<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________________
SCHEDULE 13E-4
(Amendment No. 1)
ISSUER TENDER OFFER TRANSACTION STATEMENT
(Pursuant to Section 13(e)(1) of the Securities Exchange Act of 1934)
RAWSON-KOENIG, INC.
(Name of the Issuer)
RAWSON-KOENIG, INC.
(Name of Person(s) Filing Statement)
COMMON STOCK, NO PAR VALUE PER SHARE
(Title of Class of Securities)
754498
(CUSIP Number of Class of Securities)
THOMAS C. RAWSON, CHIEF EXECUTIVE OFFICER
RAWSON-KOENIG, INC.
2301 CENTRAL PARKWAY
HOUSTON, TEXAS 77092
(713) 688-4414
(Name, Address and Telephone Number of Persons Authorized to Receive Notices
and Communications Behalf of Person(s) Filing Statement)
WITH COPIES TO:
GEORGE W. FAZAKERLY, ESQ.
GARY L. WOOLFOLK, ESQ.
VIAL, HAMILTON, KOCH & KNOX, L.L.P.
1717 MAIN STREET, SUITE 4400
DALLAS, TEXAS 75201
(214) 712-4400
June 4, 1997
(Date tender offer first published, sent or given to security holders)
CALCULATION OF FILING FEE
--------------------------------------------------------------
Transaction Valuation Amount of Filing Fee
--------------------------------------------------------------
$8,387,558.50* $1,677.51*
--------------------------------------------------------------
* The total transaction value is based on 3,901,190 shares outstanding as of
June 3, 1997, multiplied by the offer price of $2.15 per share.
** Calculated as 1/50 of one percent of the transaction value. Of this amount,
$670.41 was paid with the initial filing. Due to the increase in the
transaction valuation, $1007.10 has been paid in connection with this
Amendment No. 1.
[ ] Check box if any part of the fee is offset by Rule
O-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing and registration statement
number, or the Form or Schedule and the date of filing.
Amount Previously Paid: .........................
Form or Registration No.: .......................
Filing Party: ...................................
Date Filed: .....................................
Exhibit Index is located on Page 5.
<PAGE>
INTRODUCTION
This Rule 13e-4 Issuer Tender Offer Statement on Schedule 13E-4 (the
"Schedule 13E-4") is being filed by Rawson-Koenig, Inc., a Texas corporation
(the "Company"), pursuant to Section 13(e) of the Securities Exchange Act of
1934, as amended and Rule 13e-4 thereunder in connection with the tender offer
by the Company for all the issued and outstanding shares of its common stock, no
par value (the "Common Stock") held by persons or entities that own Common Stock
(the Public Shareholders"), upon the terms and subject to the conditions
set forth in the Offer to Purchase dated June , 1997 (the "Offer to
Purchase") and the related Letter of Transmittal (which together with the Offer
to Purchase constitute the "Offer"), copies of which are filed as Exhibits (a)
(1) and (a) (2) hereto respectively.
ITEM 1. SECURITY AND ISSUER.
(a) The name of the issuer of the securities that are the subject of the
tender offer is Rawson-Koenig, Inc., a Texas corporation with its
principal place executive offices at 2301 Central Parkway
Houston, Texas 77092.
(b) The class of equity securities being sought is all of the issued and
outstanding shares of Common Stock, no par value per share of the
Company held by the Public Shareholders. The information set forth
under "INTRODUCTION", SPECIAL FACTORS -- INTERESTS OF CERTAIN PERSONS
IN THE OFFER AND THE MERGER" and " THE TENDER OFFER -- SECTION 1.
TERMS OF THE OFFER; EXPIRATION DATE" of the Offer to Purchase is
incorporated herein by reference.
(c) The information concerning the principal market in which the Common
Stock is traded and certain high and low sales prices for the Common
Stock in such principal market is set forth in "THE TENDER OFFER --
SECTION 6. PRICE RANGE OF SHARES; DIVIDENDS" of the Offer to Purchase
is incorporated herein by reference.
(d) Not applicable.
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) and (b) The information set forth under "THE TENDER OFFER -- SECTION
8. FINANCING OF THE OFFER AND THE MERGER of the Offer to Purchase is
incorporated herein by reference.
ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER OR
AFFILIATE.
(a)-(d) and (f)-(g) The information set forth under "INTRODUCTION",
"SPECIAL FACTORS -- PURPOSE AND BACKGROUND OF THE OFFER; CERTAIN EFFECTS OF
THE OFFER; PLANS OF THE COMPANY AFTER THE OFFER" and "SPECIAL FACTORS --
RIGHTS OF SHAREHOLDERS IN THE EVENT OF MERGER" of the Offer to Purchase is
incorporated herein by reference.
(e) The information set forth under "THE TENDER OFFER -- SECTION 6. PRICE
RANGE OF SHARES; DIVIDENDS" and "THE TENDER OFFER -- SECTION 8.
FINANCING OF THE OFFER AND THE MERGER" of the Offer to Purchase is
incorporated herein by reference.
(h)-(j) The information set forth under "THE TENDER OFFER -- SECTION 10.
EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; Nasdaq QUOTATION AND
EXCHANGE ACT REGISTRATION" of the Offer to Purchase is incorporated herein
by reference.
ITEM 4. INTEREST IN SECURITIES OF THE ISSUER.
No transactions in Common Stock have been effected during the last 40
business days by the Issuer or by the persons referred to in General
Instruction C to this Schedule 13E-4.
ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE ISSUER'S SECURITIES.
The information set forth under "SPECIAL FACTORS -- PURPOSE AND BACKGROUND
OF THE OFFER; CERTAIN EFFECTS OF THE OFFER; PLANS OF THE COMPANY AFTER THE
OFFER" of the Offer to Purchase describes the contractual arrangement among
Thomas C. Rawson, Pamela Y. Rawson and the Rawson Family Limited Partnership,
which is controlled by Catherine A. Rawson (collectively, the "Rawson Family")
and the Company for the payment by the Rawson Family to the Public Shareholders
tendering shares of Common Stock of their proportionate share in any premium
received by the Rawson Family in the event of certain extraordinary corporate
transactions and is incorporated herein by reference. In addition,
Page 2 of 5 Pages
<PAGE>
"SPECIAL CONSIDERATIONS --BENEFICIAL OWNERSHIP OF COMMON STOCK" and "SPECIAL
CONSIDERATIONS -- INTEREST OF CERTAIN PERSONS IN THE OFFER AND MERGER" is
incorporated by reference herein.
ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth under "INTRODUCTION", "SPECIAL FACTORS --
OPINION OF RAUSCHER PIERCE REFSNES", "SPECIAL FACTORS -- FEES AND EXPENSES" and
"THE TENDER OFFER -- SECTION 13. FEES AND EXPENSES" of the Offer to Purchase is
incorporated herein by reference.
ITEM 7. FINANCIAL INFORMATION.
(a) The information set forth under "THE TENDER OFFER -- SECTION 7.
CERTAIN INFORMATION CONCERNING THE COMPANY" of the Offer to Purchase is
incorporated herein by reference. In addition, the Company's audited financial
statements for the years ended December 31, 1996 and December 31, 1995 and the
Company's unaudited financial statements for the periods ended March 31, 1997
and March 31, 1996 are attached to the Offer to Purchase as Schedules III and IV
thereto, respectively are incorporated herein by reference.
(b) The information set forth under "THE TENDER OFFER -- SECTION 7.
CERTAIN INFORMATION CONCERNING THE COMPANY" is incorporated herein by reference.
ITEM 8. ADDITIONAL INFORMATION.
(a) Not applicable.
(b) The information set forth under "THE TENDER OFFER -- SECTION 12.
CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS" of the Offer to Purchase is
incorporated herein by reference.
(c) The information set forth under "THE TENDER OFFER -- SECTION 10.
EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; Nasdaq QUOTATION AND EXCHANGE
ACT REGISTRATION" of the Offer to Purchase is incorporated herein by reference.
(d) Not applicable.
(e) The information set forth in the Offer to Purchase and the Letter of
Transmittal, copies of which are attached hereto as Exhibits (a)(1) and (a)(2),
respectively, is incorporated herein by reference.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Form of Offer to Purchase dated , 1997.
(a)(2) Form of Letter of Transmittal.
(a)(3) Form of Notice of Guaranteed Delivery.
(a)(4) Form of Letter from Wheat, First Securities, Inc. to Brokers, Dealers,
Commercial Banks, Trust Companies and Nominees.
(a)(5) Form of Letter from Brokers, Dealers, Commercial Banks, Trust Companies
and Nominees to Clients.
(a)(6) Form of Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(7) Press Release issued by the Company on June 4, 1997.
(b) Amended and Restated Letter Loan Agreement between the Company and Bank
One, Texas, N.A. dated June 18, 1997.
(c)(1) Agreement between the Rawson Family and the Company dated as of June 2,
1997.
(c)(2) Amended and Restated Agreement between the Rawson Family and the Company
dated as of June 2, 1997.
(d) None.
(e) Not applicable.
(f) None.
Page 3 of 5 Pages
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SIGNATURES
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
August 7, 1997
Rawson-Koenig, Inc.
By: /s/ Thomas C. Rawson
--------------------
Name: Thomas C. Rawson
Title: Chief Executive Officer
Page 4 of 5 Pages
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. PAGE IN
SEQUENTIAL
NUMBERING
SYSTEM
_____________________________________________________________________________________________________________________________
<S> <C>
(a)(1) Form of Offer to Purchase dated , 1997.
(a)(2) Form of Letter of Transmittal.
(a)(3) Form of Notice of Guaranteed Delivery.
(a)(4) Form of Letter from Wheat, First Securities, Inc. to Brokers, Dealers,
Commercial Banks, Trust Companies and Nominees.
(a)(5) Form of Letter from Brokers, Dealers, Commercial Banks,
Trust Companies and Nominees to Clients.
(a)(6) Form of Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
(a)(7) Press Release issued by the Company on June 4, 1997.
(b) Amended and Restated Letter Loan Agreement between the Company and Bank
One, Texas, N.A. dated June 18, 1997.(1)
(c)(1) Agreement between the Rawson Family and the Company dated as of June 2,
1997.
(c)(2) Amended and Restated Agreement between the Rawson Family and the Company
dated as of June 2, 1997.
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(1) Previously filed.
</TABLE>
Page 5 of 5
<PAGE>
Exhibit (a)(1): FORM OF OFFER TO PURCHASE
OFFER TO PURCHASE FOR CASH
BY
RAWSON-KOENIG, INC.
OF
ITS ISSUED AND OUTSTANDING SHARES
OF COMMON STOCK, NO PAR VALUE,
AT
$2.15 NET PER SHARE
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, EASTERN DAYLIGHT
TIME, ON , 1997, UNLESS THE OFFER IS EXTENDED.
RAWSON-KOENIG, INC., a Texas corporation (the "Company"), is offering to
purchase the issued and outstanding shares of its common stock, no par value
(the "Common Stock"), held by persons or entities that own Common Stock (the
"Public Shareholders"), at $2.15 per share of Common Stock, net to the seller in
cash, without interest thereon, upon the terms and subject to the conditions set
forth in this Offer to Purchase (the "Offer to Purchase") and in the related
Letter of Transmittal, which together with this Offer to Purchase constitutes
the "Offer".
The Offer is not conditioned upon any minimum number of shares of the
Common Stock owned by the Public Shareholders (the "Shares") being tendered.
The Offer is , however, subject to certain other conditions. See TENDER OFFER -
SECTION 11. CERTAIN CONDITIONS OF THE OFFER.
THE BOARD OF DIRECTORS OF THE COMPANY, BY UNANIMOUS VOTE OF ALL DIRECTORS
PRESENT AND VOTING, BASED UPON, AMONG OTHER THINGS, THE UNANIMOUS RECOMMENDATION
AND APPROVAL OF THE DIRECTORS OF THE COMPANY WHO ARE NOT OFFICERS OF THE COMPANY
OR COUNSEL TO THE COMPANY (THE "INDEPENDENT DIRECTORS"), HAS DETERMINED THAT THE
OFFER IS FAIR TO, AND IN THE BEST INTERESTS OF, THE PUBLIC SHAREHOLDERS, AND
RECOMMENDS THAT THE PUBLIC SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES
PURSUANT TO THE OFFER.
The Common Stock is listed and traded on the National Association of
Securities Dealers Automated Quotation System ("Nasdaq") SmallCap Market, Inc.
under the ticker symbol "RAKO". On June 3, 1997, the last trading day before
the Company announced the Offer, the last sale price was $1.875 per Share.
SHAREHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION
FOR THE COMMON STOCK.
__________________________________
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE FAIRNESS OR MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR
ADEQUACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION
TO THE CONTRARY IS UNLAWFUL.
_________________________________
THE DEALER MANAGER FOR THE OFFER IS
WHEAT, FIRST SECURITIES, INC.
, 1997
<PAGE>
IMPORTANT
ANY SHAREHOLDER DESIRING TO TENDER ALL OR ANY PORTION OF SUCH SHAREHOLDER'S
SHARES OF COMMON STOCK 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 TOGETHER WITH THE CERTIFICATE(S)
EVIDENCING TENDERED SHARES, AND ANY OTHER REQUIRED DOCUMENTS, TO THE DEPOSITARY
OR TENDER SUCH SHARES PURSUANT TO THE PROCEDURE FOR BOOK-ENTRY TRANSFER SET
FORTH IN "THE TENDER OFFER -- SECTION 3. PROCEDURES FOR ACCEPTING THE OFFER AND
TENDERING SHARES" OR (2) REQUEST SUCH SHAREHOLDER'S BROKER, DEALER, COMMERCIAL
BANK, TRUST COMPANY OR OTHER NOMINEE TO EFFECT THE TRANSACTION FOR SUCH
SHAREHOLDER. ANY SHAREHOLDER 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
SHAREHOLDER DESIRES TO TENDER SUCH SHARES.
ANY SHAREHOLDER 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 -- SECTION 3. PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES".
QUESTIONS OR REQUESTS FOR ASSISTANCE MAY BE DIRECTED TO THE INFORMATION
AGENT OR THE DEALER MANAGER AT THEIR RESPECTIVE ADDRESSES AND TELEPHONE NUMBERS
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.
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<PAGE>
TABLE OF CONTENTS
INTRODUCTION......................................................... 4
SPECIAL FACTORS...................................................... 5
Purpose and Background of the Offer; Certain Effects of the Offer;
Plans of Company After the Offer................................ 5
Rights of Shareholders in the Event of Merger..................... 8
Recommendation of the Company's Board; Fairness of the Offer...... 9
Opinion of Rauscher Pierce Refsnes................................ 10
Interests of Certain Persons in the Offer and the Merger.......... 12
Beneficial Ownership of Common Stock.............................. 14
Fees and Expenses................................................. 15
THE TENDER OFFER..................................................... 15
1. Terms of the Offer; Expiration Date............................ 15
2. Acceptance for Payment and Payment for Shares.................. 16
3. Procedures for Accepting the Offer and Tendering Shares........ 17
4. Withdrawal Rights.............................................. 20
5. Certain Federal Income Tax Consequences........................ 20
6. Price Range of Shares; Dividends............................... 21
7. Certain Information Concerning the Company..................... 22
8. Financing of the Offer and the Merger.......................... 29
9. Dividends and Distributions.................................... 29
10. Effect of the Offer on the Market for the Shares; Nasdaq
Quotation And Exchange Act Registration...................... 30
11. Certain Conditions of the Offer................................ 30
12. Certain Legal Matters and Regulatory Approvals................. 31
13. Fees and Expenses.............................................. 32
14. Miscellaneous.................................................. 32
SCHEDULE I - Directors and Executive Officers of the Company...... I-1
SCHEDULE II - Opinion of Rauscher Pierce Refsnes, Inc.............. II-1
SCHEDULE III - Summary of Shareholder Appraisal Rights and Text
of Articles 5.11, 5.12, 5.13, and 5.16 of the
Texas Business Corporation Act..................... III-1
SCHEDULE IV - Audited Financial Statements (and Related Notes)
for the Company for the Years for the Years Ended
December 31, 1996 and December 31, 1995............ IV-1
SCHEDULE V - Unaudited Financial Statements (and Related Notes)
for the Company for Six-Month Periods Ended
June 30, 1997 and June 30, 1996.................... V-1
-3-
<PAGE>
To the Public Shareholders of Rawson-Koenig, Inc.:
INTRODUCTION
RAWSON-KOENIG, INC., a Texas corporation (the "Company"), is offering to
purchase the issued and outstanding shares of its Common Stock, no par value
(the "Common Stock"), held by persons or entities that own Common Stock (the
"Public Shareholders"), at $2.15 per share of Common Stock, net to the seller in
cash (the "Offer Price"), upon the terms and subject to the conditions set forth
in this Offer to Purchase (the "Offer to Purchase") and in the related Letter of
Transmittal, which together with this Offer to Purchase constitutes the
"Offer".
Tendering Shareholders will not be obligated to pay brokerage fees or
commissions or, except as otherwise provided in Instruction 6 of the Letter of
Transmittal, stock transfer taxes with respect to the purchase of the shares of
Common Stock of the Company held by the Public Shareholders (the "Shares") by
the Company pursuant to this Offer. The Company will pay all charges and
expenses of Wheat, First Securities, Inc. (the "Dealer Manager"), Harris Trust
Company of New York (the "Depositary") and D.F. King & Co., Inc. (the
"Information Agent") incurred in connection with the Offer. See "SPECIAL FACTORS
- - FEES AND EXPENSES" and "THE TENDER OFFER -- SECTION 13. FEES AND EXPENSES".
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 -- SECTION 11. CERTAIN CONDITIONS OF THE OFFER", which sets forth
in full the conditions of the Offer. After expiration of the Offer, the Board
of Directors of the Company intends to authorize a reverse stock split of the
Common Stock of 1 share for 100 shares, which will eliminate any remaining odd-
lot Public Shareholders (Public Shareholders owning less than 100 Shares) by
making their Shares fractional shares that will be purchased by the Company at
the appropriate multiple of the Offer Price prior to the reverse split. In
addition, if necessary to cause the Common Stock not to be listed for quotation
by Nasdaq, to terminate the registration of the Common Stock under the
Securities and Exchange Act of 1934 (the "Exchange Act"), and to cash-out any
remaining Public Shareholders after the Offer and the reverse split, the Company
will enter into a merger agreement with RKI Acquisition, Inc., a Texas
corporation to be formed, which will be wholly owned by Thomas C. Rawson, Pamela
Y. Rawson and the Rawson Family Limited Partnership, which is controlled by
Catherine A. Rawson (collectively, the "Rawson Family"), and seek shareholder
approval of such merger in accordance with applicable laws (the "Merger"). It is
contemplated that the Merger consideration will be at the Offer Price (as
adjusted by the reverse stock split) and that after the Merger there will be no
Public Shareholders of the Company. See "THE TENDER OFFER --SECTION 10. EFFECT
OF THE OFFER ON THE MARKET FOR THE SHARES; Nasdaq QUOTATION AND EXCHANGE ACT
REGISTRATION."
THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD"), BY UNANIMOUS VOTE OF ALL
DIRECTORS PRESENT AND VOTING, BASED UPON, AMONG OTHER THINGS, THE UNANIMOUS
RECOMMENDATION AND APPROVAL OF THE DIRECTORS OF THE COMPANY WHO ARE NOT OFFICERS
OF THE COMPANY OR COUNSEL TO THE COMPANY (THE "INDEPENDENT DIRECTORS"), HAS
DETERMINED THAT THE OFFER IS FAIR TO, AND IN THE BEST INTERESTS OF, THE PUBLIC
SHAREHOLDERS, AND RECOMMENDS THAT THE PUBLIC SHAREHOLDERS ACCEPT THE OFFER AND
TENDER THEIR SHARES PURSUANT TO THE OFFER.
The Board has received the written opinion of Rauscher Pierce Refsnes, Inc.
("Rauscher Pierce Refsnes") that the $2.15 net per Share cash consideration to
be offered to the Public Shareholders in the Offer is fair to such shareholders
from a financial point of view. See "SPECIAL FACTORS --
-4-
<PAGE>
OPINION OF RAUSCHER PIERCE REFSNES" for further information concerning the
opinion of Rauscher Pierce Refsnes.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9"), which is being mailed to Shareholders herewith.
The Common Stock is listed and traded on the National Association of
Securities Dealers Automated Quotation System ("Nasdaq") SmallCap Market, Inc.
under the ticker symbol "RAKO". On June 3, 1997, the last trading day before
the Company announced the Offer, the last sales price was $1.875 per share.
SHAREHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION
FOR THE COMMON STOCK.
Rawson-Koenig, Inc. as a public corporation originates from the Koenig family
blacksmith shop started in 1911. In 1977, Koenig Iron Works, Inc. was bought
by Keystone International, Inc. It was then spun-off as a separate public
company to the Keystone International, Inc. shareholders in 1983 and its name
was changed to Koenig, Inc. In 1987, Rawson Industries, Inc., a Texas
corporation, was merged into Koenig, Inc. with the Rawson Family acquiring 2.3
million shares of the Common Stock in exchange for their shares of Rawson
Industries, Inc.
The Rawson Family owns 2,342,102 shares of Common Stock (approximately 60% of
the issued and outstanding Shares of the Common Stock), and have informed the
Company that they do not intend to tender any Common Stock owned by them
pursuant to the Offer. The Company expects that Floyd A. Cailloux, holder of
282,214 Shares (approximately 7.2% of the issued and outstanding shares of
Common Stock of the Company), and that Joseph M. Scheer, Allen F. Rhodes and
Farrell G. Huber, Jr., being all of the Independent Directors, who hold in the
aggregate 99,097 Shares (approximately 2.5% of the issued and outstanding shares
of Common Stock of the Company), will each tender pursuant to the Offer. See
"SPECIAL FACTORS -- BENEFICIAL OWNERSHIP OF COMMON STOCK". The Company also
expects that Richard F. Koenig, an officer of the Company, will tender his
Shares pursuant to the Offer. In the event these shareholders tender all of
their Shares, and if these are the only Shares tendered, the Rawson Family will
then own approximately 66.60% of the then issued and outstanding shares of
Common Stock.
At June 3, 1997, (a) 3,901,190 shares of Common Stock were issued and
outstanding, (b) no shares of Common Stock were held in the treasury of the
Company and (c) no Shares were reserved for future issuance to employees
pursuant to any outstanding employee stock options. Prior to the announcement
of the Offer, there were approximately 1,400 holders of record of the issued and
outstanding shares of Common Stock.
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
PURPOSE AND BACKGROUND OF THE OFFER; CERTAIN EFFECTS OF THE OFFER; PLANS OF
COMPANY AFTER THE OFFER
The purpose of the Offer is to enable the Company to acquire as many Shares
as possible pursuant to the terms and conditions of the Offer, as a first step
in acquiring the entire equity interest
-5-
<PAGE>
in the Company held by the Public Shareholders. Following the completion of the
Offer, the Board intends to authorize a reverse stock split of the Common Stock
of 1 share for 100 shares, which will eliminate any remaining odd-lot Public
Shareholders (Public Shareholders owning less than 100 Shares) by making their
Shares fractional shares that will be purchased by the Company at the
appropriate multiple of the Offer Price prior to the reverse split. In
addition, if necessary to cause the Shares not to be listed for quotation by
Nasdaq, to terminate the registration of the Shares under the Exchange Act, and
to cash out any remaining Public Shareholders after the Offer and the reverse
split, the Company will enter into a merger agreement with RKI Acquisition,
Inc., a Texas corporation to be formed, which will be wholly owned by the Rawson
Family, and seek shareholder approval of the Merger in accordance with
applicable laws. It is contemplated that the per share consideration in the
Merger will be at the Offer Price as adjusted by the reverse stock split and
that after the Merger there will be no Public Shareholders of the Company. See
"THE TENDER OFFER -- SECTION 10. EFFECT OF THE OFFER ON THE MARKET FOR THE
SHARES; Nasdaq QUOTATION AND EXCHANGE ACT REGISTRATION." The net result of the
tender offer, the reverse split, and the Merger will be that the Company will
become a private company, the shares of which will be owned 100% by the Rawson
Family.
Under Texas Law, the approval of the Board and the affirmative vote of the
holders of 66 and 2/3rds% of the outstanding shares of Common Stock are required
to approve the Merger. The Board has not approved or adopted the Merger, and,
unless the Merger is consummated pursuant to the short-form merger provisions of
Texas Law as described below, the only other required corporate action by the
Company is the approval and adoption of the Merger by the affirmative vote of
the holders of at least 66 and 2/3rds% of the Common Stock. The Rawson Family
will not have sufficient voting power to cause the approval and adoption of the
Merger immediately after the Offer if no Shares other than the Shares of the
Independent Directors, Floyd A. Cailloux and the officers of the Company are
tendered, without the affirmative vote of other shareholders of the Company.
However, after the reverse stock split, the Rawson Family will have sufficient
voting power to cause the approval and adoption of the Merger without the
affirmative vote of any of the remaining shareholders of the Company.
Under Texas Law, if the Rawson Family's total percentage of stock ownership,
pursuant to the Offer and the reverse stock split (which will reduce the total
number of shares of Common Stock outstanding and thereby proportionately
increase the percentage ownership of the Rawson Family), is sufficient to equal
at least 90% of the Common Stock then outstanding, the Rawson Family will be
able to approve the Merger without a vote of the Company's other shareholders.
If, however, the percentage of ownership of the Rawson Family of the Common
Stock does not equal at least 90%, then in such case, a vote of the Company's
shareholders will be required under Texas Law, and a significantly longer period
of time may be required to effect the Merger. See "SPECIAL FACTORS -- RIGHTS OF
SHAREHOLDERS IN THE EVENT OF MERGER".
Following the consummation of the Offer, the reverse stock split and the
Merger, the Shares will no longer be quoted on Nasdaq and the registration of
the Shares under the Exchange Act will be terminated. Accordingly, following
the Merger there will be no publicly traded equity securities of the Company
outstanding and the Company will no longer be required to file periodic reports
with the Commission. See "THE TENDER OFFER -- SECTION 11. EFFECT OF THE OFFER
ON THE MARKET FOR SHARES; Nasdaq QUOTATION AND EXCHANGE ACT REGISTRATION".
All Shares purchased in the Offer will be held in the treasury of the Company
until the completion of the reverse stock split and, if necessary, the Merger,
at which time the Shares will be retired by the taking of all required corporate
action and filings with the office of the Texas Secretary of State.
-6-
<PAGE>
Since the Rawson Family acquired the majority ownership of the Company in
1987, the market price for the Company's stock has been essentially flat. The
public market has not responded to sustained profitability of the Company, and
the stock has remained very thinly traded.
In September 1995, an unaffiliated third party with substantial experience in
buying and selling companies approached Mr. Thomas Rawson, on an informal basis,
to discuss the potential of purchasing the Rawson Family's Common Stock in the
Company. The proposed price for the Rawson Family's Common Stock was the
current market price as reported on Nasdaq (at that time, $1.5625 per share).
Mr. Rawson indicated to said party that he had no interest in selling his shares
at that price.
Thereafter, in April 1996, Mr. Rawson was approached, again on an informal
basis, by another unaffiliated third party with substantial experience in buying
and selling companies, who indicated that he would be interested in exploring
the purchase of the Rawson Family's Common Stock for a price equal to the market
price of the Common Stock as reported on Nasdaq (at that time, $1.4375 per
share). Mr. Rawson's response was that he had no interest in selling the shares
at that price.
Following the initial contacts, Mr. Rawson has been further contacted at
different times by each of said third parties (or their respective
representatives) to determine if Mr. Rawson had reconsidered his prior response
to their proposed offers. Mr. Rawson's response has uniformly been that he has
no interest in selling the shares at the proposed price, which has consistently
been the current market price as reported on Nasdaq.
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 non-income
producing time expended by Company management, the legal, accounting and other
expenses involved in the preparation of annual and other periodic reports, as
well as similar expenses and costs of printing and mailing proxy solicitation
materials and Annual Reports are considerable. Additionally, the Company's
management believes that required public disclosures under the Exchange Act have
given its competitors, who are not similarly burdened, certain information and
insights about the Company's operations which have helped them in competing with
the Company.
The Company has been unable to utilize the Common Stock effectively for
acquisitions, financing, or employee incentives because of its low market price
and low trading volume, and so has been unable to realize some of the principle
benefits of public ownership.
For these reasons, the Rawson Family informed the Board of Directors of the
Company (the "Board") on March 7, 1997 that they desired to convene a meeting of
the Board on March 20, 1997 for the purpose of further exploring the feasibility
of a "going private" transaction. In prior conversations with investment
bankers, the Rawson Family had discussed generally the possibility of such a
transaction, and had discussed with the Company's principal lender the
possibility of providing financing to the Company for such a transaction.
At the March 20, 1997 Board meeting, a general discussion was held concerning
the proposed transaction, and the Board determined that the proposed transaction
should be explored and formed a committee of independent directors consisting of
Allen F. Rhodes, Farrell G. Huber, Jr. and Joseph M. Scheer (the "Independent
Directors"). The committee of Independent Directors was given the authority to
accept bids and recommend to the Board a reputable and experienced brokerage
firm to render a fairness opinion to the Board relating to the proposed
transaction. The Independent Directors did not retain an unaffiliated
representative to act solely on behalf of the Public Shareholders for the
purposes of negotiating the terms of the Offer or the preparation of a report
concerning the fairness of the Offer.
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Thereafter, at a subsequent Board meeting held on May 6, 1997, following a
report to the Board by the committee of Independent Directors, the firm of
Rauscher Pierce Refsnes was retained for this purpose.
A further meeting of the Board was held on May 27, 1997, at which
representatives of Rauscher Pierce Refsnes presented their preliminary report to
the Board concerning their opinion as to the fairness, from a financial point of
view, of the Offer Price to the Public Shareholders, and were questioned by the
Board concerning the methods used and factors considered by Rauscher Pierce
Refsnes in rendering the preliminary report.
The Rawson Family has informed the Board that, assuming the completion of the
Offer and the Merger, they have no present intention that the Company will
change its fundamental business, sell or otherwise dispose of any material part
of its business, merge, liquidate or otherwise wind-up its business. The Rawson
Family has further agreed with the Company that in the event that there is
relating to the Company (or any successor to the Company): (i) a change in
control (other than by death of a member of the Rawson Family or by inter-vivos
for estate planning purposes by any member of the Rawson Family), (ii) a
disposition of substantially all of the assets, or (iii) a liquidation
(collectively, a "Transaction") at any time within three years following the
later of the date of consummation of the Offer or the date of consummation of
the Merger, which Transaction results in the receipt by the Rawson Family of a
sum in excess of $8,387,558.50 (the "Excess Proceeds") i.e., the Offer Price
multiplied by the 3,901,190 Shares currently issued and outstanding, 40% (i.e.,
the ownership percentage of the Company held by persons other than the Rawson
Family) of the Excess Proceeds will be paid over proportionately to each of the
Public Shareholders who tender Shares pursuant to the Offer, provided however,
that in the event that any Public Shareholder tenders only a portion of his
Shares pursuant to the Offer, such Public Shareholder will share the Excess
Proceeds only in the ratio that the Shares tendered by such Public Shareholder
bears to the total number of Shares tendered by all Public Shareholders.
The Company anticipates that each of its current directors will remain as
directors of the Company following the consummation of the Offer, the reverse
split, and, if necessary, the Merger.
RIGHTS OF SHAREHOLDERS IN THE EVENT OF MERGER
No appraisal rights are available in connection with the Offer. However, if
the Merger is consummated, shareholders who have not tendered their Shares will
have certain rights under Texas Law to dissent and demand appraisal of, and to
receive payment in cash of the fair value of their Shares, unless the Offer and
the reverse split result in the Rawson Family owning at least 90% of the then-
issued and outstanding Common Stock. Such rights to dissent, if the statutory
procedures are complied with, could lead to a judicial determination of the fair
value of the Shares, as of the day prior to the date on which the shareholders'
vote was taken approving the Merger (excluding any element of value arising from
the accomplishment or expectation of the Merger), required to be paid in cash to
such dissenting shareholders for their Shares. In addition, such dissenting
shareholders would be entitled to receive payment of a fair rate of interest
beginning 91 days after the date of the Merger to the date of such judgment on
the amount determined to be the fair value of their Shares. 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 earning capacity. In Parkview
v. Waco Construction, Inc., the Texas Court of Appeals stated, among other
things, that "a qualified appraiser appointed by the Court shall have the power
to examine any of the books and records of the corporation the shares of which
he is charged with valuing and he shall make a determination of the fair value
of the shares upon such investigation as to him may seem proper. The appraiser
shall also afford a reasonable opportunity to the parties interested to submit
to him pertinent evidence as to the value of the shares." 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.
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In addition, Texas courts have held that, in certain circumstances, a
controlling shareholder of a company involved in a merger has a fiduciary duty
to other shareholders that requires that the merger be fair to such other
shareholders. In determining whether a merger is fair to minority shareholders,
Texas courts have considered, among other things, the type and amount of
consideration to be received by the shareholders and whether there was fair
dealing among the parties. The Texas Court of Appeals stated in Gannon v. Baker
that the remedy ordinarily available to minority stockholders in a cash-out
merger is the right to appraisal described above. However, a damages remedy may
be available if a merger is found to be the product of fraud or irregularity.
See Schedule III attached hereto for a description of appraisal rights under
Texas Law, as well as a reproduction of the text of Articles 5.11, 5.12, 5.13,
and 5.16 of the Texas Business Corporation Act.
RECOMMENDATION OF THE COMPANY'S BOARD; FAIRNESS OF THE OFFER
RECOMMENDATION OF THE COMPANY'S BOARD. On May 27, 1997, the Board, by
unanimous vote of all directors present and voting, based in part on the
unanimous recommendation and approval of the Independent Directors, determined
that the Offer is fair to and in the best interests of the Public Shareholders
of the Company, subject only to receipt of a final report and opinion of
Rauscher Pierce Refsnes, and a firm commitment from the Company's principal
lender to provide financing. The Board, by a unanimous vote of all directors
present and voting, has recommended that all Public Shareholders accept the
Offer and tender their Shares pursuant to the Offer.
FAIRNESS OF THE OFFER. In reaching its determinations referred to
immediately above, the Board considered the following factors, each of which, in
the view of the Independent Directors as well as the other members of the Board,
supported such determinations:
(a) the historical market prices and recent trading activity of the
Shares, including the fact that the $2.15 net per Share cash consideration to
be paid to the Public Shareholders in the Offer represents a premium of
$0.275 per share over the last reported sales price on the last full trading
day preceding the public announcement of the Offer and a $ 0.40 per share
premium over the average closing price for the thirty days prior to May 30,
1997;
(b) the large number of odd-lot shareholders (approximately 75% of
shareholders of record as of June 13, 1997), largely attributable to the
"spin-off" of the Company by Keystone International, Inc. to its
shareholders, who by virtue of the low trading volume in the Shares, the
brokerage fees associated with sales, and the low market price of the shares,
are unable to realize any appreciable benefit on the sale of their Shares;
(c) the fact that two previous informal cash offers by independent,
experienced outside third parties for a controlling interest in the Company
were proposed at a price equal to the market price of the Common Stock as
reported on Nasdaq at the time of the offers;
(d) the opinion of Rauscher Pierce Refsnes that the consideration to be
offered to the Public Shareholders is fair to such shareholders from a
financial point of view and the Report and analysis presented by Rauscher
Pierce Refsnes, which included discussion and analysis of other offers to
purchase, historical trading volume and market prices, multiples of net
income, cash flow from operations, book value, orderly liquidation value and
various other factors;
(e) the market price for the Shares has not consistently reflected the
continued profitability and growth of the Company due to the relatively small
public float, the control of the Rawson Family and the margin potential of
the Company's business; the highest bid price for the Shares has not exceeded
the Offer Price during the last two years;
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(f) the structure of the transaction, which is designed, among other
things, to result in the receipt by the Public Shareholders of cash
consideration at the earliest practicable time without any brokerage fees;
(g) the fact that the Company has never in its history paid a cash
dividend to the holders of Common Stock, and the expectation that no such
cash dividends are expected to be paid in the foreseeable future;
(h) the stated unwillingness of the Rawson Family to consider a sale of
their majority interest in the Company, which made pursuit of other potential
alternatives (such as sale of the Company as a going concern or a business
combination with another company) impracticable;
(i) even though the liquidation value may exceed the Offer Price, the
intention of the Rawson Family to continue the business as a going concern
makes any consideration of liquidation of the Company or values that
ultimately might be obtained from such a liquidation highly speculative,
especially when considered in conjunction with the right of the tendering
Public Shareholders to participate prorata for three years in any excess over
the Offer Price after such a transaction;
(j) the voluntary nature of the Offer; and
(k) the availability of dissenters' rights under Texas Law in the event
of the Merger.
The members of the Board, including the Independent Directors, evaluated the
various factors listed above in light of their knowledge of the business,
financial condition and prospects of the Company, and based on the advice of
financial and legal advisors. Certain projections were prepared internally for
use by the Board and its financial advisors. These projections assumed a 6.6%
increase in sales (based on the average increase in sales during the two most
recently completed years), and a cost of sales at 76.85% of sales (derived from
1996 actual figures). In light of the number and variety of factors that the
Board and the Independent Directors considered in connection with their
evaluation of the Offer, neither the Board nor the Independent Directors found
it practicable to assign relative weights to the foregoing factors, and ,
accordingly, neither the Board nor the Independent Directors did so. In addition
to the factors listed above, the Board and the Independent Directors had each
considered the fact that consummation of the Offer would eliminate the
opportunity of the Public Shareholders 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 price of $2.15 net per Share to be paid in the
Offer, as well as the agreement of the Rawson Family to share any excess
proceeds from a private sale of the Company within three (3) years after the
consummation of the Offer. See "SPECIAL FACTORS -- PURPOSE AND BACKGROUND OF THE
OFFER; CERTAIN EFFECTS OF THE OFFER; PLANS OF COMPANY AFTER THE OFFER.
OPINION OF RAUSCHER PIERCE REFSNES
Rauscher Pierce Refsnes has acted as financial advisor to the Board in
connection with the Offer. As part of its role as financial advisor, Rauscher
Pierce Refsnes was engaged to render to the Board an opinion as to the fairness,
from a financial point of view, of the Offer Price to the Company's Public
Shareholders. See "SPECIAL FACTORS -- PURPOSE AND BACKGROUND OF THE OFFER;
CERTAIN EFFECTS OF THE OFFER; PLANS OF COMPANY AFTER THE OFFER".
At its meeting on May 27, 1997 to consider and vote on the Offer, the Board
received a preliminary report and an oral opinion from Rauscher Pierce Refsnes
(subsequently confirmed by delivery of a final report and a written opinion
dated May 27, 1997) that, as of such date, the cash consideration of $2.15 per
share to be received by the Public Shareholders of the Company pursuant to the
Offer, is fair to the Public Shareholders of the Company from a financial point
of view. Rauscher Pierce Refsnes' opinion related only to the consideration to
be paid pursuant to the Offer and does not constitute a recommendation to any
Public Shareholder as to whether to tender his or her shares in connection with
the Offer. The full text of Rauscher Pierce Refsnes' opinion and report, which
summarizes the assumptions made, procedures followed and matters considered in
connection with such opinion, is attached as Schedule II hereto and is
incorporated herein by reference. THE PUBLIC SHAREHOLDERS ARE URGED TO READ THE
OPINION AND REPORT IN THEIR ENTIRETY, ESPECIALLY WITH REGARD TO THE ASSUMPTIONS
MADE AND MATTERS CONSIDERED BY RAUSCHER PIERCE REFSNES.
In connection with their opinion, Rauscher Pierce Refsnes reviewed, among
other things: (i) the preliminary Tender Offer Information Circular dated May
20, 1997; (ii) the Company's Annual Reports on Form 10-K for the years 1993,
1994, 1995 and 1996; (iii) certain internal financial analyses and forecasts for
the Company for the years 1997 through 2001 prepared by its management; and (iv)
the Company's profile and product literature. Rauscher Pierce Refsnes also held
discussions with members of the senior management of the Company regarding its
assets and liabilities, past and current business operations, financial
condition and future prospects. In addition, Rauscher Pierce Refsnes reviewed
the reported price and trading activity for the shares of Common Stock, compared
certain financial and stock market information for the Company with similar
information for certain other companies and performed such other analyses and
studies as Rauscher Pierce Refsnes deemed appropriate.
Rauscher Pierce Refsnes relied without independent verification upon the
accuracy and completeness of all the financial and other information reviewed
by them for purposes of their opinion and assumed that the financial forecasts
provided to them were reasonably prepared on a basis reflecting the best
currently available estimates and judgments of the management of the Company as
to its expected future financial performance as currently configured and after
giving effect to the consummation of the Offer, the reverse stock split and the
Merger. In addition, Rauscher Pierce Refsnes has not made an independent
evaluation or appraisal of the assets and liabilities of the Company, but did
consider the appraised value of the real estate, machinery and equipment of the
Company, which appraisals were commissioned by Bank One, Texas N.A. in
connection with the financing of the Offer. See "THE TENDER OFFER--SECTION 8.
FINANCING OF THE OFFER AND THE MERGER".
The following is a summary of certain financial analyses performed by
Rauscher Pierce Refsnes in connection with providing their written opinion dated
May 27, 1997 to the Board of Directors. Rauscher Pierce Refsnes reviewed these
financial analyses with the Board of Directors at its meeting on May 27, 1997.
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MARKET PRICE FOR COMMON STOCK. Rauscher Pierce Refsnes reviewed the trading
history of the Common Stock and determined that the Offer Price represented a
significant premium over recent historic market prices for Common Stock. In
arriving at this conclusion, Rauscher Pierce Refsnes examined the average daily
market price at the following dates and for the following periods: (i) May 27,
1997, the date of the meeting of the Board of Directors ($1.75); (ii) average
for 7 days prior to such date ($1.72); (iii) average for 14 days prior to such
date ($1.75); (iv) average for 30, 60, and 90 days prior to such date (all
$1.76); and (v) average for 120 days prior to May 27, 1997 ($1.74). Rauscher
Pierce Refsnes also tracked the Common Stock's trading price and volume for the
period from January 1, 1995 to May 27, 1997, the date of their opinion. Rauscher
Pierce Refsnes concluded that (i) while the highest market price per share of
Common Stock since January 1, 1995 was $2.25 per share on February 17, 1995,
since January 2, 1996, the market price has not been above $2.125 per share;
(ii) since July 1, 1996, the market price has not been above $2.00 per share;
and (iii) the Offer Price represents an approximate 20% premium over recent
historical market prices for the Common Stock. Rauscher Pierce Refsnes considers
a premium from 20-30% as being a normal range for the take-over of a public
company. While acknowledging the existence of higher and lower premiums,
Rauscher Pierce Refsnes considered the Common Stock's recent trading history as
favorable to its opinion as to the fairness of the consideration to be received
by the Public Shareholders pursuant to the terms of the Offer.
LIMITED INTEREST IN THE ACQUISITION OF THE COMPANY OR ITS OPERATIONS. Based
on interviews with senior management of the Company, Rauscher Pierce Refsnes
concluded that there had been limited interest in purchasing all or part of
the Company. Since January 1, 1995, only two informal offers to purchase the
Company were made. On September 6, 1995 and on April 23, 1996, respectively,
well informed, competent buyers expressed an interest in purchasing the Company
for the then current market price of the Common Stock, which was $1.5625 per
share and $1.4375, respectively. Both offers, which were declined by the
Company, were extended at 27.3% and 33.1%, respectively, below the Offer Price.
Rauscher Pierce Refsnes did not contact any prospects regarding the purchase of
the Company.
ANALYSIS OF POTENTIAL LIQUIDATION VALUE. Rauscher Pierce Refsnes also
prepared an analysis which, based on forecasts of the Company's management and
appraisals obtained in connection with the financing of the Offer, attempted to
estimate what an unaffiliated party might pay for the Company. See "THE TENDER
OFFER--SECTION 8. FINANCING OF THE OFFER AND THE MERGER". Based on interviews
with management, Rauscher Pierce Refsnes estimated the Company's orderly
liquidation value to be approximately $2.l9 per share, which is close to the
proposed consideration to the Public Shareholders of $2.15 per share. Pursuant
to informal, independent estimates of the orderly liquidation values of the
Company's assets near May 22, 1997, the estimated total "orderly liquidation
value" would be $6,903,525 for the Company's fixed assets. While the $2.19 per
share liquidation value is in excess of the Offer Price, the liquidation value
is subject to uncertainties inherent in estimates of fair market value at
liquidation and may fairly be viewed as less attractive than a firm current
offer at $2.15 per share. Moreover, even if $2.19 were a firm liquidation
valuation, Rauscher Pierce Refsnes believes that the Offer Price would still be
fair consideration to the Public Shareholders from a financial point of view.
DISCOUNTED CASH FLOW ANALYSIS. Rauscher Pierce Refsnes performed discounted
cash flow analyses of the projected free cash flows of the Company for the
fiscal years 1997 through 2001 based on internal estimates of the management of
the Company and based on a terminal value of 6x the 2001 cash flow. Estimated
cash flows were discounted at 15, 20 and 25%, respectively, resulting in net
present values per share of $2.13, $1.77 and $1.49, respectively, as compared to
the consideration payable pursuant to the Offer of $2.15 per share.
PRICE/MULTIPLE ANALYSIS. Rauscher Pierce Refsnes also considered the
multiples resulting from a comparison of the Offer Price times the total number
of shares of outstanding Common Stock (approximately $8,387,559 or $2.15 per
share) to selected Company financial information. Total consideration of
$8,387,559 results in the following multiples: (i) 7.6x net income for the year
ended December 31, 1996; (ii) 7.7x estimated net income of $0.28 per share for
the year ending December 31, 1997; (iii) 7.4x estimated net income of $0.29 per
share for the year ending December 31, 1998; (iv) 5.2x cash flow from operations
(net income plus depreciation and amortization plus losses and minus gains on
asset sales plus deferred taxes) of $0.41 per share for the year ended December
31, 1996; (v) 4.9x estimated cash flow from operations of $0.44 per share for
the year ending December 31, 1997; (vi) 4.7x estimated cash flow from operations
of $0.46 per share for the year ending December 31, 1998; and (vii) 1.1x book
value of $1.97 per share on March 31, 1997. The conclusions reached by Rauscher
Pierce Refsnes in this analysis were not considered significant to its
conclusion as to the fairness of the cash consideration being offered to the
Public Shareholders.
ANALYSES OF SELECTED PUBLICLY TRADED SOMEWHAT COMPARABLE COMPANIES. Rauscher
Pierce Refsnes compared the Company to 50 public Auto/Truck Parts and Equipment
Supply Companies. The 50 public companies trade (adjusted for data which
includes unusually high or low ratios) with the following ratios: (i) price to
sales: 4.0x high, 0.2x low, 0.9x average; (ii) price to book value: 5.3x high,
1.1x low, 2.4x average; (iii) price to earnings (last 12 months): 43.7x high,
9.0x low, 17.8x average; (iv) estimated price to earnings for 1997: 40.4x high,
9.3x low, 14.2x average; (v) estimated price to earnings for 1998: 25.7x high,
7.3x low, 11.5x average; (vi) price to cash flow (last 12 months): 34.7x high,
2.7x low, 10.9x average.
Due to the fact that these public companies are significantly larger than the
Company and that the Company's direct competitors are not publicly traded,
Rauscher Pierce Refsnes did not consider any of the data generated from the
analysis described above to be significant to the rendering of its fairness
opinion. Despite efforts (in cooperation with the Company) to identify
comparable companies, Rauscher Pierce Refsnes concluded that none of the
companies included in its analysis were sufficiently comparable to the Company
to make the analyses relevant for Rauscher Pierce Refsnes' fairness opinion.
ANALYSES OF COMPARABLE MERGERS AND ACQUISITIONS. Using publicly available
information, Rauscher Pierce Refsnes reviewed, among other things, the implied
transaction multiples paid or proposed to be paid in the following 10 selected
transactions in the automotive products industry consisting of
(acquiror/target): Tomkins PLC/Stant Corp; Scotsman Industries Inc/Kysor
Industrial Corp; Tower Automotive (Hidden Creek)/Automotive Products (AO Smith);
Northern Trust
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Co/Arvin Industries Inc; Intermet Corp/Sudbury Inc; Park-Ohio Industries
Inc/Sudbury Inc; Lear Corp/Masland Corp; Borg-Warner Automotive Inc/Coltec
Industries-Holley Automotive; Motor Wheel Corp/Hayes Wheels International; and
Eaton Corp/CAPCO Automotive Products Corp. Rauscher Pierce Refsnes developed
multiples of transaction value to sales (average 0.8x), enterprise value to EBIT
(average 9.4x), transaction value to net income (average 17.3x), transaction
value to cash flow (average 9.9x), transaction value to net assets (average
2.5x), and premium one day prior to announcement date (average 24.1%).
Due to the inherent differences between the operations of the Company and the
selected companies involved in comparable acquisitions, Rauscher Pierce Refsnes
believes that a purely quantitative comparable transaction analysis is only one
of several factors to be considered in its opinion and not a very important
factor in Rauscher Pierce Refsnes' analysis of the fairness of the consideration
to be paid to the Public Shareholders in connection with the Offer.
OTHER ANALYSES. Rauscher Pierce Refsnes considered other factors in arriving
at its opinion that the consideration to be received by the Public Shareholders
is fair to such shareholders from a financial point of view. These
considerations included: the ability of each shareholder to accept or reject the
Offer; the fact that the Company currently pays no cash dividends on its Common
Stock and that no cash dividends are expected in the foreseeable future; the
lack of normal arm's length negotiation in determining the Offer Price; and the
fact that there are no hidden assets that might add substantial value to the
Company.
Although considered individually, no one of these other analyses was
determined by Rauscher Pierce Refsnes to be highly significant. Taken together,
Rauscher Pierce Refsnes determined that these other analyses supported the
reasonableness of its determination of the fairness of the consideration.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. While
Rauscher Pierce Refsnes considered many factors, none were dispositive and none
were given any particular weight in rendering its fairness opinion. Selecting
portions of the analyses or of the summary set forth above, without considering
the analyses as a whole, could create an incomplete view of the processes
underlying Rauscher Pierce Refsnes' opinion. In arriving at their fairness
determination, Rauscher Pierce Refsnes considered the results of all such
analyses. No company or transaction used in the above analyses as a comparison
is very comparable to the Company or the contemplated transaction. The analyses
were prepared solely for purposes of Rauscher Pierce Refsnes providing its
opinion to the Board of Directors as to the fairness of the consideration to the
holders of the Common Stock and do not purport to be appraisals or necessarily
reflect the prices at which businesses or securities actually may be sold.
Analyses based upon forecasts of future results are not necessarily indicative
of actual future results, which may be significantly more or less favorable than
suggested by such analyses. Because such analyses are inherently subject to
uncertainty, being based upon numerous factors or events beyond the control of
the parties or their respective advisors, none of the Company, Rauscher Pierce
Refsnes or any other person assumes responsibility if future results are
materially different from those forecasts. As described above, Rauscher Pierce
Refsnes' opinion and presentation to the Board of Directors is one of many
factors taken into account by the Board in making its determination to approve
the Offer. The foregoing summary does not purport to be a complete description
of the analyses performed by Rauscher Pierce Refsnes and is qualified by
reference to the written opinion of Rauscher Pierce Refsnes set forth in
Schedule II hereto.
Rauscher Pierce Refsnes, as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements, and valuations for estate, corporate and other purposes. Rauscher
Pierce Refsnes is familiar with the Company, having acted as its financial
advisor in connection with the preparation of the Offer. The Independent
Directors selected Rauscher Pierce Refsnes as the Company's financial advisor
because Rauscher Pierce Refsnes is a nationally recognized investment banking
firm that has substantial experience in transactions similar to the Offer, the
reverse stock split, and the Merger.
Pursuant to a letter agreement dated May 5, 1997 (the "Engagement Letter"),
the Company engaged Rauscher Pierce Refsnes to act as the Company's financial
advisor. Pursuant to the terms of the Engagement Letter, the Company agreed to
pay to Rauscher Pierce Refsnes a fee of $25,000 on the date of the Engagement
Letter, plus an additional $25,000 upon delivery of the opinion. The Company
has agreed to reimburse Rauscher Pierce Refsnes for its reasonable
out-of-pocket expenses, including the fees and disbursements to attorneys, and
to indemnify Rauscher Pierce Refsnes against certain liabilities in connection
with the engagement.
INTERESTS OF CERTAIN PERSONS IN THE OFFER AND THE MERGER
In considering the recommendation of the Board and the Independent Directors
with respect to the Offer and the fairness of the consideration to be received
in the Offer and the Merger (if necessary), shareholders 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 potential conflicts
of interest. As a result of the Rawson Family's current ownership of
approximately 60% of the outstanding shares of Common Stock, Thomas C. Rawson
(Chairman of the Board, Director and Chief Executive Officer of the Company),
Catherine A. Rawson (Director, President and Principal Financial Officer of the
Company), and Pamela Y. Rawson (a Director of the Company) may be deemed to
control the Company. The Board was aware of these actual and potential
conflicts of interest and
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considered them along with the other matters described under "SPECIAL FACTORS --
RECOMMENDATION OF THE COMPANY'S BOARD; FAIRNESS OF THE OFFER".
The Rawson Family has informed the Company that they do not intend to tender
any Common Stock owned by them pursuant to the Offer. The Company expects that
Floyd A. Cailloux, holder of 282,214 Shares (approximately 7.2% of the issued
and outstanding shares of Common Stock of the Company), and that Joseph M.
Scheer, Allen F. Rhodes and Farrell G. Huber, Jr., being all of the Independent
Directors, who hold in the aggregate, 99,097 Shares (approximately 2.5% of the
issued and outstanding shares of Common Stock of the Company), will each tender
their Shares pursuant to the Offer. See "SPECIAL FACTORS -- BENEFICIAL
OWNERSHIP OF COMMON STOCK". The Company also expects that Richard F. Koenig, an
officer of the Company and certain other employees of the Company who are not
members of the Rawson Family will tender their Shares pursuant to the Offer.
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BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information, as of June 3, 1997,
regarding the ownership of Common Stock by each person known by the Company to
be the beneficial owner of more than 5% of the outstanding Common Stock, each
director of the Company, the Chief Executive Officer of the Company, the other
officers of the Company, and all executive officers and directors of the Company
as a group:
Shares of Common
Stock Beneficially
Owned As Of Percentage of
Name June 3, 1997 Class Owned
Floyd A. Cailloux
P.O. Box 1952
Kerrville, TX 78028 282,214 7.2
Farrell G. Huber, Jr.
7701 Texas Avenue
Houston, TX 77056 1,900 *1
Richard F. Koenig
2301 Central Parkway
Houston, TX 77092 3,063 *1
Catherine A. Rawson
2301 Central Parkway
Houston, TX 77092 1,161,261/1/ 60.0/1/
Thomas C. Rawson
2301 Central Parkway
Houston, TX 77092 1,180,841 60.0/3/
Pamela Y. Rawson
2301 Central Parkway
Houston, TX 77092 1,180,841 60.0/2/
Allen F. Rhodes
5643 Ella Lee Lane
Houston, TX 77056 12,197 *1
Joseph M. Scheer
16262 Dorilee Lane
Encino, CA 91436 85,000 2.2
All directors and officers as a group 2,444,262 62.7
/1/ Represents less than 1% of the issued and outstanding shares.
/2/ Shares are held by the Rawson Family Limited Partnership that is controlled
by Catherine A. Rawson.
/3/ Catherine A. Rawson, Thomas C. Rawson and Pamela Y. Rawson constitute a
"group" as such term is defined under applicable regulations of the Securities
and Exchange Commission. Therefore, the share ownership percentage of the entire
group is listed by each individual's name. In the case of Thomas C. Rawson and
Pamela Y. Rawson ownership of shares held or to be held by either such person
are assumed to be beneficially owned by such other person due to their marital
relationship.
-14-
<PAGE>
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 -- SECTION 13. FEES AND
EXPENSES".
<TABLE>
<CAPTION>
<S> <C>
Legal Fees................ $125,000
Printing and Mailing...... 30,000
Filing Fees............... 1,000
Depositary Fees........... 10,000
Information Agent Fees.... 12,000
Dealer Manager Fees....... 78,000
Investment Bankers' Fees.. 50,000
Accountants' Fees......... 25,000
Miscellaneous............. 19,000
--------
Total $350,000
========
</TABLE>
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 will pay for, all Shares validly tendered prior to the
Expiration Date (as hereinafter defined) and not withdrawn as permitted by "THE
TENDER OFFER -- SECTION 4. WITHDRAWAL RIGHTS". The term "Expiration Date"
means 12:00 midnight, New York City time, on Friday, , 1997, 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 -- SECTION 11. 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 shareholder to withdraw such
shareholder's Shares. See "THE TENDER OFFER -- SECTION 4. 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 -- SECTION 12.
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 -- SECTION 11. CERTAIN CONDITIONS OF
THE OFFER" prior to the Expiration Date 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
-15-
<PAGE>
occurrence of any of the conditions specified in "THE TENDER OFFER -- SECTION
11. 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 Shareholders in a manner reasonably designed to inform them of
such changes) and without limiting the manner in which Purchaser may choose to
make any public announcement, Purchaser 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 the
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.
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 Shares being sought or such
increase or decrease in the consideration being offered will be applicable to
all shareholders 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 the Offer, a "business day" means any day other
than a Saturday, Sunday or federal holiday and consists of the time period from
12:01 a.m. through 12:00 midnight, New York City time.
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 shareholder 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 shareholder
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 will pay for, all Shares validly tendered
prior to the Expiration Date and not properly withdrawn, 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 -- SECTION 11.
CERTAIN CONDITIONS OF THE OFFER" prior to the Expiration Date. 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 -- SECTION 12. 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 or the
Philadelphia Depository Trust Company (each, a "Book-Entry Transfer Facility"
and, collectively, the "Book-Entry Transfer Facilities") pursuant to the
procedures set forth in "THE TENDER OFFER -- SECTION 3.
-16-
<PAGE>
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 shareholders for the purpose of receiving payments from the Company
and transmitting such payments to tendering shareholders 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.
If any tendered Shares are not accepted for payment for any reason pursuant
to the terms and conditions of the Offer, or if Share Certificates are submitted
evidencing more Shares than are tendered, Share Certificates evidencing
unpurchased Shares will be returned, without expense to the tendering
Shareholder (or, in the case of Shares tendered by book-entry transfer into the
Depositary's account at a Book-Entry Transfer Facility pursuant to the procedure
set forth in "THE TENDER OFFER -- SECTION 3. PROCEDURES FOR ACCEPTING THE OFFER
AND TENDERING SHARES", such Shares will be credited to an account maintained at
such Book-Entry Transfer Facility), as promptly as practicable following the
expiration or termination of the Offer.
If, prior to the Expiration Date, the Company shall increase the
consideration offered to any holders of Shares pursuant to the Offer, such
increased consideration will be paid to all holders of Shares that are purchased
pursuant to the Offer, whether or not such Shares were tendered prior to such
increase in consideration.
The Company reserves the right to transfer or assign, in whole or from time
to time in part, to one or more of its affiliates, the right to purchase all or
any portion of the Shares tendered pursuant to the Offer, but any such transfer
or assignment will not relieve the Company of its obligations under the Offer
and will in no way prejudice the rights of tendering shareholders to receive
payment for Shares validly tendered and accepted for payment pursuant to the
Offer.
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 shareholder has not delivered a
Letter of Transmittal), in each case prior to the Expiration Date, or (ii) the
tendering shareholder 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 acknowledgement from the participant in such
Book-Entry Transfer Facility tendering the Shares that are the subject of 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.
-17-
<PAGE>
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 SHAREHOLDER, 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 Facilities 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 any 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 shareholder 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 Instruction. 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 made, or a Share Certificate not accepted for payment or not tendered 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 5 of the
Letter of Transmittal.
GUARANTEED DELIVERY. If a shareholder desires to tender Shares pursuant to
the Offer and the Share Certificates evidencing such shareholder's Shares are
not immediately available or such shareholder cannot deliver the Share
Certificates and all other required documents to the Depositary prior to the
Expiration Date, or such shareholder 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:
(i) such tender is made by or through an Eligible Institution;
(ii) 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
(iii) 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
-18-
<PAGE>
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.
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 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 shareholder, whether or not similar defects or irregularities
are waived in the case of other shareholders. 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 Dealer Manager, 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.
OTHER REQUIREMENTS. By executing the Letter of Transmittal as set forth
above, a tendering shareholder irrevocably appoints designees of the Company as
such shareholder's proxies, each with full power of substitution, in the manner
set forth in the Letter of Transmittal, to the full extent of such shareholder's
rights with respect to the Shares tendered by such shareholder and accepted for
payment by the Company (and with respect to any and all other Shares or other
securities issued or issuable in respect of such Shares on or after May 31,
1997). 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 shareholder 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 shareholder (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 shareholder as they in
their sole discretion may deem proper at any annual or special meeting of the
Company's shareholders or any adjournment or postponement thereof, by written
consent in lieu of any such meeting or otherwise.
The acceptance for payment by the Company of Shares pursuant to any of the
procedures described above will constitute a binding agreement between the
tendering shareholder and the Company upon the terms and subject to the
conditions of the Offer.
TO PREVENT BACKUP FEDERAL INCOME TAX WITHHOLDING WITH RESPECT TO PAYMENT TO
CERTAIN SHAREHOLDERS OF THE PURCHASE PRICE OF SHARES PURCHASED PURSUANT TO THE
OFFER, EACH SUCH SHAREHOLDER MUST PROVIDE THE DEPOSITARY WITH SUCH SHAREHOLDER'S
CORRECT TAXPAYER IDENTIFICATION NUMBER AND CERTIFY THAT SUCH
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<PAGE>
SHAREHOLDER 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 SHAREHOLDER, THE DEPOSITARY IS REQUIRED TO
WITHHOLD 31% OF ANY PAYMENTS MADE TO SUCH SHAREHOLDER. SEE INSTRUCTION 9 OF THE
LETTER OF TRANSMITTAL.
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 , 1997.
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 for any
reason, then, without prejudice to the Company's rights under 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
shareholders 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 -- SECTION 3. 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 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 Dealer
Manager, 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 following one of the
procedures described in "THE TENDER OFFER -- SECTION 3. PROCEDURES FOR
ACCEPTING THE OFFER AND TENDERING SHARES".
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The receipt of cash for Shares
pursuant to the Offer will be a taxable transaction for federal income tax
purposes and may also be a taxable transaction under applicable state, local or
foreign tax laws. In general, a shareholder will recognize gain or loss for
federal income tax purposes equal to the difference between the amount of cash
received in exchange for the Shares sold and such shareholder's adjusted tax
basis in such Shares. Assuming the Shares constitute capital assets in the
hands of the shareholder, such gain or loss will be capital gain or loss and
will be long-term capital gain or loss if the holder will have held the Shares
for more than one year at the time of the sale. Gain or loss will be calculated
separately for each block of Shares tendered pursuant to the Offer.
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<PAGE>
In general, in order to prevent backup federal income tax withholding at a
rate of 31% on the cash consideration to be received in the Offer, each
shareholder who is not otherwise exempt from such requirements must provide such
holder's correct taxpayer identification number (and certain other information)
by completing the Substitute Form W-9 in the Letter of Transmittal.
THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE TO CERTAIN TYPES OF
SHAREHOLDERS, INCLUDING BROKER-DEALERS, SHAREHOLDERS WHO ACQUIRED
SHARES PURSUANT TO THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS
COMPENSATION, INDIVIDUALS WHO ARE NOT CITIZENS OR RESIDENTS OF THE UNITED STATES
AND FOREIGN CORPORATIONS.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND IS BASED UPON PRESENT LAW. SHAREHOLDERS ARE URGED TO
CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE
OFFER TO THEM, INCLUDING THE APPLICATION AND EFFECT OF THE ALTERNATIVE MINIMUM
TAX, AND STATE, LOCAL AND FOREIGN TAX LAWS.
6. PRICE RANGE OF SHARES; DIVIDENDS. The Shares are listed and principally
traded on Nasdaq SmallCap Market, Inc. under the ticker symbol "RAKO". The
following table sets forth the high and low bid and ask prices per Share during
the quarters indicated:
<TABLE>
<CAPTION>
Bid Ask
High Low High Low
Year Ended December 31, 1995:
- -----------------------------
<S> <C> <C> <C> <C>
First Quarter 2-1/16 1-5/8 2-5/16 1-3/4
Second Quarter 1-13/16 1-13/16 2 1-15/16
Third Quarter 1-7/8 1-1/2 2 1-5/8
Fourth Quarter 1-3/4 1-1/8 2 1-3/8
Year Ended December 31, 1996:
- ---------------------
First Quarter 1-17/32 1-1/4 1-5/8 1-1/2
Second Quarter 1-15/16 1-1/8 2-1/8 1-3/8
Third Quarter 1-21/32 1-5/16 2 1-9/16
Fourth Quarter 1-7/8 1-1/4 2 1-13/32
Year Ending December 31, 1997:
- ---------------------
First Quarter 1-13/16 1-9/16 2-1/16 1-3/4
Second Quarter 2-1/16 1-17/32 2-1/2 1-3/4
</TABLE>
The foregoing figures, which were obtained from Nasdaq monthly statistical
reports, do not reflect retail markups or markdowns and may not represent actual
trades. As of June 13, 1997, the Common Stock was held by approximately 1,400
stockholders of record. The Registrant has not paid any dividends since it
became a publicly held company.
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<PAGE>
There is no legal restriction on the payment of dividends by the Company.
The Company has never declared or paid dividends and has no future plans to do
so. The Company currently intends to retain any future earnings for the
development of its business.
On June 3, 1997, the last full trading day prior to the announcement of the
Offer, the closing price per Share as reported on Nasdaq was $1.875. On
, 1997, the last full trading day prior to the commencement of the Offer, the
closing price per Share as reported on Nasdaq was $ .
STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES.
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 Texas corporation with its principal executive
offices located at 2301 Central Parkway, Houston, Texas 77092. The Company
designs, manufacturers and markets certain equipment for light trucks
principally under the name "Rawson-Koenig". Its chief products are truck tool
boxes, truck service bodies, winches and truck-mounted cranes.
In 1983, the Company's stock was registered and spun-off by Keystone
International, Inc. to the shareholders of Keystone International, Inc. In
1987, Rawson Industries, Inc. was merged into Koenig, Inc. and the Rawson
Industries, Inc. shareholders received 2,300,000 registered shares of Common
Stock. Since that time, the Company has made no additional public offerings of
Common Stock.
FINANCIAL INFORMATION. Set forth below is certain selected financial
information relating to the Company which has been excerpted or derived from the
audited financial statements contained in the Company's Annual Report on Form
10-K for the year ended December 31, 1996 (the "Form 10-K") and the Form 10-Q
for the six months ended June 30, 1997 (the "Form 10-Q") and the Form 10-Q
for the six months ended June 30, 1996. More comprehensive financial
information is included in the Form 10-K and Form 10-Q and other documents filed
by the Company with the Commission. 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. Such
reports and other documents may be examined and copies may be obtained from the
offices of the Commission in the manner set forth below. In addition, Schedules
IV and V hereto set forth the Company's audited financial statements for the
year ended December 31, 1996 and the Company's unaudited financial statements
for the six months ended June 30, 1997, respectively.
-22-
<PAGE>
Summary Financial and Operating Data
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS
----------------------- ENDED JUNE 30,
----------------
1996 1995 1997/2/ 1996
----------- ---------- -------- ------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
INCOME STATEMENT:
Sales $19,522 $18,682 $ 11,391 $10,598
Net income 1,100 825 916 624
BALANCE SHEET (at end of period):
Working Capital 3,800 4,193 4,475 4,012
Total assets 10,489 9,824 10,696 9,596
Shareholders' equity 7,203 6,103 8,119 6,728
PER SHARE:/1/
Net income per common share .28 .21 .23 .16
</TABLE>
__________________________________
/1/Average number of shares of Common Stock outstanding during each period was
3,901,190.
/2/The six months ended June 30, 1997, includes a $280,000 non-recurring
reduction to cost of sales as a result of a decrease in the accrued liability
for potential claims arising from employee injuries incurred in the normal
course of business prior to May 1, 1994.
-23-
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES; BOOK VALUE PER SHARE. The ratio of
earnings to fixed charges for the years ended December 31, 1996 and December 31,
1995, was 12.1 to 1 and 7.1 to 1, respectively. The ratio of earnings to fixed
charges for the six months ended June 30, 1997 and June 30, 1996, was 19.3
to 1 and 13 to 1, respectively. The book value per share was $1.85 at December
31, 1996 and $2.08 at June 30, 1997.
UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS. The following
unaudited pro forma condensed financial information and explanatory notes give
effect to the Offer and are based on the estimates and assumptions set forth in
the notes to such statements. This pro forma information has been prepared
using the historical financial statements of the Company and should be read in
conjunction with the historical financial statements and notes thereto included
elsewhere in this Offer to Purchase.
The pro forma condensed balance sheet information as of December 31, 1996
and as of June 30, 1997, gives effect to the Offer as if it had occurred on
such dates, respectively. The pro forma condensed income statements from the
year ended December 31, 1996 and the six-month period ended June 30, 1997
gives effect to the Offer as if it had occurred on January 1, 1996 and January
1, 1997, respectively. The pro forma condensed financial data may not be
indicative of actual results that would have been achieved if the Offer had
occurred on the date indicated or the results that may be realized in the
future.
-24-
<PAGE>
Rawson-Koenig, Inc.
Pro Forma Condensed Balance Sheet
December 31, 1996
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
----------- ------------ ---------
<S> <C> <C> <C>
Assets
- ------
Current assets:
Cash and cash equivalents $ 334 $ (61)(a) $ 273
Accounts receivable, net 1,269 1,269
Inventories 3,941 3,941
Prepayments and other 107 107
------- ------ -------
Total current assets 5,651 (61) 5,590
Property, plant and equipment, net 4,838 4,838
Other assets 10 (b) 10
------- ------ -------
Total assets $10,489 $ (51) $10,438
======= ====== =======
Liabilities and Shareholders' Equity
- ------------------------------------
Current liabilities:
Current portion of long-term debt $ 229 $ 218 (d) $ 447
Other current liabilities 1,622 1,622
------- ------ -------
Total current liabilities 1,851 218 2,069
Long-term debt, less current portion 1,435 3,433 (d) 4,868
------- ------ -------
Total liabilities 3,286 3,651 6,937
------- ------ -------
Shareholders' equity:
Common stock 1 1
Additional paid-in-capital 4,529 (3,702)(e) 827
Retained earnings 2,673 2,673
------- ------ -------
Total shareholders' equity 7,203 (3,702) 3,501
------- ------ -------
Total liabilities and shareholders' equity $10,489 $ (51) $10,438
======= ====== =======
</TABLE>
-25-
<PAGE>
Rawson-Koenig, Inc.
Pro Forma Condensed Balance Sheet
June 30, 1997
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
---------- ------------- ---------
<S> <C> <C> <C>
Assets
- ------
Current assets:
Cash and cash equivalents $ 465 $ (10)(a) $ 455
Accounts receivable, net 1,746 1,746
Inventories 3,243 3,243
Prepayments and other 571 (51)(c) 520
------- ------- -------
Total current assets 6,025 (61) 5,964
Property, plant and equipment, net 4,671 4,671
Other assets 10 (b) 10
------- ------- -------
Total assets $10,696 $ (51) $10,645
======= ======= =======
Liabilities and Shareholders' Equity
- ------------------------------------
Current liabilities:
Current portion of long-term debt $ 280 $ 96 (d) $ 376
Other current liabilities 1,270 1,270
------- ------- -------
Total current liabilities 1,550 96 1,646
Long-term debt, less current portion 943 3,555 (d) 4,498
Deferred income taxes 84 84
------- ------- -------
Total liabilities 2,577 3,651 6,228
------- ------- -------
Shareholders' equity:
Common stock 1 1
Additional paid-in-capital 4,529 (3,702)(e) 827
Retained earnings 3,589 3,589
------- ------- -------
Total shareholders' equity 8,119 (3,702) 4,417
------- ------- -------
Total liabilities and shareholders' equity $10,696 $ (51) $10,645
======= ======= =======
</TABLE>
-26-
<PAGE>
Rawson-Koenig, Inc.
Pro Forma Condensed Statement of Operations
For the year ended December 31, 1996
(Unaudited)
(in thousands, except per share data and average shares outstanding)
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
----------- ------------ ----------
<S> <C> <C> <C>
Sales $ 19,522 $ 19,522
Cost of sales 15,002 15,002
---------- ----------
Gross profit 4,520 4,520
Selling, general and administrative expenses 2,749 $ 2 (f) 2,751
---------- ---------- ----------
Income from operations 1,771 (2) 1,769
Other income (expense):
Interest expense (147) (299) (g) (446)
Other, net 9 9
---------- ---------- ----------
Income before income taxes 1,633 (301) 1,332
Income taxes:
Federal 454 (102) (h) 352
State 79 (14) (h) 65
---------- ---------- ----------
Net income $ 1,100 $ (185) $ 915
========== ========== ==========
Net income per share $ .28 $ .39
========== ==========
Average shares outstanding 3,901,190 (1,559,088) (i) 2,342,102
========== ========== ==========
</TABLE>
-27-
<PAGE>
Rawson-Koenig, Inc.
Pro Forma Condensed Statement of Operations
For the six months ended June 30, 1997
(Unaudited)
(in thousands, except per share data and average shares outstanding)
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
----------- ------------ ----------
<S> <C> <C> <C>
Sales $ 11,391 $ 11,391
Cost of sales 8,456 8,456
--------- ---------
Gross profit 2,935 2,935
Selling, general and administrative expenses 1,716 $ 1 (f) 1,717
--------- ---------- ---------
Income from operations 1,219 (1) 1,218
Other income (expense):
Interest expense (64) (153)(g) (217)
Other, net 18 18
--------- ---------- ---------
Income before income taxes 1,173 (154) 1,019
Income taxes:
Federal 220 (29)(h) 191
State 37 (5)(h) 32
--------- ---------- ---------
Net income $ 916 $ (120) $ 796
========= ========== =========
Net income per share $ .23 $ .34
========= =========
Average shares outstanding 3,901,190 (1,559,088)(i) 2,342,102
========= ========== =========
</TABLE>
Notes to Pro Forma Condensed Financial Statements:
(a) 12/31/96: Bank loan fees of $10 (based on .25% of bank loan proceeds) and
$51 of Offer costs paid out of cash.
6/30/97: Bank loan fees of $10.
(b) Capitalized bank loan fees, see (a).
(c) Offer costs that have been paid as of June 30, 1997.
(d) Summary of bank loan proceeds to finance the Offer:
<TABLE>
12/31/96 6/30/97
-------- -------
<S> <C> <C>
Purchase price including estimated
Offer costs, see (e) $3,702 $3,702
Less Offer costs paid in cash, see
(a) and (c) (51) (51)
------ ------
Total loan proceeds 3,651 3,651
Less current portion (218) (96)
------ ------
Long-term portion $3,433 $3,555
====== ======
</TABLE>
(e) Purchase of all Public Shareholders' shares (except the Rawson Family):
<TABLE>
<CAPTION>
<S> <C>
Shares held by Public Shareholders (except the
Rawson Family) (in thousands) 1,559
Times $2.15 per share Offer price x $2.15
-------
Purchase price before Offer costs $ 3,352
Estimated Offer costs 350
-------
Purchase price including estimated Offer costs $ 3,702
=======
</TABLE>
(f) Bank loan fees amortized on the straight-line method over a five year life.
(g) Interest expense at 8.5% per year for the respective period.
(h) Income tax effect of (f) and (g) for the respective period.
(i) Maximum number of shares to be purchased under the Offer.
-28-
<PAGE>
PRO FORMA RATIO OF EARNINGS TO FIXED CHARGES; PRO FORMA BOOK VALUE PER SHARE.
The pro forma ratio of earnings to fixed charges for the year ended December 31,
1996 was 4 to 1. The pro forma ratio of earnings to fixed charges for the six
months ended June 30, 1997 was 5.7 to 1. The pro forma book value per share was
$1.50 at December 31, 1996 and $1.89 at June 30, 1997.
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. The
information should also be available for inspection at the National Association
of Securities Dealers, Inc., 1735 K Street N.W., Washington, D.C. 20006.
8. FINANCING OF THE OFFER AND THE MERGER. The total amount of funds
required by the Company to consummate the Offer, the reverse stock split, and
the Merger (if necessary), and to pay related fees and expenses is estimated to
be approximately $3.7 million. The Company will ensure that it has sufficient
cash to acquire all the Shares from the Public Shareholders by a real estate
term loan facility in the principal amount of approximately $4.2 million
maturing June 18, 2002, and an equipment term loan in the principal amount of up
to approximately $1.4 million maturing. These loans will bear interest at the
lender's prime rate of interest and are between the Company, as borrower and
Bank One, Texas, N.A., as lender. Each of these loans are governed by an
Amended and Restated Letter Loan Agreement, which also includes a revolving
promissory note in the principal amount of $2.2 million for working capital
purposes, and an advancing term promissory note in the principal amount of $1.0
million for capital expenditures. All of these loans are secured by the real
estate, equipment, accounts receivable and inventory of the Company.
Approximately $1.3 million of pre-existing debt borrowed by the Company under
its previous loan agreements with Bank One, Texas, N.A. has been transferred to
these loan facilities.
Additional material terms of the Amended and Restated Letter Loan Agreement
are (i) clearance to proceed with the Offer from the Securities and Exchange
Commission by affirmation of no further comments, and (ii) the usual and
customary affirmative and negative covenants related to the Company's financial
condition.
In connection with the financing of the Offer, Bank One, Texas N.A.
commissioned and received appraisals from three appraisal firms, with each
appraisal firm appraising different assets (collectively, the "Appraisers").
The Company did not give any instructions to, or place any limitations on, any
of the Appraisers in connection with the appraisals. These appraisals are
summarized as follows: (i) an appraisal by Gary Brown & Associates, Inc., dated
May 30, 1997, of the Company's Houston, Texas real estate setting forth an "as
is" market value of $4,300,000 and a liquidation value of $3,870,000; (ii) an
appraisal by Michael W. Massey & Associates, dated May 21, 1997, of the
Company's Fort Worth, Texas real estate setting forth an estimated market value
of $950,000 and an estimated liquidation value of $665,000; and (iii) an
appraisal by WFA/Collateral Review Services, Inc., dated May 31, 1997, of the
Company's machinery and equipment in Houston, Texas and Fort Worth, Texas
setting forth an orderly liquidation value of $2,368,525.
The Company plans to repay such borrowings from funds generated by
operations and does not anticipate any refinancing of the debt incurred in
connection with the Offer or the Merger, if necessary. However, it is
anticipated that the revolving loan for working capital purposes and the advance
term promissory note may be extended, refinanced, renewed, increased or amended
in the future, but the Company currently has no plans to do so.
9. DIVIDENDS AND DISTRIBUTIONS. If, on or after May 31, 1997, 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 shareholders 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 -- SECTION 11. 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
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<PAGE>
shareholder for the account of the Company and will be required to be promptly
remitted and transferred by each tendering shareholder 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 QUOTATION 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.
The Company intends to cause the Shares not to be listed for quotation by
Nasdaq following consummation of the Offer, and if necessary, the Merger.
Depending upon the number of Shares purchased pursuant to the Offer, the
Shares may no longer meet the standards for continued inclusion in Nasdaq.
According to Nasdaq's published guidelines, the Shares would not be eligible to
be included for listing on the Nasdaq SmallCap Market, Inc. if, among other
things, the number of holders of the Shares falls below 300, or if the number of
publicly held Shares falls below 100,000, or if the aggregate market value of
such publicly held Shares does not exceed $200,000 or there are not at least two
registered and active market makers, one of which may be a market maker entering
a stabilizing bid, Nasdaq rules provide that the securities would no longer
qualify for inclusion in Nasdaq and Nasdaq would cease to provide any
quotations. Shares held directly or indirectly by an officer or director of the
Company or by a beneficial owner of more than 10% of the Common Stock will
ordinarily not be considered as being publicly held for this purpose. In the
event the Shares were no longer eligible for Nasdaq quotation, 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 such Shares remaining at such time, the interest in
maintaining a market in such Shares on the part of securities firms, the
possible termination of registration of such Shares under the Exchange Act as
described below and other factors.
The Shares are not currently "margin securities", as such term is defined
under the rules of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), which has the effect, among other things, of not
allowing brokers to extend credit on the collateral of such securities.
The Shares are currently registered under the Exchange Act. Such
registration may 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 record holders. 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 holders of Shares and to the
Commission and would make certain provisions of the Exchange Act, such as the
short-swing profit recovery provisions of Section 16(b), the requirement of
furnishing a proxy statement in connection with shareholders' meetings and the
requirements of Rule 13e-3 under the Exchange Act with respect to "going
private" transactions, no longer applicable to the Shares. In addition,
"affiliates" of the Company and persons holding "restricted securities" of the
Company may be deprived of the ability to dispose of such securities pursuant to
Rule 144 promulgated under the Securities Act of 1933, as amended. The Company
currently intends to terminate the registration of the Shares under the Exchange
Act as soon after consummation of the Offer as the requirements for termination
of registration are met; if such requirements are not met after the consummation
of the Offer, the Company intends to declare a reverse stock split of 1 share
for 100 shares of Common Stock as an additional step to ensure that the
requirements for termination of registration are met, and, if necessary, to
consummate the Merger.
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 Expiration Date, any of the following
conditions exist:
-30-
<PAGE>
(a) an order shall have been entered in any action or proceeding
before any federal or state court or governmental agency or other
regulatory body or a permanent injunction by any federal or state court of
competent jurisdiction in the United States shall have been issued and
remain in effect making illegal the purchase of, or payment for, any Shares
by the Company;
(b) there shall have been any federal or state statute, rule or
regulation enacted or promulgated on or after the date of the Offer that
could reasonably be expected to result, directly or indirectly, in any of
the consequences referred to in paragraph (a) above;
(c) there shall have occurred and be remaining in effect (i) any
general suspension of, or limitation on prices for, trading in securities
of the Company on Nasdaq, (ii) a declaration of a banking moratorium or
any suspension of payments in respect of banks in the United States, (iii)
a commencement of a war or armed hostilities or other national or
international calamity, directly or indirectly, involving the United States
or (iv) in the case of any of the foregoing existing on the date hereof, a
material acceleration or worsening thereof;
(d) the Company (with the approval of a majority of the Independent
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.
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, except as set forth below, 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 --
SECTION 11. 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 -- SECTION 11. CERTAIN CONDITIONS OF THE OFFER".
STATE TAKEOVER LAWS. The Company conducts business in a number of states
throughout the United States, some of which have enacted takeover laws. Texas
has not enacted any such laws. The Company does not know whether any of these
laws will, by their terms, apply to the Offer and has not complied with any such
laws. Should any person seek to apply any state takeover law, the
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<PAGE>
Company will take such action as then appears desirable, which may include
challenging the validity or applicability of any such statute in appropriate
court proceedings. In the event it is asserted that one or more state takeover
laws are applicable to the Offer, and an appropriate court does not determine
that it is inapplicable or invalid as applied to the Offer, the Company might be
required to file certain information with, or receive approvals from, the
relevant state authorities. In addition, if enjoined, the Company might be
unable to accept for payment any Shares tendered pursuant to the Offer, or be
delayed in continuing or consummating the Offer. In such case, the Company may
not be obligated to accept for payment any Shares tendered. See "THE TENDER
OFFER -- SECTION 11. CERTAIN CONDITIONS OF THE OFFER".
ANTITRUST. Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
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. See "THE TENDER OFFER -- SECTION
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES".
LITIGATION. To the best knowledge of the Company, no lawsuits have been
filed relating to the Offer, the Merger or the proposed reverse stock split
since June 4, 1997, the date of the announcement by the Company that it proposed
to acquire the Shares from the Public Shareholders.
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.
Wheat, First Securities, Inc. is acting as Dealer Manager in connection
with the Offer. The Dealer Manager will be paid a fee of the greater of (i)
$0.05 per Share for each Share tendered pursuant to the Offer and (ii) $60,000.
This fee will be a minimum of $60,000 and approximately $78,000 if all of the
Shares are tendered pursuant to the Offer. The Company has agreed to reimburse
the Dealer Manager for all reasonable out-of-pocket expenses incurred by the
Dealer Manager up to $3,000, including the reasonable fees and expenses of legal
counsel, and to indemnify the Dealer Manager against certain liabilities and
expenses in connection with its engagement, including certain liabilities under
the federal securities laws.
The Company has retained D.F. King & Co., Inc., as the Information Agent,
and Harris Trust Company of New York, as the Depositary, in connection with the
Offer. The Information Agent may contact holders of Shares by mail, telephone,
telecopy, telegraph and personal interview and may request banks, brokers,
dealers and other nominee stockholders to forward materials relating to the
Offer to beneficial owners.
As compensation for acting as Information Agent in connection with the
Offer, D.F. King & Co., Inc. will be paid an estimated fee of $12,000 and will
also be reimbursed for certain out-of-pocket expenses and may be indemnified
against certain liabilities and expenses in connection with the Offer, including
certain liabilities under the federal securities laws. The Company will pay the
Depositary a fee of $10,000 for its services in connection with the Offer, plus
reimbursement for out-of-pocket expenses, and will indemnify the Depositary
against certain liabilities and expenses in connection therewith, including
certain liabilities under federal securities laws. Brokers, dealers, commercial
banks and trust companies will be reimbursed by the Company for customary
handling and mailing expenses incurred by them in forwarding material to their
customers.
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
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<PAGE>
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 the Dealer Manager
or 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.
Pursuant to Rule 13e-3 and Rule 13e-4 of the General Rules and Regulations
under the Exchange Act, the Company has filed with the Commission the Schedule
13E-3 and the Schedule 13E-4 together with exhibits, furnishing additional
information with respect to the Offer and may file amendments thereto. Such
statements, including exhibits and any amendments thereto, which furnish certain
additional information with respect to the Offer, 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 -- SECTION 7. CERTAIN INFORMATION CONCERNING THE COMPANY"
(except that they will not be available at the regional offices of the
Commission).
RAWSON-KOENIG, INC.
, 1997
-33-
<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth the name, current business address,
citizenship and present principal occupation or employment, and material
occupations, positions, offices or employments and business addresses thereof
for the past five years of each directors and executive officer of the Company.
Unless otherwise indicated, each such person is a citizen of the United States
of America.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME, CITIZENSHIP MATERIAL POSITIONS HELD DURING THE PAST FIVE
AND CURRENT BUSINESS ADDRESS YEARS AND BUSINESS ADDRESSES THEREOF
- ------------------------------------- ---------------------------------------------
<S> <C>
Thomas C. Rawson Mr. Rawson has been Chairman of the Board and the
2301 Central Parkway Chief Executive Officer of the Company since October
Houston, TX 77092 1989. From September 1987 to October 1989, Mr.
Rawson was a Director and President of the Company.
Catherine A. Rawson Mrs. Catherine Rawson has been President, Principal
2301 Central Parkway Financial Officer and a Director of the Company since
Houston, TX 77092 October 1989. From September 1987 to October
1989, Mrs. Rawson was Treasurer, Vice President of
Administration and a Director of the Company.
Pamela Y. Rawson Mrs. Pamela Rawson has been a Director of the
2301 Central Parkway Company since October 1989. Mrs. Rawson has been a
Houston, TX 77092 part-time payroll administrator for the Company since
1994.
Farrell G. Huber, Jr. Farrell G. Huber, Jr. is currently retired and was a
5220 Texas Avenue Director of Keystone International, Inc., 9600 W. Gulf
Houston, TX 77011 Bank Road, Houston, TX 77040, from 1980 to May 5,
1997. Mr. Huber has been a director of the Company
since July 1983, except for the period from September
18, 1987 through September 21, 1987.
George W. Fazakerly Mr. Fazakerly has been a Director of the Company since
Vial, Hamilton, Koch & Knox, L.L.P. October 1989. Since January 1974 Mr. Fazakerly has
1717 Main Street, Suite 4400 been a partner in the Dallas, Texas law firm of Vial,
Dallas, TX 75201 Hamilton, Koch & Knox, L.L.P.
Allen F. Rhodes Allen F. Rhodes is currently Chairman of the Silver Fox
5634 Ella Lee Lane Advisors, P.O. Box 572465, Houston, TX 77257. He
Houston, TX 77056 has been a member of the Silver Fox Advisors since
1993. He was President of Arnco Technology, P.O. Box
40472, Houston, TX 77240, from 1991 to 1993. Mr.
Rhodes has been a Director of Keystone International,
Inc., 9600 W. Gulf Bank Road, Houston, TX 77040,
since 1980.
Joseph M. Scheer Mr. Scheer has been a Director of the Company since
16262 Dorilee Lane 1991. Since 1994, Mr. Scheer has been a director of
Encino, CA 91436 Microsemi Corp., 2830 S. Fairview St., Santa Ana, CA
92704. Mr. Scheer has been a member of the Advisory
Board of Soligen Technologies, Inc., 19408 Londelius
Street, Northridge, CA 91324 since 1996 and was a
Director of Laserform, Inc., 1124 Centre Road, Auburn
Hills, MI 48326, from 1989 to 1994.
</TABLE>
I-1
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Fredrick C. Wamhoff Fredrick C. Wamhoff has been Vice President - General
2301 Central Parkway Counsel and Secretary of the Company since July 1996.
Houston, TX 77092 Mr. Wamhoff has been a Vice President of the Company
since 1988. From 1990 to July 1996, Mr. Wamhoff
was Vice President - Operations and Secretary of the
Company.
Richard F. Koenig Richard F. Koenig has been Vice President - Information
2301 Central Parkway Systems of the Company since January 1994. Mr.
Houston, TX 77092 Koenig joined the Company in 1967 and has served in
various functions over the years including as manager of
cost estimating from 1989 through July 1996.
</TABLE>
I-2
<PAGE>
SCHEDULE II
OPINION OF RAUSCHER PIERCE REFSNES, INC.
May 27, 1997
Board of Directors
Rawson-Koenig, Inc.
2301 Central Parkway
Houston, Texas 77092
Attention: Mr. Thomas C. Rawson
Chairman of the Board and
Chief Executive Officer
Ladies and Gentlemen:
You have advised Rauscher Pierce Refsnes, Inc. ("RPR") that Rawson-Koenig,
Inc. ("Rawson") has proposed to purchase all outstanding publicly held common
shares of Rawson at a price of $2.15 per share in cash in a "going private"
transaction. You have requested that RPR issue an opinion ("Opinion") as to the
fairness to the public common stockholders of Rawson of the financial terms of
the proposed transaction, as set forth in a preliminary Tender Offer Information
Circular (the "Tender Offer Circular") dated May 20, 1997.
RPR, as part of its investment banking business, is continually engaged in
the valuation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, secondary distributions of listed and
unlisted securities, private placements, and valuations for estate, corporate
and other purposes.
In arriving at our opinion, we have, among other things:
1. Reviewed a preliminary Tender Offer Circular dated May 20, 1997;
2. Reviewed Rawson's Form 10-K for the years ended December 31, 1996, 1995,
1994 and 1993;
3. Reviewed Rawson's internal projections for 1997 through 2001 prepared in
April, 1997;
4. Reviewed Rawson's corporate profile and product literature;
<PAGE>
Rawson-Koenig, Inc.
May 27, 1997
Page 2
5. Considered such other information, financial studies, analyses and
investigations as we deemed relevant under the circumstances; and
6. Discussed with management of Rawson the outlook for future operating
results, the assets and liabilities of the Company, material in the
foregoing documents, and other matters we considered relevant to our
inquiry.
In our review and in arriving at our opinion, we have, with your
permission, (i) not independently verified any of the foregoing information and
have relied upon its being complete and accurate in all material respects, and
(ii) not made an independent evaluation or appraisal of specific assets of
Rawson. Our opinion is provided solely for your benefit in connection with the
proposed transaction and, with respect to any required disclosure of this
opinion in the Tender Offer Circular, the benefit of your stockholders in
connection with their evaluation of whether or not to accept the tender offer,
according to the terms of our engagement letter dated May 5, 1997.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the consideration to be received pursuant to the proposed
transaction is fair to the public common stockholders of Rawson from a financial
point of view.
RAUSCHER PIERCE REFSNES, INC.
/s/ G. CLYDE BUCK
By: _________________________________
G. Clyde Buck
Managing Director
<PAGE>
M E M O R A N D U M
----------------------------
TO: File
FROM: G. Clyde Buck
Michael Jamieson
DATE: May 27, 1997
RE: Fairness Opinion for Rawson-Koenig, Inc. - Summary of Critical Factors
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
PAGE
A. CRITICAL FACTORS AND LOGIC.......................................... 2
B. DESCRIPTION OF BUSINESS............................................. 10
EXHIBITS
1. Rawson-Koenig, Inc. - Historical Financial Statements
2. Rawson-Koenig, Inc. - Projected Financial Results
3. Comparable Company Analysis
This memo sets forth the critical factors and logic behind our analysis as
to the fairness to the public common stockholders of Rawson-Koenig, Inc.
("Rawson" or the "Company") of the proposed offer to purchase all of the
publicly held shares of common stock of Rawson pursuant to the terms and subject
to the conditions of the preliminary Tender Offer Information Circular (the
"Tender Offer") dated May 20, 1997. Rawson has approximately 1.56 million
shares of common stock currently held by public stockholders which, at $2.15 per
share, would involve approximately $3.35 million in total cash consideration to
the public common stockholders of Rawson. A value of $2.15 per share would be a
value of $8.39 million for 100% of Rawson's total of 3,901,190 common shares
outstanding.
1
<PAGE>
A. CRITICAL FACTORS AND LOGIC
1. Offers to Purchase Rawson
-------------------------
On September 6, 1995, Mr. John Poindexter, an experienced leveraged
buy-out specialist, approached Tom Rawson about combining Rawson with
Mr. Poindexter's other truck equipment interests. Mr. Poindexter was
willing to pay only the current market price for up to 100% of the
stock of Rawson ($1.5625 per share on 9/6/95). Mr. Rawson declined
the offer. (Note: The Rawson family owns control of the Company but
not 100% of the Company).
On April 23, 1996, Mr. Aubrey Hornsby of the Hornsby Company in
Pensacola, Florida, introduced Mr. Hal Holder as a potential buyer of
Rawson to the Company. Mr. Holder was interested in purchasing Rawson
at the current market price for the stock ($1.4375 per share on
4/23/96). Mr. Rawson declined the offer.
Since the above events, both Mr. Poindexter and Mr. Holder have made
follow-up contacts to Tom Rawson to see if he was interested in
selling the Company at a price per share equal to its current market
price. Mr. Rawson has also declined these offers.
We note that these events are an important indicator that the $2.15
per share price is fair to the stockholders of Rawson. Both parties
are well informed, competent buyers that extended offers 27.3% below
and 33.1% below the current $2.15 offer to buy the outstanding shares
of the Company. Moreover, their offers were equal to the market price
of Rawson at the time. The average market price of Rawson has
averaged at $1.75-1.80 in recent weeks and months. A price of $2.15
would be a premium of 22.9% over $1.75 and a premium of 19.4% over
$1.80 (see also Item 2 which follows).
2
<PAGE>
2. Rawson's public common stock has historically been thinly traded, but
we have no reason to believe that it has been "overstated" or
"understated." The market has been reasonably steady and consistent,
and it has appeared to reflect the current fair market value of small
minority interests in Rawson. We define "fair market value" as "the
price agreed upon between a willing buyer and willing seller, with
each having full knowledge of all relevant facts and neither being
under any compulsion to act."
[Graph depicting Rawson-Koenig, Inc. Daily Price and Trading Volume
for the period from January 3, 1995 to May 24, 1997.]
We note that a $2.15 price per share would be an approximate 20%
premium over recent historical market prices for the stock, as
indicated by the amounts shown in the table which follows. We have
also indicated in the table the average daily number of shares traded
in each period. Since 1/1/95, the highest market price of Rawson was
$2.25 per share, which occurred on 2/17/95. Since 1/2/96, the stock
has not been above $2.125 per share. Since 7/1/96, the stock has not
been above $2.00 per share.
3
<PAGE>
<TABLE>
<CAPTION>
AVERAGE PREMIUM OF $2.15 AVERAGE
DAILY MARKET OVER AVERAGE DAILY NUMBER OF
DATE PRICE PER SHARE(B) PRICE PER SHARE SHARES TRADED
------------ ----------------- ---------------- -------------
<S> <C> <C> <C>
May 27, 1997 $1.75 22.9% 60,900
Prior 7-day average(A) 1.72 25.0% 11,029
Prior 14-day average(A) 1.75 22.9% 9,121
Prior 30-day average(A) 1.76 22.2% 5,987
Prior 60-day average(A) 1.76 22.2% 5,352
Prior 90-day average(A) 1.76 22.2% 6,492
Prior 120-day average(A) 1.74 23.6% 6,454
Average $1.75 22.9% 15,048
</TABLE>
(A) From 5/27/97.
(B) Pricing information from Factset Database.
Based upon our overall knowledge of mergers and acquisitions, a normal
take-over premium for a public company might be roughly 20-30%.
3. From the standpoint of public stockholders of Rawson holding stock
which can only be sold at prevailing market prices of roughly $1.60-
1.90 per share, such stockholders might feel that any offer at $2.00
or higher would be an attractive alternative which they would like to
see made available to all public stockholders of Rawson. In this
sense, any offer at $2.00 or better would appear to be fair to the
stockholders of Rawson as the offer does not include any brokerage
fees (i.e., the offer is a net offer).
4. Exhibit 2 is an LBO model prepared by RPR, with input from Rawson's
management regarding projections, seeking to estimate what an outside
party might pay for the Company on a going concern basis. The values
indicated from this LBO model follows (in thousands):
NET PRESENT VALUE OF FREE CASH FLOW
----------------------------------------------------
DISCOUNT RATE TOTAL VALUE PER SHARE
------------- ----------- ---------
15% $8,295 $2.13
20% $6,910 $1.77
25% $5,816 $1.49
These LBO analyses also indicate that an offer of $2.15 per share in
cash is fair to the
4
<PAGE>
stockholders of Rawson.
We further note that if the long-term value of Rawson was not expected
by the Company to be above $2.15 per share, the Company would not be
willing to furnish the cash necessary to purchase 100% of Rawson's
existing publicly held common stock. An offer at $2.15 can be fair to
both existing public stockholders and to the Company.
5. We considered the impact of outstanding options to purchase common
stock, but Rawson has no options or warrants outstanding.
6. An offer of $2.15 per share would be equivalent to an offer of
$8,387,559 million for 100% of Rawson ($2.15 x 3,901,190 shares) and
that price would be the following multiples of various items:
(a) 7.6 times net income of $1.10 million (or $0.28 per share) for
the year ended 12/31/96;
(b) 7.7 times estimated net income of $1.09 million (or $0.28 per
share) for the year ending 12/31/97;
(c) 7.4 times estimated net income of $1.13 million (or $0.29 per
share) for the year ending 12/31/98;
(d) 5.2 times "cash flow from operations" (i.e., net income plus
depreciation and amortization plus losses and minus gains on
asset sales plus deferred taxes, as shown in Exhibit 1) of
$1.61 million (or $0.41 per share) for the year ended
12/31/96;
(e) 4.9 times estimated "cash flow from operations" (see prior
definition above in Item 6(d)) for the year ending 12/31/97
of $1.72 million (or $0.44 per share);
(f) 4.7 times estimated "cash flow from operations" of $1.80 million
(or $0.46 per share) for the year ending 12/31/98; and
(g) 1.1 times book value of $7.7 million (or $1.97 per share) on
3/31/97.
7. We understand that there are no other "hidden," "unrecognized" or "off
balance sheet" assets that might add substantial value to Rawson.
Rawson has no pension plan or other comparable item with a
significantly overfunded
5
<PAGE>
(or underfunded) position.
8. We considered all elements that go into determining fair market value,
including the possibilities that a buyer would continue to operate the
business or would decide to liquidate the business. Based on
interviews with management, we estimated Rawson's orderly liquidation
value to be approximately $2.19 per share, which is close to the
proposed "going private" price of $2.15 per share. Rawson recently
asked for informal, independent estimates of the orderly liquidation
values of Rawson's fixed assets near May 22, 1997, and those values
are included in the summary below.
Summary of Estimated Orderly Liquidation Values (in thousands)
--------------------------------------------------------------
<TABLE>
<CAPTION>
Book Est. Orderly
Value at Liquidation
3/31/97 Factor Value (5/97)
------- ------ --------------
<S> <C> <C> <C>
Cash $ 497 100% 497
Receivables 1,629 90% 1,466
Inventory 3,493 70% 2,445
Prepayments 124 50% 62
Fixed assets 4,766 6,904(A)
Liabilities (2,816) 100% (2,816)
------- -------
Net Asset Value $ 7,693 8,558
Shares outstanding 3,901 3,901
NAV/share $ 1.97 $ 2.19
</TABLE>
(A) Consists of Houston land and buildings ($3,870,000), Ft. Worth
land and buildings ($665,000) and overall equipment ($2,368,525)
(i.e., a total of $6,903,525) as of 5/27/97.
We noted that the fixed asset appraisers who estimated total "orderly
liquidation values" of $6,903,525 also estimated total "fair market
values" of $8,465,550 for the same assets, which would appear to be
optimistic.
Our analysis of going concern value is derived primarily from the
future cash flows of the Company and generates a fair market value for
all assets less liabilities. To the extent that a buyer also looked
at a possible liquidation of the Company and its assets, the relevant
estimate would be $6,903,525 for the Company's fixed assets.
9. We are not aware of any material information concerning the operations
and assets of Rawson which has not been available to public
stockholders, other than the potential
6
<PAGE>
for the proposed Tender Offer.
10. We recognize that the $2.15 price and other terms of the Tender Offer
were not the result of normal, arm's-length negotiations when they
were determined.
The lack of extensive, arm's length negotiations in selecting a $2.15
per share price creates a potential for bias or unfairness, but our
discussions with Rawson's management and the Company's Independent
Directors and our review of written information indicated that no
significant bias or unfairness occurred. We were given full access to
all information we requested.
11. We noted that the common stockholders of Rawson currently receive no
cash dividends, and no cash dividends are expected to be paid in the
foreseeable future. Accordingly, the receipt of $2.15 per share in
cash in the near future would presumably be more cash than Rawson's
existing common stockholders could expect to receive in the form of
cash dividends for many years to come.
12. Comparable Companies
--------------------
We compared Rawson to 50 public Auto/Truck Parts and Equipment Supply
Companies, as shown in Exhibit 3. Virtually all of the companies are
not directly comparable to Rawson due to scope of business, market
size, etc. The 50 public companies trade (adjusted for data which
includes unusually high or low ratios) with the following ratios.
<TABLE>
<CAPTION>
High Low Average
------------- ------------- -------------
<S> <C> <C> <C>
Price to Sales 4.0 0.2 0.9
Price to Book 5.3 1.1 2.4x
P/E-Latest 12 Months (LTM) 43.7 9.0 17.8x
P/E-1997E 40.4 9.3 14.2x
P/E-1998E 25.7 7.3 11.5x
Price to Cash Flow-LTM 34.7 2.7 10.9x
</TABLE>
We note that because of the inherent difference between the operations
of Rawson and
7
<PAGE>
the selected comparable companies, we believe that a purely
quantitative comparable company analysis is not very useful or
relevant to our analysis of the fairness of the Tender Offer.
13. Comparable Transactions
-----------------------
We considered 10 somewhat comparable, albeit larger, acquisitions
since 1/1/96, as shown in the following table:
Merger Activity From 1/1/96 to Present
<TABLE>
<CAPTION>
Value of Value/
Date Transaction Value/ EBIT Net
Announced Acquiror Name Target Name ($ mil) Sales Multiple Income
- --------- ------------- ----------- ----------- ----- -------- ------
<S> <C> <C> <C> <C> <C> <C>
04/09/97 Tomkins PLC Stant Corp 548.9 0.9x 9.9x 26.2x
02/03/97 Scotsman Industries Inc Kysor Industrial Corp 359.2 0.9x 16.7x 19.2x
01/24/97 Tower Automotive (Hidden Creek) Automotive Products (AO Smith) 625.0 0.7x na na
01/23/97 Northern Trust Co Arvin Industries Inc 42.2 0.2x 5.0x 15.4x
11/18/96 Intermet Corp Sudbury Inc 155.4 0.5x 6.8x 9.7x
09/03/96 Park-Ohio Industries Inc Sudbury Inc 173.3 0.6x 7.6x 10.9x
05/24/96 Lear Corp Masland Corp 413.5 0.9x 10.7x 20.0x
04/26/96 Borg-Warner Automotive Inc Coltec Inds-Holley Automotive 283.0 1.1x na na
03/29/96 Motor Wheel Corp Hayes Wheels International 563.8 0.9x 9.4x 19.9x
03/13/96 Eaton Corp CAPCO Automotive Products Corp 128.9 0.8x na na
- ------------------------------------------------------------------------------------------------------------------------------------
Average 329.3 0.8x 9.4x 17.3x
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Premium 1 day
Value/ prior to
Date Cash Value/ announcement
Announced Acquiror Name Target Name Flow Net Assets Date
- --------- ------------- ----------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
04/09/97 Tomkins PLC Stant Corp 6.7x 1.8x 29.3%
02/03/97 Scotsman Industries Inc Kysor Industrial Corp 11.7x 3.4x 16.2%
01/24/97 Tower Automotive (Hidden Creek) Automotive Products (AO Smith) na na na
01/23/97 Northern Trust Co Arvin Industries Inc 2.9x 1.3x na
11/18/96 Intermet Corp Sudbury Inc 5.0x 2.3x 19.0%
09/03/96 Park-Ohio Industries Inc Sudbury Inc 5.5x 2.6x 2.3%
05/24/96 Lear Corp Masland Corp 8.4x 4.5x 6.1%
04/26/96 Borg-Warner Automotive Inc Coltec inds-Holley Automotive na na na
03/29/96 Motor Wheel Corp Hayes Wheels International 6.1x 2.3x 29.3%
03/13/96 Eaton Corp CAPCO Automotive Products Corp 32.5x 1.5x 66.7%
- ------------------------------------------------------------------------------------------------------------------------------------
Average 9.9x 2.5x 24.1%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Because the reasons for, and circumstances surrounding, each of the
transactions analyzed were diverse, and due to the inherent
differences between the operations of Rawson and the selected
companies involved in the comparable acquisitions, we believe that a
purely quantitative comparable transaction analysis is only one of
several factors to be considered and not a very important factor in
our analysis of fairness of the Tender Offer.
14. The Rawson Family has informed the Board that, assuming the completion
of the Offer and the Merger, they have no present intention that the
Company will change its fundamental business, sell or otherwise
dispose of any material part of its business, merge or liquidate or
otherwise wind-up its business. The Rawson Family has further agreed
with the Board that in the event that there is relating to the Company
(or any successor to the Company): (i) a change in control (other than
by death of a member of the Rawson Family or inter-vivos for estate
planning purposes of any member of the Rawson Family), (ii)
disposition of substantially all of the assets, (iii) liquidation or
8
<PAGE>
winding-up at any time within three years following the date of
consummation of the Offer or Merger, which transaction results in the
receipt by the Rawson Family of a sum in excess of $8,387,558.50
(i.e., the Offer Price multiplied by the 3,901,190 shares currently
issued and outstanding), any such excess will be paid over
proportionately to each of the current shareholders of the Company.
This is a significant enhancement to the fairness of the $2.15 price
because it raises that price if Rawson is sold at a higher price in
the next three (3) years.
15. In the context of RPR's fairness opinion for Rawson, "fair" would seem
to be comparable to "reasonable," "just" and "equitable" as those
words apply to a business transactions. These adjectives imply that
the transaction shows little or no evidence of favoritism, bias, undue
pressure or lack of objective, informed negotiating between the
parties involved. "Fair" involves not only what is legal and ethical,
but also what is in the best interest of all parties involved.
"Fair" is not, however, synonymous with "the best possible,"
especially in the context of a merger, acquisition or other financial
transaction. "Fair" recognizes that if ten experts were asked to
suggest a "fair market value" for a normal company, ten different
values would probably result. If each expert was well-informed and
unbiased, the entire range of values might be considered "fair" prices
for selling or merging the Company; but only one value would be the
"best."
In summary, a "fair" transaction indicates that the overall terms
appear to be in a range of what one would expect to be negotiated
between two willing, competent parties with each having full knowledge
of all relevant facts and neither being under any compulsion to act.
9
<PAGE>
B. DESCRIPTION OF BUSINESS
Rawson-Koenig, Inc. is a leading manufacturer of truck equipment. The four
major product lines are truck service bodies, truck tool boxes, winches and
truck mounted cranes.
Service bodies are structures mounted on a truck chassis in order to
provide cover, storage space and working space, while tool boxes are
simpler and usually smaller structures which are also truck mounted but are
designed solely for storage of tools or other property. Rawson believes
that it offers the largest line of tool boxes available from any single
manufacturer. The products can be installed on trucks of all major United
States and foreign producers and are used for general, industrial and
recreational purposes. Rawson-Koenig service bodies and tool boxes enjoy a
reputation for rugged construction, attractive appearance and excellent
quality control.
Rawson cranes may be mounted on service bodies which are specially designed
to withstand additional stress when the crane is in use. Lifting capacities
of the cranes range up to 6,000 pounds depending upon the model. A unique
feature of Rawson cranes is their patented load sensing device which is
standard on all models. This device protects workers and equipment by not
allowing the crane to operate under overload conditions. The standard
winches have capacities of 2,000 to 30,000 pounds, are designed to be truck
mounted and are also sold for general and industrial purposes. All of these
winches are available with or without automatic brakes and may be used with
mechanical, hydraulic or electrical power sources. In addition to these
standard products, winches for special applications are routinely designed
and built.
Plant and Facilities
--------------------
Rawson owns its manufacturing and office facilities in Houston and Fort
Worth. The Houston service body and tool box manufacturing facilities
occupy approximately 163,000 square feet of space in a metal and brick
building located in an office and industrial park, while its executive and
administrative offices occupy approximately 12,000 additional square feet
in the same building. Winch and crane manufacturing facilities occupy
approximately 24,000 square
10
<PAGE>
feet of space in an adjacent metal and concrete building constructed on the
same tract of approximately 13 acres. The Fort Worth tool box facility is
on approximately 3.7 acres of land with metal and block buildings totaling
approximately 73,000 square feet.
History
-------
Members of the Koenig family founded the Company in 1911 as a blacksmith
shop. Truck equipment evolved as the main product line. In 1977, Koenig
Iron Works, Inc. was bought by Keystone International. The Company became a
separate public corporation in 1983 when its shares were spun off to the
Keystone shareholders. In 1987, Rawson Industries, Inc., a Texas
corporation, was merged into the Company. The Rawson Industries
shareholders became officers and directors of the Company. They acquired
2,300,000 of the outstanding shares of stock in the Company in
consideration for all of the outstanding shares of Rawson Industries.
11
<PAGE>
RAWSON-KOENIG, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------------------
1993 1994 1995 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Sales $14,449,688 $17,184,557 $18,682,075 $19,521,871
Cost of sales 11,777,024 13,300,320 14,903,247 15,002,105
-------------- -------------- -------------- --------------
Gross profit 2,672,664 3,884,237 3,778,828 4,519,766
Selling, general and administrative
expenses 1,857,857 2,281,899 2,585,773 2,748,844
-------------- -------------- -------------- --------------
Income from operations 814,807 1,602,338 1,193,055 1,770,922
Other income (expense):
Interest expense (255,649) (210,891) (194,436) (147,211)
Other, net 85,760 92,330 193,874 9,151
-------------- -------------- -------------- --------------
Income before provision for
income taxes 644,918 1,483,777 1,192,493 1,632,862
-------------- -------------- -------------- --------------
Provision for income taxes:
Federal 118,500 267,000 306,000 454,000
State 46,000 75,000 61,000 79,000
-------------- -------------- -------------- --------------
164,500 342,000 367,000 533,000
-------------- -------------- -------------- --------------
Net income $480,418 $1,141,777 $825,493 $1,099,862
============== ============== ============== ==============
Plus/(less) Depreciation, deferred
taxes and other non-cash items $445,999 $464,772 $454,656 $510,029
-------------- -------------- -------------- --------------
Total cash flow $926,417 $1,606,549 $1,280,149 $1,609,891
============== ============== ============== ==============
Net income per share $0.12 $0.29 $0.21 $0.28
============== ============== ============== ==============
Cash flow per share $0.24 $0.41 $0.33 $0.41
============== ============== ============== ==============
Average shares outstanding 3,901,190 3,901,190 3,901,190 3,901,190
============== ============== ============== ==============
</TABLE>
-12-
<PAGE>
RAWSON-KOENIG, INC.
Historical - Percentage of Total Revenues Analysis
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------
1993 1994 1995 1996
------- -------- ------- -------
<S> <C> <C> <C> <C>
Sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 81.5% 77.4% 79.8% 76.8%
------- -------- ------- -------
Gross profit 18.5% 22.6% 20.2% 23.2%
Selling, general and administrative expenses 12.9% 13.3% 13.8% 14.1%
------- -------- ------- -------
Income from operations 5.6% 9.3% 6.4% 9.1%
Interest expense -1.8% -1.2% -1.0% -0.8%
Other, net 0.6% 0.5% 1.0% 0.0%
------- -------- ------- -------
Income before provision for income taxes 4.4% 8.6% 6.4% 8.3%
------- -------- ------- -------
Provision for income taxes:
Federal 0.8% 1.6% 1.6% 2.3%
State 0.3% 0.4% 0.4% 0.4%
======= ======== ======= =======
1.1% 2.0% 2.0% 2.7%
======= ======== ======= =======
Net income 3.3% 6.6% 4.4% 5.6%
======= ======== ======= =======
</TABLE>
-13-
<PAGE>
RAWSON-KOENIG, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS As of December 31,
----------------------------------
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 193,026 $ 315,412 $ 334,199
Accounts receivable, net 1,608,555 1,713,511 1,269,006
Inventories 3,565,329 3,615,265 3,941,189
Prepayments and other 164,232 173,960 106,548
---------- ---------- -----------
Total current assets 5,531,142 5,818,148 5,650,942
Property, plant & equipment, net 3,557,452 3,893,266 4,838,109
Other assets -- 112,412 --
---------- ---------- -----------
Total assets $9,088,594 $9,823,826 $10,489,051
========== ========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 203,626 $ 215,253 $ 228,639
Current portion of capital lease
obligation 29,672 27,025 --
Accounts payable 650,878 437,681 685,360
Accrued expenses 837,151 884,326 857,960
State income taxes payable 233,459 61,000 79,000
---------- ---------- -----------
Total current liabilities 1,954,786 1,625,285 1,850,959
Long-term debt, less current portion 1,828,859 2,095,124 1,434,813
Capital lease obligation, less current
portion 27,025 -- --
---------- ---------- -----------
Total liabilities 3,810,670 3,720,409 3,285,772
---------- ---------- -----------
Shareholders' equity:
Common stock 1,000 1,000 1,000
Additional paid-in capital 4,529,120 4,529,120 4,529,120
Retained earnings 747,804 1,573,297 2,673,159
---------- ---------- -----------
Total shareholders' equity 5,277,924 6,103,417 7,203,279
---------- ---------- -----------
Total liabilities and
shareholders' equity $9,088,594 $9,823,826 $10,489,051
========== ========== ===========
</TABLE>
-14-
<PAGE>
RAWSON-KOENIG, INC.
Historical Balance Sheets - Percentage of Total Assets Analysis
<TABLE>
<CAPTION>
ASSETS As of December 31,
----------------------------------
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents 2.1% 3.2% 3.2%
Accounts receivable, net 17.7% 17.4% 12.1%
Inventories 39.3% 36.8% 37.6%
Prepayments and other 1.8% 1.8% 1.0%
----- ----- -----
Total current assets 60.9% 59.2% 53.9%
Property, plant & equipment, net 39.1% 39.6% 46.1%
Other assets 0.0% 1.2% 0.0%
----- ----- -----
Total assets 100.0% 100.0% 100.0%
===== ===== =====
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt 2.2% 2.2% 2.2%
Current portion of capital lease
obligation 0.3% 0.3% 0.0%
Accounts payable 7.2% 4.5% 6.5%
Accrued expenses 9.2% 9.0% 8.2%
State income taxes payable 2.6% 0.6% 0.8%
----- ----- -----
Total current liabilities 21.5% 16.6% 17.7%
Long-term debt, less current portion 20.1% 21.3% 13.6%
Capital lease obligation, less current
portion 0.3% 0.0% 0.0%
----- ----- -----
Total liabilities 41.9% 37.9% 31.3%
----- ----- -----
Shareholders' equity:
Common stock 0.0% 0.0% 0.0%
Additional paid-in capital 49.9% 46.1% 43.2%
Retained earnings 8.2% 16.0% 25.5%
----- ----- -----
Total shareholders' equity 58.1% 62.1% 68.7%
----- ----- -----
Total liabilities and
shareholders' equity 100.0% 100.0% 100.0%
===== ===== =====
</TABLE>
-15-
<PAGE>
Rawson-Koenig, Inc.
Income Statement and Net Present Value Analysis
<TABLE>
<CAPTION>
Historical Projected
-------------------------------- -----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(in thousands) 1994 1995 1996 1997 1998 1999 2000 2001
----------- --------- --------- --------- -------- --------- --------- ---------
Sales $17,184 $18,682 $19,522 $20,812 $22,189 $23,655 $25,219 $26,887
Cost of Sales 13,300 14,903 15,002 15,995 17,052 18,179 19,381 20,663
----------- --------- --------- --------- -------- --------- --------- ---------
Gross profit 3,884 3,779 4,520 4,817 5,137 5,476 5,838 6,224
SG&A 2,282 2,586 2,749 3,047 3,326 3,645 4,004 4,406
----------- --------- --------- --------- -------- --------- --------- ---------
Income from operations 1,602 1,193 1,771 1,770 1,811 1,831 1,834 1,818
Other income (expense)
Interest expense -211 -195 -147 -137 -113 -79 -36 -3
Other 92 194 9 10 10 10 10 10
----------- --------- --------- --------- -------- --------- --------- ---------
Income before taxes 1,483 1,192 1,633 1,643 1,708 1,762 1,808 1,825
Provision for income taxes 342 367 533 551 575 605 674 681
----------- --------- --------- --------- -------- --------- --------- ---------
Net income 1,141 825 1,100 1,092 1,133 1,157 1,134 1,144
=========== ========= ========= ========= ======== ========= ========= =========
Depreciation 454 470 503 630 670 700 740 770
Other 11 -15 7 0 0 0 0 0
----------- --------- --------- --------- -------- --------- --------- ---------
Cash flow 1,606 1,280 1,610 1,722 1,803 1,857 1,874 1,914
=========== ========= ========= ========= ======== ========= ========= =========
Capital expenditures 237 806 1,342 1,050 1,050 1,050 1,050 1,050
Free cash flow 1,369 474 268 672 753 807 824 864
Net income per share $0.29 $0.21 $0.28 $0.28 $0.29 $0.30 $0.29 $0.29
Cash flow per share $0.41 $0.33 $0.41 $0.44 $0.46 $0.48 $0.48 $0.49
Free cash flow per share $0.35 $0.12 $0.07 $0.17 $0.19 $0.21 $0.21 $0.22
Average shares outstanding 3,901 3,901 3,901 3,901 3,901 3,901 3,901 3,901
Terminal value (at 6.0x 2001 cash flow) $11,484
</TABLE>
<TABLE>
<CAPTION>
Net Present Value of Free Cash Flow
--------------------------------------------------
Discount Rate Total Value Per Share
------------------ ------------ ------------
<S> <C> <C>
15% $8,295 $2.13
20% $6,910 $1.77
25% $5,816 $1.49
</TABLE>
Note:
- -----------------------------------
Does not include effect of LBO financing
Projections from Company
Capital expenditures represent capital improvements to existing facilities and
equipment as maintenance expenditures are expensed as they are incurred.
-16-
<PAGE>
Auto/Trucks Part and Equipment Public Companies
<TABLE>
<CAPTION>
Market LTM P/E P/E LTM
Value of Price/ Price/ Price/ Current Year Next Year Price/
Capital Sales Book Value Earnings Earnings Earnings Cash Flow
--------- ------- ---------- -------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
ARSN AIRSENSORS INC $ 62.2 0.8x 2.8x 10.7x 14.2x 17.2x 22.3x
ARV ARVIN INDUSTRIES INC 897.3 0.3x 1.4x 11.4x 12.5x 10.7x 3.6x
BWA BORG WARNER AUTO 1,447.8 0.7x 1.8x 20.8x 10.7x 9.8x 6.4x
BDT BREED TECHNOLOGIES INC 865.4 0.8x 2.0x 18.8x 15.1x 7.3x 5.7x
SNSR CONTROL DEVICES INC 54.8 0.7x 2.1x 9.0x NA NA 5.7x
DCN DANA CORP 6,176.8 0.4x 2.4x 10.8x 10.7x 10.0x 4.9x
DDC DETROIT DIESEL CORP 702.1 0.3x 1.8x NA 21.4x 16.9x 25.3x
DON DONNELLY CORP 270.4 0.3x 2.0x 11.2x 11.4x 9.1x 3.5x
DRRA DURA AUTOMOTIVE SYS -CL B 352.8 0.7x 2.8x 15.6x 15.4x 12.6x 9.0x
EXC EXCEL INDUSTRIES INC 291.4 0.2x 1.3x 9.2x 10.0x 8.9x 2.7x
HAYS HAYES WHEELS INTL INC 1,167.5 0.8x NA NA 14.3x 13.6x 15.8x
JASN JASON INC 261.4 0.3x 1.3x 15.2x 11.4x 9.6x 18.7x
LEA LEAR CORP 3,530.0 0.4x 2.4x 14.4x 12.2x 10.7x 5.1x
MGA MAGNA INTERNATIONAL -CL A 3,421.5 0.7x 2.3x 10.1x 9.9x 8.7x 16.0x
MLR MILLER INDUSTRIES INC/TN 532.3 2.5x 4.9x 43.7x 40.4x 25.7x NA
OEA OEA INC 769.1 4.0x 4.2x 25.2x 19.4x 14.4x 34.7x
SMPS SIMPSON INDUSTRIES 209.6 0.4x 1.5x 9.8x 9.9x 8.9x 3.5x
SPAR SPARTAN MOTORS INC 78.4 0.5x 1.4x 38.9x 12.1x 8.1x 18.7x
SPD STANDARD PRODUCTS CO 557.6 0.4x 1.6x 17.5x 11.0x 9.0x 4.1x
SUP SUPERIOR INDUSTRIES INTL 677.5 1.4x 2.8x 14.5x 13.1x 11.7x 7.5x
TWI TITAN WHEEL INTERNATIONAL 470.4 0.5x 1.3x 10.3x 11.6x 9.8x 6.2x
TWR TOWER AUTOMOTIVE INC 691.2 1.3x 3.2x 23.7x 18.2x 14.0x 18.2x
TRW TRW INC 6,747.9 0.7x 3.0x 38.3x 14.1x 12.8x 10.1x
WALB WALBRO CORP 452.7 0.3x 1.1x 17.0x 12.5x 8.9x 4.2x
WCSTF WESCAST INDUSTRIES -CL A 306.3 1.9x 5.3x 12.8x 9.3x 7.9x 10.4x
High $6,747.9 4.0x 5.3x 43.7x 40.4x 25.7x 34.7x
Low 54.8 0.2x 1.1x 9.0x 9.3x 7.3x 2.7x
Mean $1,239.8 0.9x 2.4x 17.8x 14.2x 11.5x 10.9x
</TABLE>
-17-
<PAGE>
SCHEDULE III
SUMMARY OF SHAREHOLDER APPRAISAL RIGHTS AND
TEXT OF ARTICLES 5.11, 5.12, 5.13 AND 5.16 OF THE
TEXAS BUSINESS CORPORATION ACT
SUMMARY OF SHAREHOLDER APPRAISAL RIGHTS. No appraisal rights are available
in connection with the Offer. However, if the Merger is consummated,
shareholders will have certain rights under Texas Law to dissent and demand
appraisal of, and to receive payment in cash of the fair value of, their Shares.
Such rights to dissent, if the statutory procedures are complied with, could
lead to a judicial determination of the fair value of the Shares, as of the day
prior to the date on which the shareholders' vote was taken approving the Merger
(excluding any element of value arising from the accomplishment or expectation
of the Merger), required to be paid in cash to such dissenting shareholders for
their Shares. In addition, such dissenting shareholders would be entitled to
receive payment of a fair rate of interest beginning 91 days after the date of
the Merger to the date of such judgment on the amount determined to be the fair
value of their Shares. 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
earning capacity. In Parkview v. Waco Construction Inc., the Texas Court of
Appeals stated, among other things, that a qualified appraiser appointed by the
court shall have the power to examine any of the books and records of the
corporation the shares of which he is charged with valuing and he shall make a
determination of the fair value of the shares upon such investigation as to him
may seem proper. The appraiser shall also afford a reasonable opportunity to
the parties interested to submit to him pertinent evidence as to the value of
the shares. Therefore, the value so determined in any appraisal proceeding
could be the same, more or less than the purchase price per Share received in
the Merger.
In addition, Texas courts have held that, in certain circumstances, a
controlling shareholder of a company involved in a merger has a fiduciary duty
to other shareholders that requires that the merger be fair to such other
shareholders. In determining whether a merger is fair to minority shareholders,
Texas courts have considered, among other things, the type and amount of
consideration to be received by the shareholders and whether there was fair
dealing among the parties. The Texas Court of Appeals stated in Gannon v.
Parker, that the remedy ordinarily available to minority stockholders in a cash-
out merger is the right to appraisal described above. However, a damages remedy
may be available if a merger is found to be the product of fraud or
irregularity.
TEXAS BUSINESS CORPORATION ACT
Article 5.11. Rights of Dissenting Shareholders in the Event of Certain
Corporate Actions
A. Any shareholder of a domestic corporation shall have the right to
dissent from any of the following corporate actions:
(1) Any plan of merger to which the corporation is a party if shareholder
approval is required by Article 5.03 or 5.16 of this Act and the shareholder
holds shares of a class or series that was entitled to vote thereon as a class
or otherwise;
(2) Any sale, lease, exchange or other disposition (not including any
pledge, mortgage, deed of trust or trust indenture unless otherwise provided in
the articles of incorporation) of all, or substantially all, the property and
assets, with or without good will, of a corporation requiring the special
authorization of the shareholders as provided by this Act;
(3) Any plan of exchange pursuant to Article 5.02 of this Act in which the
shares of the corporation of the class or series held by the shareholder are to
be acquired.
B. Notwithstanding the provisions of Section A of this Article, a
shareholder shall not have the right to dissent from any plan of merger in which
there is a single surviving or new domestic or
III-1
<PAGE>
foreign corporation, or from any plan of exchange, if (1) the shares held by the
shareholder are part of a class of shares which are listed on a national
securities exchange, or are held of record by not less than 2,000 holders, on
the record date fixed to determine the shareholders entitled to vote on the plan
of merger or the plan of exchange, and (2) the shareholder is not required by
the terms of the plan of merger or the plan of exchange to accept for his shares
any consideration other than (a) shares of a corporation that, immediately after
the effective time of the merger or exchange, will be part of a class or series
of shares of which are (i) listed, or authorized for listing upon official
notice of issuance, on a national securities exchange, or (ii) held of record by
not less than 2,000 holders, and (b) cash in lieu of fractional shares otherwise
entitled to be received.
Article 5.12 Procedure for Dissent by Shareholders as to Said Corporate Actions
A. Any shareholder of any domestic corporation who has the right to
dissent from any of the corporate actions referred to in Article 5.11 of this
Act may exercise that right to dissent only by complying with the following
procedures:
(1)(a) With respect to proposed corporate action that is submitted to
a vote of shareholders at a meeting, the shareholder shall file with the
corporation, prior to the meeting, a written objection to the action, setting
out that the shareholder's right to dissent will be exercised if the action is
effective and giving the shareholder's address, to which notice thereof shall be
delivered or mailed in that event. If the action is effected and the
shareholder shall not have voted in favor of the action, the corporation, in the
case of action other than a merger, or the surviving or new corporation (foreign
or domestic) or other entity that is liable to discharge the shareholder's right
of dissent, in the case of a merger, shall, within ten (10) days after the
action is effected, deliver or mail to the shareholder written notice that the
action has been effected, and the shareholder may, within ten (10) days from the
delivery or mailing of the notice, make written demand on the existing,
surviving, or new corporation (foreign or domestic) or other entity, as the case
may be, for payment of the fair value of the shareholder's shares. The fair
value of the shares shall be the value thereof as of the day immediately
preceding the meeting, excluding any appreciation or depreciation in
anticipation of the proposed action. The demand shall state the number and class
of the shares owned by the shareholder and the fair value of the shares as
estimated by the shareholder. Any shareholder failing to make demand within the
ten (10) day period shall be bound by the action.
(b) With respect to proposed corporate action that is approved
pursuant to Section A of Article 9.10 of this Act, the corporation, in the case
of action other than a merger, and the surviving or new corporation (foreign or
domestic) or other entity that is liable to discharge the shareholder's right of
dissent, in the case of a merger, shall, within ten (10) days after the date the
action is effected, mail to each shareholder of record as of the effective date
of the action notice of the fact and date of the action and that the shareholder
may exercise the shareholder's right to dissent from the action. The notice
shall be accompanied by a copy of this Article and any articles or documents
filed by the corporation with the Secretary of State to effect the action. If
the shareholder shall not have consented to the taking of the action, the
shareholder may, within twenty (20) days after the mailing of the notice, make
written demand on the existing, surviving, or new corporation (foreign or
domestic) or other entity, as the case may be, for payment of the fair value of
the shareholder's shares. The fair value of the shares shall be the value
thereof as of the date the written consent authorizing the action was delivered
to the corporation pursuant to Section A of Article 9.10 of this Act, excluding
any appreciation or depreciation in anticipation of the action. The demand
shall state the number and class of shares owned by the dissenting shareholder
and the fair value of the shares as estimated by the shareholder. Any
shareholder failing to make demand within the twenty (20) day period shall be
bound by the action.
(2) Within twenty (20) days after receipt by the existing, surviving,
or new corporation (foreign or domestic) or other entity, as the case may be, of
a demand for payment made by a dissenting shareholder in accordance with
Subsection (1) of this Section, the corporation (foreign or domestic) or other
entity shall deliver or mail to the shareholder a written notice that shall
either set out that the corporation (foreign or domestic) or other entity
accepts the amount claimed in the demand and agrees to pay that amount within
ninety (90) days after the date on which the action was
III-2
<PAGE>
effected, and, in the case of shares represented by certificates, upon the
surrender of the certificates duly endorsed, or shall contain an estimate by the
corporation (foreign or domestic) or other entity of the fair value of the
shares, together with an offer to pay the amount of that estimate within ninety
(90) days after the date on which the action was effected, upon receipt of
notice within sixty (60) days after that date from the shareholder that the
shareholder agrees to accept that amount and, in the case of shares represented
by certificates, upon the surrender of the certificates duly endorsed.
(3) If, within sixty (60) days after the date on which the corporate
action was effected, the value of the shares is agreed upon between the
shareholder and the existing, surviving, or new corporation (foreign or
domestic) or other entity, as the case may be, payment for the shares shall be
made within ninety (90) days after the date on which the action was effected
and, in the case of shares represented by certificates, upon surrender of the
certificates duly endorsed. Upon payment of the agreed value, the shareholder
shall cease to have any interest in the shares or in the corporation.
B. If, within the period of sixty (60) days after the date on which the
corporate action was effected, the shareholder and the existing, surviving, or
new corporation (foreign or domestic) or other entity, as the case may be, do
not so agree, then the shareholder or the corporation (foreign or domestic) or
other entity may, within sixty (60) days after the expiration of the sixty (60)
day period, file a petition in any court of competent jurisdiction in the county
in which the principal office of the domestic corporation is located, asking for
a finding and determination of the fair value of the shareholder's shares. Upon
the filing of any such petition by the shareholder, service of a copy thereof
shall be made upon the corporation (foreign or domestic) or other entity, which
shall, within ten (10) days after service, file in the office of the clerk of
the court in which the petition was filed a list containing the names and
addresses of all shareholders of the domestic corporation who have demanded
payment for their shares and with whom agreements as to the value of their
shares have not been reached by the corporation (foreign or domestic) or other
entity. If the petition shall be filed by the corporation (foreign or domestic)
or other entity, the petition shall be accompanied by such a list. The clerk of
the court shall give notice of the time and place fixed for the hearing of the
petition by registered mail to the corporation (foreign or domestic) or other
entity and to the shareholders named on the list at the addresses therein
stated. The forms of the notices by mail shall be approved by the court. All
shareholders thus notified and the corporation (foreign or domestic) or other
entity shall thereafter be bound by the final judgment of the court.
C. After the hearing of the petition, the court shall determine the
shareholders who have complied with the provisions of this Article and have
become entitled to the valuation of and payment for their shares, and shall
appoint one or more qualified appraisers to determine that value. The
appraisers shall have power to examine any of the books and records of the
corporation the shares of which they are charged with the duty of valuing, and
they shall make a determination of the fair value of the shares upon such
investigation as to them may seem proper. The appraisers shall also afford a
reasonable opportunity to the parties interested to submit to them pertinent
evidence as to the value of the shares. The appraisers shall have such power
and authority as may be conferred on Masters in Chancery by the Rules of Civil
Procedures or by the order of their appointment.
D. The appraisers shall determine the fair value of the shares of the
shareholders adjudged by the court to be entitled to payment for their shares
and shall file their report of that value in the office of the clerk of the
court. Notice of the filing of the report shall be given by the clerk to the
parties in interest. The report shall be subject to exceptions to be heard
before the court both upon the law and the facts. The court shall by its
judgment determine the fair value of the shares of the shareholders entitled to
payment for their shares and shall direct the payment of that value by the
existing, surviving, or new corporation (foreign or domestic) or other entity,
together with interest thereon, beginning 91 days after the date on which the
applicable corporate action from which the shareholder elected to dissent was
effected to the date of such judgment, to the shareholders entitled to payment.
The judgment shall be payable to the holders of uncertificated shares
immediately but to the holders of shares represented by certificates only upon,
and simultaneously with, the surrender to the existing, surviving, or new
corporation (foreign or domestic) or other entity, as the case may be, of duly
endorsed certificates for those shares. Upon payment of the judgment, the
dissenting shareholders shall cease to have any interest in those shares or in
the corporation. The court shall
III-3
<PAGE>
allow the appraisers a reasonable fee as court costs, and all court costs shall
be allotted between the parties in the manner that the court determines to be
fair and equitable.
E. Shares acquired by the existing, surviving, or new corporation
(foreign or domestic) or other entity, as the case may be, pursuant to the
payment of the agreed value of the shares or pursuant to payment of the judgment
entered for the value of the shares, as in this Article provided, shall, in the
case of a merger, be treated as provided in the plan of merger and, in all other
cases, may be held and disposed of by the corporation as in the case of other
treasury shares.
F. The provisions of this Article shall not apply to a merger if, on the
date of the filing of the articles of merger, the surviving corporation is the
owner of all the outstanding shares of the other corporation, domestic or
foreign, that are parties to the merger.
G. In the absence of fraud in the transaction, the remedy provided by
this Article to a shareholder objecting to any corporation action referred to in
Article 5.11 of this Act is the exclusive remedy for the recovery of the value
of his shares or money damages to the shareholder with respect to the action.
If the existing, surviving, or new corporation (foreign or domestic) or other
entity, as the case may be, complies with the requirements of this Article, any
shareholder who fails to comply with the requirements of this Article shall not
be entitled to bring suit for the recovery of the value of his shares or money
damages to the shareholder with respect to the action.
Article 5.13 Provisions Affecting Remedies of Dissenting Shareholders
A. Any shareholder who has demanded payment for his shares in accordance
with either Article 5.12 or 5.16 of this Act shall not thereafter be entitled to
vote or exercise any other rights of a shareholder except the right to receive
payment for his shares pursuant to the provisions of those articles and the
right to maintain an appropriate action to obtain relief on the ground that the
corporate action would be or was fraudulent, and the respective shares for which
payment has been demanded shall not thereafter be considered outstanding for the
purposes of any subsequent vote of shareholders.
B. Upon receiving a demand for payment from any dissenting shareholder,
the corporation shall make an appropriate notation thereof in its shareholder
records. Within twenty (20) days after demanding payment for his shares in
accordance with either Article 5.12 or 5.16 of this Act, each holder of
certificates representing shares so demanding payment shall submit such
certificates to the corporation for notation thereon that such demand has been
made. The failure of holders of certificated shares to do so shall, at the
option of the corporation, terminate such shareholder's rights under Article
5.12 and 5.16 of this Act unless a court of competent jurisdiction for good and
sufficient cause shown shall otherwise direct. If uncertificated shares for
which payment has been demanded or shares represented by a certificate on which
notation has been so made shall be transferred, any new certificate issued
therefore shall bear similar notation together with the name of the original
dissenting holder of such shares and a transferee of such shares shall acquire
by such transfer no rights in the corporation other than those which the
original dissenting shareholder had after making demand for payment of the fair
value thereof.
C. Any shareholder who has demanded payment for his shares in accordance
with either Article 5.12 or 5.16 of this Act may withdraw such demand at any
time before payment for his shares or before any petition has been filed
pursuant to Article 5.12 or 5.16 of this Act asking for a finding and
determination of the fair value of such shares, but no such demand may be
withdrawn after such payment has been made or, unless the corporation shall
consent thereto, after any such petition has been filed. If, however, such
demand shall be withdrawn as hereinbefore provided, or if pursuant to Section B
of this Article the corporation shall terminate the shareholder's rights under
Article 5.12 or 5.16 of this Act, as the case may be, or if after the hearing of
a petition filed pursuant to Article 5.12 or 5.16, the court shall determine
that such shareholder and all persons claiming under him shall be conclusively
presumed to have approved and ratified the corporate action from which he
dissented and shall be bound thereby, the right of such shareholder to be paid
the fair value of his shares shall cease, and his status as a shareholder shall
be restored without prejudice to any corporate proceedings which
III-4
<PAGE>
may have been taken during the interim, and such shareholder shall be entitled
to receive any dividends or other distributions made to shareholders in the
interim.
Article 5.16 Merger into Subsidiary or Subsidiaries into Parent Corporation
Qualifications
A. In any case in which at least ninety (90%) percent of the outstanding
shares of each class and series of a domestic or foreign corporation or
corporations is owned by another domestic or foreign corporation, and at least
one of such corporations is a domestic corporation and the other or others are
domestic corporations or foreign corporations organized under the laws of a
jurisdiction that permit such a merger, the corporation having such share
ownership may (1) merge such other domestic or foreign corporation or
corporations into itself, (2) merge itself into such other corporation, or (3)
merge itself and one or more of such corporations into another of such domestic
or foreign corporations:
(a) in the event that the corporation having such share ownership will be a
surviving corporation in the merger, by executing and filing articles of merger
in accordance with Section B of this Article; or
(b) in the event that the corporation having such share ownership will not
be a surviving corporation in the merger, by the corporation having such share
ownership adopting a plan of merger in the manner required by Article 5.03 of
this Act, except that no action under Section 5.03 shall be required to be taken
by the corporation or corporations whose shares are so owned, and executing and
filing articles of merger in accordance with Section B of this Article.
Signature of articles; contents
B. The articles of merger shall be signed on behalf of the parent
corporation by an officer and shall set forth:
(1) The name of the parent corporation, and the name or names of the
subsidiary corporations and the respective jurisdiction under which each such
corporation is organized.
(2) The number of outstanding shares of each class of each subsidiary
corporation and the number of such shares of each class owned by the parent
corporation.
(3) A copy of the resolution adopted by the board of directors of the
parent corporation to so merge and the date of the adoption thereof. If the
parent corporation does not own all the outstanding shares of each class of each
subsidiary corporation that is a party to the merger, the resolution shall state
the terms and conditions of the merger, including the cash or other property,
including shares, obligations, evidences of ownership, rights to purchase
securities, or other securities of any person or entity or any combination of
the shares, obligations, evidences of ownership, rights, or other securities, to
be used, paid or delivered by the surviving corporation upon surrender of each
share of the subsidiary corporation or corporations not owned by the parent
corporation.
(4) If the surviving corporation is a foreign corporation, the address,
including street number if any, of its registered or principle office in the
jurisdiction under whose laws it is governed. If the surviving corporation is a
foreign corporation, on the merger taking effect the surviving foreign
corporation is deemed to (a) appoint the Secretary of State of this state as
its agent for service of process to enforce an obligation or the rights of
dissenting shareholders of each domestic corporation that is a party to the
merger, and (b) agree that it will promptly pay to the dissenting shareholders
of each domestic corporation that is a party to the merger the amount, if any,
to which they are entitled under this Article.
(5) If a plan of merger is required by Section A of this Article to be
adopted in the manner required by Article 5.03 of this Act, the information
required by Section A of Article 5.04 of this Act.
III-5
<PAGE>
C. Delivery to Secretary of State; Duties. The original and a copy of the
articles of merger shall be delivered to the Secretary of State. If the
Secretary of State finds that such articles conform to law, he shall, when all
fees and franchise taxes have been paid as required by law:
(1) Endorse on the original and the copy of the word "Filed," and the
month, day and year of the filing thereof.
(2) File the original in his office.
(3) Issue a certificate of merger to which he shall affix the copy and
deliver them to the surviving corporation or its representative.
D. Effective Date and Effect. The effective date and the effect of such
merger shall be the same as provided in Articles 5.05 and 5.06 of this Act if
the surviving corporation is a domestic corporation. If the surviving
corporation is a foreign corporation, the effective date and the effect of such
merger shall be the same as in the case of the merger of domestic corporations
except in so far as the laws of such other jurisdiction provide otherwise.
Remedy of minority shareholders
E. In the event all of the shares of a subsidiary domestic corporation
that is a party to a merger effected under this Article are not owned by the
parent corporation immediately prior to the merger, the surviving corporation
(foreign or domestic) shall, within ten (10) days after the effective date of
the merger, mail to each shareholder of record of each subsidiary domestic
corporation a copy of the articles of merger and notify the shareholder that the
merger has become effective. Any such shareholder who holds shares of a class
or series that would have been entitled to vote on the merger if it had been
effected pursuant to Article 5.03 of this Act shall have the right to dissent
from the merger and demand payment of the fair value for his shares in lieu of
the cash or other property to be used, paid or delivered to such shareholder
upon the surrender of such shareholder's shares pursuant to the terms and
conditions of the merger, with the following procedure:
(1) Such shareholder shall within twenty (20) days after the mailing of the
notice and copy of the articles of merger make written demand on the surviving
corporation, domestic or foreign, for payment of the fair value of his shares.
The fair value of the shares shall be the value thereof as of the day before the
effective date of the merger, excluding any appreciation or depreciation in
anticipation of such act. The demand shall state the number and class of the
shares owned by the dissenting shareholder and the fair value of such shares as
estimated by him. Any shareholder failing to make demand within the twenty (20)
day period shall be bound by the corporate action.
(2) Within ten (10) days after receipt by the surviving corporation of a
demand for payment by the dissenting shareholder of the fair value of his shares
in accordance with Subsection (1) of this section, the corporation (foreign or
domestic) shall deliver or mail to the dissenting shareholder a written notice
which shall either set out that the corporation (foreign or domestic) accepts
the amount claimed in the demand and agrees to pay such amount within ninety
(90) days after the date on which the corporate action was effected and, in the
case of shares represented by certificates, upon the surrender of the shares
certificates duly endorsed, or shall contain an estimate by the corporation of
the fair value of such shares, together with an offer to pay the amount of that
estimate within ninety (90) days after the date on which such corporate action
was effected, upon receipt of notice within sixty (60) days after that date from
the shareholder that the shareholder agrees to accept that amount and, in the
case of shares represented by certificates, upon the surrender of the share
certificates duly endorsed.
(3) If, within sixty (60) days after the date on which the corporate action
was effected, the value of the shares is agreed upon between the dissenting
shareholder and the surviving corporation (foreign or domestic), payment for the
shares shall be made within ninety (90) days after the date on which the
corporate action was effected and, in the case of shares represented by
certificates, upon surrender of his certificate or certificates representing
such shares. Upon payment
III-6
<PAGE>
of the agreed value, the dissenting shareholder shall cease to have any interest
in such shares or in the corporation.
(4) If, within sixty (60) days after the date on which such corporate
action was effected, the shareholder and the surviving corporation (foreign or
domestic) do not so agree, then the dissenting shareholder or the corporation
(foreign or domestic) may, within sixty (60) days after the expiration of the
sixty (60) day period, file a petition in any court of competent jurisdiction in
the county in which the principle office of the corporation is located, asking
for a finding and determination of the fair value of the shareholder's shares as
provided in Section B of Article 5.12 of this Act and thereupon the parties
shall have the rights and duties and follow the procedure set forth in Sections
B to D inclusive of Article 5.12.
(5) In the absence of fraud in the transaction, the remedy provided by this
Article to a shareholder objecting to the corporate action is the exclusive
remedy for the recovery of the value of his shares or money damages to the
shareholder with respect to the corporate action. If the surviving corporation
(foreign or domestic) complies with the requirements of this Article, any such
shareholder who fails to comply with the requirements of this Article shall not
be entitled to bring suit for the recovery of the value of his shares or money
damages to such shareholder with respect to such corporate action.
III-7
<PAGE>
Dissenting shareholders
F. If a plan of merger is required by Section A of this Article to be
adopted in the manner required by Article 5.03 of this Act, the provisions of
Articles 5.11 and 5.12 of this Act shall apply to the rights of the shareholders
of the parent corporation to dissent from such merger. Except as otherwise
provided in this Article, the provisions of Articles 5.11 and 5.12 of this Act
shall not be applicable to a merger effected under the provisions of this
Article. The provisions of Article 5.13 of this Act shall be applicable to any
merger effected under the provisions of this Article to the extent provided in
Article 5.13 of this Act.
III-8
<PAGE>
SCHEDULE IV
FINANCIAL STATEMENTS
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
Rawson-Koenig, Inc.:
We have audited the financial statements and the financial statement
schedule of Rawson-Koenig, Inc. (the "Company") listed in Item 14(a) of this
Form 10-K. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform our audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Rawson-Koenig, Inc. as of
December 31, 1996 and 1995, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles. In addition, in our
opinion, the financial statement schedule referred to above, when considered
in relation to the basic financial statements taken as a whole, presents
fairly, in all material respects, the information required to be included
therein.
COOPERS & LYBRAND L.L.P.
Houston, Texas
February 12, 1997
IV-1
<PAGE>
RAWSON-KOENIG, INC.
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
1996 1995
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents......................... $ 334,199 $ 315,412
Accounts receivable, trade (net of allowance for
doubtful accounts of $40,000 in 1996 and 1995)... 1,269,006 1,713,511
Inventories....................................... 3,941,189 3,615,265
Prepayments and other............................. 106,548 173,960
----------- -----------
Total current assets.......................... 5,650,942 5,818,148
Property, plant and equipment, net.................. 4,838,109 3,893,266
Other assets........................................ 112,412
----------- -----------
Total assets.................................. $10,489,051 $ 9,823,826
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt................. $ 228,639 $ 215,253
Current portion of capital lease obligation....... 27,025
Accounts payable.................................. 685,360 437,681
Accrued expenses.................................. 857,960 884,326
State income taxes payable........................ 79,000 61,000
----------- -----------
Total current liabilities....................... 1,850,959 1,625,285
Long-term debt, less current portion................ 1,434,813 2,095,124
----------- -----------
Total liabilities............................... 3,285,772 3,720,409
----------- -----------
Commitments and contingencies
Shareholders' equity:
Preferred stock, $10 par value, 1,000,000
shares authorized, none issued Common stock,
no par, $1,000 stated value, 5,000,000 shares
authorized, 3,901,190 shares issued and
outstanding at December 31, 1996 and 1995......... 1,000 1,000
Additional paid-in capital........................ 4,529,120 4,529,120
Retained earnings................................. 2,673,159 1,573,297
----------- -----------
Total shareholders' equity...................... 7,203,279 6,103,417
----------- -----------
Total liabilities and shareholders' equity.... $10,489,051 $ 9,823,826
=========== ===========
The accompanying notes are an integral part of the financial statements.
IV-2
<PAGE>
RAWSON-KOENIG, INC.
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994
----------- ----------- -----------
Sales................................... $19,521,871 $18,682,075 $17,184,557
Cost of sales........................... 15,002,105 14,903,247 13,300,320
----------- ----------- -----------
Gross profit........................ 4,519,766 3,778,828 3,884,237
Selling, general and administrative
expenses............................... 2,748,844 2,585,773 2,281,899
----------- ----------- -----------
Income from operations.............. 1,770,922 1,193,055 1,602,338
Other income (expense):
Interest expense...................... (147,211) (194,436) (210,891)
Other, net............................ 9,151 193,874 92,330
----------- ----------- -----------
Income before provision for income
taxes.............................. 1,632,862 1,192,493 1,483,777
----------- ----------- -----------
Provision for income taxes:
Federal............................... 454,000 306,000 267,000
State................................. 79,000 61,000 75,000
----------- ----------- -----------
533,000 367,000 342,000
----------- ----------- -----------
Net income.......................... $ 1,099,862 $ 825,493 $ 1,141,777
=========== =========== ===========
Net income per share................ $ .28 $ .21 $ .29
=========== =========== ===========
Average shares outstanding.............. 3,901,190 3,901,190 3,901,190
=========== =========== ===========
The accompanying notes are an integral part of the financial statements.
IV-3
<PAGE>
RAWSON-KOENIG, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
RETAINED
COMMON STOCK ADDITIONAL EARNINGS TOTAL
----------------- PAID-IN (ACCUMULATED SHAREHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT) EQUITY
------ ------ ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Balance, December 31,
1993........................... 3,901,190 $ 1,000 $ 4,529,120 $ (393,973) $ 4,136,147
Net income...................... 1,141,777 1,141,777
---------- -------- ----------- ------------ ------------
Balance, December 31, 1994...... 3,901,190 1,000 4,529,120 747,804 5,277,924
Net income...................... 825,493 825,493
---------- -------- ----------- ------------ ------------
Balance, December 31, 1995...... 3,901,190 1,000 4,529,120 1,573,297 6,103,417
Net income...................... 1,099,862 1,099,862
---------- -------- ----------- ------------ ------------
Balance, December 31, 1996...... 3,901,190 $ 1,000 $ 4,529,120 $ 2,673,159 $ 7,203,279
========== ======== =========== ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
IV-4
<PAGE>
RAWSON-KOENIG, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income..................................... $ 1,099,862 $ 825,493 $ 1,141,777
----------- ----------- -----------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization................. 502,706 470,156 454,292
Loss (gain) on disposal of property,
plant and equipment.......................... 7,323 (15,500) 10,480
Change in assets and liabilities:
Decrease (increase) in accounts
receivable, trade........................... 444,505 (104,956) (363,771)
Increase in inventories...................... (325,924) (49,936) (498,925)
Decrease (increase) in prepayments and
other....................................... 67,412 (9,728) (53,083)
Decrease (increase) in other assets.......... 112,412 (112,412)
Increase (decrease) in accounts payable...... 135,267 (213,197) 116,901
Increase (decrease) in accrued expenses...... (26,366) 47,175 132,528
Increase (decrease) in state income
taxes payable............................... 18,000 (172,459) 159,774
----------- ----------- -----------
Total adjustments........................... 935,335 (160,857) (41,804)
----------- ----------- -----------
Net cash provided by operating
activities................................. 2,035,197 664,636 1,099,973
----------- ----------- -----------
Cash flows from investing activities:
Purchase of property, plant, and
equipment.................................... (1,342,460) (805,970) (236,915)
Proceeds from disposal of property,
plant, and equipment......................... 15,500 1,955
----------- ----------- -----------
Net cash used by investing activities....... (1,342,460) (790,470) (234,960)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from revolving line of credit........ 1,030,000 1,544,605 250,000
Payments on revolving line of credit.......... (1,461,605) (1,063,000) (800,000)
Payments on long-term debt.................... (215,320) (203,713) (262,007)
Payments on capital lease obligation.......... (27,025) (29,672) (26,926)
----------- ----------- -----------
Net cash provided (used) by financing
activities................................. (673,950) 248,220 (838,933)
----------- ----------- -----------
Net increase in cash and cash equivalents....... 18,787 122,386 26,080
Cash and cash equivalents at beginning
of year........................................ 315,412 193,026 166,946
----------- ----------- -----------
Cash and cash equivalents at end of year........ $ 334,199 $ 315,412 $ 193,026
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
IV-5
<PAGE>
RAWSON-KOENIG, INC.
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF ORGANIZATION:
Rawson-Koenig, Inc. (the "Company"), a Texas corporation, designs,
manufactures, and markets certain equipment for light trucks. Its chief products
are truck tool boxes, truck service bodies, winches and truck-mounted cranes.
The Company sells its products to customers in the truck equipment industry
located throughout the United States. The Company performs ongoing credit
evaluations of its customers and generally does not require collateral. The
Company maintains reserves for potential credit losses and such losses have
been within management's expectations.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Net Income Per Share
Net income per share is computed on the basis of the weighted average
number of shares of common stock outstanding during the year.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers any
highly liquid debt instruments purchased with an original maturity date of
three months or less to be cash equivalents.
The Company maintains its cash in bank deposit accounts which, at times,
may exceed federally insured limits. The Company has not experienced any losses
in such accounts.
Inventories
Inventories are valued at the lower of cost or market. Cost, which includes
material, labor and manufacturing overhead, is determined by the first-in,
first-out (FIFO) method and, at December 31, 1996 and 1995, consisted of the
following:
1996 1995
----------- -----------
Raw materials................................. $ 1,391,135 $ 1,262,869
Work in process............................... 1,554,390 1,609,002
Finished goods................................ 995,664 743,394
----------- -----------
$ 3,941,189 $ 3,615,265
=========== ===========
Tooling Costs
The costs of self-constructing tools and dies for use in manufacturing are
capitalized and depreciated over four years using the straight-line method.
Capitalized costs consist of labor, material and construction overhead.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost and include improvements
that significantly add to productive capacity or extend useful lives. Costs of
maintenance and repairs are charged to expense. Upon retirement or disposal of
assets, the cost and related accumulated depreciation are removed from the
accounts and the gain or loss, if any, is reflected in operations.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets. Estimated useful lives range from three to thirty
one years. Depreciation expense for the years ended December 31, 1996, 1995
and 1994, amounted to $502,706, $470,156 and $454,292, respectively.
IV-6
<PAGE>
RAWSON-KOENIG, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Property, plant and equipment at December 31, 1996 and 1995, consisted of
the following:
1996 1995
----------- -----------
Land.......................................... $ 680,000 $ 680,000
Buildings..................................... 3,134,856 3,014,778
Machinery and equipment....................... 5,313,870 4,023,323
Self-constructed tools and dies............... 865,320 768,917
Furniture and fixtures........................ 394,737 385,703
Vehicles...................................... 151,554 110,974
Machinery and equipment under capital lease... 130,230
----------- -----------
10,540,337 9,113,925
Accumulated depreciation and amortization..... (5,702,228) (5,220,659)
----------- -----------
$ 4,838,109 $ 3,893,266
=========== ===========
Included in accumulated depreciation and amortization at December 31, 1995,
is $72,102 of accumulated amortization on machinery and equipment acquired
under a capital lease agreement. The lease expired during 1996 and the Company
purchased the equipment for $1 under the terms of the lease.
Included in accumulated depreciation and amortization at December 31, 1996
and 1995, is $660,514 and $546,081, respectively, of accumulated depreciation
on self-constructed tools and dies.
Income Taxes
Income taxes are computed under the provisions of the Financial Accounting
Standards Board Statement No. 109, "Accounting for Income Taxes" ("SFAS 109").
Under SFAS 109, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to the differences between the financial
statement carrying value of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured by
using enacted tax rates that are applicable to the future years in which
deferred tax assets or liabilities are expected to be realized or settled.
Under SFAS 109, the effect of a change in tax rates on deferred tax assets and
liabilities is recognized in net earnings in the period in which the tax rate
change was enacted. The Company establishes a valuation allowance when it is
more likely than not that a deferred tax asset will not be recovered.
Management Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reported period. Actual results could differ from those
estimates.
3. ACCRUED EXPENSES:
Accrued expenses at December 31, 1996 and 1995, include $400,000 for
potential claims against the Company by its employees arising from injuries
incurred in the normal course of business prior to May 1, 1994. Actual claims
for medical expenses and lost time paid during the years ended December 31,
1996, 1995 and 1994, for injuries incurred prior to May 1, 1994, were $12,000,
$1,085 and $7,570, respectively. In addition, prior to May 1, 1994, the
Company had stop-loss insurance for any individual claim in excess of
$250,000. Effective May 1, 1994, the Company was fully insured under standard
workers' compensation insurance for claims incurred after that date.
IV-7
<PAGE>
RAWSON-KOENIG, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Accrued expenses at December 31, 1996 and 1995, include $123,097 and
$124,110, respectively, for accrued payroll.
4. LONG-TERM DEBT:
Long-term debt at December 31, 1996 and 1995, consisted of the following:
1996 1995
----------- -----------
Revolving line of credit in the amount of
$2,200,000 with a bank, which matures
April 30, 1998. Interest is payable monthly
at the bank's prime rate (8.25% at
December 31, 1996). Borrowings under the
agreement are restricted to certain
percentages of accounts receivable and
inventories.................................. $ 200,000 $ 631,605
Real estate loan payable to a bank, due in
monthly payments of $22,047, including
interest at 8.5% per year, with the unpaid
balance due May 2000......................... 1,300,258 1,445,618
Installment loan payable to a bank, due in
monthly payments of $5,830 plus interest
at the bank's prime rate with the unpaid
balance due April 1999....................... 163,194 233,154
----------- -----------
1,663,452 2,310,377
Current portion of long-term debt............. (228,639) (215,253)
----------- -----------
Long-term portion............................. $ 1,434,813 $ 2,095,124
=========== ===========
Effective May 28, 1996, the Company amended its loan agreement with its
primary lender. The amended agreement extended the maturity date of the line
of credit to April 30, 1998 and provided the Company with an advancing term
equipment loan under which the Company may borrow up to $1,000,000 to finance
equipment purchases through April 30, 1997. Any borrowings outstanding under
this advancing term equipment loan as of April 30, 1997, will be converted to
a five year term loan that will be due in sixty equal monthly principal
payments beginning May 30, 1997, plus interest at the bank's prime rate. As of
December 31, 1996, there were no amounts outstanding under this advancing term
equipment loan.
The Company's other advancing term equipment loan agreement, that allowed
for borrowings up to $1,500,000, expired unused on August 31, 1996.
The line of credit agreement and other bank debt contain various
restrictive covenants which include, among other things, maintenance of a
minimum tangible net worth and minimum working capital, restrictions on
property, plant and equipment additions and additional indebtedness, and
requirements to maintain certain financial ratios. All loans from the bank are
collateralized by accounts receivable, inventories, equipment and Houston real
estate.
Future maturities of long-term debt are as follows:
YEAR ENDING DECEMBER 31,
------------------------
1997...................................................... $ 228,639
1998...................................................... 442,867
1999...................................................... 211,686
2000...................................................... 780,260
-----------
$ 1,663,452
===========
IV-8
<PAGE>
RAWSON-KOENIG, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Cash paid for interest was $147,572, $194,578 and $211,372 for the years
ended December 31, 1996, 1995 and 1994, respectively.
5. INCOME TAXES:
The composition of deferred tax assets and liabilities and the related tax
effects at December 31, 1996 and 1995 was as follows:
1996 1995
----------- -----------
Deferred tax assets:
Tax assets which have been
expensed for book purposes............. $ 24,570 $ 29,703
Accrued expenses deductible when
paid for tax........................... 148,000 148,000
Net operating loss carryforwards........ 176,955 239,289
Investment tax credit carryforwards..... 15,000 15,000
----------- -----------
Total deferred tax assets............. 364,525 431,992
Deferred tax liabilities:
Property, plant and equipment basis..... 156,302 146,546
----------- -----------
Net deferred tax assets before
valuation allowance...................... 208,223 285,446
Valuation allowance....................... (208,223) (285,446)
----------- -----------
Net deferred tax assets............... $ - $ -
=========== ===========
The differences between the federal income tax provision and the amount
that would result if the federal statutory rate of 34% were applied to pretax
financial income for 1996, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------------ ----------------- -----------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ -------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Federal income tax
provision at the statutory rate................ $ 555,173 34.0% $ 405,448 34.0% $ 504,484 34.0%
Utilization of net operating loss carryforwards. (62,334) (3.8) (62,335) (5.2) (87,056) (5.9)
Utilization of alternative minimum tax
credit carryforwards........................... (4,013) (0.4) (125,500) (8.4)
State income tax, net of federal benefit........ 52,140 3.2 40,260 3.4 49,500 3.3
Change in valuation allowance, net of
alternative minimum tax and utilization
of net operating loss and alternative
minimum tax credit carryforwards............... (14,889) (.9) (16,574) (1.4) 3,092 0.2
Other........................................... 2,910 .1 4,214 0.4 (2,520) (0.2)
---------- ----- --------- ----- --------- -----
$ 533,000 32.6% $ 367,000 30.8% $ 342,000 23.0%
========== ===== ========= ===== ========= =====
</TABLE>
IV-9
<PAGE>
RAWSON-KOENIG, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
At December 31, 1996, the Company had approximate tax net operating loss
and tax credit carryforwards available to offset future taxable income as
follows:
NET OPERATING LOSS
CARRYFORWARDS
------------------
ALTERNATIVE
REGULAR MINIMUM
TAX TAX INVESTMENT
REPORTING REPORTING TAX CREDIT
EXPIRATION YEAR ENDING DECEMBER 31, PURPOSES PURPOSES CARRYFORWARDS
----------------------------------- --------- ----------- -------------
1998.................................. $ 6,000
1999.................................. 9,000
2001................................... $ 346,000 $ 346,000
2002.................................. 58,000 58,000
2003.................................. 58,000 58,000
2004.................................. 58,000 58,000
--------- ---------- ----------
$ 520,000 $ 520,000 $ 15,000
========= ========== ==========
Utilization of net operating loss carryforwards is limited under the
alternative minimum tax rules. Additionally, special limitations exist under
the tax law which may restrict the utilization of the regular tax and
alternative minimum tax net operating loss carryforwards.
Cash paid for income taxes was $503,530, $575,773 and $182,226 for the
years ended December 31, 1996, 1995 and 1994, respectively.
6. RELATED PARTY TRANSACTIONS:
During 1996 and 1995, the Company paid $8,127 and $7,470, respectively, to
directors for consulting fees. In addition, the Company made payments for
legal services provided by the law firm of a director in the amount of
$90,346, $49,217 and $30,990 for the years ended December 31, 1996, 1995 and
1994, respectively. Accrued amounts payable to this law firm at December 31,
1996 and 1995 were $36,067 and $29,079, respectively.
7. COMMITMENTS AND CONTINGENCIES:
The Company is engaged in various claims and litigation arising from its
operations. In the opinion of management, uninsured losses, if any, resulting
from these matters will not have a material adverse effect upon the financial
position or results of operations of the Company.
8. SUPPLEMENTAL CASH FLOW INFORMATION:
During 1996, the Company purchased certain equipment with a cost of
$1,124,120 of which $112,412 was included in accounts payable at December 31,
1996.
IV-10
<PAGE>
RAWSON-KOENIG, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
COLUMN C
ADDITIONS
COLUMN B --------------------- COLUMN E
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
COLUMN A BEGINNING COSTS AND OTHER COLUMN D END
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD
----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Valuation and qualifying accounts
deducted in the balance sheet
from the related assets to
which they apply:
(a) Allowance for doubtful accounts
receivable:
Year ended December 31, 1994............ $ 40,000 $ (9,746) $ 10,124 $ 378 $ 40,000
Year ended December 31, 1995............ 40,000 466 63 529 40,000
Year ended December 31, 1996............ 40,000 6,217 - 6,217 40,000
(b) Deferred tax asset valuation
allowance:
Year ended December 31, 1994............ 655,976 - - 291,621 364,355
Year ended December 31, 1995............ 364,355 - - 78,909 285,446
Year ended December 31, 1996............ 285,446 - - 77,223 208,223
</TABLE>
IV-11
<PAGE>
SCHEDULE V
RAWSON-KOENIG, INC.
CONDENSED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
June 30, June 30,
1997 1996
-------- --------
<S> <C> <C>
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 465 $ 293
Accounts receivable, net 1,746 1,855
Inventories:
Raw materials 1,469 1,205
Work in process 1,127 1,385
Finished goods 647 601
Prepayments and other 571 191
------- -------
Total current assets 6,025 5,530
------- -------
Property, plant and equipment, at cost:
Land and buildings 3,829 3,809
Machinery and equipment 6,829 5,494
Accumulated depreciation and amortization (5,987) (5,462)
------- -------
Property, plant and equipment, net 4,671 3,841
------- -------
Other assets 225
------- -------
Total assets $10,696 $ 9,596
======= =======
</TABLE>
The accompanying notes are an integral part of these
financial statements.
V-1
<PAGE>
RAWSON-KOENIG, INC.
CONDENSED BALANCE SHEETS, CONTINUED
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
June 30, June 30,
1997 1996
-------- --------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Current portion of long-term debt $ 280 $ 222
Current portion of capital lease obligation 11
Accounts payable 748 329
Accrued expenses 428 887
Income taxes payable 94 69
------- -------
Total current liabilities 1,550 1,518
Long-term debt, less current portion 943 1,350
Deferred income taxes 84
------- -------
Total liabilities 2,577 2,868
------- -------
Shareholders' equity:
Preferred stock, $10 par value, 1,000,000
shares authorized, none issued
Common stock, no par, $1,000 stated value,
5,000,000 shares authorized, 3,901,190
shares issued and outstanding 1 1
Additional paid-in capital 4,529 4,529
Retained earnings 3,589 2,198
------- -------
Total shareholders' equity 8,119 6,728
------- -------
Total liabilities and shareholders' equity $10,696 $ 9,596
======= =======
</TABLE>
The accompanying notes are an integral part of these
financial statements.
V-2
<PAGE>
RAWSON-KOENIG, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA AND AVERAGE SHARES OUTSTANDING)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales $ 5,980 $ 5,562 $ 11,391 $ 10,598
Cost of sales 4,466 4,249 8,456 8,117
---------- ---------- ---------- ----------
Gross profit 1,514 1,313 2,935 2,481
Selling, general and
administrative expenses 910 724 1,716 1,460
---------- ---------- ---------- ----------
Income from operations 604 589 1,219 1,021
Other income (expense):
Interest expense (30) (35) (64) (79)
Other, net 12 18 4
---------- ---------- ---------- ----------
Income before income taxes 586 554 1,173 946
Income taxes:
Federal 138 164 220 276
State 22 27 37 46
---------- ---------- ---------- ----------
Net income $ 426 $ 363 $ 916 $ 624
========== ========== ========== ==========
Net income per share $ .10 $ .09 $ .23 $ .16
========== ========== ========== ==========
Average shares outstanding 3,901,190 3,901,190 3,901,190 3,901,190
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
V-3
<PAGE>
RAWSON-KOENIG, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1997 1996
-------- --------
<S> <C> <C>
Cash flow from operating activities:
Net income $ 916 $ 624
----- -----
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 295 245
Change in assets and liabilities, net (511) 56
----- -----
Total adjustments (216) 301
----- -----
Net cash provided by operating activities 700 925
Cash flows from investing activities:
Purchase of property and equipment, net (128) (193)
Cash flows from financing activities:
Decrease in borrowings, net (441) (754)
----- -----
Net increase (decrease) in cash and cash
equivalents 131 (22)
Cash and cash equivalents at beginning
of period 334 315
----- -----
Cash and cash equivalents at end of period $ 465 $ 293
===== =====
Supplemental cash flow disclosure:
Income taxes paid $ 217 $ 278
===== =====
Interest paid $ 65 $ 80
===== =====
</TABLE>
The accompanying notes are an integral part of these
financial statements.
V-4
<PAGE>
RAWSON-KOENIG, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
(UNAUDITED)
1. NATURE OF ORGANIZATION
Rawson-Koenig, Inc. (the "Registrant"), a Texas corporation, designs,
manufactures and markets certain equipment for light trucks. Its chief products
are truck tool boxes, truck service bodies, winches and truck mounted cranes.
2. BASIS FOR PREPARATION OF THE CONDENSED FINANCIAL STATEMENTS
The condensed financial statements for the three months and six months ended
June 30, 1997 and 1996, have been prepared by the Registrant and are unaudited.
Certain information and footnote disclosures, including significant accounting
policies, normally included in financial statements prepared in accordance with
generally accepted accounting principles, have been condensed or omitted;
however, the Registrant believes that the disclosures are adequate to make the
information presented not misleading. All the adjustments which are, in the
opinion of management, necessary for a fair statement of the results of the
interim periods have been included. These condensed financial statements should
be read in conjunction with the financial statements and the notes thereto
included in the Registrant's latest Annual Report to Shareholders on Form 10-K.
3. ACCRUED EXPENSES
During the quarter ended March 31, 1997, the liability for potential claims
against the Registrant by its employees arising from injuries incurred in the
normal course of business prior to May 1, 1994, was reduced from $400,000 to
120,000. This decrease of $280,000 was recorded as a reduction to cost of sales
in the quarter ended March 31, 1997. During the quarter ended June 30, 1997,
the remaining liability claims of $120,000 were settled and paid.
4. DEBT AGREEMENT
On June 18, 1997, the Registrant amended its debt agreement with its primary
lender. The amended agreement provides funding for the Registrant's tender
offer described in Note 6. The amended agreement allows the Registrant to
borrow up to $4,200,000 under a loan that is collateralized by the Registrant's
real estate (the "Real Estate Loan"). On June 18, 1997, the Registrant's
existing Houston real estate loan was rolled into the Real Estate Loan. The
Real Estate Loan had a balance of approximately $1,223,000 at June 30, 1997, and
is due in monthly principal payments of $23,333 plus interest at the bank's
prime rate (8.5% per year at June 30, 1997) with the unpaid balance due June 18,
2002.
V-5
<PAGE>
The amended agreement also allows the Registrant to borrow up to $1,390,000
under a loan that is collateralized by account receivable, inventory and
equipment (the "Equipment Loan"). Borrowings under the Equipment Loan will be
due in equal monthly principal payments based on a seven year amortization plus
interest at the bank's prime rate with the unpaid balance due June 18, 2002. At
June 30, 1997, the Equipment Loan had a balance of zero.
The amended agreement extended the maturity date of the Registrant's
revolving line of credit to April 30, 1999. Interest on the revolving line of
credit remains payable monthly at the bank's prime rate and the maximum amount
of credit available under the line remains at $2,200,000. At June 30, 1997, the
revolving line had a balance of zero.
The amended agreement also amended the terms of the Registrant's advancing
term equipment loan. The amended agreement allows the Registrant to borrow up
to $1,000,000 to finance equipment purchases through June 18, 1998. Any
borrowings outstanding as of June 18, 1998, will be converted to a five year
term loan that will be due in sixty equal principal payments, beginning in July
1998, plus interest at the bank's prime rate. At June 30, 1997, the advancing
term equipment loan had a balance of zero.
On June 18, 1997, the Registrant paid-off its Fort Worth loan that had a
balance due of approximately $135,000 at pay-off.
5. INCOME TAXES
The provisions for federal and state income taxes for the three months and
six months ended June 30, 1997 and 1996, were computed by applying the estimated
effective annual tax rate to income before income taxes.
6. TENDER OFFER
On June 4, 1997, the Registrant announced that its Board of Directors had
approved a tender offer by the Registrant to acquire all of its issued and
outstanding shares of common stock. The Rawson family currently owns
approximately 60% of the issued and outstanding shares of the Registrant, and
does not intend to tender these shares. The offer price is $2.15 net per share
to sellers in cash. The Registrant will pay all fees and expenses of the tender
offer. The tender offer will be immediately followed by a 1 for 100 reverse
stock split, which will result in all remaining odd-lot shareholders receiving
$2.15 net per share in cash for each share held prior to the reverse split.
After the tender offer and reverse split, it is anticipated that all remaining
shares will be converted into the right to receive $2.15 per share (as adjusted
for the reverse stock split) in a merger with a newly formed company that will
be wholly owned by the Rawson family. After the consummation of the tender offer
and reverse split (and the merger, if necessary) the Rawson family will own 100%
of the Registrant.
V-6
<PAGE>
The Registrant estimates that the total purchase price of the tender offer
and reverse split (and the merger, if necessary) will approximate $3,702,000,
including offering costs of approximately $350,000.
V-7
<PAGE>
EXHIBIT (a)(2): FORM OF LETTER OF TRANSMITTAL
LETTER OF TRANSMITTAL
TO TENDER SHARES
OF
COMMON STOCK
OF
RAWSON-KOENIG, INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED , 1997
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON , 1997, UNLESS THE OFFER IS EXTENDED.
THE DEPOSITARY FOR THE OFFER IS:
HARRIS TRUST COMPANY OF NEW YORK
By Overnight Courier:
77 Water Street, 4th Floor
New York, NY 10005
By Mail: By Facsimile Transmission: By Hand:
(For Eligible Institutions Only)
Wall Street Station Fax: (212) 701-7636 Receive Window
P.O. Box 1010 (212) 701-7637 77 Water Street, 5th Floor
New York, NY 10268-1010 Confirm by Telephone: New York, NY
(212) 701-7624
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OR TELEX
OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by shareholders either if
certificates evidencing Shares (as defined below) are to be forwarded herewith
or if delivery of Shares is to be made by book-entry transfer to the
Depositary's account at The Depository Trust Company ("DTC") or the Philadelphia
Depository Trust Company ("PDTC") (each a "Book-Entry Transfer Facility" and
collectively, the "Book-Entry Transfer Facilities") pursuant to the book-entry
transfer procedure described under "THE TENDER OFFER -- SECTION 3. PROCEDURES
FOR ACCEPTING THE OFFER AND TENDERING SHARES" in the Offer to Purchase (as
defined below). DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES
NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
Shareholders whose certificates evidencing Shares ("Share Certificates")
are not immediately available or who cannot deliver their Share Certificates and
all other documents required hereby to the Depositary prior to the Expiration
Date (as defined under "THE TENDER OFFER -- SECTION 1. TERMS OF THE OFFER;
EXPIRATION DATE" in the Offer to Purchase) or who cannot complete the procedure
for delivery by book-entry transfer on a timely basis and who wish to tender
their Shares must do so pursuant to the
<PAGE>
guaranteed delivery procedure described under "THE TENDER OFFER -- SECTION 3.
PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES" in the Offer to
Purchase. See Instruction 2.
- --------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- --------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES)
of Registered Holder(s)
(Please fill in, if blank,
exactly as name(s) appear(s)
on Share Certificate(s)
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHARE CERTIFICATE(S) AND SHARE(S) TENDERED
(Attach additional list if necessary)
- --------------------------------------------------------------------------------
SHARE CLASS TOTAL NUMBER NUMBER OF
CERTIFICATE OF SHARES OF SHARES SHARES
NUMBER(S)* REPRESENTED BY REPRESENTED BY TENDERED**
SHARE CERTIFICATE(S) SHARE CERTIFICATE(S)*
- --------------------------------------------------------------------------------
COMMON
- --------------------------------------------------------------------------------
COMMON
- --------------------------------------------------------------------------------
COMMON
- --------------------------------------------------------------------------------
Total Shares.......................................................
- --------------------------------------------------------------------------------
* Need not be completed by shareholders tendering by book=entry transfer.
** Unless otherwise indicated, it will be assumed that all shares represented
by any certificates delivered to the depositary are being tendered.
See Instruction 4.
- -------------------------------------------------------------------------------
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
[ ] CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE
DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution...........................................
Check Box of Applicable Book-Entry Transfer Facility:
(CHECK ONE) [ ] DTC [ ] PDTC
Account Number..........................................................
Transaction Code Number.................................................
[ ] CHECK HERE IF SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s)..........................................
Window Ticket No. (if any)...............................................
Date of Execution of Notice of Guaranteed Delivery.......................
Name of Institution which Guaranteed Delivery............................
If delivered by Book-Entry Transfer, check box of Book-Entry Transfer
Facility
(Check One) [ ]DTC [ ] PDTC
Account Number........................................................
Transaction Code Number...............................................
_______________________
Ladies and Gentlemen:
The undersigned hereby tenders to Rawson-Koenig, Inc., a Texas corporation
(the "Company") the above-described shares of Common Stock, no par value per
share, of the Company (all shares of such Common Stock from time to time
outstanding being, collectively, the "Shares") pursuant to the Company's offer
to purchase all Shares, at $2.15 per Share, net to the seller in cash, upon the
terms and subject to the conditions set forth in the Offer to Purchase, dated
, 1997 (the "Offer to Purchase"), receipt of which is hereby acknowledged,
and in this Letter of Transmittal (which, together with the Offer to Purchase,
constitute the "Offer"). The undersigned understands that the Company reserves
the right to transfer or assign, in whole or from time to time in part, to one
or more of its affiliates, the right to purchase all or any portion of the
Shares tendered pursuant to the Offer.
Subject to, and effective upon, acceptance for payment of the Shares
tendered herewith, in accordance with the terms of the Offer, the undersigned
hereby sells, assigns and transfers to, or upon the order of, the Company all
right, title and interest in and to all the Shares that are being tendered
hereby and all dividends, distributions (including, without limitation,
distributions of additional Shares) and rights declared, paid or distributed in
respect of such Shares on or after May 31, 1997 (collectively, "Distributions")
and irrevocably appoints the Depositary the true and lawful agent and attorney-
in-fact of the undersigned with respect to such Shares and all Distributions,
with full power of substitution (such power of attorney being deemed to be an
irrevocable power coupled with an interest), to (i) deliver Share Certificates
evidencing such Shares and all Distributions, or transfer ownership of such
Shares and all Distributions on the account books maintained by a Book-Entry
Transfer Facility, together, in either case, with all accompanying evidences of
transfer and authenticity, to or upon the order of the Company, (ii) present
such Shares and all Distributions for transfer on the books of the Company and
(iii) receive all benefits and otherwise exercise all rights of beneficial
ownership of such Shares and all Distributions, all in accordance with the terms
of the Offer.
<PAGE>
The undersigned hereby irrevocably appoints Thomas C. Rawson and
Catherine A. Rawson and each of them, as the attorneys and proxies of the
undersigned, each with full power of substitution, to vote in such manner as
each such attorney and proxy or his substitute shall, in his sole discretion,
deem proper and otherwise act (by written consent or otherwise) with respect to
all the Shares tendered hereby that have been accepted for payment by the
Company prior to the time of such vote or other action and all Shares and other
securities issued in Distributions in respect of such Shares, which the
undersigned is entitled to vote at any meeting of shareholders of the Company
(whether annual or special and whether or not an adjourned or postponed meeting)
or consent in lieu of any such meeting or otherwise. This proxy and power of
attorney is coupled with an interest in the Shares tendered hereby, is
irrevocable and is granted in consideration of, and is effective upon, the
acceptance for payment of such Shares by the Company in accordance with the
terms of the Offer. Such acceptance for payment shall revoke all other proxies
and powers of attorney granted by the undersigned at any time with respect to
such Shares (and all Shares and other securities issued in Distributions in
respect of such Shares), and no subsequent proxy or power of attorney shall be
given or written consent executed (and if given or executed, shall not be
effective) by the undersigned with respect thereto. The undersigned understands
that, in order for Shares to be deemed validly tendered, immediately upon the
Company's acceptance of such Shares for payment, the Company must be able to
exercise full voting and other rights with respect to such Shares, including,
without limitation, voting at any meeting of the Company's shareholders then
scheduled.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby and all Distributions, that when such Shares are accepted for
payment by the Company, the Company will acquire good, marketable and
unencumbered title thereto and to all Distributions, free and clear of all
liens, restrictions, charges and encumbrances, and that none of such Shares and
Distributions will be subject to any adverse claim. The undersigned, upon
request, shall execute and deliver all additional documents deemed by the
Depositary or the Company to be necessary or desirable to complete the sale,
assignment and transfer of the Shares tendered hereby and all Distributions. In
addition, the undersigned shall remit and transfer promptly to the Depositary
for the account of the Company all Distributions in respect of the Shares
tendered hereby, accompanied by appropriate documentation of transfer, and
pending such remittance and transfer or appropriate assurance thereof, the
Company shall be entitled to all rights and privileges as owner of each such
Distribution and may withhold the entire purchase price of the Shares tendered
hereby, or deduct from such purchase price the amount or value of such
Distribution as determined by the Company in its sole discretion.
No authority herein conferred or agreed to be conferred shall be affected
by, and all such authority shall survive, the death or incapacity of the
undersigned. All obligations of the undersigned hereunder shall be binding upon
the heirs, personal representatives, successors and assigns of the undersigned.
Except as stated in the Offer to Purchase, this tender is irrevocable.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in the Offer to Purchase under "THE TENDER OFFER --
SECTION 3. PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES" and in the
instructions hereto will constitute the undersigned's acceptance of the terms
and conditions of the Offer. The Company's acceptance of such Shares for
payment will constitute a binding agreement between the undersigned and the
Company upon the terms and subject to the conditions of the Offer.
Unless otherwise indicated herein in the box entitled "Special Payment
Instructions", please issue the check for the purchase price of all Shares
purchased, and return all Share Certificates evidencing Shares not purchased or
not tendered in the name(s) of the registered holder(s) appearing above under
"Description of Shares Tendered". Similarly, unless otherwise indicated in the
box entitled "Special Delivery Instructions", please mail the check for the
purchase price of all Shares purchased and all Share Certificates evidencing
Shares not tendered or not purchased (and accompanying documents, as
appropriate) to the address(es) of the registered holder(s) appearing above
under "Description of Shares Tendered". In the event that the boxes entitled
"Special Payment Instructions" and "Special Delivery Instructions" are both
completed, please issue the check for the purchase price of all Shares purchased
and return all Share Certificates evidencing Shares not purchased or not
<PAGE>
tendered in the name(s) of, and mail such check and Share Certificates to, the
person(s) so indicated. Unless otherwise indicated herein in the box entitled
"Special Payment Instructions". The undersigned recognizes that the Company has
no obligation, pursuant to the Special Payment Instructions, to transfer any
Shares from the name of the registered holder(s) thereof if the Company does not
purchase any of the Shares tendered hereby.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7) (SEE INSTRUCTIONS 1, 5, 6 AND 7)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C>
To be completed ONLY if the check for the purchase To be completed ONLY if the check for the purchase
price of Shares or Share Certificates evidencing price of Shares purchased or Share Certificates
Shares not tendered or not purchased are to be evidencing Shares not tendered or not purchased
issued in the name of someone other than the are to be mailed to someone other than the under-
undersigned. signed, or the undersigned at an address other than
Issue [ ] check [ ] Share Certificate(s) to: that shown under "Description of Shares Tendered".
Name ............................................... Mail [ ] check [ ] Share Certificates(s) to:
(Please Print)
Address ............................................ Name .............................................
.................................................... (Please Print)
(Zip Code) Address ..........................................
..................................................
.................................................... (Zip Code)
(Taxpayer Identification No. or Social Security No.) ..................................................
(See Substitute Form W-9 below) (Zip Code)
..................................................
(Taxpayer Identification No. or Social Security No.)
(See Substitute Form W-9 below)
</TABLE>
<PAGE>
SIGN HERE
(Please complete Substitute Form W-9 below)
................................................................................
................................................................................
Signature(s) of Shareholder(s)
Dated................................................................... , 1997
(Must be signed by registered holder(s) exactly as name(s) appear(s) on stock
certificate(s) or on a security position listing or by person(s) authorized to
become registered holder(s) by certificates and documents transmitted herewith.
If signature is by a trustee, executor, administrator, guardian, attorney-in-
fact, officer of a corporation or other person acting in a fiduciary or
representative capacity, please set forth full title and see Instruction 5.)
Name(s).........................................................................
(Please Print)
................................................................................
Capacity (full title)...........................................................
Address.........................................................................
................................................................................
................................................................................
(Include Zip Code)
Area Code and Telephone No......................................................
Tax Identification or Social Security No........................................
(See Substitute Form W-9 on Reverse Side)
Guarantee of Signature(s)
(If required - See Instructions 1 and 5)
For use by Financial Institutions Only
Financial Institutions: Place Medallion
Guarantee in space below.
Name of Firm....................................................................
Authorized Signature............................................................
Name............................................................................
Address.........................................................................
Area Code and Telephone Number..................................................
Dated................................................................... , 1997
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. All signatures on this Letter 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 Securities Exchange Act of
1934, as amended (each of the foregoing being referred to as an "Eligible
Institution"), unless (i) this Letter of Transmittal is signed by the registered
holder(s) of the Shares (which term, for purposes of this document, shall
include any participant in a Book-Entry Transfer Facility whose name appears on
a security position listing as the owner of Shares) tendered hereby and such
holder(s) has (have) completed neither the box entitled "Special Payment
Instructions" nor the box entitled "Special Delivery Instructions" on the
reverse hereof or (ii) such Shares are tendered for the account of an Eligible
Institution. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND SHARE CERTIFICATES. This
Letter of Transmittal is to be used either if Share Certificates are to be
forwarded herewith or if Shares are to be delivered by book-entry transfer
pursuant to the procedure set forth under "THE TENDER OFFER -- SECTION 3.
PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES" in the Offer to
Purchase. Share Certificates evidencing all physically tendered Shares, or a
confirmation of a book-entry transfer into the Depositary's account at a Book-
Entry Transfer Facility of all Shares delivered by book-entry transfer as well
as a properly completed and duly executed Letter of Transmittal (or facsimile
thereof) and any other documents required by this Letter of Transmittal, must be
received by the Depositary at one of its addresses set forth on the reverse
hereof prior to the Expiration Date (as defined under "THE TENDER OFFER --
SECTION 1. TERMS OF THE OFFER; EXPIRATION DATE" in the Offer to Purchase). If
Share Certificates are forwarded to the Depositary in multiple deliveries, a
properly completed and duly executed Letter of Transmittal must accompany each
such delivery.
Shareholders whose Share Certificates are not immediately available, who
cannot deliver their Share Certificates and all other required documents to the
Depositary prior to the Expiration Date or who cannot complete the procedure for
delivery by book-entry transfer on a timely basis may tender their Shares
pursuant to the guaranteed delivery procedure described under "THE TENDER OFFER
- -- SECTION 3. PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES" in the
Offer to Purchase. Pursuant to such procedure: (i) such tender must be made by
or through an Eligible Institution; (ii) a properly completed and duly executed
Notice of Guaranteed Delivery, substantially in the form made available by the
Company, must be received by the Depositary prior to the Expiration Date; and
(iii) the Share Certificates evidencing all physically delivered Shares in
proper form for transfer by delivery, or a confirmation of a book-entry transfer
into the Depositary's account at a Book-Entry Transfer Facility of all Shares
delivered by book-entry transfer, in each case together with a 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 under "THE TENDER OFFER -- SECTION 3. PROCEDURES FOR
ACCEPTING THE OFFER AND TENDERING SHARES" in the Offer to Purchase)), and any
other documents required by this Letter of Transmittal, must be received by the
Depositary within three Nasdaq trading days after the date of execution of such
Notice of Guaranteed Delivery, all as described under "THE TENDER OFFER --
SECTION 3. PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES" in the Offer
to Purchase.
The method of delivery of this Letter of Transmittal, Share Certificates
and all other required documents, including delivery through any Book-Entry
Transfer Facility, is at the option and risk of the tendering shareholder, 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.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. By execution of this Letter of Transmittal
(or a facsimile hereof), all tendering shareholders waive any right to receive
any notice of the acceptance of their Shares for payment.
<PAGE>
3. INADEQUATE SPACE. If the space provided herein under "Description
of Shares Tendered" is inadequate, the Share Certificate numbers, the number of
Shares evidenced by such Share Certificates and the number of Shares tendered
should be listed on a separate schedule and attached hereto.
4. PARTIAL TENDERS (NOT APPLICABLE TO SHAREHOLDERS WHO TENDER BY BOOK-
ENTRY TRANSFER). If fewer than all the Shares evidenced by any Share
Certificate delivered to the Depositary herewith are to be tendered hereby, fill
in the number of Shares which are to be tendered in the box entitled "Number of
Shares Tendered". In such cases, new Share Certificate(s) evidencing the
remainder of the Shares that were evidenced by the Share Certificates delivered
to the Depositary herewith will be sent to the person(s) signing this Letter of
Transmittal, unless otherwise provided in the box entitled "Special Delivery
Instructions" on the reverse hereof, as soon as practicable after the expiration
or termination of the Offer. All Shares evidenced by Share Certificates
delivered to the Depositary will be deemed to have been tendered unless
otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, the signature(s) must correspond with the name(s) as
written on the face of the Share Certificates evidencing such Shares without
alteration, enlargement or any other change whatsoever.
If any Share tendered hereby is owned of record by two or more persons, all
such persons must sign this Letter of Transmittal.
If any of the Shares tendered hereby are registered in the names of
different holders, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of such
Shares.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, no endorsements of Share Certificates or separate stock
powers are required, unless payment is to be made to, or Share Certificates
evidencing Shares not tendered or not purchased are to be issued in the name of,
a person other than the registered holder(s), in which case, the Share
Certificate(s) evidencing the Shares tendered hereby must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name(s) of the registered holder(s) appear(s) on such Share Certificate(s).
Signatures on such Share Certificate(s) and stock powers must be guaranteed by
an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, the Share Certificate(s)
evidencing the Shares tendered hereby must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name(s) of the
registered holder(s) appear(s) on such Share Certificate(s). Signatures on such
Share Certificate(s) and stock powers must be guaranteed by an Eligible
Institution.
If this Letter of Transmittal or any Share Certificate or stock power is
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to the Company of such person's authority so to act must be
submitted.
6. STOCK TRANSFER TAXES. Except as otherwise provided in this
Instruction 6, the Company will pay all stock transfer taxes with respect to the
sale and transfer of any Shares to it or its order pursuant to the Offer. If,
however, payment of the purchase price of any Shares purchased is to be made to,
or Share Certificate(s) evidencing Shares not tendered or not purchased are to
be issued in the name of, a person other than the registered holder(s), the
amount of any stock transfer taxes (whether imposed on the registered holder(s),
such other person or otherwise) payable on account of the transfer to such other
person will be deducted from the purchase price of such Shares purchased, unless
evidence satisfactory to the Company of the payment of such taxes, or exemption
therefrom, is submitted. Except as provided in this Instruction 6, it will not
be necessary for transfer tax stamps to be affixed to the Share Certificates
evidencing the Shares tendered hereby.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check for the
purchase price of any Shares tendered hereby is to be issued, or Share
Certificate(s) evidencing Shares not tendered
<PAGE>
or not purchased are to be issued, in the name of a person other than the
person(s) signing this Letter of Transmittal or if such check or any such Share
Certificate is to be sent to someone other than the person(s) signing this
Letter of Transmittal or to the person(s) signing this Letter of Transmittal but
at an address other than that shown in the box entitled "Description of Shares
Tendered" on the reverse hereof, the appropriate boxes on the reverse of this
Letter of Transmittal must be completed.
8. QUESTIONS AND REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions and requests for assistance may be directed to the Information Agent
or the Dealer Manager at their respective addresses or telephone numbers set
forth below. Additional copies of the Offer to Purchase, this Letter of
Transmittal and the Notice of Guaranteed Delivery may be obtained from the
Information Agent or from brokers, dealers, commercial banks or trust companies.
9. SUBSTITUTE FORM W-9. Each tendering shareholder is required to
provide the Depositary with a correct Taxpayer Identification Number ("TIN") on
the Substitute Form W-9, which is provided under "Important Tax Information"
below, and to certify, under penalties of perjury, that such number is correct
and that such shareholder is not subject to backup withholding of federal income
tax. If a tendering shareholder has been notified by the Internal Revenue
Service that such shareholder is subject to backup withholding, such shareholder
must cross out item (2) of the Certification box of the Substitute Form W-9,
unless such shareholder has since been notified by the Internal Revenue Service
that such shareholder is no longer subject to backup withholding. Failure to
provide the information on the Substitute Form W-9 may subject the tendering
shareholder to 31% federal income tax withholding on the payment of the purchase
price of all Shares purchased from such shareholder. If the tendering
shareholder has not been issued a TIN and has applied for one or intends to
apply for one in the near future, such shareholder should write "Applied For" in
the space provided for the TIN in Part I of the Substitute Form W-9, and sign
and date the Substitute Form W-9. If "Applied For" is written in Part I and the
Depositary is not provided with a TIN within 60 days, the Depositary will
withhold 31% on all payments of the purchase price to such shareholder until a
TIN is provided to the Depositary.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF), PROPERLY
COMPLETED AND DULY EXECUTED (TOGETHER WITH ANY REQUIRED SIGNATURE GUARANTEES AND
SHARE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED
DOCUMENTS) OR A PROPERLY COMPLETED AND DULY EXECUTED NOTICE OF GUARANTEED
DELIVERY MUST BE RECEIVED BY THE DEPOSITARY PRIOR TO THE EXPIRATION DATE (AS
DEFINED IN THE OFFER TO PURCHASE).
IMPORTANT TAX INFORMATION
Under the federal income tax law, a shareholder whose tendered Shares are
accepted for payment is required by law to provide the Depositary (as payer)
with such shareholder's correct TIN on Substitute Form W-9 below. If such
shareholder is an individual, the TIN is such shareholder's social security
number. If the Depositary is not provided with the correct TIN, the shareholder
may be subject to a $50 penalty imposed by the Internal Revenue Service and
payments that are made to such shareholder with respect to Shares purchased
pursuant to the Offer may be subject to backup withholding of 31%. In addition,
if a shareholder makes a false statement that results in no imposition of backup
withholding, and there was no reasonable basis for such a statement, a $500
penalty may also be imposed by the Internal Revenue Service.
Certain shareholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, such individual must submit a statement, signed under penalties of
perjury, attesting to such individual's exempt status. Forms of such statements
can be obtained from the Depositary. See the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional instructions. A shareholder should consult his or her tax advisor as
to such shareholder's qualification for an exemption from backup withholding and
the procedure for obtaining such exemption.
<PAGE>
If backup withholding applies, the Depositary is required to withhold 31%
of any payments made to the shareholder. Backup withholding is not an additional
tax. Rather, the tax liability of persons subject to backup withholding will be
reduced by the amount of tax withheld. If withholding results in an overpayment
of taxes, a refund may be obtained from the Internal Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a shareholder
with respect to Shares purchased pursuant to the Offer, the shareholder is
required to notify the Depositary of such shareholder's correct TIN by
completing the form below certifying that (a) the TIN provided on Substitute
Form W-9 is correct (or that such shareholder is awaiting a TIN) and (b) that
(i) such shareholder has not been notified by the Internal Revenue Service that
such shareholder is subject to backup withholding as a result of a failure to
report all interest or dividends or (ii) the Internal Revenue Service has
notified such shareholder that such shareholder is no longer subject to backup
withholding.
WHAT NUMBER TO GIVE THE DEPOSITARY
The shareholder is required to give the Depositary the social security
number or employer identification number of the record holder of the Shares
tendered hereby. If the Shares are in more than one name or are not in the name
of the actual owner, consult the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 for additional guidance on
which number to report. If the tendering shareholder has not been issued a TIN
and has applied for a number or intends to apply for a number in the near
future, the shareholder should write "Applied For" in the space provided for the
TIN in Part I, and sign and date the Substitute Form W-9. If "Applied For" is
written in Part I and the Depositary is not provided with a TIN within 60 days,
the Depositary will withhold 31% of all payments of the purchase price to such
shareholder until a TIN is provided to the Depositary.
10. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate representing
shares has been lost, destroyed or stolen, the Shareholder should promptly
notify either the Depositary or the Transfer Agent. The Shareholder will then be
instructed as to the steps that must be taken in order to replace the
certificate. This Letter of Transmittal and related documents cannot be
processed until the procedures for replacing lost or destroyed certificates have
been followed.
<PAGE>
TO BE COMPLETED BY ALL TENDERING SHAREHOLDERS
(See Instruction 9)
PAYER'S NAME: HARRIS TRUST COMPANY OF NEW YORK
- --------------------------------------------------------------------------------
SUBSTITUTE PART I - PLEASE PROVIDE
FORM W-9 YOUR TIN IN THE BOX AT THE ________________________
RIGHT AND CERTIFY BY Social Security Number
Department of the SIGNING AND DATING BELOW.
Treasury Internal or
Revenue Service
________________________
Payer's Request for Employer Identification
Taxpayer Identification Number
Number (TIN)
- --------------------------------------------------------------------------------
PART II
- --------------------------------------------------------------------------------
CERTIFICATION - Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct taxpayer identification
number (or I am waiting for a number to be issued to me);
(2) I am not subject to backup withholding because (a) I am exempt from
backup withholding, or (b) I have not been notified by the Internal
Revenue Service ("IRS") that I am subject to backup withholding as a
result of a failure to report all interest or dividends, or (c) the IRS
has notified me that I am no longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS - You must cross out item (2) above if you
have been notified by the IRS that you are currently subject to backup
withholding because of underreporting interest or dividends on your tax
return. However, if after being notified by the IRS that you were subject
to backup withholding you received another notification from the IRS that
you are no longer subject to backup withholding, do not cross out such
item (2).
- --------------------------------------------------------------------------------
SIGNATURE _______________________ DATE __, 1997 PART III
Awaiting TIN [ ]
- --------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN
PART 3 OF SUBSTITUTE FORM W-9.
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (1) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (2) I intend to mail
or deliver an application in the near future, I understand that if I do not
provide a taxpayer identification number by the time of payment, 31% of all
reportable payments made to me will be withheld, but that such amounts will be
refunded to me if I then provide a Taxpayer Identification Number within sixty
(60) days.
Signature ______________________________________ Date___________________
- --------------------------------------------------------------------------------
<PAGE>
Facsimile copies of the Letter of Transmittal, properly completed and duly
signed, will be accepted. The Letter of Transmittal certificates evidencing
Shares and any other required documents should be sent or delivered by each
shareholder or such shareholder'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:
HARRIS TRUST COMPANY OF NEW YORK
By Overnight Courier:
77 Water Street, 4th Floor
New York, NY 10005
By Mail: By Facsimile Transmission: By Hand:
(For Eligible Institutions Only)
Wall Street Station Fax: (212) 701-7636 Receive Window
P.O. Box 1010 (212) 701-7637 77 Water Street, 5th Floor
New York, NY 10268-1010 Confirm by Telephone: New York, NY
(212) 701-7624
Questions or requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone numbers
listed below. Additional copies of this Offer to Purchase, the Letter of
Transmittal and the Notice of Guaranteed Delivery may be obtained from the
Information Agent. A shareholder may also contact brokers, dealers, commercial
banks or trust companies for assistance concerning the Offer.
The Information Agent for the Offer is:
D.F. KING & CO., INC.
77 Water Street
New York, NY 10005
Banks and Brokers Call Collect:
(212) 269-5550
All Others Call Toll Free:
(800) 207-3159
The Dealer Manager for the Offer is:
WHEAT, FIRST SECURITIES, INC.
Riverfront Plaza, West Tower
901 East Byrd Street
Richmond, Virginia 23219
____________________________________
, 1997
<PAGE>
EXHIBIT (a)(3): FORM OF NOTICE OF GUARANTEED DELIVERY
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
OF RAWSON-KOENIG, INC.
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
This Notice of Guaranteed Delivery, or one substantially in the form
hereof, must be used to accept the Offer (as defined below) (i) if certificates
("Share Certificates") evidencing shares of common stock, no par value per share
(the "Common Stock"), of Rawson-Koenig, Inc., a Texas corporation (the
"Shares"), are not immediately available, (ii) if Share Certificates and all
other required documents cannot be delivered to Harris Trust Company of New
York, as Depositary (the "Depositary"), prior to the Expiration Date (as defined
in Section 1 of the Offer to Purchase (as defined below)) or (iii) if the
procedure for delivery by book-entry transfer cannot be completed on a timely
basis. This Notice of Guaranteed Delivery may be delivered by hand or mail or
transmitted by telegram or facsimile transmission to the Depositary. See "THE
TENDER OFFER -- SECTION 3. PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING
SHARES" in the Offer to Purchase.
THE DEPOSITARY FOR THE OFFER IS:
HARRIS TRUST COMPANY OF NEW YORK
By Overnight Courier:
77 Water Street, 4th Floor
New York, NY 10005
BY MAIL: BY FACSIMILE TRANSMISSION: BY HAND:
(For Eligible Institutions Only)
Wall Street Station Fax: (212) 701-7636 Receive Window
P.O. Box 1010 (212) 701-7637 77 Water Street, 5th Floor
New York, NY 10268-1010 Confirm by Telephone: New York, NY
(212) 701-7624
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION
OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Rawson-Koenig, Inc., a Texas corporation,
upon the terms and subject to the conditions set forth in the Offer to Purchase,
dated , 1997 (the "Offer to Purchase"), and the related Letter
of Transmittal (which together constitute the "Offer"), receipt of each of which
is hereby acknowledged, the number of Shares specified below pursuant to the
guaranteed delivery procedure described under "THE TENDER OFFER -- SECTION 3.
PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES" in the Offer to
Purchase.
<TABLE>
<CAPTION>
Number of Shares: SIGNATURE(S) OF HOLDER(S)
Certificate Nos. (If Available):
<S> <C>
Check box if Shares will be delivered by book-entry transfer:
[ ] The Depository Trust Company Date: , 1997
[ ] Philadelphia Depository Trust Company Name(s) of Holders:
---------------------------------------
Please Type or Print Name
---------------------------------------
Address
---------------------------------------
(Zip Code)
---------------------------------------
Area Code and Telephone Number
</TABLE>
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of the Medallion Signature
Guarantee Program, guarantees to deliver to the Depositary, at one of its
addresses set forth above, Share Certificates evidencing the Shares tendered
hereby, in proper form for transfer, or confirmation of book-entry transfer of
such Shares into the Depositary's account at The Depository Trust Company or the
Philadelphia Depository Trust Company, in each case with delivery of a Letter of
Transmittal (or facsimile thereof) properly completed and duly executed, and any
other required documents, all within three National Association of Securities
Dealers Automated Quotation -- SmallCap Market System trading days of the date
hereof.
NAME OF FIRM AUTHORIZED SIGNATURE
ADDRESS
ZIP CODE
AREA CODE AND TELEPHONE NO.
TITLE:
NAME:
(Please Type or Print)
DATED: , 1997
DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE. SHARE CERTIFICATES SHOULD
BE SENT WITH YOUR LETTER OF TRANSMITTAL.
<PAGE>
EXHIBIT (a)(4): FORM OF LETTER FROM WHEAT, FIRST SECURITIES, INC. TO
BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES AND
NOMINEES.
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
RAWSON-KOENIG, INC.
AT
$2.15 NET PER SHARE
BY
RAWSON-KOENIG, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE
AT 12:00 MIDNIGHT, NEW YORK CITY TIME,
ON , 1997, UNLESS THE OFFER IS EXTENDED.
, 1997
To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees:
We have been appointed by Rawson-Koenig, Inc., a Texas corporation (the
"Company") to act as Dealer Manager in connection with the Company's offer to
purchase all outstanding shares of Common Stock, no par value per share (the
"Shares"), of the Company at a price of $2.15 per Share, net to the seller in
cash, upon the terms and subject to the conditions set forth in the Company's
Offer to Purchase, dated , 1997 (the "Offer"), and the related Letter of
Transmittal (which together constitute the "Offer") enclosed herewith. Please
furnish copies of the enclosed materials to those of your clients for whose
accounts you hold Shares registered in your name or in the name of your nominee.
Enclosed for your information and use are copies of the following
documents:
1. Offer to Purchase, dated , 1997;
2. Letter of Transmittal to be used by holders of Shares in accepting the
Offer and tendering Shares;
3. Notice of Guaranteed Delivery to be used to accept the Offer if the
Shares and all other required documents are not immediately available or cannot
be delivered to Harris Trust Company of New York (the "Depositary") by the
Expiration Date (as defined in the Offer to Purchase) or if the procedure for
book-entry transfer cannot be completed by the Expiration Date;
4. A letter to shareholders of the Company from Thomas C. Rawson, Chief
Executive Officer of the Company, together with a Solicitation/Recommendation
Statement on Schedule 14D-9 filed with the Securities and Exchange Commission by
the Company;
5. A letter which may be sent to your clients for whose accounts you hold
Shares registered in your name or in the name of your nominee, with space
provided for obtaining such clients' instructions with regard to the offer;
6. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
7. Return envelope addressed to the Depositary.
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE
THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON , 1997, UNLESS THE OFFER IS EXTENDED.
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of certificates
evidencing such Shares (or a confirmation of a book-entry transfer of such
Shares into the Depositary's account at one of the Book-Entry Transfer
Facilities (as defined in the Offer to Purchase)), a Letter of Transmittal (or
facsimile thereof) properly completed and duly executed and any other required
documents.
<PAGE>
If holders of Shares wish to tender, but cannot deliver their certificates
or other required documents, or cannot comply with the procedure for book-entry
transfer, prior to the expiration of the Offer, a tender of Shares may be
effected by following the guaranteed delivery procedure described under "THE
TENDER OFFER -- SECTION 3. PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING
SHARES" in the Offer to Purchase.
The Company will not pay any fees or commissions to any broker, dealer or
other person (other than the Dealer Manager, the Depositary and the Information
Agent as described in the Offer) in connection with the solicitation of tenders
of Shares pursuant to the Offer. However, the Company will reimburse you for
customary mailing and handling expenses incurred by you in forwarding any of the
enclosed materials to your clients. The Company will pay or cause to be paid
any stock transfer taxes payable with respect to the transfer of Shares to it,
except as otherwise provided in Instruction 6 of the Letter of Transmittal.
Any inquiries you may have with respect to the Offer should be addressed to
D.F. King & Co., Inc. (the "Information Agent") at their respective addresses
and telephone numbers set forth on the back cover page of the Offer to Purchase.
Additional copies of the enclosed material may be obtained from the
Information Agent, at the address and telephone number set forth on the back
cover page of the Offer to Purchase.
VERY TRULY YOURS,
WHEAT, FIRST SECURITIES, INC.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU,
OR ANY OTHER PERSON, THE AGENT OF PARENT, PURCHASER, THE COMPANY, THE DEALER
MANAGER, THE INFORMATION AGENT OR THE DEPOSITARY, OR OF ANY AFFILIATE OF ANY OF
THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR TO MAKE ANY
STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE
ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
<PAGE>
EXHIBIT (a)(5): FORM OF LETTER FROM BROKERS, DEALERS, COMMERCIAL BANKS, TRUST
COMPANIES AND NOMINEES TO CLIENTS.
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
RAWSON-KOENIG, INC.
AT
$2.15 NET PER SHARE
BY
RAWSON-KOENIG, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE
AT 12:00 MIDNIGHT, NEW YORK CITY TIME,
ON , 1997, UNLESS THE OFFER IS EXTENDED.
To Our Clients:
Enclosed for your consideration are an Offer to Purchase, dated, 1997 (the
"Offer to Purchase"), and a related Letter of Transmittal in connection with the
offer by Rawson-Koenig, Inc., a Texas corporation (the "Company") to purchase
all outstanding shares of Common Stock, no par value per share (the "Shares"),
of the Company at a price of $2.15 per Share, net to the seller in cash, upon
the terms and subject to the conditions set forth in the Offer to Purchase and
in a related Letter of Transmittal (which together constitute the "Offer").
We are (or our nominee is) the holder of record of Shares held by us for
your account. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US OR OUR NOMINEE AS
THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF
TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY
YOU TO TENDER SHARES HELD BY US FOR YOUR ACCOUNT.
We request instructions as to whether you wish to have us tender on your
behalf any or all of the Shares held by us for your account, upon the terms and
subject to the conditions set forth in the Offer.
Your attention is invited to the following:
1. The tender price is $2.15 per Share, net to the seller in cash.
2. The Offer is being made for all outstanding Shares of the Public
Shareholders.
3. The Board of Directors of the Company and the Independent Directors have
determined that the Offer is fair to, and in the best interests of, the
shareholders of the Company, and recommends that shareholders accept the Offer
and tender their Shares pursuant to the Offer.
4. The Offer and withdrawal rights will expire at 12:00 Midnight, New York
City time, on , 1997, unless the Offer is extended.
5. Tendering shareholders will not be obligated to pay brokerage fees or
commissions or, except as otherwise provided in Instruction 6 of the Letter of
Transmittal, stock transfer taxes with respect to the purchase of Shares by the
Company pursuant to the Offer.
If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing and returning to us the instruction form contained
in this letter. An envelope in which to return your instructions to us is
enclosed. If you authorize the tender of your Shares, all such Shares will be
tendered unless otherwise specified in your instructions. YOUR INSTRUCTIONS
SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR
BEHALF PRIOR TO THE EXPIRATION OF THE OFFER.
<PAGE>
The Offer is made solely by the Offer to Purchase and the related Letter of
Transmittal and is being made to all holders of Shares. The Company is not
aware of any state where the making of the Offer is prohibited by administrative
or judicial action pursuant to 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. If after such good faith effort, the Company cannot comply with 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 Wheat, First Securities, Inc. or one or more registered brokers or
dealers licensed under the laws of such jurisdiction.
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR
CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF
RAWSON-KOENIG, INC. BY RAWSON-KOENIG, INC.
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase, dated , 1997, and the related Letter of
Transmittal (which together constitute the "Offer") in connection with the offer
by Rawson-Koenig, Inc., a Texas corporation (the "Company") to purchase all
outstanding shares of Common Stock, no par value per share, held by the Public
Shareholders (the "Shares"), of the Company.
This will instruct you to tender the number of Shares indicated below (or
if no number is indicated below, all Shares) that are held by you for the
account of the undersigned, upon the terms and subject to the conditions set
forth in the Offer.
Dated: , 1997 SIGN HERE
Signature(s)
Number of Shares to be Tendered:
------------------------------------
Shares* Please Type or Print Name(s)
------------------------------------
Please Type or Print Address
------------------------------------
(Zip Code)
------------------------------------
Area Code and Telephone Number
------------------------------------
Taxpayer Identification Number or
Social Security Number
___________________________
* Unless otherwise indicated, it will be assumed that all Shares held by us
for your account are to be tendered.
<PAGE>
EXHIBIT (a)(6): FORM OF GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER (W-9)
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
IRS INSTRUCTIONS
(SECTION REFERENCES ARE TO THE INTERNAL REVENUE CODE.)
PURPOSE OF FORM. -- A person who is required to file an information return
with the Internal Revenue Service (the IRS) must obtain your correct taxpayer
identification number (TIN) to report income paid to you, real estate
transactions, mortgage interest you paid, the acquisition or abandonment of
secured property, or contributions you made to an individual retirement account
(IRA). Use Form W-9 to furnish your correct TIN to the requester (the person
asking you to furnish your TIN), and, when applicable (1) to certify that the
TIN you are furnishing is correct (or that you are waiting for a number to be
issued), (2) to certify that you are not subject to backup withholding, and (3)
to claim exemption from backup withholding if you are an exempt payee.
Furnishing your correct TIN and making the appropriate certifications will
prevent certain payments from being subject to backup withholding.
NOTE: IF A REQUESTER GIVES YOU A FORM OTHER THAN A W-9 TO REQUEST YOUR TIN,
YOU MUST USE THE REQUESTER'S FORM.
HOW TO OBTAIN A TIN. -- If you do not have a TIN, apply for one
immediately. To apply, get FORM SS-5, Application for Social Security Card (SSN)
(for individuals), from your local office of the Social Security Administration,
or FORM SS-4, Application for Employer Identification Number (EIN) (for
businesses and all other entities), from your local IRS office.
To complete Form W-9, if you do not have a TIN and have applied for one or
intend to apply for one in the near future, write "Applied For" in the space for
the TIN in Part I of the substitute Form W-9, sign and date the form, and give
it to the requester. Generally, you will then have 60 days to obtain a TIN and
furnish it to the requester. If the requester does not receive your TIN within
60 days, backup withholding, if applicable, will begin and continue until you
furnish your TIN to the requester. For reportable interest or dividend
payments, the payer must exercise one of the following options concerning backup
withholding during this 60-day period. Under option (1), a payer must backup
withhold on any withdrawals you make from your account after 7 business days
after the requester receives this form back from you. Under option (2), the
payer must backup withhold on any reportable interest or dividend payments made
to your account, regardless of whether you make any withdrawals. The backup
withholding under option (2) must begin no later than 7 business days after the
requester receives this form back. Under option (2), the payer is required to
refund the amounts withheld if your certified TIN is received within the 60-day
period and you were not subject to backup withholding during the period.
NOTE: WRITING "APPLIED FOR" ON THE SUBSTITUTE FORM W-9 MEANS THAT YOU HAVE
ALREADY APPLIED FOR A TIN OR THAT YOU INTEND TO APPLY FOR ONE IN THE NEAR
FUTURE.
As soon as you receive your TIN, complete another Form W-9, include your
TIN, sign and date this form, and give it to the requester.
WHAT IS BACKUP WITHHOLDING? -- Persons making certain payment to you after
1992 are required to withhold and pay to the IRS 31% of such payments under
certain conditions. This is called "backup withholding." Payments that could
be subject to backup withholding include interest, dividends, broker and barter
exchange transactions, rents, royalties, nonemployee compensation, and certain
payments from fishing boat operators, but do not include real estate
transactions.
If you give the requester your correct TIN, make the appropriate
certifications, and report all your taxable interest and dividends on your tax
return, your payments will not be subject to backup withholding. Payments you
receive will be subject to backup withholding if:
(1) You do not furnish your TIN to the requester, or
(2) The IRS notifies the requester that you furnished an incorrect TIN, or
(3) You are notified by the IRS that you are subject to backup withholding
because you failed to report all your interest and dividends on your tax return
(for reportable interest and dividends only), or
<PAGE>
(4) You fail to certify to the requester that you are not subject to backup
withholding under (3) above (for reportable interest and dividend accounts
opened after 1983 only), or
(5) You fail to certify your TIN. This applies only to reportable
interest, dividend, broker or barter exchange accounts opened after 1983, or
broker accounts considered inactive in 1983.
Except as explained in (5) above, other reportable payments are subject to
backup withholding only if (1) or (2) above applies. Certain payees and payments
are exempt from backup withholding and information reporting. See PAYEES AND
PAYMENTS EXEMPT FROM BACKUP WITHHOLDING, below, and EXEMPT PAYEES AND PAYMENTS
under SPECIFIC INSTRUCTIONS, below, if you are an exempt payee.
PAYEES AND PAYMENTS EXEMPT FROM BACKUP WITHHOLDING -- The following is a
list of payees exempt from backup withholding and for which no information
reporting is required. For interest and dividends, all listed payees are exempt
except item (9). For broker transactions, payees listed in (1) through (13) and
a person registered under the Investment Advisers Act of 1940 who regularly acts
as a broker are exempt. Payments subject to reporting under sections 6041 and
6041A are generally exempt from backup withholding only if made to payees
described in items (1) through (7), except that a corporation that provides
medical and health care services or bills and collects payments for such
services is not exempt from backup withholding or information reporting. Only
payees described in items (2) through (6) are exempt from backup withholding for
barter exchange transactions, patronage dividends, and payments by certain
fishing boat operators.
(1) A corporation.
(2) An organization exempt from tax under Section 501(a), or an IRA, or a
custodial account under section 403(b)(7).
(3) The United States or any of its agencies or instrumentalities.
(4) A state, the District of Columbia, a possession of the United States,
or any of their political subdivisions or instrumentalities.
(5) A foreign government or any of its political subdivisions, agencies or
instrumentalities.
(6) An international organization or any of its agencies or
instrumentalities.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to register in the U.S.
or a possession of the U.S.
(9) A futures commission merchant registered with the Commodity Futures
Trading Commission.
(10) A real estate investment trust.
(11) An entity registered at all times during the tax year under the
Investment Company Act of 1940.
(12) A common trust fund operated by a bank under section 584(a).
(13) A financial institution.
(14) A middleman known in the investment community as a nominee or listed
in the most recent publication of the American Society of Corporation
Secretaries, Inc., Nominee List.
(15) A trust exempt from tax under section 664 or described in section
4947.
Payments of dividends and patronage dividends generally not subject to
backup withholding also include the following:
- - Payments to nonresident aliens subject to withholding under section 1441.
- - Payments to partnerships not engaged in trade or business in the U.S.
and that have at least one nonresident partner.
<PAGE>
- - Payments of patronage dividends not paid in money.
- - Payments made by certain foreign organizations.
Payments of interest generally not subject to backup withholding include
the following:
- - Payments of interest on obligations issued by individuals.
NOTE: YOU MAY BE SUBJECT TO BACKUP WITHHOLDING IF THIS INTEREST IS $600 OR
MORE AND IS PAID IN THE COURSE OF THE PAYER'S TRADE OR BUSINESS AND YOU HAVE NOT
PROVIDED YOUR CORRECT TIN TO THE PAYER.
- - Payments of tax-exempt interest (including exempt-interest dividends
under section 852).
- - Payments described in section 6049(b)(5) to nonresident aliens.
- - Payments on tax-free covenant bonds under section 1451.
- - Payments made by certain foreign organizations.
- - Mortgage interest paid by you.
Payments that are not subject to information reporting are also not subject
to backup withholding. For details, see sections 6041, 6041A(a), 6042, 6044,
6045, 6049, 6050A and 6050N, and their regulations.
PENALTIES
FAILURE TO FURNISH TIN. -- If you fail to furnish your correct TIN to a
requester, you are subject to a penalty of $50 for each such failure unless your
failure is due to reasonable cause and not to willful neglect.
CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you
make a false statement with no reasonable basis that results in no backup
withholding, you are subject to a $500 penalty.
CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
MISUSE OF TINS. -- If the requester discloses or uses TINs in violation of
Federal law, the requester may be subject to civil and criminal penalties.
SPECIFIC INSTRUCTIONS
NAME. -- If you are an individual, you must generally provide the name
shown on your social security card. However, if you have changed your last
name, for instance, due to marriage, without informing the Social Security
Administration of the name change, please enter your first name, the last name
shown on your social security card and your new last name.
If you are a sole proprietor, you must furnish your individual name and
either your SSN or EIN. You may also enter your business name. Enter your
name(s) as shown on your social security card and/or as it was used to apply or
your EIN on Form SS-4.
SIGNING THE CERTIFICATION.
(1) INTEREST, DIVIDEND, AND BARTER EXCHANGE ACCOUNTS OPENED BEFORE 1984 AND
BROKER ACCOUNTS CONSIDERED ACTIVE DURING 1983. -- You are requested to furnish
your correct TIN, but you are not required to sign the certification.
<PAGE>
(2) INTEREST, DIVIDEND, BROKER AND BARTER EXCHANGE ACCOUNTS OPENED AFTER
1983 AND BROKER ACCOUNTS CONSIDERED INACTIVE DURING 1983. -- You must sign the
certification or backup withholding will apply. If you are subject to backup
withholding and you are merely providing your correct TIN to the requester, you
must cross out item (2) in the certification before signing the form.
(3) REAL ESTATE TRANSACTIONS. -- You must sign the certification. You may
cross out item (2) of the certification.
(4) OTHER PAYMENTS. -- You are required to furnish your correct TIN, but
you are not required to sign the certification unless you have been notified of
an incorrect TIN. Other payments include payments made in the course of the
requester's trade or business for rents, royalties, goods (other than bills for
merchandise), medical and health care services, payments to a nonemployee for
services (including attorney and accounting fees), and payments to certain
fishing boat crew members.
(5) MORTGAGE INTEREST PAID BY YOU, ACQUISITION OR ABANDONMENT OF SECURED
PROPERTY, OR IRA CONTRIBUTIONS. -- You are requested to furnish your correct
TIN, but you are not required to sign the certification.
(6) EXEMPT PAYEES AND PAYMENTS. -- If you are exempt from backup
withholding, you should complete this form to avoid possible erroneous backup
withholding. Enter your correct TIN in Part I, write "EXEMPT" in the block in
Part II, and sign and date the form. If you are a nonresident alien or foreign
entity not subject to backup withholding, give the requester a completed Form W-
8. Certificate of Foreign Status.
(7) "AWAITING TIN". -- Following the instructions under HOW TO OBTAIN A
TIN, on page 1, write "Applied For" in the space for the TIN in Part I of the
Substitute Form W-9 and sign and date the form.
SIGNATURE. -- For a joint account, only the person whose TIN is shown in
Part I should sign the form.
PRIVACY ACT NOTICE. -- Section 6109 requires you to furnish your correct
TIN to persons who must file information returns with the IRS to report
interest, dividends, and certain other income paid to you, mortgage interest you
paid, the acquisition or abandonment of secured property, or contributions you
made to an IRA. The IRS uses the numbers for identification purposes and to
help verify the accuracy of your tax return. You must provide your TIN whether
or not you are required to file a tax return. Payers must generally withhold
31% of taxable interest, dividends, and certain other payments to a payee who
does not furnish a TIN to payer. Certain penalties may also apply.
WHAT NAME AND NUMBER TO GIVE THE REQUESTER
- --------------------------------------------------------------------------------
FOR THE TYPE OF ACCOUNT IN: GIVE THE NAME AND
SOCIAL SECURITY
NUMBER OF:
1., 2., 3., 4., or 5.
- --------------------------------------------------------------------------------
FOR THE TYPE OF ACCOUNT IN: GIVE THE NAME AND
EMPLOYER IDENTIFICATION
NUMBER OF:
6., 7., 8., 9., 10., or 11.
- --------------------------------------------------------------------------------
1. Individual The individual
2. Two or more individuals The actual owner of the
(joint account) account or, if
combined funds, the
first individual on the
account(1)
<PAGE>
3. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
4. A. The usual revocable The grantor-trustee(1)
savings trust (grantor is
also trustee)
B. So-called trust account The actual owner(1)
that is not a legal or valid
trust under state law
5. Sole proprietorship The owner(3)
6. A valid trust, estate or Legal entity(4)
pension trust
7. Corporate The corporation
8. Association, club, The organization
religious, charitable,
educational, or other tax
exempt organization
9. Partnership The partnership
10. A broker or registered The broker or nominee
nominee
11. Account with the Department The public entity
of Agriculture in the name
of a public entity (such as
a state or local government,
school district, or prison)
that receives agricultural
program payments
________________________________
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Show the individual's name. You may also enter your business name. You may
use your SSN or EIN.
(4) List first and circle the name of the legal trust, estate or pension trust.
(Do not furnish the TIN of the personal representative or trustee unless
the legal entity itself is not designated in the account title.)
NOTE: IF NO NAME IS CIRCLED WHEN THERE IS MORE THAN ONE NAME, THE NUMBER WILL
BE CONSIDERED TO BE THAT OF THE FIRST NAME LISTED.
<PAGE>
EXHIBIT (a)(7): PRESS RELEASE
FOR IMMEDIATE RELEASE
- ---------------------
FOR: RAWSON-KOENIG, INC. CONTACT: Les Horvath
2301 Central Parkway Controller
Houston, Texas 77092 (713) 688-4414
RAWSON-KOENIG, INC.
ANNOUNCES TENDER OFFER
----------------------
Houston, Texas, June 4, 1997 - Rawson-Koenig, Inc. (Nasdaq SmallCap Market
Symbol: RAKO) announced today that its Board of Directors had approved a tender
offer by the Company to acquire all of the issued and outstanding shares of
common stock of the Company not owned by the Rawson Family, which currently owns
approximately 60% of the issued and outstanding shares.
The offer price is $2.15 net per share to sellers in cash. On June 3,
1997, the last full trading day prior to the announcement of the tender offer,
the last sales price per share was $1.875. The Company will pay all fees and
expenses of the tender offer, and tendering sellers will not be required to pay
any brokerage fees or commissions.
The tender offer was approved by the Company's independent directors as
well as by its full board of directors. It is intended that the tender offer
will be commenced at the earliest practicable time following reviews of the
necessary documentation by the Securities and Exchange Commission.
The tender offer will be immediately followed by a 1 for 100 reverse stock
split, which will result in all remaining odd-lot shareholders (i.e.,
shareholders owning less than 100 shares) receiving $2.15 net per share in cash
for each share held prior to the reverse split.
All remaining shares, if any, not purchased in the tender offer or the
reverse stock split, will be converted into the right to receive $2.15 net per
share (as adjusted for the reverse stock split) in a merger to be consummated as
soon as practicable after the tender offer.
Thomas C. Rawson, Chief Executive Officer of the Company, commented: "This
transaction will give our shareholders, many of whom own very small amounts of
stock, the opportunity to sell their shares at a substantial premium over
historical market prices and at the same time avoid the fees and commissions of
brokers."
Headquartered in Houston, Texas, Rawson-Koenig, Inc. manufactures truck
service bodies, truck tool boxes, winches, and truck-mounted cranes.
<PAGE>
EXHIBIT (C)(1): AGREEMENT BETWEEN THE RAWSON FAMILY AND THE COMPANY
RAWSON FAMILY AGREEMENT
This Rawson Family Agreement (this "Agreement") is made effective as of
June 2, 1997 by and among Rawson-Koenig, Inc. (the "Company"), and Thomas C.
Rawson, Pamela Y. Rawson and The Rawson Family Limited Partnership, which is
controlled by Catherine A. Rawson (collectively, the "Rawson Family").
WHEREAS, the Rawson Family owns 60% of the Common Stock, no par value, of
the Company;
WHEREAS, the Company is making a tender offer to purchase the issued and
outstanding shares of its Common Stock, no par value (the "Offer"), held by
persons or entities other than the Rawson Family (the "Public Shareholders") at
the price set forth in the Offer to Purchase, including any amendments thereto
(the "Offer Price"); and
WHEREAS, pursuant to the Offer, the Rawson Family has agreed to share with
the Public Shareholders any Excess Proceeds (as defined herein), if any,
received in the future as a result of certain change in control transactions as
set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Rawson Family
hereby agree as follows:
1. DEFINITIONS.
a. "Change of Control" means the occurrence of any of the following: (i)
the sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company or any successor to the Company
to any "person" (as such term is used in Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended); (ii) the adoption of a plan relating to the
liquidation or dissolution of the Company or any successor to the Company; or
(iii) the consummation of any transaction (including, without limitation, any
merger or consolidation) the result of which is that any "person" (as defined
above), other than the Rawson Family or their heirs (including assignees by
inter vivos transfers for estate planning purposes), acquires a direct or
indirect interest in more than 50% of the voting power of the Common Stock of
the Company or any successor to the Company.
b. Unless otherwise defined herein, all initially capitalized terms
herein shall have the same definitions set forth in the Offer to Purchase,
including any amendments thereto, filed by the Company with the Securities and
Exchange Commission.
2. AGREEMENT REGARDING PROCEEDS UPON A CHANGE OF CONTROL. In the event a
Change of Control occurs at any time within the three years following the later
of the date of consummation of the Offer or the date of consummation of the
Merger, the parties agree that if the aggregate amount of proceeds received by
the Rawson
<PAGE>
Family as a result of such Change of Control (the "Proceeds") exceeds the
product of the Offer Price multiplied by the 3,901,190 shares currently issued
and outstanding (the "Total Purchase Price"), then any positive difference
between the Proceeds and the Total Purchase Price (the "Excess Proceeds") shall
be distributed by the Company as follows: the Rawson Family shall receive their
proportionate share of the Excess Proceeds (i.e. 60%, collectively) and the
Public Shareholders of record on the date immediately prior to the commencement
of the Offer shall receive the remaining amount of the Excess Proceeds
(i.e. 40%, collectively) in proportion to their ownership interests.
3. TRANSFER OF RIGHTS. This Agreement shall be binding on any heirs,
successors or permitted assigns of the parties.
4. ENTIRE AGREEMENT. This Agreement contains the entire agreement of the
parties and there are no other promises or conditions in any other agreement
whether oral or written. This Agreement supersedes any prior written or oral
agreements between the parties.
5. SEVERABILITY. If any provision of this Agreement shall be held to be
invalid or unenforceable for any reason, the remaining provisions shall continue
to be valid and enforceable. If a court finds that any provision of this
Agreement is invalid or unenforceable, but that by limiting such provision it
would become valid or enforceable, then such provision shall be deemed to be
written, construed, and enforced as so limited.
6. TERM. This Agreement shall terminate three years following the later
of the date of consummation of the Offer or the date of consummation of the
Merger.
7. APPLICABLE LAW. This Agreement shall be governed by and construed
according to the laws of the State of Texas.
RAWSON-KOENIG, INC.
/s/ THOMAS C. RAWSON
By: ____________________________________________
Thomas C. Rawson
Name: ___________________________________________
Chairman of the Board
Its: ____________________________________________
/s/ THOMAS C. RAWSON
- --------------------------------------------------
Thomas C. Rawson
/s/ PAMELA Y. RAWSON
- --------------------------------------------------
Pamela Y. Rawson
The Rawson Family Limited Partnership
/s/ CATHERINE A. RAWSON
By: ----------------------------------------------
Name: Catherine A. Rawson
Its: Managing General Partner
-2-
<PAGE>
EXHIBIT (C)(2): AMENDED AND RESTATED AGREEMENT BETWEEN THE RAWSON FAMILY AND
THE COMPANY
AMENDED AND RESTATED RAWSON FAMILY AGREEMENT
This Amended and Restated Rawson Family Agreement (this "Agreement") is
made effective as of June 2, 1997 by and among Rawson-Koenig, Inc. (the
"Company"), and Thomas C. Rawson, Pamela Y. Rawson and The Rawson Family Limited
Partnership, which is controlled by Catherine A. Rawson (collectively, the
"Rawson Family").
WHEREAS, the Rawson Family owns 60% of the Common Stock, no par value, of
the Company; and
WHEREAS, the parties hereto previously executed that certain Rawson Family
Agreement effective as of June 2, 1997 and now desire to amend and restate said
Agreement; and
WHEREAS, the Company is making a tender offer to purchase the issued and
outstanding shares of its Common Stock, no par value (the "Offer"), held by
persons or entities who own Common Stock (the "Public Shareholders") at
the price set forth in the Offer to Purchase, including any amendments thereto
(the "Offer Price"); and
WHEREAS, pursuant to the Offer, the Rawson Family has agreed to share with
the Public Shareholders who tender their Shares pursuant to the Offer any Excess
Proceeds (as defined herein), if any, received in the future as a result of
certain change in control transactions as set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Rawson Family
hereby agree as follows:
1. DEFINITIONS.
a. "Change of Control" means the occurrence of any of the following: (i)
the sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company or any successor to the Company
to any "person" (as such term is used in Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended); (ii) the adoption of a plan relating to the
liquidation or dissolution of the Company or any successor to the Company; or
(iii) the consummation of any transaction (including, without limitation, any
merger or consolidation) the result of which is that any "person" (as defined
above), other than the Rawson Family or their heirs (including assignees by
inter vivos transfers for estate planning purposes), acquires a direct or
indirect interest in more than 50% of the voting power of the Common Stock of
the Company or any successor to the Company.
b. Unless otherwise defined herein, all initially capitalized terms
herein shall have the same definitions set forth in the Offer to Purchase,
including any amendments thereto, filed by the Company with the Securities and
Exchange Commission.
2. AGREEMENT REGARDING PROCEEDS UPON A CHANGE OF CONTROL. In the event a
Change of Control occurs at any time within the three years following the later
of the date of consummation of the Offer or the date of consummation of the
Merger, the parties agree that if the aggregate amount of proceeds received by
the Rawson
<PAGE>
Family as a result of such Change of Control (the "Proceeds") exceeds the
product of the Offer Price multiplied by the 3,901,190 shares currently issued
and outstanding (the "Total Purchase Price"), then any positive difference
between the Proceeds and the Total Purchase Price (the "Excess Proceeds") shall
be distributed by the Company as follows: the Rawson Family shall receive their
proportionate share of the Excess Proceeds (i.e. 60%, collectively) and the
Public Shareholders other than the Rawson Family who tender their Shares
pursuant to the Offer shall receive the remaining amount of the Excess Proceeds
(i.e. 40%, collectively) in proportion to their ownership interests; provided,
however, that in the event that any Public Shareholder tenders only a part of
his Shares pursuant to the Offer, such Shareholder will share the Excess
Proceeds only in the ratio that the Shares tendered bears to the total number of
Shares tendered by all Public Shareholders.
3. TRANSFER OF RIGHTS. This Agreement shall be binding on any heirs,
successors or permitted assigns of the parties.
4. ENTIRE AGREEMENT. This Agreement contains the entire agreement of the
parties and there are no other promises or conditions in any other agreement
whether oral or written. This Agreement supersedes any prior written or oral
agreements between the parties.
5. SEVERABILITY. If any provision of this Agreement shall be held to be
invalid or unenforceable for any reason, the remaining provisions shall continue
to be valid and enforceable. If a court finds that any provision of this
Agreement is invalid or unenforceable, but that by limiting such provision it
would become valid or enforceable, then such provision shall be deemed to be
written, construed, and enforced as so limited.
6. TERM. This Agreement shall terminate three years following the later
of the date of consummation of the Offer or the date of consummation of the
Merger.
7. APPLICABLE LAW. This Agreement shall be governed by and construed
according to the laws of the State of Texas.
RAWSON-KOENIG, INC.
/s/ THOMAS C. RAWSON
By: ____________________________________________
Thomas C. Rawson
Name: ___________________________________________
Chairman of the Board
Its: ____________________________________________
/s/ THOMAS C. RAWSON
- --------------------------------------------------
Thomas C. Rawson
/s/ PAMELA Y. RAWSON
- --------------------------------------------------
Pamela Y. Rawson
The Rawson Family Limited Partnership
/s/ CATHERINE A. RAWSON
By: ----------------------------------------------
Name: Catherine A. Rawson
Its: Managing General Partner
-2-
