0000921895-95-000106.txt : 19950918 0000921895-95-000106.hdr.sgml : 19950918 ACCESSION NUMBER: 0000921895-95-000106 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 19950915 SROS: NONE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: KINARK CORP CENTRAL INDEX KEY: 0000055805 STANDARD INDUSTRIAL CLASSIFICATION: COATING, ENGRAVING & ALLIED SERVICES [3470] IRS NUMBER: 710268502 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-31242 FILM NUMBER: 95574123 BUSINESS ADDRESS: STREET 1: 7060 S YALE CITY: TULSA STATE: OK ZIP: 74136 BUSINESS PHONE: 9184940964 MAIL ADDRESS: STREET 1: 7060 SOUTH YALE STREET 2: STE 603 CITY: TULSA STATE: OK ZIP: 741365723 FORMER COMPANY: FORMER CONFORMED NAME: KIN ARK OIL CO DATE OF NAME CHANGE: 19690601 FORMER COMPANY: FORMER CONFORMED NAME: KIN ARK OIL & GAS CO DATE OF NAME CHANGE: 19680906 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: STEEL PARTNERS II L P CENTRAL INDEX KEY: 0000915653 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 750 LEXINGTON AVE 27TH FL CITY: NEW YORK STATE: NY ZIP: 10022 SC 13D/A 1 SCHEDULE 13D AMENDMENT NO. 3 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 -------------- SCHEDULE 13D Under the Securities Exchange Act of 1934 (Amendment No. 3)(1) KINARK CORPORATION -------------------------------------------------------------------------------- (Name of issuer) COMMON STOCK, $.10 PAR VALUE -------------------------------------------------------------------------------- (Title of class of securities) 494474109 -------------------------------------------------------------------------------- (CUSIP number) STEVEN WOLOSKY, ESQUIRE OLSHAN GRUNDMAN FROME & ROSENZWEIG LLP 505 Park Avenue New York, New York 10022 (212) 753-7200 -------------------------------------------------------------------------------- (Name, address and telephone number of person authorized to receive notices and communications) SEPTEMBER 13, 1995 -------------------------------------------------------------------------------- (Date of event which requires filing of this statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box / /. Check the following box if a fee is being paid with the statement / /. (A fee is not required only if the reporting person: (1) has a previous statement on file reporting beneficial ownership of more than five percent of the class of securities described in Item 1; and (2) has filed no amendment subsequent thereto reporting beneficial ownership of five percent or less of such class.) (See Rule 13d-7). Note. six copies of this statement, including all exhibits, should be filed with the Commission. See Rule 13d-1(a) for other parties to whom copies are to be sent. (Continued on following pages) (Page 1 of 16 Pages) Exhibit Index Appears on Page 8 -------- (1) The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). ================================================================================ 1 NAME OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS STEEL PARTNERS II, L.P. -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) | | (b) | | -------------------------------------------------------------------------------- 3 SEC USE ONLY -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* PF -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) | | -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE -------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES BENEFICIALLY 501,100 OWNED BY ----------------------------------------------------------------- EACH 8 SHARED VOTING POWER REPORTING PERSON WITH -0- ----------------------------------------------------------------- 9 SOLE DISPOSITIVE POWER 501,100 ----------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER -0- -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 501,100 -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* | | -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 13.38% -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* PN ================================================================================ *SEE INSTRUCTIONS BEFORE FILLING OUT! ================================================================================ 1 NAME OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS STEEL PARTNERS SERVICES, LTD. -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) | | (b) | | -------------------------------------------------------------------------------- 3 SEC USE ONLY -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* OO -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) | | -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION NEW YORK -------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES BENEFICIALLY 25,000(2) OWNED BY ----------------------------------------------------------------- EACH 8 SHARED VOTING POWER REPORTING PERSON WITH -0- ----------------------------------------------------------------- 9 SOLE DISPOSITIVE POWER 25,000(2) ----------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER -0- -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 25,000(2) -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* | | -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) .67% -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* CO ================================================================================ *SEE INSTRUCTIONS BEFORE FILLING OUT! ---------------- (2) Represents Shares in a securities portfolio owned by a foreign investment company that is managed on a discretionary basis by Steel Partners Services, Ltd. ================================================================================ 1 NAME OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS WARREN LICHTENSTEIN -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) | | (b) | | -------------------------------------------------------------------------------- 3 SEC USE ONLY -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* PF, OO -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) | | -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION USA -------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES BENEFICIALLY 526,150(3) OWNED BY ----------------------------------------------------------------- EACH 8 SHARED VOTING POWER REPORTING PERSON WITH -0- ----------------------------------------------------------------- 9 SOLE DISPOSITIVE POWER 526,150(3) ----------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER -0- -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 526,150(3) -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* | | -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 14.04% -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* IN ================================================================================ *SEE INSTRUCTIONS BEFORE FILLING OUT! ---------------- (3) Includes 501,100 Shares owned by Steel Partners II, L.P. and 25,000 Shares managed by Steel Partners Services, Ltd., an entity controlled by Warren G. Lichtenstein and Lawrence Butler. ================================================================================ 1 NAME OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS LAWRENCE BUTLER -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) | | (b) | | -------------------------------------------------------------------------------- 3 SEC USE ONLY -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* PF, OO -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) | | -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION USA -------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES BENEFICIALLY 528,100(4) OWNED BY ----------------------------------------------------------------- EACH 8 SHARED VOTING POWER REPORTING PERSON WITH -0- ----------------------------------------------------------------- 9 SOLE DISPOSITIVE POWER 528,100(4) ----------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER -0- -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 528,100(4) -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* | | -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 14.10% -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* IN ================================================================================ *SEE INSTRUCTIONS BEFORE FILLING OUT! ---------------- (4) Includes 501,100 Shares owned by Steel Partners II, L.P. and 25,000 Shares managed by Steel Partners Services, Ltd., an entity controlled by Warren G. Lichtenstein and Lawrence Butler. This constitutes Amendment No. 3 ("Amendment No. 3") to Schedule 13D filed by the undersigned on March 25, 1995 (the "Schedule 13D"). Except as specifically amended by this Amendment No. 3, the Schedule 13D, as amended, remains in full force and effect. Defined terms shall have the meaning specified in the Schedule 13D, except as otherwise provided herein. Item 4 is amended to read in its entirety as follows: Item 4. Purpose of Transaction. The Reporting Persons believe that the Shares of the Issuer at current market prices present an attractive investment opportunity for capital appreciation. On September 13, 1995, the Reporting Persons submitted a proposal to the Issuer to provide debt financing and a commitment in connection with a proposed rights offering to be undertaken by the Issuer, a copy of which is attached hereto. The proposal reflects a proposed equity and debt financing which is on substantially better terms than that offered by Michael T. Crimmins, the Chairman of the Board of the Issuer. The Reporting Persons believe that it would be imprudent for the Board to pursue the Crimmins transaction at the present time and reserves any rights it may have to oppose such financing. No Reporting Person has any present plan or proposal which would relate to or result in any of the matters set forth in subparagraphs (a) - (j) of Item 4 of Schedule 13D except as otherwise provided herein. Each intends to review its investment in the Issuer on a continuing basis and, depending on various factors including, without limitation, the Issuer's business affairs and financial position, the price levels of the Common Stock, conditions in the securities markets and general economic and industry conditions, may in the future take such actions with respect to its investment in the Issuer as it deems appropriate including, without limitation, purchasing additional Shares of Common Stock, selling some or all of its Shares, or proposing a slate of nominees for election as directors at the Issuer's annual meeting, a special meeting of stockholders or otherwise. Item 7. Material to be Filed as Exhibits. 1. Joint Filing Agreement (previously filed). 2. Letter sent by the Reporting Persons to the Issuer on September 13, 1995 with attached Term Sheet for the proposed debt and equity financing referred to in Item 4. SIGNATURES After reasonable inquiry and to the best of his knowledge and belief, each of the undersigned certifies that the information set forth in this statement is true, complete and correct. Dated: September 14, 1995 STEEL PARTNERS II, L.P. By: Steel Partners Associates, L.P. General Partner By: Steel Partners, Ltd. General Partner By:/s/ Warren G. Lichtenstein -------------------------- Warren G. Lichtenstein, Chief Executive Officer STEEL PARTNERS SERVICES, LTD. By:/s/ Warren G. Lichtenstein -------------------------- Warren G. Lichtenstein, Chief Executive Officer /s/ Warren G. Lichtenstein -------------------------- WARREN G. LICHTENSTEIN /s/ Lawrence Butler ------------------- LAWRENCE BUTLER EXHIBIT INDEX EXHIBIT PAGE 1. Joint Filing Agreement previously filed 2. Letter sent by the Reporting Persons to 9 the Issuer on September 13, 1995 with attached Term Sheet for the proposed debt and equity financing referred to in Item 4. EX-99.2 2 EXHIBIT 2 TO 13D/A FILING Exhibit 2 September 13, 1995 The Board of Directors of Kinark Corporation 7060 South Yale Avenue Tulsa, Oklahoma 74101 Ladies and Gentlemen: The undersigned hereby submits the attached proposal to provide debt financing and a commitment in connection with the proposed rights offering to be undertaken by Kinark Corporation. The proposal reflects a proposed equity and debt financing which is on substantially better terms than that offered by Michael T. Crimmins, the Chairman of the Board of Kinark. The offer has been formatted to conform to the proposal by Mr. Crimmins but reflects terms substantially more favorable to Kinark. We are prepared to immediately negotiate in good faith any changes or modifications that each of us may find appropriate to further refine this offer to be in the best interests of Kinark and its stockholders and to enter into definitive agreements. We believe that it would be inappropriate for the Board to pursue the proposed transaction with Mr. Crimmins, since it involves substantially greater dilution to the equity holders of Kinark as compared to the enclosed proposal. We further believe that to the extent that any debt financing portion can be minimized and/or reduced, it is in the best interest of all stockholders. We have set forth this offer in writing so that there is no confusion that we are ready, willing and able to proceed diligently with regard to this matter. We trust that the Board will contact us immediately so that we can move forward. We believe that it would be imprudent for the Board to pursue the Crimmins transaction at the present time and reserve any rights we may have to oppose such financing should the Board not proceed with good faith negotiations regarding the enclosed proposal. We trust that such action will be unnecessary and that any financing can be concluded in the best interests of all stockholders of Kinark. Very truly yours, /S/ WARREN LICHTENSTEIN ----------------------- Warren Lichtenstein Proposed Term Sheet 9/13/95 MEMORANDUM RE: Kinark Corporation - Steel Partners II, L.P. Proposed Debt and Equity Financing I. DEBT FINANCING A. SENIOR SUBORDINATED NOTES Issuer: Kinark Corporation ("Company") Issue: Up to $4,000,000 principal amount of Senior Subordinated Notes ("Notes" or "Subordinated Debt") to be sold at par, in increments of $500,000 at Closing and or over a one year period from Closing, if the Rogers transaction closes. Investor: Steel Partners II, L.P. or its designees or affiliates. Use of Proceeds: The up to $4,000,000 proceeds, plus the proceeds of the equity financing referred to in II below and of the senior bank debt, will be used to purchase the capital stock of Rogers Galvanizing Company ("Rogers"), and, subject to such purchase, for such other general corporate uses as agreed to by the Board of Directors. Final Maturity: Tenth Anniversary of Date of Closing. Interest: Interest payable semi-annually in arrears at an annual rate of 12%. Amortization: No scheduled principal payments for five years, but see "Prepayment Items" below. Thereafter, payable in 10 equal semi-annual principal payments. Optional Prepayments: The Company may prepay the Notes at any time in full or in part in increments of at least $100,000.00, at par with accrued interest, and in inverse order of maturity (if paid in part). Prepayment Items: All prepayments to be applied to the semi-annual principal installments in the inverse order of maturity. The Notes will be subject to mandatory prepayment in full at par, plus accrued interest, upon a change in control of the Company. Investment Fee: An aggregate fee of $75,000 will be payable to Investor at Closing. Subordination: The Notes will be subordinated to the Company's bank debt ("Senior Debt") on terms acceptable to the bank and the Investor. Security: The Notes will be secured by the capital stock of Rogers. Rogers shall not be an obligor or guarantor in respect of the Senior Debt but may pledge its working capital items as additional security for the Senior Debt. There will be a negative pledge with respect to all other assets of Rogers. Representations and Warranties; Covenants, Events of Default: The Company will make standard representations and warranties in the loan documentation which will also incorporate standard covenants and events of defaults, including affirmative covenants as to maintenance of corporate existence, payment of taxes, compliance with laws and regulations, maintenance of properties and insurance, etc. and negative covenants as to maintenance of debt service coverage, net worth and working capital, limitations on debt incurrence, acquisitions, capital expenditures, mergers, sale of assets, etc. Governing Law: The Notes will be governed by internal N.Y. law without regard to its conflict of law principles. Registration Rights: See under B. WARRANTS below. The Company will agree in the loan documentation to appoint a Trustee for the holders of Notes in the event of an offering of the Notes. B. WARRANTS: The Investor will receive detachable and transferable warrants ("Warrants") for 50,000 shares of the Company for issuing a binding and irrevocable commitment for one year after Closing of up to $4,000,000 in Subordinated Debt. For any borrowing under the Subordinated Debt, 200,000 Warrants shall be issued for each $500,000 borrowed. The numbers of Warrants is based on the 3,746,410 shares currently outstanding. The Warrants shall expire on the fifth anniversary of their respective dates of issuance. Exercisable: Exercisable in whole or in part at any time after their respective dates of issuance until the fifth anniversary of such dates. Purchase and Exercise Price: The purchase price of the Warrants will be a nominal amount. The Warrants issued at Closing shall be issued with an exercise price equivalent to the average 20 day closing price prior to the Closing. The exercise price of any other Warrants issued will be the average 20 day closing price prior to the Company's notice of borrowing. The Warrants are payable in cash or by the surrender of Notes in an equivalent principal amount. Anti-Dilution: Full anti-dilution provisions including adjustment for stock splits, stock dividends and distributions, subdivisions, combinations, and reclassifications on, or of, the Company's common stock; issuance of rights to purchase common stock or common stock at less than market price, (other than the Rights referred to in II below), sale of assets, mergers, etc. Registration Rights: Full registration rights including one demand registration for Notes, Warrants and/or underlying common stock (and any other common stock owned by Investor) at any time after the Closing, and unlimited piggyback rights, subject in the case of piggyback registration to Managing Underwriter's approval and to the pro rata share limitation. In the case of the demand registration and each piggyback registration, the Company will (a) pay all expenses, including registration and Blue Sky fees, printing, legal and accounting but excluding fees and expenses of counsel to Investor, underwriting discounts applicable to securities sold by Investor and applicable stock transfer taxes and (b) agree to fully indemnify Investor and any underwriter for Investor in respect of all information contained or omitted from the Registration Statement other than information furnished by Investor or such underwriter. Conditions: 1. Satisfactory completion of due diligence by Investor. 2. Agreement with holder of Senior Debt on terms satisfactory to Investor. 3. Satisfactory completion of and compliance with all required documentation. 4. Absence of material adverse change in the financial condition, business, operations or prospects of the Company and its subsidiaries or Rogers prior to the termination of the Subordinated Debt commitment (1 year following closing). 5. Investor to be satisfied that proceeds, together with other funds available to Company, will be sufficient to purchase all the common stock of Rogers which Company is required to purchase, and the purchase of Rogers common stock shall take place contemporaneously with the Closing. 6. Recommendation by the Board of Directors of the Company to the shareholders to approve the proposed sale of the Notes and Warrants on the terms provided herein and the proposed equity financing referred to in II below and such recommendation shall not be withdrawn or qualified prior to the Closing, and agreement by the Board of Directors and the Company not to shop or solicit other financing terms pending the Closing. 7. Approval of the shareholders of the Company of the issuance of the Notes and Warrants and of any other matters for which such approval is required. 8. Approval of the American Stock Exchange as to the listing of the shares of the Company's common stock issuable upon exercise of the Warrants and Rights referred to in II below. 9. Approval of the shareholders of the Company of the proposed Rights offering referred to in II below. 10. In addition to the conditions specified in Paragraphs 1 through 9 above, if any of the following events shall have occurred on or prior to the Closing or the funding of the Subordinated Debt, as the case may be, the Investor shall have the right to cancel any definitive agreement and terminate any obligation to purchase the Notes and Warrants and the shares of the Company's common stock in connection with the Rights offering referred to in II below: (a) Any action or proceeding (including any consent or proxy solicitation) shall have been commenced or threatened which challenges the legality of the proposed debt and equity financing contemplated herein and/or seeks to effect any change of control of the Company through a change in the composition of its Board of Directors or otherwise; or (b) Any person (as such term is defined in Section 13(d)(3) of the Securities Exchange Act of 1934) other than the Investor, shall have acquired beneficial ownership of more than 20% of the outstanding shares of the Company's common stock or shall have commenced any tender offer or exchange offer for its shares of common stock which, upon completion, would result in such person having beneficial ownership of more than 20% of the outstanding shares of the Company's common stock; or (c) The Board of Directors of the Company shall have approved (a) any definitive agreement or understanding with any person, including any person referred to in (b) above, providing for any merger, consolidation, tender offer or exchange offer, acquisition, disposition, sale of assets, joint venture, or other business combination involving the Company, or any of its subsidiaries or Rogers (other than the acquisition of Rogers contemplated hereby) and/or (b) any transaction or undertaking that would involve a change of control of the Company and/or a material change in any aspect of the business and operations of the Company or any of its subsidiaries or Rogers from that heretofore conducted; and/or the Company shall have entered into or reached any such agreement, understanding, transaction or undertaking, whether or not subject to the approval of the Board of Directors; or (d) There shall have occurred any general suspension of trading, or limitation on prices, for securities on the New York or American Stock Exchanges or the declaration of a banking moratorium or any suspension of payments in respect to banks in the United States or the commencement of a war, armed hostilities, or other international or natural calamity involving the United States. Board of Directors Representation: For so long as the Subordinated Debt is outstanding or Investor has ten percent (10%) of the Common Stock of the Company, the Board of Directors shall remain six (6) members of which two will consist of designees of Steel Partners II, L.P. Expenses: Investor to be reimbursed by the Company for all expenses incurred in connection with the proposed sale of the Notes and Warrants and participation in the Rights Offering referred to in II below and completion of the due diligence and required documentation, including travel expenses and the fees and expenses of counsel to Investor, whether or not definitive agreements are reached, or the sale of the Notes and Warrants is closed and/or the Equity Offering is approved by the shareholders or is successful. The Investor will not engage a financial advisor. II. EQUITY OFFERING It is anticipated that the Company will make a Rights Offering to its holders of Common Stock, offering them the right to purchase Common Stock of the Company. The actual terms of the Rights Offering will be formulated between the Company and the Investor with the assistance of Company's financial adviser to make the offering as attractive as possible to the Company's shareholders, and the following terms are proposed for discussion only. A. Rights to Purchase Common Stock Basic Terms: Rights to Subscribe for Common Stock of the Company up to $10 million on terms agreed to by both Company and Investor. Rights are non- transferable. Backstop: Investor will subscribe for rights equivalent to its percentage ownership of the Company and will provide a standby commitment of $2,000,000. Proceeds: The proceeds from the exercise of the Rights and sale of the Common Stock, together with the proceeds from the Notes and Senior Debt will be used to purchase the common stock of Rogers and for other general corporate purpose approved by the Board of Directors. Voting Rights: The Common Stock issuable upon the purchase of the Rights will have the same voting rights as the outstanding Common Stock. The Rights will have no voting rights. Registration: The Common Stock issued pursuant to the Rights Offering will be registered under the Securities Act of 1933 at the time of the Rights Offering. Approvals: Issuance of Rights and Common Stock to be subject to the approval of the Company's shareholders. Listing: The additional Common Stock issued pursuant to the Rights Offering will continue to be listed on the American Stock Exchange. Investor: Subject to the issuance of the Notes and Warrants to the Investor pursuant to I above, and satisfaction with the terms of the Rights Offering as finally formulated, Investor will agree to exercise the Rights to purchase its proportionate Common Stock and to contribute to the Board's standby commitment up to a maximum aggregate additional investment in the Company by Investor of $2,000,000. Public Announcement: Any press release or other public announcement of the proposed debt and equity financing shall be subject to the prior approval of the Company and the Investor; provided that the Company may make such a public announcement despite the objection of the Investor if general counsel to the Company advises that a public announcement is legally required. Termination Fee: The Company will pay Investor a termination fee of $100,000 and reimburse investor for expenses as provided above, if the Board of Directors or the Company decide upon an alternative source of financing for the Rogers acquisition at any time after the proposed debt and equity financing has been approved in principle by the Board of Directors of the Company.