**THIS DOCUMENT HAS NOT BEEN MAILED TO RSI'S SHAREHOLDERS
PENDING ITS REVIEW BY THE SECURITIES AND EXCHANGE COMMISSION**
OFFER TO PURCHASE FOR CASH
ALL OF THE OUTSTANDING SHARES OF COMMON STOCK OF
RSI HOLDINGS, INC.
AT $0.10 NET PER SHARE
BY
BCM ACQUISITION CORP.
--------------
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON [_____], [________], 2004, UNLESS THE OFFER IS EXTENDED OR EARLIER
TERMINATED.
- --------------------------------------------------------------------------------
BCM Acquisition Corp. ("BCM"), a South Carolina corporation, is
offering to purchase all outstanding shares of the common stock, par value $0.01
per share (the "Shares"), of RSI Holdings, Inc., a North Carolina corporation
("RSI"), at a price of $0.10 per share, net to the seller in cash, without
interest, upon the terms and subject to the conditions specified in this Offer
to Purchase and related Letter of Transmittal.
Our offer is conditioned on, among other things, there being validly
tendered and not withdrawn Shares from a sufficient number of holders of record
of RSI's common stock such that, after those Shares are purchased pursuant to
the Offer and the BCM shareholders have contributed their Shares to BCM, BCM
would own at least 90% of RSI's voting stock. See "The Offer - Certain
Conditions of the Offer" for a description of this and certain other conditions
to the Offer. This offer is not conditioned on BCM obtaining any financing or
the approval of RSI's board of directors. Upon satisfaction or waiver of the
conditions to the Offer, the shareholders of BCM will contribute their Shares to
BCM. If BCM owns at least 90% of RSI's voting stock upon consummation of the
Offer, it will effect a short-form merger of RSI into BCM.
BCM's shareholders are three siblings, Buck A. Mickel, Charles C.
Mickel and Minor Mickel Shaw. (When we use words such as "we", "us" or "our" in
this Offer to Purchase, we are referring to BCM and its shareholders.) Buck A.
Mickel is RSI's President and Chief Executive Officer, Charles C. Mickel is
RSI's Vice President, and they are two of RSI's five directors. The Mickel
siblings beneficially own approximately 76% of RSI's common stock. Because of
the close relationship between BCM's shareholders and RSI, there may be actual
or potential conflicts of interests between BCM and unaffiliated RSI
shareholders. See "Special Factors - Conflicts of Interest."
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION (THE "COMMISSION") NOR HAS THE COMMISSION PASSED UPON
THE FAIRNESS OR MERITS OF THIS TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF
THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY
IS UNLAWFUL.
------------
The date of this Offer to Purchase is [________], 2004
IMPORTANT
Shareholders desiring to tender all or any portion of their Shares
should do one of the following, as applicable: (1) complete and sign the
enclosed Letter of Transmittal and enclose all the documents required by it and
its instructions, including your Share certificates and any required signature
guarantees, and mail or deliver them to the Depositary at the address listed on
the back cover of this document; (2) follow the procedure for book-entry
transfer of Shares set forth in "The Offer - Procedure for Tendering Shares"; or
(3) request your broker, dealer, commercial bank, trust company or other nominee
to effect the transaction for you. Shareholders having Shares registered in the
name of a broker, dealer, commercial bank, trust company or other nominee must
contact such broker, dealer, commercial bank, trust company or other nominee if
they desire to tender those Shares.
A shareholder who desires to tender Shares and whose certificates for
such Shares are not immediately available, or who cannot comply with the
procedure for book-entry transfer on a timely basis, may tender such Shares by
following the procedures for guaranteed delivery set forth in "The Offer -
Procedure for Tendering Shares".
WE HAVE NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON OUR BEHALF
AS TO WHETHER YOU SHOULD TENDER OR REFRAIN FROM TENDERING YOUR SHARES. YOU
SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO WHICH WE
HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION
OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THIS OFFER TO PURCHASE OTHER
THAN THOSE CONTAINED IN THIS OFFER TO PURCHASE OR IN THE RELATED LETTER OF
TRANSMITTAL. IF ANYONE MAKES ANY RECOMMENDATION OR GIVES ANY INFORMATION OR
REPRESENTATION, YOU MUST NOT RELY UPON THAT RECOMMENDATION, INFORMATION OR
REPRESENTATION AS HAVING BEEN AUTHORIZED BY US.
THIS OFFER TO PURCHASE DOES NOT CONSTITUTE AN OFFER TO EXCHANGE OR SELL OR
A SOLICITATION OF AN OFFER TO EXCHANGE OR BUY, ANY SECURITIES OTHER THAN THE
SHARES BY BCM. THE OFFER IS BEING MADE TO ALL HOLDERS OF SHARES. WE ARE NOT
AWARE OF ANY STATE WHERE THE MAKING OF THE OFFER IS PROHIBITED BY ADMINISTRATIVE
OR JUDICIAL ACTION PURSUANT TO A STATE STATUTE. IF WE BECOME AWARE OF ANY STATE
WHERE THE MAKING OF THE OFFER IS PROHIBITED, WE WILL MAKE A GOOD FAITH EFFORT TO
COMPLY WITH ANY SUCH STATUTE. IF, AFTER SUCH GOOD FAITH EFFORT, WE CANNOT COMPLY
WITH ANY SUCH STATUTE, THE OFFER WILL NOT BE MADE TO (NOR WILL TENDERS BE
ACCEPTED FROM OR ON BEHALF OF) THE HOLDERS OF SHARES IN THAT STATE.
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.
Questions and requests for assistance may be directed to the
Information Agent at its address and telephone number set forth below and on the
back cover of this Offer to Purchase. Requests for additional copies of this
Offer to Purchase and the Letter of Transmittal may be directed to the
Information Agent or to brokers, dealers, commercial banks or trust companies.
GEORGESON SHAREHOLDER COMMUNICATIONS INC.
17 State Street, 10th Floor
New York, New York 10004
Toll Free: 888-264-7027
BANKS AND BROKERS MAY CALL: 212-440-9800
ii
TABLE OF CONTENTS
Section Page
- ------- ----
SUMMARY TERM SHEET..................................................................................................1
QUESTIONS AND ANSWERS ABOUT THE TENDER OFFER........................................................................2
INTRODUCTION........................................................................................................7
SPECIAL FACTORS.....................................................................................................9
Background.................................................................................................9
Purpose of the Tender Offer: the Plans of BCM; Consideration of Alternatives.............................12
Certain Effects of the Offer..............................................................................13
Purchaser's Position Regarding the Fairness of the Offer..................................................14
RSI Financial Projections.................................................................................15
Treatment of RSI Options..................................................................................17
Conflicts Of Interest.....................................................................................17
Conduct of RSI's Business if the Offer is Not Completed...................................................18
THE OFFER..........................................................................................................18
Terms of the Offer........................................................................................18
Acceptance for Payment and Payment for Shares.............................................................20
Contribution of Mickel Shares.............................................................................21
Procedure for Tendering Shares............................................................................21
Rights of Withdrawal......................................................................................24
Certain Federal Income Tax Consequences of the Offer......................................................24
Price Range of Shares; Dividends..........................................................................26
Certain Information Concerning RSI........................................................................26
Certain Information Concerning BCM........................................................................29
Merger; Dissenters' Rights;...............................................................................30
Source and Amount of Funds................................................................................32
Certain Conditions of the Offer...........................................................................32
Certain Legal Matters.....................................................................................34
Fees and Expenses.........................................................................................36
Miscellaneous.............................................................................................36
Schedule A........Information Concerning the Shareholders of BCM
Schedule B........Security Ownership of Certain Beneficial Owners and Management
Schedule C........Certain Relationships
Schedule D........Dissenters' Rights under N.C. Gen. Stat. Chapter 55, Article 13 of the General Statutes of
North Carolina
iii
SUMMARY TERM SHEET
This summary highlights important and material information contained in
this Offer to Purchase but is intended to be an overview only. To fully
understand the Offer described in this document and for a more complete
description of the terms of the Offer, you should read carefully this entire
Offer to Purchase, the appendices to this Offer to Purchase, documents
incorporated by reference or otherwise referred to in this Offer to Purchase and
the Letter of Transmittal. Heading references are included to direct you to a
more complete description of the topics contained in this summary.
o BCM Acquisition Corp. ("BCM") is offering to acquire all of the shares
of common stock, par value $0.01 per share (the "Shares"), of RSI
Holdings, Inc. ("RSI"), including any Shares issued upon exercise of
options. The tender price is $0.10 net per share in cash, without
interest. The offer is subject to the terms and conditions set forth
in this Offer to Purchase and the Letter of Transmittal (the "Offer").
See "The Offer - Terms of the Offer" for a description of the terms of
the Offer.
o BCM was formed by siblings Buck A. Mickel, Charles C. Mickel and Minor
Mickel Shaw (sometimes referred to as the "Mickel siblings" or the
"BCM shareholders") for the purpose of completing this Offer and the
Merger. (When we use words such as "we", "us" or "our" in this Offer
to Purchase, we are referring to BCM and its shareholders.) Mickel
family members have been substantial shareholders in RSI since its
spin-off in 1989 and currently collectively own approximately 76% of
the Shares, and Buck A. Mickel has had primary management
responsibility for RSI since the death of his father, Buck Mickel, in
July 1998.
o Buck A. Mickel is the President and Chief Executive Officer of RSI,
and Charles C. Mickel is the Vice President of RSI. Buck A. Mickel and
Charles C. Mickel are two of the five directors of RSI. The Mickel
siblings collectively beneficially own approximately 76% of the
Shares. Because of the close relationship between the Mickel siblings
and RSI, there may be actual or potential conflicts of interests
between BCM and unaffiliated RSI shareholders. See "Special Factors -
Conflicts of Interest."
o This is a "going private" transaction. If we own at least 90% of the
voting securities of RSI following the purchase of Shares in the Offer
and the contribution of Shares by the Mickel siblings, we will cause
RSI to merge into BCM (the "Merger"). As a consequence of the Offer
and the Merger:
o The Mickel siblings will own all of the equity interests in the
surviving company;
o You will no longer have any interest in RSI's future earnings or
growth;
o RSI will no longer be a public company;
o There will be no trading market for RSI Shares; and
o RSI Shares will no longer trade on the Over the Counter Bulletin
Board.
If we complete the Offer by waiving the condition of 90% ownership,
which we do not currently expect to do, then the Merger would not
occur. We expect that we would continue to pursue a going-private
strategy, possibly including, among other options, deregistering the
Shares if possible and pursuing a long-form merger to acquire any
remaining Shares.
See "The Offer - Certain Effects of the Offer."
o Our offer is conditioned, among other things, on the tender of a
sufficient number of Shares so that, after the purchase of the Shares
pursuant to the Offer and contribution of Shares to BCM by the Mickel
siblings, BCM would own at least 90% of the voting securities of RSI
1
(the "Minimum Tender Condition"). We have the right to waive or reduce
the number of RSI Shares that are required to be tendered in the
Offer, subject to compliance with the applicable provisions of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). We
have no current expectation that we would seek to exercise this right.
Our offer is also subject to other terms and conditions. See "The
Offer - Terms of the Offer," and "The Offer - Certain Conditions of
the Offer."
o We commenced the Offer without obtaining the approval of RSI's Board
of Directors. The offer is not conditioned on the approval of the RSI
Board of Directors. See "Special Factors - Background of the Offer."
o The offer is not conditioned on our obtaining any financing. See "The
Offer - Source and Amount of Funds."
o Any shareholders who do not tender their Shares and who dissent from
the Merger may exercise dissenters' rights in accordance with North
Carolina law. See "The Offer - Merger; Dissenters' Rights; `Going
Private' Rules" and Schedule D.
o In the Merger, we will pay to those shareholders who do not tender
their Shares and do not exercise their dissenters' rights the same
consideration as we pay in the Offer. See "Introduction" and, "The
Offer - Merger; Dissenters' Rights; `Going Private' Rules."
o Shareholders who sell their Shares in the Offer will receive cash for
their Shares sooner than shareholders who wait for the Merger to occur
or those who exercise their dissenters' rights. Shareholders who sell
their Shares in the Offer will not be entitled to the benefit of any
judicial determination of the fair value of their Shares under North
Carolina law.
QUESTIONS AND ANSWERS ABOUT THE TENDER OFFER
Q: WHAT ARE THE CLASSES AND AMOUNTS OF SECURITIES SOUGHT IN THE OFFER?
A: BCM is offering to buy all of the outstanding shares of RSI common stock,
including shares issued upon exercise of options. For information about the
terms of the Offer, see "The Offer - Terms of the Offer".
Q: WHO IS OFFERING TO BUY MY SECURITIES?
A: BCM is offering to buy your securities as described in this document. BCM was
formed by siblings Buck A. Mickel, Charles C. Mickel and Minor Mickel Shaw for
the purpose of completing this Offer and the Merger. Buck A Mickel is the
President and Chief Executive Officer of RSI, and Charles C. Mickel is the Vice
President of RSI. Buck A. Mickel and Charles C. Mickel are two of the five
directors of RSI. See "The Offer - Certain Information Concerning BCM", Schedule
A (Information Concerning the Shareholders of BCM) and Schedule B (Security
Ownership of Certain Beneficial Owners and Management) for further information
about BCM and its shareholders.
Q: HOW MUCH IS BCM OFFERING TO PAY AND WHAT IS THE FORM OF PAYMENT?
A: BCM is offering to pay net to you $0.10 in cash for each share of common
stock of RSI. See "The Offer -Terms of the Offer" for information about the
terms of the Offer.
2
Q: DOES BCM HAVE THE FINANCIAL RESOURCES TO MAKE PAYMENT?
A: Yes. We have the financial resources to pay the Offer price with cash on
hand. The Offer is not conditioned on our obtaining any financing. See "The
Offer - Source and Amount of Funds".
Q: WHAT ARE THE MOST SIGNIFICANT CONDITIONS TO THE OFFER?
A: The Offer is conditioned on the tender of a sufficient number of RSI Shares
so that, after the purchase of the Shares pursuant to the Offer and the
contribution of Shares by the Mickel siblings, BCM would own at least 90% of
RSI's voting securities (the "Minimum Tender Condition"). See "The Offer -
Certain Conditions of the Offer," for a complete description of all the
conditions to which the Offer is subject.
Q: HAS THIS OFFER BEEN APPROVED BY THE RSI BOARD OF DIRECTORS?
A: We commenced this Offer without obtaining the prior approval of RSI's board
of directors. The completion of the Offer is not conditioned on the approval of
RSI's Board of Directors. Federal securities laws require RSI's Board of
Directors to advise RSI stockholders of its position on this Offer within ten
business days of the date of this document. We believe that the Board is
unlikely to be able to take a position with respect to the Offer, because four
of the five members have conflicts of interest. See "Special Factors -
Background of the Offer" and "Special Factors" - Conflicts of Interest".
Q: WHY IS BCM MAKING THIS OFFER?
A: BCM believes the Offer, if consummated, would:
o Relieve RSI of certain expenses inherent with being a public company
(during its last fiscal year, it paid in excess of $45,000 for
accounting, legal, transfer agent, and related fees and costs
associated with being a public company, and we anticipate that these
costs will rise to over $100,000 for future years); and
o Afford shareholders who have been unable to sell RSI common stock
because of the general lack of liquidity for its common stock in the
public market an opportunity to sell their RSI common stock at a price
that is equal to or greater than the stock's fair market value.
BCM and the Mickel siblings have determined that maintaining a less than 100%
interest in RSI is not a desirable long-term strategy. For more information, see
"Special Factors - Purpose of the Offer; the Plans of BCM; Consideration of
Alternatives."
Q: WHY DO BCM AND THE MICKEL SIBLINGS BELIEVE THAT THE OFFER IS FAIR TO RSI'S
SHAREHOLDERS?
BCM and its shareholders, the Mickel siblings, believe that the Offer and Merger
are both procedurally and financially fair to the RSI's shareholders who are not
affiliated with BCM or its shareholders for the following reasons, among others:
(i) the Offer price exceeds the (negative) net book value per share of RSI
common stock at August 31, 2004 by $0.14 and exceeds the (estimated nonexistent)
per-share liquidation value of RSI stock by $0.10 per share, and RSI's
consistent history of losses indicates that there is not much likelihood of
RSI's achieving positive net book value or liquidation value in the near future;
(ii) the $0.10 per share Offer price represents an 11.1% premium to the closing
price of $0.09 on August 16, 2004, the last full trading day prior to the public
announcement of an anticipated going-private transaction by the Mickel siblings;
(iii) the Offer is conditioned upon BCM acquiring at least 90% of the voting
securities of RSI (including through contribution by the Mickel siblings); (iv)
the Mickel siblings' ownership of approximately 76% of RSI's voting securities
may have limited RSI's alternatives; (v) the Offer provides the RSI shareholders
with the opportunity to sell their historically illiquid holdings at a premium
and without incurring brokerage and other costs typically associated with market
sales; (vi) RSI's shareholders are capable of evaluating the Offer, and each RSI
shareholder can individually determine whether or not to tender his/her shares;
(vii) RSI shareholders who elect not to tender their Shares in the Offer and do
not exercise their dissenters' rights with respect to the Merger will receive
the same consideration in the Merger that we pay in the Offer; and (viii) RSI's
shareholders who elect not to tender their shares are entitled to pursue
dissenters' rights under North Carolina law. See "Special Factors - Purchasers'
Position Regarding the Fairness of the Offer."
3
Q: HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER IN THE INITIAL OFFERING
PERIOD?
A: You may tender your Shares until [_____], [________], 2004, which is the
scheduled expiration date of the offering period, unless BCM decides to extend
the offering period or provide a subsequent offering period. See "The Offer -
Procedure for Tendering Shares" for information about tendering your shares.
Q: CAN THE OFFER BE EXTENDED, AND HOW WILL I BE NOTIFIED IF THE OFFER IS
EXTENDED?
A: Yes, BCM may elect to extend the Offer. We can do so by issuing a press
release no later than 9:00 A.M., New York City time, on the business day
following the scheduled expiration date of the Offer, stating the extended
expiration date and the approximate number of Shares tendered to date. See "The
Offer - Terms of the Offer" for information about extension of the Offer.
Q: WILL THERE BE A SUBSEQUENT OFFERING PERIOD?
A: Following the satisfaction or waiver of all the conditions to the Offer and
the acceptance of and payment for all the Shares tendered during the offering
period, BCM may elect to provide a subsequent offering period of at least three
(3) business days, during which time shareholders whose Shares have not been
accepted for payment may tender, but not withdraw, their Shares and receive the
Offer consideration. BCM is not permitted under the federal securities laws to
provide a subsequent offering period of more than twenty (20) business days. See
"The Offer - Terms of the Offer" and "The Offer - "Rights of Withdrawal" for
more information concerning any subsequent offering period.
Q: HOW DO I TENDER MY SHARES?
A: If you hold the certificates for your Shares, you should complete the
enclosed Letter of Transmittal and enclose all the documents required by it,
including your certificates and any required signature guarantees, and send them
to the American Stock Transfer & Trust Company (the "Depositary") at the address
listed on the back cover of this document. You may also tender your Shares by
following the procedures for book-entry transfer of Shares, or by having a
broker, dealer, commercial bank, trust company or other nominee effect the
transaction for you. If your broker holds your Shares for you in "street name,"
you must instruct your broker to tender your shares on your behalf. If you
cannot comply with any of these procedures, you still may be able to tender your
Shares by using the guaranteed delivery procedures described in this document.
In any case, the Depositary must receive all required documents prior to the
expiration date of the Offer which is 5:00 p.m., [_____], [________], 2004,
unless extended. See "The Offer - Procedure for Tendering Shares" for more
information on the procedures for tendering your Shares.
Q: UNTIL WHAT TIME CAN I WITHDRAW PREVIOUSLY TENDERED SHARES?
A: The tender of your Shares may be withdrawn at any time prior to the
expiration date of the Offer. There will be no withdrawal rights during any
subsequent offering period. See "The Offer - Rights of Withdrawal" for more
information.
Q: HOW DO I WITHDRAW PREVIOUSLY TENDERED SHARES?
A: You (or your broker if your shares are held in "street name") must notify the
Depositary at the address and telephone number listed on the back cover of this
document, and the notice must include the name of the shareholder that tendered
the Shares, the number of Shares to be withdrawn and the name in which the
tendered Shares are registered. For complete information about the procedures
for withdrawing your previously tendered Shares, see "The Offer - Rights of
Withdrawal".
4
Q: WILL I HAVE THE RIGHT TO HAVE THE FAIR VALUE OF MY RSI SHARES DETERMINED?
A: If you tender your RSI Shares in the Offer, you will not be entitled to
exercise statutory dissenters' rights under North Carolina law. If you do not
tender your Shares in the Offer and the Merger occurs, you will have a statutory
right to demand payment of the judicially determined fair value of your RSI
Shares plus a fair rate of interest, if any, from the date of the Merger. The
judicially determined fair value may be more than, less than or the same as the
cash consideration we pay in the Offer and the Merger. See "The Offer - Merger;
Dissenters' Rights; `Going Private' Rules" and Schedule D for more information.
Q: IF BCM CONSUMMATES THE TENDER OFFER, WHAT ARE ITS PLANS WITH RESPECT TO THE
SHARES THAT ARE NOT TENDERED IN THE OFFER?
A: If the tender offer is successful and we own at least 90% of the voting
securities of RSI, we will cause RSI to merge with and into BCM and will pay the
RSI shareholders who have not tendered their Shares the same consideration we
paid for Shares in the tender offer. After the Merger, RSI will cease to exist
as a separate entity. The surviving company, which is expected to be renamed
"RSI Holdings, Inc." as part of the Merger (the "New RSI"), will be wholly owned
by the Mickel siblings.
RSI shareholders who do not tender their Shares in the Offer will have a right
to dissent and exercise their dissenters' rights to receive the fair value of
their Shares under North Carolina law. If you exercise your dissenters' rights,
you will not receive the Merger consideration unless you waive or effectively
lose your dissenters' rights. See "The Offer - Merger; Dissenters' Rights;
`Going Private' Rules."
If you do not tender in the Offer and the Merger does not occur, and we purchase
Shares in the Offer, our purchase of Shares will reduce the number of Shares
that might otherwise trade publicly and will reduce the number of holders of
Shares. These events could adversely affect the liquidity and trading price of
the remaining Shares held by the public. The Shares may no longer be quoted on
the Over the Counter Bulletin Board. In addition, RSI may no longer be required
to make filings with the SEC or comply with the SEC's rules relating to
publicly-held companies. In addition, we expect that we would continue to pursue
a going-private strategy, possibly including, among other options, pursuing a
long-form merger to acquire any remaining Shares. See "Special Factors - Certain
Effects of the Offer," for more information about the effect of the Offer on
your Shares.
Q: WHAT IS THE MARKET VALUE OF MY SHARES AS OF A RECENT DATE?
A: On August 16, 2004, the last full trading day prior to the public
announcement of an anticipated going-private transaction by the Mickel siblings,
the reported closing price on the Nasdaq OTC Bulletin Board Market was $0.09 per
Share. For the year, quarter, month and week ending on August 16, 2004, the
average closing prices were $0.093, $0.084, $0.090 and $0.090 per Share,
respectively. The $0.10 per Share price represents an 11.1% premium over the
August 16, 2004 closing price and premiums of 7.6%, 19.1%, 11.1% and 11.1% over
the average closing prices for the year, quarter, month and week ending on
August 16, 2004, respectively. Since August 16, there have been three trades in
the Shares, all at $0.08 per Share. You should obtain a recent market quotation
for Shares of the common stock of RSI in deciding whether to tender your Shares.
In addition, because RSI's stock is thinly traded, its closing prices may not be
as meaningful as for more heavily traded stock. See "The Offer - Price Range of
Shares; Dividends" for recent high and low sales prices for the Shares.
Q: WILL I HAVE TO PAY ANY FEES OR COMMISSIONS?
A: If you are the record owner of your shares and you tender your shares to us
in the Offer, you will not have to pay brokerage fees or similar expenses. If
you own your shares through a broker or other nominee, and your broker or
nominee tenders your shares on your behalf, it may charge you a fee for doing
so. You should consult your broker or nominee to determine whether any charges
will apply. See "The Offer - Procedure for Tendering Shares."
5
Q: HOW WILL U.S. TAXPAYERS BE TAXED FOR U.S. FEDERAL INCOME TAX PURPOSES?
A: If you are a U.S. taxpayer, your receipt of cash for RSI Shares in the Offer
will be a taxable transaction for U.S. federal income tax purposes. You will
generally recognize gain or loss in an amount equal to the difference between
(i) the cash you receive in the Offer and (ii) your adjusted tax basis in the
RSI Shares you sell in the Offer. That gain or loss will be a capital gain or
loss if the shares are a capital asset in your hands, and will be long-term
capital gain or loss if the shares have been held for more than one year at the
time the Offer is completed. You are urged to consult your own tax advisor as to
the particular tax consequences of the Offer to you. See "The Offer - Certain
Federal Income Tax Consequences of the Offer."
Q: WHO CAN I TALK TO IF I HAVE QUESTIONS ABOUT THE TENDER OFFER?
A: If you have questions or you need assistance you should contact the
Information Agent at the following address and telephone number:
Georgeson Shareholder Communications Inc.
17 State Street, 10th Floor
New York, New York 10004
Toll Free: 888-264-7027
Banks and Brokers may call: 212-440-9800
6
INTRODUCTION
BCM Acquisition Corp., a South Carolina corporation ("BCM" or the
"Purchaser"), hereby offers to purchase any and all of the issued and
outstanding shares of common stock, par value $0.01 per share (the "Shares"), of
RSI Holdings, Inc., a North Carolina corporation ("RSI"), at a price of $0.10
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, as they may be amended
and supplemented from time to time, together constitute the "Offer"). The Offer
price exceeds the (negative) net book value per share of RSI common stock at
August 31, 2004 by $0.14 and exceeds the (estimated nonexistent) per-share
liquidation value of RSI stock by $0.10 per share. The Offer Price also
represents a premium of approximately 11.1% over the August 16, 2004 closing
price and premiums of 7.6%, 19.1%, 11.1% and 11.1% over the average closing
prices for the year, quarter, month and week ending on August 16, 2004, the last
full trading day before the public announcement of the Mickel siblings'
intention to initiate a going-private transaction. Because RSI's stock is thinly
traded, however, its closing prices may not be as meaningful as for more heavily
traded stock. As of [ ], 2004, there were 7,846,455 shares of RSI's common
stock outstanding, 5,934,856 (approximately 76%) of which were owned by the
Mickel siblings.
If you are a record owner of Shares, you will not be required to pay
brokerage fees or commissions or, except as described in Instruction 6 of the
Letter of Transmittal, stock transfer taxes on the transfer and sale of Shares
in the Offer. Stockholders who hold their Shares through bankers or brokers
should check with such institutions as to whether they charge any service fee.
However, if you do not complete and sign the Substitute Form W-9 that is
included in the Letter of Transmittal, you may be subject to a required backup
U.S. federal income tax withholding of 28% of the gross proceeds payable to you.
We will pay all charges and expenses of American Stock Transfer & Trust Company,
as Depositary (the "Depositary"), and Georgeson Shareholder Communications,
Inc., as Information Agent (the "Information Agent"), incurred in connection
with the Offer.
OUR OFFER IS CONDITIONED, AMONG OTHER THINGS, ON THE TENDER OF A
SUFFICIENT NUMBER OF SHARES SO THAT, AFTER THE PURCHASE OF THE SHARES PURSUANT
TO THE OFFER AND CONTRIBUTION OF SHARES BY THE MICKEL SIBLINGS, BCM WOULD OWN AT
LEAST 90% OF THE VOTING SECURITIES OF RSI (THE "MINIMUM TENDER CONDITION").
WE RESERVE THE RIGHT TO WAIVE OR REDUCE THE MINIMUM TENDER CONDITION
AND TO ELECT TO PURCHASE A SMALLER NUMBER OF SHARES, SUBJECT TO COMPLIANCE WITH
THE APPLICABLE PROVISIONS OF THE EXCHANGE ACT. WE HAVE NO CURRENT EXPECTATION
THAT WE WOULD SEEK TO EXERCISE THIS RIGHT. OUR OFFER IS ALSO SUBJECT TO OTHER
TERMS AND CONDITIONS. SEE "THE OFFER - TERMS OF THE OFFER," AND "THE OFFER -
CERTAIN CONDITIONS OF THE OFFER."
The purpose of the Offer is to acquire as many outstanding Shares as
possible as a first step in acquiring all of the equity of RSI. If the Minimum
Tender Condition is satisfied and we own at least 90% of the voting securities
of RSI, we will effect the Merger: RSI will merge with BCM through a short-form
merger. In the Merger, each outstanding Share that we do not own (other than
Shares held by RSI shareholders who dissent from the Merger and perfect their
dissenters' rights under the North Carolina Business Corporation Act (the
"NCBCA")) will be converted into the right to receive the same consideration
that we paid in the Offer, without interest. See "The Offer - Merger;
Dissenters' Rights; `Going Private' Rules." Under the NCBCA and under the South
Carolina Business Corporation Act of 1988 (the "SCBCA"), which applies to BCM,
if BCM owns at least 90% of the voting securities of RSI we can consummate the
Merger without a vote of or prior notice to the remaining shareholders or Board
of Directors of RSI. See "The Offer - Merger; Dissenters' Rights; `Going
Private' Rules." As a result of the Offer and the Merger, BCM would be the
surviving company, would be renamed "RSI Holdings, Inc." and would be wholly
owned by the Mickel siblings. RSI would cease to exist as a separate entity and
the Shares would no longer trade publicly. If we complete the Offer by waiving
the Minimum Tender Condition, which we do not currently expect to do, then the
Merger would not occur. We expect that we would continue to pursue a
7
going-private strategy, possibly including, among other options, deregistering
the Shares if possible and pursuing a long-form merger to acquire the remaining
Shares.
We have not asked the RSI Board of Directors to approve the Offer. The
RSI board must file with the Securities and Exchange Commission (the "SEC") and
provide to RSI stockholders a "Solicitation/Recommendation Statement on Schedule
14D-9" within ten business days from the commencement of this Offer. We believe
that the Board is unlikely to be able to take a position with respect to the
Offer, because four of the five members have conflicts of interest. We encourage
you to review carefully the Schedule 14D-9 when it becomes available.
Buck A. Mickel is the President and Chief Executive Officer of RSI and
Charles C. Mickel is the Vice President of RSI. Buck A. Mickel and Charles C.
Mickel are two of the five directors of RSI. The Mickel siblings collectively
beneficially own approximately 76% of the Shares.
This Offer to Purchase and the documents incorporated by reference in
this Offer to Purchase include certain forward-looking statements. These
statements appear throughout this Offer to Purchase and include statements
regarding our intent, belief or current expectations of, including statements
concerning our plans with respect to, the acquisition of all of the Shares. Such
forward-looking statements are not guarantees of future performance or events
and involve risks and uncertainties. Actual results may differ materially from
those described in such forward-looking statements as a result of various
factors. Factors that might affect such forward-looking statements include,
among other things:
o general economic, capital market and business conditions;
o terrorist attacks on the United States or international targets;
o changes in government regulation;
o the risks and uncertainties described in RSI's filings with the SEC
under the Exchange Act; and
o changes in tax law requirements, including tax rate changes, new tax
laws and revised tax law interpretations.
THE OFFER IS CONDITIONED UPON THE SATISFACTION OR WAIVER OF THE
CONDITIONS DESCRIBED IN "THE OFFER - CERTAIN CONDITIONS OF THE OFFER." THE
OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON [_____], [_______], 2004,
UNLESS WE EXTEND IT.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH YOU SHOULD READ CAREFULLY BEFORE YOU MAKE ANY
DECISION WITH RESPECT TO THE OFFER.
8
SPECIAL FACTORS
BACKGROUND
BACKGROUND OF RSI AND THE MICKELS' INVESTMENT
RSI has had a troubled history in recent years. In January 2000, RSI
commenced the liquidation of its sole operating subsidiary at the time, HomeAdd
Financial Corporation. RSI completed the liquidation of HomeAdd during December
2000, and during the period from January 2001 through March 2002, RSI searched
for and investigated business opportunities. In March 2002, RSI acquired its
current sole operating subsidiary, Employment Solutions, which is in the
business of locating and providing labor to industrial companies. Since then,
RSI has had a consistent history of losses and of relatively flat revenues, and
with the anticipated cost increases associated with being a public company, we
expect that RSI's losses will increase as well.
Over the past several years, Mickel family members have provided the
bulk of RSI's funding. During August 2001, Minor H. Mickel, the Mickel siblings'
mother, loaned RSI $250,000 under a 5-year unsecured note. During February 2002,
Minor H. Mickel and the Mickel siblings collectively loaned RSI $1,260,000 under
5-year unsecured notes, the proceeds of which were used to purchase the assets
of RSI's subsidiary, Employment Solutions. Minor H. Mickel's interest in these
notes from RSI has since been given to the Mickel siblings.
RSI's continuing operations depend on the deferral of the payment of
interest by the Mickel siblings with respect to their notes from RSI. They (and,
before she gave them the notes, Minor H. Mickel) have permitted the deferral of
payment of interest on their notes payable aggregating $1,200,000 in principal
amount since the notes' issuance. Since November 2003, the Mickel siblings have
also permitted the deferral of payment of interest under the other notes payable
held by them, in the aggregate principal amount of $310,000. The aggregate
amount of the deferral of interest on these notes is approximately $9,000 per
month. The Mickel siblings have agreed that they will not require payment of
interest until July 2005 at the earliest.
Given this history of funding RSI through loans and maintaining RSI's
ability to operate by deferring our interest payments, we have determined that
RSI's remaining a public company and our maintaining a less than 100% interest
in RSI is not a desirable long-term strategy. We believe that RSI may be able to
make modest improvements in operations and achieve profitability, but we do not
anticipate any substantial improvement to its existing business and we are not
contemplating any acquisition of another business. Accordingly, we believe that
the achievement of profitability is only possible for RSI as a private company,
because any reasonably possible projected future improvements would otherwise be
outweighed by projected public company expenses. Accordingly, we have no
interest in continuing to support RSI as a public company. Moreover, we believe
that it would not be prudent to advance further funds to RSI, because we would
derive only a portion of the benefits contributed.
BACKGROUND OF THE OFFER
The Mickel siblings and RSI's Board of Directors began to consider a
going-private transaction for RSI in late 2003. At a November 3, 2003 board
meeting, Buck A. Mickel began a discussion about the potential benefits of RSI's
being a private company. In particular, he highlighted the increasing costs of
being a public company, which had been approximately $50,000 per year. Mr.
Mickel noted that the likely cost to purchase all the stock of shareholders
other than the Mickels, RSI directors and management, including their family
members, would be saved in a few years through savings in legal, accounting and
other costs associated with meeting the filing requirements of public companies.
In addition, he mentioned that there are no real advantages to shareholders to
RSI's being a public company, because RSI is thinly traded and there is
9
therefore very little liquidity for the stock. There was a general agreement
among the Board members that they would begin to explore the possibility of
taking RSI private.
In late November 2003, a family health crisis developed in the Mickel
family, and the Mickel siblings chose to delay any going-private planning in
order to focus on the crisis.
During December 2003, RSI's management continued to seek a qualified
firm that a special committee of independent directors, which RSI's directors
and management expected to be created in connection with a going-private
transaction, might employ to issue a fairness opinion of any offer that might be
presented to the Board. The range of prices quoted to RSI by various firms for
those firms to give a fairness opinion ranged from a low estimate of
$50,000-$75,000 range to a price in the $250,000 range. Given the likely
consideration to unaffiliated shareholders in a going-private transaction, it
was felt that these prices were excessive in relation to the likely price of the
transaction and would not add sufficient value to justify the cost. In January
2004, RSI's management spoke with a firm that quoted a price of $20,000 to
provide a valuation of RSI. Based on this quote, the Board approved this firm's
proposal. However, on learning that the valuation would be included in RSI's
filings with the SEC, the firm withdrew the quote and declined to provide
services to RSI.
At its January 29, 2004 meeting, the Board continued to discuss the
possibility of a going-private transaction for RSI. Buck Mickel noted that any
going-private transaction had been delayed and would continue to be delayed due
to a family health crisis. The Board discussed the possibility of a transaction
in which all the stock except the stock of those shareholders who are not
considered insiders or family of insiders (1,233,995 shares) would be purchased
or cashed out. The objective discussed was to buy as many of the 1,233,995
shares as possible through a tender offer and to bring the total number of
shareholders to less than 500, below which RSI could terminate its registration
with the SEC. A schedule was furnished to the effect that the expenses incurred
by RSI over the prior two years relating to public company disclosures total
$124,930.
From November 2003 through January 2004, the Mickel siblings considered
the possibility of making a tender offer for shares of RSI's stock owned by
other shareholders. They considered the advantages of this structure, including
the potential for concluding the transaction more quickly than would be likely
in other structures, such as a long-form merger. They also considered the
disadvantages, including the possibility that RSI's shareholders would choose
not to tender their shares because of the minimal value involved. It has been
RSI's experience that many shareholders are indifferent to their holdings in RSI
- - for instance, only 25% of RSI's shareholders submitted their certificates for
exchange in connection with RSI's reverse stock split completed in 2002.
In considering the possibility of a tender offer, the Mickel siblings
concluded that a tender offer would best be followed by a cash-out merger. The
Board began to consider a long-form merger transaction as an alternative to
a tender offer and short-form merger transaction.
At the Board's May 3, 2004 meeting, discussions continued as to reasons
for going private. Actual public-company-related expenses of $45,435 for the
most recent fiscal year were compared to estimated expenses of $107,200 for the
fiscal year ended August 31, 2005. Anticipated expenses for the 2005 fiscal year
10
include the evaluation of internal controls and the additional Form 8-K filing
requirements. The Board concluded that the cost and the management time required
to comply with public company requirements is becoming disproportionate to the
size of RSI. The Board discussed the possibility of a merger structure in which
all of the RSI stock other than stock owned by the Mickel family members would
be cashed out.
In June 2004, the Mickel siblings and RSI's management considered the
possibility of a going-private cash-out merger in which the Mickel siblings
would be the sole remaining shareholders of the surviving company.
At the Board's August 2, 2004 meeting, discussions about a potential
transaction continued. The directors were given projections for the 2004-05
fiscal year that projected estimated savings from not having to comply with the
public company filing requirements of $109,200. (These projections are discussed
below in "Special Factors - RSI Financial Projections.")
During the week of August 9, the Mickel siblings discussed a cash-out
going-private merger structure. Under the North Carolina Shareholder Protection
Act of the NCBCA, under some circumstances the business combination between a
company and owners of more than 20% of its stock requires the approval of 95% of
the company's outstanding shares. As indicated under "The Offer - Certain Legal
Matters", we believe that an exemption from the Shareholder Protection Act
applies to any combination between the Mickels and RSI, including the Merger,
but because the factual situation is complicated and there is no interpretive
case law with respect to this exemption, there is some uncertainty as to the
application of this statute to RSI. For this reason, and because historical
voting records and conversation with a prospective proxy solicitor indicated
that 95% approval was an achievable threshold, the Mickel siblings considered
voluntarily including a 95% approval requirement for RSI's shareholders. On
August 12, 2004, the Mickel siblings signed a letter proposing the Merger. On
August 13, 2004, Buck A. Mickel sent the letter to the other Board members,
along with a request for a special meeting of directors by teleconference on
August 16, 2004.
On August 16, 2004, the Board met by teleconference. Buck A. Mickel
presented the proposal to the Board. He explained the Mickel siblings' reasons
for the transaction, including the disproportionate size of the costs associated
with being a public company and the limited liquidity of RSI stock. He stated
that the Mickel family has been financing RSI with loans and has been
maintaining its working capital by deferring interest payments on the loans, and
he noted that the Mickels might not be willing to continue to finance RSI unless
it becomes a private company. The Board formed a special committee composed of
the two non-employee Board members, C.C. Guy and Charles M. Bolt, to consider
and negotiate the transaction from the perspective of unaffiliated shareholders.
Mr. Mickel mentioned that RSI's counsel had referred RSI to Ronald E. Gregory, a
potential independent evaluator of the transaction, noted that he had not been
in contact with Mr. Gregory and gave his contact information to the members of
the special committee.
On August 16, 2004, after the Board meeting, the members of the special
committee spoke by teleconference with Ronald E. Gregory of R.E. Gregory & Co.,
LLC, d/b/a Economic Evaluations ("Economic Evaluations"). After discussing his
credentials and the potential scope of work he would provide, the committee
agreed to engage Economic Evaluations. On August 18, 2004, the special committee
and Economic Evaluations signed an engagement letter dated as of August 16,
2004.
On August 19, 2004, RSI and the Mickels received a report from ADP
Investor Communications Services with details about the beneficial ownership of
RSI's stock. They learned that approximately 4.5% of the Shares are beneficially
owned by street-name holders who have chosen not to provide their personal
contact information. Because these shareholders cannot be contacted by a proxy
solicitor and because RSI's experience is that its small shareholders appear to
be indifferent to and unresponsive about their RSI holdings, the Mickels
concluded that RSI might not be able to achieve a 95% participation rate, and
that as a consequence voluntarily seeking a 95% approval vote for a complicated,
expensive going-private transaction might not be a reasonable option.
On August 20, 2004, Ronald Gregory of Economic Evaluations informed
C.C. Guy, one of the members of the special committee, by telephone of his
conclusion that $0.10 represents a fair price for the Shares.
On September 1, 2004, the Mickels and RSI learned that Charles M. Bolt,
one of RSI's five directors and one of the two members of the special committee
appointed with respect to the proposed merger transaction, was seriously ill and
would be unable to continue to serve actively for some period of time. Buck
Mickel concluded that it would be unreasonable for RSI to expect C.C. Guy to
serve alone on a special committee and that having a special committee to
evaluate any going-private offer was therefore impossible.
11
In late August and early September 2004, the Mickels reevaluated the
structuring options available for a going-private transaction. They concluded
that the likelihood of a substantial percentage of unresponsive, unreachable
shareholders, the inability to have a special committee of independent
directors, and the cost and delay of obtaining the approvals of RSI's Board of
Directors and of RSI's stockholders as compared to a tender offer weighed
against continuing to pursue the long-form merger transaction. In considering
the options, they came to the conclusion that a tender offer, followed by a
short-form merger, was likely to be the quickest and most cost effective way to
offer liquidity to RSI's unaffiliated shareholders and to enable RSI to go
private.
On September 13, 2004, RSI's board dissolved the special committee
formed in connection with the proposed merger and, acting on behalf of RSI's
unaffiliated shareholders, engaged Economic Evaluations to provide a fairness
opinion and supporting analysis to be included in RSI's response to the
contemplated tender offer.
PURPOSE OF THE TENDER OFFER; THE PLANS OF BCM; CONSIDERATION OF ALTERNATIVES
We have determined that RSI's remaining a public company and our
maintaining a less than 100% interest in RSI is not a desirable long-term
strategy. We have historically funded RSI through loans and have deferred
interest payments to maintain RSI's ability to operate, and we believe that it
would not be prudent to advance further funds to RSI, because we would derive
only a portion of the benefits contributed. We believe that RSI may be able to
make modest improvements in operations and achieve profitability, but we do not
anticipate any substantial improvement to its existing business and we are not
contemplating any acquisition of another business. Accordingly, we believe that
the achievement of profitability is only possible for RSI as a private company,
because any reasonably possible projected future improvements would otherwise be
outweighed by projected public company expenses. Accordingly, we have no
interest in continuing to support RSI as a public company.
We believe that the costs and additional burdens on RSI's management
associated with public reporting and other procedural and compliance
requirements resulting from RSI's status as a public company, are a strain on
RSI's management resources, shareholder return and operations. The current cost
of compliance is, in our view, disproportionate to RSI's size, and we believe
that these costs are likely to increase in the future as, for example, internal
control evaluating and reporting requirements begin to apply to RSI. Making RSI
wholly-owned by the Mickel siblings will reduce these complications and costs
and provide RSI's management the ability to focus on long-term business goals,
operations and a return to profitability rather than on compliance-related
issues. Further, given the public capital market trends affecting small-cap
companies, including institutional investors' perceived lack of interest in
companies with limited public float, RSI is not deriving benefits from its
status as a public company.
Upon the successful completion of the Offer and the Merger, we would be
more willing to make further contributions of capital and management expertise
in order to effect changes and improvements that we believe are necessary for
RSI to achieve profitability.
The purpose of the Offer is for BCM to acquire for cash as many
outstanding Shares as possible. The Offer is a first step in acquiring all
equity interests in RSI not owned by us. The Merger is intended to pay for and
remove any remaining minority interest.
If we own at least 90% of the voting securities of RSI following the
purchase of Shares in the Offer and the contribution of Shares by the Mickel
siblings, the Merger will be effected. As a result of the Offer and the Merger,
the surviving company of the merger of RSI into BCM (the New RSI) would be
wholly owned by the Mickel siblings and the Shares would no longer trade
publicly.
Following completion of the Offer and the Merger, we will cause the
Shares to be delisted from the Over the Counter Bulletin Board and New RSI will
be a privately-held corporation. Accordingly, current shareholders who are not
affiliated with us will not have the opportunity to participate in any earnings
and growth of New RSI and will not have any right to vote on corporate matters.
Correspondingly, after completion of the Merger, former shareholders will not
12
face the risk of losses resulting from New RSI's operations or from any decline
in the value of New RSI. Also, if there is ever any offset to RSI's future
taxable income from RSI's net operating loss carryforwards, the benefit of the
offset will be realized only by continuing shareholders. See "Special Factors -
Conflicts of Interest - Net Operating Loss Carryforwards."
If we complete the Offer by waiving the condition of 90% ownership,
which we do not currently expect to do, then the Merger would not occur. In that
event, we expect that we would continue to pursue a going-private strategy,
possibly including, among other options, deregistering the Shares if possible
and pursuing a long-form merger to acquire any remaining Shares.
Except as otherwise described in this Offer to Purchase, we have no
current plans or proposals or negotiations which relate to or would result in:
(i) an extraordinary corporate transaction, such as a merger (other than the
Merger), reorganization or liquidation involving RSI; (ii) any purchase, sale or
transfer of a material amount of assets of RSI; (iii) any material change in
RSI's present dividend rate or policy; (iv) any change in the management of RSI
(except that Charles M. Bolt will not serve on the board of New RSI for health
reasons); or (v) any other material change in RSI's corporate structure or
business. We expressly reserve the right to change our business plans with
respect to RSI based on future developments.
As discussed above in "Background - Background of the Offer", we
considered alternative structures and we came to the conclusion that a tender
offer followed by a short-form merger, was likely to be the quickest and most
cost effective way to offer liquidity to RSI's unaffiliated shareholders and to
enable RSI to go private. We rejected the long-form merger structure due to the
likelihood of a substantial percentage of unresponsive, unreachable
shareholders, the inability to have a special committee of independent
directors, and the cost and delay of obtaining the approvals of RSI's Board of
Directors and of RSI's stockholders as compared to a tender offer. Other
alternatives, including an asset sale from RSI to BCM or bankruptcy protection
for RSI, were rejected because they would result in no payments to unaffiliated
shareholders.
CERTAIN EFFECTS OF THE OFFER
PARTICIPATION IN FUTURE GROWTH. If you tender your Shares in the Offer,
you will not have the opportunity to participate in any future earnings, profits
and growth of RSI and will not have the right to vote on corporate matters
relating to RSI. If the Offer and the Merger are completed, the Mickel siblings
will indirectly own a 100% interest in the net book value and net earnings of
RSI and only they will benefit from any future increase in the value of RSI.
Correspondingly, the Mickel siblings will bear the risk of any decrease in the
value of RSI, and you will not face the risk of a decline in the value of RSI.
Upon the completion of the Merger, the Mickel siblings' beneficial interest in
RSI's net book value and net gain or loss would increase from approximately 76%
to 100% and RSI would no longer be a public company. Also, if there is ever any
offset to RSI's future taxable income from RSI's net operating loss
carryforwards, the benefit of the offset will be realized only by continuing
shareholders. See "Special Factors - Conflicts of Interest - Net Operating Loss
Carryforwards."
MARKET FOR SHARES. The purchase of Shares by BCM pursuant to the Offer
will reduce the number of Shares that might otherwise trade publicly and may
reduce the number of holders of Shares, which could adversely affect the
liquidity and market value of the remaining Shares held by the public. We cannot
predict whether the reduction in the number of Shares that might otherwise trade
publicly would have an adverse or beneficial effect on the market price for, or
marketability of, the Shares or whether such reduction would cause future market
prices to be greater or less than the price to be paid in the Offer.
STOCK QUOTATION. The Shares are quoted on the Over the Counter Bulletin
Board. According to published guidelines of the Over the Counter Bulletin Board,
the Shares might no longer be eligible for quotation on the Over the Counter
Bulletin Board if, among other things, RSI no longer files reports pursuant to
Section 12 or Section 15(d) of the Exchange Act. If the Shares were to cease to
be quoted on the Over the Counter Bulletin Board, the market for the Shares
could be adversely affected.
13
EXCHANGE ACT REGISTRATION. The Shares are currently registered under
the Exchange Act. The purchase of Shares pursuant to the Offer may result in the
RSI becoming eligible for deregistration under the Exchange Act. Registration of
the Shares may be terminated upon application by RSI to the SEC if the Shares
are not listed on a national securities exchange and there are fewer than 500
holders of record of the Shares. Termination of registration of the Shares under
the Exchange Act would substantially reduce the information required to be
furnished by RSI to its shareholders and to the SEC and would make certain
provisions of the Exchange Act no longer applicable to RSI, 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 shareholders' meetings and the related
requirement of furnishing an annual report to shareholders, and the requirements
of Rule 13e-3 under the Exchange Act with respect to "going private"
transactions. Furthermore, the ability of "affiliates" of RSI and persons
holding "restricted securities" of RSI to dispose of such securities pursuant to
Rule 144 promulgated under the Securities Act of 1933, as amended, may be
impaired or eliminated. If registration of the Shares under the Exchange Act
were terminated, the Shares would no longer be eligible for inclusion on the
Over the Counter Bulletin Board.
PURCHASER'S POSITION REGARDING THE FAIRNESS OF THE OFFER
We believe the Offer is both financially and procedurally fair to RSI's
unaffiliated shareholders. We base our belief on our observations of the
following factors, each of which, in our judgment, supports our views as to the
fairness of the Offer.
o The fact that the net book value of RSI is significantly below the
Offer price. Due to RSI's net deficit in shareholder equity, the
(unaudited) deficit net book value per share was ($0.04) as of August
31, 2004. Accordingly the Offer price of $0.10 per share exceeds the
(unaudited) book value per share as of August 31, 2004 by $0.14.
o The Offer price substantially exceeds the (estimated nonexistent)
liquidation value of the Shares. At August 31, 2004, RSI had assets of
approximately $2.0 million and liabilities of approximately $2.3
million. BCM believes that liquidation of RSI would likely result in
no return for its stockholders.
o Because RSI has a consistent history of losses, as indicated in its
Exchange Act reports, and because we do not currently expect any
substantial change in its prospects, we do not think there is much
likelihood of RSI achieving positive net book value or liquidation
value in the near future.
o The $0.10 Offer Price represents a premium of approximately 7.6%,
19.1%, 11.1% and 11.1% over the average closing price of the common
stock during the year, quarter, month and week ended August 16, 2004
(the trading day before a going-private transaction was announced) and
an 11.1% premium over the closing price of the common stock on August
16, 2004.
o The Offer is conditioned, among other things, on the tender of a
sufficient number of Shares so that, after the Shares are purchased
pursuant to the Offer and contributed to BCM by the Mickel siblings,
BCM would own at least 90% of the voting securities of RSI.
o The Mickel siblings' ownership of approximately 76% of the currently
outstanding voting securities may have limited the alternatives
available to RSI.
o The Offer provides the RSI shareholders substantially greater
opportunity to sell their holdings in RSI at a premium that has not
been available in the public market, where historically low volumes of
trading have greatly limited liquidity.
o We believe that the RSI shareholders are capable of evaluating the
Offer.
14
o RSI shareholders who elect not to tender their Shares in the Offer,
will receive the same consideration in the Merger that we pay in the
Offer, subject to their right to dissent from the Merger and demand
judicial determination of the fair value of their Shares under the
NCBCA. This provision is designed to eliminate any concern on the part
of RSI shareholders that they should tender into the Offer or risk
being treated less fairly.
o Each RSI shareholder can individually determine whether to tender
Shares pursuant to the Offer.
o The Offer provides RSI shareholders the opportunity to sell their
Shares without incurring brokerage and other costs typically
associated with market sales.
o RSI shareholders who believe that the terms of the Merger are not fair
can pursue dissenters' rights under North Carolina law.
This Offer is not conditioned on the tender by a majority of
unaffiliated security holders or by the approval by a majority of RSI's
directors who are not RSI employees. Four of the five RSI directors have
conflicts of interest. Accordingly, we believe that the Board is unlikely to be
able take a position with respect to the Offer. RSI's directors have, on behalf
of the unaffiliated shareholders, retained an unaffiliated representative to
prepare a report concerning the fairness of the Offer, but have not retained an
unaffiliated representative to act on behalf of unaffiliated security holders
for purposes of this Offer.
We have not received or commissioned any report, opinion or appraisal
from any outside party relating to this Offer, including the Offering Price or
the fairness of the Offering Price or the Offer. We believe that the Offering
Price is fair for the reasons included above, and we do not believe that the
size of the Offer justifies the additional expense associated with our
commissioning third party reports or appraisals.
NEITHER BCM NOR ITS SHAREHOLDERS ARE MAKING ANY SPECIFIC RECOMMENDATION
REGARDING WHETHER YOU SHOULD TENDER YOUR SHARES IN THIS TENDER OFFER.
ACCORDINGLY, YOU MUST MAKE YOUR OWN DETERMINATION AS TO WHETHER OR NOT YOU WISH
TO TENDER YOUR SHARES.
RSI FINANCIAL PROJECTIONS
RSI does not, as a matter of course, make public forecasts or
projections as to revenues or other income statement data, cash flows or balance
sheet and financial position information. However, as part of RSI's ongoing
financial planning process, RSI's management periodically prepares financial
projections, which are not publicly available, of RSI's results of operations
and provides these projections to the Board of Directors of RSI. Two of the
Mickel siblings are members of RSI's management and directors of RSI. Buck A.
Mickel, RSI's President, participated in the preparation of RSI's projections,
and Charles C. Mickel received the projections in his capacity as director.
The following are summary financial projections for the fiscal year
ending August 31, 2005 provided by RSI to BCM. The summary includes projections
with respect to a few income statement items, including the projected $109,200
reduction in selling, general and administrative expenses if RSI is a private
company as opposed to a public company.
15
Fiscal 2004-2005
Public Private
Company Company
--------------- ---------------
Revenues from services $ 5,132,381 $ 5,132,381
Cost of services 4,290,745 4,290,745
--------------- ---------------
Gross profit 841,636 841,636
Expenses:
Selling, general and administrative 902,236 793,036
--------------- ---------------
Income (loss) from operations (60,600) 48,600
Other income (expense):
Interest expense (129,523) (129,523)
--------------- ---------------
Total other income (expense) (129,523) (129,523)
--------------- ---------------
Net loss $ (190,123) $ (80,923)
=============== ===============
CAUTIONARY STATEMENT CONCERNING RSI PROJECTIONS. RSI's projections have
been included in the Offer to Purchase for the limited purpose of giving
shareholders access to financial projections that were prepared by RSI
management and obtained by the two BCM representatives on the RSI Board of
Directors in their capacities as directors of RSI. Such information was prepared
by RSI management for internal use and not with a view to publication.
RSI's projections were based on assumptions concerning RSI's business
prospects and other revenue and operating assumptions, which were disclosed at
the August 2, 2004 meeting of the RSI Board of Directors at which the
projections were presented.. These included the assumption that revenues and
costs (other than public company-related costs) would remain similar to those
experienced in fiscal 2004, except for additional revenues and costs associated
with an approximately 10% increase in the number of workers in fiscal 2005 as
compared to fiscal 2004. We believe that these assumptions are reasonable.
Projected information of this type is considered a forward looking
statement based on estimates and assumptions that are inherently subject to
significant economic and competitive uncertainties and contingencies. These
uncertainties and contingencies are difficult to predict and many are beyond the
ability of any company to control. Accordingly, there can be no assurance that
the projected results would be realized or that actual results would not be
significantly higher or lower than those set forth above. In addition, RSI's
projections were not prepared by BCM (although Buck A. Mickel was involved in
their preparation in his capacity as President of RSI) and were not prepared
with a view to public disclosure or compliance with the published guidelines of
the SEC or the guidelines established by the American Institute of Certified
Public Accountants regarding projections and forecasts. Except for Buck A.
Mickel in his capacity as President of RSI, neither BCM nor RSI's independent
accountants were involved in the development or have audited, examined,
compiled, reviewed or applied any agreed upon procedures to this information
and, accordingly, are not associated with and assume no responsibility for the
accuracy of this information. We make no representation as to the accuracy or
validity of the foregoing projections.
16
TREATMENT OF RSI OPTIONS
If the Offer is consummated and the Merger occurs, at the effective
time of the Merger all options with respect to RSI stock will be canceled, and
options with per share exercise prices less than $0.10 will be converted into
the right to receive $0.10 minus the per share exercise price of the option,
multiplied by the number of shares of common stock issuable upon exercise of the
option.
CONFLICTS OF INTEREST
The following matters, in addition to those disclosed on Schedule C to
this Offer to Purchase, may present actual or potential conflicts of interest
with respect to the Offer.
Certain Affiliates. The financial interests of the BCM shareholders are
adverse, as to the Offer price, to the financial interests of RSI's other public
stockholders. BCM's shareholders are three siblings, Buck A. Mickel, Charles C.
Mickel and Minor Mickel Shaw. Buck A. Mickel is RSI's President and Chief
Executive Officer, Charles C. Mickel is RSI's Vice President, and they are two
of RSI's five directors. The Mickel siblings beneficially own approximately 76%
of RSI's common stock. In the event the Offer is completed, as equity owners of
RSI (or of New RSI, the surviving company upon completion of the Merger), the
Mickel siblings would benefit to the extent RSI pays less consideration for the
Shares. Further, if the Offer is completed, they would possess a substantial
interest in RSI's future earnings and growth insofar as such earnings and growth
are realized.
Joe F. Ogburn serves as a director of RSI and also as RSI's Secretary
and Chief Financial Officer. Following the Merger, he will continue to serve as
a director and as Secretary and Chief Financial Officer of New RSI, the
surviving company.
C.C. Guy, another director of RSI, will continue to serve as a director
of New RSI upon the Merger.
Michael J. Bolt serves as President of Employment Solutions, Inc.,
RSI's subsidiary. His father, Charles M. Bolt, is on RSI's Board. Mr. Charles M.
Bolt has participated in past Board discussions relating to a going-private
transaction for RSI, but because he is currently unable to serve for health
reasons he is not expected serve on the board of the New RSI.
Net Operating Loss Carryforwards. According to its 10-KSB for its
fiscal year ended August 31, 2003, RSI had approximately $12.7 million in net
operating loss carryforwards for income tax purposes at August 31, 2003. Because
RSI has a consistent history of losses, we believe that there is not much
likelihood of RSI's utilizing these carryforwards, which expire in 2006 through
2023. In RSI's 2003 10-KSB, RSI indicated that it did not record a deferred tax
asset because it did not believe that it was more likely than not that it would
be able to utilize these carryforwards. If RSI had recorded the full net
deferred tax asset on its balance sheet at August 31, 2003, the amount of the
net deferred tax asset would have been $4.7 million. To our knowledge, RSI has
not prepared any projections that utilize any carryforwards, and we do not
foresee RSI's present operation utilizing any substantial amount of this
carryforward.
If, through improvements in the operating results of its current
business or through the acquisition of profitable businesses, RSI were to become
profitable before its carryforwards expire or are otherwise lost, it would be
able to utilize them to offset future taxable income, reducing its income tax
expense and increasing its future net earnings, and any offset would only be
realized by continuing shareholders.
Control of RSI. The Mickel siblings beneficially owns 76% of the
Shares, and accordingly have supermajority voting control over RSI. As a result
of their voting interest, the Mickel siblings have the power to control the vote
regarding such matters as the election of RSI's directors, amendments to RSI's
charter and other fundamental corporate transactions.
17
Treatment of Stock Options. In connection with the Merger, all options
with respect to RSI stock would be canceled, and options with per share exercise
prices less than $0.10 would be converted into the right to receive $0.10 minus
the per share exercise price of the option, multiplied by the number of shares
of common stock issuable upon exercise of the option. The following insiders
have the following number of options with respect to RSI stock with exercise
prices under $0.10 and as part of the Merger, would receive the following
amounts of option-related Merger consideration:
Name Options Amount
---- ------- ------
Buck A. Mickel 300,000 $ 6,900
Charles C. Mickel 10,000 $ 300
C.C. Guy 10,000 $ 300
Charles M. Bolt 10,000 $ 300
Joe F. Ogburn 120,000 $ 3,600
======= ==========
TOTAL 450,000 $ 11,400
Directors and Officers of RSI. See Schedule A to this Offer to Purchase
for a listing of the positions that the shareholders of BCM hold with RSI and
see Schedule B for a listing of the shares of our common stock owned by such
persons.
CONDUCT OF RSI'S BUSINESS IF THE OFFER IS NOT COMPLETED
If the Offer is not completed because a condition is not satisfied or
waived, BCM expects that BCM and its shareholders will re-evaluate other
potential strategies to address their concerns regarding RSI's future
operations. In particular, BCM may consider:
o engaging in open market or privately negotiated purchases of Shares to
increase BCM's ownership of the Shares to at least 90% of the then
outstanding Shares and then, subject to any applicable statutory
anti-takeover restrictions, effecting a short-form merger;
o engaging in open market or privately negotiated purchases of Shares to
reduce the number of holders of record to fewer than 500, followed by
termination of registration of RSI's common stock;
o proposing that BCM and RSI enter into a merger agreement or sell its
primary asset, the equity interest in Employment Solutions, either of
which would require the approval of the RSI board and the vote of
two-thirds of the outstanding Shares in favor of the merger (which
vote in favor of the merger could be effected by virtue of BCM's
beneficial ownership of the Shares, subject to applicable statutory
antitakeover provisions); or
o proposing voluntary or (as creditors) involuntary bankruptcy for RSI.
If BCM were to pursue any of these alternatives, it might take
considerably longer for the public stockholders of RSI to receive any
consideration for their Shares (other than through sales in the open market)
than if they had tendered their Shares in the Offer. Any such transaction may
result in proceeds per Share to the public stockholders of RSI that are more or
less than or the same as the Offer Price.
THE OFFER
TERMS OF THE OFFER
Upon the terms and subject to the conditions set forth in the Offer
(including the Minimum Tender Condition and the other terms and conditions set
forth in "The Offer - Certain Conditions of the Offer" and, if the Offer is
extended or amended, the terms and conditions of such extension or amendment
(the "Offer Conditions")), the Mickel siblings will contribute their Shares to
18
BCM and BCM will accept for payment, and pay for, Shares validly tendered on or
prior to the Expiration Date (as defined herein) and not withdrawn as permitted
by "The Offer - Rights of Withdrawal". The term "Expiration Date" means 5:00
p.m., New York City time, on [_____], [________], 2004, unless BCM shall have
extended the period for 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 BCM, shall expire. The period until 5:00 p.m., New York City time,
on [_____], [________], 2004, as such may be extended, is referred to as the
"Offering Period."
BCM may elect, in its sole discretion, to provide a subsequent offering
period of three (3) to twenty (20) business days (the "Subsequent Offering
Period"). A Subsequent Offering Period, if one is provided, is not an extension
of the Offering Period. A Subsequent Offering Period would be an additional
period of time, following the expiration of the Offering Period, in which
shareholders may tender Shares not tendered during the Offering Period. If BCM
decides to provide for a Subsequent Offering Period, BCM will make an
announcement to that effect by issuing a press release no later than 9:00 A.M.,
New York City time, on the next business day after the previously scheduled
Expiration Date. All Offer Conditions must be satisfied or waived prior to the
commencement of any Subsequent Offering Period.
Subject to the applicable rules and regulations of the SEC, BCM
expressly reserves the right, in its sole discretion, at any time or from time
to time, to extend the Offering Period by giving oral or written notice of such
extension to the Depositary and issuing a press release announcing the extension
no later than 9:00 A.M., New York City time, on the next business day after the
previously scheduled Expiration Date and otherwise in accordance with applicable
SEC rules. During any such extension of the Offering Period, all Shares
previously tendered and not withdrawn will remain subject to the terms of the
Offer, including the right of a tendering shareholder to withdraw such
shareholder's Shares. See "The Offer - Rights of Withdrawal". Subject to the
applicable regulations of the SEC, BCM also expressly reserves the right, in its
sole discretion, at any time or from time to time, (i) to delay acceptance for
payment of or (regardless of whether such Shares were theretofore accepted for
payment) payment for, any tendered Shares, or to terminate or amend the Offer as
to any Shares not then paid for, if any of the Offer Conditions are not then
satisfied and (ii) to waive any condition and to add, supplement or change any
other term and condition of the Offer, by giving oral or written notice of such
delay, termination, amendment, waiver or change to the Depositary and by making
a public announcement thereof. If BCM elects to provide a Subsequent Offering
Period, it expressly reserves the right, in its sole discretion, at any time or
from time to time, to extend the Subsequent Offering Period (not beyond a total
of twenty (20) business days) by giving oral or written notice of such extension
to the Depositary. If BCM accepts any Shares for payment pursuant to the terms
of the Offer, it will accept for payment all Shares validly tendered during the
Offering Period and not withdrawn, and, on the terms and subject to the
conditions of the Offer, including but not limited to the Offer Conditions, it
will promptly pay for all Shares so accepted for payment and will immediately
accept for payment and promptly pay for all Shares as they are tendered in any
Subsequent Offering Period. BCM confirms that its reservation of the right to
delay payment for Shares which it has accepted for payment is limited by Rule
14e-1(c) under the Exchange Act, which requires that a tender offeror pay the
consideration offered or return the tendered securities promptly after the
termination or withdrawal of a tender offer.
Any delay, termination, amendment, waiver or change of the Offer will
be followed as promptly as practicable by public announcement thereof, such
announcement in the case of an extension to be issued no later than 9:00 A.M.,
New York City time, on the next business day after the previously scheduled
Expiration Date. Subject to applicable law (including Rules 14d-4(d), 14d-6(c)
and 14e-1 under the Exchange Act, which require that any material change in the
information published, sent or given to shareholders in connection with the
Offer be promptly disseminated to shareholders in a manner reasonably designed
to inform shareholders of such change) and without limiting the manner in which
BCM may choose to make any public announcement, BCM shall have no obligation to
publish, advertise or otherwise communicate any such public announcement other
than by issuing a press release or other announcement.
BCM confirms that if it makes a material change in the terms of the
Offer or the information concerning the Offer, or if it waives a material
condition of the Offer, BCM will extend the Offer to the extent required by
Rules 14d-4(d), 14d-6(c) and 14e-1 under the Exchange Act.
19
If, during the Offering Period, BCM, in its sole discretion, shall
decrease the percentage of Shares being sought or increase or decrease the
consideration offered to holders of Shares, such increase or decrease shall be
applicable to all holders whose Shares are accepted for payment pursuant to the
Offer and, if at the time notice of any decrease is first published, sent or
given to holders of Shares, the Offer is scheduled to expire at any time earlier
than the tenth (10th) business day from and including the date that such notice
is first so published, sent or given, the Offer will be extended until the
expiration of such ten (10) business day period. For purposes of the Offer, a
"business day" means any day other than a Saturday, Sunday or federal holiday
and consists of the time period from 12:01 A.M. through 12:00 Midnight, New York
City time.
BCM is making a request of RSI for the use of RSI's shareholder list
and security position listings for the purpose of disseminating the Offer to
shareholders. Upon compliance by RSI with such request and Rule 14d-5 pertaining
to such request, this Offer to Purchase and the related Letter of Transmittal
will be mailed to record holders of Shares and will be furnished to brokers,
banks and similar persons whose names, or the names of whose nominees, appear on
the shareholder list or, if applicable, who are listed as participants in a
clearing agency's security position listing for subsequent transmittal to
beneficial owners of Shares.
ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES
Upon the terms and subject to the conditions of the Offer (including
the Minimum Tender Condition and, if the Offer is extended or amended, the terms
and conditions of any such extension or amendment), BCM will accept for payment,
and will pay for, Shares validly tendered and not withdrawn as promptly as
practicable after the expiration of the Offering Period. If there is a
Subsequent Offering Period, all Shares tendered during the Offering Period will
be immediately accepted for payment and promptly paid for following the
expiration thereof and Shares tendered during a Subsequent Offering Period will
be immediately accepted for payment and paid for as they are tendered. Subject
to applicable rules of the SEC, BCM 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. See "The Offer - Certain Conditions of the
Offer". In all cases, payment for Shares tendered and accepted for payment
pursuant to the Offer will be made only after timely receipt by the Depositary
of certificates evidencing such Shares (or a confirmation of a book-entry
transfer of such Shares (a "Book-Entry Confirmation") into the Depositary's
account at The Depository Trust Company (the "Book-Entry Transfer Facility")), a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof) and any other required documents.
For purposes of the Offer, BCM will be deemed to have accepted for
payment Shares validly tendered and not withdrawn as, if and when BCM gives oral
or written notice to the Depositary of its acceptance for payment of such Shares
pursuant to 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 the tendering shareholders for the
purpose of receiving payments from BCM and transmitting such payments to the
tendering shareholders. UNDER NO CIRCUMSTANCES WILL INTEREST ON THE PURCHASE
PRICE FOR TENDERED SHARES BE PAID, REGARDLESS OF ANY DELAY IN MAKING SUCH
PAYMENT.
If any tendered Shares are not accepted for payment pursuant to the
terms and conditions of the Offer for any reason, or if certificates are
submitted for more Shares than are tendered, certificates for such unpurchased
Shares will be returned, without expense to the tendering shareholder (or, in
the case of Shares tendered by book-entry transfer of such Shares into the
Depositary's account at the Book-Entry Transfer Facility pursuant to the
procedures set forth in "The Offer - Procedure for Tendering Shares", such
Shares will be credited to an account maintained with the Book-Entry Transfer
Facility), as soon as practicable following expiration or termination of the
Offer.
BCM reserves the right to transfer or assign in whole or in part from
time to time to one or more of its affiliates the right to purchase all or any
portion of the Shares tendered pursuant to the Offer, but any such transfer or
assignment will not relieve BCM of its obligations under the Offer and will in
20
no way prejudice the rights of tendering shareholders to receive payment for
Shares validly tendered and accepted for payment pursuant to the Offer.
CONTRIBUTION OF MICKEL SHARES
Upon the satisfaction or waiver of all conditions to the Offer, the
Mickel siblings will contribute their Shares to BCM.
PROCEDURE FOR TENDERING SHARES
Valid Tender. To tender Shares pursuant to the Offer, (a) a Letter of
Transmittal (or a facsimile thereof) properly completed and duly executed in
accordance with the instructions of the Letter of Transmittal, with any required
signature guarantees, certificates for Shares to be tendered, and any other
documents required by the Letter of Transmittal, must be received by the
Depositary prior to the Expiration Date at one of its addresses set forth on the
back cover of this Offer to Purchase, or (b) such Shares must be delivered
pursuant to the procedures for book-entry transfer described below (and the
Book-Entry Confirmation of such delivery received by the Depositary, including
an Agent's Message (as defined herein) if the tendering shareholder has not
delivered a Letter of Transmittal), prior to the Expiration Date, or (c) the
tendering shareholder must comply with the guaranteed delivery procedures set
forth below. 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 which are the subject of such
Book-Entry Confirmation, that such participant has received and agrees to be
bound by the terms of the Letter of Transmittal and that BCM may enforce such
agreement against the participant.
Book-Entry Delivery. The Depositary will establish accounts with
respect to the Shares at the Book-Entry Transfer Facility for purposes of the
Offer within two (2) business days after the date of this Offer to Purchase. Any
financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry transfer 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, either the Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, together with any required signature
guarantees, or an Agent's Message in lieu of the Letter of Transmittal, and any
other required documents, must, in any case, be transmitted to and received by
the Depositary at one of its addresses set forth on the back cover of this Offer
to Purchase by the Expiration Date, or the tendering shareholder must comply
with the guaranteed delivery procedures described below.
DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE
WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY
TO THE DEPOSITARY.
THE METHOD OF DELIVERY OF THE 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 SHAREHOLDER. SHARES WILL
BE 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, IT IS RECOMMENDED THAT THE SHAREHOLDER USE PROPERLY INSURED REGISTERED
MAIL WITH RETURN RECEIPT REQUESTED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ENSURE TIMELY DELIVERY.
Signature Guarantees. Except as otherwise provided below, all
signatures on a Letter of Transmittal must be guaranteed by a financial
institution (including most commercial banks, savings and loan associations and
21
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 or by any other "Eligible
Guarantor Institution," as such term is defined in Rule 17Ad-15 under the
Exchange Act (each, an "Eligible Institution"). Signatures on a Letter of
Transmittal need not be guaranteed, however, (a) if the Letter of Transmittal is
signed by the registered holders (which term, for purposes of this section,
includes any participant in the Book-Entry Transfer Facility's systems 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 the box
entitled "Special Payment Instructions" or the box entitled "Special Delivery
Instructions" on the Letter of Transmittal or (b) if such Shares are tendered
for the account of an Eligible Institution. See Instructions 1 and 5 of 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, then 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 described
above. See Instructions 1 and 5 of the Letter of Transmittal.
Guaranteed Delivery. A shareholder who desires to tender Shares
pursuant to the Offer and whose certificates for Shares are not immediately
available, or who cannot comply with the procedure for book-entry transfer on a
timely basis, or who cannot deliver all required documents to the Depositary
prior to the Expiration Date, may tender such Shares by following all of the
procedures set forth below:
(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 BCM, is received by the
Depositary, as provided below, prior to the Expiration Date;
(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 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 in lieu of the Letter of Transmittal),
and any other required documents, are received by the Depositary within three
(3) trading days after the date of execution of such Notice of Guaranteed
Delivery. A "trading day" is any day on which the New York Stock Exchange, Inc.
is open for business; and
(iv) The Notice of Guaranteed Delivery may be delivered by hand to the
Depositary or transmitted by 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.
Other Requirements. Notwithstanding any 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 evidencing such
Shares (or a timely Book-Entry Confirmation with respect to such Shares into the
Book-Entry Transfer Facility), (b) 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 in lieu
of the Letter of Transmittal) and (c) any other documents required by the Letter
of Transmittal. Accordingly, tendering shareholders 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 ON THE PURCHASE PRICE OF THE
TENDERED SHARES BE PAID BY BCM, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY
DELAY IN MAKING SUCH PAYMENT.
22
Tender Constitutes an Agreement. The valid tender of Shares pursuant to
one of the procedures described above will constitute a binding agreement
between the tendering shareholder and BCM upon the terms and subject to the
conditions of the Offer.
Appointment. By executing a Letter of Transmittal as set forth above,
the tendering shareholder irrevocably appoints the officers and designees of BCM
as such shareholder's proxies, each with full power of substitution, to the full
extent of such shareholder's rights with respect to the Shares tendered by such
shareholder and accepted for payment by BCM and with respect to any and all
other Shares or other securities issued or issuable in respect of such Shares on
or after [_________]. All such proxies will be considered coupled with an
interest in the tendered Shares. Such appointment is effective when, and only to
the extent that, BCM deposits the payment for such Shares with the Depositary.
Upon the effectiveness of such appointment, all prior powers of attorney,
proxies and consents given by such shareholder will be revoked, and no
subsequent powers of attorney, proxies and consents by such shareholder may be
given (and, if given, will not be deemed effective), with respect to such
tendered Shares. BCM's officers or designees will, with respect to the Shares
for which the appointment is effective, be empowered to exercise all voting and
other rights of such shareholder as they, in their sole discretion, may deem
proper at any annual, special or adjourned meeting of the shareholders of RSI,
by written consent in lieu of any such meeting or otherwise. BCM reserves the
right to require that, in order for Shares to be deemed validly tendered,
immediately upon BCM's payment for such Shares, BCM must be able to exercise
full voting rights with respect to such Shares.
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 BCM in its sole discretion, which determination will be
final and binding. BCM reserves the absolute right to reject any and all tenders
determined by it not to be in proper form or the acceptance for payment of or
payment for which may, in the opinion of BCM's counsel, be unlawful. BCM also
reserves the absolute right to waive any defect or irregularity in the tender of
any Shares of any particular shareholder whether or not similar defects or
irregularities are waived in the case of other shareholders. No tender of Shares
will be deemed to have been validly made until all defects and irregularities
relating thereto have been cured or waived. None of BCM, 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. BCM's interpretation of the terms and
conditions of the Offer (including the Letter of Transmittal and 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 shareholder surrendering
Shares in the Offer must, unless an exemption applies, provide the Depositary
with such shareholder'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 shareholder is not subject to backup withholding. If a
shareholder does not provide such shareholder's correct TIN or fails to provide
the certifications described above, the Internal Revenue Service (the "IRS") may
impose a penalty on such shareholder and payment of cash to such shareholder
pursuant to the Offer may be subject to backup withholding of 28%. All
shareholders who are United States persons 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 a manner satisfactory to BCM and the
Depositary). Certain shareholders (including, among others, all corporations and
certain foreign individuals and entities) are not subject to backup withholding.
Non-corporate foreign shareholders should complete and sign the main signature
form and a Form W-8BEN Certificate of Foreign Status of Beneficial Owner for
United States Tax Withholding, a copy of which may be obtained from the
Depositary, in order to avoid backup withholding. See Instruction 8 to the
Letter of Transmittal.
23
RIGHTS OF WITHDRAWAL
Tenders of Shares made pursuant to the Offer are irrevocable except
that Shares tendered pursuant to the Offer may be withdrawn at any time prior to
the termination of the Offering Period and, unless theretofore accepted for
payment by BCM pursuant to the Offer, may also be withdrawn at any time after
[________], [__________], 2004]. There will be no withdrawal rights during any
Subsequent Offering Period for Shares tendered during the Subsequent Offering
Period.
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 this Offer to Purchase. Any such notice
of withdrawal must specify the name of the person having tendered the Shares to
be withdrawn, the number or amount of Shares to be withdrawn and the names in
which the certificate(s) evidencing the Shares to be withdrawn are registered,
if different from that of the person who tendered such Shares. The signature(s)
on the notice of withdrawal must be guaranteed by an Eligible Institution,
unless (a) the notice of withdrawal is signed by registered holders (which term,
for purposes of this section, includes any participant in the Book-Entry
Transfer Facility's systems whose name appears on a security position listing as
the owner of the Shares) of Shares tendered in connection with a Letter of
Transmittal on which the registered holder did not complete the box entitled
"Special Payment Instructions" or the box entitled "Special Delivery
Instructions" or (b) such Shares have been tendered for the account of any
Eligible Institution. If Shares have been tendered pursuant to the procedures
for book-entry tender as set forth in "The Offer - Procedure for Tendering
Shares", any notice of withdrawal must specify the name and number of the
account at the Book-Entry Transfer Facility to be credited with the withdrawn
Shares. If certificates for Shares to be withdrawn have been delivered or
otherwise identified to the Depositary, the name of the registered holder and
the serial numbers of the particular certificates evidencing the Shares to be
withdrawn must also be furnished to the Depositary as aforesaid prior to the
physical release of such certificates. All questions as to the form and validity
(including time of receipt) of any notice of withdrawal will be determined by
BCM, in its sole discretion, which determination shall be final and binding.
None of BCM, 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 such
notification. Withdrawals of tender for Shares may not be rescinded, and any
Shares properly withdrawn will be deemed not to have been validly tendered for
purposes of the Offer. However, withdrawn Shares may be retendered by following
one of the procedures described in "The Offer - Procedure for Tendering Shares"
at any time prior to the Expiration Date.
If BCM extends the Offer, is delayed in its acceptance for payment of
Shares, or is unable to accept for payment Shares tendered pursuant to the
Offer, for any reason, then, without prejudice to BCM's rights under this Offer,
the Depositary may, nevertheless, on behalf of BCM, retain tendered Shares, and
such Shares may not be withdrawn except to the extent that tendering
shareholders are entitled to withdrawal rights as set forth in this section
("Rights of Withdrawal").
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE OFFER
The following is a summary of certain United States federal income tax
consequences of the Offer to holders whose Shares are purchased pursuant to the
Offer. The summary is based on the provisions of the Internal Revenue Code of
1986, as amended (the "Code"), applicable current and proposed United States
Treasury Regulations issued thereunder, judicial authority and administrative
rulings and practice, each as currently in effect. All of these are subject to
change, possibly with retroactive effect, at any time and, therefore, the
following statements and conclusions could be altered or modified. The
discussion does not address holders of Shares in whose hands Shares are not
capital assets, nor does it address holders who hold Shares as part of a
hedging, "straddle," conversion or other integrated transaction, or who received
Shares upon conversion of securities or exercise of warrants or other rights to
acquire Shares or pursuant to the exercise of employee stock options or
otherwise as compensation, or to holders of restricted shares received as
compensation or to holders of Shares who are in special tax situations (such as
insurance companies, tax-exempt organizations, financial institutions, United
24
States expatriates or non-U.S. persons). Furthermore, the discussion does not
address any aspect of state, local or foreign taxation or estate and gift
taxation.
The United States federal income tax consequences set forth below are
included for general informational purposes only and are based upon current law.
The following summary does not purport to consider all aspects of United States
federal income taxation that might be relevant to our stockholders. Because
individual circumstances may differ, each holder of Shares should consult such
holder's own tax advisor to determine the applicability of the rules discussed
below to such stockholder and the particular tax effects of the Offer, including
the application and effect of state, local and other tax laws.
Sales of any Shares for cash pursuant to the Offer and the exchange of
any Shares for cash pursuant to the Merger will not have a tax effect on RSI,
BCM or the Mickel siblings.
The receipt of cash for Shares pursuant to the Offer will be a taxable
transaction for United States federal income tax purposes (and also may be a
taxable transaction under applicable state, local, foreign and other income tax
laws). In general, for United States federal income tax purposes, a holder of
Shares will recognize gain or loss equal to the difference between the holder's
adjusted tax basis in the Shares sold pursuant to the Offer and the amount of
cash received therefor. Gain or loss must be determined separately for each
block of Shares (i.e., Shares acquired at the same cost in a single transaction)
sold pursuant to the Offer. If the Shares exchanged constitute capital assets in
the hands of the stockholder, gain or loss will be capital gain or loss. In
general, capital gains recognized by an individual will be subject to a maximum
United States federal income tax rate of 15% if the Shares were held for more
than one year on the date of sale, and if held for one year or less they will be
subject to tax at ordinary income tax rates. Certain limitations may apply on
the use of capital losses.
Payments in connection with the Offer may be subject to "backup
withholding" at a 28% rate. Backup withholding generally applies if a holder (a)
fails to furnish its social security number or other taxpayer identification
number ("TIN"), (b) furnishes an incorrect TIN, (c) fails properly to include a
reportable interest or dividend payment on its United States federal income tax
return or (d) under certain circumstances, fails to provide a certified
statement, signed under penalties of perjury, that the TIN provided is its
correct number and that it is not subject to backup withholding. Backup
withholding is not an additional tax but merely an advance payment, which may be
refunded to the extent it results in an overpayment of tax. Certain persons
generally are entitled to exemption from backup withholding, including
corporations, financial institutions and certain foreign stockholders if such
foreign stockholders submit a statement, signed under penalties of perjury,
attesting to their exempt status. Certain penalties apply for failure to furnish
correct information and for failure to include reportable payments in income.
Each stockholder should consult such stockholder's own tax advisor as to its
qualification for exemption from backup withholding and the procedure for
obtaining such exemption.
All stockholders who are United States persons 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 a manner satisfactory to us and the
Depositary). Non-corporate foreign stockholders should complete and sign the
main signature form and a statement, signed under penalties of perjury,
attesting to that stockholder's exempt status (such forms can be obtained from
the Depositary), in order to avoid backup withholding.
THE INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE TO STOCKHOLDERS IN SPECIAL SITUATIONS
SUCH AS STOCKHOLDERS WHO RECEIVED THEIR SHARES UPON THE EXERCISE OF EMPLOYEE
STOCK OPTIONS OR OTHERWISE AS COMPENSATION AND STOCKHOLDERS WHO ARE NOT UNITED
STATES PERSONS. STOCKHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT
25
TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE OFFER, INCLUDING THE APPLICATION
AND EFFECT OF FEDERAL, STATE, LOCAL, FOREIGN OR OTHER TAX LAWS.
PRICE RANGE OF SHARES; DIVIDENDS
The Shares are quoted on the Nasdaq OTC Bulletin Board. The high and
low bid quotations of RSI's common stock after giving effect to RSI's 3:1
reverse stock split effective June 10, 2002 are set forth below for the fiscal
quarters indicated, as reported by NASDAQ for such periods. These quotations
reflect inter-dealer prices, without retail mark-up, mark-down or commission,
and may not necessarily represent actual transactions.
2004 2003
Fiscal High Low High Low
First Quarter .10 .08 .19 .03
Second Quarter .15 .08 .38 .10
Third Quarter .15 .08 .23 .13
Fourth Quarter .09 .08 .13 .08
On August 16, 2004, the last full trading day prior to the announcement
of a going-private transaction, the reported closing price of the Shares on the
Nasdaq OTC Bulletin Board was $0.09 per Share. SHAREHOLDERS ARE URGED TO OBTAIN
A CURRENT MARKET QUOTATION FOR THE SHARES.
According to its 10-KSB for the fiscal year ended August 31, 2003, RSI
paid no cash dividends with respect to its common stock during fiscal 2003, 2002
and 2001, and does not intend to pay cash dividends in the foreseeable future.
CERTAIN INFORMATION CONCERNING RSI
RSI Holdings was incorporated in North Carolina in 1978. RSI's
executive offices are located at 28 East Court Street, Greenville, South
Carolina, 29601. Its telephone number is (864) 271-7171.
RSI has described itself in its 10-KSB for its fiscal year ended August
31, 2003 as follows: From January 2000 to March 2002, RSI did not conduct any
business operations other than seeking acquisition opportunities and liquidating
assets of its prior businesses. On March 4, 2002, RSI acquired substantially all
of the assets of Employment Solutions, LLC, a South Carolina limited liability
company through a newly-formed, wholly-owned subsidiary, Employment Solutions,
Inc., a South Carolina corporation ("Employment Solutions"). Employment
Solutions is in the business of locating and providing labor to industrial
companies.
BCM does not currently own any Shares. Upon satisfaction or waiver of
all conditions to the Offer, the Mickel siblings will contribute all their
Shares to BCM and accordingly will not tender them in the Offer. BCM expects
that all directors, executive officers and affiliates of RSI, other than the
Mickel siblings, will tender Shares in the Offer, although it has not sought
confirmation from them as to their intention.
We have not requested that the RSI board approve our offer, and neither
RSI nor its board of directors has made any recommendation as to whether
shareholders should tender or refrain from tendering their shares in the Offer.
Under Rule 14e-2, RSI's board of directors must state its position with respect
to this Offer within ten (10) business days of the date of this Offer to
Purchase. We believe that the board is unlikely to be able to take a position
with respect to the Offer, because four of the five members have conflicts of
interest.
26
Selected Consolidated Financial Information
The following table sets forth summary historical consolidated balance
sheet data for RSI as of August 31, 2004 (Unaudited) and August 31, 2003 and
income statement data for RSI as of and for the years ended August 31, 2004
(Unaudited) and 2003.
This data and the comparative per share data set forth below are
extracted from, and should be read in conjunction with, the audited consolidated
financial statements and other financial information contained in RSI's Annual
Report on Form 10-KSB for the year ended August 31, 2003, including the notes
thereto (the most recent filed Form 10-KSB). More comprehensive financial
information is included in such report (including management's discussion and
analysis of financial condition and results of operation) and other reports and
documents filed by RSI with the SEC, and the following summary is qualified in
its entirety by reference to such reports and other documents and all of the
financial information and notes contained therein. The financial statements
included as Item 7 in RSI's Annual Report on Form 10-KSB for the year ended
August 31, 2003 are hereby incorporated herein by this reference. Copies of such
reports and other documents may be examined at or obtained from the SEC in the
manner set forth below. See "The Offer - Certain Information Concerning RSI".
August 31, 2004 August 31, 2003
--------------- ---------------
(unaudited)
Assets
Current assets $360,027 $ 370,695
Property and equipment 32,186 83,245
Other assets 1,613,997 1,743,117
---------- ----------
$2,006,210 $2,197,057
========== ==========
Liabilities and Shareholders' Deficit
Current liabilities $330,458 $298,744
Long-term debt and other 2,007,431 2,091,869
Shareholders' equity (331,679) (193,556)
---------- ----------
$2,006,210 $2,197,057
========== ==========
Year Ended August 31,
2004 Year Ended August 31,
(Unaudited) 2003
----------- -----
Revenues from services $5,055,245 $5,314,156
Cost of services 4,201,137 4,307,446
---------- ----------
Gross profit 854,108 1,006,710
Expenses 851,669 873,441
---------- ----------
Income (loss) from operations 2,449 133,269
Other income (expenses) (140,562) (148,904)
---------- -----------
Net loss $(138,123) $ (15,635)
========== ===========
27
Comparative Per Share Data
The following table sets forth certain historical per share data for
RSI. Basic and diluted earnings per common share and ratio of earnings to fixed
charges are presented for the years ended August 31, 2004 and 2003. Book value
per share is presented as of August 31, 2004 and 2003.
Year Ended
August 31, 2004 Year Ended
(Unaudited) August 31, 2003
----------- ---------------
Net loss per share - basic and diluted $ (0.02) $ (0.00)
Ratio of earnings to fixed charges* 0.29x* 2.23x
* In fiscal year 2004, fixed charges exceeded earnings by $48,465.
The term "fixed charges" is defined by the Commission to mean the sum
of the following: (a) interest expensed and capitalized, (b) amortized premiums,
discounts and capitalized expenses related to indebtedness, (c) an estimate of
the interest within rental expense, and (d) preference security dividend
requirements of consolidated subsidiaries (inapplicable due to RSI having no
preference securities). The term "earnings" is defined by the Commission as the
amount resulting from adding and subtracting the following items. Add the
following: (a) Pre-tax income from continuing operations before adjustment for
minority interests in consolidated subsidiaries or income or loss from equity
investees, (b) fixed charges, (c) amortization of capitalized interest, (d)
distributed income of equity investees, and (e) RSI's share of pre-tax losses of
equity investees for which charges arising from guarantees are included in fixed
charges. From the total of the added items, subtract the (a) interest
capitalized, (b) preference security dividend requirements of consolidated
subsidiaries (inapplicable due to RSI having no preference securities), and (c)
the minority interest in pre-tax income of subsidiaries that have not incurred
fixed charges (inapplicable due to RSI having no minority interest in any
subsidiaries). Equity investees are investments that you account for using the
equity method of accounting.
August 31, 2004
(Unaudited) August 31, 2003
----------- ----------------
Deficit book value per share $ (0.04) $ (0.02)
Book value per share is not a term defined by generally accepted
accounting principles. Book value per share is calculated by dividing
shareholders' equity by the weighted average number of shares of common stock
outstanding.
SUMMARY UNAUDITED RESULTS OF OPERATIONS FOR FISCAL 2004
During the year ended August 31, 2004 RSI's revenues were $5,055,245 as
compared to revenues during the year ended August 31, 2003 of $5,314,156. The
decrease in revenues during the year ended August 31, 2004 can be attributed to
a decrease in the number of workers provided. The decrease resulted from reduced
demand for RSI's services from existing customers.
Cost of services provided during the year ended August 31, 2004 were
$4,201,137 as compared to cost of services provided during the year ended August
31, 2003 of $4,307,446. These costs include wages paid directly to the
employees, payroll taxes, workers compensation insurance and other costs
directly associated with employment of workers. The decrease in cost of services
provided primarily results from the decrease in number of workers provided.
General and administrative expenses during the year ended August 31,
2004 were $851,669 as compared to $873,441 during the year ended August 31,
2003. The reduction of general and administrative expenses is primarily the
result of the decrease in certain administration expenses and relates to the
decrease in the number of workers provided.
28
Information Concerning RSI.
Except as otherwise set forth herein, the information concerning RSI
contained in this Offer to Purchase has been taken from or based upon publicly
available documents and records on file with the SEC and other public sources
and is qualified in its entirety by reference thereto. Although BCM and the BCM
Shareholders have no knowledge that would indicate that any statements contained
herein based on such documents and records are untrue, BCM and the BCM
Shareholders cannot take responsibility for the accuracy or completeness of the
information contained in such documents and records, or for any failure by RSI
to disclose events which may have occurred or may affect the significance or
accuracy of any such information but which are unknown to BCM or the BCM
Shareholders.
Available Information. RSI is subject to the information and reporting
requirements of the Exchange Act and in accordance therewith is obligated to
file reports and other information with the SEC relating to its business,
financial condition and other matters. Information, as of particular dates,
concerning RSI's directors and officers, their remuneration, stock options
granted to them, the principal holders of RSI's securities, any material
interests of such persons in transactions with RSI and other matters is required
to be disclosed in proxy statements distributed to RSI's shareholders and filed
with the SEC. Such reports, proxy statements and other information should be
available for inspection and copying (at prescribed rates) at the public
reference room at the Commission's offices at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Information regarding the operation of the public
reference room may be obtained by calling the Commission at 1-800-SEC-0330.
Copies may be obtained, by mail, upon payment of the Commission's customary
charges, by writing to its principal office at 450 Fifth Street, N.W., Judiciary
Plaza, Washington, D.C. 20549 and can be obtained electronically on the
Commission's Website at http://www.sec.gov.
CERTAIN INFORMATION CONCERNING BCM
BCM is a South Carolina corporation incorporated on October 8, 2004 and
has its principal executive offices at 28 East Court Street, Post Office Box
6847, Greenville, South Carolina 29606. BCM does not currently own any shares,
although the Mickel siblings will contribute their 5,934,856 Shares,
representing approximately 76% of the outstanding Shares, to BCM upon
satisfaction or waiver of the conditions to the Offer. See Schedule B to this
Offer to Purchase. Unless the context otherwise requires, references herein to
BCM agreeing to take or refrain from taking business actions include agreement
by BCM's shareholders to so act or refrain. BCM has made no arrangements in
connection with the Offer to provide holders of Shares access to its files or to
obtain counsel or appraisal services at their expense.
The name, citizenship, business address, business telephone number,
current principal occupation (including the name, principal business and address
of the organization in which such occupation is conducted), and material
positions held during the past five (5) years (including the name, principal
business and address of the organization in which such occupation was
conducted), of each of the shareholders of BCM are set forth in Schedule A to
this Offer to Purchase. None of BCM or any BCM shareholder has been convicted in
a criminal proceeding during the past five years (excluding traffic violations
or similar misdemeanors), nor has BCM or any of its shareholders been a party to
any judicial or administrative proceeding during the past five years that
resulted in a judgment, decree or final order enjoining the person from future
violations of, or prohibiting activities subject to, federal or state securities
laws or a finding of any violation of federal or state securities laws.
Except as set forth under Special Factors, on Schedule B hereto, or in
the following sentence, neither BCM nor, to the best of its knowledge, any of
the persons listed in Schedule A hereto nor any associate or majority-owned
subsidiary of any of the foregoing, beneficially owns or has a right to acquire
any Shares or has engaged in any transactions in Shares in the past sixty (60)
days. Neither BCM nor any of BCM's shareholders has made any acquisition of
RSI's securities during the past two (2) years except for gifts of stock in late
September 2004 from Minor Mickel Shaw's children to Mrs. Shaw and her husband
(collectively, 337,500 Shares to each) with respect to the 675,000 Shares that
she had gifted to her children in November 2002, followed by the gift of 337,500
Shares in early October 2004 to Minor Mickel Shaw from her husband.
29
Except as set forth under "Special Factors", there have been no
negotiations, transactions or material contacts during the past two (2) years
between BCM, or, to the best of its knowledge, any of the persons listed in
Schedule A hereto, on the one hand, and RSI or its affiliates, on the other
hand, concerning a merger, consolidation or acquisition, a tender offer or other
acquisition of securities, an election of directors, or a sale or other transfer
of a material amount of assets nor to the best knowledge of BCM have there been
any such negotiations or material contacts between subsidiaries, executive
officers and directors. Except as described under "Special Factors", neither BCM
nor, to the best of its knowledge, any of the persons listed in Schedule A
hereto, has since the date hereof had any transaction with RSI or any of its
executive officers, directors or affiliates that would require disclosure under
the rules and regulations of the SEC applicable to the Offer.
MERGER; DISSENTERS' RIGHTS; "GOING PRIVATE" RULES
Merger. If, pursuant to the Offer, BCM acquires Shares which, together
with Shares beneficially owned by BCM, constitute at least 90% of the
outstanding Shares, BCM will consummate a "short-form" merger pursuant to
Section 55-11-04 of the NCBCA and Section 33-11-104 of the SCBCA promptly
following completion of the Offer. Each of these sections provides, in relevant
part, that if an entity owns at least 90% of the outstanding Shares, such entity
may merge RSI into itself by executing, acknowledging and filing, in accordance
with Section 55-11-05 of the NCBCA and Section 33-11-105 of the SCBCA, articles
of merger setting forth a copy of the resolution of such entity's board of
directors to so merge (including a statement of the terms and conditions of the
Merger and the consideration to be paid upon surrender of Shares not owned by
BCM) and the date of its adoption. Under Section 55-11-04 of the NCBCA and
Section 33-11-104 of the SCBCA, the Merger would not require the approval or any
other action on the part of the board of directors or the shareholders of RSI.
Therefore, if at least 90% of the outstanding Shares are acquired pursuant to
the Offer or otherwise, BCM will be able to, and intends to, effect the Merger
without a meeting or vote of RSI shareholders or directors.
The Offer is conditioned on BCM's obtaining a number of Shares in the
Offer (including by contribution from the Mickel siblings) sufficient for it to
own at least 90% of the Shares, unless waived. If the Minimum Tender Condition
is satisfied, BCM will have acquired, as a result of the contribution to BCM of
Shares by the Mickel siblings and the Offer, more than 90% of the Shares issued
and outstanding, as of the date the Shares are accepted for payment pursuant to
the Offer.
Alternatively, whether or not the Offer is consummated, BCM might seek
to effect a merger with RSI pursuant to Section 55-11-01 of the NCBCA and
Section 33-11-101 of the SCBCA. Under RSI's Articles of Incorporation, the NCBCA
and the SCBCA, approval of the board of directors of RSI and a vote of at least
a majority of the outstanding Shares of RSI entitled to vote thereon would be
required to approve such a merger. Even if the Minimum Tender Condition is not
satisfied, the Mickel siblings currently have a sufficient number of votes to
effect the merger pursuant to Section 55-11-01 of the NCBCA and Section
33-11-101 of the SCBCA.
THIS OFFER DOES NOT CONSTITUTE A SOLICITATION OF PROXIES OR CONSENTS.
ANY SUCH SOLICITATION WHICH BCM MIGHT MAKE WILL BE MADE PURSUANT TO SEPARATE
PROXY OR CONSENT SOLICITATION MATERIALS COMPLYING WITH THE REQUIREMENTS OF
SECTION 14(A) OF THE EXCHANGE ACT.
Dissenters' Rights. Holders of Shares do not have dissenters' rights as
a result of the Offer. However, if the Merger is consummated, each holder of
Shares who has not tendered his Shares in the Offer and has neither voted in
favor of the Merger nor consented thereto in writing and who properly exercises
his or her dissenters' rights under Article 13 of the NCBCA will be entitled to
demand a proceeding by the North Carolina Superior Court to determine the fair
value of his or her Shares, exclusive of any element of value arising from the
accomplishment or expectation of the Merger, together with a fair rate of
interest, if any, to be paid from the date of the Merger. North Carolina law
defines such fair value, with respect to a dissenters' Shares, as the value of
the Shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
30
anticipation of the corporate action unless exclusion would be inequitable. In
determining such fair value, the Court may consider all relevant factors. The
value so determined could be more or less than the consideration to be paid in
the Offer and the Merger. Any judicial determination of the fair value could be
based upon considerations other than, or in addition to, the market value of the
Shares, including, among other things, asset values and earning capacity.
If the Merger is approved by BCM, RSI shall notify all of its
shareholders entitled to assert dissenters' rights, in writing, within 10 days
thereafter, that the Merger has been approved by BCM and will send each such RSI
shareholder a dissenters' notice as required under Section 55-13-22 of the
NCBCA. Such notice shall: (i) state where the payment demand from such
shareholder must be sent, and where and when share certificates must be
deposited; (ii) supply a form for mailing the payment demand; (iii) set a date
by which RSI must receive the payment demand (which must be no fewer than 30 nor
more than 60 days after the dissenters' notice is mailed); and (iv) be
accompanied by a copy of Article 13 of the NCBCA. An RSI shareholder to whom a
dissenters' notice has been mailed as described above, in order to preserve its
dissenters' rights, must demand payment and deposit its RSI share certificates
in accordance with the requirements of that notice. If the RSI shareholder
complies with those requirements, it preserves its right to receive payment for
its shares, and surrenders the right to transfer its shares, but retains all
other shareholder rights except to the extent they are cancelled or nullified by
the Merger. If the shareholder fails to comply with the requirements, it loses
its right to dissent.
Within 30 days after receipt of a demand for payment, RSI must pay each
dissenting shareholder the amount that RSI estimates to be the fair value of
such shareholder's shares, plus interest accrued from the effective date of the
Merger to the date of payment. The payment must be accompanied by: (a) RSI's
most recent available balance sheet, income statement and statement of cash
flows as of the end of or for the fiscal year ending not more than 16 months
before the date of payment, and the latest available interim financial
statements, if any; (b) an explanation of how the fair value of the shares was
estimated; (c) an explanation of the interest calculation; (d) a statement of
the dissenters' right to demand payment (as described below); and (e) a copy of
Article 13 of the NCBCA.
If the Merger is not consummated within 60 days after the date set for
demanding payment and depositing share certificates, RSI must, pursuant to
Article 13, return the deposited certificates. If after returning the deposited
certificates the Merger is consummated, RSI must send a new dissenters' notice
and repeat the payment demand procedure.
An RSI shareholder that has complied with the demand and deposit
requirements described above may notify RSI in writing of such shareholder's own
estimate of the fair value of his shares and amount of interest due, and demand
payment of the excess of such shareholder's estimate of the fair value of such
shareholder's shares over the amount previously paid by RSI if: (a) the
shareholder believes that the amount paid is less than the fair value of the RSI
shares or that the interest is incorrectly calculated; (b) RSI fails to make
payment of its estimate of fair value to the shareholder within 30 days after
receipt of a demand for payment; or (c) the Merger not having been consummated,
RSI does not return the deposited certificates within 60 days after the date set
for demanding payment. A shareholder waives the right to demand payment of such
excess unless such shareholder notifies RSI of such shareholder's demand in
writing within 30 days of RSI's payment of its estimate of fair value (with
respect to clause (a) above) or RSI's failure to perform (with respect to
clauses (b) and (c) in this paragraph). A shareholder who fails to notify RSI of
its demand for payment of such excess within such 30-day period shall be deemed
to have withdrawn its dissent and demand of payment of such excess.
If a demand for payment of the excess of such shareholder's estimate of
the fair value of such shareholder's shares over the amount previously paid by
RSI remains unsettled, the dissenting shareholder may commence a proceeding
within 60 days after the earlier of (a) the date of its payment demand for such
excess or (b) the date payment is made, by filing a complaint with the Superior
Court Division of the North Carolina General Court of Justice to determine the
fair value of the shares and accrued interest. If the dissenting shareholder
31
does not commence the proceeding within such 60-day period, the dissenting
shareholder shall be deemed to have withdrawn the dissent and demand for
payment.
The court in such an appraisal proceeding will determine all costs of
the proceeding and assess the costs as it finds equitable. The proceeding is to
be tried as in other civil actions; however, the dissenting shareholder will not
have the right to a trial by jury. The court may also assess the fees and
expenses of counsel and expenses for the respective parties, in the amounts the
court finds equitable: (a) against RSI if the court finds that it did not
substantially comply with the statute; or (b) against RSI or the dissenting
shareholder, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously or not in good faith. If
the court finds that the services of counsel for any dissenting shareholder were
of substantial benefit to other dissenting shareholders, and that the fees for
those services should not be assessed against RSI, the court may award to these
counsel reasonable fees to be paid out of the amounts awarded the dissenting
shareholders who were benefited.
If any holder of Shares who exercises his or her dissenters' rights
under Article 13 of the NCBCA fails to perfect, or effectively withdraws or
loses his or her right to demand payment or to otherwise exercise his or her
dissenters' rights as provided in the NCBCA, the Shares of such shareholder will
be converted into the cash consideration offered in the Merger.
The foregoing discussion is not a complete statement of law pertaining
to the dissenters' rights of an RSI shareholder under the NCBCA and is qualified
in its entirety by the full text of Article 13 of the NCBCA, which is attached
as Schedule D to this Offer to Purchase.
FAILURE TO FOLLOW THE STEPS REQUIRED BY ARTICLE 13 OF THE NC BUSINESS
ACT FOR PERFECTING DISSENTERS' RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS.
"Going Private" Rules. Because BCM is an affiliate of RSI, the
transactions contemplated herein constitute a "going private" transaction under
Rule 13e-3 under the Exchange Act. Rule 13e-3 requires, among other things, that
certain financial information concerning RSI and certain information relating to
the fairness of the Offer and the Merger and the consideration offered to
minority shareholders be filed with the SEC and disclosed to minority
shareholders prior to consummation of the Merger. BCM has provided such
information in this Offer to Purchase. BCM does not presently intend to file a
Form 15 to evidence the termination of RSI's duty to file reports pursuant to
Section 12 or Section 15(d) of the Exchange Act until after the Merger is
complete.
SOURCE AND AMOUNT OF FUNDS
BCM estimates that the total amount of funds required to purchase all
of the outstanding Shares (other than those already owned directly or indirectly
by BCM's shareholders) pursuant to the Offer and the Merger and to pay related
fees and expenses will be approximately $300,000. BCM has sufficient resources
to pay this amount and will pay these funds from its cash on hand.
CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer, BCM will not be
required to accept for payment or pay for any Shares, may postpone the
acceptance for payment or payment for tendered Shares, and may, in its sole
discretion, terminate or amend the Offer as to any Shares not then paid for if
(i) at the expiration of the Offering Period, the Minimum Tender Condition has
not been satisfied or waived or (ii) if on or after [__________], 2004, and at
or prior to the time of payment for any such Shares (whether or not any Shares
have theretofore been accepted for payment or paid for pursuant to the Offer),
any of the following events shall occur:
32
(a) there shall be threatened, instituted or pending any action,
proceeding or application before any court, government or governmental authority
or other regulatory or administrative agency or commission, domestic or foreign,
which (i) challenges the acquisition by BCM of the Shares, seeks to restrain,
delay or prohibit the consummation of the Offer or the Merger or the
transactions contemplated by the Offer or the Merger, or seeks to obtain any
material damages or otherwise directly or indirectly relates to the transactions
contemplated by the Offer or the Merger, (ii) seeks to prohibit or impose
material limitations on BCM's acquisition, ownership or operation of all or any
portion of its or RSI's business or assets (including the business or assets of
their respective affiliates and subsidiaries) or of the Shares (including,
without limitation, the right to vote the Shares purchased by BCM, on an equal
basis with all other Shares, on all matters presented to the shareholders of
RSI), or seeks to compel BCM to dispose of or hold separate all or any portion
of its own or RSI's business or assets (including the business or assets of
their respective affiliates or subsidiaries) as a result of the transactions
contemplated by the Offer or the Merger, (iii) might adversely affect RSI or
BCM, or any of their respective affiliates or subsidiaries (an "Adverse
Effect"), or result in a diminution in the value of the Shares or the benefits
expected to be derived by BCM as a result of the transactions contemplated by
the Offer (a "Diminution in Value"), or (iv) seeks to impose any condition to
the Offer unacceptable to BCM; or
(b) any statute, including without limitation any state anti-takeover
statute, rule, regulation, order or injunction, shall be sought, proposed,
enacted, promulgated, entered, enforced or deemed applicable or which becomes
applicable or asserted to be applicable to the Offer or the Merger or the
transactions contemplated by the Offer or the Merger that might, directly or
indirectly, result in any of the consequences referred to in clauses (i) through
(iv) of paragraph (a) above, including any determination or assertion by any
governmental authority that a filing under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act") is required; or
(c) any change (or any condition, event or development involving a
prospective change) shall have occurred or be threatened that has or might have
a material Adverse Effect on the business, properties, assets, liabilities,
capitalization, shareholders' equity, financial condition, operations, results
of operations or prospects of RSI or any of its subsidiaries, or BCM shall have
become aware of any fact that has or might have such an Adverse Effect or
results or might result in a Diminution in Value; or
(d) there shall have occurred (i) any general suspension of, or
limitation on times or prices for, trading in securities on any national
securities exchange or in the over-the-counter market, (ii) a declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States, (iii) the outbreak or escalation of a war, armed hostilities or
other international or national calamity directly or indirectly involving the
United States, (iv) any limitation (whether or not mandatory) by any
governmental authority on, or any other event which might affect the extension
of credit by banks or other lending institutions, (v) a suspension of or
limitation (whether or not mandatory) on the currency exchange markets or the
imposition of, or material changes in, any currency or exchange control laws in
the United States or (vi) in the case of any of the foregoing existing at the
time of the commencement of the Offer, a material acceleration or worsening
thereof; or
(e) a tender or exchange offer for some portion or all of the Shares
shall have been commenced or publicly proposed to be made by another person
(other than RSI or its subsidiaries), or it shall have been publicly disclosed
or BCM shall have learned that (i) any person (other than RSI or its
subsidiaries), entity or "group" (as defined in Section 13(d)(3) of the Exchange
Act) shall have acquired or proposed to acquire more than 5% of the Shares, or
shall have been granted any option or right, conditional or otherwise, to
acquire more than 5% of the Shares, other than acquisitions for bona fide
arbitrage purposes and other than acquisitions by persons or groups who have
publicly disclosed in a Schedule 13D or 13G (or amendments thereto on file with
the SEC) such ownership on or prior to [______], 2004; (ii) any such person,
entity or group who has publicly disclosed any such ownership of more than 5%
percent of the Shares prior to such date shall have acquired or proposed to
acquire additional Shares constituting more than 1% of the Shares, or shall have
been granted any option or right to acquire more than 1% of the Shares; (iii)
any new group was, or is, formed which beneficially owns more than 5% of the
outstanding Shares; (iv) any person, entity or group shall have entered into a
definitive agreement or an agreement in principal or made a proposal with
33
respect to a tender offer or exchange offer for some portion or all of the
Shares or a merger, consolidation or other business combination or sale of
assets (other than in the ordinary course of business) with or involving RSI or
any of its affiliates or subsidiaries; or (v) any person shall have filed a
Notification and Report Form under the HSR Act or made a public announcement
reflecting an intent to acquire RSI or assets or securities of RSI; or
(f) RSI and BCM shall have reached an agreement or understanding that
the Offer be terminated or amended or BCM (or one of its affiliates) shall have
entered into a definitive agreement or an agreement in principle to acquire RSI
by merger or similar business combination, or purchase of Shares or assets of
RSI; or
(g) any change (or any condition, event or development involving a
prospective change) shall have occurred or be threatened in the general
economic, financial, currency exchange or market conditions in the United States
or abroad that has or might have an Adverse Effect or results or might result in
a Diminution in Value.
The foregoing conditions in clause (i) and paragraphs (a) through (g)
of clause (ii) are for the sole benefit of BCM and may be asserted by BCM
regardless of the circumstances (including any action or inaction by BCM) giving
rise to any such conditions, or may be waived by BCM as a whole or in part at
any time and from time to time in its sole discretion. The determination as to
whether any condition has occurred shall be in the sole judgment of BCM and will
be final and binding on all parties. The failure by BCM at any time to exercise
any of the foregoing rights shall not be deemed a waiver of any such right and
each such right shall be deemed an ongoing right which may be asserted at any
time and from time to time. Notwithstanding the fact that BCM reserves the right
to assert the occurrence of a condition following acceptance for payment but
prior to payment in order to delay payment or cancel its obligation to pay for
properly tendered Shares, BCM will either promptly pay for such Shares or
promptly return such Shares.
A public announcement shall be made of a material change in, or waiver
of, such conditions, and the Offer may, in certain circumstances, be extended in
connection with any such change or waiver. All Offer Conditions must be
satisfied or waived prior to the commencement of any Subsequent Offering Period.
CERTAIN LEGAL MATTERS
General. Except as otherwise disclosed herein, BCM is not aware of any
licenses or other regulatory permits which appear to be material to the business
of RSI and which might be adversely affected by the acquisition of Shares by BCM
pursuant to the Offer or of any approval or other action by any governmental,
administrative or regulatory agency or authority which would be required for the
acquisition or ownership of Shares by BCM pursuant to the Offer. Should any such
approval or other action be required, it is currently contemplated that such
approval or action would be sought or taken. There can be no assurance that any
such approval or action, if needed, would be obtained or, if obtained, that it
will be obtained without substantial conditions or that adverse consequences
might not result to RSI's or BCM's business or that certain parts of RSI's or
BCM's business might not have to be disposed of in the event that such approvals
were not obtained or such other actions were not taken, any of which could cause
BCM to elect to terminate the Offer without the purchase of the Shares
thereunder. BCM's obligation under the Offer to accept for payment and pay for
Shares is subject to certain conditions. See "The Offer - Certain Conditions of
the Offer".
Antitrust Compliance. Under the HSR Act, certain acquisition
transactions may not be consummated unless certain information has been
furnished to the Antitrust Division of the Department of Justice and the Federal
Trade Commission and certain waiting period requirements have been satisfied. As
explained more fully below, however, the Offer is not a reportable transaction
under the HSR Act.
BCM's shareholders currently own directly or beneficially more than 50%
of the outstanding voting securities of RSI. See "The Offer - Absence of
Appraisal Rights; `Going Private' Rules". Under HSR Act reporting regulations,
34
this level of ownership means that BCM is in "control" of RSI for the purposes
of such regulations. Based on the foregoing, BCM believes no HSR Act filing is
required in connection with the Offer.
Federal Reserve Board Regulations. Regulations T, U and X (the "Margin
Regulations") promulgated by the Federal Reserve Board place restrictions on the
amount of credit that may be extended for the purpose of purchasing margin stock
(including the Shares) if such credit is secured directly or indirectly by
margin stock. BCM is funding the acquisition of the Shares from its cash on
hand. The Margin Regulations are thus inapplicable.
State Takeover Laws. A number of states have adopted laws and
regulations applicable to offers to acquire securities of corporations which are
incorporated in such states and/or which have substantial assets, shareholders,
principal executive offices or principal places of business in such states. In
Edgar v. MITE Corporation, the Supreme Court of the United States held that the
Illinois Business Takeover Statute, which made the takeover of certain
corporations more difficult, imposed a substantial burden on interstate commerce
and was therefore unconstitutional. In CTS Corporation v. Dynamics Corporation
of America, the United States Supreme Court held that as a matter of corporate
law, and in particular, those laws concerning corporate governance, a state may
constitutionally disqualify an acquiror of "Control Shares" (ones representing
ownership in excess of certain voting power thresholds e.g. 20%, 33% or 50%) of
a corporation incorporated in its state and meeting certain other jurisdictional
requirements from exercising voting power with respect to those shares without
the approval of a majority of the disinterested shareholders.
Pursuant to the North Carolina Shareholder Protection Act of the NCBCA,
no business combination involving a corporation which has a class of securities
registered under Section 12 of the Exchange Act and any entity that is the
beneficial owner, directly or indirectly, of more than 20% of the corporation's
voting shares may be consummated unless the holders of 95% of the outstanding
voting shares approve the business combination. This provision does not apply if
the parties comply with certain requirements specified in the Shareholder
Protection Act (relating, among other things, to the value of the consideration
paid) or if there is an applicable exemption. One of the exemptions applies to
business combinations involving the corporation and another entity if the
corporation was not public at the time the other entity acquired more than 10%
of the voting shares. We believe that this exemption applies to the Merger: at
the time of the spin-off of RSI from its former parent in 1989, when RSI became
a public company, the Mickel siblings beneficially owned over 25% of the stock
of the parent company (and, upon the spin-off, of RSI), and the Vice President
and the Chairman of the Board and Chief Executive Officer of the parent were
Buck A. Mickel and his father, Buck Mickel, respectively. Although we believe
that this exemption applies, the factual situation is complicated and there is
no interpretive caselaw with respect to this exemption, and accordingly there is
some uncertainty as to the application of this statute to RSI.
The North Carolina Control Share Acquisition Act of the NCBCA applies
to a corporation that is incorporated in North Carolina and that has substantial
assets in North Carolina, its principal place of business or a principal office
within North Carolina, a class of securities registered under Section 12 of the
Exchange Act, and more than 10.0% of its shareholders are residents of North
Carolina or more than 10.0% of its shares held by North Carolina residents. The
North Carolina Control Share Acquisition Act restricts the voting rights of a
person who acquires "control shares" in a covered corporation. Control shares
are shares that, when added to all other shares of the covered corporation
beneficially owned by a person, would entitle that person to voting power equal
to or greater than one-fifth, one-third or a majority of all voting power.
Without shareholder approval by "disinterested shareholders," the shares
acquired by the acquiror have no voting rights. RSI has its principal place of
business and principal office in South Carolina rather than North Carolina, and
is therefore not subject to, the North Carolina Control Share Acquisition Act.
Based on the foregoing, BCM does not believe that the takeover laws of
any state, including North Carolina, apply to the Offer. BCM has not currently
complied with any state takeover statute or regulation. BCM 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
35
is asserted that any state takeover statute is applicable to the Offer or the
Merger and if an appropriate court does not determine that it is inapplicable or
invalid as applied to the Offer or the Merger, BCM might be required to file
certain information with, or to receive approvals from, the relevant state
authorities, and BCM might be unable to accept for payment or pay for Shares
tendered pursuant to the Offer, or be delayed in or prevented from consummating
the Offer or the Merger. In such case, BCM may not be obliged to accept for
payment or pay for any Shares tendered pursuant to the Offer. See "The Offer -
Certain Conditions of the Offer".
Agreements Concerning RSI Securities. Neither BCM nor any BCM
shareholder has any agreements with regard to RSI securities other than the
Offer.
FEES AND EXPENSES
BCM has retained Georgeson Shareholder Communications Inc. to act as
the Information Agent in connection with the Offer. The Information Agent may
contact holders of Shares by mail, telephone and in person, and may request
brokers, dealers and other nominee shareholders to forward materials relating to
the Offer to beneficial owners of Shares. The Information Agent will receive
reasonable and customary compensation for such services, plus reimbursement of
out-of-pocket expenses and BCM will indemnify the Information Agent against
certain liabilities and expenses in connection with the Offer, including
liabilities under the federal securities laws.
BCM will pay the Depositary reasonable and customary compensation for
its services in connection with the Offer, plus reimbursement for out-of-pocket
expenses, and will indemnify the Depositary against certain liabilities and
expenses in connection therewith, including liabilities under the federal
securities laws. Brokers, dealers, commercial banks and trust companies will be
reimbursed by BCM for customary mailing and handling expenses incurred by them
in forwarding material to their customers.
In addition, RSI will incur its own fees and expenses in connection
with the Offer.
The following is an estimate of the fees and expenses to be incurred by
BCM:
Filing Fees $ 24
Legal Fees and Expenses $ 60,000
Accounting Fees and Expenses $ 0
Depositary Fees $ 7,500
Information Agent, Printing and Mailing $ 18,000
Costs
Miscellaneous $ 10,000
======
Total $ 90,524
BCM has not made any provisions in connection with this Offer for RSI
shareholders to access its files or for BCM to provide counsel or legal advice
to RSI's shareholders at BCM's expense.
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. BCM may, however, in its sole discretion, take such action as it
may deem necessary to make the Offer in any such jurisdiction and extend the
Offer to holders of Shares in such jurisdiction.
36
BCM is not aware of any jurisdiction in which the making of the Offer
or the acceptance of Shares in connection therewith would not be in compliance
with the laws of such jurisdiction.
BCM has filed with the SEC a Tender Offer Statement on Schedule TO
pursuant to Rule 14d-3 of the General Rules and Regulations under the Exchange
Act, furnishing certain additional information with respect to the Offer, and
may file amendments thereto. Such Statement includes within it the information
required by the SEC's Statement on Schedule 13E-3 relating to "going private"
transactions. Such Statement and any amendments thereto, including exhibits, may
be examined and copies may be obtained from the principal office of the SEC in
Washington, D.C. in the manner set forth in "The Offer - Certain Information
Concerning RSI".
No person has been authorized to give any information or make any
representation on behalf of BCM not contained in this Offer to Purchase or in
the Letter of Transmittal and, if given or made, such information or
representation must not be relied upon as having been authorized.
37
AMERICAN STOCK TRANSFER & TRUST COMPANY
[DELIVERY INFORMATION TO COME]
For information, call:
[--------]
Questions and requests for assistance or for additional copies of this
Offer to Purchase and the Letter of Transmittal may be directed to the
Information Agent at its telephone number 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:
GEORGESON SHAREHOLDER COMMUNICATIONS INC.
17 State Street, 10th Floor
New York, New York 10004
Toll Free: 888-264-7027
Banks and Brokers may call: 212-440-9800
SCHEDULE A
SHAREHOLDERS OF BCM
Set forth below is the name, present principal occupation or employment and
material occupations, positions, offices or employment for the past five years
of each shareholder of BCM Acquisition Corp. Each person identified below has
held his or her position since the formation of BCM Acquisition Corp. on October
8, 2004. The principal address of BCM Acquisition Corp. and, unless indicated
below, the current business address for each individual listed below is c/o BCM
Acquisition Corp., 28 East Court Street, Greenville, South Carolina, 29601;
Telephone: (864) 271-7171. BCM and the BCM shareholders are U.S. citizens.
Buck A. Mickel has served as the President and Chief Executive Officer and
as a director of RSI since July 28, 1998, following the death of his father, Mr.
Buck Mickel. Mr. Mickel was Vice President of RSI from 1989 to January 1995 and
from September 1996 to July 1998. Mr. Mickel served as a consultant to RSI from
January 1995 to September 1996. Mr. Mickel served as a director of RSI or RSI
Corporation from 1987 until December 1992. Mr. Mickel currently serves as a
director of Delta Woodside Industries, Inc. and Delta Apparel, Inc.
Charles C. Mickel has served as a director of RSI since 2001 and as Vice
President of RSI since September 1, 2003. Mr. Mickel served as vice president of
U. S. Shelter Corporation from 1981 to 1990 and vice president of asset
management of Insigna Financial Group, Inc., the successor of U. S. Shelter
Corporation, from 1990 to 1992. Since July 1992 Mr. Mickel has been a private
investor in commercial real estate. Mr. Mickel is Buck A. Mickel's brother.
Minor Mickel Shaw is President of Micco Corporation, a family investment
company. Previously, Mrs. Shaw was with C&S National Bank of South Carolina and
the Manly Investment Group. Mrs. Shaw is a trustee of Nations Funds and is a
board member of Piedmont Natural Gas. Previously, she has served on the boards
of Interstate Johnson Lane and Nations Banks Carolinas.
SCHEDULE B
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the current ownership of shares of RSI
common stock (except for the BCM's ownership, which is shown giving pro forma
effect to the contribution of Shares by the Mickel siblings) and of BCM common
stock by BCM, the BCM shareholders and by the other directors and executive
officers of RSI:
RSI BCM (7)
- -------------------------------------------------------------------------------------------------------------------------
Amount and Amount and
Nature of Nature of
Name and Address of Beneficial Percent Beneficial Percent
Beneficial Owner Ownership of Class (7) Ownership of Class (7)
- -------------------------------------------------------------------------------------------------------------------------
BCM Acquisition Corp. 6,368,188 (1) 75.9 - -
Buck A. Mickel 3,513,975 (2) 41.9 5,202 52.0
President, CEO and director, RSI and
BCM
Shareholder, BCM
Charles C. Mickel 1,473,851 (3) 17.6 2,472 24.7
Vice President and director, RSI and
BCM
Shareholder, BCM
Minor Mickel Shaw 1,380,362 16.5 2,326 23.3
Shareholder, BCM
Joe F. Ogburn 201,990 (4) 2.4 - -
Secretary, Treasurer and director, RSI
and BCM
Charles M. Bolt 94,851 (5) 1.1 - -
Director, RSI
C.C. Guy 50,962 (6) 0.6 - -
Director, RSI and BCM
(1) The number of shares includes all shares shown as beneficially owned by each
of Buck A. Mickel, Charles C. Mickel and Minor M. Shaw. Of these, only 5,934,856
shares (3,087,309 shares of Buck A. Mickel, 1,467,185 shares of Charles C.
Mickel and 1,380,362 shares of Minor M. Shaw) are expected to be contributed to
BCM upon satisfaction or waiver of the conditions to the Offer. The shares
underlying currently exercisable stock options (226,666 for Buck A Mickel and
6,666 for Charles C. Mickel) are expected to remain unexercised through the
Offer period and to be cashed out in the Merger. The 200,000 shares held by Mr.
Mickel's wife and by Mr. Mickel as custodian for his minor child are expected to
be tendered in connection with the Offer.
(2) The number of shares shown as beneficially owned by Mr. Buck A. Mickel
includes 3,087,309 shares directly owned by him, 150,000 shares owned by him as
custodian for his minor child and 226,666 unissued shares subject to stock
options held by Mr. Mickel which are currently exercisable. The number of shares
shown also includes 50,000 shares held by Mr. Mickel's wife, as to which shares
Mr. Mickel disclaims beneficial ownership. The 200,000 shares held by Mr.
Mickel's wife and by Mr. Mickel as custodian for his minor child are expected to
be tendered in connection with the Offer.
(3) The number of shares shown as beneficially owned by Mr. Charles C. Mickel
includes 1,467,185 shares directly owned by him and 6,666 unissued shares
subject to stock options held by Mr. Mickel which are currently exercisable.
(4) The number of shares shown as beneficially owned by Mr. Ogburn includes
45,142 shares directly owned by him and 156,665 unissued shares subject to stock
options held by Mr. Ogburn which are currently exercisable. Such number also
includes 183 shares held by Mr. Ogburn's wife, as to which shares Mr. Ogburn
disclaims beneficial ownership.
(5) The number of shares shown as beneficially owned by Mr. Bolt includes 88,185
shares directly owned by him and 6,666 unissued shares subject to stock options
held by Mr. Bolt which are currently exercisable.
(6) The number of shares shown as beneficially owned by Mr. Guy includes 26,307
shares directly owned by him and 6,666 unissued shares subject to stock options
held by Mr. Guy which are currently exercisable. The number of shares shown also
includes 17,989 shares held by Mr. Guy's wife, as to which shares Mr. Guy
disclaims beneficial ownership.
(7) Pursuant to Rule 13d-3 promulgated under the Exchange Act, percentages of
total outstanding shares have been computed on the assumption that shares that
can be acquired within 60 days upon the exercise of options by a given person
are outstanding, but no other shares similarly subject to acquisition by other
persons are outstanding.
SCHEDULE C
CERTAIN RELATIONSHIPS
SALARY AND OTHER COMPENSATION ARRANGEMENTS
As compensation for his services as President and Chief Executive Officer,
Buck A. Mickel received $81,000 in fiscal 2004 and $90,083 in 2003.
Messrs. C.C. Guy and Charles M. Bolt retired as officers of RSI on January
17, 1995. RSI paid each of these two retired officers $100 per month in
consulting fees during the years ended August 2003 and August 2004. The Board of
RSI determined that these payments were appropriate in light of these officers'
long records of service to RSI and value as consultants to RSI.
LOAN ARRANGEMENT
During August 2001, Minor H. Mickel loaned RSI $250,000 under the terms of
an unsecured note payable bearing interest at 8.0% per year with the principal
balance and all unpaid interest due in August 2006. Mrs. Mickel is the mother of
the Mickel siblings.
During February 2002, Minor H. Mickel loaned RSI $1,200,000 and Buck A.
Mickel, Charles C. Mickel and Minor Mickel Shaw, each loaned RSI $20,000 under
unsecured promissory notes bearing interest at 7.0% per year with the principal
balances and all unpaid interest due in February 2007. Proceeds from these notes
aggregating $1,260,000 were used to purchase the assets of RSI's wholly-owned
subsidiary, Employment Solutions, Inc.
On March 25, 2004, Minor H. Mickel gave the two notes above, having
principal unpaid balances of $250,000 and $1,200,000 and the unpaid interest at
February 29, 2004 of $177,485, in equal parts to Buck A. Mickel, Charles C.
Mickel and Minor M. Shaw.
Buck A. Mickel, Charles C. Mickel and Minor M. Shaw (and, before March 25,
2004, Minor H. Mickel), the creditors of the three notes payable aggregating
$1,200,000, have permitted the deferral of payment of interest on these notes
since the notes' issuance. Since November 2003, these creditors have also
permitted the deferral of payment of interest under the other notes payable held
by them, in the aggregate principal amount of $310,000.
These creditors have agreed that they will not require payment of interest
on any of these notes until July 2005 at the earliest. Management of RSI could
decide at any time to pay all or part of the accrued interest if it determines
that cash balances are sufficient to pay the interest without a detrimental
effect on the future operations of RSI. As of August 31, 2004, the aggregate
accrued unpaid interest with respect to these notes was $231,833.
CORPORATE OFFICE ARRANGEMENT
During fiscal 2003 and 2004, RSI's executive offices were located in a
facility consisting of approximately 3,000 square feet of floor space located at
28 East Court Street, Greenville, South Carolina. Rental expense of $30,600 was
incurred by RSI during the year ended August 31, 2004 for RSI's executive
offices under a month-to-month lease arrangement. The lease at 28 East Court
Street, Greenville, South Carolina includes office furniture and equipment. The
office space at 28 East Court Street, Greenville, South Carolina was leased from
CTST, LLC, which is owned by three shareholders: Buck A. Mickel, Charles C.
Mickel and Minor Mickel Shaw. In its proxy statement with respect to its annual
meeting in January 2004, RSI stated that it believed that this lease contains
provisions as favorable to RSI as could be obtained from a third-party landlord.
SCHEDULE D
APPRAISAL RIGHTS PROVISIONS OF ARTICLE 13 OF THE
NORTH CAROLINA BUSINESS CORPORATION ACT
Article 13.
Dissenters' Rights.
Part 1. Right to Dissent and Obtain Payment for Shares.
SS. 55-13-01. DEFINITIONS.
In this Article:
(1) "Corporation" means the issuer of the shares held by a
dissenter before the corporate action, or the surviving or
acquiring corporation by merger or share exchange of that
issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent
from corporate action under G.S. 55-13-02 and who
exercises that right when and in the manner required by
G.S. 55-13-20 through 55-13-28.
(3) "Fair value", with respect to a dissenters' shares, means
the value of the shares immediately before the
effectuation of the corporate action to which the
dissenter objects, excluding any appreciation or
depreciation in anticipation of the corporate action
unless exclusion would be inequitable.
(4) "Interest" means interest from the effective date of the
corporate action until the date of payment, at a rate that
is fair and equitable under all the circumstances, giving
due consideration to the rate currently paid by the
corporation on its principal bank loans, if any, but not
less than the rate provided in G.S. 24-1.
(5) "Record shareholder" means the person in whose name shares
are registered in the records of a corporation or the
beneficial owner of shares to the extent of the rights
granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a
beneficial owner of shares held in a voting trust or by a
nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the
beneficial shareholder.
SS. 55-13-02. RIGHT TO DISSENT.
(a) In addition to any rights granted under Article 9, a shareholder is
entitled to dissent from, and obtain payment of the fair value of his shares in
the event of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the corporation
(other than a parent corporation in a merger whose shares
are not affected under G.S. 55-11-04) is a party unless
(i) approval by the shareholders of that corporation is
not required under G.S. 55-11-03(g) or (ii) such shares
are then redeemable by the corporation at a price not
greater than the cash to be received in exchange for such
shares;
(2) Consummation of a plan of share exchange to which the
corporation is a party as the corporation whose shares
will be acquired, unless such shares are then redeemable
by the corporation at a price not greater than the cash to
be received in exchange for such shares;
(2a) Consummation of a plan of conversion pursuant to Part 2 of
Article 11A of this Chapter;
(3) Consummation of a sale or exchange of all, or
substantially all, of the property of the corporation
other than as permitted by G.S. 55-12-01, including a sale
in dissolution, but not including a sale pursuant to court
order or a sale pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be
distributed in cash to the shareholders within one year
after the date of sale;
(4) An amendment of the articles of incorporation that
materially and adversely affects rights in respect of a
dissenters' shares because it (i) alters or abolishes a
preferential right of the shares; (ii) creates, alters, or
abolishes a right in respect of redemption, including a
provision respecting a sinking fund for the redemption or
repurchase, of the shares; (iii) alters or abolishes a
preemptive right of the holder of the shares to acquire
shares or other securities; (iv) excludes or limits the
right of the shares to vote on any matter, or to cumulate
votes, other than an amendment of the articles of
incorporation permitting action without meeting to be
taken by less than all shareholders entitled to vote,
without advance notice, or both, as provided in G.S.
55-7-04; (v) reduces the number of shares owned by the
shareholder to a fraction of a share if the fractional
share so created is to be acquired for cash under G.S.
55-6-04; or (vi) changes the corporation into a nonprofit
corporation or cooperative organization; or
(5) Any corporate action taken pursuant to a shareholder vote
to the extent the articles of incorporation, bylaws, or a
resolution of the board of directors provides that voting
or nonvoting shareholders are entitled to dissent and
obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this Article may not challenge the corporate action creating his
entitlement, including without limitation a merger solely or partly in exchange
for cash or other property, unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
(c) Notwithstanding any other provision of this Article, there shall be no
right of shareholders to dissent from, or obtain payment of the fair value of
the shares in the event of, the corporate actions set forth in subdivisions (1),
(2), or (3) of subsection (a) of this section if the affected shares are any
class or series which, at the record date fixed to determine the shareholders
entitled to receive notice of and to vote at the meeting at which the plan of
merger or share exchange or the sale or exchange of property is to be acted on,
were (i) listed on a national securities exchange or designated as a national
market system security on an interdealer quotation system by the National
Association of Securities Dealers, Inc., or (ii) held by at least 2,000 record
shareholders. This subsection does not apply in cases in which either:
(1) The articles of incorporation, bylaws, or a resolution of
the board of directors of the corporation issuing the
shares provide otherwise; or
(2) In the case of a plan of merger or share exchange, the
holders of the class or series are required under the plan
of merger or share exchange to accept for the shares
anything except:
a. Cash;
b. Shares, or shares and cash in lieu of fractional shares
of the surviving or acquiring corporation, or of any
other corporation which, at the record date fixed to
determine the shareholders entitled to receive notice
of and vote at the meeting at which the plan of merger
or share exchange is to be acted on, were either listed
subject to notice of issuance on a national securities
exchange or designated as a national market system
security on an interdealer quotation system by the
National Association of Securities Dealers, Inc., or
held by at least 2,000 record shareholders; or
c. A combination of cash and shares as set forth in
sub-subdivisions a. and b. of this subdivision.
SS. 55-13-03. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(a) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(1) He submits to the corporation the record shareholder's
written consent to the dissent not later than the time the
beneficial shareholder asserts dissenters' rights; and
(2) He does so with respect to all shares of which he is the
beneficial shareholder.
Part 2. Procedure for Exercise of Dissenters' Rights.
SS. 55-13-20. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is submitted to a vote at a shareholders' meeting, the meeting notice
must state that shareholders are or may be entitled to assert dissenters' rights
under this Article and be accompanied by a copy of this Article.
(b) If corporate action creating dissenters' rights under G.S. 55-13-02 is
taken without a vote of shareholders or is taken by shareholder action without
meeting under G.S. 55-7-04, the corporation shall no later than 10 days
thereafter notify in writing all shareholders entitled to assert dissenters'
rights that the action was taken and send them the dissenters' notice described
in G.S. 55-13-22. A shareholder who consents to shareholder action taken without
meeting under G.S. 55-7-04 approving a corporate action is not entitled to
payment for the shareholder's shares under this Article with respect to that
corporate action.
(c) If a corporation fails to comply with the requirements of this section,
such failure shall not invalidate any corporate action taken; but any
shareholder may recover from the corporation any damage which he suffered from
such failure in a civil action brought in his own name within three years after
the taking of the corporate action creating dissenters' rights under G.S.
55-13-02 unless he voted for such corporate action.
SS. 55-13-21. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights:
(1) Must give to the corporation, and the corporation must
actually receive, before the vote is taken written notice
of his intent to demand payment for his shares if the
proposed action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a)
is not entitled to payment for his shares under this Article.
SS. 55-13-22. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under G.S.
55-13-02 is approved at a shareholders' meeting, the corporation shall mail by
registered or certified mail, return receipt requested, a written dissenters'
notice to all shareholders who satisfied the requirements of G.S. 55-13-21.
(b) The dissenters' notice must be sent no later than 10 days after
shareholder approval, or if no shareholder approval is required, after the
approval of the board of directors, of the corporate action creating dissenters'
rights under G.S. 55-13-02, and must:
(1) State where the payment demand must be sent and where and
when certificates for certificated shares must be
deposited;
(2) Inform holders of uncertificated shares to what extent
transfer of the shares will be restricted after the
payment demand is received;
(3) Supply a form for demanding payment;
(4) Set a date by which the corporation must receive the
payment demand, which date may not be fewer than 30 nor
more than 60 days after the date the subsection (a) notice
is mailed; and
(5) Be accompanied by a copy of this Article.
SS. 55-13-23. DUTY TO DEMAND PAYMENT.
(a) A shareholder sent a dissenters' notice described in G.S. 55-13-22 must
demand payment and deposit his share certificates in accordance with the terms
of the notice.
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) retains all other rights of a shareholder until these
rights are cancelled or modified by the taking of the proposed corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this Article.
SS. 55-13-24. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under G.S. 55-13-26.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are cancelled or modified by the taking of the proposed corporate action.
SS. 55-13-25. PAYMENT.
(a) As soon as the proposed corporate action is taken, or within 30 days
after receipt of a payment demand, the corporation shall pay each dissenter who
complied with G.S. 55-13-23 the amount the corporation estimates to be the fair
value of his shares, plus interest accrued to the date of payment.
(b) The payment shall be accompanied by:
(1) The corporation's most recent available balance sheet as of
the end of a fiscal year ending not more than 16 months before
the date of payment, an income statement for that year, a
statement of cash flows for that year, and the latest
available interim financial statements, if any;
(2) An explanation of how the corporation estimated the fair value
of the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenters' right to demand payment under
G.S. 55-13-28; and
(5) A copy of this Article.
SS. 55-13-26. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under G.S. 55-13-22 and repeat the payment demand procedure.
SS. 55-13-28. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH CORPORATION'S PAYMENT
OR FAILURE TO PERFORM.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of the amount in excess of the payment by the corporation under G.S. 55-13-25
for the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount paid under G.S.
55-13-25 is less than the fair value of his shares or that
the interest due is incorrectly calculated;
(2) The corporation fails to make payment under G.S. 55-13-25;
or
(3) The corporation, having failed to take the proposed
action, does not return the deposited certificates or
release the transfer restrictions imposed on
uncertificated shares within 60 days after the date set
for demanding payment.
(b) A dissenter waives his right to demand payment under this section
unless he notifies the corporation of his demand in writing (i) under
subdivision (a)(1) within 30 days after the corporation made payment for his
shares or (ii) under subdivisions (a)(2) and (a)(3) within 30 days after the
corporation has failed to perform timely. A dissenter who fails to notify the
corporation of his demand under subsection (a) within such 30-day period shall
be deemed to have withdrawn his dissent and demand for payment.
Part 3. Judicial Appraisal of Shares.
SS. 55-13-30. COURT ACTION.
(a) If a demand for payment under G.S. 55-13-28 remains unsettled, the
dissenter may commence a proceeding within 60 days after the earlier of (i)
the date payment is made under G.S. 55-13-25, or (ii) the date of the
dissenters' payment demand under G.S. 55-13-28 by filing a complaint with
the Superior Court Division of the General Court of Justice to determine
the fair value of the shares and accrued interest. A dissenter who takes no
action within the 60-day period shall be deemed to have withdrawn his
dissent and demand for payment.
(a1) Repealed by Session Laws 1997-202, s. 4.
(b) Reserved for future codification purposes.
(c) The court shall have the discretion to make all dissenters (whether or
not residents of this State) whose demands remain unsettled parties to the
proceeding as in an action against their shares and all parties must be
served with a copy of the complaint. Nonresidents may be served by
registered or certified mail or by publication as provided by law.
(d) The jurisdiction of the superior court in which the proceeding is
commenced under subsection (a) is plenary and exclusive. The court may
appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers
described in the order appointing them, or in any amendment to it. The
parties are entitled to the same discovery rights as parties in other civil
proceedings. The proceeding shall be tried as in other civil actions.
However, in a proceeding by a dissenter in a corporation that was a public
corporation immediately prior to consummation of the corporate action
giving rise to the right of dissent under G.S. 55-13-02, there is no right
to a trial by jury.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount, if any, by which the court finds the fair value of his
shares, plus interest, exceeds the amount paid by the corporation.
SS. 55-13-31. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under G.S. 55-13-30
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, and shall assess
the costs as it finds equitable.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all
dissenters if the court finds the corporation did not
substantially comply with the requirements of G.S.
55-13-20 through 55-13-28; or
(2) Against either the corporation or a dissenter, in favor of
either or any other party, if the court finds that the
party against whom the fees and expenses are assessed
acted arbitrarily, vexatiously, or not in good faith with
respect to the rights provided by this Article.
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.