splits, stock dividends, cash dividends,
repurchases of outstanding shares and various combinations of the foregoing. In
each instance, these alternatives (except for annual 10% stock dividends
declared in 1987 through 1991 and in 1993, and a 5:4 stock split declared in
April 1992) have been rejected on the basis of the Board's conclusion that,
given the low price of the Company's common stock, the small float for its
shares, the limited number of public shareholders, the limited or absent
research coverage, the spotty participation by institutions and the likely
expense to be incurred, none of these approaches would be likely to have the
desired effect or would justify the expense of implementation. In addition,
serious consideration of these alternatives had been deferred in recent years as
a result of the Company's operating losses in 1997 and 1998, which arose from
declining sales and historically high prices for cedar and other lumber. During
this period, the market price of the Company's common stock further
deteriorated, falling from approximately $4.00 per share in 1996 to a low of
approximately $1.00 per share in late 1999.

Although the Company returned to profitability in 1999 and continues to be
profitable in 2000, its stock price has ranged from $1.50 to $3.28 per share and
has traded at volumes of approximately 4,500 shares per day for the last twelve
months. For many years, but particularly in this recent environment,
shareholders have urged the Company to consider ways of enhancing shareholder
value and improving liquidity. In late 1998, Heartland Advisors, Inc., the
Company's largest stockholder other than the Lindal Family Members, contacted
the Company and urged it to consider such alternatives as a share repurchase
program, a business combination or a going-private transaction. The Board
considered a stock repurchase program, but rejected it as likely to further
reduce liquidity and require compliance with the "going-private" rules under the
Federal securities laws.

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<PAGE> 11

In early February 1999, as the Company's operations improved, the Board of
Directors formed a Strategic Alternatives Committee, consisting of three
directors who were not Lindal Family Members, to consider more actively other
alternatives for improving shareholder value and liquidity. During February
1999, the Company contacted more than ten investment banking firms regarding an
engagement to advise the Company on strategic alternatives available to it.
During this period, the Lindal Family Members also began actively to consider
the range of strategic alternatives available to the Company, including the
possibility of selling the Company or conducting a going-private transaction. On
March 3, 1999, the Strategic Alternatives Committee held additional meetings
with three of the investment banking firms and, at the conclusion of these
meetings, favored engaging FSVK. No formal action was taken at this time,
however. The Lindal Family Members believed that such action was premature in
view of the limited duration of the Company's improved results and the lack of
market recognition for this improvement.

In October 1999, the Board of Directors resumed active consideration of
strategic alternatives and the engagement of an investment banking firm as a
financial adviser. The Lindal Family Members indicated that they would be
willing to consider, depending on price and other factors, either a sale of the
Company or a going-private transaction. During November and December 1999, the
members of the Strategic Alternatives Committee and management periodically
discussed various alternatives and renewed its contacts with FSVK.

In January 2000, the Company met with FSVK regarding strategic alternatives
and the terms of a possible engagement letter. These discussions continued into
February 2000. On February 17, 2000, the Board of Directors met and formally
established, in lieu of the Strategic Alternatives Committee, a Special
Committee, consisting of Charles T. Collins, William M. Weisfield and Charles R.
Widman, directors who were not Lindal Family Members or involved in the
Company's business. The Board also discussed the purpose of the Special
Committee, which was to seek a sale of the Company or, in the alternative, a
going-private transaction with the Lindal Family Members as the remaining
stockholders. The Board, based in part on the recommendation of the Special
Committee and its predecessor, the Strategic Alternatives Committee, approved
the engagement of FSVK as financial adviser to the Special Committee to assist
it in seeking potential buyers for the Company, to provide financial advice in
this process and, with respect to any final transaction, to render a fairness
opinion. The Board also reviewed and approved the authority and scope of the
Special Committee.

On February 23, 2000, the Company became aware of a class action lawsuit
against it brought by certain dealers alleging wrongful termination of dealer
agreements. During the following month, the Company, the Special Committee and
FSVK assessed the impact of this action on the process of seeking a potential
buyer. The Lindal Family Members expressed their view that the action would not
change their objective of pursuing a going-private transaction if a satisfactory
proposal for sale of the Company was not obtained.

On March 30, 2000, the Company and FSVK entered into an engagement letter
dated as of February 22, 2000, which was later amended on June 13, 2000.

During the period from March through June 2000, the Company and FSVK
prepared business and financial information for use in seeking potential buyers
for the Company. At meetings of the Special Committee held on June 21 and 26,
2000, the Special Committee reviewed the memorandum of business and financial
information prepared for use in soliciting interested buyers. On July 6, 2000,
FSVK began contacting parties that it and the Company believed could have an
interest in acquiring the Company. FSVK continued to solicit interest through
July, August and September 2000, contacting approximately 12 strategic buyers
and 22 financial buyers. FSVK periodically advised the members of the Special
Committee of progress with respect to these solicitations.

At a meeting on August 1, 2000, the Special Committee discussed the status
of FSVK's search for potential buyers and considered ways of accelerating the
process.

At a meeting of the Special Committee on August 17, 2000, FSVK reported
that the solicitation of interest had not resulted in any offers for the
Company. The Special Committee instructed FSVK to continue to pursue any
promising leads and also requested that, by September 17, 2000, the Lindal
Family Members submit a price at which they would be willing to conclude a
going-private transaction.

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<PAGE> 12

On August 30, 2000, FSVK and Robert Lindal met with a potential financial
buyer who had expressed interest in discussing the acquisition of the Company.
The meeting was informational and no valuation or price was discussed. The
Company furnished additional information and responded to questions in several
telephone conferences following this meeting.

On September 11, 2000, the Lindal Family Members proposed a price of $4.05
per share for all public shares in a going-private transaction. On September 14,
2000, the Special Committee met to consider the proposal. Robert Lindal attended
a portion of the meeting to discuss the proposal and answer questions. The
Special Committee and Mr. Lindal also discussed such matters as the structure
and financing of a possible transaction. In addition, the Committee reviewed a
letter from Robert McLennaghan, the husband of Bonnie McLennaghan, expressing
the view that the proposed price of $4.05 was inadequate. In response to
inquiries from the financial buyer who had earlier met with the Company, the
Special Committee asked Mr. Lindal to clarify his position in relation to
potential offers from parties unrelated to the Lindal Family Members. Mr. Lindal
indicated that he was willing, depending on price and other factors, to continue
as an equity holder in and an executive officer of the Company following a
transaction in which the shares of the public shareholders and the other Lindal
Family Members were acquired by a third party. The Special Committee requested
that the Lindal Family Members advise the Special Committee more specifically
regarding the structure and financing of a possible going-private transaction
and that Mr. Lindal confirm to FSVK his position relating to participation with
third parties seeking to acquire the Company.

On September 27, 2000, the Lindal Family Members advised the Special
Committee that its preferred structure was a self tender for all the outstanding
common stock not owned by the Lindal Family Members. They also presented a
commitment letter from KeyBank. With the financing from the Company's existing
cash and, if necessary, KeyBank, the Lindal Family Members believed the
Company's cash resources would be adequate to complete the going-private
transaction at the proposed price.

On September 21, 2000, FSVK and Robert Lindal met with a representative of
another prospective financial buyer and provided additional business and
financial information regarding the Company. On October 13, 2000, the
prospective financial buyer telephoned Mr. Lindal to discuss various synergies
between the two businesses and the attitudes of Mr. Lindal and other Lindal
Family Members regarding a continuing equity participation if the Company were
acquired. In a telephone conference on October 16, 2000, Mr. Lindal reported
that the other Lindal Family Members would prefer to act as a group in remaining
as shareholders or selling their shares. Mr. Lindal disclosed that the Lindal
Family Members had made a going-private proposal at $4.05 per share. The
prospective buyer and Mr. Lindal discussed whether the Lindal Family Members
would accept a price of $4.50 per share. Mr. Lindal indicated, on the basis of
prior discussions, that although the Lindal Family Members each had their own
view as to the price at which they would consider a sale transaction, the
consensus of the Lindal Family Members was that any discussion regarding a sale
transaction would have to be at or above $5.00 per share. The discussion
concluded without resolution. On October 20, 2000, the prospective buyer called
Mr. Lindal to indicate that a price of $5.00 per share or higher was not
acceptable.

On November 7, 2000, FSVK received a written indication of interest from
the prospective buyer that had met with the Company in August at a price of
ranging from $4.20 to $4.75 per share, subject to due diligence and an
opportunity to meet with management and selected dealers. In addition, on
November 7, 2000, the prospective buyer that had discussed possible transactions
in October submitted a written indication of interest at $4.50 per share,
subject to due diligence. On November 8, 2000, the Lindal Family Members revised
their proposal, increasing their proposed price to $4.50 per share and providing
that the other interested parties complete their remaining due diligence within
a two week period and that they be advised of the revised offer and that the
consensus of the Lindal Family Members was that the sale of their shares would
require a price of $5.00 or above.

On November 9, 2000, the Special Committee met to consider the Lindal
Family Members' revised proposal and the two indications of interest. The
committee decided to request that the Lindal Family Members' proposal be further
increased to $4.60 while the other proposals were evaluated. On November 14,
2000, the Special Committee made the request to the Lindal Family Members.

10
<PAGE> 13

The Special Committee met on November 16, 2000 to discuss further the
Lindal Family Members' proposal and the two indications of interest. During the
meeting, the Special Committee discussed with the Lindal Family Members possible
revisions of their proposal. At the conclusion of the meeting, the Special
Committee tentatively determined to proceed with the proposal of the Lindal
Family Members on the following basis, which was contained in a letter dated
November 17, 2000 from the Lindal Family Members: (i) the proposed price of a
self tender would be $4.55 per share; (ii) there would be a $100, 000 break-up
fee payable to the Lindal Family Members in the event another offer is accepted,
(iii) the transaction would be subject to a fairness opinion provided by FSVK,
(iv) the offer would be for any and all shares, without a minimum, and
outstanding options without regard to vesting and would not be subject to
financing, and (v) the Special Committee would not approach competitors and
would decline to pursue the indications of interest from the other parties.

During the remainder of November and early December, 2000, the Company and
the Lindal Family Members continued preparation of the offering materials and
other steps necessary for the self tender, including working with KeyBank to
complete the financing described elsewhere in this Offer to Purchase.

On December 8, 2000, the Special Committee met again to consider the status
of the proposal from the Lindal Family Members. Present at the meeting, in
addition to all of the members of the Special Committee, were representatives
from FSVK and a representative from Perkins Coie LLP, the Company's legal
counsel. The Special Committee received the most recent draft of the Offer to
Purchase. In addition, the Special Committee was advised that several matters
remained to be completed before the self tender could begin and, accordingly, a
final determination with respect to the transaction was premature. With this in
mind, the Special Committee scheduled a subsequent meeting for December 12, 2000
and proceeded with a detailed review of the proposal as of that date.

A representative of FSVK reviewed its financial analysis of the proposed
going-private transaction as reflected in the November 17, 2000 letter from the
Lindal Family Members. In the course of his presentation, he reviewed the
Company's historical operating results and management's projected operating
results, the historical trading performance of the Shares, comparisons with
comparable public companies and with comparable transactions, discounted free
cash flow analyses and liquidation values based on recent appraisals and
analyses made by the Company regarding the effects of liquidation on asset
values. The representative of FSVK also reviewed its experience of seeking
offers to purchase the Company from strategic and financial buyers and the
limited response to that process over a period of more than three months. The
members of the Special Committee questioned FSVK regarding its analysis and the
valuation methods used by FSVK in considering the price proposed by the Lindal
Family Members in the proposed going-private transaction. The Special Committee
recalled that the Purchase Price had resulted from a process in which a price
had been initially proposed by the Lindal Family Members at the request of the
Special Committee and had been increased through subsequent negotiations with
the Committee. At the conclusion of the presentation, FSVK delivered its opinion
that the proposed cash Purchase Price of $4.55 per share was fair, as of such
date, to the stockholders of the Company (other than the Lindal Family Members)
from a financial point of view.

The Special Committee then reviewed the overall reasons for proceeding with
the self-tender. A representative of Perkins Coie reviewed various legal issues
relating the proposed transaction, including the reasons for establishing the
Special Committee and the legal requirement relating to such approval. The
Special Committee members reviewed again and summarized the factors bearing on a
determination to proceed with the transaction and acknowledged that a final
determination was being deferred to a later meeting. A meeting of the full Board
of Directors was convened and the Special Committee reported on the status of
its deliberations.

On December 12, 2000, the Special Committee held a meeting by conference
telephone. The Special Committee reviewed the status of the Company's financing
with KeyBank, which was expected to be executed the following day. The Special
Committee deferred its decision on the Offer to the following day.

On December 13, 2000, the Special Committee held a meeting by conference
telephone. Representatives of FSVK and Perkins Coie were again present. The
Special Committee received an update on the status of the self-tender
transaction and discussed any remaining issues. At the Special Committee's
request, FSVK

11
<PAGE> 14

delivered its updated opinion as to the fairness of the Purchase Price to the
stockholders (other than the Lindal Family Members) from a financial point of
view. After further discussion, the Special Committee, by unanimous vote of all
members, based in part on the advice provided by FSVK, recommended to the Board
of Directors that the Company initiate a self-tender for the Shares at a price
of $4.55 per share. The Board of Directors, at a meeting convened immediately
after the Special Committee meeting, approved the self-tender. On December 14,
2000, the Company issued a press release regarding the proposed going-private
transaction and the Offer.

No limitations were imposed by the Board of Directors, the Special
Committee or management of the Company on FSVK with respect to the investigation
made, or the procedures followed in rendering its advice with respect to a
possible going-private transaction or the opinion as to the fairness of the
consideration, from a financial point of view provided to the Company's
stockholders.

During the period between the engagement of FSVK and the presentation of
its final report to the Board of Directors on December 13, 2000, the Company
provided extensive information to representatives of FSVK regarding the Company
and its prospects including, without limitation, the Company's historical
financial results, projected financial results, customers, suppliers,
competitors, expansion plans and sales and marketing plans and appraisals of
certain real estate. In addition, representatives of FSVK, met with members of
the Company's senior management to discuss the projections and underlying
assumptions thereto provided to, and relied upon by, FSVK in preparing its
analyses.

Purpose of the Offer. The purpose of the Offer and the Second-Step
Transaction is (i) to provide the public stockholders with liquidity and a price
for their Shares that has not been available in the market for some time and
(ii) to enable the Lindal Family Members to succeed to the entire equity
interest in the Company.

The Company believes that the public trading market for the Shares has been
and will continue to be characterized by low prices and low trading volumes.
Since early 1998 the Company's stock has only briefly traded above $3.00 per
share and has most frequently traded between $2.00 and $2.50 per share. During
the last year, average daily trading volume has been approximately 4,500 shares.
As a result, there is a limited market for the Shares and low trading volumes
make it difficult for stockholders to sell large blocks of Shares. Low prices
mean stockholders who wish to sell a small number of Shares may receive only a
nominal return after payment of commissions. The Company also has been unable to
utilize the Shares effectively for acquisitions or financing because of the low
market price and low trading volume and so has been unable to realize one of the
principal benefits of public ownership. The Offer provides the stockholders
other than the Lindal Family Members with an opportunity to sell their Shares at
a price higher than those recently available in the public market and without
the liquidity limitations characterized by that market.

The Lindal Family Members, who own approximately 48% of outstanding shares,
have advised the Company that they do not intend to tender any of their Shares
in the Offer. The Offer will therefore enable the Lindal Family Members to
increase their proportionate ownership to as high a percentage as possible as a
first step in acquiring the entire equity interest in the Company. All Shares
purchased in the Offer will be held in the treasury of the Company until the
completion of the Second Step Transaction, if necessary, at which time the
Shares will be retired.

If less than all of the Shares owned by the public stockholders are
tendered pursuant to the Offer, the Lindal Family Members intend to implement
the Second-Step Transaction, in which the Shares of such remaining public
stockholders would be converted into the right to receive the Purchase Price and
the Lindal Family Members would thereafter own the entire equity interest in the
Company.

If less than all of the Shares owned by the public stockholders are
tendered pursuant to the Offer, and for any reason the Second-Step Transaction
does not occur, the Company would have even fewer stockholders and a more
limited trading market. Under these circumstances, given the continuing costs of
public reporting and compliance, the Company would delist its stock from Nasdaq
and seek to terminate its registration under the Exchange Act if it had less
than 300 holders of record. Following these steps, the Company would become

12
<PAGE> 15

a private company and there would be no public market for the Company's stock.
See "The Tender Offer -- Effect of the Offer on the Market for the Shares;
Nasdaq Listing and Exchange Act Registration."

The Company believes that consummation of the Offer and the Second-Step
Transaction, if it occurs, will result in substantially greater flexibility for
the Company in the utilization of assets and in the planning of its future. If
the Offer and/or the Second-Step Transaction are completed, management will be
able to make investments in the Company's business without considering whether
other stockholders would approve of such decisions. Such flexibility is believed
to be especially appropriate in view of the belief of management that the risks
of making such investments may not be appropriate for the Company as a
publicly-held entity.

Certain Effects of the Offer; Plans of the Company After the Offer.
Consummation of the Offer and, if completed, the Second-Step Transaction will
permit the Lindal Family Members, should they choose to do so, to receive the
benefits that result from ownership of the entire equity interest in the
Company. Such benefits include management and investment discretion with regard
to the future conduct of the business of the Company, the benefits of any
profits generated by operations and any increase in the Company's value.
Similarly, the Lindal Family Members will also bear the risk of any decrease in
the value of the Company.

Consummation of the Offer and, if completed, the Second-Step Transaction
will also allow the Lindal Family Members to recapitalize the Company by
increasing its debt to equity ratio, thereby leveraging their equity investment
to a degree that might not be appropriate for the Company as a public company.
Such high leveraging entails high risk to equity investors. Furthermore, high
leveraging and associated high debt service costs may have an adverse effect on
earnings and the value of the Company.

The Second-Step Transaction could be implemented through a merger of the
Company with a corporation to be formed and wholly owned by the Lindal Family
Members. Under the Delaware General Corporation Law ("DGCL") and the Company's
certificate of incorporation the approval of the Board and the affirmative vote
of a majority of the outstanding Shares are required to approve a merger at a
meeting of the stockholders. The Lindal Family Members, who currently own
approximately 48.2% of the outstanding Shares and would own a greater percentage
after completion of the Offer, intend to vote all of their Shares in favor of
the merger if it is proposed and if a stockholder vote is required. Accordingly,
the Lindal Family Members expect to have sufficient voting power to cause the
approval and adoption of a merger immediately after the Offer, without the
affirmative vote of any other stockholders of the Company. It is contemplated
that the consideration payable to the public stockholders in any Second-Step
Transaction will be cash in an amount equal to the Purchase Price. Under the
DGCL, an entity that owns 90% or more of the outstanding shares of another
entity may effect a merger with such other entity without submitting the merger
to a vote of stockholders of the other entity (a "short-form merger").
Accordingly, if the Lindal Family Members own 90% or more of the Shares that
remain outstanding after completion of the Offer, a merger may be effected as a
short-form merger, without a vote of the Company's stockholders. If, however,
the percentage of ownership of the Lindal Family Members after completion of the
Offer is less than 90% of the Shares then outstanding, a vote of the Company's
stockholders will be required under the applicable laws, and a longer period of
time may be required to effect a merger. See "Special Factors -- Rights of
Stockholders in the Event of the Second-Step Transaction."

Following the Offer, the Shares will no longer be listed for trading on the
Nasdaq, and, if there are less than 300 record stockholders of the Company, the
registration of the Shares under the Exchange Act will be terminated. Following
the completion of the Offer, the Company will become a private company and the
Lindal Family Members will succeed to a more dominant equity interest in the
Company. In addition, the Lindal Family Members intend to acquire any remaining
equity interest in the Company through the Second-Step Transaction. Following
the Offer and the Second-Step Transaction, there will be no publicly traded
equity securities of the Company outstanding and the Company will no longer file
periodic reports with the Commission. After the Second-Step Transaction the
entire equity interest will be owned by the Lindal Family Members. See "The
Tender Offer -- Effect of the Offer on the Market for the Shares; Nasdaq Listing
and Exchange Act Registration."

Reversion of the Company to private ownership will eliminate the
substantial general and administrative costs attendant to the Company's status
as a reporting company under the Exchange Act. In addition to the

13
<PAGE> 16

time expended by Company management, the legal, accounting and other expenses
involved in the preparation of annual and other periodic reports are
considerable. The Company estimates that its total out-of-pocket expenses
associated with maintaining its public status are approximately $225,000 per
year. These costs include review of periodic reports to the Commission (such as
Form 10-K and Form 10-Q), legal and accounting fees relating to such matters,
annual fees for the Company's transfer agent, fees relating to the listing of
its common stock on Nasdaq, directors' fees and costs associated with
communications with stockholders. These costs do not include the salaries and
time of employees of the Company who devote attention to these matters.
Additionally, the Company's management believes that required public disclosures
under the Exchange Act may have given its competitors, some of which are not
similarly burdened, certain information and insights about the Company's
operations which have helped them in competing with the Company.

The Lindal Family Members have advised the Board of Directors that,
assuming the completion of the Offer and the Second-Step Transaction, they have
no present intention to cause the Company to change its fundamental business,
sell or otherwise dispose of the Company or all or any material part of its
business, merge, liquidate or otherwise wind-up its business. Nevertheless, the
Lindal Family Members may initiate a review of the Company and its assets,
corporate structure, capitalization, operations, properties and personnel to
determine what changes, if any, would be desirable following the Offer to
enhance the operations of the Company.

Borrowings incurred in connection with the financing of the Offer and the
Second-Step Transaction, if it occurs, will increase the consolidated
indebtedness of the Company. See "The Tender Offer -- Financing of the Offer and
the Second-Step Transaction."

2. RIGHTS OF STOCKHOLDERS IN THE EVENT OF THE SECOND-STEP TRANSACTION

No dissenter's or appraisal rights are available to stockholders in
connection with the Offer. However, if the Second-Step Transaction is
implemented through a merger, the stockholders who have not tendered their
Shares will have certain rights to dissent and demand appraisal of, and to
receive payment in cash of the fair value of their Shares.

If a dissenting stockholder were to exercise such appraisal rights in
connection with a merger, and if the Company and such stockholder were unable to
agree on the fair value of the Shares, a court would determine the fair value of
the Shares, as of the day prior to the date on which the stockholders' vote was
taken approving the merger. The fair value of the Shares would be paid in cash
to such dissenting stockholder. In determining the fair value of the Shares, the
court is required to take into account all relevant factors. Accordingly, such
determination could be based upon considerations other than, or in addition to,
the market value of the Shares, including, among other things, asset values and
earnings capacity. Therefore, the value so determined in any appraisal
proceeding could be the same as, or more or less than, the price received in the
merger.

THE FOREGOING SUMMARY OF THE RIGHTS OF DISSENTING STOCKHOLDERS DOES NOT
PURPORT TO BE A COMPLETE STATEMENT OF THE PROCEDURES TO BE FOLLOWED BY
STOCKHOLDERS DESIRING TO EXERCISE ANY AVAILABLE APPRAISAL RIGHTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SECTION 262 OF THE
DGCL INCLUDED IN SCHEDULE II ATTACHED HERETO. THE PRESERVATION AND EXERCISE OF
APPRAISAL RIGHTS REQUIRE STRICT ADHERENCE TO THE APPLICABLE PROVISIONS OF THE
DGCL SECTION 262.

3. POSITION OF THE SPECIAL COMMITTEE AND BOARD; FAIRNESS OF THE OFFER

Position of the Special Committee. On December 13, 2000, the Special
Committee, by unanimous vote, approved the Offer. The Special Committee
determined that the Offer is fair to, and in the best interests of, the
stockholders other than the Lindal Family Members and recommended that such
public stockholders

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<PAGE> 17

accept the Offer. In reaching its determinations the Special Committee
considered the following factors, each of which, in the view of the Special
Committee, supported such determination:

a. the historical market prices and trading activity of the Shares,
including the fact that the average daily trading volume of the Shares for
calendar 1999 and the first nine months of calendar 2000 has been
approximately 4,000 shares per day;

b. the opinion of FSVK to the Special Committee that the consideration
to be offered to the public stockholders is fair to such stockholders from
a financial point of view, and the report and analysis presented by FSVK,
which included discussion and analysis of historical trading performance of
the Shares, discounted free cash flow analysis based on the Company's
historical and projected operating results, comparable company analysis,
comparable transactions analysis, control premium analysis and book value
liquidation value;

c. the market price for the Shares as compared to the performance of
the Company;

d. the small stockholder base of the Company, as indicated by its
approximately 335 stockholders of record;

e. the fact that the Company could, with a small repurchase program,
terminate the registration of the Shares under the Exchange Act without
initiating the Offer, because of the number of current record holders of
the Shares;

f. the nature of the Company's business and the industry in which the
Company operates, including various uncertainties associated with current
and potential future industry and market conditions;

g. the structure of the going-private transaction, which is designed,
among other things, to result in the receipt by the public stockholders of
cash consideration at the earliest practicable time without any brokerage
fees;

h. the fact that the Company has not paid a cash dividend in over 20
years to its stockholders, and the expectation that no such cash dividends
are expected to be paid in the foreseeable future;

i. the difficulty in finding buyers of the Company after an extensive
search by the Special Committee through FSVK, which made pursuit of this
strategic alternative impracticable;

j. the reluctance of the Lindal Family to consider a sale of their
majority interest in the Company at prices discussed in preliminary
discussions by several possible buyers, which made the pursuit of such
interest impractical; and

k. the stated intent of the Lindal Family Members that, following the
consummation of the Offer, they would propose and pursue the Second-Step
Transaction, which would provide all remaining public stockholders with
cash in the amount of the Purchase Price for their Shares.

With respect to the matters contained in the opinion of FSVK, the Special
Committee reviewed the report and adopted the analysis contained therein and
considered the other factors set forth herein in determining that the Offer is
fair. In light of the number and variety of factors that the Special Committee
considered in connection with their evaluation of the Offer, they did not find
it practicable to assign relative weights to the foregoing factors, and,
accordingly, did not do so.

In addition to the factors listed above, the Special Committee considered
the fact that consummation of the Offer would eliminate the opportunity of the
stockholders other than the Lindal Family Members to participate in any
potential future growth in the value of the Company, but determined that this
loss of opportunity was ameliorated in part by the Purchase Price of $4.55 net
per Share to be paid in the Offer. See "Special Factors -- Background and
Purpose of the Offer; Certain Effects of the Offer; Plans of the Company after
the Offer."

In connection with its deliberations, the Special Committee considered the
Company's liquidation value because the book value per Share of the Company on
October 31, 2000 exceeded the Purchase Price. Based

15
<PAGE> 18

on appraisals and other estimates prepared by the Company, as well as advice
from FSVK, the Special Committee concluded that the liquidation value per share
was not greater than the Purchase Price.

Position of the Board of Directors and the Lindal Family Members. The Board
of Directors of the Company consists of the three members of the Special
Committee, four Lindal Family Members and a director who is a Lindal Cedar Homes
dealer. The Board, based in part on the unanimous recommendation of the Special
Committee, unanimously approved the Offer but, because of the conflict of
interest of the Lindal Family members (who make up one half of the Board) did
not make a recommendation to the Shareholders. The Board and the Lindal Family
Members, however, also believe the Offer is fair to the other stockholders based
on (i) the conclusions of, and approval of the Special Committee, as well as the
basis therefor, which conclusion and basis are set forth above, and (ii)
notwithstanding the fact that the FSVK opinion was provided for the information
and assistance of the Special Committee and that the Lindal Family Members are
not entitled to rely on such opinion, the fact that the Special Committee had
received the written opinion of FSVK that the Purchase Price of $4.55 in cash
was fair, from a financial point of view, to the public stockholders. The Board
and the Lindal Family Members adopted the analysis of the Special Committee in
determining that the Offer is fair, from a financial point of view, to the
public stockholders. Neither the Board nor the Lindal Family Members found it
practical to, and neither did, quantify or otherwise attach relative weights to
the specific factors which they considered.

4. OPINION OF FIRST SECURITY VAN KASPER, INC.

In connection with its opinion, First Security Van Kasper, Inc. ("FSVK"),
among other things:

- Reviewed certain publicly available financial statements and other
business and financial information of the Company;

- Reviewed certain internal financial statements and other financial and
operating data concerning the Company prepared by the Company's
management;

- Reviewed drafts dated September 27, 2000 of certain financial forecasts
and other forward looking financial information prepared by the Company's
management;

- Held discussions with the Company's management concerning the business,
past and current operations, financial condition and future prospects for
the Company;

- Reviewed the financial terms and conditions set forth in a draft of the
Offer to Purchase dated December 12, 2000;

- Reviewed the stock price and trading history of the Company's common
stock;

- Compared the equity value of the Company implied by the Purchase Price
with the valuation multiples of other publicly traded companies that FSVK
believes have some similar fundamentals as the Company;

- Compared the equity value of the Company implied by the Purchase Price
with the financial terms of other publicly disclosed transactions that
FSVK deemed relevant;

- Prepared a discounted cash flow analysis of the Company;

- Compared the control premium of the Purchase Price to the control
premiums on domestic transactions and to the control premiums on the
acquisition of site builders and manufactured housing companies;

- Reviewed a liquidation analysis of the Company;

- Participated in discussions with representatives of the Company and its
legal advisors; and

- Made such other studies and inquiries, and took into account such other
matters, as FSVK deemed relevant, including its assessment of general
economic, market and monetary conditions as of the date of FSVK's
opinion.

16
<PAGE> 19

In FSVK's review and analysis, and in arriving at its opinion, it assumed
and relied upon the accuracy and completeness of all of the financial and other
information provided to FSVK (including information furnished to FSVK orally or
otherwise discussed with FSVK by the Company's management) or publicly available
and FSVK neither attempted to verify, nor assumed responsibility for verifying,
any of such information. FSVK relied upon the assurances of the Company's
management that it is not aware of any facts that would make such information
inaccurate or misleading. FSVK has not made an independent evaluation or
appraisal of any of the assets or liabilities (contingent or otherwise) of the
Company nor has FSVK made a physical inspection of any of the properties or
assets of the Company. At the request of KeyBank, the Company had Shorett,
Kidder, Mathews & Segner Valuation Advisory Group perform a liquidation
appraisal on five of its properties as of October 31, 2000 in connection with
the KeyBank loan facility. Management has estimated the liquidation value of all
other assets and liabilities. FSVK has not performed an independent analysis of
these assets and liabilities. With respect to the financial forecasts and
projections (and the assumptions and bases therefore) for the Company that FSVK
reviewed, upon the advice of the Company's management, FSVK assumed that such
forecasts and projections were reasonably prepared in good faith on the basis of
reasonable assumptions and reflected the best currently available estimates and
judgments of management as to the future financial condition and performance of
the Company, and FSVK further assumed that such projections and forecasts would
be realized in the amounts and in the time periods then estimated. FSVK assumed
that the Offer would be consummated upon the terms set forth in the Offer to
Purchase without material alteration thereof. As part of the Offer to Purchase,
the Company will accelerate the vesting of outstanding stock options so that all
such options will be fully exercisable and the optionees may exercise their
options and tender their Shares in the Offer. FSVK has assumed in its analysis
that all outstanding options except those held by the Lindal Family Members,
where the Purchase Price exceeds the applicable exercise price of such options
will be exercised and has based its analysis and opinion assuming full exercise
of such options. In addition, it assumed that the historical financial
statements of the Company reviewed by FSVK had been prepared and fairly
presented in accordance with generally accepted accounting principles
consistently applied.

The fairness opinion was based upon market, economic and other conditions
as in effect on, and information made available to FSVK as of, the date of such
opinion. The opinion noted that subsequent developments might affect the
conclusion expressed in such opinion and that FSVK disclaimed any undertaking or
obligation to advise any person of any change in any matter affecting this
opinion which might come or be brought to its attention after the date of such
opinion. The opinion is limited to the fairness, from a financial point of view
and as to the date of such opinion, of the Offer to the Holders of Common Stock.
FSVK did not express any opinion as to (i) the value of any employee agreement
or other arrangement entered into in connection with the Offer or (ii) any tax
or other consequences that might result from the Offer. The opinion did not
address the relative merits of the Offer and the other business strategies that
the Company's Board of Directors or the Special Committee thereof had considered
or might be considering, nor did it address the decision of the Company's Board
of Directors or the Special Committee thereof to proceed with the Offer. The
following discussion summarizes the material financial analyses FSVK performed
in arriving at its opinion. FSVK presented the results of these analyses to the
Special Committee on December 13, 2000.

Stock Price Analysis. FSVK examined the history of the trading prices and
volume for the Company common stock. FSVK noted that the twelve-month trading
range for the Company's closing stock price was $1.50 - $3.28 and that the
higher end of this range was achieved in early 2000. FSVK noted that the market
price of the Company's common stock for all of the prior 24 months had been
below the $4.55 Purchase Price.

Analysis of Certain Public Comparable Companies to the Company. FSVK
reviewed and compared certain Company financial information to corresponding
financial information, ratios and public market multiples for publicly traded
companies that are engaged in manufactured housing or are site builders. These
publicly traded companies included American Homestar, Cavalier Homes, Champion
Enterprises, Fleetwood Enterprises, KIT Manufacturing Company, Liberty Homes,
Nobility Homes, Oakwood Homes, Palm Harbor Homes, Southern Energy Homes,
Skyline, Beazer Homes, Hovnanian Enterprises, M.D.C. Holdings, M/I Schottenstein
Homes, NVR, The Ryland Group, and Standard Pacific. FSVK selected these
companies because they are the publicly traded companies whose operations and
financial condition FSVK deemed most

17
<PAGE> 20

comparable to the Company. FSVK compared the trading multiples of the selected
companies at the date of FSVK's opinion to the implied enterprise value
multiples of the Company.

Among the information FSVK considered were revenue, operating income
("EBIT"), earnings before interest, taxes, depreciation and amortization
("EBITDA"), net income, earnings per share, tangible equity, gross profit
margins, EBIT margins, net income margins, and growth in revenues. The multiples
and ratios for the comparable companies were based on the most recent publicly
available financial information and were based on the closing share prices as of
December 13, 2000.

Information regarding the multiples implied by the terms of the Offer
compared to the multiples derived from FSVK's analysis of selected manufactured
housing and site builder companies are set forth in the following table. All
figures are for the latest twelve months.

<TABLE>
<CAPTION>
PUBLIC COMPARABLE COMPANY ANALYSIS EQUITY VALUE
---------------------------------- ------------
(MILLIONS)
<S> <C>
Manufactured Housing EV/Revenue Multiple.................... $17.14
Manufactured Housing EV/EBITDA Multiple..................... $20.33
Manufactured Housing EV/Operating Income Multiple........... $19.48
Manufactured Housing P/E Ratio.............................. $17.25
Manufactured Housing Market Cap/Tangible Equity............. $11.12
Site Builder EV/Revenue Multiple............................ $31.43
Site Builder EV/EBITDA Multiple............................. $27.47
Site Builder EV/Operating Income Multiple................... $20.60
Site Builder P/E Ratio...................................... $11.00
Site Builder Market Cap/Tangible Equity..................... $26.13
</TABLE>

NOTE: EV (Enterprise Value) defined as Market Cap plus cash minus debt.

FSVK observed that the equity value implied by the Purchase Price is below
most of the public comparable company multiples for the site builders but within
the range of the multiples of the manufactured housing companies. The Public
Comparable Company valuation method was not highly weighted in FSVK's analysis
for two reasons: (1) the business models of site builders and manufactured
housing companies were not exactly comparable to the Company model; and (2) the
public comparable companies were in most cases significantly larger in terms of
revenue, market capitalization, and had higher trading volume, all of which
typically commands higher multiples.

Premium Analysis. A control premium is defined as the additional
consideration that an investor would pay over a marketable minority equity value
(i.e., current publicly traded stock prices) in order to own a controlling
interest in the common stock of a company.

- For the quarter ending June 30, 2000, the control premiums for domestic
transactions were as follows:

<TABLE>
<CAPTION>
PREMIUM -- PREMIUM -- EXCLUDING
# DEALS 30 DAY NEGATIVE PREMIUMS
------- ---------- --------------------
<S> <C> <C> <C>
Domestic Average........................ 139 29.7% 51.3%
Domestic Medium......................... 139 29.3% 42.6%
</TABLE>

Source: Mergerstat

- The average 30-day control premium on the eight acquisitions of site
builders and manufactured housing companies from December 13, 1997 to
December 13, 2000 was 45.67%.

- The share price of the Company Cedar Homes, Inc. on December 13, 2000 was
$2.50. The proposed tender offer price of $4.55 per share is a 82%
premium over the December 13, 2000 share price.

FSVK noted that the tender offer premiums implied by the $4.55 Purchase
Price was significantly above the premiums paid on other acquisitions.

Comparable Merger and Acquisitions Analysis. FSVK performed an analysis of
selected recent merger and acquisition transactions in the manufactured housing
and site builder industries. The selected transactions were chosen based on
FSVK's judgment that they were generally comparable, in whole or in part, to the
proposed transaction. In total, FSVK examined eleven transactions that were
announced between Decem-

18
<PAGE> 21

ber 13, 1997 and December 13, 2000. The selected transactions were not intended
to be representative of the entire range of possible transactions in the
industry. Although FSVK compared the transaction multiples of these companies to
the implied equity value multiples of the Company, none of the selected
companies is identical to the Company.

FSVK reviewed the consideration paid in such transactions in terms of the
Equity Value of such transactions as a multiple of revenues, EBITDA and net
income for the latest twelve months prior to the announcement of such
transactions.

Information regarding the multiples implied by the terms of the Offer
compared to the acquisition multiples from FSVK's analysis of selected
distribution companies is set forth in the following table. All figures are for
the latest twelve months. FSVK applied the multiples implied by these
transactions to the operating statistics for the Company to indicate an implied
price range for the Company. These results are set forth in the following table:

<TABLE>
<CAPTION>
EQUITY VALUE
------------
(MILLIONS)
<S> <C>
Equity Value/Revenue Multiple............................... $13.86
Equity Value/EBITDA Multiple................................ $17.40
Equity Value/Net Income Multiple............................ $12.91
</TABLE>

FSVK noted that the equity value implied by the Purchase Price is above the
valuation derived from the Precedent Transaction Analysis.

Discounted Cash Flow Analysis. Using a discounted cash flow analysis, FSVK
estimated the net present value of the free cash flows that the Company could
produce on a stand-alone basis over a four-year period from 2001 to 2004. Free
cash flows means Cash Flow from Operations less Cash Flow from investing, less
after-tax interest expense. In estimating these cash flows, FSVK used the
financial projections provided by the Company management. In calculating the
"terminal value", FSVK assumed multiples of Enterprise Value to EBITDA ranging
from 5.0x to 6.5x, which multiples FSVK believed to be appropriate for such an
analysis. FSVK also performed discounted cash flow analysis on the basis of
price to earnings ratios for terminal values ranging from 7.0x to 10.0x 2004 net
earnings. FSVK also performed discounted cash flow analysis on the basis of
perpetuity of 2004 free cash flow for a terminal value discounted at rates from
15% to 35%. The annual and terminal free cash flows were discounted at rates
between 15% and 35% to determine a net present value of the Enterprise Value of
the Company. These implied enterprise values were then added to the year 2000
excess cash (cash greater than $3 million for working capital) and less the year
2000 debt of the Company for implied equity values. The discounted cash flow
analysis conducted by FSVK indicated the following:

LINDAL CEDAR HOMES, INC.
DISCOUNTED CASH FLOW SUMMARY

DCF WITH EBITDA MULTIPLE TERMINAL VALUE

DCF WITH PRICE EARNINGS RATIO TERMINAL VALUE

19
<PAGE> 22

DCF WITH PERPETUITY OF FREE FLOW TERMINAL VALUE

FSVK noted that the valuation implied by the proposed Purchase Price is
within the range of values established through the discounted cash flow method
of valuation. The Company's value is at the lower end of the range because of
the higher discount rate and lower terminal value multiple typically associated
with a company of the Company's size compared to the discount rates and terminal
value multiples of larger, more diversified public companies.

Adjusted Book Value. FSVK reviewed the Company's book value and an estimate
of the liquidation value. The Company's October 1, 2000 Balance Sheet, prepared
in accordance with generally accepted accounting principles ("GAAP"), show total
shareholders' equity of $19.48 million, which compare with the Equity Value of
the Purchase Price of $19.3 million.

<TABLE>
<CAPTION>
10/1/00
-----------
<S> <C>
Shareholders' Equity.................................... $19,483,092
Option Proceeds......................................... $ 958,038
Adjusted Book Value..................................... $20,441,130
Basic Shares Outstanding................................ $ 4,136,622
Fully Diluted Shares Outstanding........................ $ 4,446,348
Basic Book Value Per Share.............................. $ 4.71
Fully Diluted Book Value Per Share...................... $ 4.60
</TABLE>

FSVK has not made an independent evaluation or appraisal of any of the
assets or liabilities (contingent or otherwise) of the Company nor has FSVK made
a physical inspection of any of the properties or assets of the Company. At the
request of KeyBank the Company had Shorett, Kidder, Mathews & Segner Valuation
Advisory Group perform a liquidation appraisal on five of its properties as of
October 31, 2000 in connection with the KeyBank loan facility. The liquidation
value of the five appraised real estate assets was $3,179,538 over their
historical book value as of October 31, 2000.

Management has estimated the liquidation value of all other assets and
liabilities. FSVK has not performed an independent analysis of these assets and
liabilities. It is management's estimate that the liquidation value, as of
October 31, 2000 of all the assets and liabilities of the Company, after the
write-up on the five appraised properties, is $14,431,779 or $3.49 on the basic
shares and $3.46 on a fully diluted basis.

General. This summary is not a complete description of the analysis
performed by FSVK but contains all material elements of the analysis. The
preparation of a fairness opinion involves determinations as to the most
appropriate and relevant methods of financial analysis and the application of
these methods to the particular circumstances. Therefore, such an opinion is not
readily susceptible to summary description. The preparation of a fairness
opinion does not involve a mathematical evaluation or weighing of the results of
the individual analyses performed, but requires FSVK to exercise its
professional judgment, based on its experience and expertise in considering a
wide variety of analyses taken as a whole. Each of the analyses conducted by
FSVK was carried out in order to provide a different perspective on the Offer
and add to the total mix of information available. FSVK did not form a
conclusion as to whether any individual analysis, considered in isolation,
supported or failed to support an opinion as to fairness. Rather, in reaching
its conclusion, FSVK considered the results of the analyses in light of each
other and ultimately reached its opinion based on the results of all analyses
taken as a whole. FSVK did not place particular reliance or weight on any
particular analysis, but instead concluded its analyses, taken as a whole,
supported its determination. Accordingly, notwithstanding the separate factors
summarized above, FSVK believes that its analyses must be considered as a whole
and that selecting portions of its analyses and the factors considered by it,
without considering all analyses and factors, may create an incomplete view of
the evaluation process underlying its opinion. No company or transaction used in
the above analyses as a comparison is directly comparable to the Company or the
contemplated transaction. In performing its analyses, FSVK made numerous
assumptions with respect to industry performance, business and economic
conditions and other matters. The analyses

20
<PAGE> 23

performed by FSVK are not necessarily indicative of future actual values and
future results, which may be significantly more or less favorable than suggested
by such analyses.

FSVK is a nationally recognized firm and, as part of its investment banking
activities, is regularly engaged in the valuation of businesses and their
securities in connection with tender offer transactions and other types of
strategic combinations and acquisitions. Over the past year FSVK has received
customary fees from the Company for providing strategic advisory services. FSVK
has also received a fee for the rendering of the fairness opinion. In addition,
the Company has agreed to indemnify FSVK and its affiliates against certain
liabilities, including liabilities arising under applicable securities laws and
its out of pocket legal expenses in connection with any litigation relating to
the transaction.

FSVK was not retained as an advisor or agent to the Company shareholders or
any other person other than as an advisor to the Special Committee. The Special
Committee and the Investors determined the Purchase Price in arms-length
negotiations in which FSVK advised the Special Committee. The Company did not
impose any restrictions or limitations upon FSVK with respect to the
investigations made or the procedures that FSVK followed in rendering its
opinion.

5. INTERESTS OF CERTAIN PERSONS IN THE OFFER AND THE SECOND-STEP TRANSACTION

In considering the Offer and the fairness of the consideration to be
received in the Offer and the Second-Step Transaction, if it occurs,
stockholders should be aware that certain officers and directors of the Company
have interests in the Offer that are described below and which may present them
with certain actual or potential conflicts of interest.

As of October 31, 2000, the Lindal Family Members, who represent four of
eight directors and two executive officers, beneficially owned 1,994,591 Shares
(excluding stock options), or 48.2% of the Shares. Even if only a small number
of Shares are tendered in the Offer, the Lindal Family Members will own more
than a majority of the outstanding Shares and, if acting together, will be able
to control all matters requiring approval of the Company's stockholders,
including the election of directors and the approval of any Second-Step
Transaction. The Board was aware of these actual and potential conflicts of
interest and considered them along with the other matters described under
"Special Factors -- Position of the Company's Board; Fairness of the Offer" and
"Special Factors -- Beneficial Ownership of Shares."

Each of the Lindal Family Members has advised the Company that he or she
does not intend to tender any Shares pursuant to the Offer.

As of October 31, 2000, directors other than Lindal Family Members
(including members of the Special Committee) beneficially own 156,342 Shares,
including options to purchase 129,242 Shares, of which 126,500 have exercise
prices less than the Purchase Price (ranging from $1.563 - $4.25 per share).
Executive officers other than Lindal Family Members beneficially own 59,291
Shares, including options to purchase 52,988 Shares, of which 47,738 have
exercise prices less than the Purchase Price (ranging from $1.563 - $4.364 per
share). These directors and executive officers have advised the Company that
they intend to tender their Shares and options in the Offer, other than Shares
subject to options having exercise prices higher than the Purchase Price.

The Lindal Family Members and Bonnie G. McLennaghan are parties to a Family
Voting Agreement dated as of September 15, 2000 (the "Voting Agreement") to
govern relations among the parties after the completion of the Offer. The Voting
Agreement will become effective on completion of the Offer and will remain in
effect so long as the parties beneficially own at least one-half of the
outstanding voting stock of the Company. Under the Voting Agreement the Board of
Directors will consist of each of the parties (or their

21
<PAGE> 24

representatives) who initially retain all their stock and who continue to own at
least 5% of outstanding stock (initially, the Lindal Family Members). In
addition, one-half of all annual income of the Company will be distributed as
dividends or used to repurchase common stock tendered by Lindal Family Members.
Under the Voting Agreement, the Company is also obligated to repurchase common
stock quarterly if any common stock is tendered for repurchase by Lindal Family
Members up to an amount reasonably deemed appropriate on an annual basis by the
Board and approved by the Company's lenders. If available cash is insufficient
to repurchase on an annual basis one-fifth of the shares of stock offered to the
Company by parties to the Voting Agreement, and the Company has assets that a
majority of the Board determine to be excess to the Company's operating needs,
then the Company shall sell such excess assets and use the proceeds, subject to
the requirements of any lenders, to repurchase stock in accordance with the
Voting Agreement. The repurchase prices shall be established annually by
unanimous vote of the directors. If the directors fail to set the price, then
the price shall be the net book value at the end of the calendar year. If the
stock is purchased in the second half of the year, a portion of the shares will
be purchased at the price determined at the end of the year. If any shareholder
falls below 5% ownership, the Company has the option to purchase any or all of
the remaining shares of such shareholder during any quarterly repurchase period.
All parties to the Voting Agreement agree to vote their shares to carry out the
terms of the agreement.

Except as described herein, based on the Company's records and on
information provided to the Company by its directors and executive officers,
neither the Company, nor any associate or subsidiary of the Company nor, to the
best of the Company's knowledge, any of the directors or executive officers of
the Company, nor any associates or affiliates of any of the foregoing, has
effected any transactions involving the Shares during the 60 business days prior
to the date hereof. Except as otherwise described herein, neither the Company
nor, to the best of the Company's knowledge, any of its affiliates, directors or
executive officers, is a party to any contract, arrangement, understanding or
relationship with any other person relating, directly or indirectly, to the
Offer with respect to any securities of the Company, including, but not limited
to, any contract, arrangement, understanding or relationship concerning the
transfer or the voting of any such securities, joint ventures, loan or option
arrangements, puts or calls, guarantees of loans, guarantees against loss or the
giving or withholding of proxies, consents or authorizations.

Under the DGCL, corporations organized under the laws of Delaware are
permitted to indemnify their current and former directors, officers, employees
and agents under certain circumstances against certain liabilities and expenses
incurred by them by reason of their serving in such capacities. The Company's
Certificate of Incorporation and Bylaws provide that each director and officer
will be indemnified by the Company against liabilities and expenses incurred in
connection with any threatened, pending or completed legal action or proceeding
to which he or she may be made a party or threatened to be made a party by
reason of being a director of the Company or a predecessor company, or serving
any other enterprise as a director or officer at the request of the Company. The
Company's Certificate of Incorporation provides that, to the fullest extent that
limitations on the liability of directors and officers are permitted by the
DGCL, no director or officer of the Company shall have any liability to the
Company or its stockholders for monetary damages. The DGCL provides that a
corporation's certificate of incorporation may include a provision which
eliminates or limits the personal liability of its directors or officers to the
corporation or its stockholders for money damages for breach of fiduciary duty
as a director except: (1) for any breach of the director's duty of loyalty to
the corporation or its stockholders; (2) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law; (3) for
liability in connection with the unlawful payment of dividends or unlawful stock
purchases or redemptions; or (4) for any transaction from which the director
derived an improper personal benefit. The Company has also purchased directors'
and officers' liability insurance for the benefit of these persons.

22
<PAGE> 25

6. BENEFICIAL OWNERSHIP OF SHARES

The following table sets forth certain information, as of October 31, 2000,
regarding the ownership of Shares by each person known by the Company to be the
beneficial owner of more than 5% of the outstanding Shares, each director of the
Company, each executive officer of the Company, and all executive officers and
directors of the Company as a group:

<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP PERCENT
NAME AND ADDRESS(1) OF STOCKHOLDER (2)(3) OF CLASS
---------------------------------- -------------------- --------
<S> <C> <C>
Sir Walter Lindal(4)........................................ 878,324(5) 19.50%
Robert W. Lindal(4)......................................... 504,423(6) 11.20%
Bonnie G. McLennaghan(4).................................... 395,668(6) 8.78%
Douglas F. Lindal(4)........................................ 385,656(6) 8.56%
Martin J. Lindal(4)......................................... 366,588(6) 8.14%
Heartland Advisors, Inc..................................... 345,400 7.67%
790 North Milwaukee Street
Milwaukee, WI 53202
Charles R. Widman........................................... 47,725 1.06%
William M. Weisfield........................................ 47,017 1.04%
Charles T. Collins.......................................... 37,500 *
Gary D. Kline............................................... 28,353 *
Steven G. Conley............................................ 24,100 *
David S. Nixon.............................................. 12,938 *
Dennis L. Gregg............................................. 10,000 *
Jeffrey Caden............................................... 3,000 *
Louis Carlascio............................................. 3,000 *
Kenneth R. Schafer.......................................... 2,000 *
All executive officers and directors as a group (14
persons).................................................. 2,350,624 52.19%
</TABLE>

---------------
(1) Unless otherwise indicated, the address of each of the stockholders is the
address of the Company.

(2) Beneficial ownership includes both voting and investment power.

(3) With respect to the following individuals and to all executive officers and
directors as a group, the beneficial ownership data includes options to
purchase common stock exercisable within 60 days of October 31, 2000 as
follows: (i) options to purchase 35,100 shares held each by Sir Walter
Lindal, Robert W. Lindal, Douglas F. Lindal, and Martin J. Lindal; (ii)
options to purchase 41,725 shares held by Charles R. Widman; (iii) options
to purchase 41,017 shares held by William M. Weisfield; (iv) options to
purchase 25,000 shares held Charles T. Collins; (v) options to purchase
21,500 shares held by Steven Conley; (vi) options to purchase 23,050 shares
held by Gary D. Kline; (vii) with respect to David S. Nixon, options to
purchase 8,838 shares held directly and options to purchase 4,100 shares are
held by Cydney Lewis-Nixon, the wife of David S. Nixon; (viii) options to
purchase 9,000 shares held by Dennis L. Gregg; (ix) options to purchase
3,000 shares held by Jeffrey Caden; (x) options to purchase 3,000 shares
held by Louis Carlascio; (xi) options to purchase 2,000 shares held by
Kenneth R. Schafer and (xii) options to purchase 322,630 shares held by all
executive officers and directors as a group. With respect to Bonnie G.
McLennaghan, the beneficial ownership data includes options to purchase
common stock as follows: (i) options to purchase 35,100 shares held directly
and (ii) options to purchase 10,000 shares held by Robert McLennaghan, the
husband of Bonnie McLennaghan.

(4) Robert W. Lindal, Martin J. Lindal and Douglas F. Lindal are sons, and
Bonnie McLennaghan is the daughter, of Sir Walter Lindal.

(5) Includes 705,589 shares held by Lindal, Inc., a private corporation
controlled by Sir Walter Lindal in which all adult members of the Lindal
family have an ownership interest.

(6) Does not include any portion of the 705,589 shares owned by Lindal, Inc.

23
<PAGE> 26

7. FEES AND EXPENSES

The following is an estimate of expenses incurred or to be incurred in
connection with the Offer. Also see "The Tender Offer -- Fees and Expenses."

<TABLE>
<S> <C>
Legal Fees.................................................. $150,000
Printing and Mailing........................................ 35,000
Filing Fees................................................. 5,000
Depositary Fees............................................. 10,000
Information Agent Fees...................................... 8,000
Investment Banker's Fees.................................... 220,000
Accountant's Fees........................................... 30,000
Financing Fees.............................................. 29,000
Miscellaneous............................................... 13,000
--------
Total............................................. $500,000
========
</TABLE>

24
<PAGE> 27

THE TENDER OFFER

1. TERMS OF THE OFFER; EXPIRATION DATE

Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of such extension or
amendment), the Company will accept for payment and pay for all Shares validly
tendered prior to the Expiration Date (as hereinafter defined) and not withdrawn
in accordance with "The Tender Offer -- Withdrawal Rights" at a price of $4.55
per Share (the "Purchase Price"), net to the seller in cash, without interest
thereon. The term "Expiration Date" means 12:00 midnight, New York City time, on
January 19, 2001, unless and until the Company, in its sole discretion, shall
have extended the period during which the Offer is open, in which event the term
"Expiration Date" shall mean the latest time and date at which the Offer, as so
extended by the Company, shall expire.

The Company expressly reserves the right, in its sole discretion, at any
time and from time to time, to extend for any reason the period of time during
which the Offer is open, including the occurrence of any of the conditions
specified in "The Tender Offer -- Certain Conditions of the Offer," by giving
oral or written notice of such extension to the Depositary. During any such
extension, all Shares previously tendered and not withdrawn will remain subject
to the Offer, subject to the rights of a tendering stockholder to withdraw such
stockholder's Shares. See "The Tender Offer -- Withdrawal Rights."

Subject to the applicable regulations of the Commission, the Company also
expressly reserves the right, in its sole discretion, at any time and from time
to time, (i) to delay acceptance for payment of, or, regardless of whether such
Shares were theretofore accepted for payment, payment for, any Shares, pending
receipt of any regulatory approval specified in "The Tender Offer -- Certain
Legal Matters and Regulatory Approvals," (ii) to terminate the Offer and not
accept for payment any Shares upon the occurrence of any of the conditions
specified in "The Tender Offer -- Certain Conditions of the Offer" and (iii) to
waive any condition or otherwise amend the Offer in any respect, by giving oral
or written notice of such delay, termination, waiver or amendment to the
Depositary and by making a public announcement thereof. The Company acknowledges
that (i) Rule 13e-4(f) under the Exchange Act requires the Company to pay the
consideration offered or return the Shares tendered promptly after the
termination or withdrawal of the Offer and (ii) the Company may not delay
acceptance for payment of, or payment for (except as provided in clause (i) of
the first sentence of this paragraph), any Shares upon the occurrence of any of
the conditions specified in "The Tender Offer -- Certain Conditions of the
Offer" without extending the period of time during which the Offer is open.

Any such extension, delay, termination, waiver or amendment will be
followed as promptly as practicable by public announcement thereof, such
announcement in the case of an extension to be made no later than 9:00 a.m., New
York City time, on the next business day after the previously scheduled
Expiration Date. Subject to applicable law (including Rules 13e-3(e)(2),
13e-4(e)(2) and 13e-4(f) under the Exchange Act, which require that material
changes be promptly disseminated to stockholders in a manner reasonably designed
to inform them of such changes) and without limiting the manner in which the
Company may choose to make any public announcement, the Company shall have no
obligation to publish, advertise or otherwise communicate any such public
announcement other than by issuing a press release to the Dow Jones News
Service.

If the Company makes a material change in the terms of the Offer or other
information concerning the Offer, or if it waives a material condition of the
Offer, the Company will extend the Offer to the extent required by Rules
13e-3(e)(2), 13e-4(e)(2) and 13e-4(f) under the Exchange Act. The minimum period
during which an offer must remain open following material changes in the terms
of the Offer or information concerning the Offer, other than a change in price
or a change in the percentage of securities sought, will depend on the facts and
circumstances then existing, including the relative materiality of the changed
terms or information. With respect to a change in price or a change in the
percentage of securities sought, a minimum period of ten business days is
generally required to allow for adequate dissemination to stockholders and
investor response.

If, prior to the Expiration Date, the Company should decide to decrease the
number of Shares being sought or to increase or decrease the consideration being
offered in the Offer, such decrease in the number of

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<PAGE> 28

Shares being sought or such increase or decrease in the consideration being
offered will be applicable to all stockholders whose Shares are accepted for
payment pursuant to the Offer and, if at the time notice of any such decrease in
the number of Shares being sought or such increase or decrease in the
consideration being offered is first published, sent or given to holders of such
Shares, the Offer is scheduled to expire at any time earlier than the period
ending on the tenth business day from and including the date that such notice is
first so published, sent or given, the Offer will be extended at least until the
expiration of such ten business day period. For purposes of this Offer, a
"business day" means any day other than a Saturday, Sunday or federal holiday
and consists of the time period from 12:01 a.m. through 12:00 midnight, New York
City time.

Pursuant to Rule 14d-11, under the Exchange Act, the Company may, subject
to certain conditions, provide a subsequent offering period of from three
business days to twenty business days in length following the purchase of Shares
on the Expiration Date (the "Subsequent Offering Period"). The Company currently
has no intention to provide a Subsequent Offering Period but reserves the right
to provide for one if the Lindal Family Members own less than 90% of the
outstanding Shares following expiration of the initial offering period. A
Subsequent Offering Period is an additional period of time, following the
expiration of the Offer and the purchase of Shares in the Offer, during which
stockholders may tender Shares that had not been purchased in the Offer. A
Subsequent Offering Period is not an extension of the Offer which already will
have been completed. In the event the Company decides to provide for a
Subsequent Offering Period, it will notify the stockholders by means of a public
announcement.

During a Subsequent Offering Period, tendering stockholders will not have
withdrawal rights and the Company will promptly purchase and pay for any Shares
tendered at the same price paid in the Offer. Rule 14d-11 provides that the
Company may provide a Subsequent Offering Period so long as, among other things,
(i) the initial twenty business days period of the Offer has expired; (ii) the
Company offers the same form and amount of consideration for Shares in the
Subsequent Offering Period as in the Offer; (iii) the Company accepts and
promptly pays for all Shares tendered during the Offer prior to the Expiration
Date; (iv) the Company announces the results of the Offer, including the
approximate number and percentage of Shares deposited in the Offer, no later
than 9:00 a.m. New York City time on the next business day after the Expiration
Date and immediately begin the Subsequent Offering Period; and (v) the Company
immediately accepts and promptly pays for Shares as they are tendered during the
Subsequent Offering Period. In the event the Company elects to extend the
Subsequent Offering Period, the Company will notify the stockholders consistent
with the requirements of the Commission.

PURSUANT TO RULE 14D-7 UNDER THE EXCHANGE ACT, NO WITHDRAWAL RIGHTS APPLY
TO SHARES TENDERED DURING THE SUBSEQUENT OFFERING PERIOD. THE OFFER PRICE WILL
BE PAID TO STOCKHOLDERS TENDERING SHARES IN THE SUBSEQUENT OFFERING PERIOD.

This Offer to Purchase and the related Letter of Transmittal will be mailed
to record holders of Shares whose names appear on the Company's stockholder list
and will be furnished, for subsequent transmittal to beneficial owners of
Shares, to brokers, dealers, commercial banks, trust companies and similar
persons whose names, or the names of whose nominees, appear on the stockholder
list or, if applicable, who are listed as participants in a clearing agency's
security position listing.

2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES

Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), the Company will accept for payment and pay for (and thereby
purchase) all Shares properly tendered and not properly withdrawn prior to the
Expiration Date. All questions as to the satisfaction of such terms and
conditions will be determined by the Company in its sole discretion's, which
determination will be final and binding. See "The Tender Offer -- Terms of the
Offer; Expiration Date" and "-- Certain Conditions of the Offer."

Upon the terms and subject to the conditions of the Offer, promptly after
the latest to occur of (i) the Expiration Date and (ii) the satisfaction or
waiver of the conditions to the Offer set forth in "The Tender Offer -- Certain
Conditions of the Offer" the Company will accept for payment and pay a Purchase
Price of

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<PAGE> 29

$4.55 per Share for any and all Shares properly tendered, and not properly
withdrawn. Subject to applicable rules of the Commission, the Company expressly
reserves the right to delay acceptance for payment of, or payment for, Shares
pending receipt of any regulatory approvals specified in "The Tender
Offer -- Certain Legal Matters and Regulatory Approvals" or in order to comply
in whole or in part with any other applicable law.

In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (i) the
certificates evidencing such Shares (the "Share Certificates") or timely
confirmation (a "Book-Entry Confirmation") of a book-entry transfer of such
Shares into the Depositary's account at The Depository Trust Company (the
"Book-Entry Transfer Facility") pursuant to the procedures set forth in "The
Tender Offer -- Procedures for Accepting the Offer and Tendering Shares," (ii)
the Letter of Transmittal (or a facsimile thereof), properly completed and duly
executed, with any required signature guarantees or, in the case of a book-entry
transfer, an Agent's Message (as defined below) in lieu of the Letter of
Transmittal and (iii) any other documents required under the Letter of
Transmittal.

For purposes of the Offer, the Company will be deemed to have accepted for
payment (and thereby purchased) Shares validly tendered and not properly
withdrawn as, if and when the Company gives oral or written notice to the
Depositary of the Company's acceptance for payment of such Shares pursuant to
the Offer. Upon the terms and subject to the conditions of the Offer, payment
for Shares accepted for payment pursuant to the Offer will be made by deposit of
the purchase price therefor with the Depositary, which will act as agent for
tendering stockholders for the purpose of receiving payments from the Company
and transmitting such payments to tendering stockholders whose Shares have been
accepted for payment. Under no circumstances will interest on the purchase price
for Shares be paid, regardless of any delay in making such payment.

The Company will pay all stock transfer taxes, if any, payable on the
transfer to it of Shares purchased pursuant to the Offer. If, however, payment
of the Purchase Price is to be made to, or (in the circumstances permitted by
the Offer) if unpurchased Shares are to be registered in the name of, any person
other than the registered holder, or if tendered certificates are registered in
the name of any person other than the person signing the Letter of Transmittal,
the amount of all stock transfer taxes, if any (whether imposed on the
registered holder or the other person), payable on account of the transfer to
the person will be deducted from the Purchase Price unless satisfactory evidence
of the payment of the stock transfer taxes, or exemption therefrom, is
submitted. See Instruction 6 of the Letter of Transmittal.

3. PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES

In order for a holder of Shares validly to tender Shares pursuant to the
Offer, the Letter of Transmittal (or a facsimile thereof), properly completed
and duly executed, together with any required signature guarantees (or, in the
case of a book-entry transfer, an Agent's Message (as defined below) in lieu of
the Letter of Transmittal) and any other documents required by the Letter of
Transmittal, must be received by the Depositary at one of its addresses set
forth on the back cover of this Offer to Purchase and either (i) the Share
Certificates evidencing tendered Shares must be received by the Depositary at
such address or such Shares must be tendered pursuant to the procedure for
book-entry transfer described below and a Book-Entry Confirmation must be
received by the Depositary (including an Agent's Message if the tendering
stockholder has not delivered a Letter of Transmittal), in each case prior to
the Expiration Date, or (ii) the tendering stockholder must comply with the
guaranteed delivery procedures described below. The term "Agent's Message" means
a message, transmitted by a Book-Entry Transfer Facility to, and received by,
the Depositary and forming a part of a Book-Entry Confirmation, which states
that such Book-Entry Transfer Facility has received an express acknowledgment
from the participant in such book-entry confirmation, that such participant has
received and agrees to be bound by the terms of the Letter of Transmittal and
that the Company may enforce such agreement against such participant.

STOCKHOLDERS WHO HOLD SHARES THROUGH BROKERS OR BANKS ARE URGED TO CONSULT
THE BROKERS OR BANKS TO DETERMINE WHETHER TRANSACTION

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<PAGE> 30

COSTS ARE APPLICABLE IF STOCKHOLDERS TENDER SHARES THROUGH THE BROKERS OR BANKS
AND NOT DIRECTLY TO THE DEPOSITARY.

THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT
THE OPTION AND RISK OF THE TENDERING STOCKHOLDER, AND THE DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.

Book-Entry Transfer. The Depositary will establish accounts with respect to
the Shares at the Book-Entry Transfer Facility for purposes of the Offer within
two business days after the date of this Offer to Purchase. Any financial
institution that is a participant in the system of Book-Entry Transfer Facility
may make a book-entry delivery of Shares by causing such Book-Entry Transfer
Facility to transfer such Shares into the Depositary's account at such
Book-Entry Transfer Facility in accordance with such Book-Entry Transfer
Facility's procedures for such transfer. However, although delivery of Shares
may be effected through book-entry transfer at a Book-Entry Transfer Facility,
either the Letter of Transmittal (or a facsimile thereof), properly completed
and duly executed, together with any required signature guarantees, or an
Agent's Message in lieu of the Letter of Transmittal, and any other required
documents, must, in any case, be received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase prior to the
Expiration Date, or the tendering stockholder must comply with the guaranteed
delivery procedure described below. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY
TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.

Signature Guarantees. Signatures on all Letters of Transmittal must be
guaranteed by a firm that is a member of the Medallion Signature Guarantee
Program, or by any other "eligible guarantor institution," as such term is
defined in Rule 17Ad-15 under the Exchange Act (each of the foregoing referred
to as an "Eligible Institution"), except in cases where Shares are tendered (i)
by a registered holder of Shares who has not completed either the box entitled
"Special Payment Instructions" or the box entitled "Special Delivery
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution. If a Share Certificate is registered in the name of a
person other than the signer of the Letter of Transmittal, or if payment is to
be returned, to a person other than the registered holder(s), then the Share
Certificate must be endorsed or accompanied by appropriate stock powers, in
either case signed exactly as the name(s) of the registered holder(s) appear on
the Share Certificate, with the signature(s) on such Share Certificate or stock
powers guaranteed by an Eligible Institution. See Instructions 1 and 6 of the
Letter of Transmittal.

Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and the Share Certificates evidencing such stockholder's Shares are
not immediately available or such stockholder cannot deliver the Share
Certificates and all other required documents to the Depositary prior to the
Expiration Date, or such stockholder cannot complete the procedure for delivery
by book-entry transfer on a timely basis, such Shares may nevertheless be
tendered, provided that all the following conditions are satisfied:

a. such tender is made by or through an Eligible Institution;

b. a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form made available by the Company is
received prior to the Expiration Date by the Depositary as provided below;
and

c. the Share Certificates (or a Book-Entry Confirmation) evidencing
all tendered Shares, in proper form for transfer, in each case together
with the Letter of Transmittal (or a facsimile thereof), properly completed
and duly executed, with any required signature guarantees, and any other
documents required by the Letter of Transmittal are received by the
Depositary within three Nasdaq trading days after the date of execution of
such Notice of Guaranteed Delivery.

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<PAGE> 31

The Notice of Guaranteed Delivery may be delivered by hand or mail or
transmitted by telegram or facsimile transmission to the Depositary and must
include a guarantee by an Eligible Institution in the form set forth in the form
of Notice of Guaranteed Delivery made available by the Company.

In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of the
Share Certificates evidencing such Shares, or a Book-Entry Confirmation of the
delivery of such Shares, and the Letter of Transmittal (or a facsimile thereof),
properly completed and duly executed, with any required signature guarantees,
and any other documents required by the Letter of Transmittal.

Determination of Validity. All questions as to the number of Shares to be
accepted, the validity, form, eligibility (including time of receipt) and
acceptance for payment of any tender of Shares will be determined by the Company
in its sole discretion, which determination shall be final and binding on all
parties. The Company reserves the absolute right to reject any and all tenders
determined by it not to be in proper form or the acceptance for payment of which
may, in the opinion of its counsel, be unlawful. The Company also reserves the
absolute right to waive any condition of the Offer or any defect or irregularity
in the tender of any Shares of any particular stockholder, whether or not
similar defects or irregularities are waived in the case of other stockholders.
No tender of Shares will be deemed to have been validly made until all defects
and irregularities have been cured or waived. None of the Company, the
Depositary, the Information Agent or any other person will be under any duty to
give notification of any defects or irregularities in tenders or incur any
liability for failure to give any such notification. The Company's
interpretation of the terms and conditions of the Offer (including the Letter of
Transmittal and the instructions thereto) will be final and binding.

Lost, Destroyed or Stolen Certificates. If any certificates for the Shares
have been lost, destroyed or stolen, stockholders should contact the Depositary
immediately at the address and telephone number set forth on the back cover of
this Offer to Purchase. In such event, the Depositary will forward additional
documentation necessary to be completed in order to surrender effectively such
lost, destroyed or stolen certificates. The Purchase Price with respect to the
relevant Shares will not be paid until the procedures for replacing lost,
destroyed or stolen certificates have been followed.

Other Requirements. By executing the Letter of Transmittal as set forth
above, a tendering stockholder irrevocably appoints designees of the Company as
such stockholder's proxies, each with full power of substitution, in the manner
set forth in the Letter of Transmittal, to the full extent of such stockholder's
rights with respect to the Shares tendered by such stockholder and accepted for
payment by the Company (and with respect to any and all Shares or other
securities issued or issuable in respect of such Shares on or after December 20,
2000). All such proxies shall be considered coupled with an interest in the
tendered Shares. Such appointment will be effective when, and only to the extent
that, the Company accepts such Shares for payment. Upon such acceptance for
payment, all prior proxies given by such stockholder with respect to such Shares
(and such other Shares and securities) will be revoked without further action,
and no subsequent proxies may be given nor any subsequent written consent
executed by such stockholder (and, if given or executed, will not be deemed to
be effective) with respect thereto. The designees of the Company will, with
respect to the Shares for which the appointment is effective, be empowered to
exercise all voting and other rights of such stockholder as they in their sole
discretion may deem proper at any annual or special meeting of the Company's
stockholders or any adjournment or postponement thereof, by written consent in
lieu of any such meeting or otherwise.

TO PREVENT BACKUP FEDERAL INCOME TAX WITHHOLDING WITH RESPECT TO PAYMENT TO
CERTAIN STOCKHOLDERS OF THE PURCHASE PRICE OF SHARES PURCHASED PURSUANT TO THE
OFFER, EACH SUCH STOCKHOLDER MUST PROVIDE THE DEPOSITARY WITH SUCH STOCKHOLDER'S
CORRECT TAXPAYER IDENTIFICATION NUMBER AND CERTIFY THAT SUCH STOCKHOLDER IS NOT
SUBJECT TO BACKUP FEDERAL INCOME TAX WITHHOLDING BY COMPLETING THE SUBSTITUTE
FORM W-9 IN THE LETTER OF TRANSMITTAL. IF BACKUP WITHHOLDING APPLIES WITH
RESPECT TO A STOCKHOLDER, THE DEPOSITARY IS REQUIRED TO WITHHOLD 31% OF ANY PAY-

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<PAGE> 32

MENTS MADE TO SUCH STOCKHOLDER. SEE INSTRUCTION 11 OF THE LETTER OF TRANSMITTAL.

Tendering Stockholder's Representation and Warranty; Company's Acceptance
Constitutes an Agreement. A tender of Shares pursuant to any of the procedures
described above will constitute the tendering stockholder's acceptance of the
terms and conditions of the Offer, as well as the tendering stockholder's
representation and warranty to the Company that (a) the stockholder has a "net
long position" (as defined in Rule 14e-4 promulgated by the Commission under the
Exchange Act) in the Shares or equivalent securities at least equal to the
Shares tendered within the meaning of Rule 14e-4 and (b) the tender of Shares
complies with Rule 14e-4. It is a violation of Rule 14e-4 for a person, directly
or indirectly, to tender Shares for that person's own account unless, at the
time of tender (including any extensions thereof), the person so tendering (i)
has a net long position equal to or greater than the amount of (x) Shares
tendered or (y) other securities immediately convertible into or exchangeable or
exercisable for the Shares tendered and will acquire the Shares for tender by
conversion, exchange or exercise and (ii) will deliver or cause to be delivered
the Shares in accordance with the terms of the Offer. Rule 14e-4 provides a
similar restriction applicable to the tender or guarantee of a tender on behalf
of another person. The Company's acceptance for payment of Shares tendered
pursuant to the Offer will constitute a binding agreement between the tendering
stockholder and the Company upon the terms and conditions of the Offer.

CERTIFICATES FOR SHARES, TOGETHER WITH A PROPERLY COMPLETED LETTER OF
TRANSMITTAL AND ANY OTHER DOCUMENTS REQUIRED BY THE LETTER OF TRANSMITTAL, MUST
BE DELIVERED TO THE DEPOSITARY AND NOT TO THE COMPANY. ANY SUCH DOCUMENTS
DELIVERED TO THE COMPANY WILL NOT BE FORWARDED TO THE DEPOSITARY AND THEREFORE
WILL NOT BE DEEMED TO BE PROPERLY TENDERED.

4. WITHDRAWAL RIGHTS

Tenders of Shares made pursuant to the Offer are irrevocable except that
such Shares may be withdrawn at any time prior to the Expiration Date and,
unless theretofore accepted for payment by the Company pursuant to the Offer,
may also be withdrawn at any time after February 16, 2001. If the Company
extends the Offer, is delayed in its acceptance for payment of Shares or is
unable to accept Shares for payment pursuant to the Offer, the Depositary may,
nevertheless, on behalf of the Company, retain tendered Shares, and such Shares
may not be withdrawn except to the extent that tendering stockholders are
entitled to withdrawal rights as described in this Section 4.

For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover page of this Offer to Purchase.
Any such notice of withdrawal must specify the name of the person who tendered
the Shares to be withdrawn, the number of Shares to be withdrawn and the name of
the registered holder of such Shares, if different from that of the person who
tendered such Shares. If Share Certificates evidencing Shares to be withdrawn
have been delivered or otherwise identified to the Depositary, then, prior to
the physical release of such Share Certificates, the serial numbers shown on
such Share Certificates must be submitted to the Depositary and the signature(s)
on the notice of withdrawal must be guaranteed by an Eligible Institution,
unless such Shares have been tendered for the account of an Eligible
Institution. If Shares have been tendered pursuant to the procedure for
book-entry transfer as set forth in the "The Tender Offer -- Procedures for
Accepting the Offer and Tendering Shares," any notice of withdrawal must specify
the name and number of the account at the Book-Entry Transfer Facility to be
credited with the withdrawn Shares.

All questions as to the form and validity (including the time of receipt)
or any notice of withdrawal will be determined by the Company, in its sole
discretion, whose determination will be final and binding. None of the Company,
the Information Agent or any other person will be under any duty to give
notification of any defects or irregularities in any notice of withdrawal or
incur any liability for failure to give any such notification.

Any Shares properly withdrawn will thereafter be deemed not to have been
validly tendered for purposes of the Offer. However, withdrawn Shares may be
re-tendered at any time prior to the Expiration Date by

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<PAGE> 33

following one of the procedures described in "The Tender Offer -- Procedures for
Accepting the Offer and Tendering Shares."

5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES

Sales of Shares by stockholders pursuant to the Offer will be taxable
transactions for federal income tax purposes and may also be taxable
transactions under applicable state, local, foreign and other tax laws. This
summary is based upon laws, regulations, rulings and decisions now in effect,
all of which are subject to change, possibly retroactively. No ruling as to any
matter discussed in this summary has been requested or received from the
Internal Revenue Service. The federal income tax consequences to a stockholder
may vary depending upon the stockholder's particular facts and circumstances.

Under section 302 of the Internal Revenue Code of 1986, as amended (the
"Code"), a sale of Shares pursuant to the Offer will, as a general rule, be
treated as a sale or exchange if the receipt of cash upon such sale (a) is
"substantially disproportionate" with respect to the stockholder, (b) results in
a "complete redemption" of the stockholder's interest in the Company or (c) is
"not essentially equivalent to a dividend" with respect to the stockholder. If
any of those three tests is satisfied, a tendering stockholder will recognize
gain or loss equal to the difference between the amount of cash received by the
stockholder pursuant to the Offer and the stockholder's tax basis in the Shares
sold pursuant to the Offer. Recognized gain or loss will be capital gain or
loss, assuming the Shares are held as capital assets, which will be long-term
capital gain or loss if the Shares are held for more than one year. If you are a
certain type of entity or individual (including insurance companies, tax-exempt
organizations, financial institutions or broker dealers, foreign stockholders
and stockholders who acquired their shares upon the exercise of options or
otherwise as compensation) you may be subject to special rules not discussed
below.

Net capital gain recognized by an individual upon the sale of, or otherwise
attributable to, a capital asset that has been held for more than one year will
generally be subject to tax at a rate not to exceed 20%. Capital gain recognized
from the sale of, or otherwise attributable to, a capital asset held for one
year or less will be subject to tax at the ordinary income tax rates. Currently,
the highest ordinary income tax rate is 39.6%. In addition, capital gain
recognized by a corporate taxpayer will be subject to tax at the ordinary income
tax rates applicable to corporations. The deductibility of capital losses by
individuals and corporations is subject to certain limitations.

In determining whether any of the tests under section 302 of the Code are
satisfied, stockholders must take into account not only the shares of Common
Stock they actually own, but also any shares of Common Stock they are deemed to
own pursuant to the constructive ownership rules of section 318 of the Code.
Pursuant to those constructive ownership rules, a stockholder is deemed to own
Common Stock actually owned, and in some cases constructively owned, by certain
related individuals or entities, and any Common Stock that the stockholder has
the right to acquire by exercise of an option or by conversion or exchange of a
security. The receipt of cash will be "substantially disproportionate" with
respect to a stockholder if, among other things, the percentage of the
outstanding Common Stock actually and constructively owned by the stockholder
immediately following the sale of Shares pursuant to the Offer (treating as no
longer outstanding all Shares purchased pursuant to the Offer) is less than 80%
of the percentage of the outstanding Common Stock actually and constructively
owned by such stockholder immediately before the sale of Shares pursuant to the
Offer (treating as outstanding all Shares purchased pursuant to the Offer).
Stockholders should consult their tax advisors with respect to the application
of the "substantially disproportionate" test to their particular facts and
circumstances.

The receipt of cash by a stockholder will result in a "complete redemption"
of the stockholder's interest in the Company if all the Common Stock actually
and constructively owned by the stockholder is sold pursuant to the Offer or
otherwise and, if applicable, the stockholder is eligible to waive and does
effectively waive attribution of all Common Stock constructively owned by the
stockholder in accordance with section 302(c) of the Code.

Even if the receipt of cash by a stockholder fails to satisfy the
"substantially disproportionate" test and the "complete redemption" test such
stockholder may nevertheless satisfy the "not essentially equivalent to a

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<PAGE> 34

dividend" test, if the stockholder's sale of Shares pursuant to the Offer
results in a "meaningful reduction" in the stockholder's proportionate interest
in the Company. Whether a meaningful reduction has occurred and, therefore,
whether the receipt of cash by a stockholder will be "not essentially equivalent
to a dividend," will depend upon the individual stockholder's facts and
circumstances. Stockholders expecting to rely upon the "not essentially
equivalent to a dividend" test should therefore consult their tax advisors as to
its application in their particular situations.

If none of the three tests under section 302 is satisfied then, to the
extent the Company has sufficient earnings and profits, the tendering
stockholder will be treated as having received a dividend includible in gross
income (and taxable at ordinary income rates) in an amount equal to the entire
amount of cash received by the stockholder pursuant to the Offer (without any
offset for such shareholders tax basis in the Shares surrendered).

In the case of a corporate stockholder, if the cash paid is treated as a
dividend, the dividend income may be eligible for the 70% dividends-received
deduction. The dividends-received deduction is subject to certain limitations,
and may not be available if, among other things, the corporate stockholder does
not satisfy certain holding period requirements with respect to the Shares or if
the Shares are treated as "debt financed portfolio stock" within the meaning of
section 246A(c) of the Code. Generally, if a dividends-received deduction is
available, the dividend may be treated as an "extraordinary dividend" under
section 1059(a) of the Code, in which case such corporate stockholder's tax
basis in Shares retained by such stockholder would be reduced, but not below
zero, by the amount of the nontaxed portion of the dividend. Any amount of the
nontaxed portion of the dividend in excess of the stockholder's basis will
generally be treated as capital gain and will be recognized in the taxable year
in which the extraordinary dividend is received. If a redemption of Shares from
a corporate stockholder pursuant to the Offer is treated as a dividend as a
result of the stockholder's constructive ownership of other Common Stock that it
has an option or other right to acquire, the portion of the extraordinary
dividend not otherwise taxed because of the dividends-received deduction would
reduce the stockholder's adjusted tax basis only in its Shares sold pursuant to
the Offer, and any excess of such non-taxed portion over such basis would be
currently taxable as gain on the sale of such Shares. Except as may otherwise be
provided in applicable Treasury regulations, in the case of any redemption of
stock which is not pro rata as to all stockholders, any amount treated as a
dividend under the rules of section 302 of the Code is treated as an
extraordinary dividend without regard to the stockholder's holding period or the
amount of the dividend. Corporate stockholders should consult their tax advisors
as to the availability of the dividends-received deduction and the application
of section 1059 of the Code.

"Backup withholding" at a rate of 31% will apply to payments made to
stockholders pursuant to the Offer unless the stockholder has furnished its
taxpayer identification number in the manner prescribed in applicable Treasury
regulations, has certified under penalties of perjury that such number is
correct, has certified as to no loss of exemption from backup withholding and
meets certain other conditions. Any amounts withheld from a stockholder of
Shares under the backup withholding rules generally will be allowed as a refund
or a credit against such stockholder's United States federal income tax
liability, provided the required information is furnished to the IRS.

To avoid the imposition of the backup withholding, stockholders who are
U.S. persons should submit to the Depositary the Form W-9 included with the
Letter of Transmittal, and stockholders who are non-U.S. persons should submit
to the Depositary form W-8BEN. Stockholders should consult their tax advisors to
determine whether or not they will be treated as a U.S. person for purposes of
backup withholding.

THE TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY
AND IS BASED ON THE FEDERAL INCOME TAX LAW NOW IN EFFECT, WHICH IS SUBJECT TO
CHANGE, POSSIBLY RETROACTIVELY. THE TAX CONSEQUENCES OF A SALE PURSUANT TO THE
OFFER MAY VARY DEPENDING UPON, AMONG OTHER THINGS, THE PARTICULAR CIRCUMSTANCES
OF THE TENDERING STOCKHOLDER. NO INFORMATION IS PROVIDED HEREIN AS TO THE STATE,
LOCAL OR FOREIGN TAX CONSEQUENCES OF THE TRANSACTION CONTEMPLATED BY THE OFFER.
STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE
PARTIC-

32
<PAGE> 35

ULAR FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF SALES MADE BY THEM
PURSUANT TO THE OFFER AND THE EFFECT OF THE RULES DESCRIBED ABOVE.

6. PRICE RANGE OF SHARES; DIVIDENDS

The Shares are listed and principally traded on the Nasdaq market under the
ticker symbol "LNDL." The following table sets forth, for the periods indicated,
the high and low sales prices per Share reported on the Nasdaq:

<TABLE>
<CAPTION>
HIGH LOW
------ -----
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1998:
First Quarter............................................. $3.875 3.000
Second Quarter............................................ 3.375 2.875
Third Quarter............................................. 3.250 1.500
Fourth Quarter............................................ 2.375 1.438

YEAR ENDED DECEMBER 31, 1999:
First Quarter............................................. $3.000 1.250
Second Quarter............................................ 2.563 1.500
Third Quarter............................................. 3.125 2.000
Fourth Quarter............................................ 3.156 1.000

YEAR ENDED DECEMBER 31, 2000:
First Quarter............................................. $3.281 1.875
Second Quarter............................................ 2.500 1.625
Third Quarter............................................. 2.438 1.500
Fourth Quarter (through December 8)....................... 3.000 1.844
</TABLE>

On December 13, 2000, the last day the shares were traded prior to the
announcement of the Offer, the last reported sales price per Share as reported
on the Nasdaq was $2.50 per share. As of October 31, 2000, the Shares were held
by approximately 335 stockholders of record.

The Company has not declared or paid any cash dividends on the Shares in
the past 20 years. The Company does not anticipate paying cash dividends on the
Shares in the foreseeable future. In addition, the certain of the Company's
lending agreements prohibit the Company from paying cash dividends without the
lender's prior consent. The Company intends to retain future earnings to finance
its operations and to fund the growth of the business. Any payment of future
dividends will be at the discretion of the Board of Directors and will depend
upon, among other things, the Company's earnings, financial condition, capital
requirements, level of indebtedness, contractual restrictions with respect to
the payment of dividends and other factors that the Board of Directors deems
relevant.

On November 21, 2000, Robert Lindal purchased 67,309 Shares at a purchase
price of $4.55 per share from Lindal, Inc., a private corporation controlled by
Sir Walter Lindal in which all adult members of the Lindal family have an
ownership interest.

7. CERTAIN INFORMATION CONCERNING THE COMPANY

Except as otherwise set forth herein, the information concerning the
Company contained in this Offer to Purchase, including financial information,
has been furnished by the Company.

General. The Company is a Delaware corporation with its principal executive
offices located at 4300 South 104th Place, Seattle, Washington 98178. The
telephone number of the Company at such offices is 206-725-0900. The Company is
primarily engaged in the manufacture and distribution of custom cedar homes,
windows and sunrooms. The Company re-manufactures most of its standard
dimensional cedar lumber needs. Remanufactured cedar lumber that meets the
Company's quality standards is combined with manufactured and/or purchased
windows, manufactured sunrooms, and other purchased forest products and

33
<PAGE> 36

building materials into home packages which can be shipped nationally and
internationally to the home buyer's construction site. Remanufactured cedar
lumber that is not of a grade suitable for use in homes is sold on the open
lumber market.

Financial Information. Set forth on the following page is certain summary
financial information relating to the Company for the periods indicated. The
summary financial information (other than "Other Data" and "Pro Forma Data") set
forth below for the nine months ended October 1, 2000 and October 3, 1999 have
been derived from the unaudited consolidated financial statements set forth in
the Company's Quarterly Reports on Form 10-Q for the quarters ended October 1,
2000 and October 3, 1999, respectively (the "Forms 10-Q"). The financial
information for the nine month periods ended October 1, 2000 and October 3,
1999, has not been audited and, in the opinion of management, reflects all
adjustments (consisting of normal recurring adjustments) which are necessary for
a fair presentation of such information. Results for the nine month periods are
not necessarily indicative of results for the full year. The summary financial
information (other than "Other Data" and "Pro Forma Data") set forth below for
the years ended December 31, 1999 and 1998 have been derived from the audited
financial statements contained in the Company's Annual Report on Form 10-K for
the year ended December 31, 1999 (the "Form 10-K"). More comprehensive financial
information is included in the Forms 10-Q, the Form 10-K and other documents
filed by the Company with the Commission, which financial information is
incorporated herein by reference. The financial information that follows is
qualified in its entirety by reference to such reports and other documents,
including the financial statements and related notes contained therein. The
Company's Forms 10-Q and Form 10-K and other such documents may be examined and
copies may be obtained from the offices of the Commission in the manner set
forth below under "Available Information."

34
<PAGE> 37

SUMMARY FINANCIAL INFORMATION

<TABLE>
<CAPTION>
AS OF AND FOR THE AS OF AND FOR THE
NINE MONTHS ENDED FISCAL YEARS ENDED
---------------------------- ------------------------------
OCT. 1, 2000 OCT. 3, 1999 DEC. 31, 1999 DEC. 31, 1998
(39 WEEKS) (39 WEEKS) (52 WEEKS) (52 WEEKS)
------------ ------------ ------------- -------------
(DOLLARS IN THOUSANDS, EXCEPT RATIO AND PER SHARE DATA)
<S> <C> <C> <C> <C>
Balance Sheet Data:
Current assets.......................... $23,792 19,393 19,078 15,380
Non-current assets...................... 8,856 12,552 12,801 12,762
Current liabilities..................... 9,378 8,941 8,732 6,423
Non-current liabilities................. 3,787 4,852 4,712 4,929
Stockholders' equity.................... 19,483 18,152 18,435 16,790
Statement of Operations Data:
Revenue................................. $32,560 28,812 39,505 37,719
Gross profit............................ 7,105 7,144 9,338 7,619
Net earnings (loss)..................... 1,323 953 1,020 (936)
Net earnings (loss) per common share
-- basic and diluted................. $ .32 .23 .25 (.23)
Other Data:
Book value per common share............. $ 4.71 4.39 4.46 4.07
Ratio of earnings to fixed charges...... 9.68x 5.93x 5.80x N/A
Deficiency of earnings to cover fixed
charges.............................. N/A N/A N/A 1,286
Pro Forma Data:
Current assets.......................... $14,595 -- -- --
Non-current liabilities................. 4,687 -- -- --
Stockholders' equity.................... 9,019 -- -- --
Net earnings (loss)..................... 1,122 -- 875 --
Net earnings (loss) per common share
-- basic and diluted................. $ .56 -- .44 --
Book value per common share............. $ 4.52 -- -- --
Ratio of earnings to fixed charges...... 6.58x -- 4.29x --
</TABLE>

35
<PAGE> 38

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL INFORMATION

The following unaudited pro forma financial information and accompanying
notes of Lindal Cedar Homes Inc. (the "Company") are based on historical
financial statements of the Company and give effect to the Offer and are based
on the estimates and assumptions set forth in the notes to such information.
This pro forma information has been prepared based on historical financial
statements of the Company and should be read in conjunction with the historical
financial statements and notes thereto included in the Company's fiscal 1999
Form 10-K and the fiscal 2000 third quarter Form 10-Q.

The unaudited pro forma condensed consolidated balance sheet information
gives effect to the Offer as if it had occurred on October 1, 2000. The
unaudited pro forma condensed consolidated statements of operations for the nine
months ended October 1, 2000, and for the year ended December 31, 1999, give
effect to the Offer as if it had occurred on January 1, 1999.

The pro forma adjustments are based upon available information and upon
assumptions that management believes are reasonable under the circumstances. The
following unaudited pro forma financial information and accompanying notes
should be read in conjunction with the historical financial statements of the
Company. The pro forma financial information does not purport to represent what
the Company's actual operating results of operations or actual financial
position would have been had the offer occurred on such dates or to project the
Company's results of operations or financial position for any future period or
date.

36
<PAGE> 39

LINDAL CEDAR HOMES, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET*
OCTOBER 1, 2000
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

ASSETS

<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS(1) PRO FORMA
---------- -------------- ---------
<S> <C> <C> <C>
Current assets:
Cash, cash equivalents and investments................ $12,979 (9,197)(2) 3,782
Receivables:
Trade.............................................. 1,325 -- 1,325
Refundable federal taxes........................... 268 -- 268
------- ------- -------
1,593 -- 1,593
Less allowance for doubtful receivables............ 78 -- 78
------- ------- -------
Net receivables............................... 1,515 -- 1,515
Inventories........................................... 7,608 -- 7,608
Promotional material.................................. 1,002 -- 1,002
Other current assets.................................. 688 -- 688
------- ------- -------
Total current assets.......................... 23,792 (9,197) 14,595
Other assets............................................ 1,379 -- 1,379
Property, plant and equipment, net...................... 7,477 -- 7,477
------- ------- -------
$32,648 (9,197) 23,451
======= ======= =======

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt................ $ 138 100(2) 238
Accounts payable and accrued expenses................. 3,444 420(2) 3,864
Income taxes payable.................................. 174 (153)(3) 21
Customer deposits..................................... 5,622 -- 5,622
------- ------- -------
Total current liabilities..................... 9,378 367 9,745
Long-term debt, excluding current installments.......... 3,492 900(2) 4,392
Deferred income taxes................................... 295 -- 295
Stockholders' equity:
Common stock.......................................... 41 (21)(2) 20
Additional paid-in capital............................ 16,061 (10,145)(2) 5,916
Accumulated other comprehensive loss.................. (1,112) -- (1,112)
Retained earnings..................................... 4,493 (298)(3) 4,195
------- ------- -------
Total stockholders' equity.................... 19,483 (10,464) 9,019
------- ------- -------
$32,648 (9,197) $23,451
======= ======= =======
Book value per common share(4).......................... $ 4.71 $ 4.52
</TABLE>

*See accompanying notes to the unaudited pro forma condensed consolidated
financial information.

37
<PAGE> 40

LINDAL CEDAR HOMES, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS*
FOR THE NINE MONTHS ENDED OCTOBER 1, 2000
(AMOUNTS IN THOUSANDS, EXCEPT RATIO AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS(1) PRO FORMA
---------- -------------- ---------
<S> <C> <C> <C>
Revenue:................................................ $32,560 $ -- $32,560
Cost of goods sold.................................... 25,455 -- 25,455
------- ------- -------
Gross profit.................................. 7,105 -- 7,105
Operating expenses:
Selling, general and administrative expenses.......... 6,113 -- 6,113
Display court expenses................................ 411 -- 411
------- ------- -------
Total operating expenses...................... 6,524 -- 6,524
Net gain from disposition and impairment of operating
assets............................................. 1,025 -- 1,025
------- ------- -------
Operating income.............................. 1,606 -- 1,606
Other income (expense):
Rental income......................................... $ 113 -- 113
Interest, net......................................... 174 (305)(5) (131)
Gain from sale of assets.............................. 18 -- 18
Other, net............................................ 7 -- 7
------- ------- -------
Other income (expense), net................... 312 (305) 7
------- ------- -------
Earnings before income taxes.................. 1,918 (305) 1,613
Income tax expense (benefit)............................ 595 (104)(6) 491
------- ------- -------
Net earnings.................................. $ 1,323 $ (201) $ 1,122
======= ======= =======
Common shares used in computing earnings per common
share:
Basic................................................. 4,131 (2,136) 1,995
Diluted............................................... 4,149 (2,154) 1,995
Earnings per common share -- basic and diluted.......... $ .32 $ .56
Ratio of earnings to fixed charges(7)................... 9.68x 6.58x
</TABLE>

*See accompanying notes to the unaudited pro forma condensed consolidated
financial information.

38
<PAGE> 41

LINDAL CEDAR HOMES, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS*
FOR THE YEAR ENDED DECEMBER 31, 1999
(AMOUNTS IN THOUSANDS, EXCEPT RATIO AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS(1)(8) PRO FORMA
---------- ----------------- ---------
<S> <C> <C> <C>
Revenue............................................... $39,505 $ -- $39,505
Cost of goods sold.................................. 30,167 -- 30,167
------- ------- -------
Gross profit................................ 9,338 -- 9,338
Operating expenses:
Selling, general and administrative expenses........ 7,674 -- 7,674
Display court expenses.............................. 484 -- 484
------- ------- -------
Total operating expenses.................... 8,158 -- 8,158
------- ------- -------
Operating income............................ 1,180 -- 1,180
Other income (expense):
Rental income....................................... 201 -- 201
Interest, net....................................... 183 (220)(5) (37)
Other, net.......................................... (18) -- (18)
------- ------- -------
Other income (expense), net................. 366 (220) 146
------- ------- -------
Earnings before income taxes................ 1,546 (220) 1,326
Income tax expense (benefit).......................... 526 (75)(6) 451
------- ------- -------
Net earnings................................ $ 1,020 $ (145) $ 875
======= ======= =======
Common shares used in computing earnings per common
share:
Basic............................................... 4,127 (2,132) 1,995
Diluted............................................. 4,147 (2,152) 1,995
Earnings per common share -- basic and diluted........ $ .25 $ .44
Ratio of earnings to fixed charges(7)................. 5.80x 4.29x
</TABLE>

*See accompanying notes to the unaudited pro forma condensed consolidated
financial information.

39
<PAGE> 42

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL INFORMATION

(1) Pro forma adjustments reflect the effect of purchasing 2,142,031 Shares
at $4.55 per Share (Purchase Price). Furthermore, these pro forma
adjustments assume that of the 497,168 stock options outstanding at
October 1, 2000, 309,726 stock options, which are in the money at the
Purchase Price, will be repurchased at a cost of $451,215 which is net
of the stock option exercise price. An additional 140,400 stock options
are in the money at the Purchase Price but will remain unexercised in
accordance with agreements with the respective option holders and
canceled in the Second-Step Transaction. The remaining options are out
of the money at the Purchase Price and will be cancelled in the
Second-Step Transaction. Estimated transaction costs related to the
Offer are assumed to be $500,000, of which $80,000 has already been
expensed by the Company as of October 1, 2000.

(2) The purchase price for the Shares of $9,746,000 and the outstanding
stock options of $451,000 are assumed to be financed using available
cash of $9,197,000 and borrowings under the Company's term-loan
agreement of $1,000,000. The remaining estimated transaction costs of
$420,000 will be settled as accounts payable.

(3) Represents the charge to retained earnings associated with the cash
paid to purchase outstanding stock options, net of the associated tax
benefit at the Company's federal tax rate of 34%.

(4) Book value per common share is calculated as total stockholders' equity
divided by the number of shares outstanding at the end of the period,
giving effect in the case of the pro forma amounts to the Shares
repurchased as contemplated herein.

(5) The Offering, the repurchase of stock options and the remaining
transaction costs are expected to be financed using available cash,
causing a reduction in the cash position to approximately $3,360,000,
and the borrowing of $1,000,000 of long-term debt as of October 1,
2000. The reduction in cash and increased borrowings will impact the
Company's ability to generate interest income from short-term
investments and will result in an increase in interest expense compared
to historical levels. The pro forma adjustment reduces interest income
to an amount which the Company could have earned assuming its average
available cash position to invest was $3,360,000, and its annual
investment interest rates were 6.2% for the nine months ended October
1, 2000 and 5.0% for the fiscal year ended December 31, 1999. The
adjustment furthermore increases interest expense reflecting the impact
of an additional borrowing of $1,000,000 under the Company's term-loan
at an annual interest rate of LIBOR plus 2.75% (9.13% and 8.05%
annually for the nine months ended October 1, 2000 and the fiscal year
ended December 31, 1999, respectively.

(6) The pro forma adjustment to income tax expense represents federal
income taxes at the Company's federal tax rate of 34% for the nine
months ended October 1, 2000 and the fiscal year ended December 31,
1999.

(7) For the purpose of calculating the ratio of earnings to fixed charges,
"earnings" consists of the sum of earnings before income taxes and
"fixed charges." "Fixed charges" consist of interest expense.

(8) These pro forma adjustments do not reflect the compensation expense of
$451,000 and resulting current tax benefit of $153,000 related to the
purchase of outstanding stock options as they are nonrecurring in
nature. These amounts will be reflected by the Company in its statement
of operations for fiscal 2000.

40
<PAGE> 43

Available Information. The Company is subject to the informational filing
requirements of the Exchange Act and, in accordance therewith, is required to
file periodic reports, proxy statements and other information with the
Commission relating to its business, financial condition and other matters.
Information as of particular dates concerning the Company's directors and
officers, their remuneration, stock options granted to them, the principal
holders of the Company's securities and any material interest of such persons in
transactions with the Company is required to be disclosed in proxy statements
distributed to the Company's stockholders and filed with the Commission. Such
reports, proxy statements and other information should be available for
inspection at the public reference facilities maintained by the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and also should be
available for inspection at the Commission's regional offices located at Seven
World Trade Center, 13th Floor, New York, New York 10048 and the Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such materials may also be obtained by mail, upon payment of the Commission's
customary fees, by writing to its principal office at 450 Fifth Street, N.W.,
Washington, D.C. 20549. These materials filed by the Company with the Commission
are also available at the Web site of the Commission at http://www.sec.gov.

Certain Estimates Prepared by the Company. In June 2000, the Company's
management provided the Lindal Family Members and FSVK with certain information
about the Company which is not publicly available, which information was
subsequently updated in September 2000. The information provided included
financial projections which contain, among other things, the summary financial
information set forth below. The Company does not, as a matter of course,
publicly disclose forward-looking information (such as the financial projections
referred to above) as to future revenues, earnings or other financial
information. Projections of this type are based on estimates and assumptions
that are inherently subject to significant economic, industry and competitive
uncertainties and contingencies, all of which are difficult to predict and many
of which are beyond the control of the Company. Accordingly, there can be no
assurance that the projected results would be realized or that actual results
would not be significantly higher or lower than those projected. In addition,
these projections were prepared by the Company solely for internal use and not
for publication or with a view to complying with the published guidelines of the
Commission regarding projections or with guidelines established by the American
Institute of Certified Public Accountants for prospective financial statements
and are included in this Offer to Purchase only because they were furnished to
the Lindal Family Members and FSVK. The financial projections necessarily make
numerous assumptions with respect to industry performance, general business and
economic conditions, access to markets and distribution channels, availability
and pricing of raw materials and other matters, all of which are inherently
subject to significant uncertainties and contingencies and many of which are
beyond the Company's control. One cannot predict whether the assumptions made in
preparing the financial projections will be accurate, and actual results may be
materially higher or lower than those contained in the projections. The
inclusion of this forward-looking information should not be regarded as fact or
an indication that the Company, the Lindal Family Members or anyone who received
this information considered it a reliable predictor of future results, and this
information should not be relied on as such. Neither the Company's independent
auditors, nor any other independent accountants or financial advisors, have
compiled, examined, or performed any procedures with respect to the prospective
financial information contained herein, nor have they expressed any opinion or
any form of assurance on such information or its achievability, and assume no
responsibility for, and disclaim any association with, the projected financial
information.

LINDAL CEDAR HOMES, INC.

SUMMARY PROJECTED FINANCIAL INFORMATION
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 2000E 2001E 2002E 2003E 2004E
---------------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net sales............................. 42,601 48,138 53,271 55,988 58,045
Earnings before income taxes.......... 2,378 2,791 3,522 4,047 4,552
Net earnings.......................... 1,504 2,147 2,296 2,615 2,945
</TABLE>

41
<PAGE> 44

SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS.

This Offer to Purchase contains certain forward-looking statements and
information relating to the Company that are based on the beliefs of management
as well as assumptions made by and information currently available to
management. Such forward-looking statements are principally contained in this
section and include, without limitation, the Company's expectation and estimates
as to the operating results for the years ended December 31, 2000 through
December 31, 2004 and the Company's business operations, including the
introduction of new products, future financial performance, including net sales
and earnings, cash flows from operations and capital expenditures. In addition,
in this and other portions of this Offer to Purchase, the words "anticipates,"
"believes," "estimates," "expects," "plans," "intends" and similar expressions,
as they relate to the Company or the Company's management, are intended to
identify forward-looking statements. Such statements reflect the current views
of the Company with respect to future events and are subject to certain risks,
uncertainties and assumptions. In addition to factors that may be described in
this Offer to Purchase, the following factors, among others, could cause the
actual results to differ materially from those expressed in any forward-looking
statements made by the Company: (i) seasonal and cyclical fluctuations in sales
in the housing industry; (ii) weather conditions, housing trends and demographic
influences existing in the locales of the Company's dealers; (iii) fluctuations
in the price of cedar, other lumber products and other building products, (iv)
difficulties or delays in developing and introducing new products or failure of
customers to accept new product offerings; (v) changes in consumer preferences
and the ability of the Company to adequately anticipate such changes; (vi) the
ability of the Company to maintain relationships with existing dealers and
develop relationships with new dealers; (vii) effects of and changes in general
economic and business conditions; (viii) actions by competitors, including new
product offerings and marketing and promotional successes; (ix) the Company's
ability to execute its business plan; and (x) changes in business strategy or
new product lines. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results
may vary materially from those described herein as anticipated, believed,
estimated or expected. The Company does not intend to update these
forward-looking statements.

8. FINANCING OF THE OFFER AND THE SECOND-STEP TRANSACTION

The total amount of funds required by the Company to consummate the Offer
(and to pay related fees and expenses estimated to be approximately $500,000)
assuming that all Shares not owned by the Lindal Family Members are validly
tendered and not withdrawn, is approximately $10,700,000. The Company plans to
finance the Offer using available cash of $9,700,000 and borrowings from KeyBank
National Association ("KeyBank") under a $2,900,000 term loan conversion
facility (the "Term Loan"). KeyBank is also issuing a $1,000,000 revolving
credit facility (the "Revolving Credit Loan") and a $3,500,000 direct pay
standby letter of credit to replace a letter of credit issued by US Bank to
support the Company's existing Industrial Revenue Bond financing. The Term Loan,
the Revolving Credit Loan and financing arrangements with KeyBank relating to
the Industrial Revenue Bonds are referred to collectively as the "KeyBank
Loans").

The Company plans to repay the KeyBank Loans when due through internally
generated funds.

The Term Loan is for an amount not to exceed $2,900,000, which can be drawn
on by the Company through July 2, 2001. During this period, interest accrues at
the prime rate plus .25% and is payable monthly. The balance outstanding at July
2, 2001 is payable in equal monthly installments of principal over five years.
At the election of the Company, interest is payable monthly at either the prime
rate plus .25% or the one month LIBOR rate plus 2.75%, fully floating, or
KeyBank will provide a fixed rate via an interest rate swap. The Company expects
to renew the Revolving Credit Loan prior to November 30, 2001 and annually
thereafter. The Term Loan is secured by certain real property and other related
assets.

The Revolving Credit Loan, which has a maximum principal amount of
$1,000,000, is secured by accounts receivable, inventory and all other assets of
the Company, and matures December 30, 2001. At the election of the Company,
interest accrues either at (i) the one, two or three month LIBOR RATE plus 2.5%,
with a minimum advance of $100,000 or (ii) the prime rate, floating. Interest is
payable monthly.

The KeyBank Loans are cross-defaulted and cross-collateralized.

42
<PAGE> 45

The Company pays an annual fee of 0.30% or $3,000 on the Revolving Credit
Loan and a commitment fee of 1% for the used portion of the Term Loan. Under the
replacement letter of credit, the Company will pay a 1% issuance fee plus an
annual fee of 1% of the principal amount.

The KeyBank Loans contain restrictive covenants which impose on the
Borrowers limitations on, among other things: (i) indebtedness for borrowed
money; (ii) the creation of mortgages and security interests and other liens;
(iii) the making of loans, guaranties and investments; (iv) transactions with
affiliates; (v) acquisitions of any interest in another enterprise or entity;
(vi) payments of dividends or repurchases of outstanding stock; (vii)
dispositions of material assets; (viii) changes in capital structure; and (ix)
certain significant changes of control of the Borrowers. Under the KeyBank
Loans, the Borrowers are required to maintain certain specified minimum ratios
of current assets to current liabilities, senior liabilities to tangible capital
and cash flow to fixed charges and to pay off short-term debt to KeyBank for 60
days each fiscal year. The KeyBank Loans also contain various event of default
provisions, including default in payment of principal or interest of the KeyBank
Loans, material misrepresentations, default in compliance with other terms of
the KeyBank Loans, bankruptcy and insolvency events, default in other
indebtedness, significant change in ownership, and a material adverse change in
the Company's financial condition.

9. DIVIDENDS AND DISTRIBUTIONS

If, on or after December 20, 2000, the Company should declare or pay any
dividend on the Shares or make any other distribution (including the issuance of
additional shares of capital stock pursuant to a stock dividend or stock split,
the issuance of other securities or the issuance of rights for the purchase of
any securities) with respect to the Shares that is payable or distributable to
stockholders of record on a date prior to the transfer to the name of the
Company on the Company's stock transfer records of the Shares purchased pursuant
to the Offer, then, without prejudice to the Company's rights under "The Tender
Offer -- Certain Conditions of the Offer," (i) the purchase price per Share
payable by the Company pursuant to the Offer will be reduced to the extent any
such dividend or distribution is payable in cash; and (ii) any non-cash
dividend, distribution or right shall be received and held by the tendering
stockholder for the account of the Company and will be required to be promptly
remitted and transferred by each tendering stockholder to the Depositary for the
account of the Company, accompanied by appropriate documentation of transfer.

10. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; NASDAQ LISTING AND
EXCHANGE ACT REGISTRATION

The purchase of Shares by the Company pursuant to the Offer will reduce the
number of Shares that might otherwise trade publicly and will reduce the number
of holders of Shares, which could adversely affect the liquidity and market
value of the remaining Shares held by the public. If consummated, the Offer
alone, or the Offer followed by the Second-Step Transaction, would also result
in a change in the composition of the present board of directors of the Company
and a change in the capitalization of the Company.

In August 1998, the Company received notification from The Nasdaq National
Market that its stock no longer met the listing requirements of the Nasdaq
National Market. In December 1998, the Company applied to transfer its stock to
the Nasdaq Small Cap Market. The transfer was approved in early 1999. As of
October 31, 2000, there were 4,136,622 Shares issued and outstanding and 335
holders of record of the outstanding Shares. Pursuant to the Nasdaq's published
guidelines, shares of common stock are not eligible to be included for continued
listing on the Small Cap Market if, among other things, the number of shares
publicly held falls below 500,000, the number of record and beneficial round lot
holders of shares falls below 300 or the aggregate market value of such publicly
held shares is less than $1,000,000. In addition, under Section 12(g) of the
Exchange Act, registration under the Exchange Act may be terminated by the
issuer if there are fewer than 300 holders of record of a class of security.
Shares held directly or indirectly by an officer or director of the issuer or by
any beneficial owner of more than 5% of the shares of the issuer will ordinarily
not be considered as being publicly held for this purpose. In the event the
Shares were no longer listed on the Nasdaq, price quotations might still be
available from other sources. The extent of the public market for the Shares and
the availability of such quotations would, however, depend upon the number of
holders of Shares remaining at such time, the interest in maintaining a market
in the Shares on the part of securities firms, the termination of registration
under the Exchange Act as described below and other factors.

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<PAGE> 46

The Shares are currently "margin securities" under the rules of the Board
of Governors of the Federal Reserve System (the "Federal Reserve Board"). Among
other things, this has the effect of allowing brokers to extend credit on the
collateral of such Shares. Depending upon factors similar to those described
above regarding listing and market quotations, it is likely that, following the
tender and purchase of the Shares pursuant to the Offer, the Shares will no
longer constitute "margin securities" for purposes of the Federal Reserve
Board's margin regulations. In such event, Shares could no longer be used as
collateral for margin loans made by brokers.

The Shares are currently registered under the Exchange Act, which requires,
among other things, that the Company furnish certain information to its
stockholders and to the Commission and comply with the Commission's proxy rules
in connection with meetings of the Company's stockholders. Registration of the
Shares under the Exchange Act will be terminated upon application by the Company
to the Commission if the Shares are not listed on a national securities exchange
and there are fewer than 300 holders of record of the Shares.

The termination of the registration of the Shares under the Exchange Act
would substantially reduce the information required to be furnished by the
Company to its stockholders and to the Commission and would render inapplicable
certain provisions of the Exchange Act, including requirements that the Company
file periodic reports (including financial statements), the requirements of Rule
13e-3 under the Exchange Act with respect to "going private" transactions,
requirements that the Company's officers, directors and ten-percent stockholders
file certain reports concerning ownership of the Company's equity securities and
provisions that any profit by such officers, directors and stockholders realized
through purchases and sales of the Company's equity securities within any
six-month period may be recaptured by the Company. In addition, the ability of
"affiliates" of the Company and other persons to dispose of Shares which are
"restricted securities" under Rule 144 under the Securities Act of 1933, as
amended (the "Securities Act"), may be impaired or eliminated. If registration
of the Shares under the Exchange Act were terminated, the Shares would no longer
be "margin securities" or eligible for listing on the Nasdaq, American Stock
Exchange or other similar exchanges. Except as disclosed in this section and
elsewhere in this Offer to Purchase, the Company has no other present plans or
proposals that relate to or would result in (i) the acquisition by any person of
additional securities of the Company, or the disposition of securities of the
Company, (ii) any extraordinary corporate transaction, such as a merger,
reorganization, liquidation or sale or transfer of a material amount of assets,
involving the Company, (iii) any material change in the present dividend policy
or indebtedness or capitalization of the Company, (iv) any other material change
in the Company's corporate structure or business, or (v) any change in the
Company's Certificate of Incorporation, bylaws or instruments corresponding
thereto or any other actions which may impede the acquisition of control of the
Company by any person.

The Company anticipates that following the Offer, the Lindal Family Members
will cause the Company to change the composition of the Board of Directors to
include only Lindal Family Members. The persons who are presently officers of
the Company will continue in their same positions following consummation of the
Offer and the Second-Step Transaction, if it occurs.

11. CERTAIN CONDITIONS OF THE OFFER

Notwithstanding any other provision of the Offer, the Company shall not be
required to accept for payment or pay for any Shares tendered pursuant to the
Offer, and may terminate or amend the Offer and may postpone the acceptance for
payment of, and payment for, Shares tendered, if prior to the acceptance for
payment of Shares, any of the following conditions exist:

a. there shall have been threatened, instituted or pending any action
or proceeding by any government or governmental, regulatory or
administrative agency, authority or tribunal or any other person, domestic
or foreign, before any court, authority, agency or tribunal that directly
or indirectly (i) challenges the making of the Offer, the acquisition of
some or all of the Shares pursuant to the Offer or otherwise relates in any
manner to the Offer, or (ii) in the Company's reasonable judgment, could
materially and adversely affect the business, condition (financial or
other), income, operations or

44
<PAGE> 47

prospects of the Company and its subsidiaries, taken as a whole, or
otherwise materially impair in any way the contemplated future conduct of
the business of the Company and its subsidiaries or materially impair the
contemplated benefits of the Offer to the Company;

b. there shall have been any action threatened, pending or taken, or
approval withheld, or any statute, rule, regulation, judgment, order or
injunction threatened, proposed, sought, promulgated, enacted, entered,
amended, enforced or deemed to be applicable to the Offer or the Company or
any of its subsidiaries, by any court or any authority, agency or tribunal
that, in the Company's reasonable judgment, would or might directly or
indirectly (i) make the acceptance for payment of, or payment for, some or
all of the Shares illegal or otherwise restrict or prohibit consummation of
the Offer, (ii) delay or restrict the ability of the Company, or render the
Company unable to accept for payment or pay for some or all of the Shares,
(iii) materially impair the contemplated benefits of the Offer to the
Company, or (iv) materially and adversely affect the business, condition
(financial or other), income, operations or prospects of the Company and
its subsidiaries, taken as a whole, or otherwise materially impair in any
way the contemplated future conduct of the business of the Company and its
subsidiaries;

c. there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on any national securities exchange
or in the over-the-counter market, (ii) the declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States, (iii) the commencement of a war, armed hostilities or other
international or national calamity directly or indirectly involving the
United States, (iv) any limitation (whether or not mandatory) by any
governmental, regulatory or administrative agency or authority on, or any
event that, in the Company's reasonable judgment, might affect, the
extension of credit by banks or other lending institutions in the United
States, (v) any significant decrease in the market price of the Shares or
any change in the general political, market, economic or financial
conditions in the United States or abroad that could, in the reasonable
judgment of the Company, have a material adverse effect on the Company's
business, operations or prospects or the trading in the Shares, (vi) in the
case of any of the foregoing existing at the time of the commencement of
the Offer, a material acceleration or worsening thereof, or (vii) any
decline in either the Dow Jones Industrial Average or the Standard and
Poor's Index of 500 Industrial Companies by an amount in excess of 10%
measured from the close of business on December 20, 2000;

d. a tender or exchange offer for any or all of the Shares (other than
the Offer), or any merger, business combination or other similar
transaction with or involving the Company or any subsidiary, shall have
been proposed, announced or made by any person;

e. (i) any entity, person or "group" (as that term is used in Section
13(d)(3) of the Exchange Act) shall have acquired or proposed to acquire
beneficial ownership of more than 5% of the outstanding Shares (other than
any such person, entity or group who has filed a Schedule 13D or Schedule
13G with the Commission on or before December 20, 2000), (ii) any such
entity, group or person who has filed a Schedule 13D or Schedule 13G with
the Commission on or before the Expiration Date shall have acquired or
proposed to acquire beneficial ownership of an additional 2% or more of the
outstanding Shares, or (iii) any person, entity or group shall have filed a
Notification and Report Form under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, or made a public announcement
reflecting an intent to acquire the Company or any of its assets or
securities other than in connection with a transaction authorized by the
Board of Directors of the Company;

f. any change or changes shall have occurred in the business,
financial condition, assets, income, operations, prospects or stock
ownership of the Company and its subsidiaries that, in the Company's
reasonable judgment, is or may have a material adverse significance to the
Company or its subsidiaries, taken as a whole; or

g. the Company (with the approval of a majority of the Board of
Directors) shall have agreed that the Company shall terminate the Offer or
postpone the acceptance for payment of or payment for Shares thereunder;
which, in the reasonable judgment of the Company in any such case, and
regardless of the circumstances giving rise to any such condition, makes it
inadvisable to proceed with such acceptance for payment or payment.

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<PAGE> 48

The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company in whole or in part at any time and
from time to time in its sole discretion. The failure by the Company at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right; the waiver of any such right with respect to particular facts and other
circumstances shall not be deemed a waiver with respect to any other facts and
circumstances; and each such right shall be deemed an ongoing right that may be
asserted at any time and from time to time.

12. CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS

General. The Company is not aware of any license or other regulatory permit
that appears to be material to the business of the Company that might be
adversely affected by the acquisition of Shares by the Company pursuant to the
Offer or of any approval or other action by any domestic (federal or state) or
foreign governmental, administrative or regulatory authority or agency which
would be required prior to the acquisition of Shares by the Company pursuant to
the Offer. Should any such approval or other action be required, it is the
Company's present intention to seek such approval or action. The Company does
not currently intend, however, to delay the purchase of Shares tendered pursuant
to the Offer pending the outcome of any such action or the receipt of any such
approval (subject to the Company's right to decline to purchase Shares if any of
the conditions in "The Tender Offer -- Certain Conditions of the Offer" shall
have occurred). There can be no assurance that any such approval or other
action, if needed, would be obtained without substantial conditions or that
adverse consequences might not result to the business of the Company, or that
certain parts of the businesses of the Company, might not have to be disposed of
or held separate or other substantial conditions complied with in order to
obtain such approval or other action or in the event that such approval was not
obtained or such other action was not taken. The Company's obligation under the
Offer to accept for payment and pay for Shares is subject to certain conditions,
including conditions relating to the legal matters discussed in this Section 12.
See "The Tender Offer -- Certain Conditions of the Offer."

Antitrust. Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules that have been promulgated thereunder by the Federal
Trade Commission (the "FTC"), certain transactions may not be consummated unless
certain information has been furnished to the Antitrust Division of the
Department of Justice and the FTC and certain waiting period requirements have
been satisfied. The acquisition of Shares by the Company pursuant to the Offer,
however, is not subject to such requirements.

State Takeover Laws. The Company is incorporated under the laws of the
State of Delaware. In general, Section 203 of the DGCL prevents an "interested
stockholder" (generally a person who beneficially owns or has the right to
acquire 15% or more of a corporation's outstanding voting stock, or an affiliate
or associate thereof that beneficially owned 15% or more of the outstanding
voting stock of the corporation at any time within the past three years) from
engaging in a "business combination" (defined to include mergers and certain
other transactions) with a Delaware corporation for a period of three years
following the date such person became an interested stockholder unless, among
other things, prior to the date the interested stockholder became an interested
stockholder, the board of directors of the corporation approved either the
business combination or the transaction in which the interested stockholder
became an interested stockholder. The Company believes that the restrictions
contained in Section 203 of the DGCL applicable to a "business combination" will
not apply to the Offer or the Second Step Transaction, if it occurs.

Chapter 23B.19 of the Washington Business Corporation Act applies to
non-Washington corporations that have a class of voting securities registered
with the Exchange Act and have certain connections with the state, including the
location of its principal executive office and concentrations of employees,
shareholders and tangible assets. If applicable, the statute prohibits the
corporation, with certain exceptions, from engaging in certain "significant
business transactions" with a person who has acquires beneficial ownership of
10% or more of the voting securities of the corporation for a period of five
years after such acquisition, unless the acquisition of ownership or the
significant business transaction is approved by the corporation's board of
directors prior to such acquisition. Because the Lindal Family Members have held
their Shares for more than 25 years, the Company believes that the statute will
not be applicable to the Offer or the Second Step Transaction, if it occurs.

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<PAGE> 49

The Company conducts limited business in several states in the United
States, some of which have enacted takeover laws. The Company does not believe
that any state takeover statutes apply to the Offer and has not currently
complied with any state takeover statute or regulation. In the event it is
asserted that one or more state takeover laws is applicable to the Offer or the
Second Step Transaction, and an appropriate court does not determine that it is
inapplicable or invalid as applied to the Offer or the Second-Step Transaction,
the Company may be required to file certain information with, or receive
approvals from, the relevant state authorities. In addition, if enjoined, the
Company may be unable to accept for payment any Shares tendered pursuant to the
Offer or be delayed in continuing or consummating the Offer and the Second-Step
Transaction. In such case, the Company may not be obligated to accept for
payment any Shares tendered. See "The Tender Offer -- Certain Conditions of the
Offer."

Litigation. To the best knowledge of the Company, no lawsuits have been
filed relating to the Offer or the Second-Step Transaction.

13. FEES AND EXPENSES

Except as set forth below, the Company will not pay any fees or commissions
to any broker, dealer or other person for soliciting tenders of Shares pursuant
to the Offer.

The Company has retained First Security Van Kasper, Inc. ("FSVK") to act as
its financial advisor in connection with the Offer. The engagement letter, as
amended, between the Company and FSVK (the "Engagement Letter") provides that
the Company will pay FSVK (a) a retainer fee of $75,000 upon the signing of the
Engagement Letter, plus additional fees of $10,000 each month if the Company has
not entered into a definitive agreement with respect to a transaction (as
defined in the Engagement Letter) before November 1, 2000, December 1, 2000 and
January 1, 2001 (the "Retainer Fee"); (b) an opinion fee (the "Opinion Fee") of
$125,000, which would be due when the Board of Directors recommends a
transaction to the stockholders and FSVK has advised the Board of Directors that
FSVK is prepared to render its fairness opinion; and (c) a completion fee (the
"Completion Fee") of 3% of the transaction value (as defined in the Engagement
Letter), payable only upon consummation of any transaction (as defined in the
Engagement Letter); provided, however, that the Completion Fee shall, in no
event, be less than $500,000. The Completion Fee is only payable in connection
with a transaction with a party other than the Lindal Family Members and is
therefore not payable in connection with the Offer or the Second-Step
Transaction. The Retainer Fee would be deducted from the Completion Fee, if it
were payable, and one-half of the Opinion Fee would be deducted from the
Completion Fee, if it were payable. In addition, the Engagement Letter between
the Company and FSVK provides that the Company will reimburse FSVK for certain
of its out-of-pocket expenses, up to $25,000, and will indemnify FSVK and
certain related persons against certain liabilities, including liabilities under
securities laws, arising out of its engagement. FSVK has not rendered investment
banking or other advisory services to the Company in the past, but it may render
such services to the Company in the future.

The Company has retained MacKenzie Partners to act as Information Agent and
American Stock Transfer and Trust Company to act as Depositary in connection
with the Offer. The Information Agent may contact holders of Shares by mail,
telephone, telegraph and personal interviews and may request brokers, dealers
and other nominee stockholders to forward materials relating to the Offer to
beneficial owners. The Information Agent and the Depositary will each receive
reasonable and customary compensation for their respective services, will be
reimbursed by the Company for certain reasonable out-of-pocket expenses and will
be indemnified against certain liabilities in connection with the Offer,
including certain liabilities under the federal securities laws.

No fees or commissions will be payable by the Company to brokers, dealers
or other persons (other than fees to the Information Agent as described above)
for soliciting tenders of Shares pursuant to the Offer. Stockholders holding
Shares through brokers or banks are urged to consult the brokers or banks to
determine whether transaction costs are applicable if stockholders tender Shares
through such brokers or banks and not directly to the Depositary. The Company,
however, upon request, will reimburse brokers, dealers and commercial banks for
customary mailing and handling expenses incurred by them in forwarding the Offer
and related materials to the beneficial owners of Shares held by them as a
nominee or in a fiduciary capacity. No

47
<PAGE> 50

broker, dealer, commercial bank or trust company has been authorized to act as
the agent of the Company, the Information Agent or the Depositary for purposes
of the Offer. The Company will pay or cause to be paid all stock transfer taxes,
if any, on its purchase of Shares except as otherwise provided in Instruction 6
in the Letter of Transmittal.

14. MISCELLANEOUS

The Company is not aware of any jurisdiction in which the making of the
Offer is prohibited by any administrative or judicial action pursuant to any
valid state statute. If the Company becomes aware of any valid state statute
prohibiting the making of the Offer or the acceptance of Shares pursuant
thereto, the Company will make a good faith effort to comply with any such state
statute. If, after such good faith effort, the Company cannot comply with any
such state statute, the Offer will not be made to (nor will tenders be accepted
from or on behalf of) the holders of Shares in such state. In any jurisdiction
where the securities, blue sky or other laws require the Offer to be made by a
licensed broker or dealer, the Offer shall be deemed to be made on behalf of the
Company by one or more registered brokers or dealers licensed under the laws of
such jurisdiction.

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF THE COMPANY NOT CONTAINED IN THIS OFFER TO PURCHASE
OR IN THE LETTER OF TRANSMITTAL, AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY.

The Company has filed with the Commission a Tender Offer Statement on
Schedule TO under the Exchange Act, furnishing certain additional information
with respect to the Offer, and may file amendments thereto. Such Schedules and
any amendments thereto, including exhibits, may be inspected at, and copies may
be obtained from, the same places and in the same manner as set forth in "The
Tender Offer -- Certain Information Concerning the Company" (except that they
will not be available at the regional offices of the Commission).

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<PAGE> 51

SCHEDULE I

DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

The following table sets forth the names and ages of the members of the
Board of Directors of the Company as of October 31, 2000 and the year in which
they were first elected directors of the Company. The Company's Amended Bylaws
(the "Bylaws") divide the Board of Directors into two classes. Each class
consists of four directors, but such number may be increased or decreased by
resolution of the Board or by the shareholders amending the Bylaws. Classes are
to be as nearly equal in number as possible. Unless a director has been
appointed to fill a vacancy or to fill a position that was created by increasing
the number of directors, each director serves for a term ending at the second
annual shareholders' meeting following the annual meeting at which elected. Each
director serves until such director's successor is elected and qualified or
until such director's earlier death, resignation or removal.

The Board of Directors presently consists of eight members. Four directors,
Robert W. Lindal, Charles T. Collins, Martin J. Lindal and Charles R. Widman,
were elected at the annual meeting of stockholders held on May 25, 2000 to serve
two-year terms expiring at the annual meeting of stockholders in 2002 and until
their respective successors have been elected and qualified.

<TABLE>
<CAPTION>
NAME AND ADDRESS(1) AGE SERVED AS DIRECTOR SINCE
------------------- --- ------------------------
<S> <C> <C>
Robert W. Lindal.......................................... 52 1969
Charles T. Collins........................................ 58 1998
Martin J. Lindal.......................................... 46 1981
Charles R. Widman......................................... 74 1993
Douglas F. Lindal......................................... 49 1971
Sir Walter Lindal......................................... 81 1966
William M. Weisfield...................................... 58 1994
Steven G. Conley.......................................... 37 1999
</TABLE>

---------------
(1) The address for each director is 4300 South 104th Place, Seattle, Washington
98178, the address of the Company's principal executive offices.

Robert W. Lindal, age 52, was President of the Company from 1981 to January
1995, when he became Chairman of the Board. He has been the Chief Executive
Officer of the Company since 1981. Mr. Lindal continues to have the Operations
and Finance areas of the Company report to him. Mr. Lindal has been a director
of the Company from 1969 to 1975 and 1976 to present. Prior to 1981, Mr. Lindal
was an independent distributor for the Company's products in Hawaii, and the
Canadian Production Facilities Manager for the Company. Mr. Lindal is a
structural engineer.

Charles T. Collins, age 58, served as President of Colsper Corporation, a
diversified holding company focused primarily in waste management, from 1981 to
1998. Mr. Collins' diversified experience in both government and business
includes currently serving as Chair of the Washington State Commission on
Student Learning, and member of the Washington Dental Service Board of
Directors. Earlier, Mr. Collins served as chairman, 1996 to 1997, of the
Washington Dental Service Board of Directors; member, 1981 to 1985, and chair,
1984 to 1985, of the Northwest Power Council; chairman of the State Higher
Education Coordinating Board, 1985 to 1991; Transit Director of Seattle Metro,
1976 to 1979, and County Administrator of King County, 1973 to 1976. Mr. Collins
has been a director of the Company since 1998.

Martin J. Lindal, age 46, has served as a director of the Company since
1981, and was employed by the Company as Administration Manager from 1982 to
1990. Mr. Lindal was elected Assistant Secretary in 1986 and has been the Vice
President Information Systems & Assistant Secretary since 1990.

Charles R. Widman, age 74, has been the President of Widman Associates,
Inc., forest industry analysts, since 1993. From 1991 to 1993, Mr. Widman was an
executive consultant with Sandwell, Inc., a diversified international consulting
firm specializing in engineering and the forest industry. From 1978 to 1991, he
was

I-1
<PAGE> 52

Chairman and CEO of Widman Management Ltd., a forest industry consulting firm.
Mr. Widman has been a director of the Company since 1993.

Douglas F. Lindal, age 49, was Executive Vice President of the Company from
1981 until January 1995, when he became President and Chief Operating Officer.
Mr. Lindal continued to have the Sales, Marketing and Administration areas
report to him as well as function as General Manager supervising most Company
activities until his retirement as an employee and officer in July 2000. He has
served as a director of the Company from 1971 to 1975 and from 1980 to present.
Prior to 1981, Mr. Lindal also was an independent distributor for the Company's
products in Hawaii.

Sir Walter Lindal, age 81, was Chairman of the Board from 1981 until 1995,
when he became Chairman Emeritus of the Company. Mr. Lindal has been Secretary
of the Company since 1981. From 1966 to 1975, he was President of the Company
and Chairman of the Board and managed the Company. Mr. Lindal is the Company's
founder.

William M. Weisfield, age 58, has been the Chief Executive Officer of UTILX
Corporation, since November 1998 and Chairman of the Board of Directors of UTILX
Corporation since January 1997. From 1994 to November 1998, Mr. Weisfield was
the Chief Operating Officer of Northern Capital Company, a privately held
investment company in Seattle, Washington. From December 1992 to December 1993,
Mr. Weisfield was Chief Operating Officer of the Robbins Company in Kent,
Washington, a manufacturer of underground tunnel boring machines. From 1988 to
December 1992, Mr. Weisfield was the Chief Executive Officer of Cornerstone
Columbia Development Company, a Seattle, Washington real estate development
firm. From 1978 to 1982, Mr. Weisfield was Chairman of the Board of the Federal
Home Loan Bank of Seattle and is a past member of the Board of Regents of
Seattle University. Mr. Weisfield also serves as a director on the boards of
several non-public entities. Mr. Weisfield has been a director of the Company
since 1994.

Steven G. Conley, age 37, has been the President of CedarCraft Northwest,
an independent dealer of the Company, since 1991. In 1995, Mr. Conley was
elected to the Dealer Advisory Council. Mr. Conley has been a director of the
Company since February 1999.

I-2
<PAGE> 53

SCHEDULE II

SUMMARY OF STOCKHOLDER APPRAISAL RIGHTS AND TEXT OF SECTION 262
OF THE DELAWARE GENERAL CORPORATION LAW (THE "DGCL")

THE FOLLOWING IS ONLY A SUMMARY OF THE PROCEDURES FOR
STOCKHOLDERS SEEKING APPRAISAL RIGHTS PRESCRIBED
BY SECTION 262 OF THE DGCL AND
IS QUALIFIED IN ITS ENTIRETY BY THE FULL TEXT OF SECTION 262 OF
THE DGCL AS SET FORTH BELOW

If the Second-Step Transaction is implemented through a merger, the
stockholders who have not tendered their shares will have certain rights to
dissent and demand appraisal of and receive payment in cash of the fair value of
their shares. In accordance with Section 262(a) of the DGCL, in order for a
stockholder to exercise appraisal rights, such stockholder must deliver to the
Company written notice of such stockholder's intent to demand payment for shares
in the event the Second-Step Transaction is approved. To be eligible for
appraisal rights, the stockholder must not vote in favor of the Second-Step
Transaction or consent to such in writing.

In accordance with Section 262(d) of the DGCL, if the Second-Step
Transaction must be submitted for approval at a meeting of the stockholders, the
Company, within 20 days prior to such meeting, must notify stockholders who
satisfy the requirements of Section 262(d)(1) that appraisal rights are
available. Before the taking of the vote on the Second-Step Transaction, a
stockholder electing to demand appraisal must submit a written demand for
appraisal. The written demand must reasonably inform the Company of the identity
of the stockholder and that the stockholder intends to demand appraisal of such
stockholder's shares.

If the Second-Step Transaction is approved other than at a meeting of the
stockholders, the Company, before the effective date of the transaction or
within 10 days of such approval, must notify those stockholders entitled to
appraisal rights under Section 262(d)(1) that the transaction was approved and
that appraisal rights are available. If the Company gives notice on or after the
effective date of the transaction, the notice must also provide the effective
date of the transaction. A stockholder electing such appraisal rights must
notify the Company in writing within 20 days after the date the Company mailed
its notice. The stockholder's notice must reasonably identify the stockholder
and the stockholder's intent to demand appraisal.

The Delaware Court of Chancery will determine the value of the shares upon
a petition by either the surviving corporation of the Second-Step Transaction or
any stockholder who has complied with the above requirements for seeking
appraisal. Such petition must be made within 120 days after the effective date
of the Second-Step Transaction. A stockholder who has complied with the above
requirements is also entitled to make a written request for a statement from the
surviving corporation that sets forth the following information: the aggregate
number of shares not voted in favor of the transaction or with respect to which
appraisal rights have been demanded; and the aggregate number of holders of such
shares. The stockholder's request must be made within 120 days after the
effective date of the transaction. The surviving corporation must mail the
statement within 10 days after the stockholder's written request or within 10
days after the period for making appraisal demands has expired under DGCL
Section 262(d).

The Court of Chancery will appraise the shares and determine a fair value,
exclusive of any value arising from the Second-Step Transaction itself or from
the expectation of it. The court may also include a fair rate of interest to be
paid upon the amount it determines to be the fair value. Then, court will direct
the surviving corporation to pay such fair value and interest, if any.

TITLE 8. DELAWARE GENERAL CORPORATION LAW
SECTION 262. APPRAISAL RIGHTS

262 APPRAISAL RIGHTS.

(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such
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shares through the effective date of the merger or consolidation, who has
otherwise complied with subsection (d) of this section and who has neither voted
in favor of the merger or consolidation nor consented thereto in writing
pursuant to sec. 228 of this title shall be entitled to an appraisal by the
Court of Chancery of the fair value of the stockholder's shares of stock under
the circumstances described in subsections (b) and (c) of this section. As used
in this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.

(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sec. 251 (other than a merger effected pursuant to
sec. 251(g) of this title), sec. 252, sec. 254, sec. 257, sec. 258, sec. 263 or
sec. 264 of this title:

(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of sec. 251 of this title.

(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
sec.sec. 251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:

a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;

b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;

c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or

d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.

(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec. 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.

(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.

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(d) Appraisal rights shall be perfected as follows:

(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsection (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing the appraisal of such stockholder's
shares shall deliver to the corporation, before the taking of the vote on
the merger or consolidation, a written demand for appraisal of such
stockholder's shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of such stockholder's
shares. A proxy or vote against the merger or consolidation shall not
constitute such a demand. A stockholder electing to take such action must
do so by a separate written demand as herein provided. Within 10 days after
the effective date of such merger or consolidation, the surviving or
resulting corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not voted in
favor of or consented to the merger or consolidation of the date that the
merger or consolidation has become effective; or

(2) If the merger or consolidation was approved pursuant to sec. 228
or sec. 253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within 20 days after the date of mailing
of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given, provided, that
if the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
record date shall be to close of business on the day next preceding the day
on which the notice is given.

(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms offered
upon the merger or consolidation. Within

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120 days after the effective date of the merger or consolidation, any
stockholder who has complied win the requirements of subsections (a) and (d)
hereof, upon written request, shall be entitled to receive from the corporation
surviving the merger or resulting in the consolidation a statement setting forth
the aggregate number of shares not voted in favor of the merger or consolidation
and with respect to which demands for appraisal have been received and the
aggregate number of holders of such shares. Such written statement shall be
mailed to the stockholder within 10 days after such stockholder's written
request for such a statement is received by the surviving or resulting
corporation or within 10 days after expiration of the period for delivery of
demands for appraisal under subsection (d) hereof, whichever is later.

(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.

(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this Section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendancy of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.

(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder enticed to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholders certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.

(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders enticed thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Count of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.

(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Count may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without

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limitation, reasonable attorney's fees and the fees and expenses of experts, to
be charged pro rata against the value of all the shares entitled to an
appraisal.

(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceedings in the
Court of Chancery shall be dismissed as to any stockholder without the approval
of the Court, and such approval may be conditioned upon such terms as the Court
deems just.

(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.

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SCHEDULE III

OPINION OF FIRST SECURITY VAN KASPER

December 13, 2000

Board of Directors
Lindal Cedar Homes, Inc.
4300 South 104th Place
Seattle, Washington 98124

Gentlemen:

You have requested that we render our opinion as to the fairness, from a
financial point of view, to the shareholders of Lindal Cedar Homes, Inc. (the
"Company"), a Delaware corporation, of the consideration (the "Purchase Price")
which is proposed to be paid to purchase all of the Company's outstanding shares
common stock other than a portion of such shares held by certain shareholders of
the Company making the proposal (the "Lindal Family Members") who will retain
their equity interest in the Company (the "Offer"). The Lindal Family Members
are comprised of Sir Walter Lindal, Mr. Robert Lindal, Mr. Douglas Lindal and
Mr. Martin Lindal, each of whom is an existing shareholder of the Company and
together own an aggregate of 44.9% of the Company's fully diluted outstanding
shares at the date hereof. Each of the Lindal Family Members is also a director
and an executive officer of the Company.

Pursuant to the draft of the Offer To Purchase dated December 12, 2000, the
Lindal Family Members propose that the Company make a fixed price self tender
offer for up to all of the outstanding shares of common stock of the Company not
held by the Lindal Family Members, followed by a "cleanup" merger with a company
formed by the Lindal Family Members. We have also been advised by the Company
that upon commencement of the Tender Offer, all outstanding options to purchase
Common Shares, except those held by the Lindal Family Members, where the
Purchase Price exceeds the applicable exercise price of such options, will be
exercised and have based our analysis and opinion assuming full exercise of such
options. The Purchase Price to be paid to the unaffiliated shareholders in the
Tender Offer is $4.55 cash per share.

In connection with the preparation of our opinion, among other things, we:

(i) reviewed certain financial information relating to the Company
including publicly available historical financial and operating statements
as well as internal financial and operating projections prepared by the
management of the Company;

(ii) held discussions with certain members of the Company's management
concerning the business, past and current business operations, financial
condition and future prospects of the Company as an independent company as
wells as views regarding the rational for the Transaction;

(iii) reviewed the financial terms and conditions set forth in the
Offer To Purchase, which has been represented to us to be the terms and
conditions agreed to between the Special Committee of the Board of
Directors and the Lindal Family Members;

(iv) reviewed the stock price and trading history of the Company;

(v) reviewed publicly-available data, information and valuations of
publicly-traded companies that we deemed generally comparable to the
Company;

(vi) compared the financial terms of the Purchase Price with the
financial terms, to the extent publicly available, of other business
combinations that we deemed relevant; and

(vii) made other studies, inquiries and analysis and reviewed other
data, as we deemed relevant and appropriate, based on our judgment as
investment bankers, for the purpose of this opinion.

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Board of Directors
Lindal Cedar Homes, Inc.
December 13, 2000
Page 2

We also reviewed a liquidation appraisal on five real estate properties
prepared by Shorett Kidder Mathews & Segner Valuation Advisory Group which the
Company made available to us and management's estimate of the liquidation value
of the other assets and liabilities of the Company. We have not reviewed the
methodology or the basis for such estimates of liquidation value. We also
solicited on behalf of the Company third party indications of interest in
acquiring all or any part of the Company from both strategic and financial
buyers. Two potential financial buyers submitted letters of interest in
acquiring the Company, one proposing $4.50 per share and the other a range of
values between $4.20 and $4.75 per share. Such letters of interest were
conditioned on due diligence, meeting with management, and meeting with some of
the Company's dealers.

In our review we have assumed, with your permission, that the documents to
be prepared, used and signed by the Company and the Lindal Family Members to
formally effect the Offer, including any disclosure materials to be delivered to
the shareholders of the Company, will effect the Offer on the terms set forth in
the draft of the Offer To Purchase without material alteration and that the
Offer To Purchase and other such documents and materials, comply and will comply
with all applicable federal, state and foreign securities laws and other
applicable laws. We have not provided any legal or tax advice with respect to
the Offer or its structure and have not made an independent evaluation or
appraisal of any of the assets or liabilities (contingent or otherwise) of the
Company nor have we made a physical inspection of any of the properties or
assets of the Company.

In rendering this opinion, we relied, without independent verification, on
the accuracy and completeness of all of the financial and other information that
was publicly available, furnished, or otherwise communicated to us by the
Company and relied upon and assumed without independent verification that there
has been no material change in the assets, financial condition and business
prospects of the Company since the date that the most recent financial
statements were made available to us.

With respect to financial projections provided to us by the Company, we
reviewed the projections and have been advised by certain members of management
of the Company, and have relied upon and assumed without independent
verification, that the projections (i) were reasonably prepared; (ii) are based
upon assumptions reflecting the best currently available estimates and good
faith judgments of management as to the future performance of the Company as an
independent company; and (iii) are believed to be realizable in the amounts and
time periods contemplated thereby. Management of the Company has also advised us
that it does not presently have any information or belief that would make the
projections incomplete or misleading.

Our opinion is based upon analysis of the foregoing factors in light of our
assessment of general economic, financial and market conditions as they exist
and as they can be evaluated by us as of the date hereof and on information made
available to us as of the date hereof. Although events occurring after the date
hereof could materially affect the assumptions relied upon in preparing this
opinion, we do not have any obligation to update, revise or reaffirm this
opinion.

This opinion is solely for the benefit and use of the Board of Directors of
Lindal Cedar Homes, Inc. in its consideration of the Transaction and is not a
recommendation to any shareholder as to whether such shareholder should tender
his shares or how such shareholder should vote or otherwise act with respect to
the Transaction. Further, this opinion addresses only the financial fairness of
the Purchase Price to be paid by the Lindal Family Members and does not address
the relative merits of the Offer, any alternatives to the Offer, the Company's
underlying decision to proceed with or effect the Offer or any other aspect of
the Offer. This opinion may not be used or referred to, or quoted or disclosed
to any person in any manner, without our prior written consent in each instance.
In furnishing this opinion, we do not admit that we are experts within the
meaning of the term "experts" as used in the Securities Act of 1933, as amended,
and the rules and

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Board of Directors
Lindal Cedar Homes, Inc.
December 13, 2000
Page 3

regulations promulgated thereunder, nor do we admit that this opinion
constitutes a report or valuation within the meaning of Section 11 of the
Securities Act.

First Security Van Kasper, Inc., as part of its investment banking
business, is regularly engaged to provide fairness opinions in connection with
mergers and acquisitions. We have received a fee from the Company for rendering
this opinion and were paid a retainer fee when we were engaged by the Company to
render financial advisory and investment banking services. The Company has also
agreed to indemnify us for certain liabilities that may arise in rendering this
opinion.

Based upon and subject to the foregoing, we are of the opinion that, as of
the date hereof, the Purchase Price is fair to the shareholders of the Company
(other than the Lindal Family Members, as to which we express no opinion) from a
financial point of view.

Very truly yours,

FIRST SECURITY VAN KASPER, INC.

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LINDAL CEDAR HOMES, INC. LOGO

December 20, 2000

Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal, certificates for Shares and any other
required documents should be sent or delivered by each of our stockholders of
such stockholder's broker, dealer, commercial bank, trust company or other
nominee to the Depositary at one of its addresses set forth below.

The Depositary for the Offer is:

AMERICAN STOCK TRANSFER & TRUST COMPANY

<TABLE>
<S> <C> <C>
By Mail: By Facsimile Transmission By Hand/Overnight Delivery
(For Eligible Institutions Only):
Attn: Reorganization (718) 234-5001 Attn: Reorganization
Department Department
59 Maiden Lane Confirm by Telephone 59 Maiden Lane
New York, NY 10038 (800) 937-5449 New York, NY 10038
</TABLE>

Questions and requests for assistance or for additional copies of this
Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery
or any other tender offer materials may be directed to the Information Agent at
its address and telephone number listed below. You may also contact your broker,
dealer, commercial bank, trust company or other nominee for assistance
concerning the Offer.

The Information Agent for the Offer is:

MACKENZIE PARTNERS, INC. LOGO
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)
(800) 322-2885 (Call Toll-Free)