-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CmvLnfoj1dtLZSRydiz0ppTjkev7AZiCgHPEsryQY9bWdezBB0R4GI/hdD5kxJof FCYkmlCR44fyWcpjiGst9A== 0000921895-95-000135.txt : 19951025 0000921895-95-000135.hdr.sgml : 19951025 ACCESSION NUMBER: 0000921895-95-000135 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 19951024 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: 95583614 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. 5 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 -------------- SCHEDULE 13D Under the Securities Exchange Act of 1934 (Amendment No. 5)(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) OCTOBER 19, 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 o. (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 19 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 OR ORGANIZATION DELAWARE - -------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES BENEFICIALLY 503,600 OWNED BY EACH REPORTING PERSON WITH --------------------------------------------------------- 8 SHARED VOTING POWER -0- --------------------------------------------------------- 9 SOLE DISPOSITIVE POWER 503,600 --------------------------------------------------------- 10 SHARED DISPOSITIVE POWER -0- - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 503,600 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* / / - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 13.4% - -------------------------------------------------------------------------------- 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 OR ORGANIZATION NEW YORK - -------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES BENEFICIALLY 27,500(2) OWNED BY EACH REPORTING PERSON WITH --------------------------------------------------------- 8 SHARED VOTING POWER -0- --------------------------------------------------------- 9 SOLE DISPOSITIVE POWER 27,500(2) --------------------------------------------------------- 10 SHARED DISPOSITIVE POWER -0- - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 27,500(2) - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* / / - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) .7% - -------------------------------------------------------------------------------- 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 OR ORGANIZATION USA - -------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES BENEFICIALLY 531,150(3) OWNED BY EACH REPORTING PERSON WITH --------------------------------------------------------- 8 SHARED VOTING POWER - 0 - --------------------------------------------------------- 9 SOLE DISPOSITIVE POWER 531,150(3) --------------------------------------------------------- 10 SHARED DISPOSITIVE POWER - 0 - - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 531,150(3) - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* / / - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 14.2% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* IN ================================================================================ *SEE INSTRUCTIONS BEFORE FILLING OUT! - -------- (3) Includes 503,600 Shares owned by Steel Partners II, L.P. and 27,500 Shares managed by Steel Partners Services, Ltd., entities 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 OR ORGANIZATION USA - -------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES BENEFICIALLY 533,100(4) OWNED BY EACH REPORTING PERSON WITH --------------------------------------------------------- 8 SHARED VOTING POWER - 0 - --------------------------------------------------------- 9 SOLE DISPOSITIVE POWER 533,100(4) --------------------------------------------------------- 10 SHARED DISPOSITIVE POWER - 0 - - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 533,100(4) - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* / / - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 14.2% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* IN ================================================================================ *SEE INSTRUCTIONS BEFORE FILLING OUT! - -------- (4) Includes 503,600 Shares owned by Steel Partners II, L.P. and 27,500 Shares managed by Steel Partners Services, Ltd., entities controlled by Warren G. Lichtenstein and Lawrence Butler. This constitutes Amendment No. 5 ("Amendment No. 5") to Schedule 13D filed by the undersigned on March 25, 1995 (the "Schedule 13D"). Except as specifically amended by this Amendment No. 5, 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 include the following: Item 4. Purpose of Transaction. The Reporting Persons met with the Board of Directors of the Issuer on October 16, 1995. At the meeting, the Reporting Persons presented a further financing proposal to the Board and answered each of the Board's questions with respect thereto. The Board, in a letter dated October 17, 1995 (a copy of which is attached hereto), requested the Reporting Persons to put the terms of their further proposal in writing and to be available for questions from the Issuer on the afternoon of October 23, 1995. The Reporting Persons delivered a written copy of such financing proposal to the Issuer on October 19, 1995 by letter (a copy of which is attached hereto). An officer of the Issuer contacted the Reporting Persons on October 23, 1995 to advise them that the Issuer had established a Special Committee of the Board of Directors, and that the Special Committee would contact the Reporting Persons regarding their further financing proposal. 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 (previously filed). 3. Letter sent by counsel to the Reporting Persons to the Issuer on October 2, 1995 (previously filed). 4. Letter sent by the Issuer to the Reporting Persons on October 17, 1995. 5. Response sent by the Reporting Persons to the Issuer on October 19, 1995. 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: October 24, 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 previously filed to the Issuer on September 13, 1995 with attached Term Sheet for the proposed debt and equity financing 3. Letter sent by Counsel to the previously filed Reporting Persons to the Issuer on October 2, 1995 4. Letter sent by the Issuer to the Reporting Persons on October 17, 1995. 5. Response sent by the Reporting Persons to the Issuer on October 19, 1995. EX-99.2 2 EXHIBIT 4 EXHIBIT 4 --------- October 17, 1995 PERSONAL AND CONFIDENTIAL - ------------------------- Steel Partners II, L.P. c/o Mr. Warren Lichtenstein 750 Lexington Avenue - 27th Floor New York, New York 10022 Dear Mr. Lichtenstein: Thank you for your interest in assisting Kinark Corporation ("Kinark" or the "Company") with the financing of its acquisition of Rogers Galvanizing Company ("Rogers"). Others have also expressed an interest in assisting Kinark to acquire Rogers. In an effort for the Board of Directors of Kinark (the "Board") to fairly evaluate all proposals, the Board has decided to seek final proposals from all potential investors who have expressed an interest in assisting Kinark with this financing. These final proposals are requested to be delivered to the Company by 5:00 p.m. (Tulsa time) on Thursday, October 19, 1995 (see the instructions set forth below). The Board will review all proposals thoroughly, seek counsel from financial and other advisors and meet together to consider all proposals on Monday, October 23, 1995. The Board of Directors of Kinark currently contemplates that the funds necessary to complete the acquisition of Rogers will be obtained through a rights offering to existing shareholders, together with a standby commitment or investment by an investor or investors to be selected by the Board. The Board has not determined at this time whether the best interests of Kinark's shareholders would favor an investment beyond a pro rata offering of rights to shareholders, coming in the form of equity, debt, or a combination of equity and debt, and intends to determine this issue in connection with its review of the offers received. To enable the Board to review and compare the competing offers from potential investors, we ask that your offer contain at least the following information: 1. The maximum amount you are willing to commit or invest and the source of funding. 2. The proposed form of your investment, whether debt or equity, including all terms of any instruments, warrants or securities to be received by you. If you would consider alternative forms of investments, please describe all such alternatives. 3. Your plans for funding any "gap" between the maximum amount you are willing to invest and the $9.8 million needed by Kinark to complete the acquisition of Rogers. 4. Whether shareholders other than yourself would be offered an over-subscription privilege, i.e., permitted to purchase more than their proportionate share of the securities to be offered and, if so, whether existing shareholders would be limited in the amount of securities they could acquire. 5. Whether you would be willing to participate with other investors giving standby commitments and, if so, whether the relative investment of each of the participating investors, including yourself, would be allocated among the standby investors equally, in proportion to their existing holdings of company stock, or in some other manner. 6. If other investors participate in a standby commitment, the minimum amount you would consider committing or investing. 7. Whether you would require any designees to be elected to the Board of Directors of Kinark as a condition to completing the investment, and, if so, the number of designees or how the number of designees would be determined. 8. The other conditions to a firm commitment and investment, such as due diligence, additional financing, or representations, warranties and covenants of Kinark. 9. Your identity and the identity of any of your affiliates or any persons constituting a "group" with you under the federal securities laws, including the beneficial owners of any instruments or securities to be received in the transaction. 10. Whether you would agree to give minority shareholders any assurances or protections beyond those afforded by applicable law. 11. Any other information that you think the Board should consider to positively evaluate your proposal. Further, to assure that a fair and nondiscriminatory evaluation is available for all potential investors, the Board intends to follow certain established procedures in reviewing your offer and the offers of other potential investors. This procedure, to which you should strictly adhere, is outlined as follows: (a) All offers to provide financial assistance to the Company to complete the acquisition of Rogers must be received by the Company at the address on the first page of this letter no later than 5:00 p.m. (Tulsa time) Thursday, October 19, 1995. Please address your letters to me. (b) The Undersigned is coordinating Kinark's efforts to finalize the terms of an investment and to complete the acquisition of Rogers. Consequently, you should contact me if you need any additional information or have any questions about this letter. (c) I am and other representatives of Kinark will be available at any time to answer questions or to provide relevant information to the extent consistent with Kinark's duties under Federal securities laws and Delaware law. (d) If you wish to obtain additional information beyond what is available publicly, then you must execute a confidentiality agreement which is satisfactory to Kinark. (e) The Company will not provide any investor with access to any offers received from other investors. (f) The Board would ask that you be available during the afternoon of October 23, 1995, in case questions concerning your proposal arise or if the Board wishes to negotiate further with you, depending on the nature of the other proposals. To this end, please provide in your proposal an indication of your willingness to be available during this time and a telephone number where you can be reached. Please feel free to call me if you have any questions regarding this letter. Sincerely, /s/ Paul R. Chastain ----------------------- Paul R. Chastain, President EX-99.2 3 EXHIBIT 5 EXHIBIT 5 --------- STEEL PARTNERS II, L.P. 750 Lexington Avenue 27th Floor New York, New York 10022 October 19, 1995 To: The Board of Directors Kinark Corporation 7060 South Yale Avenue Tulsa, Oklahoma 74101 Att'n: Paul R. Chastain, President Gentlemen: In response to your letter of October 17, 1995 (the "Letter") to Steel Partners II, L.P. ("Steel") and based upon the indication of the Board of Directors of Kinark Corporation ("Kinark"), set forth in the Letter, that it prefers to obtain the funds necessary to complete the Rogers acquisition through a rights offering to existing shareholders, together with a standby commitment, Steel hereby submits the following proposal. The item numbers below are generally responsive to the item numbers in the Letter. 1. Steel understands that Kinark proposes to proceed with its contemplated offering to shareholders of non-transferable rights to purchase additional shares of the Company's common stock (the "Rights Offering"). Steel also proposes that each Right carry with it the right to subscribe at the Subscription Price for additional shares that are not otherwise purchased through the exercise of Rights ("the Oversubscription Privilege"). If the number of shares subscribed for pursuant to the Oversubscription Privilege exceeds the number of shares available, the shares subject to the Oversubscription Privilege would be allocated, on a pro rata basis, in proportion to the number of shares that are subscribed for by shareholders participating in the Oversubscription Privilege. In connection with the Rights Offering, and as further described below, Steel hereby commits to act as a "standby" purchaser, for an aggregate of $6 million in total, inclusive of the aggregate price paid for any and all shares for which it subscribes pursuant to the Rights Offering (including shares subscribed for pursuant to the Oversubscription Privilege). The source of funds for this commitment shall be working capital available to Steel. The within proposal is not subject to any financing or due diligence condition. 2. Steel prefers, as suggested by the foregoing, to invest in Kinark on an equity basis only. Steel would consider other alternatives for its investment; however, since Steel believes an appropriate Rights Offering is in the best interests of all Company shareholders, no such alternatives are presented with this proposal. The within proposal does not contemplate that Steel would receive any commitment or other fees, whether in the form of warrants or otherwise, for acting as a standby purchaser in the Rights Offering. 3. It is Steel's understanding that Kinark estimates that approximately $9.8 million is needed, in all, to purchase all outstanding capital stock of Rogers, and that approximately $5.4 million is needed to consummate the existing contract to acquire a majority of its outstanding shares pursuant to the existing stock purchase agreements with the Simpson Inter Vivos Trusts. Whether there will be a "gap" between the funds to be raised in the contemplated Rights Offering, and the funds required to consummate the purchase of all outstanding Rogers capital stock, cannot, of course, be known at this time. But it appears obvious that such a gap, if any, will be appreciably smaller than $3.8 million, i.e., the maximum possible amount which the Company could require if Steel's equity proposal is accepted. Based upon its knowledge of the financial markets, Steel believes that, if Kinark determines to accept the within proposal, the Company will have a substantially strengthened balance sheet and, in all likelihood, would be able to fund the balance required to acquire the minority interests in Rogers through traditional bank financing (based, of course, on a much stronger balance sheet) and/or the redeployment of existing equity. Nevertheless, Steel confirms its willingness to use its best efforts to provide financing in an amount equal to the shortfall, if any, should the same prove necessary. Steel is prepared to discuss this minor issue, and attempt to come to a definitive agreement with respect to it now, or leave it for discussion for another time. 4. Steel is prepared to participate with other purchasers who, like Steel, are willing to provide standby commitments. However, since Steel does not know whether there are such purchasers, or the number thereof, Steel reserves the right to modify the within proposal based upon the level of participation by others and whether they are existing shareholders or not. Steel would be willing to participate in a standby commitment in which participations are made proportionate to the current stock ownership of each such participant. Steel would also consider other bases to allocate standby commitments. 5. In the event that Kinark locates other standby purchasers, Steel would be willing to invest less than the $6 million contemplated hereby, based, of course, on the level of interest expressed by others and/or the level of their current holdings in the Company. 6. For its agreement to provide a standby commitment of $6 million, and on the assumption it is the sole standby purchaser, Steel would request (a) the right to designate two (2) directors on a Board to be comprised of not more than eight (8) directors and (b) the right to designate one (1) director on an Executive Committee of the Board to be comprised of not more than three (3) directors. In the event that the Company takes down the full $6 million contemplated hereby, and on the assumption it is the sole standby purchaser, Steel would request (a) the right to designate two (2) directors on a Board to be comprised of not more than six (6) directors (or three (3) directors on a Board to be comprised of not more than nine (9) directors) and (b) the right to designate one (1) director on an Executive Committee of the Board to be comprised of not more than three (3) directors. Steel's designated representatives would be affiliated with it. 7. Consummation of the within proposal is contingent upon Kinark's obtaining all necessary and appropriate consents and approvals, including consents from its board of directors and its shareholders, if required. The within offer is subject to each of the conditions as set forth in the registration statement filed by Kinark with the Securities and Exchange Commission ("Commission") on September 15, 1995, other than the condition that no stockholder shall own beneficially after the Rights Offering more than 20% of the outstanding shares of the Company's common stock. For purposes of submitting this proposal, Steel has assumed (i) that there have been no material adverse changes in the Company's financial condition, business or prospcsts and (ii) that there have been no undisclosed related party contracts or transactions. 8. For information concerning Steel and its ownership in Kinark, reference is made to its Schedule 13D, as amended, as filed with the Commission. 9. Steel would consider providing minority shareholder assurances in addition to those contained under the Delaware General Corporate Law and the American Stock Exchange rules, including, without limitation, that Steel or its designees on the Board (i) shall not receive any fees from Kinark other than customary directors fees paid to outside directors and (ii) shall not engage in any related party transactions. Steel will also review and address any other specific concerns that Kinark might identify. The within proposal reflects the discussion we had with Kinark's Board of Directors, at its meeting of October 16, 1995. We believe that this proposal fully addresses the issues and questions raised that day. However, as before, Steel remains ready, willing and interested to continue to meet with the Board of Directors or any designated committee thereof to discuss the within proposal, any of its prior proposals or how an alternative transaction could be structured to ensure that Kinark has the necessary funds to complete the Rogers transaction, on terms and conditions which are the best available to Kinark and its shareholders. Steel reiterates its request that it be treated equally with any and all other parties which are or may be interested in providing standby commitments or other forms of financing to Kinark. Among other things, because he is financially interested in the outcome, we request that the Company confirm in writing that Mr. Crimmins will be excluded from Kinark's review of this and any other competing proposals which the Company may receive. Kinark's Board of Directors has again raised concerns about Steel's ability to consummate the within proposal within the time frame required by the Rogers transaction. For the record, Steel reconfirms that it is ready and, since it submitted its proposal on September 13, 1995, that it has been ready to negotiate and quickly conclude a transaction with Kinark which is in the best interests of all Kinark shareholders. The within proposal is made on the understanding that Kinark wishes and intends to proceed with a rights offering, substantially as contemplated in its September 15, 1995 registration statement. If for any reason Kinark decides not to proceed with its rights offering as contemplated, Steel requests that Kinark immediately advise Steel of that fact so that Steel may offer other alternatives to the Board of Directors, including, without limitation, proposals comparable to or better than proposals or opportunities discussed with other investors as to which Steel has no knowledge. Steel's representatives, Warren Lichtenstein and Lawrence Butler, remain available at any time to answer any questions of the Board of Directors with regard to its proposals. We can be reached at (212) 446-5217. Very truly yours, Steel Partners II, L.P. By: /s/ Lawrence Butler ------------------- Lawrence Butler -----END PRIVACY-ENHANCED MESSAGE-----