SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT
PURSUANT TO SECTION 14(D)(1) OF THE SECURITIES EXCHANGE ACT OF 1934
---------------------------
HITOX CORPORATION OF AMERICA
(Name of Subject Company)
PAULSON ACQUISITION LLC
PAULSON RANCH LTD.
BERNARD A. PAULSON
(Bidder)
COMMON STOCK, PAR VALUE $0.25 PER SHARE
(Title of Class of Securities)
433658101
(CUSIP Number of Class of Securities)
---------------------------
PAULSON ACQUISITION LLC
C/O FOUNDERS EQUITY GROUP, INC.
2602 MCKINNEY AVENUE
SUITE 220
DALLAS, TEXAS 75204
(214) 871-3000
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf of Bidder)
---------------------------
Copy to:
PATRICK J. DOOLEY, ESQ.
VICTORIA A. BAYLIN, ESQ.
AKIN, GUMP, STRAUSS, HAUER & FELD, L.L.P.
590 MADISON AVENUE
NEW YORK, NEW YORK 10022
TELEPHONE: (212) 872-1000
---------------------------
Calculation of Filing Fee
Transaction Valuation Amount of Filing Fee
$2,500,000 $500
<PAGE>
* For purposes of calculating the filing fee only. This amount assumes the
purchase of 1,000,000 shares of Common Stock of the subject company (the
"Shares") at $2.50 in cash per share.
[__] Check box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
Amount Previously Paid: Filing Party:
Form or Registration Number: Date Filed:
<PAGE>
1. Name of Reporting Person
S.S. or I.R.S. Identification Nos. of Above Person
--------------------------------------------------
Paulson Acquisition LLC
2. Check the Appropriate Box if a member of a Group (See Instructions)
-------------------------------------------------------------------
(a) [ ]
(b) [X]
3. SEC Use Only
------------
4. Sources of Funds (See Instructions)
-----------------------------------
WC, PF and OO
5. Check if Disclosure of Legal Proceedings is Required
Pursuant to Items 2(e) or 2(f)
------------------------------
[ ]
6. Citizenship or Place of Organization
------------------------------------
Delaware
7. Aggregate Amount Beneficially Owned by Each Reporting Person
------------------------------------------------------------
0
8. Check if the Aggregate in Row (7) Excludes Certain Shares (See
Instructions)
-------------
[ ]
9. Percent of Class Represented by Amount in Row (7)
-------------------------------------------------
0%
10. Type of Reporting Person (See Instructions)
-------------------------------------------
OO
<PAGE>
1. Name of Reporting Person
S.S. or I.R.S. Identification Nos. of Above Person
--------------------------------------------------
Paulson Ranch Ltd.
2. Check the Appropriate Box if a member of a Group (See Instructions)
-------------------------------------------------------------------
(a) [ ]
(b) [X]
3. SEC Use Only
------------
4. Sources of Funds (See Instructions)
-----------------------------------
WC, PF and OO
5. Check if Disclosure of Legal Proceedings is Required
Pursuant to Items 2(e) or 2(f)
------------------------------
[ ]
6. Citizenship or Place of Organization
------------------------------------
Texas
7. Aggregate Amount Beneficially Owned by Each Reporting Person
------------------------------------------------------------
0
8. Check if the Aggregate in Row (7) Excludes Certain Shares (See
Instructions)
-------------
[ ]
9. Percent of Class Represented by Amount in Row (7)
-------------------------------------------------
0%
10. Type of Reporting Person (See Instructions)
-------------------------------------------
PN
<PAGE>
1. Name of Reporting Person
S.S. or I.R.S. Identification Nos. of Above Person
--------------------------------------------------
Bernard A. Paulson
2. Check the Appropriate Box if a member of a Group (See Instructions)
-------------------------------------------------------------------
(a) [ ]
(b) [X]
3. SEC Use Only
------------
4. Sources of Funds (See Instructions)
-----------------------------------
WC, PF and OO
5. Check if Disclosure of Legal Proceedings is Required
Pursuant to Items 2(e) or 2(f)
------------------------------
[ ]
6. Citizenship or Place of Organization
------------------------------------
United States
7. Aggregate Amount Beneficially Owned by Each Reporting Person
------------------------------------------------------------
42,000
8. Check if the Aggregate in Row (7) Excludes Certain Shares (See
Instructions)
-------------
[ ]
9. Percent of Class Represented by Amount in Row (7)
-------------------------------------------------
.9%
10. Type of Reporting Person (See Instructions)
-------------------------------------------
IN
<PAGE>
ITEM 1. Security and Subject Company.
----------------------------
(a) The name of the subject company is Hitox Corporation of America.
The address of the Company's principal executive offices is 722
Burleson Street, Corpus Christi, Texas 78402.
(b) This Schedule 14D-1 relates to the offer by Paulson Acquisition LLC
(the "Purchaser") to purchase up to 1,000,000 shares of common stock,
par value $0.25 per share ("Common Stock") of the subject company (the
"Shares"). Information regarding the number of shares outstanding is
set forth in "Introduction" of the Offer to Purchase and is
incorporated herein by reference.
(c) Information concerning the principal market in which the Shares are
traded and the high and low sales prices of the Shares for each
quarterly period for the past two years is set forth in Section 7
"Price Range of the Shares" of the Offer to Purchase and is
incorporated herein by reference.
ITEM 2. Identity and Background.
-----------------------
(a) - (d) The information set forth in "Introduction," "Certain
Information Concerning the Purchaser" and in Schedule I of the Offer to
Purchase is incorporated herein by reference.
(e) - (g) The information set forth in "Certain Information Concerning
the Purchaser," and Schedule I of the Offer to Purchase is incorporated
herein by reference. Other than as set forth in the Offer to Purchase,
during the last five years, neither the Purchaser nor, to the best of
the knowledge of the Purchaser, any person named on Schedule I to the
Offer to Purchase nor any affiliate of the Purchaser (i) has been
convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors) or (ii) was a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and as a
result of such proceeding were or are subject to a judgment, decree or
final order enjoining future violations of, or prohibiting activities
subject to, Federal or State securities laws or finding any violation
of such laws.
ITEM 3. Past Contacts, Transactions or Negotiations with the Subject
Company.
-------
(a) - (b) The information set forth in Section 10 "Certain Information
Concerning the Purchaser," Section 12 "Contacts and Transactions with
the Company; Background of the Offer" and Schedule I of the Offer to
Purchase is incorporated herein by reference.
ITEM 4. Source and Amount of Funds or Other Consideration.
-------------------------------------------------
(a) - (c) The information set forth in Section 11 "Source and Amount of
Funds" of the Offer to Purchase is incorporated herein by reference.
<PAGE>
ITEM 5. Purpose of the Tender Offer and Plans or Proposals of the
Bidder.
-------
(a)-(e) and (g) The information in Section 8 "Purpose of the Offer;
Plans for the Company; Effect of the Offer on the Market for the
Shares; Stock Quotation; Exchange Act Registration;" of the Offer to
Purchase is incorporated herein by reference.
(f) Not applicable,
ITEM 6. Interest in Securities of the Subject Company.
---------------------------------------------
(a) and (b) The information set forth in Section 10 "Certain
Information Concerning the Purchaser" and Schedule I of the Offer to
Purchase is incorporated herein by reference.
ITEM 7. Contracts, Arrangements, Understandings or Relationships with
Respect to the Subject Company's Securities.
-------------------------------------------
The information set forth in Section 10 "Certain Information Concerning
the Purchaser" and Schedule I of the Offer to Purchase is incorporated
herein by reference.
ITEM 8. Persons Retained, Employed or To Be Compensated.
-----------------------------------------------
None.
ITEM 9. Financial Statements of Certain Bidders.
---------------------------------------
The information set forth in Section 11 "Source and Amount of Funds" of
the Offer to Purchase is incorporated herein by reference.
ITEM 10. Additional Information.
----------------------
(a) The information set forth in Section 10 "Certain Information
Concerning the Purchaser" and Schedule I of the Offer to Purchase
is incorporated herein by reference.
(b)-(c) The information set forth in Section 14 "Certain Legal Matters"
of the Offer to Purchase is incorporated herein by reference.
(d) None.
(e) None.
The information set forth in the Offer to Purchase is incorporated
herein by reference.
<PAGE>
ITEM 11. Material to be Filed as Exhibits.
--------------------------------
(a)(1) Form of Offer to Purchase dated March 23, 1999
(a)(2) Form of Letter of Transmittal
(a)(3) Form of Notice of Guaranteed Delivery
(a)(4) Form of Letter to brokers, dealers, commercial banks, trust
companies and nominees
(a)(5) Form of Letter to clients for use by brokers, dealers,
commercial banks, trust companies and nominees
(a)(6) Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9
(a)(7) Summary Advertisement as published in Investor's Business
Daily on March 23, 1999
(a)(8) Press release issued on March 23, 1999
(b) Commitment Letter, dated February 23, 1999, from NationsBank,
N.A. to Paulson Ranch, Ltd.
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.
Dated: March 23, 1999
PAULSON ACQUISITION LLC
BY: /S/ BERNARD A. PAULSON
______________________________________
Name: Bernard A. Paulson
Title: President and Chief Executive Officer
<PAGE>
EXHIBIT INDEX
Exhibit Description
- --------- --------------
(a)(1) Form of Offer to Purchase dated March 23, 1999
(a)(2) Form of Letter of Transmittal
(a)(3) Form of Notice of Guaranteed Delivery
(a)(4) Form of Letter to brokers, dealers, commercial banks,
trust companies and nominees
(a)(5) Form of Letter to clients for use by brokers, dealers,
commercial banks, trust companies and nominees
(a)(6) Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9
(a)(7) Summary Advertisement as published in Investor's Business
Daily on March 23, 1999
(a)(8) Press release issued on March 23, 1999
(b) Commitment Letter, dated February 23, 1999 from
NationsBank, N.A. to Paulson Ranch, Ltd.
(a)(1)
OFFER TO PURCHASE FOR CASH
UP TO 1,000,000 SHARES OF COMMON STOCK
OF
HITOX CORPORATION OF AMERICA
a Delaware Corporation
AT
$2.50 PER SHARE
by
PAULSON ACQUISITION LLC
_____________________________
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE
AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, APRIL 19, 1999,
UNLESS THE OFFER IS EXTENDED.
_____________________________
THE OFFER IS SUBJECT TO CERTAIN TERMS AND CONDITIONS CONTAINED
IN THIS OFFER TO PURCHASE. SEE SECTIONS 13 AND 14.
IMPORTANT
Any stockholder desiring to tender all or any portion of such
stockholder's shares of common stock of the Company, par value $0.25 per share
(the "Shares"), should either (1) complete and sign the Letter of Transmittal or
a facsimile copy thereof in accordance with the instructions in the Letter of
Transmittal, have such stockholder's signature thereon guaranteed if required by
Instruction 1 to the Letter of Transmittal, mail or deliver the Letter of
Transmittal (or such facsimile), or, in the case of a book-entry transfer
effected pursuant to the procedure set forth in Section 3 hereof, an Agent's
Message (as defined herein), and any other required documents to the Depositary
(as defined herein) and either deliver the certificates for such Shares to the
Depositary along with the Letter of Transmittal (or facsimile) or deliver such
Shares pursuant to the procedure for book-entry transfer set forth in Section 3
hereof prior to the expiration of the Offer or (2) request such stockholder's
<PAGE>
broker, dealer, bank, trust company or other nominee to effect the transaction
for such stockholder. A stockholder having Shares registered in the name of a
broker, dealer, bank, trust company or other nominee must contact such broker,
dealer, bank, trust company or other nominee if such stockholder desires to
tender such Shares.
A stockholder who desires to tender Shares and whose certificates for
such Shares are not immediately available or who cannot comply in a timely
manner with the procedure for book-entry transfer, or who cannot deliver all
required documents to the Depositary prior to the expiration of the Offer, may
tender such Shares by following the procedure for guaranteed delivery set forth
in Section 3 hereof.
Questions and requests for assistance or for additional copies of this
Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed
Delivery may be directed to the Information Agent at its address and telephone
numbers set forth on the back cover of this Offer to Purchase.
March 23, 1999
<PAGE>
TABLE OF CONTENTS
Page
INTRODUCTION...................................................................1
1. Terms of the Offer......................................................2
2. Number of Shares; Proration.............................................3
3. Procedure for Tendering Shares..........................................4
4. Withdrawal Rights.......................................................9
5. Acceptance for Payment and Payment......................................9
6. Certain Federal Income Tax Consequences................................10
7. Price Range of the Shares..............................................11
8. Purpose of the Offer-Plans for the Company; Effect of the Offer on the
Market for the Shares; Stock Quotation; Exchange Act
Registration...........................................................12
9. Certain Information Concerning the Company.............................14
10. Certain Information Concerning the Purchaser...........................15
11. Source and Amount of Funds.............................................15
12. Contacts and Transactions with the Company; Background of the Offer....16
13. Certain Conditions of the Offer........................................16
14. Certain Legal Matters..................................................20
15. Fees and Expenses......................................................22
16. Miscellaneous..........................................................22
SCHEDULE I.............................................................23
i
<PAGE>
TO THE HOLDERS OF COMMON STOCK OF HITOX CORPORATION OF AMERICA:
INTRODUCTION
Paulson Acquisition LLC, a Delaware limited liability company (the
"Purchaser"), a wholly-owned limited liability company of the Paulson Ranch
Ltd., a Texas limited partnership ("Paulson Ranch"), hereby offers to purchase
up to 1,000,000 shares of common stock, par value $0.25 per share (the "Shares"
or "Common Stock"), of the Company, at a price of $2.50 per Share, net to the
seller in cash, without interest thereon (the "Offer Price"), upon the terms and
subject to the conditions set forth in this Offer to Purchase and in the related
Letter of Transmittal (which, together with any amendments or supplements hereto
or thereto, collectively constitute the "Offer").
Purchaser, a Delaware limited liability company, was formed on March
18, 1999 for the purpose of consummating the Offer. Purchaser is wholly-owned
limited liability company of the Paulson Ranch, Ltd. The general partner of the
Paulson Ranch is Paulson Ranch Management, L.L.C., a Texas limited liability
company. The members of Paulson Ranch Management, L.L.C. are Mr. Bernard A.
Paulson and his wife. Mr. Paulson is a director and the acting Chief Executive
Officer of the Company. Over the past two years, Mr. Paulson has acquired 42,000
shares of the Company's common stock. Neither the Purchaser nor to the
Purchaser's knowledge any of the members, executive officers or affiliates of
the Purchaser, nor any associates of the foregoing has effected any transaction
in any class of the Company's securities during the sixty days prior to the date
hereof.
Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, transfer taxes on the purchase of Shares pursuant to the Offer. The
Purchaser will pay all fees and expenses of Founders Equity Group, Inc., which
is acting as the Depositary (the "Depositary"), and the Information Agent (the
"Information Agent"), incurred in connection with the Offer. See Section 15
hereof.
THE PURCHASER RESERVES THE RIGHT (SUBJECT TO THE APPLICABLE RULES AND
REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION (THE
"COMMISSION")) TO PURCHASE LESS THAN 1,000,000 SHARES. SEE SECTIONS 1
AND 4 HEREOF. THE CONDITIONS SET FORTH IN SECTION 13 HEREOF ARE
REFERRED TO AS THE "OFFER CONDITIONS".
Based on the Company's Annual Report on Form 10-K for the year ended
December 31, 1998, as of February 9, 1999, there were 4,657,487 shares issued
and outstanding. Accordingly, based on the foregoing and assuming that 1,000,000
shares are validly tendered and not withdrawn and the Purchaser purchases all of
the Shares, upon consummation of the Offer the Purchaser would own approximately
1,042,000 shares, or approximately 21.5% of the outstanding shares as of
February 9, 1999.
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.
1
<PAGE>
THE OFFER
1. Terms of the Offer
------------------
Upon the terms and subject to the conditions of the Offer, the
Purchaser will accept for payment and pay for all Shares validly tendered prior
to the Expiration Date and not theretofore withdrawn in accordance with Section
4 hereof. The term "Expiration Date" means 12:00 midnight, New York City time,
on April 19, 1999, unless and until the Purchaser shall have extended the period
of time 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 Purchaser, will expire.
Subject to the applicable rules and regulations of the Commission, the
Purchaser reserves the right (but shall not be obligated), at any time and from
time to time, and regardless of whether or not any of the events or facts set
forth in Section 13 hereof shall have occurred, (a) to extend the period of time
during which the Offer is open, and thereby delay acceptance for payment of and
the payment for any Shares, by giving oral or written notice of such extension
to the Depositary and (b) to amend the Offer in any other respect by giving oral
or written notice of such amendment to the Depositary.
UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE FOR
TENDERED SHARES, WHETHER OR NOT THE PURCHASER EXERCISES ITS RIGHT TO
EXTEND THE OFFER.
If by 12:00 midnight, New York City time, on Monday, April 19, 1999 (or
any date or time then set as the Expiration Date), any or all of the Offer
Conditions have not been satisfied or waived, the Purchaser reserves the right
(but shall not be obligated), subject to the applicable rules and regulations of
the Commission, (a) to terminate the Offer and not accept for payment or pay for
any Shares and return all tendered Shares to tendering stockholders, (b) to
waive all the unsatisfied conditions and accept for payment and pay for all
Shares validly tendered prior to the Expiration Date and not theretofore
withdrawn, (c) to extend the Offer and, subject to the right of stockholders to
withdraw Shares until the Expiration Date, retain the Shares that have been
tendered during the period or periods for which the Offer is extended or (d) to
amend the Offer.
There can be no assurance that the Purchaser will exercise its right to
extend the Offer. Any extension, waiver, amendment or termination will be
followed as promptly as practicable by a public announcement of such event. In
the case of an extension, Rule 14e-l(d) under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), requires that the announcement be issued
no later than 9:00 a.m., New York City time, on the next business day after the
2
<PAGE>
previously scheduled Expiration Date in accordance with the public announcement
requirements of Rule 14d-4(c) under the Exchange Act. Subject to applicable law
(including Rules 14d-4(c) and 14d-6(d) under the Exchange Act, which require
that any material change in the information published, sent or given to
stockholders in connection with the Offer be promptly disseminated to
stockholders in a manner reasonably designed to inform stockholders of such
change) and without limiting the manner in which the Purchaser may choose to
make any public announcement, the Purchaser will not have any obligation to
publish, advertise or otherwise communicate any such public announcement other
than by making a release to the Dow Jones News Service.
If the Purchaser extends the Offer or if the Purchaser is delayed in
its acceptance for payment of or payment (whether before or after its acceptance
for payment of Shares) for Shares or it is unable to pay for Shares pursuant to
the Offer for any reason, then, without prejudice to the Purchaser's rights
under the Offer, the Depositary may retain tendered Shares on behalf of the
Purchaser, and such Shares may not be withdrawn except to the extent tendering
stockholders are entitled to withdrawal rights as described in Section 4 hereof.
However, the ability of the Purchaser to delay the payment for Shares that the
Purchaser has accepted for payment is limited by Rule 14e-l(c) under the
Exchange Act, which requires that a bidder pay the consideration offered or
return the securities deposited by or on behalf of holders of securities
promptly after the termination or withdrawal of such bidder's offer.
If the Purchaser makes a material change in the terms of the Offer or
the information concerning the Offer or waives a material condition of the
Offer, the Purchaser will disseminate additional tender offer materials and
extend the Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1
under the Exchange Act. The minimum period during which an offer must remain
open following material changes in the terms of the offer or information
concerning the offer, other than a change in price or a change in the percentage
of securities sought, will depend upon the facts and circumstances then
existing, including the relative materiality of the changed terms or
information. With respect to a change in price or a change in the percentage of
securities sought, a minimum period of 10 business days is generally required to
allow for adequate dissemination to stockholders.
The Purchaser has requested the Company to provide the Purchaser with
the Company's stockholder lists and security position listings for the purpose
of disseminating the Offer to holders of Shares. This Offer to Purchase, the
related Letter of Transmittal and other relevant materials will be mailed by the
Purchaser to record holders of Shares and will be furnished to brokers, dealers,
banks, trust companies and similar persons whose names, or the names of whose
nominees, appear on the stockholder lists, or, if applicable, who are listed as
participants in a clearing agency's security position listing, for subsequent
transmittal to beneficial owners of Shares.
The Shares are listed and traded on The Nasdaq SmallCap Market System
("Nasdaq") under the symbol "HTXA". The Company announced the Offer prior to the
opening of trading on March 23, 1999. The closing price per share as reported on
Nasdaq on March 18, 1999 was $1.50. The Purchaser urges stockholders to obtain
current market quotations for the Shares.
THIS OFFER TO PURCHASE AND RELATED TRANSMITTAL CONTAIN
IMPORTANT INFORMATION AND SHOULD BE READ IN THEIR
ENTIRETY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE
OFFER.
2. Number of Shares; Proration
---------------------------
Upon the terms and subject to the conditions of the Offer, the
Purchaser will accept for payment (and thereby purchase) up to 1,000,000 Shares
that are properly tendered on or before the Expiration Date (and not withdrawn
in accordance with Section 4) at a price equal to $2.50 per Share.
3
<PAGE>
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 Midnight, New York City time.
If the number of Shares properly tendered prior to the Expiration Date
is less than or equal to 1,000,000 shares, the Purchaser will, upon the terms
and subject to the conditions of the Offer, purchase all Shares so tendered.
If more than 1,000,000 Shares are validly tendered prior to the
Expiration Date and not withdrawn, the Purchaser will, upon the terms and
subject to the conditions of the Offer, accept such Shares for payment on a pro
rata basis, with adjustments to avoid purchases of fractional Shares, based upon
the number of Shares validly tendered prior to the Expiration Date and not
withdrawn.
In the event that proration of tendered Shares is required, the
Purchaser will determine the final proration factor as promptly as practicable
after the Expiration Date. Although the Purchaser does not expect to be able to
announce the final results of such proration until approximately three Nasdaq
trading days after the Expiration Date, it will announce preliminary results of
proration by press release as promptly as practicable after the Expiration Date.
Stockholders may obtain such preliminary information from the Purchaser and may
be able to obtain such information from their brokers.
3. Procedure for Tendering Shares
------------------------------
Valid Tender. For a stockholder validly to tender Shares pursuant to
------------
the Offer, either (a) a Letter of Transmittal (or 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),
and any other required documents, must be received by the Depositary at its
address set forth on the back cover of this Offer to Purchase prior to the
Expiration Date and either certificates for tendered Shares must be received by
the Depositary at its address or such Shares must be delivered pursuant to the
procedures for book-entry transfer set forth below (and a Book-Entry
Confirmation (as defined below) received by the Depositary), in each case prior
to the Expiration Date, or (b) the tendering stockholder must comply with the
guaranteed delivery procedures set forth below.
The Depositary will establish accounts with respect to the Shares at
The Depository Trust Company (the "Book-Entry Transfer Facility") for purposes
of the Offer within two business days after the date of this Offer to Purchase.
4
<PAGE>
Any financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of Shares by causing the
Book-Entry Transfer Facility to transfer such Shares into the Depositary's
account in accordance with the Book-Entry Transfer Facility's procedures for
such transfer. However, although delivery of Shares may be effected through
book-entry transfer into the Depositary's account at the Book-Entry Transfer
Facility, the Letter of Transmittal (or facsimile thereof), properly completed
and duly executed, with any required signature guarantees, or an Agent's
Message, and any other required documents, must, in any case, be transmitted to,
and received by, the Depositary at its address set forth on the back cover of
this Offer to Purchase prior to the Expiration Date, or the tendering
stockholder must comply with the guaranteed delivery procedures described below.
The confirmation of a book-entry transfer of Shares into the Depositary's
account at the Book-Entry Transfer Facility as described above is referred to
herein as a "Book-Entry Confirmation".
DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE
WITH THE BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE
DELIVERY TO THE DEPOSITARY.
The term "Agent's Message" means a message transmitted by the
Book-Entry Transfer Facility to, and received by, the Depositary and forming a
part of a Book-Entry Confirmation, which states that the Book-Entry Transfer
Facility has received an express acknowledgment from the participant in the
Book-Entry Transfer Facility tendering the Shares that such participant has
received and agrees to be bound by the terms of the Letter of Transmittal and
that the Purchaser may enforce such agreement against the participant.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL
AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY
THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT THE ELECTION
AND RISK OF THE TENDERING STOCKHOLDER. SHARES WILL BE
5
<PAGE>
DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE
DEPOSITARY (INCLUDING, IN THE CASE OF A BOOK-ENTRY TRANSFER,
BY BOOK-ENTRY CONFIRMATION). 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.
Signature Guarantees. No signature guarantee is required on the Letter
--------------------
of Transmittal (a) if the Letter of Transmittal is signed by the registered
holder(s) (which term, for purposes of this Section, includes any participant in
the Book-Entry Transfer Facility's system whose name appears on a security
position listing as the owner of the Shares) of Shares tendered therewith and
such registered holder has not completed either the box entitled "Special
Delivery Instructions" or the box entitled "Special Payment Instructions" on the
Letter of Transmittal or (b) if such Shares are tendered for the account of a
financial institution (including most commercial banks, savings and loan
associations and brokerage houses) that is a participant in the Security
Transfer Agents Medallion Program, the New York Stock Exchange Medallion
Signature Guarantee Program or the Stock Exchange Medallion Program (such
participant, an "Eligible Institution"). In all other cases, all signatures on
the Letter of Transmittal must be guaranteed by an Eligible Institution. See
Instructions 1 and 5 to the Letter of Transmittal. If the certificates for
Shares are registered in the name of a person other than the signer of the
Letter of Transmittal, or if payment is to be made or certificates for Shares
not tendered or not accepted for payment are to be returned to a person other
than the registered holder of the certificates surrendered, the tendered
certificates must be endorsed or accompanied by appropriate stock powers, in
either case signed exactly as the name or names of the registered holders or
owners appear on the certificates, with the signatures on the certificates or
stock powers guaranteed as aforesaid. See Instructions 1 and 5 to the Letter of
Transmittal.
6
<PAGE>
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant
-------------------
to the Offer and such stockholder's certificates for Shares are not immediately
available or the procedure for book-entry transfer cannot be completed on a
timely basis or time will not permit all required documents to reach the
Depositary prior to the Expiration Date, such stockholder's tender may be
effected if all the following conditions are met:
(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 provided by the Purchaser,
is received by the Depositary, as provided below, on or prior
to the Expiration Date; and
(iii) the certificates for all tendered Shares, in proper form for
transfer (or a Book- Entry Confirmation with respect to all
such Shares), together with a Letter of Transmittal (or
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, and any other
documents required by the Letter of Transmittal are received
by the Depositary within three Nasdaq Stock Market trading
days after the date of execution of such Notice of Guaranteed
Delivery.
The Notice of Guaranteed Delivery may be delivered by hand to the
Depositary or transmitted by telegram, facsimile transmission or mail to the
Depositary and must include a guarantee by an Eligible Institution in the form
set forth in such Notice of Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Shares accepted
for payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of (a) certificates for (or a timely Book-Entry
Confirmation with respect to) such Shares, (b) either (i) a Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, with
any required signature guarantees, or, (ii) in the case of a book-entry
transfer, an Agent's Message, and (c) any other documents required by the Letter
of Transmittal. Accordingly, tendering stockholders may be paid at different
times depending upon when certificates for Shares or Book-Entry Confirmations
with respect to Shares are actually received by the Depositary.
UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE OF
THE SHARES TO BE PAID BY THE PURCHASER, REGARDLESS OF ANY EXTENSION OF
THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT.
The valid tender of Shares pursuant to one of the procedures described
above will constitute a binding agreement between the tendering stockholder and
the Purchaser upon the terms and subject to the conditions of the Offer.
7
<PAGE>
Appointment. By executing a Letter of Transmittal as set forth above,
-----------
the tendering stockholder will irrevocably appoint designees of the Purchaser as
such stockholder's attorneys-in-fact and proxies in the manner set forth in the
Letter of Transmittal, each with full power of substitution, to the full extent
of such stockholder's rights with respect to the Shares tendered by such
stockholder and accepted for payment by the Purchaser and with respect to any
and all other Shares or other securities or rights issued or issuable in respect
of such Shares on or after March 23, 1999. All such proxies will be considered
coupled with an interest in the tendered Shares. Such appointment will be
effective when, and only to the extent that, the Purchaser accepts for payment
Shares tendered by such stockholder as provided herein. Upon such appointment,
all prior powers of attorney, proxies and consents given by such stockholder
with respect to such Shares or other securities or rights will, without further
action, be revoked and no subsequent powers of attorney, proxies, consents or
revocations may be given (and, if given, will not be deemed effective). The
designees of the Purchaser will thereby be empowered to exercise all voting and
other rights with respect to such Shares and other securities or rights in
respect of any annual, special or adjourned meeting of the Company's
stockholders, actions by written consent in lieu of any such meeting or
otherwise, as they in their sole discretion deem proper. The Purchaser reserves
the right to require that, in order for Shares to be deemed validly tendered,
immediately upon the Purchaser's acceptance for payment of such Shares, the
Purchaser must be able to exercise full voting, consent and other rights with
respect to such Shares and other securities or rights, including voting at
any meeting of stockholders.
Determination of Validity. All questions as to the validity, form,
--------------------------
eligibility (including time of receipt) and acceptance of any tender of Shares
will be determined by the Purchaser in its sole discretion, which determination
will be final and binding. The Purchaser reserves the absolute right to reject
any or all tenders determined by it not to be in proper form or the acceptance
for payment of or payment for which may, in the opinion of the Purchaser's
counsel, be unlawful. The Purchaser also reserves the absolute right to waive
any defect or irregularity in the tender of any Shares of any particular
stockholder whether or not similar defects or irregularities are waived in the
case of other stockholders. No tender of Shares will be deemed to have been
validly made until all defects or irregularities relating thereto have been
cured or waived. None of the Purchaser, Parent, 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 Purchaser's interpretation of the terms and
conditions of the Offer (including the Letter of Transmittal and the
instructions thereto) will be final and binding.
Backup Withholding. In order to avoid "backup withholding" of federal
------------------
income tax on payments of cash pursuant to the Offer, a stockholder surrendering
Shares in the Offer must, unless an exemption applies, provide the Depositary
with such stockholder's correct taxpayer identification number ("TIN") on a
Substitute Form W-9 and certify under penalties of perjury that such TIN is
correct and that such stockholder is not subject to backup withholding. If a
stockholder does not provide such stockholder's correct TIN or fails to provide
the certifications described above, the Internal Revenue Service (the "IRS") may
impose a penalty on such stockholder and any payment of cash to such stockholder
pursuant to the Offer may be subject to backup withholding of 31%. All
stockholders surrendering Shares pursuant to the Offer should complete and sign
the main signature form and the Substitute Form W-9 included as part of the
Letter of Transmittal to provide the information and certification necessary to
avoid backup withholding (unless an applicable exemption exists and is proved in
8
<PAGE>
a manner satisfactory to the Purchaser and the Depositary). Certain stockholders
(including, among others, all corporations and certain foreign individuals and
entities) are not subject to backup withholding. Noncorporate foreign
stockholders should complete and sign the main signature form and a Form W-8,
Certificate of Foreign Status, a copy of which may be obtained from the
Depositary, in order to avoid backup withholding. See Instruction 9 to the
Letter of Transmittal.
4. Withdrawal Rights
-----------------
Except as otherwise provided in this Section 4, tenders of Shares are
irrevocable. Shares tendered pursuant to the Offer may be withdrawn pursuant to
the procedures set forth below at any time prior to the Expiration Date and,
unless theretofore accepted for payment and paid for by the Purchaser pursuant
to the Offer, may also be withdrawn at any time after May 23, 1999.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
its address set forth on the back cover of this Offer to Purchase and must
specify the name of the person having tendered the Shares to be withdrawn, the
number of Shares to be withdrawn and the name of the registered holder of the
Shares to be withdrawn, if different from the name of the person who tendered
the Shares. If certificates for Shares have been delivered or otherwise
identified to the Depositary, then, prior to the physical release of such
certificates, the serial numbers shown on such certificates must be submitted to
the Depositary and, unless such Shares have been tendered by an Eligible
Institution, the signatures on the notice of withdrawal must be guaranteed by an
Eligible Institution. If Shares have been delivered pursuant to the procedure
for book-entry transfer as set forth in Section 3 hereof, any notice of
withdrawal must also specify the name and number of the account at the
Book-Entry Transfer Facility and otherwise comply with the Book-Entry Transfer
Facility's procedures. Withdrawals of tenders of Shares may not be rescinded,
and any Shares properly withdrawn will thereafter be deemed not validly tendered
for purposes of the Offer. However, withdrawn Shares may be retendered by again
following one of the procedures described in Section 3 hereof at any time prior
to the Expiration Date.
All questions as to the form and validity (including time of receipt)
of notices of withdrawal will be determined by the Purchaser in its sole
discretion, which determination will be final and binding. None of the
Purchaser, Parent, the Depositary, 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.
5. Acceptance for Payment and Payment
----------------------------------
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 Purchaser will accept for payment and will pay for
all Shares validly tendered prior to the Expiration Date and not properly
withdrawn in accordance with Section 4 hereof promptly after the Expiration
Date. All determinations concerning the satisfaction of such terms and
conditions will be within the Purchaser's discretion, which determinations will
be final and binding. See Sections 1 and 13 hereof. The Purchaser expressly
reserves the right to delay acceptance for payment of or payment for Shares in
order to comply in whole or in part with any applicable law. Any such delays
will be effected in compliance with Rule 14e-l(c) under the Exchange Act
(relating to a bidder's obligation to pay for or return tendered securities
promptly after the termination or withdrawal of such bidder's offer).
9
<PAGE>
In all cases, payment for Shares accepted for payment pursuant to the
Offer will be made only after timely receipt by the Depositary of (a)
certificates for (or a timely Book-Entry Confirmation with respect to) such
Shares, (b) either (i) a Letter of Transmittal (or facsimile thereof), properly
completed and duly executed, with any required signature guarantees, or, (ii) in
the case of a book-entry transfer, an Agent's Message, and (c) any other
documents required by the Letter of Transmittal. The per Share consideration
paid to any stockholder pursuant to the Offer will be the highest per Share
consideration paid to any other stockholder pursuant to the Offer.
For purposes of the Offer, the Purchaser will be deemed to have
accepted for payment, and thereby purchased, Shares properly tendered to the
Purchaser and not withdrawn as, if and when the Purchaser gives oral or written
notice to the Depositary of the Purchaser's acceptance for payment of such
Shares. Payment for Shares accepted for payment pursuant to the Offer will be
made by deposit of the purchase price therefor with the Depositary, which will
act as agent for tendering stockholders for the purpose of receiving payment
from the Purchaser and transmitting payment to tendering stockholders.
UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE OF
THE SHARES TO BE PAID BY THE PURCHASER, REGARDLESS OF ANY EXTENSION OF
THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT.
If the Purchaser is delayed in its acceptance for payment of or payment
for Shares or is unable to accept for payment or pay for Shares pursuant to the
Offer for any reason, then, without prejudice to the Purchaser's rights under
the Offer (but subject to compliance with Rule 14e-l(c) under the Exchange Act,
which requires that a tender offeror pay the consideration offered or return the
tendered securities promptly after termination or withdrawal of a tender offer),
the Depositary may, nevertheless, on behalf of the Purchaser, retain tendered
Shares, and such Shares may not be withdrawn except to the extent tendering
stockholders are entitled to exercise, and duly exercise, withdrawal rights as
described in Section 4.
If any tendered Shares are not purchased pursuant to the Offer for any
reason, certificates for any such Shares will be returned, without expense to
the tendering stockholder (or, in the case of Shares delivered by book-entry
transfer of such Shares into the Depositary's account at the Book-Entry Transfer
Facility pursuant to the procedure set forth in Section 3, such Shares will be
credited to the account maintained at the Book-Entry Transfer Facility), as
promptly as practicable after the expiration or termination of the Offer.
6. Certain Federal Income Tax Consequences
---------------------------------------
The receipt of cash in exchange for Shares pursuant to the Offer will
be a taxable transaction for Federal income tax purposes under the Internal
Revenue Code of 1986, as amended (the "Code"), and may also be a taxable
transaction under applicable state, local or foreign income or other tax laws.
Generally, for federal income tax purposes, a tendering stockholder will
recognize gain or loss equal to the difference between the amount of cash
received by the stockholder pursuant to the Offer and the aggregate tax basis in
the Shares tendered by the stockholder and purchased pursuant to the Offer,
10
<PAGE>
If Shares are held by a stockholder as capital assets, gain or loss
recognized by the stockholder will be capital gain or loss. Such capital gain or
loss will be long-term if such stockholder's holding period for the Shares
exceeds one year and short-term in all other cases. Long term capital gains of
an individual stockholder is generally subject to a maximum tax rate of 20%.
A stockholder that tenders Shares may be subject to 31% backup
withholding unless the stockholder provides its TIN and certifies that such
number is correct or properly certifies that it is awaiting a TIN, or unless an
exemption applies. Exemptions are available for stockholders that are
corporations and for certain foreign individuals and entities. A stockholder
that does not furnish a required TIN may be subject to a penalty imposed by the
IRS.
If backup withholding applies to a stockholder, the Depositary is
required to withhold 31% from payments to such stockholder. Backup withholding
is not an additional tax. Rather, the amount of the backup withholding can be
credited against the federal income tax liability of the person subject to the
backup withholding, provided that the required information is given to the IRS.
If backup withholding results in an overpayment of tax, a refund can be obtained
by the stockholder upon filing an income tax return.
THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE WITH RESPECT TO SHARES
RECEIVED PURSUANT TO THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR
OTHERWISE AS COMPENSATION OR WITH RESPECT TO HOLDERS OF SHARES WHO ARE
SUBJECT TO SPECIAL TAX TREATMENT UNDER THE CODE, SUCH AS NON-U.S.
PERSONS, LIFE INSURANCE COMPANIES, TAX-EXEMPT ORGANIZATIONS AND
FINANCIAL INSTITUTIONS, AND MAY NOT APPLY TO OTHER HOLDERS OF SHARES IN
LIGHT OF THEIR INDIVIDUAL CIRCUMSTANCES. STOCKHOLDERS ARE URGED TO
CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE PARTICULAR TAX
CONSEQUENCES TO THEM (INCLUDING THE APPLICATION AND EFFECT OF ANY
STATE, LOCAL OR FOREIGN INCOME AND OTHER TAX LAWS) OF THE OFFER.
7. Price Range of the Shares
-------------------------
The Shares are listed and traded principally on the Nasdaq Small Cap
Market System under the symbol "HTXA". The following table sets forth, for the
fiscal years ended December 31, 1997 and December 31, 1998, the high and low
sales prices per Share as reported in the Company's Annual Report on Form 10-K
for the year ended December 31, 1998. The high and low share prices for the
period beginning January 1, 1999 and ending on March 18, 1999 were obtained from
published sources.
11
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Period Ended
March 18, 1999
--------------
1999 High $ 1.937
Low 1.437
Quarter Ended
-------------
March 31 June 30 Sept. 30 Dec. 31
-------- ------- -------- -------
1998 High $ 2.125 $ 2.438 $ 2.125 $ 2.125
Low 1.469 1.688 1.000 1.250
1997 High 3.375 3.875 4.000 3.375
Low 2.500 2.375 2.938 1.563
</TABLE>
8. Purpose of the Offer-Plans for the Company; Effect of the Offer on the
-----------------------------------------------------------------------
Market for the Shares; Stock Quotation; Exchange Act Registration
-----------------------------------------------------------------
Purpose of the Offer. The Purchaser is controlled by Mr. Bernard
---------------------
Paulson, the Acting Chief Executive Officer and a director of the Company. As of
the date hereof, Mr. Paulson is the beneficial owner of 42,000 shares of the
Company's Common Stock, which represents approximately 0.9% of the outstanding
Shares. Mr. Paulson would like to increase his investment in the Company and has
caused this Offer to be made in order to allow all shareholders the opportunity
to sell their Shares at a price above recent levels of the market price for the
Shares. Mr. Paulson is active in the formulation and implementation of the
Company's strategies and policies. If the Purchaser were to acquire Shares
pursuant to the Offer, Mr. Paulson's ability to formulate and implement those
strategies and policies might be enhanced.
In addition, the Purchaser, from time to time, intends to evaluate and
review the Company's assets, operations, management and personnel and consider
what, if any, changes would be desirable in light of circumstances which then
exist (which may include an assessment of industry trends and conditions, and
general economic and market circumstances prevailing at the time). Thereafter,
the Purchaser may, among other things, seek to (i) acquire additional securities
of the Company, enter into an extraordinary transaction such as a merger,
reorganization or liquidation of the Company, (ii) sell or transfer all or
substantially all of the Company's assets, (iii) change the Company's current
board of directors (including changing the number or term of directors or to
fill any existing vacancies on the board), (iv) change the present
capitalization or dividend policy of the Company, (v) materially change the
Company's business or corporate structure, (vi) change the Company's charter and
by-laws, (vii) cause the Company's Common Stock to be delisted from the Nasdaq
Stock Market, (viii) cause the Company's Common Stock to become eligible for
termination of registration under the Exchange Act, or (ix) take action similar
to any of those enunciated above. While the Purchaser currently has no plans or
proposals to implement such changes, there can be no assurance that the
Purchaser would not seek to implement such changes in the future.
Market for the Shares. The purchase of Shares pursuant to the Offer may
---------------------
reduce the number of holders of Shares and the number of Shares that might
otherwise trade publicly and could adversely affect the liquidity and market
value of the remaining Shares held by the public.
12
<PAGE>
Stock Quotation. Depending upon the aggregate market value and per
----------------
Share price of any Shares not purchased pursuant to the Offer, the Shares may no
longer meet the standards of the National Association of Securities Dealers,
Inc. (the "NASD") for continued designation for the Nasdaq Small Cap Market. The
maintenance of such designation requires that an issuer meet the following
criteria. The issuer must have (a) at least 500,000 shares publicly held, (b) at
least 300 shareholders of round lots, (c) a market value of publicly held shares
of at least $1 million, (d) a minimum bid price per share of $1, (e) at least
two registered and active market makers for its shares and either (f) (i) net
tangible assets of at least $2 million, (f) (ii) market capitalization of at
least $35 million, or (f) (iii) a net income of at least $500,000 in the latest
fiscal year or in two of the last three fiscal years. Shares held directly or
indirectly by directors, officers or beneficial owners of more than 10% of the
Shares outstanding are not considered as being publicly held for this purpose.
If, as a result of the purchase of Shares pursuant to the Offer or
otherwise, the Shares no longer meet the requirements of the NASD for continued
inclusion in the Nasdaq Small Cap Market or in any other tier of the Nasdaq
Stock Market, and the Shares are no longer included in Nasdaq Small Cap Market
or in any other tier of the Nasdaq Stock Market, the market for the Shares could
be adversely affected.
In the event the Shares no longer meet the requirements of the NASD for
continued inclusion in any tier of the Nasdaq Stock Market, it is possible that
Shares would continue to trade in the over-the-counter market and that price
quotations would be reported by other sources. The extent of the public market
for the Shares and the availability of such quotations would, however, depend
upon the number of holders of Shares remaining at such time, the interest in
maintaining a market in Shares on the part of securities firms, the possible
termination of registration of the Shares under the Exchange Act, as described
below, and other factors.
Exchange Act Registration. The Shares are currently registered under
--------------------------
the Exchange Act. Registration of the Shares under the Exchange Act may be
terminated upon application of the Company to the Commission if the Shares are
neither listed on a national securities exchange nor held by 300 or more holders
of record. Termination of registration of the Shares under the Exchange Act
would substantially reduce the information required to be furnished by the
Company to its stockholders and to the Commission and would make certain
provisions of the Exchange Act no longer applicable to the Company, such as the
short-swing profit recovery provisions of Section 16(b) of the Exchange Act, the
requirement of furnishing a proxy statement pursuant to Section 14(a) of the
Exchange Act in connection with stockholders' meetings and the related
requirement of furnishing an annual report to stockholders and the requirements
of Rule 13e-3 under the Exchange Act with respect to "going private"
transactions. Furthermore, the ability of "affiliates" of the Company and
persons holding "restricted securities" of the Company to dispose of such
securities pursuant to Rule 144 or 144A promulgated under the Securities Act of
1933 may be impaired or eliminated.
13
<PAGE>
9. Certain Information Concerning the Company
------------------------------------------
The Company is a Delaware corporation with its principal offices at 722
Burleson Street, Corpus Christi, Texas 78402. The Company which was incorporated
on December 28, 1973 is a specialty chemical company engaged in the business of
manufacturing and marketing mineral products for use as pigments and pigment
extenders used in the manufacture of paints, industrial coatings and plastics.
Set forth below is certain selected consolidated financial information
with respect to the Company and its subsidiaries excerpted from the information
contained in the Company's Annual Report on Form 10-K for the year ended
December 31, 1998 (the "Company 1998 10-K"). More comprehensive financial
information is included in the Company 1998 10-K, and the following summary is
qualified in its entirety by reference to the Company 1998 10-K and such other
documents and all the financial information (including any related notes)
contained therein. The Company 1998 10-K and such other documents should be
available for inspection and copies thereof should be obtainable in the manner
set forth below under "Available Information".
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
<S> <C> <C>
1998 1997
---- ----
Income Statement Data:
Net Sales................................................. $11,747,034 $11,242,590
Operating Income.......................................... 946,263 982,262
Net Income................................................ 970,133 945,155
Fully Diluted Earnings Per Share.......................... 0.21 0.21
Year Ended December 31,
-----------------------
1998 1997
---- ----
Balance Sheet Data:
Total Assets.............................................. $11,616,517 $11,247,469
Total Current Assets...................................... 8,437,539 7,755,497
Total Current Liabilities................................. 1,571,972 1,546,844
Total Long Term Liabilities............................... - 626,213
Total Shareholder's Equity................................ 10,044,545 9,074,412
</TABLE>
Available Information. The Company is subject to the informational
----------------------
requirements of the Exchange Act and, in accordance therewith, is required to
file reports 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 and other matters, the principal
holders of the Company's securities and any material interest of such persons in
transactions with the Company is disclosed in the Company's proxy statement
dated April 15, 1998, and filed with the Commission. Such information should be
available for inspection at the public reference facilities of the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and
at the regional offices of the Commission located at Seven World Trade Center,
Suite 1300, New York, NY 10048 and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, IL 60661. Copies of such information should be obtainable
from the Public Reference Section of the Commission upon payment of prescribed
14
<PAGE>
fees. Such material should also be available for inspection at the offices of
Nasdaq Operations, 1735 K Street, N.W., Washington, D.C. 20006. The Commission
also maintains a worldwide web site at http://www.sec.gov which contains
reports, proxy and information statements and other information about companies,
including the Company, that file electronically.
Except as otherwise stated in this Offer to Purchase, the information
concerning the Company contained herein has been taken from or based upon
publicly available documents on file with the Commission and other publicly
available information. Although the Purchaser does not have any knowledge that
any such information is untrue, Purchaser takes no responsibility for the
accuracy or completeness of such information or for any failure by the Company
to disclose events that may have occurred and may affect the significance or
accuracy of any such information.
10. Certain Information Concerning the Purchaser
--------------------------------------------
Purchaser, a Delaware limited liability company, was formed on March
18, 1999 for the purpose of consummating the Offer. The Purchaser is
wholly-owned limited liability company of the Paulson Ranch, Ltd.. The general
partner of the Paulson Ranch is Paulson Ranch Management, L.L.C., a Texas
limited liability company. The members of Paulson Ranch Management, L.L.C. are
Mr. Bernard A. Paulson and his wife. Mr. Paulson is a director and the acting
Chief Executive Officer of the Company. Over the past two years, Mr. Paulson has
acquired 42,000 shares of the Company's common stock. Neither the Purchaser nor
to the Purchaser's knowledge any of the members, executive officers or
affiliates of the Purchaser, nor any associates of the foregoing has effected
any transaction in any class of the Company's securities during the sixty days
prior to the date hereof.
11. Source and Amount of Funds
--------------------------
The total amount of funds required by the Purchaser to consummate the
Offer is expected to be approximately $2,625,000 which amount includes related
fees and expenses. Such amount will be funded by a capital contribution from
Paulson Ranch. Paulson Ranch has net assets in excess of $5 million and net
liquid assets in excess of $3 million. For more information on the Purchaser,
Paulson Ranch and Mr. Paulson, see "Certain Information Concerning the
Purchaser" and Schedule I.
In addition, Paulson Ranch has obtained a commitment letter, the
proceeds at which may be used to purchase Shares in the Offering. Pursuant to
the commitment letter, the lender has agreed to make available to the Purchaser
a credit facility consisting of a term loan in an amount not to exceed $2.5
million, subject to the execution of definitive loan document in form and
substance satisfactory to the lender. While the Offering is not conditioned upon
the Purchaser obtaining such financing, the Purchaser may draw funds from such
credit facility to purchase Shares in the Offering. There can be no assurance
that the Purchaser will be able to enter into such credit facility or obtain
funds from another source.
15
<PAGE>
12. Contacts and Transactions with the Company; Background of the Offer
-------------------------------------------------------------------
Since January 1, 1996, Mr. Paulson has had the following discussions
with the Company and its affiliates concerning matters related to the Offering.
On September 14, 1998, a representative of one of the largest
shareholders of the Company indicated to Mr. Paulson its desire to reduce its
investment in the Company.
On February 26, 1999, Mr. Paulson had further discussions with the same
person about the possibility of Mr. Paulson acquiring some or all the Shares
held by such shareholder.
At a meeting of the Company's Board of Directors on March 2, 1999, Mr.
Paulson informed the Board that he was considering increasing his investment in
Company and that he was exploring the possibility of making the Offer.
After that Board meeting, Mr. Paulson and the representative of such
large shareholder had several discussions concerning the possibility of Mr.
Paulson acquiring some or all of the Shares held by such shareholder. No
agreements or understandings were reached with such large shareholder concerning
Mr. Paulson purchasing any of such Shares. There were no further discussions
between Mr. Paulson and such representative or shareholder after March 8, 1999.
On March 23, 1999, the Purchaser commenced the Offer.
Other arrangements. Except as described in this Offer to Purchase
-------------------
(including Schedule I hereto), neither the Purchaser nor, to the best knowledge
of the Purchaser, any of the members, executive officers, principals or
affiliates or associates of the Purchaser, beneficially owns any equity security
of the Company, and none of the Purchaser nor, to the best knowledge of the
Purchaser, any of the other persons referred to above, or any of the respective
principals, affiliates or associates of the foregoing, has effected any
transaction in any equity security of the Company during the past 60 days.
Except as described in this Offer to Purchase, as of the date hereof
(a) there have not been any contacts, transactions or negotiations between the
Purchaser or, to the best knowledge of the Purchaser, any of the persons listed
in Schedule I hereto, on the one hand, and the Company or any of its directors,
officers or affiliates, on the other hand, that are required to be disclosed
pursuant to the rules and regulations of the Commission and (b) none of the
Purchaser nor, to the best knowledge of the Purchaser, any of the persons listed
in Schedule I hereto has any contract, arrangement, understanding or
relationship with any person with respect to any securities of the Company.
13. Certain Conditions of the Offer
-------------------------------
Notwithstanding any other term of the Offer, the Purchaser shall not be
required to accept for payment, or, subject to any applicable rules and
regulations of the Commission, including Rule 14e-1(c) under the Exchange Act
(relating to the Purchaser's obligation to pay for or return tendered shares
after the termination or withdrawal of the Offer), to pay for any Shares
tendered pursuant to the Offer, and may amend or terminate the Offer or postpone
16
<PAGE>
the acceptance for payment, the purchase of, and/or (subject to any such
applicable rules and regulations of the Commission) payment for, Shares
tendered, if at any time at or before the time of payment for any such Shares
(whether or not any Shares shall theretofore have been accepted for payment or
paid pursuant to the Offer) any of the following conditions exists:
(a) there shall have been any action or proceeding brought by any
governmental authority before any federal or state court, or any order or
preliminary or permanent injunction entered in any action or proceeding before
any federal or state court or governmental, administrative or regulatory
authority or agency, located or having jurisdiction within the United States or
any country or economic region in which the Company, directly or indirectly, has
material assets or operations, or any other action taken, proposed or
threatened, or statute, rule, regulation, legislation, interpretation, judgment
or order proposed, sought, enacted, entered, promulgated, amended or issued that
is applicable to Purchaser, the Company or any subsidiary or affiliate of
Purchaser or the Company or the Offer, by any legislative body, court,
government or governmental, administrative or regulatory authority or agency
located or having jurisdiction within the United States or any country or
economic region in which the Company, directly or indirectly, has material
assets or operations, which could reasonably be expected to have the effect of:
(i) making illegal, or otherwise restraining or prohibiting or making materially
more costly, the making of the Offer, the acceptance for payment of, payment
for, or ownership, directly or indirectly, of some of or all the Shares by
Purchaser, (ii) prohibiting or materially limiting the ownership or operation by
the Company or any of its subsidiaries, or (iii) imposing or confirming material
limitations on the ability of Purchaser effectively to acquire or hold or to
exercise full rights of ownership of Shares including, without limitation, the
right to vote any Shares acquired or owned by Purchaser on all matters properly
presented to the stockholders of the Company, (iv) requiring divestiture by
Purchaser, directly or indirectly, of any Shares; or (v) which could reasonably
be expected to materially adversely affect the business, financial condition or
results of operations of the Company and its subsidiaries (if any) taken as a
whole or the value of the Shares or of the Offer to Purchaser; or
(b) there shall have occurred (i) the delisting of the Company's Common
Stock from the Nasdaq Stock Market, (ii) any general suspension of trading in,
or limitation on prices for, securities on any national securities exchange or
in the over-the-counter market in the United States, (iii) a decline of at least
25% in either the Dow Jones Average of Industrial Stocks or the Standard &
Poor's 500 index from that existing at the close of business on the date hereof,
(iv) any material adverse change or any condition, event or development
involving a prospective material adverse change in United States or other
material international currency exchange rates or a suspension of, or limitation
on, the markets therefor, (v) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States, (vi) any
limitation (whether or not mandatory) by any government or governmental,
administrative or regulatory authority or agency, domestic or foreign on, or any
other event that materially adversely affects, the extension of credit by banks
or other lending institutions, or (vii) a commencement of a war or armed
hostilities or other national or international calamity directly or indirectly
involving the United States which would reasonably be expected to have a
material adverse effect on the Company or materially adversely affect (or
materially delay) the consummation of the Offer; or
17
<PAGE>
(c) any change (or any condition, event or development involving a
prospective change) shall have occurred or been threatened in the business,
properties, liabilities, capitalization, stockholders' equity, financial
condition, operations, licenses or franchises, results of operations or
prospects of the Company or any of its subsidiaries or affiliates, which, in the
sole judgment of the Purchaser, is or may be materially adverse to the Company
or any of its subsidiaries or affiliates, or the Purchaser shall have become
aware of any facts which, in the sole judgment of the Purchaser, has or may have
material significance with respect to the value of the Company or any of its
subsidiaries or affiliates or the value of the Common Stock to the Purchaser; or
(d) the Company or any of its subsidiaries shall have, on or after
January 1, 1999, (i) split, combined or otherwise changed, or authorized or
proposed the split, combination or other change of the Common Stock or its
capitalization, (ii) purchased, acquired or otherwise caused a reduction in the
number of, or authorized or proposed the purchase, acquisition or other
reduction in the number of, any presently outstanding Common Stock or other
securities, (iii) issued, distributed, sold or pledged, or authorized, proposed
or announced the issuance, distribution, sale or pledge of, (A) additional
shares of any other class of capital stock, other voting securities, debt
securities or any securities convertible into Common Stock, or rights, warrants
or options, conditional or otherwise, to acquire any of the foregoing, other
than Common Stock reserved for issuance as of January 1, 1999 under options in
accordance with their terms as publicly disclosed as of January 1, 1999, or (B)
any other securities in respect of, in lieu of, or in substitution for Common
Stock outstanding on January 1, 1999, (iv) declared, paid or proposed to declare
or pay any dividend or distribution on any Common Stock or issued, authorized,
recommended or proposed the issuance of any other distribution in respect of the
Common Stock, whether payable in cash, securities or other property, (v) altered
or proposed to alter any material term of any outstanding securities, (vi)
incurred any debt other than in the ordinary course of business and consistent
with past practice or any debt containing burdensome covenants, (vii)
authorized, recommended, proposed, entered into, or announced its intention to
enter into or effect any merger, consolidation, liquidation, dissolution,
business combination, acquisition of assets or securities, disposition of assets
or securities, release or relinquishment of any material contractual or other
right of the Company or any of its subsidiaries or any agreement contemplating
any of the foregoing or any comparable events not in the ordinary course of
business, (viii) authorized, recommended, proposed or entered into, or announced
its intention to authorize, recommend, propose or enter into, any transaction
which in the Purchaser's sole opinion could adversely affect either the value of
the Company or any of its subsidiaries or the value of the Common Stock, (ix)
entered into any employment, severance or similar agreement, arrangement or plan
with any of its employees other than in the ordinary course of business and
consistent with past practice or entered into or amended any agreements,
arrangements or plans so as to provide for increased benefits to the
employees-as a result of or in connection with the transactions contemplated by
the Offer or any other change in control of the Company, (x) except as may be
required by law, taken any action to terminate or amend any employee benefit
plan (as defined in Section 3(2) of the Employee Retirement Income Security Act
of 1974, as amended) of the Company or any of its subsidiaries, or the Purchaser
shall have become aware of any such action which was not previously disclosed in
publicly available filings, (xi) proposed, adopted or authorized any amendment
to the Certificate of Incorporation or the By-laws of the Company, or prepared
18
<PAGE>
adopted or authorized a shareholder rights plan or "poison pill," or the
Purchaser shall become aware that the Company shall have proposed or adopted any
such amendment or shareholder rights plan or "poison pill" which shall not have
been previously disclosed, or (xii) agreed in writing or otherwise to take any
of the foregoing actions; or
(e) the Purchaser shall become aware (1) that any material contractual
right of the Company or any of its subsidiaries or affiliates shall be impaired
or otherwise adversely affected or that any material amount of indebtedness of
the Company or any of its subsidiaries shall become accelerated or otherwise
become due prior to its stated due date, in either case with or without notice
or the lapse of time or both, as a result of the transactions contemplated by
the Offer, or (ii) of any covenant, term or condition in any of the Company's or
any of its subsidiaries' instruments or agreements that are or may be materially
adverse to the value of the Common Stock in the hands of the Purchaser
(including, but not limited to, any event of default that may ensue as a result
of the consummation of the Offer, or any other business combination, or the
acquisition of control of the Company); or
(f) a tender or exchange offer for any Common Stock shall have been
commenced or publicly proposed to be made by another person (including the
Company or any of its subsidiaries or affiliates), or it shall have been
publicly disclosed or the Purchaser shall have otherwise learned that (i) any
person, entity (including the Company or its subsidiaries or affiliates) or
"group" (as defined in Section 13(d)(3) of the Exchange Act) shall have acquired
or proposed or be attempting to acquire beneficial ownership of more than five
percent of any class or series of capital stock of the Company (including the
Common Stock), or shall have been granted any option, warrant or right,
conditional or otherwise, to acquire beneficial ownership of more than five
percent of any class or series of capital stock of the Company (including the
Common Stock), other than acquisitions for bona fide arbitrage purposes and
other than acquisitions by persons or groups who have publicly disclosed such
ownership in a Schedule 13D or 13G (or amendments thereto) on file with the
Commission on or prior to January 1, 1999, (ii) any such person, entity or group
which prior to January 1, 1999 has publicly disclosed any such ownership shall
have acquired or proposed to acquire additional shares constituting more than
one percent of any class or series of capital stock of the Company (including
the Common Stock), or shall have been granted any option, warrant or right,
conditional or otherwise, to acquire more than one percent of any class or
series of capital stock of the Company (including the Common Stock), (iii) any
new group was, or is, formed which beneficially owns more than five percent of
the outstanding shares of any class or series of the capital stock of the
Company (including the Common Stock), (iv) any person, entity or group shall
have entered into a definitive agreement or an agreement in principle or made a
proposal with respect to a tender offer or exchange offer for some portion or
all of the Common Stock or a merger, consolidation or other business combination
with or involving the Company, or (v) any person shall have filed a Notification
and Report Form under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the regulations promulgated thereunder, or made a public
announcement reflecting an intent to acquire the Company or assets or securities
of the Company; which, in the sole. judgment of the Purchaser, in any case, and
regardless of the circumstances (including any action or inaction by the
Purchaser) giving rise to any such condition, makes it inadvisable to proceed
with the Offer or with such acceptance for payment or payment.
19
<PAGE>
The foregoing conditions are for the sole benefit of Purchaser and may
be asserted by Purchaser regardless of the circumstances giving rise to any such
condition or may be waived by Purchaser in whole or in part at any time and from
time to time in its sole discretion. The failure by Purchaser 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. Any determination by the Purchaser
concerning the events in this Section 13 will be final and binding on all
parties.
14. Certain Legal Matters
---------------------
Except as set forth in this Section 14, the Purchaser is not aware of
any filings, approvals or other actions by any domestic or foreign governmental
or administrative agency that would be required prior to the acquisition of
Shares by the Purchaser pursuant to the Offer. Should any such approval or other
action be required, it is the Purchaser's present intention that such additional
approval or action would be sought. While there is no present intent to delay
the purchase of Shares tendered pursuant to the Offer pending receipt of any
such additional approval or the taking of any such action, there can be no
assurance that any such additional approval or action, if needed, would be
obtained without substantial conditions or that adverse consequences might not
result to the Company's business, or that certain parts of the Company's
business might not have to be disposed of or held separate or other substantial
conditions complied with in order to obtain such approval or action, any of
which could cause the Purchaser to elect to terminate the Offer without
purchasing Shares thereunder. The Purchaser's obligation to purchase and pay for
Shares is subject to certain conditions. See Section 13 for certain conditions
to the Offer.
Section 203 of the Delaware General Corporation Law. Section 203 of the
---------------------------------------------------
Delaware General Corporation Law ("DGCL") provides that a Delaware corporation
such as the Company may not engage in any Business Combination (defined to
include a variety of transactions, including a merger) with any Interested
Stockholder (defined generally as any person that, directly or indirectly,
beneficially owns 15% or more of the outstanding voting stock of the
corporation), or any affiliate or an Interested Stockholder, for three years
after the date on which the Interested Stockholder became an Interested
Stockholder. The three-year prohibition on Business Combinations with Interested
Stockholders (the "Business Combination Prohibition") does not apply if certain
conditions, described below, are satisfied. In the event that the purchaser
acquires at least 656,624 Shares in the Offer, Mr. Paulson, not the Purchaser,
would be deemed to be an Interested Stockholder.
The Business Combination Prohibition does not apply to a particular
Business Combination between a corporation and a particular Interested
Stockholder if (i) prior to the date such Interested Stockholder became an
Interested Stockholder, the board of directors of such corporation approves
either the Business Combination or the transaction which resulted in the
stockholder becoming an Interested Stockholder, or (ii) upon consummation of the
transaction which resulted in the stockholder becoming an Interested
Stockholder, the Interested Stockholder owned at least 85% of the voting stock
of the corporation outstanding at the time the transaction commenced, excluding
for purposes of determining the number of shares outstanding those shares owned
20
<PAGE>
by (x) persons who are directors and also officers and (y) employee stock plans
in which employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or exchange
offer, or (iii) on or subsequent to the date the stockholder becomes an
Interested Stockholder, the Business Combination is approved by the board of
directors of such corporation and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66-2/3% of the outstanding voting stock which is not owned by the Interested
Stockholder.
The foregoing summary of Section 203 of the DGCL does not purport to be
complete and is qualified in its entirety by reference to the provisions of
Section 203 of the DGCL.
Upon consummation of the Offer, if the Purchaser acquires all the
Shares in the Offer, Mr. Paulson will beneficiarlly own approximately 21.5% of
the Shares outstanding based on the number of Shares outstanding as of February
9, 1999. Accordingly, upon consummation of the Offer, Mr. Paulson may be subject
to the Business Combination Prohibition. The Purchaser may ask the Company to
adopt a resolution approving the Offer prior to the consummation of the Offer
for purposes of Section 203. There can be no assurance that the Company's Board
would adopt such a resolution.
Other State Takeover Laws. A number of states throughout the United
---------------------------
States have enacted takeover statutes that purport, in varying degrees, to be
applicable to attempts to acquire securities of corporations that are
incorporated or have assets, stockholders, executive offices or places of
business in such states. In Edgar v. MITE Corp., the Supreme Court of the United
-------------------
States held that the Illinois Business Takeover Act, which involved state
securities laws that made the takeover of certain corporations more difficult,
imposed a substantial burden on interstate commerce and therefore was
unconstitutional. In CTS Corp. v. Dynamics Corp. of America, however, the
-----------------------------
Supreme Court of the United States held that a state may, as a matter of
corporate law and, in particular, those laws concerning corporate governance,
constitutionally disqualify a potential acquirer from voting on the affairs of a
target corporation without prior approval of the remaining stockholders,
provided that such laws were applicable only under certain conditions.
Subsequently, a number of Federal courts ruled that various state takeover
statutes were unconstitutional insofar as they apply to corporations
incorporated outside the state of enactment.
The Purchaser does not believe that any other state takeover statutes
purport to apply to the Offer. The Purchaser has not currently complied with any
state takeover statute or regulation. The Purchaser reserves the right to
challenge the applicability or validity of any state law purportedly applicable
to the Offer and nothing in this Offer to Purchase or any action taken in
connection with the Offer is intended as a waiver of such right. If it is
asserted that any state takeover statute is applicable to the Offer and an
appropriate court does not determine that it is inapplicable or invalid as
applied to the Offer, the Purchaser might be required to file certain
information with, or to receive approvals from, the relevant state authorities,
and the Purchaser might be unable to accept for payment or pay for Shares
tendered pursuant to the Offer, or be delayed in consummating the Offer. In such
case, the Purchaser may not be obligated to accept payment or pay for any Shares
tendered pursuant to the Offer.
21
<PAGE>
15. Fees and Expenses
-----------------
The Purchaser has retained Founders Equity Group, Inc. to act as the
Information Agent and to serve as the Depositary in connection with the Offer.
The Information Agent and the Depositary will receive reasonable and customary
compensation for their services, and will be reimbursed for certain reasonable
out-of-pocket expenses and be indemnified against certain liabilities and
expenses in connection therewith, including certain liabilities and expenses
under the Federal securities laws.
The Purchaser will not pay any fees or commissions to any broker or
dealer or other person (other than the customary compensation payable to the
Information Agent and the Depositary as set forth above) in connection with the
solicitation of tenders of Shares pursuant to the Offer. Brokers, dealers, banks
and trust companies will be reimbursed by the Purchaser upon request for
customary mailing and handling expenses incurred by them in forwarding material
to their customers.
16. Miscellaneous
-------------
The Offer is not being made to (nor will tenders be accepted from or on
behalf of holders of Shares in any jurisdiction in which the making of the Offer
or the acceptance thereof would not be in compliance with the laws of such
jurisdiction. The Purchaser is not aware of any jurisdiction in which the making
of the Offer or the acceptance thereof would not be in compliance with the laws
of such jurisdiction. To the extent the Purchaser becomes aware of any state law
that would limit the class of offerees in the Offer, the Purchaser may amend the
Offer and, depending on the timing of such amendment, if any, may extend the
Offer to provide adequate dissemination of such information to holders of Shares
prior to the expiration of the Offer. In any jurisdiction the securities, blue
sky or other laws of which require the Offer to be made by a licensed broker or
dealer, the Offer shall be deemed to be made on behalf of the Purchaser 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 TO MAKE ANY
REPRESENTATION ON BEHALF OF THE PURCHASER NOT CONTAINED HEREIN OR IN
THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
The Purchaser has filed with the Commission the Schedule 14D-1 pursuant
to Rule 14d-3 under the Exchange Act, together with exhibits, furnishing certain
additional information with respect to the Offer, and may file amendments
thereto.
PAULSON ACQUISITION LLC
March 23, 1999
22
<PAGE>
SCHEDULE I
PRINCIPALS OF THE PURCHASER AND PAULSON RANCH
Purchaser, a Delaware limited liability company, was formed on March
18, 1999 for the purpose of consummating the Offer. The Purchaser is
wholly-owned limited liability company of the Paulson Ranch, Ltd., a Texas
Limited Partnership. The general partner of the Paulson Ranch, Ltd. is Paulson
Ranch Management, L.L.C., a Texas limited liability company. The members of
Paulson Ranch Management, L.L.C. are Mr. Bernard A. Paulson and his wife. Mr.
Paulson is a director and the acting Chief Executive Officer of the Company.
Over the past two years, Mr. Paulson has acquired 42,000 shares of the Company's
Common Stock. Neither the Purchaser, Paulson Ranch nor Mr. Paulson, nor to their
knowledge any of the members, executive officers, principals, or affiliates or
associates of the foregoing has effected any transaction in any class of the
Company's securities during the sixty days prior to the date hereof.
The name, age, business address, present principal occupation or
employment and five-year employment history of the principal of Purchaser and
Paulson Ranch are set forth below. Unless otherwise indicated, the occupation,
office or position of employment listed opposite the individual's name were held
by such individual during the last five years. The business address of such
individual is c/o Hitox Corporation of America, 722 Burleson Street, Corpus
Christi, Texas 78402. The individual listed below is a citizen of the United
States.
NAME, AGE AND BUSINESS ADDRESS PRESENT PRINCIPAL OCCUPATION
OF EMPLOYMENT AND FIVE-YEAR
EMPLOYMENT HISTORY
Bernard A. Paulson, Mr. Paulson has been a director of the
Hitox Corporation of America Company since March, 1992 and acting
722 Burleson Street Chief Executive Officer of the Company
Corpus Christi, Texas 78402 since October, 1997. Mr. Paulson is also
a director of Orion Refining Corp. and is
Chairman of the Board of Directors of The
Automation Group, Inc. From September,
1996 to January, 1999, Mr. Paulson was
Chairman of the Board of Directors and
Chief Executive Officer of The Inspection
Group, Inc.
23
<PAGE>
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal, certificates for Shares and any other
required documents should be sent or delivered by each stockholder of the
Company or such stockholder's broker, dealer, commercial bank, trust company or
other nominee to the Depositary at one of its addresses set forth below.
The Depositary for the Offer is:
Founders Equity Group, Inc.
By Mail, Hand or Overnight Delivery: By Facsimile Transmission:
Tender & Exchange Department (214) 871-0088
2602 McKinney Avenue
Suite 220 Confirm Receipt of Facsimile by Telephone
Dallas, Texas 75204 (888) 858-7303
Questions and requests for assistance or for additional copies of this Offer
to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may
be directed to the Information Agent, the telephone numbers and location listed
below. You may also contact your broker, dealer, commercial bank, trust company
or other nominee for assistance concerning the Offer.
The Information Agent for the Offer is:
Founders Equity Group, Inc.
2602 McKinney Avenue
Suite 220
Dallas, Texas 75204
1-(888) 858-7303
or
Call Collect (214) 871-3000
24
(a)(2)
Letter of Transmittal
To Tender Shares of Common Stock
of
HITOX CORPORATION OF AMERICA
Pursuant to the Offer to Purchase
Dated March 23, 1999
of
PAULSON ACQUISITION LLC
<TABLE>
<CAPTION>
____________________________________________________________________________________________________________________________________
THIS OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, 0N MONDAY, APRIL 19, 1999 UNLESS THE OFFER IS EXTENDED.
____________________________________________________________________________________________________________________________________
The Depositary for the Offer is:
Founders Equity Group, Inc.
<S> <C> <C>
By Mail: Facsimile Transmission: By Hand or Overnight Courier:
Tender & Exchange Department (for Eligible Institutions Only) Tender & Exchange Department
2602 McKinney Avenue (214) 871-0088 2602 McKinney Avenue
Suite 220 Suite 220
Dallas, Texas 75204 For Confirmation Telephone: Dallas, Texas 75204
(888) 858-7303
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN THIS LETTER
OF TRANS- MITTAL WHERE INDICATED BELOW AND COMPLETE THE SUBSTITUTE FORM W-
9 PROVIDED BELOW.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF
TRANASMITTAL SHOULD BE READ CAREFULLY BEFORE THIS
LETTER OF TRANSMITTAL IS COMPLETED.
____________________________________________________________________________________________________________________________________
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(Please Fill in, if Blank, Exactly as Name(s) Appear(s) on Certificate(s))
____________________________________________________________________________________________________________________________________
____________________________________________________________________________________________________________________________________
DESCRIPTION OF SHARES TENDERED
Certificate(s) Tendered
(Attach Additional List if Necessary)
____________________________________________________________________________________________________________________________________
Total Number of Shares
Certificate Numbers(s)* Represented by Certificate(s)** Number of Shares Tendered**
____________________________________________________________________________________________________________________________________
Total Shares....................................................................
____________________________________________________________________________________________________________________________________
* Need not be completed by stockholders tendering by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Share evidenced by any certificates delivered to the
Depositary are being tendered. See Instruction 4.
</TABLE>
<PAGE>
This Letter of Transmittal is to be completed by stockholders of Hitox
Corporation of America (the "Company") if certificates representing Shares (as
defined below) ("Share Certificates") are to be forwarded herewith or, unless an
Agent's Message (as defined in the Offer to Purchase (as defined below) is
utilized, if delivery of Shares is to be made by book-entry transfer to the
Depositary's account at The Depository Trust Company (the "Book-Entry Transfer")
pursuant to the procedures set forth in Section 3 of the Offer to Purchase.
Stockholders whose 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 in the Offer
to Purchase), or who cannot comply with the book-entry transfer procedures on a
timely basis, may nevertheless tender their Shares pursuant to the guaranteed
delivery procedure set forth in Section 3 of the Offer to Purchase. See
Instruction 2. Delivery of documents to the Book-Entry Transfer Facility in
accordance with such Book-Entry Transfer Facility's procedures does not
constitute deliver to the Depositary.
[ ] 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___________________________________________________
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 Deliver __________________________________
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
Ladies and Gentlemen:
The undersigned hereby tenders to Paulson Acquisition LLC, a Delaware
limited liability company ("the Purchaser") the above-described shares of Common
Stock, par value $.025 per share (the "Shares"), of Hitox Corporation of
America, a Delaware corporation (the "Company"), pursuant to Purchaser's offer
to purchase any and up to 1,000,000 Shares at a purchase price of $2.50 per
Share (the "Offer Price"), net to the seller in cash, without interest thereon,
upon terms and subject to the conditions set forth in the Offer to Purchase,
dated March 23, 1999 (the "Offer to Purchase"), receipt of which is hereby
acknowledged, and in this Letter of Transmittal (which, together with the Offer
to Purchase, as each may be amended and supplemented from time to time,
constitute the "Offer").
<PAGE>
Subject to, and effective upon, acceptance for payment of the Shares
tendered herewith, the undersigned hereby sells, assigns and transfers to or
upon the order of the Purchaser all right, title and interest in and to all the
Shares that are being tendered hereby and any and all other Shares or other
securities issued or issuable in respect thereof on or after March 23, 1999 (a
"Distribution") and appoints the Depositary the true and lawful agent and
attorney-in-fact of the undersigned with respect to such Shares (and any
Distributions), with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest), to (a) deliver
Shares Certificates (and any Distributions), or transfer ownership of such
Shares (and any Distributions) on the account books maintained by the Book-Entry
Transfer Facility, together, in any such case, with all accompanying evidences
of transfer and authenticity, to or upon the order of the Purchaser, (b) present
such Shares (and any Distributions) for transfer on the books of the Company,
and (c) receive all benefits and otherwise exercise all rights of beneficial
ownership of such Shares (and any Distributions), all in accordance with the
terms and subject to the conditions of the Offer.
The undersigned hereby irrevocably appoints designees of the Purchaser
as the attorneys and proxies of the undersigned, each with full power of
substitution, to exercise all voting and other rights of the undersigned in such
manner as each such attorney and proxy or his substitute shall in his sole
judgment deem proper, with respect to all of the Shares tendered hereby which
have been accepted for payment by the Purchaser prior to the time of any vote or
other action (and any Distributions), at any meeting of stockholders of the
Company (whether annual or special and whether or not an adjourned meeting) or
otherwise. This power of attorney and proxy are irrevocable, are coupled with an
interest in the Shares tendered hereby, and are granted in consideration of, and
effective upon, the acceptance for payment of such Shares by the Purchaser in
accordance with the terms of the Offer. Such acceptance for payment shall revoke
any other proxy or written consent granted by the undersigned at any time with
respect to such Shares (and any Distributions), and no subsequent proxies will
be given or written consents executed by the undersigned (and if given or
executed, will not be deemed effective).
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 any Distributions), the tender of the Shares tendered
hereby complies with Rule 14e-4 of the Securities and Exchange Act of 1934, as
amended, and that when the same are accepted for payment by the Purchaser, the
Purchaser will acquire good and unencumbered title thereto, free and clear of
all liens, restrictions, charges and encumbrances and not subject to any adverse
claims. The undersigned will, upon request, execute and deliver any additional
documents deemed by the Depositary or the Purchaser to be necessary or desirable
to complete the sale, assignment and transfer of the Shares tendered hereby (and
any Distributions). All authority herein conferred or agreed to be conferred
shall survive the death or incapacity of the undersigned, and any obligation of
the undersigned hereunder shall be binding upon the heirs, personal
representatives, successors and assigns of the undersigned. Except as stated in
the Offer, this tender is irrevocable.
The undersigned understands that if more than 1,000,000 Shares are
validly tendered prior to the expiration of the Offer and not validly withdrawn
in accordance with Section 3 of the Offer to Purchase, Shares so tendered and
not validly withdrawn shall be accepted for payment on a pro rata basis, with
adjustments to avoid purchases of fractional Shares, based upon the number of
Shares validly tendered and not withdrawn by the Expiration Date.
<PAGE>
The undersigned understands that the tender of Shares pursuant to any
one of the procedures described in Section 3 of the Offer to Purchase and in the
instructions hereto will constitute an agreement between the undersigned and the
Purchaser upon the terms and subject to the conditions of the Offer. The
undersigned acknowledges that no interest will be paid on the Offer Price for
tendered Shares regardless of any extension of the Offer or any delay in making
such payment.
Unless otherwise indicated in the box entitled "Special Payment
Instructions," please issue the check for the purchase price of any Shares
purchased, and return any Share Certificates evidencing any Shares not tendered
or not purchased, in the name (s) of the undersigned (and, in the case of Shares
tendered by book-entry transfer, by credit to the account at the Book-Entry
Transfer Facility. Similarly, unless otherwise indicated in the box entitled
"Special Delivery Instructions," please mail the check for the purchase price of
any Shares purchased and return any Share Certificates evidencing any Shares not
tendered or not purchased (and accompanying documents, as appropriate) to the
undersigned at the address shown below the undersigned's signature(s). 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 any Shares purchased and return any Share Certificates
evidencing any Shares not tendered or not purchased in the name(s) of, and mail
said check and Share to, the person(s) so indicated. The undersigned
acknowledges that the Purchaser has no obligation, pursuant to the "Special
Payment Instructions", to transfer any Shares from the name of the registered
holder(s) thereof if the Purchaser does not accept for payment any of the Shares
so tendered.
<TABLE>
<CAPTION>
<S> <C>
____________________________________________________________________________________________________________________________________
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 1,5,6 and 7) (See Instructions 1,5,6 and 7)
To be completed ONLY if the check for the To be completed ONLY if the check for the
purchase price of Shares purchased or certificates purchase price of Shares purchased or certificates
evidencing Shares not tendered or not purchased are evidencing Shares not tendered or not purchased are
to be issued issued in the name of someone other to be mailed to someone other than the undersigned,
than the undersigned, or if Shares tendered hereby or to the undersigned at an address other than that
and delivered by book-entry transfer which are not shown under the undersigned's signature.
purchased are to be returned by credit to an account
at the Book-Entry Transfer Facility other than that Issue: [ ] check [ ] Share Certificate(s) to:
designated above. Name:______________________________________________
(Please Print)
Issue: [ ] check [ ] Share Certificate(s) to: Address:___________________________________________
Name:______________________________________________ ___________________________________________________
(Please Print) (Zip Code)
Address:___________________________________________ ___________________________________________________
___________________________________________________ (Taxpayer Identification or Social Security Number)
(Zip Code) (See Substitute Form W-9 below)
___________________________________________________
(Taxpayer Identification or Social Security Number)
(See Substitute Form W-9 on reverse side)
[ ] Credit Shares delivered by book-entry transfer
and not purchased to the account set forth
below:
Account Number ___________________________________
<PAGE>
IMPORTANT
STOCKHOLDERS: SIGN HERE
(Please complete Substitute Form W-9)
====================================================================================================================================
(Signature(s) of Holder(s))
Dated: ____________________, 1999
(Must be signed by the registered holder(s) exactly as such holder(s) name(s) appear(s) on the Share Certificate(s) or on a
security position listing or by a person(s) authorized to become the registered holder(s) of such Share Certificate(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 provide the following information
and see Instruction 5.)
Name(s): __________________________________________________________________________________________________________________________
(Please Print)
Capacity (full title): ____________________________________________________________________________________________________________
Address: __________________________________________________________________________________________________________________________
(Include Zip Code)
Area Code and Telephone No.: ______________________________________________________________________________________________________
Taxpayer Identification or Social Security No.:____________________________________________________________________________________
(See Substitute Form W-9 below)
GUARANTEE OF SIGNATURE(S)
(See Instructions 1 and 5)
Authorized Signature: _____________________________________________________________________________________________________________
Name: _____________________________________________________________________________________________________________________________
(Please Type or Print)
Title: ____________________________________________________________________________________________________________________________
Name of Firm: _____________________________________________________________________________________________________________________
Address: __________________________________________________________________________________________________________________________
(Include Zip Code)
Area Code and Telephone No.: ______________________________________________________________________________________________________
Dated: _________________________, 1999
</TABLE>
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Offer
1. Guarantee of Signatures. Except as otherwise provided below, signatures
on all Letters of Transmittal must be guaranteed by a firm that is a
bank, broker, dealer, credit union, savings association or other entity
which is a member in good standing of the Securities Transfer Agents
Medallion Program or by any other bank, broker, dealer, credit union,
savings association or other entity which is an "eligible guarantor
institution," as such term is defined in Rule 17Ad-15 under the
<PAGE>
Securities Exchange Act of 1934, as amended (each of the foregoing
constituting an "Eligible Institution"), unless the Shares tendered
thereby are tendered (i) by a registered holder of Shares who has not
completed either the box labeled "Special Payment Instructions" or the
box labeled "Special Delivery Instructions" on this Letter of
Transmittal or (ii) for the account of an Eligible Institution. See
Instruction 5. If Share Certificates are registered in the name of a
person or persons other than the signer of this Letter of Transmittal,
or if payment is to be made or delivered to, or certificates evidencing
unpurchased Shares are to be issued or returned to, a person other than
the registered owner or owners, then the tendered Share Certificates
must be endorsed or accompanied by duly executed stock powers, in
either case signed exactly as the name or names of the registered owner
or owners appear on the Share Certificates, with the signatures on the
Share Certificates or stock powers guaranteed by an Eligible
Institution as provided herein. See Instruction 5.
2. Delivery of Letter of Transmittal and Share Certificates. This Letter
of Transmittal is to be used if Share Certificates are to be forwarded
herewith or, unless an Agent's Message (as defined in the Offer to
Purchase) is utilized, if the delivery of Shares is to be made by
book-entry transfer pursuant to the procedures set forth in Section 3
of the Offer to Purchase. Certificates for all physically delivered
Shares, or a confirmation of a book-entry transfer into the
Depositary's account at the Book-Entry Transfer Facility of all Shares
delivered electronically, as well as aproperly completed and duly
executed Letter of Transmittal (or a manually signed facsimile thereof)
and any other documents required by this Letter of Transmittal, or an
Agent's Message in the case of a book-entry transfer, must be received
by the Depositary at one of its addresses set forth on the front page
of this Letter of Transmittal by the Expiration Date (as defined in the
Offer to Purchase). Stockholders who cannot deliver their Share
Certificates and all other required documents to the Depositary by the
Expiration Date must tender their Shares pursuant to the guaranteed
delivery procedure set forth in Section 3 of the Offer to Purchase.
Pursuant to such procedure: (a) such tender must be made by or through
an Eligible Institution; (b) a properly completed and duly executed
Notice of Guaranteed Delivery, substantially in the form provided by
Purchaser, must be received by the Depositary prior to the Expiration
Date; and (c) Share Certificates for all tendered Shares, in proper
form for tender, or a confirmation of a book-entry transfer into the
Depositary's account at the Book-Entry Transfer Facility of all Shares
delivered electronically, as well as a properly completed and duly
executed Letter of Transmittal (or a manually signed facsimile
thereof), and any other documents required by this Letter of
Transmittal, must be received by the Depositary within three Nasdaq
Stock Market trading days after the date of execution of such Notice of
Guaranteed Delivery, all as provided in Section 3 of the Offer to
Purchase.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, SHARE
CERTIFICATES AND ALL OTHER REQURIED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY
BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING
SHAREHOLDER, AND 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. By
execution of this Letter of Transmittal (or a manually signed facsimile
thereof), all tendering stockholders waive any right to receive any notice of
the acceptance of their Shares for payment.
<PAGE>
3. Inadequate Space. If the space provided herein is inadequate, the Share
Certificate numbers and/or the number of Shares should be listed on a
separate schedule attached hereto.
4. Partial Tenders (not applicable to stockholders who tender by
book-entry transfer). If fewer than all of the Shares represented by
any Share Certificate delivered to the Depositary are to be tendered,
fill in the number of Shares which are to be tendered in the box
entitled "Number of Shares Tendered." In such case, a new Share
Certificate for the remainder of the Shares represented by the old
Share Certificate will be sent to the person(s) signing this Letter of
Transmittal, unless otherwise provided in the box entitled "Special
Delivery Instructions," as promptly as practicable following the
expiration or termination of the Offer. All Shares represented 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 Certificate(s) without
alteration, enlargement or any other change whatsoever.
If any of the Shares tendered hereby are 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 different names
on different Share Certificates, it will be necessary to complete, sign and
submit as many separate Letters of Transmittal as there are different
registrations of Share Certificates.
If this Letter of Transmittal is signed by the registered holder(s) of
the Shares tendered hereby, no endorsements of Share Certificate(s) or separate
stock powers are required, unless payment of the purchase price is to be made,
or Share Certificate(s) evidencing Shares not tendered or not purchased are to
be returned, in the name of any person other than the registered holder(s).
Signatures on any such Share Certificate(s) or 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). Signature(s) on any
such Share Certificate(s) or 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 Purchaser of the authority of such person so to act must be
submitted.
<PAGE>
6. Stock Transfer Taxes. Purchaser will pay any 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 is to
be made to, or Share Certificates evidencing Shares not tendered or not
purchased are to be returned in the name of, any person other than the
registered holder(s) of such Shares, then 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 person
will be deducted from the purchase price unless satisfactory evidence
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 Certificate(s) listed in
this Letter of Transmittal.
7. Special Payment and Delivery Instructions. If the check for the
purchase price of any Shares purchased is to be issued, or any Share
Certificate(s) evidencing Shares not tendered or not purchased are to
be returned, in the name of a person other than the person(s) signing
this Letter of Transmittal or if the check or any Share Certificate(s)
evidencing Shares not tendered or not purchased are to be mailed to
someone other than the person(s) signing this Letter of Transmittal or
to the person(s) signing this Letter of Transmittal at an address other
than that shown above, the appropriate boxes on this Letter of
Transmittal should be completed. Shareholders tendering Shares by
book-entry transfer may request that Shares not purchased be credited
to such account at any of the Book-Entry Transfer Facilities as such
stockholder may designate in the box entitled "Special Payment
Instructions." If no such instructions are given, any such Shares not
purchased will be returned by crediting the account at the Book-Entry
Transfer Facilities designated above.
8. Substitute Form W-9. The tendering holder of Shares is required to
provide the Depositary with such holder's correct taxpayer
identification number ("TIN") on Substitute Form W-9, which is provided
below, unless an exemption applies. In the case of any holder who has
completed the box entitled "Special Payment Instructions," however, the
correct TIN on Substitute Form W-9 should be provided for the recipient
of the payment pursuant to such instructions. Failure to provide the
information on the Substitute Form W-9 may subject the tendering holder
of Shares to 31% federal income tax backup withholding on the payment
of the purchase price of the Shares.
9. Questions and Requests for Assistance or Additional Copies. Questions
and requests for assistance may be directed to the Information Agent
and Depositary at the address and telephone number set forth on the
back cover of the Offer to Purchase. Additional copies of the Offer to
Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery
and other related materials may be obtained from the Information Agent
or from brokers, dealers, commercial banks and trust companies.
THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE COPY HEREOF
(TOGETHER WITH SHARE CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL
OTHER REQUIRED DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY
THE DEPOSITARY ON OR PRIOR TO THE EXPIRATION DATE (AS DEFINED IN THE OFFER TO
PURCHASE.)
IMPORTANT TAX INFORMATION
Under the federal income tax law, a holder of Shares whose tendered
Shares are accepted for payment is required by law to provide the Depositary (as
payer) with such holder's correct TIN on Substitute Form W-9 Below. The holder
of Shares must also state that (i) such holder has not been notified by the
Internal Revenue Service that such holder 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 holder that such holder is no longer subject
to back withholding. If the Depositary is not provided with the correct TIN,
payments made to such holder may be subject to 31% backup withholding.
<PAGE>
Certain holders of Shares (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.
If backup withholding applies, the Depositary is required to withhold
31% of any payments made to the holder of Shares. Backup withholding is not an
additional tax. Rather, the tax withheld pursuant to backup withholding rules
will be available as a credit against such holder's tax liabilities. If
withholding results in an overpayment of taxes, a refund may be obtained from
the Internal Revenue Service.
What Number to Give the Depositary
If the holder of Shares is an individual, the correct TIN is his or her
social security number. In other cases, the correct TIN may be the 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 holder of Share has not been issued a TIN and has applied for a
number in the near future, the holder should write "Applied For" in the space
provided for the TIN in Part II of the Substitute Form W-9, and sign and date
the Substitute Form W-9. If "Applied For" is written in Part III of the
Substitute Form W-9 and the Depositary is not provided with a TIN within thirty
(30) days, the Depositary may withhold 31% of all payments of the purchase price
to such holder until a TIN is provided to the Depositary.
<PAGE>
<TABLE>
<CAPTION>
____________________________________________________________________________________________________________________________________
PAYER'S NAME: FOUNDERS EQUITY GROUP, INC.
____________________________________________________________________________________________________________________________________
<S> <C> <C>
SUBSTITUTE Part I - Taxpayer Identification
FORM W-9 Number - For all accounts, enter
Department of the Treasury taxpayer identification number in Part III - Social Security Number
Internal Revenue Service the box at right. (For most OR
individuals this is your social Employer Identification Number
Payor's Request for Taxpayer security number. If you do not
Identification No. (TIN) have a number, see Obtaining a __________________________________________
Number in the enclosed
Guidelines.). Certify by signing (If awaiting TIN write "Applied
and dating below. For")
Note: If the account is in more
than one name, see chart in the
enclosed Guidelines to determine
which number to give the payer.
____________________________________________________________________________________________________________________________________
PART II - For Payees exempt from backup withholding, see the enclosed Guidelines
and complete as instructed therein.
____________________________________________________________________________________________________________________________________
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);
and
(2) I am not subject to backup withholding either because (a) 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 (b) the IRS has not 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 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 IRS that you were no longer subject to backup
withholding, do not cross out item (2). (Also see instructions in the enclosed Guidelines.)
____________________________________________________________________________________________________________________________________
SIGNATURE____________________________________________DATE________________________________
NAME_______________________________________________________________________________________
ADDRESS____________________________________________________________________________________
CITY_____________________________STATE______________________________ZIP____________________
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.
</TABLE>
<PAGE>
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU ARE AWAITING (OR
WILL SOON APPLY FOR) A TAXPAYER IDENTIFICATION NUMBER
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 (a) 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 (b)
I intend to mail or deliver an application in the near future. I understand
that, notwithstanding the information I provided in Part III of the Substitute
Form W-9 (and the fact that I have completed this Certificate of Awaiting
Taxpayer Identification Number), if I do not provide a correct taxpayer
identification number to the Depositary within thirty (30) days, 31% of all
reportable payments made to me pursuant to the Offer may be withheld.
___________________________________ _____________________________
Signature Date
The Information Agent and Depositary for the Offer is:
Founders Equity Group, Inc.
2602 McKinney Avenue
Suite 220
Dallas, Texas 75202
(888) 858-7303 (toll free)
(a)(3)
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
OF
HITOX CORPORATION OF AMERICA
TO
PAULSON ACQUISITION LLC
(Not To Be Used For Signature Guarantees)
- --------------------------------------------------------------------------------
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, APRIL 19, 1999, UNLESS THE OFFER IS
EXTENDED.
THE OFFER IS SUBJECT TO CERTAIN CONDITIONS DESCRIBED IN THE OFFER TO
PURCHASE.
- --------------------------------------------------------------------------------
This Notice of Guaranteed Delivery, or one substantially in the form
hereof, must be used to accept the Offer (as defined below) if certificates
("Share Certificates") representing shares of Common Stock, par value $.25 per
share (the "Shares"), of Hitox Corporation of America, a Delaware corporation,
are not immediately available, if the procedure for delivery by book-entry
transfer cannot be completed on a timely basis, or if time will not permit all
required documents to reach Founders Equity Group, Inc., as Depositary (the
"Depositary") prior to the Expiration Date (as defined in Section 1 of the Offer
to Purchase). Such Notice of Guaranteed Delivery may be delivered by hand or
transmitted by mail, overnight delivery or facsimile transmission to the
Depositary. See Section 3 of the Offer to Purchase.
The Depositary for the Offer is:
FOUNDERS EQUITY GROUP, INC.
By Mail, Hand or Overnight Delivery: By Facsimile Transmission:
2602 McKinney Avenue (214) 871-0088
Suite 220
Dallas, Texas 75204 Confirm Receipt of Facsimile by Telephone:
(888) 858-7303
DELIVERY OF THIS LETTER OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN
AS SET FORTH ABOVE OR TRANSMISSION VIA A FACSIMILE NUMBER 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 Letter Of Transmittal.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Paulson Acquisition LLC, a Delaware
limited liability company, upon the terms and subject to the conditions set
forth in the Offer to Purchase dated March 23, 1999 (the "Offer to Purchase")
and the related Letter of Transmittal (which, together with any amendments or
supplements thereto, collectively constitute the "Offer"), receipt of which is
hereby acknowledged Shares pursuant to the guaranteed delivery procedures set
forth in Section 3 of the Offer to Purchase.
Certificate No(s). (if available):________ Name(s) of Record Holder(s):_______
__________________________________________ ___________________________________
__________________________________________ ___________________________________
(Please Type or Print)
[ ] Check here if Shares will be tendered
by Book-entry transfer
Address(es):_______________________
Account Number:__________________________ ___________________________________
Zip Code
Dated:______________________, 1999 Area Code and Tel. No.:____________
Signature(s):______________________
___________________________________
GUARANTEE
(Not To Be Used For Signature Guarantee)
The undersigned, a member firm of a registered national securities
exchange or a member of the National Association of Securities Dealers, Inc. or
a commercial bank or trust company having an office, branch or agency in the
United States, hereby (a) represents that the tender of Shares effected hereby
complies with Rule 14e-4 under the Securities Exchange Act of 1934, as amended
and (b) guarantees delivery to the Depositary, at one of its addresses set forth
above, of either certificates representing the Shares tendered hereby, in proper
form for transfer, or a Book-Entry Confirmation (as defined in Section 3 of the
Offer to Purchase) of a transfer of such Shares, in any case together with a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof), with any required signature guarantees, or an Agent's Message (as
defined in Section 3 of the Offer to Purchase), and any other documents required
by the Letter of Transmittal, within three Nasdaq SmallCap Market trading days
after the date hereof.
_________________________________________ ___________________________________
Name of Firm Authorized Signature
_________________________________________ ___________________________________
Address Title
_________________________________________ ___________________________________
Zip Code
Area Code and Tel. No.:__________________ Dated:____________________, 1999
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE. SHARE CERTIFICATES
SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL
(a)(4)
Founders Equity Group, Inc. 2620 McKinney Avenue
Suite 220
Dallas, Texas
Tel: 214-871-3000
Offer to Purchase for Cash
Up to 1,000,000 Shares of Common Stock
of
HITOX CORPORATION OF AMERICA
at
$2.50 PER SHARE
by
PAULSON ACQUISITION LLC
- --------------------------------------------------------------------------------
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, APRIL 19, 1999, UNLESS THE OFFER IS
EXTENDED.
THE OFFER IS SUBJECT TO CERTAIN CONDITIONS DESCRIBED IN THE OFFER TO
PURCHASE.
- --------------------------------------------------------------------------------
March 23, 1999
To Brokers, Dealers, Commercial Banks,
Trust Companies And Other Nominees:
We have been engaged by Paulson Acquisition LLC, a Delaware limited
liability company (the "Purchaser") to act as Depositary and Information Agent
in connection with the Purchaser's offer to purchase up to 1,000,000 shares of
Common Stock, par value $.25 per share (the "Shares"), of Hitox Corporation of
America, a Delaware corporation (the "Company"), at $2.50 per Share, net to the
seller in cash, upon the terms and subject to the conditions set forth in the
Purchaser's Offer to Purchase dated March 23, 1999 (the "Offer to Purchase") and
the related Letter of Transmittal (which, together with any supplements or
amendments thereto, collectively constitute the "Offer") enclosed herewith.
For your information and for forwarding to your clients for whom you
hold Shares registered in your name or in the name of your nominee, or who hold
Shares registered in their own names, we are enclosing the following documents:
1. Offer to Purchase;
2. Letter of Transmittal to be used by stockholders of the Company
in accepting the Offer and tendering Shares;
1
<PAGE>
3. A letter which may be sent to your clients for whose account you
hold Shares in your name or in the name of your nominees, with
space provided for obtaining such clients' instructions with
regard to the Offer;
4. Notice of Guaranteed Delivery to be used to accept the Offer if
certificates for Shares are not immediately available, if the
procedure for book-entry transfer cannot be completed on a timely
basis, or if time will not permit all required documents to reach
Founders Equity Group, Inc. (the "Depositary"), prior to the
Expiration Date (as defined in Section 1 of the Offer to
Purchase);
5. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9; and
6. Return envelope addressed to the Depositary.
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 Purchaser will accept for payment and pay for up to
1,000,000 Shares validly tendered prior to the Expiration Date and not
theretofore properly withdrawn. Payment for Shares purchased pursuant to the
Offer will in all cases be made only after timely receipt by the Depositary of
(i) certificates for such Shares (or timely confirmation of a book-entry
transfer of such Shares into the Depositary's account at The Depository Trust
Company pursuant to the procedures described in Section 3 of the Offer to
Purchase), (ii) a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), with any required signature guarantees (or, in the case of a
book-entry transfer, an Agent's Message (as defined in Section 3 of the Offer to
Purchase)), and (iii) all other documents required by the Letter of Transmittal.
The Purchaser will not pay any fees or commissions to any broker or
dealer or other person (other than the Depositary and the Information Agent as
described in the Offer to Purchase) in connection with the solicitation of
tenders of Shares pursuant to the Offer. The Purchaser will, however, upon
request, reimburse you for customary mailing and handling expenses incurred by
you in forwarding the enclosed materials to your clients.
The Purchaser will pay or cause to be paid any Stock transfer taxes
payable on the transfer of Shares to it, except as otherwise provided in
Instruction 6 of the enclosed Letter of Transmittal.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL
EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, APRIL 19, 1999, UNLESS
THE OFFER IS EXTENDED.
2
<PAGE>
In order to take advantage of the Offer, a duly executed and properly
completed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, or an Agent's Message in connection with a book-entry
delivery of Shares, and any other required documents, should be sent to the
Depositary, and certificates representing the tendered Shares should be
delivered or such Shares should be tendered by book-entry transfer, all in
accordance with the Instructions set forth in the Letter of Transmittal and the
Offer to Purchase.
If holders of Shares wish to tender, but it is impracticable for them
to forward their certificates or other required documents prior to the
expiration of the Offer, a tender may be effected by following the guaranteed
delivery procedures specified under Section 3, "Procedure for Tendering Shares,"
in the Offer to Purchase.
Any inquiries you may have with respect to the Offer should be
addressed to Founders Equity Group, Inc. at its address and telephone numbers
set forth on the back cover page of the Offer to Purchase.
Additional copies of the enclosed materials may be obtained from the
undersigned, Founders Equity Group, Inc. at (888) 858-7303, or from brokers,
dealers, commercial banks or trust companies.
Very truly yours,
FOUNDERS EQUITY GROUP, INC.
Enclosures
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL DESIGNATE
YOU OR ANY PERSON AS AN AGENT OF THE PURCHASER, THE DEPOSITARY, THE INFORMATION
AGENT, THE DEALER MANAGER OR ANY AFFILIATE OF ANY OF THE FOREGOING, OR AUTHORIZE
YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF
ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED AND
THE STATEMENTS CONTAINED THEREIN.
3
(a)(5)
Offer to Purchase for Cash
Up to 1,000,000 Shares of Common Stock
of
HITOX CORPORATION OF AMERICA
at
$2.50 PER SHARE
by
PAULSON ACQUISITION LLC
- --------------------------------------------------------------------------------
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL
EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, APRIL
19, 1999, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS SUBJECT TO CERTAIN CONDITIONS DESCRIBED IN
THE OFFER TO PURCHASE.
- --------------------------------------------------------------------------------
To Our Clients:
Enclosed for your consideration is an Offer to Purchase dated March 23,
1999 (the "Offer to Purchase") and a related Letter of Transmittal (which,
together with any amendments and supplements thereto, collectively constitute
the "Offer") relating to an offer by Paulson Acquisition LLC, a Delaware limited
liability corporation (the "Purchaser"), to purchase up to 1,000,000 shares of
Common Stock, par value $.25 per shares (the "Shares"), of Hitox Corporation of
America, a Delaware corporation (the "Company"), at a purchase price of $2.50
per Share, net to the seller in cash, upon the terms and subject to the
conditions set forth in the Offer. We are the holder of record of Shares held by
us for your account. The Letter of Transmittal is furnished to you for your
information only and cannot be used by you to tender Shares. A tender for such
Shares can be made only by us as the holder of record and pursuant to your
instructions.
We request instructions as to whether you wish to tender any or all of
such Shares held by us for your account, pursuant to the terms and conditions
set forth in the Offer.
Your attention is invited to the following:
1. The tender price is $2.50 per Share, net to the seller in cash.
2. The Offer is being made for up to 1,000,000 Shares. Upon the
terms and subject to the conditions of the Offer, if more than
1,000,000 Shares are validly tendered prior to the expiration of
1
<PAGE>
the Offer and not properly withdrawn in accordance with Section 4
of the Offer to Purchase, such Shares will be accepted for
payment on a pro rata basis (with appropriate adjustments to
avoid the purchase of fractional Shares) according to the number
of Shares validly tendered and not properly withdrawn by the
expiration of the Offer.
3. The Offer, proration period and withdrawal rights will expire at
12:00 Midnight, New York City time, on Monday, April 19, 1999,
unless the Offer is extended.
4. Stockholders who tender Shares will not be obligated to pay
brokerage commissions, solicitation fees or, except as set forth
in Instruction 6 of the Letter of Transmittal, transfer taxes on
the purchase of Shares by the Purchaser pursuant to the Offer.
If you wish to have us tender any or all of your Shares, please
complete, sign and return the form set forth on the reverse side of this letter.
An envelope in which you should return your instructions to us is enclosed. Your
instructions to us should be forwarded in ample time to permit us to submit a
tender on your behalf prior to the expiration of the Offer. If you authorize the
tender of your Shares, all such Shares will be tendered unless otherwise
specified on the instruction form set forth on the reverse side of this letter.
2
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH
UP TO 1,000,000 SHARES OF COMMON STOCK OF
HITOX CORPORATION OF AMERICA
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase of Paulson Acquisition LLC (the "Purchaser") dated March 23,
1999 and the related Letter of Transmittal (which, together with any amendments
or supplements thereto, collectively constitute the "Offer") relating to the
offer by the Purchaser to purchase up to 1,000,000 shares of Common Stock, par
value $.25 per share (the "Shares"), of Hitox Corporation of America, a Delaware
corporation.
This will instruct you to tender to the Purchaser the number of Shares
indicated below (or if no number is indicated below, all Shares) held by you for
the account of the undersigned, on the terms and subject to the conditions set
forth in the Offer.
Number of Shares to be Tendered* ___________________________________
________________________________Shares ___________________________________
Signature
Account Number: ________________ ___________________________________
Dated: ________________________, 1999 ___________________________________
Please print name(s)
--------------------
Address:___________________________
(Include zip code)
Area Code and Telephone No.:_______
Taxpayer Identification or
Social Security No.:_______________
____________________
* Unless otherwise indicated, it will be assumed that all of your Shares held by
us for your account are to be tendered.
3
<TABLE>
<CAPTION>
(a)(6)
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER. - Social Security numbers have nine digits separated
by two hyphens: i.e., 000-00-0000. Employer identification numbers have nine digits separated by only one hyphen: i.e., 00-0000000.
The table below will help determine the number to give the payer.
____________________________________________________________________________________________________________________________________
FOR THIS TYPE OF ACCOUNT GIVE THE SOCIAL SECURITY NUMBER OF--
____________________________________________________________________________________________________________________________________
<S> <C>
1. An individual's account The individual
2. Two or more individuals The actual owner of the account or, if combined
(joint account) funds, any one of the individuals (1)
3. Husband and wife (joint account) The actual owner of the account or, if joint funds,
either person (1)
4. Custodian account of a minor The minor (2)
(Uniform Gift to Minors Act)
5. Adult and minor (joint account) The adult or, if the minor is the only contributors,
the minor (1)
6. Account in the name of guardian of committee for The ward, minor, or incompetent person (3)
a designated ward, minor or incompetent person
7. a. The usual revocable savings trust account The grantor trustee(1)
(grantor is also trustee)
b. So-called trust account that is not a legal The actual owner (1)
or valid trust under state law
____________________________________________________________________________________________________________________________________
FOR THIS TYPE OF ACCOUNT GIVE THE SOCIAL SECURITY NUMBER OF--
____________________________________________________________________________________________________________________________________
8. Sole proprietorship account The owner (4)
9. A valid trust, estate, or pension trust The legal entity (Do not furnish the identification
number of the personal representative or trustee
unless the legal entity itself is not designated in the
Account title.) (5)
10. Corporate Account The corporation
11. Religious, charitable, or educational account The organization
12. Partnership account The partnership
13. Association, club or other tax-exempt organization The organization
14. A broker or registered nominee The broker or nominee
15. Account with the Department of Agriculture in the The public entity
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) Circle the ward's, minor's or incompetent person's name and furnish such person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate or pension trust.
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.
</TABLE>
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Page 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local offices of
the Social Security Administration or the Internal Revenue Service and apply for
a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments including
the following:
* A corporation
* A financial institution
* An organization exempt from tax under section 501(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), or an individual
retirement plan.
* The United States or any agency or instrumentality thereof.
* A State, the District of Columbia, a possession of the United States,
or any subdivision or instrumentality thereof.
* A registered dealer in the securities or commodities registered in the
United States or a possession of the United States.
* A real estate investment trust.
* A common trust fund operated by a bank under section 584(a) of the
Code.
* An exempt charitable remainder trust, or a nonexempt trust described in
section 4947(a)(1) of the Code.
* An entity registered at all times under the Investment Company Act of
1940.
* A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
witholding include the following:
* Payments to nonresident aliens subject to withholding under section
1441 of the Code.
* Payments to partnerships not engaged in a trade or business in the
United States and which have at least one nonresident partner.
* Payments of patronage dividends where the amount received is not paid
in money.
* Payments made by certain foreign organizations.
* Payments made to a nominee.
Payments of interest not generally 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 taxpayer identification number to the payer.
* Payments of tax-exempt interest (including exempt-interest dividends
under section 852 of the Code).
* Payments described in section 6049(b)(5) of the Code to non-resident
aliens.
* Payments on tax-free covenant bond under section 1451 of the Code.
* Payments made by certain foreign organizations.
* Payments made to a nominee.
EXEMPT PAYEES DESCRIBED ABOVE MUST STILL COMPLETE THE SUBSTITUTE FORM W-9
ENCLOSED HEREWITH TO AVOID POSSIBLE ERRONEOUS BACKUP WITHHOLDING. FILE
SUBSTITUTE FORM W-9 WITH THE PAYER, REMEMBERING TO CERTIFY YOUR TAXPAYER
IDENTIFICATION NUMBER ON PART III OF THE FORM, WRITE "EXEMPT" ON THE FACE OF THE
FORM AND SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Page 3
Payments that are not subject to information reporting are also not subject to
backup withholding. For details, see section 6041, 6041A(a), 6042, 6044, 6045,
6049, 605A, and 6050N of the Code and their regulations.
PRIVACY ACT NOTICE - Section 6109 requires most recipients of dividends,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments of IRS. The IRS uses the numbers for identification
purposes and to help verify the accuracy of your tax return. Payers must be
given the numbers whether or not recipients 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 taxpayer identification number
to a payer. Certain penalties must also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER - If you fail
to furnish your taxpayer identification number to a payer, 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.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING - If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION - Falsifying certification or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
(a)(7)
This advertisement is neither an offer to purchase nor a solicitation of an
offer to sell Shares. The Offer is made solely by the Offer to Purchase dated
March 23, 1999 and the related Letter of Transmittal and is being made to all
holders of Shares. The Offer is not being made to (nor will tenders be accepted
from or on behalf of) holders of Shares in any jurisdiction in which the making
of the Offer or the acceptance thereof would not be in compliance with the laws
of such jurisdiction. 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 will be deemed to be made on behalf of Paulson Acquisition LLC by Founders
Equity Group, Inc. or one or more registered brokers or dealers licensed under
the laws of such jurisdiction.
NOTICE OF OFFER TO PURCHASE FOR CASH
UP TO 1,000,000 SHARES OF COMMON STOCK
OF
HITOX COPORATION OF AMERICA
AT
$2.50 PER SHARE
BY
PAULSON ACQUISITION LLC
Paulson Acquisition LLC, a Delaware limited liability company (the "Purchaser"),
is offering to purchase up to 1,000,000 shares of Common Stock, par value $0.25
per share (the "Shares"), of Hitox Corporation of America, a Delaware
corporation (the "Company"), at $2.50 per Share, net to the seller in cash, upon
the terms and subject to the conditions set forth in the Offer to Purchase dated
March 23, 1999 (the "Offer to Purchase") and in the related Letter of
Transmittal (which, together with any amendments or supplements thereto,
collectively constitute the "Offer").
- --------------------------------------------------------------------------------
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON MONDAY, APRIL 19, 1999, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS SUBJECT TO CERTAIN CONDITIONS DESCRIBED IN THE OFFER TO PURCHASE.
- --------------------------------------------------------------------------------
For purposes of the Offer, the Purchaser will be deemed to have
accepted for payment, and thereby purchased, Shares that have been validly
tendered and not properly withdrawn as, if and when the Purchaser gives oral or
written notice to Founders Equity Group, Inc. (the "Depositary") of the
Purchaser's acceptance for payment of such Shares. Upon the terms and subject to
<PAGE>
the conditions of the Offer, payment for Shares accepted for payment pursuant to
the Offer will be made by deposit of the purchase price therefor with the
Depositary, which will act as agent for tendering stockholders for the purpose
of receiving payment from the Purchaser and transmitting such payment to
tendering stockholders. In all cases, payment for shares accepted for payment
pursuant to the Offer will be made only after timely receipt by the Depositary
of (i) certificates for such Shares (or timely confirmation of book-entry
transfer of such Shares into the Depositary's account at The Depository Trust
Company pursuant to the procedures described in Section 3 of the Offer to
Purchase), (ii) a properly completed and duly executed Letter of Transmittal (or
facsimile thereof) with any required signature guarantees (or, in the case of a
book-entry transfer, an Agent's Message (as defined in Section 3 of the Offer to
Purchase)), and (iii) any other documents required by the Letter of Transmittal.
Under no circumstances will interest be paid on the purchase price, regardless
of any extension of the Offer or any delay in making such payment.
The term "Expiration Date" means 12:00 Midnight, New York City time, on
Monday, April 19, 1999, unless and until the Purchaser shall have extended the
period of time during which the Offer is open, in which event the term
"Expiration Date" shall mean the latest time and date on which the Offer, as so
extended by the Purchaser, shall expire. The Purchaser expressly reserves the
right, in its sole discretion at any time or from time to time, to extend the
period of time during which the Offer is open and thereby delay acceptance for
payment of, and the payment for, any Shares, by giving oral or written notice of
such extension to the Depositary. The Purchaser shall not have any obligation to
pay interest on the purchase price for tendered Shares in the event the period
of time during which the Offer is open is extended for any reason. Any extension
of the Offer will be followed by a public announcement thereof no later than
9:00 a.m. New York City time, on the next business day after the previously
scheduled Expiration Date. During any such extension, all Shares previously
tendered and not withdrawn will remain subject to the Offer, subject to the
right of a tendering stockholder to withdraw such stockholder's Shares.
If more than 1,000,000 Shares are validly tendered prior to the
Expiration Date and not properly withdrawn, the Purchaser will, upon the terms
and subject to the conditions of the Offer, accept such Shares for payment on a
pro rata basis, with adjustments to avoid purchases of fractional Shares, based
upon the number of Shares validly tendered prior to the Expiration Date and not
properly withdrawn. Because of the difficulty of determining precisely the
number of Shares validly tendered and not properly withdrawn, if proration is
required, the Purchaser would not expect to announce the final results of
proration immediately after the Expiration Date. The Purchaser will announce the
preliminary results of proration by press release as promptly as practicable
after the Expiration Date, and expects to be able to announce the final results
of proration approximately three Nasdaq SmallCap Market trading days after the
Expiration Date. Holders of Shares may obtain such preliminary information and
final results from the Depositary or the Information Agent, and also may be able
to obtain such information from their brokers.
Except as otherwise provided in this paragraph, tenders of Shares are
irrevocable. Shares tendered pursuant to the Offer may be withdrawn at any time
prior to the Expiration Date, and, unless theretofore accepted for payment and
<PAGE>
paid for by the Purchaser pursuant to the Offer, may also be withdrawn at any
time after May 23, 1999. For a withdrawal to be effective, a written or
facsimile transmission notice of withdrawal must be timely received by the
Depositary at one of its addresses set forth on the back cover of the Offer to
Purchase and must specify the name of the person having tendered the Shares to
be withdrawn, the number of Shares to be withdrawn and the name of the
registered holder of the Shares to be withdrawn, if different from the name of
the person who tendered the Shares. If certificates for Shares to be withdrawn
have been delivered or otherwise identified to the Depositary, then, prior to
the physical release of such certificates, the serial numbers shown on such
certificates must be submitted to the Depositary and, unless such Shares have
been tendered by an Eligible Institution (as defined in Section 3 of the Offer
to Purchase), the signatures on the notice of withdrawal must be guaranteed by
an Eligible Institution. If Shares have been tendered pursuant to the procedures
for book-entry transfers as set forth in Section 3 of the Offer to Purchase, any
notice of withdrawal must also specify the name and number of the account at the
appropriate Book-Entry Transfer Facility to be credited with the withdrawn
Shares and otherwise comply with such Book-Entry Transfer Facility's procedures.
Withdrawals of tenders of Shares may not be rescinded, and any Shares properly
withdrawn will thereafter be deemed not validly tendered for any purposes of the
Offer. However, withdrawn Shares may be retendered by again following one of the
procedures described in Section 3 of the Offer to Purchase at any time prior to
the Expiration Date. All questions as to the form and validity (including time
of receipt) of notices of withdrawal will be determined by the Purchaser in its
sole discretion, whose determination will be final and binding.
The Purchaser has requested the Company to furnish the Purchaser with
copies of the Company's stockholder lists and security position listings. The
Offer to Purchase and the related Letter of Transmittal and other relevant
materials will be mailed to record holders of Shares and furnished to brokers,
dealers, commercial banks, trust companies and similar persons whose names, or
the names of whose nominees, appear on the Company's stockholders lists or, if
applicable, who are listed as participants in a clearing agency's security
position listing, for subsequent transmittal to beneficial owners of Shares.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of
the General Rules and Regulations under the Securities Exchange Act of 1934, as
amended, is contained in the Offer to Purchase and is incorporated herein by
reference.
THE OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER.
<PAGE>
Requests for copies of the Offer to Purchase, the Letter of Transmittal
and all other tender offer materials may be directed to the Information Agent as
set forth below, and copies will be furnished promptly at the Purchaser's
expense.
Questions or requests for assistance may be directed to the Information
Agent.
THE INFORMATION AGENT FOR THE OFFER IS:
FOUNDERS EQUITY GROUP, INC.
2602 McKinney Avenue
Suite 220
Dallas, Texas 75204
Toll-free 1-888-858-7303
or
Call Collect (214) 871-3000
March 23, 1999
(a)(8)
FOR IMMEDIATE RELEASE
March 23, 1999
BERNARD PAULSON
_______________
COMMENCES TENDER OFFER FOR
__________________________
HITOX CORPORATION OF AMERICA
____________________________
CORPUS CHRISTI, TEXAS--March 23, 1999--- Bernard Paulson, the Acting Chief
Executive Officer and a Director of Hitox Corporation of America (the "Company")
announced today that an affiliated entity has commenced a tender offer to
purchase up to 1,000,000 shares of the Company's Common Stock, par value $0.25
per share (the "Shares"), net to the seller in cash, upon the terms and subject
to the conditions set forth in the Offer to Purchase dated March 23, 1999 (the
"Offer to Purchase") and in the related Letter of Transmittal (which, together
with any amendments or supplements thereto, collectively constitute the
"Offer").
The Offer is subject to certain conditions described in the Offer to Purchase.
The Offer, proration period and withdrawal rights will expire on Monday April
19, 1999, unless the Offer is extended.
Copies of the Offer to Purchase and transmittal materials governing the Offer
may be obtained from the Information Agent, Founders Equity Group, Inc., at the
following address:
Founders Equity Group, Inc.
2602 McKinney Avenue
Suite 220
Dallas, Texas 75204
Telephone: (214) 871-3000
(b)
[LOGO OF NATIONSBANK, N.A.]
February 23, 1999
Paulson Ranch, Ltd.
3 Ocean Park Drive
Corpus Christi, TX 78404
Attention: Mr. Paulson
Dear Mr. Paulson:
Thank you for the opportunity to make the following commitment to you.
NationsBank, N.A. (the "Bank") is pleased to have approved for The Paulson
Ranch, Ltd. (the "Borrower") a credit facility consisting of a term loan in an
amount not to exceed $2,500,000 (the "Loan"). This commitment is to be used by
you for the purpose of purchasing 1.5 million shares of Hitox Corporation of
America common stock.
This commitment is subject to the execution and delivery to the Bank of legal
documents yet to be prepared, including, without limitation, loan agreements,
promissory notes, guaranties, and collateral and security documents. All such
documents must be satisfactory in form and substance to the Bank and its
counsel.
The making and funding of any loans under this commitment (in addition to any
other conditions which may be required in the documents referred to in the
preceding paragraph) is expressly subject to the terms and conditions set forth
in the attached Terms and Conditions.
If you find the terms and conditions of this commitment to be acceptable to you,
please execute the enclosed copy of this letter and return it to the
undersigned. This commitment shall expire on April 30, 1999.
We appreciate the opportunity to provide you with the financial services of
NationsBank, N.A.
Sincerely,
/S/ TOM L. HUNT
- ---------------
Tom L. Hunt
Accepted and agreed to this 18th day of March, 1999.
---- ----- --
Paulson Ranch Ltd.
By: /S/ BERNARD A. PAULSON
----------------------
Bernard A. Paulson
<PAGE>
TERMS AND CONDITIONS
BORROWER: Paulson Ranch Ltd.
GUARANTORS: Bernard A. Paulson and Joan L. Paulson
PURPOSE: Purchase 1.5 million shares of Hitox Corporation of
America common stock
AMOUNT OF LOAN: Up to $2,500,000
INTEREST RATE OPTIONS
- ---------------------
A) Variable: 90-day LIBOR, as determined by NationsBank and adjusted for
--------
reserves, deposit insurance assessments and other regulatory costs, plus a
spread ranging between 1.50% to 2.0%.
B) "Effective Fixed Rate" Utilizing Interest Rate Swap: The borrower may elect
----------------------
to fix its rate on the loan by selecting Variable rate option A, and executing
an Interest Rate Swap. There are no fees associated with the Swap. An indicative
rate for this option is currently 7.35% for a 2 year term or 7.65% for a 5 year
term. The additional benefits of selecting this option are:
* The Borrower may elect to fix the rate on some or all of the principal
amount of the loan, provided that the minimum amount selected for the
fixed rate is $1 million.
* The Borrower may elect to fix the rate for a period less than the term
of the loan (e.g., fixing the rate for three years on a five year term
loan). At the end of the fixed rate period the loan would revert to the
variable LIBOR based rate.
* The Borrower may elect to enter into a "Forward Starting Swap." In this
case, the loan will, for a predetermined time of up to two years, float
at the variable LIBOR rate, and then convert to an effective fixed rate
utilizing the Swap. The advantage to this is that the Borrower would be
able to enjoy currently lower variable rates while still having the
certainty of a committed fixed rate that will commence at a designated
future date.
* The Swap may be terminated at any time in the future. However,
generally stated, the Swap may have value if terminated in a higher
interest rate environment. Alternatively, if terminated in a lower
interest rate environment, the Swap may have a termination cost.
Should the Borrower select Option B, NationsBank will provide a separate,
detailed, interest rate Swap proposal.
<PAGE>
REPAYMENT:
Two Year Term Interest Only Period and Installments: Accrued interest only shall
- ---------------------------------------------------
be payable quarterly until June 15, 2000 at which time a $790,000 principal
reduction will be required. Quarterly interest payments will then be required
until June 15, 2001, at which time the remaining principal and interest balance
will be due and payable.
Five Year Term Interest Only Period and Installments: Accrued interest only
- -------------------------------------------------------
shall be payable quarterly until June 15, 2000 at which time a $790,000
principal reduction will be required. Quarterly interest payments will then be
required until June 15, 2001, when an additional $790,000 principal reduction
will be required. The remaining balance may be amortized up to a three year
period or principal plus interest payable quarterly.
LOAN DOCUMENTS:
The Loan shall be made under and governed by definitive Loan documents to be
executed and delivered by the Borrower to the Bank and containing the terms set
forth in this commitment and such other terms, conditions, representations,
warranties and covenants as are usual and customary in lending transactions such
as the Loan, which documents may include one or more promissory notes, loan
agreements, security agreements, guaranties, pledge agreements, letter of credit
applications/agreements, liquidity maintenance agreements, assignments,
financing statements and such other documents, instruments, guarantees,
certificates and agreements executed and/or delivered by Borrower, any guarantor
or third party in connection with the Loan (collectively, the "Loan Documents").
COLLATERAL:
Stocks: Pledge and delivery of 1.5 million shares of Hitox Corporation of
- ------
America owned by Bernard Paulson/Paulson Ranch Ltd. together with appropriate
stock powers.
Assignment of Note Receivable: Represents an assignment of the note receivable
- ------------------------------
from Petro Chemical International.
Negative Pledge: So long as this commitment is outstanding or the indebtedness
- ----------------
to the Bank remains unpaid, all Municipal Bonds shall be maintained by Borrower
free and clear of all liens, encumbrances and pledges. This obligation shall be
evidenced by a negative pledge agreement executed by Borrower and recorded in
the appropriate personal or real property records.
SURVIVAL:
This commitment letter shall constitute one of the Loan Documents and shall
survive the closing of the Loan, the execution and delivery of all Loan
Documents, and the making of any advances or disbursements thereunder. In the
event of a conflict between a provision contained in this commitment letter and
a provision of any other Loan Document, the terms of the other Loan Document
shall control.
<PAGE>
EXPIRATION/RENEWAL CLAUSES:
Any commitment to advance funds under the Loan shall expire on April 19, 1999
and the Bank shall have no further obligation to extend credit. Any renewal,
extension of maturity and/or expiration date, or increase in amount of this Loan
by the Bank shall be governed by the terms of this commitment unless otherwise
agreed to by the Bank, in writing.
Any renewal, extension of maturity and/or expiration date, or increase in amount
of this Loan by the Bank shall be governed by the terms of this commitment
unless otherwise agreed to by the Bank, in writing.
CONDITIONS TO FIRST ADVANCE:
Prior to the making by the Bank of the first advance to the Borrower, the
following conditions precedent shall have been satisfied.
The Bank shall have received, duly executed, all Loan Documents and any other
documents and instruments necessary or advisable in connection with the Loan,
all of which shall be in form and substance satisfactory to the Bank and its
counsel.
All mortgages, deeds to secure debt, deeds of trust, financing statements,
notices and other documents and instruments deemed by the Bank and its counsel
to be necessary or advisable in connection with the collateral described herein
shall have been recorded or filed in all necessary places, and sent to or
receive by all necessary person, as the case may be.
The bank shall have received the written opinion of Borrower's counsel as to the
validity and enforceability of the Loan Documents and such other matters as the
Bank may reasonably require.
REPORTING REQUIRMENTS:
So long as the Borrower is indebted to the Bank, the Borrower shall submit to
the Bank the following:
1. Annually,within 45 days, internally prepared financial statements of
the Borrower, including a balance sheet and income statement.
2. The above information shall be required from each of the Guarantors on
an annual basis.
3. On a quarterly basis, a brokerage statements on the Borrower's
account(s) reflecting the market value of the Municipal Bonds described
above under Collateral.
REPRESENTATIONS AND WARRANTIES:
Customary, including confirmation of partnership status and authority;
execution, delivery and performance of loan documents do not violate law or
existing agreements; no litigation except as disclosed to Bank; ownership of
property; payment of taxes; no material adverse change in financial condition or
operations since February 23, 1999; principal place of business; compliance with
environmental laws and continuation of representations and warranties.
<PAGE>
Existence and Compliance. Maintain its existence, good standing and
qualification to do business, where required and comply with all laws,
regulations and governmental requirements including, without limitation,
environmental laws applicable to it or to any of its property, business
operations and transactions.
Adverse Conditions or Events. Promptly advise Bank in writing of (i) any
condition, event or act which comes to its attention that would or might
materially adversely affect Borrower's financial condition or operations or
Bank's rights under the Loan Documents, (ii) any litigation filed by or against
Borrower, (iii) any event that has occurred that would constitute an event of
default under any Loan Documents and (iv) any uninsured or partially uninsured
loss through fire, theft, liability or property damage in excess of an aggregate
of $100,000.
Taxes and Other Obligations. Pay all of its taxes, assessments and other
obligations, including, but not limited to taxes, costs or other expenses
arising out of this transaction, as the same become due and payable, except to
the extent the same are being contested in good faith by appropriate proceedings
in a diligent manner.
Maintenance. Maintain all of its tangible property in good condition and repair
and make all necessary replacements thereof, and preserve and maintain all
licenses, trademarks, privileges, permits, franchises, certificates and the like
necessary for the operation of its business.
EVENTS OF DEFAULT:
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A default shall occur under the Letter of Commitment and under each of the Loan
Documents and under any other promissory note executed by the Borrower in favor
of Bank if the Borrower, any endorser or any guarantor of the Loan defaults in
the payment of any amounts due and owing under the Loan or any other
indebtedness owing to Bank within fifteen days of its due date or fails to
timely and properly observe, keep or perform any term, covenant, agreement or
condition in any of the Loan Documents or in any other loan agreement,
promissory note, security agreement, deed of trust, deed to secure debt,
mortgage, assignment or other contract securing or evidencing payment of any
indebtedness of Borrower, any endorser or any guarantor of any loan to Bank or
to any affiliate or subsidiary of NationsBank Corporation.
REMEDIES UPON DEFAULT:
If an event of default shall occur Bank shall have all rights, powers and
remedies available under each of the loan Documents as well as all rights and
remedies available at law or in equity.
CLOSING COSTS AND EXPENSES:
Expenses: The Borrower shall pay all costs and expenses incurred by the Bank in
connection with the Bank's review, due diligence and closing of the Loan,
including attorneys' fees (to include outside counsel fees and all allocated
costs of Bank's in-house counsel if permitted by applicable law) incurred by the
Bank in connection with the negotiation and preparation of the Loan Documents,
the costs of any environmental investigation and audit, appraisal, title
insurance premiums, survey and inspection fees, whether or not the Loan actually
closes.
<PAGE>
MATERIAL ADVERSE CHANGE:
This commitment may be terminated, in the sole discretion of the Bank, upon the
occurrence of a material adverse change in the financial condition of the
Borrower or any other person liable to the Bank for the repayment of this Loan.
NON-ASSIGNABLE:
This commitment and the right of Borrower to receive loans hereunder may not be
assigned by Borrower.
RELIANCE:
This commitment constitutes an offer by the Bank to the Borrower to make a Loan
on the terms and conditions set forth herein and should not be relied upon by
any third party for any purpose.
AMENDMENT AND WAIVER:
No alteration, modification, amendment or waiver of any terms and conditions of
this commitment, or of any of the documents required by or delivered to the Bank
under this commitment, shall be effective or enforceable against the Bank unless
set forth in a writing signed by the Bank.
GOVERNING LAW:
This commitment and the Loan shall be governed by and construed in accordance
with the laws of the State of Texas (without regard to choice of law
principles).
INTEGRATION:
The terms set forth above represent the entire understanding between the
Borrower and the Bank with respect to the subject matter of this commitment, and
this commitment supersedes any prior and contemporaneous agreements,
commitments, discussions and understandings, oral or written, with respect to
the subject matter of this commitment.
YEAR 2000 COMPLIANCE: This commitment is subject to, among the other conditions
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contained herein, the Bank's satisfaction that (a) the Borrower and its
subsidiaries are taking all necessary and appropriate steps to ascertain the
extent of, and to quantify and successfully address, business and financial
risks facing the Borrower and its subsidiaries as a result of failure to become
Year 2000 compliant (that is, that computer applications, imbedded microchips
and other systems will be able to perform date-sensitive functions prior to and
after December 31, 1999) including risks resulting from the failure of key
vendors and suppliers of the Borrower and its subsidiaries to become Year 2000
compliant, and (b) the Borrower's and its subsidiaries' material computer
applications and those of its key vendors and suppliers will, on a timely basis,
adequately address the Year 2000 problem in all material respects.
<PAGE>
ARBITRATION: ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES HERETO
- -----------
INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT OR ANY RELATED INSTRUMENTS. AGREEMENTS OR
DOCUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL
BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION
ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND
PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF J.A.M./ENDISPUTE AND ANY
SUCCESSOR THEREOF (J.A.M.S.), AND THE "SPECIAL RULES" SET FORTH BELOW. IN THE
EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL JUDGMENT UPON ANY
ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY PARTY TO
THIS AGREEMENT MAY BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED PROCEEDING,
TO COMPEL ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH THIS AGREEMENT
APPLIES IN ANY COURT HAVING JURISDICTION OVER SUCH ACTION.
A. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE
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CITY OF THE BORROWER'S DOMICILE AT TIME OF THE EXECUTION OF THIS INSTRUMENT,
AGREEMENT OR DOCUMENT AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN
ARBITRATOR: IF J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE
ARBITRATION, THEN THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL
ARBITRATION HEARINGS WILL BE COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR
ARBITRATION; FURTHER, THE ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE, BE
PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60
DAYS.
B. RESERVATION OF RIGHTS. NOTHING IN THIS INSTRUMENT,
-----------------------
AGREEMENT OR DOCUMENT SHALL BE DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY
OTHERWISE APPLICABLE STATUTES OF LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED
IN THIS AGREEMENT; OR (II) BE A WAIVER BY THE BANK OF THE PROTECTION AFFORDED TO
IT BY 12 U.S.C. SEC. 91 OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III)
LIMIT THE RIGHT OF THE BANK HERETO (A) TO EXERCISE SELF HELP REMEDIES SUCH AS
(BUT NOT LIMITED TO) SETOFF, OR (B) TO FORECLOSE AGAINST ANY REAL OR PERSONAL
PROPERTY COLLATERAL, OR (C) TO OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY
REMEDIES SUCH AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION OR
THE APPOINTMENT OF A RECEIVER. THE BANK MAY EXERCISE SUCH SELF HELP RIGHTS,
FORECLOSURE UPON SUCH PROPERTY, OR OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES
BEFORE, DURING OR AFTER THE PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT
PURSUANT TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT. NEITHER THIS EXERCISE OF
SELF HELP REMEDIES NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION FOR
FORECLOSURE OR PROVISIONAL OR ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER OF
THE RIGHT OF ANY PARTY, INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO ARBITRATE
THE MERITS OF THE CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH REMEDIES.
<PAGE>
EXPIRATION:
This commitment is to be closed within 28 days of the acceptance date. Should
this commitment not be accepted by the expiration date, and not closed within 28
days of the acceptance date, then the Bank shall have no further obligation to
extend credit hereunder.
13. NOTICE OF FINAL AGREEMENT. THIS WRITTEN AGREEMENT REPRESENTS THE
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FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
