Exhibit 99.2
Offer to Purchase and Consent Solicitation Statement
GLENOIT CORPORATION
Tender Offer and Solicitation of Consents
For the Proposed Amendments To The Indenture
We are offering to purchase for cash any and all of our outstanding 11%
Senior Subordinated Notes Due 2007 at a price equal to 17% of the principal
amount of the Notes, or $170 per $1,000 of principal.
If you accept our Tender Offer and tender your Notes, your acceptance
will also constitute your consent to certain Proposed Amendments to the
Indenture under which the Notes were issued. These Proposed Amendments would
remove substantially all of the restrictive covenants and events of default to
enhance our operating and financial flexibility and to prevent our default under
the Indenture.
We will complete the purchase of the Notes and the Proposed Amendments
only if the holders of 99% of the principal amount of the Notes elect to tender
their Notes prior to the Expiration Date. We may reduce this percentage only in
the very limited circumstances described herein. The holders of approximately
83% of the principal amount of the Notes have agreed to tender their Notes, but
this agreement may be terminated under certain conditions. We may terminate the
Tender Offer at any time and for any reason, whether or not all of the
conditions necessary to complete the Tender Offer have been satisfied. If you
tender your Notes, your tender may not be withdrawn, except under very limited
circumstances.
SOLICITATION OF ACCEPTANCES FOR THE
JOINT PREPACKAGED PLAN OF REORGANIZATION
Together with certain of our affiliates, we are separately soliciting
your acceptance of a Joint Prepackaged Plan of Reorganization that we may file
in bankruptcy, whether or not all of the conditions to our completing the Tender
Offer have been satisfied. In order for us to confirm the Prepackaged Plan with
an accepting Noteholder class, we must receive acceptances of the Prepackaged
Plan from holders of Notes representing more than half of all holders who
respond and more than two-thirds of the principal and interest of those
responding. The holders of approximately 83% of the principal amount of the
Notes have agreed to accept the Prepackaged Plan, but this agreement may be
terminated under certain conditions. Under the Prepackaged Plan, Noteholders are
intended to receive 17% of the principal amount of the Notes, or $170 per $1,000
of principal. Under certain circumstances, however, Noteholders could become the
owners of 100% of the equity of our parent, in which case they would receive no
cash.
The Prepackaged Plan also must be confirmed by a United States
Bankruptcy Court. Please refer to the attached Annex A for a complete copy of
the Disclosure Statement, which describes the Prepackaged Plan and the
procedures and instructions for voting on the Prepackaged Plan, as well a
complete copy of the Prepackaged Plan.
EXPIRATION DATE
Our Tender Offer and related solicitation of consents to the Proposed
Amendments, as well as our solicitation of acceptances of the Prepackaged Plan,
will expire at 12:00 Midnight, New York City time, on August 3, 2000, which we
refer to as the "Expiration Date." We may extend the Expiration Date at our
option.
RISKS
See the section entitled "Risk Factors" on page 12 for a discussion of
certain risks which you should consider in connection with the Tender Offer, the
Proposed Amendments and the Prepackaged Plan.
The date of this Statement is July 6, 2000.
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WHERE TO DIRECT QUESTIONS AND REQUESTS FOR ASSISTANCE
Please direct any questions, requests for assistance, and requests for
additional copies of this Statement to the Information and Balloting Agent at
the address and telephone number provided on the back page of this Statement.
FORWARD-LOOKING STATEMENTS
Except for historical information, many of the matters that we discuss
in this Statement contain forward-looking information and describe our belief
concerning future business, capital market conditions, and general outlook based
on currently available information. We have identified these "forward-looking"
statements by using words such as "anticipate," "expect," "believe," "estimate,"
"may," "intend," "could result" and "appear," as well as similar expressions of
the future. Risks, factors and uncertainties which could cause actual results or
performance to differ materially from those expressed in these statements, many
of which may be beyond our control, include, without limitation: the price and
availability of raw materials; weather, fashion, consumer tastes, and other
factors that impact consumer demand for apparel and similar merchandise; the
cyclical nature of the textile industry; competition among textile companies;
stringent federal, state and local laws and regulations governing environmental,
health and safety matters; and those disclosed under the section entitled "Risk
Factors." We will not, and we assume no obligation to, update the information
contained in this Statement, including any forward-looking statements.
IMPORTANT
When we refer to this "Statement," we are referring not only to this
Offer to Purchase and Consent Solicitation Statement, but also to the Annexes
and other documents that we incorporate into, or refer to, in this Statement.
You should rely only on the information contained or incorporated by
reference in this Statement. We have not authorized anyone to provide you with
different or supplemental information. You should not assume that the
information in this Statement is accurate as of any date other than the date on
the cover page. The delivery of this Statement shall not under any circumstances
create any implication that the information contained herein is correct as of
any time subsequent to the date hereof or that there has been no change in the
information set forth herein or in any attachments hereto or in our affairs or
the affairs of any of our affiliates since the date hereof. By tendering your
Notes, you represent that you are basing your decision solely on this Statement
and your own examination of our company and the terms of the Tender Offer, the
Proposed Amendments and the Prepackaged Plan, including the merits and risks
involved.
Since no bankruptcy case has yet been filed, no bankruptcy court has
approved the contents of this Statement or the Prepackaged Plan. However, if a
bankruptcy case is filed, we may seek bankruptcy court approval of the adequacy
of the information in this document, and the documents that we refer to herein,
such as the Disclosure Statement, to the extent necessary under the Bankruptcy
Code. Similarly, neither the Securities and Exchange Commission, or the "SEC,"
nor any state securities commission has approved or disapproved of the
transactions described by this Statement or upon the accuracy or adequacy of
this Statement. Any representation to the contrary is a criminal offense.
The contents of this Statement should not be construed as legal,
business or tax advice. You should consult your own attorney, business advisor
and tax advisor as to such matters. This Statement
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constitutes neither an offer to purchase nor a solicitation of consents in any
jurisdiction in which, or to or from any person to or from whom, it is unlawful
to make such offer or solicitation under bankruptcy, securities or blue sky
laws.
We may terminate the Tender Offer at any time. Whether or not all of
the conditions to our completing the Tender Offer have been satisfied, we may
nonetheless file the Prepackaged Plan at any time, and, if a sufficient number
of Noteholders has returned a Ballot or Master Ballot, as appropriate, accepting
the Prepackaged Plan, the Noteholder class will be deemed to have accepted the
Prepackaged Plan.
Your decision whether to tender your Notes is unrelated to your
decision to accept the Prepackaged Plan, and, if you tender your Notes, you will
NOT be deemed to have accepted the Prepackaged Plan. To accept the Prepackaged
Plan, you must submit a Ballot or Master Ballot, as applicable, each of which
accompany this Statement.
WHERE YOU CAN FIND ADDITIONAL INFORMATION ABOUT US
We file annual, quarterly, special reports and other information with
the SEC. You may read and copy any document we file with the SEC at the SEC's
Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549, or at
the SEC's regional offices located at Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511 and 7 World Trade Center, Suite 1300,
New York, New York 10048. You may obtain further information on the operation of
the Public Reference Room by calling the SEC at 1-800-SEC-0330. Our SEC filings
are also available to the public over the Internet at the SEC's Web site at
http://www.sec.gov.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
We are incorporating by reference into this Statement all of the
information contained in our filings with the SEC under Sections 13(a), 13(c),
14, or 15(d) of the Securities Exchange Act of 1934 from the date hereof until
the completion of the Tender Offer, the Proposed Amendments, and the
solicitation of acceptances of the Prepackaged Plan.
The information incorporated by reference is considered to be part of
this Statement and later information that we file with the SEC will
automatically update and supersede that information.
You may obtain a copy of these filings, at no cost, by writing or
contacting our counsel at:
Alston & Bird LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
(404) 881-7000
Attention: Mark C. Kanaly
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TABLE OF CONTENTS
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SUMMARY...........................................................................................................1
Glenoit Corporation..........................................................................................1
Recent Developments..........................................................................................2
Financial Plan...............................................................................................3
The Tender Offer.............................................................................................4
Certain Consequences of the Tender Offer.....................................................................8
Federal Income Tax Considerations............................................................................9
The Prepackaged Plan.........................................................................................9
Depositary and Information and Balloting Agent..............................................................10
RISK FACTORS.....................................................................................................11
Risks to Noteholders If the Tender Offer Is Not Successfully Completed or the Prepackaged Plan Is
Not Consummated....................................................................................11
Risks If the Tender Offer Is Completed......................................................................11
Risks Relating to the Prepackaged Plan......................................................................11
THE TENDER OFFER.................................................................................................14
Consideration...............................................................................................14
Proposed Amendments.........................................................................................14
Expiration; Extension; Termination..........................................................................14
Conditions of the Tender Offer..............................................................................15
Sources of Funds for the Tender Offer.......................................................................18
Appraisal Rights............................................................................................18
THE PROPOSED AMENDMENTS..........................................................................................18
General.....................................................................................................18
Description and Effect......................................................................................18
PROCEDURES FOR TENDERING YOUR NOTES AND DELIVERING YOUR CONSENTS.................................................21
General.....................................................................................................21
Tender of Notes; Delivery of Consents.......................................................................21
Signature Guarantees........................................................................................23
Book-Entry Transfers........................................................................................24
Guaranteed Delivery Procedures..............................................................................24
Transfers of Ownership of Tendered Notes....................................................................25
Lost or Missing Certificates................................................................................25
Backup Withholding..........................................................................................25
Acceptance of Notes, Delivery of Payment....................................................................26
Withdrawal of Tenders.......................................................................................27
Interpretation..............................................................................................27
Payments for Solicitation...................................................................................28
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FEDERAL INCOME TAX CONSEQUENCES..................................................................................28
THE PREPACKAGED PLAN.............................................................................................30
General.....................................................................................................30
Potential Consequences of the Prepackaged Plan..............................................................31
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ATTACHMENTS
Annex A: Disclosure Statement (Includes The Prepackaged Plan of Bankruptcy)
Annex B: Form of Ballot
Annex C: Form of Master Ballot
Annex D: Letter of Transmittal
Annex E: Notice of Guaranteed Delivery
Annex F: Letter to Our Clients
Annex G: Letter to Securities Dealers, Commercial Banks, Trust Companies and
Other Nominees
Annex H: Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9
Annex I: Supplemental Indenture
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SUMMARY
This summary highlights some of the information that is contained
elsewhere or incorporated by reference into this Statement. It does not contain
all of the information that may be important to you. You should carefully read
this entire document and the other documents to which it refers before deciding
whether to accept the Tender Offer, including the related consent to the
Proposed Amendments, as well as whether to accept the Prepackaged Plan. The
terms "we," "us," "our company," and "the Company" refer to Glenoit Corporation.
Glenoit Corporation
We were incorporated in 1954 as a Delaware corporation, and we became a
wholly-owned subsidiary of Glenoit Universal, Ltd. during 1995. In October 1998,
we acquired American Pacific Enterprises, Inc., and in February 1999, we
acquired Ex-Cell Home Fashions, Inc. As a result of these acquisitions, we
believe that we have transformed our company from a specialty textile
manufacturer focused on profitable niche segments to a diversified manufacturer
and distributor of consumer goods, with the majority of our revenues derived
from the home textile market.
We currently have two operating segments:
o the Decorative Home Furnishings Division, which designs,
manufactures, imports and distributes decorative textile home
furnishings; and
o the Fabric Division, which manufactures and markets specialty
fabrics, primarily for the apparel industry, known as
"sliver-knit" pile fabrics.
Decorative Home Furnishings Division. Through our Decorative Home
Furnishings Division, we design, manufacture, import and distribute a wide array
of textile products for every room in the home. Our products consist of
decorative bedding accessories, quilts, duvet covers, window treatments, kitchen
rugs, shower curtains, table linens, area rugs and decorative pillows. These
products are manufactured domestically as well as sourced from a wholly-owned
foreign manufacturing facility or established, independent contractors located
primarily in China. We believe the multiple sourcing avenues available to us
allow us to compete with low-cost, high quality goods produced overseas or with
programs that demand quick response from domestic manufacturing locations. We
supply products across all distribution channels including the large national
discount retailers, specialty retailers and department stores.
Fabric Division. We develop fabrics to target the increasing consumer
preference towards more casual and comfortable dress and a growing emphasis on
outdoor activities and styling related to outdoor activities. Beginning with
Glenaura(TM) in 1993, we have introduced series of branded, performance-oriented
fabrics which haVE transformed our Fabric Division from a traditional deep-pile
fabric manufacturer dependent upon the coat market into a diversified fabric
producer serving a broader range of end-use markets. In addition to
performance-oriented sliver-knit fabrics, we are a manufacturer and marketer of
FAUX furs in the United States. FAUX fur synthetically replicates animal fur
such as mink, beaver and leopard and is typically used in women's and children's
coats. We also manufacture fabrics used to cover audio speakers in certain
models of automobiles, fireproof fabric marketed under the Glentec(TM) name used
by the United States Navy, and a wide variety of othER fabrics used in the
manufacture of toys, golf club head covers, powder puffs, case linings and other
end-use products.
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RECENT DEVELOPMENTS
Recent Operational Difficulties. While we continue to develop new and
innovative fabrics, there has been an overall decline in the sourcing of apparel
fabric manufactured in the United States. As a result, we took steps in 1999 to
consolidate operations and eliminate excess capacity. In connection with those
actions, we consolidated the Tennessee facility of our Fabric Division into our
North Carolina and Canadian facilities to support current and future sales
volumes. We began marketing finished garments in 1999 made from apparel fabric
to help further our product offerings and strengthen sales in the Fabric
Division. During the first quarter of fiscal 1999, we recorded a restructuring
charge totaling $13.1 million to cover the estimated costs associated with the
closing of the Tennessee facility.
During September 1999, our two Tarboro, North Carolina facilities were
temporarily shut down as a result of the extensive flooding caused by Hurricane
Floyd. While the facilities did not sustain significant damage, the shortage of
utilities and the dramatic impact to the local workforce resulted in work
stoppage and a delay in shipments for approximately ten days. We continued to
pay our affected employees during the shutdown. We estimate that our operating
losses exceeded anticipated insurance recoveries by approximately $800,000.
Recent Financial Difficulties. We generally rely on internally
generated cash flow from operations, supplemented by borrowings under our senior
credit facility and vendor financing to meet our debt service requirements,
capital expenditures and working capital needs. We are highly leveraged.
In April 1997, concurrently with our issuance of the Notes, we entered
into a $70 million senior credit facility with a syndicate of senior lenders led
by Banque National de Paris. In connection with two acquisitions, we
subsequently amended the credit facility first in October 1998 and again in
February 1999. As a result of the February 1999 amendment, the credit facility
entitled us to borrow an aggregate of $200 million, comprised of:
o a $90 million working capital commitment;
o a $40 million Term A loan; and
o a $70 million Term B loan.
Principal payments under the Term A and Term B loans began on September
30, 1999 at a total of $1.7 million per quarter and increase over the life of
the loans. Borrowings under the Term A loan and working capital commitment are
required to be fully repaid by December 31, 2003, and borrowings under the Term
B loan are required to be fully repaid by June 30, 2004. At the time of our
acquisition of Ex-Cell in February 1999, both the Term A and Term B loans were
fully drawn. During November 1999, we prepaid a total of approximately $1
million of loans outstanding under the Term A and Term B facilities with excess
cash proceeds from the sale of fixed assets related to the closure of our
Tennessee facility.
As of June 29, 1999, our senior lenders waived our requirement to
maintain and meet certain financial covenants contained in the credit facility
for the period ending July 3, 1999. In connection with obtaining the waiver, the
working capital commitment was reduced from $90 million to $65 million and
certain financial covenants were amended, including an amendment to require
monthly testing of our total leverage and senior leverage ratios.
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We were not in compliance with these ratios for the month of July 1999.
At that time, we received a waiver with respect to such non-compliance and
amended certain of the covenants under the credit facility. As a result of the
temporary shut down of our two facilities in Tarboro, North Carolina in
September 1999, we were not in compliance with the revised covenants as of
October 2, 1999. We received a waiver for such non-compliance as of October 29,
1999. On November 19, 1999, we received a waiver which eliminated the
requirement to meet certain financial covenants for the month of October and
amended existing covenants for November and December 1999, as well as created
monthly covenants for January and February 2000.
On February 23, 2000, we acknowledged that we were unable to repay
approximately $2 million of borrowings required to be repaid as of January 29,
2000 under the working capital commitment because of an insufficient borrowing
base, which resulted in a default under the credit facility. The insufficient
borrowing base was the result of missed shipments during the last week of
January 2000 due to a blizzard in Eastern North Carolina that closed operating
facilities and restricted shipments. On March 16, 2000, our senior lenders
waived this default until April 10, 2000 and limited our available credit under
the working capital commitment during this period.
Based on the February payment default and various covenant defaults
existing at April 1, 2000, the banks delivered a blocking notice on April 14,
2000, which prohibits our making any payment under the Notes. Subsequently, we
entered into a number of amendments to the credit facility in which our senior
lenders agreed to continue to provide funding under the credit facility, at
their discretion. These amendments limit the amount of working capital loans and
letters of credit under the credit facility, require us to provide weekly cash
reports and provide that we will diligently pursue a financial restructuring.
On June 30, 2000, we entered into a Tenth Amendment to the credit
facility, which increased the amount of loans available to us through July 18,
2000 in order to accommodate our forecasted liquidity needs. In addition, our
senior lenders agreed to defer through July 25, 2000 principal amortization
payments in the amount of approximately $1.7 million under the Term A and Term B
loans due on July 1, 2000. We have begun negotiating a further amendment to the
credit facility that would effectively extend the Tenth Amendment so as to
provide us with available credit through August 15, 2000.
Because of the blocking or "standstill" notice that we received from
our senior lenders (which we refer to as the "Standstill Notice"), we did not
make a payment of approximately $5.3 million that was due to be paid on the
Notes on April 15, 2000. The Standstill Notice prohibits us from making any
payments on, or in exchange for, the Notes, and prohibits the Noteholders from
accepting any payment from us on their Notes. As a result, we cannot complete
this Tender Offer unless our senior lenders agree to waive the Standstill Notice
and consent to the Tender Offer.
Financial Plan
In order for us to continue our operations, we must reduce our
outstanding indebtedness and increase our total equity. The following actions
are being undertaken to effect these changes:
o Citicorp Venture Capital, Ltd. (we collectively refer to Citicorp
Venture Capital and other investors who may participate with it in
this investment as the "New Investors") has committed to purchase
approximately $16.2 million of our common or preferred stock. If
we file the Prepackaged Plan and the Plan is confirmed, the New
Investors will invest in our parent, Glenoit Universal, Ltd.,
which will contribute to us the proceeds of the investment;
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o Through this Tender Offer, or in the Prepackaged Plan, we will use
the $16.2 million investment to purchase the Notes in the Tender
Offer or to discharge the Notes in the Prepackaged Plan; and
o Citicorp Mezzanine III, L.P., an affiliate of Citicorp Venture
Capital (whom we refer to as the "New Lender"), has committed to
lend us $15 million in term debt on an unsecured subordinated
basis, to be used by us as follows:
(i) We will pay an estimated $1.0 million of expenses
attributable to this Tender Offer;
(ii) If necessary, we will pay an estimated $4.0 million
of expenses attributable to the filing and execution
of the Prepackaged Plan in bankruptcy; and
(iii) We will apply the remaining amount to repay amounts
borrowed under our credit facility, thereby providing
the working capital that we believe is necessary to
fund our future operations.
The commitments that we have received from the New Investors to
purchase the common stock of one of our affiliates and from the New Lender to
lend us the term debt are subject to certain conditions. These conditions
include the consummation of the Tender Offer or the Prepackaged Plan and the
agreement of our senior lenders to continue to make a credit facility available
to us on terms that are mutually acceptable to us, the senior lenders, the New
Investors and New Lender. We cannot assure you that these conditions will be
satisfied.
Through these transactions, we would reduce our overall indebtedness by
approximately $80 million while at the same time raising our total shareholders'
equity from a deficit of approximately $57.8 million to approximately $9.1
million of positive equity.
The Tender Offer
Terms. We are offering to purchase for cash any and all of our
outstanding Notes at a price equal to 17% of the principal amount of the Notes,
or $170 per $1,000 of principal. If you tender your Notes, you will not receive
any accrued and unpaid interest on the Notes.
We will complete the Tender Offer only if we receive acceptances from
the holders of 99% of the aggregate principal amount of the Notes, a threshold
that we may only reduce with the consent of Citicorp Venture Capital and the
holders of a majority in principal amount of the Notes that have previously
agreed to tender their Notes under this Tender Offer. We may terminate the
Tender Offer at any time, even if we have received the acceptances required to
complete the Tender Offer. Even if all of the conditions necessary for our
completion of the Tender Offer have been satisfied, we may decide that the goals
of our financial plan are better served by the filing of the Prepackaged Plan in
bankruptcy; provided that we have received the acceptances necessary for us to
do so.
If you tender your Notes, your tender may NOT be withdrawn, except
under certain very limited circumstances.
Your decision whether to tender your Notes is unrelated to your
decision to accept the Prepackaged Plan, and, if you tender your Notes, you will
NOT be deemed to have accepted the Prepackaged Plan. To accept the Prepackaged
Plan, you must submit a Ballot or Master Ballot, as applicable, each of which
accompany this Statement.
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Purpose. The purpose of the Tender Offer is to acquire at least 99% of
the Notes, thereby reducing our indebtedness by that amount. If we cannot retire
the Notes, either in the Tender Offer or the Prepackaged Plan, it is likely that
we would not be able to obtain financing to fund our financial needs outside of
bankruptcy. In that case, we would be compelled to seek protection under the
bankruptcy laws without a pre-approved plan.
Proposed Amendments to the Indenture. If you accept our Tender Offer
and tender your Notes, your acceptance will also constitute your consent to
certain Proposed Amendments to the Indenture under which the Notes were issued.
These Proposed Amendments would remove substantially all of the restrictive
covenants and events of default to enhance our operating and financial
flexibility and to prevent our default under the Indenture. Please refer to the
sections entitled "The Tender Offer" and "The Proposed Amendments" for a more
complete description of the Tender Offer and the Proposed Amendments.
If the Tender Offer is consummated, a Supplemental Indenture that
reflects the Proposed Amendments will become effective. You should refer to the
attached Annex I for a complete copy of the Supplemental Indenture.
Conditions of the Tender Offer. Conditions to completion of the Tender
Offer include, among other things:
Minimum Tender Condition. It is a condition to the Tender
Offer that at least 99% of the principal amount of the Notes be
tendered. The holders of approximately 83% of the outstanding principal
amount of the Notes have executed a letter (we refer to this as the
"Lock-up Letter") in which they have agreed to tender their Notes and
to consent to the Prepackaged Plan. The Lock-up Letter may be
terminated, however, if we do not obtain financing sufficient to meet
our working capital needs under arrangements that are reasonably
satisfactory to the holders of a majority in principal amount of the
Notes that have executed the Lock-up Letter by July 18, 2000. This date
may be extended with the consent of a majority of the holders in
principal amount of the Notes that have executed the Lock-up Letter.
The Lock-up Letter will also terminate if the Tender Offer or
Prepackaged Plan is not consummated by November 15, 2000.
Under the terms of the Lock-up Letter, we may only reduce the
percentage of the outstanding Notes whose tender is required in order
to consummate the Tender Offer with the consent of Citicorp Venture
Capital and the holders of a majority in principal amount of the Notes
that have executed the Lock-up Letter. The percentage of the principal
amount of the Notes outstanding whose tender is required is referred to
in this Statement as the "Minimum Tender Condition."
Other Conditions. In addition to the Minimum Tender Condition,
the following conditions must also be satisfied:
o We must obtain the funds necessary to purchase the tendered Notes and pay
the expenses of the Tender Offer;
o Our senior lenders must waive the Standstill Notice and consent to our
completion of the Tender Offer, including our payment of the Tender Offer
consideration to the Noteholders and their acceptance of such
consideration;
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o There must be no legal proceedings that challenge or
otherwise adversely affect the Tender Offer; and
o Certain other customary conditions pertaining to
compliance with applicable securities laws, changes to
existing law and the absence of financial or other
national emergencies must be satisfied.
We can waive most of these conditions, although we do not presently
intend or expect to do so, but we cannot waive the Minimum Tender Condition
without the consent of Citicorp Venture Capital and the holders of a majority in
principal amount of the Notes subject to the Lock-Up Letter, nor can we waive
the Standstill Notice without the consent of our senior lenders.
The commitment that we have received from the New Investors to make the
$16.2 million investment, which we will use to purchase the tendered Notes, and
the commitment that we have received from the New Lender to provide the $15
million term debt, a portion of which we will use to pay the expenses of the
Tender Offer, are each subject to certain conditions. These conditions include
there being available to us, following consummation of the Tender Offer, a
credit facility from our senior lenders on terms that are mutually acceptable to
us, the senior lenders and the New Investors and New Lender.
Procedures for Accepting the Tender Offer. If you wish to accept the
Tender Offer, you must:
(1) Deliver a properly completed and duly executed Letter of
Transmittal or manually-signed facsimile thereof (or, in the
case of a book-entry transfer, an Agent's Message, as defined
below under the section entitled "Procedures for Tendering
Your Notes and Delivering Your Consents--Book-Entry
Transfers") and any other documents required by the Letter of
Transmittal, to the Depositary at the address set forth on the
back cover page of this document on or prior to the Expiration
Date; and
(2) Either: (a) Deliver certificates representing
your Notes to the Depositary; or
(b) Comply with the book-entry transfer
procedures described under the
section entitled "Procedures for
Tendering Your Notes and Delivering
Your Consents--Book-Entry
Transfers."
The valid tender of your Notes also will constitute your consent to the
Proposed Amendments. The valid tender of any Note is conditioned upon delivery
of a properly completed Letter of Transmittal, and we reserve the right to
reject any Notes tendered which are not accompanied thereby.
If you are not an "Eligible Institution" and are requesting special
delivery or transfer of the cash you will receive in the Tender Offer, your
signature on the Letter of Transmittal must be guaranteed by an Eligible
Institution. The term "Eligible Institution" means a member firm of a registered
national securities exchange, a member of the National Association of Securities
Dealers, Inc., or the "NASD," or a commercial bank or trust company with an
office in the U.S.
If you are the beneficial owner of Notes that are registered in the
name of a broker, dealer, commercial bank, trust company or other nominee and
you wish to accept the Tender Offer, you should contact your broker or other
nominee promptly and instruct such person, as the registered holder of the
Notes, to validly tender your Notes to the Depositary on your behalf. If your
Notes are registered in anyone else's name and you wish to tender them yourself,
then you must either submit a properly completed Letter of Transmittal signed by
the registered holder or have your Notes endorsed or
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accompanied by bond powers signed by the registered holder with such registered
holder's signature guaranteed by an Eligible Institution, as described above.
If you want to tender your Notes but are unable to locate them, please
contact the Trustee at the following address about procedures for obtaining
replacement Notes:
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By Mail (Whether Certified or Registered): By Overnight Courier:
United States Trust Company of New York United States Trust Company of New York
P.O. Box 84 30 Broad Street
Bowling Green Station 14th Floor
New York, New York 10274-0084 New York, New York 10004-2304
Attention: Corporate Trust Services Attention: Corporate Trust Services
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By Facsimile Transmission: (212) 422-0183 or (646) 458-8104
(For Eligible Institutions Only)
To Confirm Facsimile by Telephone: (800) 548-6565
For Information Call: (800) 548-6565
Expiration and Termination. The Tender Offer is scheduled to expire at
12:00 Midnight., New York City time on August 3, 2000, which we refer to as the
"Expiration Date." We may extend the Expiration Date at our option.
We may terminate the Tender Offer at any time, in our sole discretion
before we have accepted Notes for payment, whether or not the conditions to the
Tender Offer have been satisfied. Upon termination of the Tender Offer, all
Notes previously tendered will be promptly returned to the tendering
Noteholders.
If you accept the Tender Offer, you may not withdraw your tender of
your Notes, or any related consent, except under certain very limited
circumstances.
Interpretation. We will decide any and all questions affecting the
validity of any tender or of your Notes. Our decision will be final and binding.
We may reject any tenders that are not in proper form or which our counsel
believe would be unlawful.
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Sources of Funds for the Tender Offer. We estimate that the expenses to
be incurred in connection with the Tender Offer, including the fees and expenses
of the Information and Balloting Agent, the Depositary, and printing, filing,
accounting, legal and financial advisor fees, will be approximately $1.0
million. A portion of this amount has already been paid, and we may pay
additional amounts prior to the completion of the Tender Offer. This amount does
not include expenses expected to be incurred solely as a result of the filing
and consummation of the Prepackaged Plan in bankruptcy, which we estimate to be
approximately $13.5 million.
The payment of these expenses and the cash payment to tendering
Noteholders will be funded by:
o The $16.2 million investment which the New Investors have
committed to make; and
o A portion of the approximately $15 million of term debt that
the New Lender has committed to extend to us.
Circumstances Under Which We Would File the Prepackaged Plan and Not
Consummate the Tender Offer. Whether or not all of the conditions to the Tender
Offer are satisfied, we may elect not to consummate the Tender Offer and instead
file the Prepackaged Plan in bankruptcy, provided that we have received the
required acceptances for the Prepackaged Plan. We may do this at any time if our
management and/or our Board of Directors determines that it is in the best
interests of our company.
Certain Consequences of the Tender Offer
Consequences of Our Failure to Complete the Tender Offer or the
Prepackaged Plan. If we do not complete the Tender Offer or the Prepackaged
Plan, we believe that we will be unable to obtain additional financing, and that
we will not have adequate funds to continue our operations. In this case, it is
likely that we will be required to file for protection under the bankruptcy laws
without a pre-approved plan.
Consequences of the Tender Offer to Tendering Noteholders. If you
participate in the Tender Offer, and the Tender Offer is consummated, you will
receive cash in exchange for your Notes. In this case, you will have received
cash that may not otherwise be available upon maturity of the Notes. However,
you will lose all rights associated with the Notes, and you will surrender the
right to receive any future principal and interest payments.
Consequences of the Tender Offer to Non-Tendering Noteholders. If you
do not participate in the Tender Offer, you will not receive cash in exchange
for your Notes, and, consequently, you will be subject to continuing risks
related to our financial position to the full extent of your Notes. In addition,
if the Tender Offer is consummated, the Indenture will be modified by the
Proposed Amendments, and you will not have the benefit of various protective
business covenants and events of default that are currently in the Indenture.
The Tender Offer will not be consummated unless at least the Minimum
Tender Condition is satisfied. This means that at least 99% of the principal
amount of the Notes must be tendered, unless a lower threshold is consented to
by Citicorp Venture Capital and the holders of a majority of the principal
amount of the Notes subject to the Lock-Up Letter. Your failure to tender will
increase the possibility that the Tender Offer will not be consummated. If the
Tender Offer is not consummated, it is likely that we will have to restructure
our debt in a bankruptcy proceeding, whether through the Prepackaged Plan or
otherwise. Accordingly, the likelihood that your Notes will be paid in full may
not be improved by your failure to tender.
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Federal Income Tax Considerations
You should not rely upon the following summary, which is necessarily
short and may not apply to you or your particular circumstances. You should
consult your own tax counsel to determine the actual effect that the Tender
Offer will have on you. For a more detailed description of the tax effects
described below, you should refer to the section entitled "Federal Income Tax
Consequences."
Tax Considerations for Tendering Noteholders. If you tender your Notes,
the tender will generally be a taxable transaction to you for U.S. federal
income tax purposes. Subject to certain exceptions, you will likely recognize
capital gain or loss on the sale of your Notes in an amount equal to the
difference between:
o The amount of cash that you receive for your Notes; and
o Your "adjusted tax basis" for your Notes at the time of the
sale.
Generally, such capital gain or loss will be long-term if you have held
your Notes for more than one year at the time of such sale.
Your receipt of cash may be subject to backup withholding at the rate
of 31% unless you (i) are a corporation or come within certain other exempt
categories and, when required, demonstrate this fact, or (ii) provide a correct
taxpayer identification number, certify as to no loss of exemption from backup
withholding and otherwise comply with applicable requirements of the backup
withholding rules. Any amount withheld under these rules will be credited
against your U.S. federal income tax liability. If you do not provide your
correct taxpayer identification number, you may be subject to penalties imposed
by the Internal Revenue Service, or the "IRS."
Tax Considerations for Non-Tendering Noteholders. If you do not
participate in the Tender Offer, and the Tender Offer is consummated, you will
likely not recognize any income, gain, or loss for U.S. federal income tax
purposes as a result of the Proposed Amendments. However, the IRS could assert
that, as a result of the modifications to the Notes pursuant to the Proposed
Amendments, you will be treated as having exchanged your Notes for new notes. If
the Proposed Amendments were treated in this manner, your tax treatment would
depend upon whether the tendered Notes and new notes constitute "securities" for
federal income tax purposes and the extent to which the Notes are deemed to be
"publicly traded" within the meaning of the Treasury Regulations.
The Prepackaged Plan
General. Together with certain of our affiliates, we are soliciting
acceptances of the Prepackaged Plan so that we may file the Prepackaged Plan in
bankruptcy to expedite our bankruptcy cases should we deem them necessary. For
the Prepackaged Plan to be approved, we must receive acceptances of the
Prepackaged Plan from holders of Notes representing more than half of all
holders who respond and more than two-thirds of the principal and interest of
those responding. Holders representing approximately 83% in principal amount of
the Notes have agreed to accept the Prepackaged Plan, subject to certain
conditions.
If, by the Expiration Date, we have received sufficient acceptances of
the Prepackaged Plan, we may commence a bankruptcy case under Chapter 11 of the
Bankruptcy Code and seek confirmation of the Prepackaged Plan, whether or not
the Minimum Tender Condition and the other conditions to the Tender Offer have
been satisfied. If confirmed by the bankruptcy court, the Prepackaged Plan will
be binding upon all holders of Notes regardless of whether they have voted to
accept the Prepackaged Plan.
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Under the Prepackaged Plan, Noteholders are intended to receive 17% of
the principal amount of the Notes, or $170 per $1,000 of principal. Under
certain circumstances, however, Noteholders could become the owners of 100% of
the equity of our parent, in which case they would receive no cash.
A copy of the Disclosure Statement, which describes the Prepackaged
Plan and provides you with certain information required by the bankruptcy laws,
is attached to this Statement as Annex A and is incorporated herein by
reference. A copy of the Prepackaged Plan is included as part of the Disclosure
Statement.
You should carefully read and review the Disclosure Statement and the
Prepackaged Plan prior to determining whether to accept the Prepackaged Plan,
which is separate from your participation in the Tender. The Disclosure
Statement also contains the instructions and procedures for voting on the
Prepackaged Plan. You need not accept the Prepackaged Plan in order to tender
your Notes.
Potential Consequences of the Prepackaged Plan. While we hope that a
bankruptcy filing solely for the purpose of implementing an agreed-upon
restructuring would be of short duration and would not be seriously disruptive
to our business, we cannot be certain that this would be the case. Although the
Prepackaged Plan is designed to minimize the length of the bankruptcy case, it
is impossible to predict with certainty the amount of time and money that we may
spend in bankruptcy or to assure that the Prepackaged Plan will be confirmed.
Even if confirmed on a timely basis, a bankruptcy case to confirm the
Prepackaged Plan could have an adverse effect on our business. A bankruptcy case
also will involve additional expenses and will divert the attention of our
management from the operation of our business and the implementation of our
financial plan.
The extent to which a bankruptcy case disrupts our business will likely
be directly related to the length of time it takes to complete the case. If we
are unable to obtain confirmation of the Prepackaged Plan on a timely basis
because of a challenge to the Prepackaged Plan or a failure to satisfy the
conditions to the Prepackaged Plan or for any other reason, we may be forced to
operate in bankruptcy for an extended period while we try to develop a different
plan of reorganization that can be confirmed. Extended operations in bankruptcy
would likely increase both the probability and the magnitude of the adverse
effects described above.
Depositary and Information and Balloting Agent
Depositary. United States Trust Company of New York, the Trustee under
the Indenture, will act as the Depositary for the Tender Offer. All
correspondence in connection with the Tender Offer and the Letter of Transmittal
should be sent to the Depositary at the address set forth on the back cover page
of this document.
Information and Balloting Agent. Beacon Hill Partners, Inc. has been
appointed as Information and Balloting Agent for the Tender Offer. All inquires
relating to the Tender Offer should be directed to the Information and Balloting
Agent at the address and telephone number set forth on the back cover page of
this document.
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RISK FACTORS
You should carefully consider the factors set forth below, as well as
the other information set forth in this document, prior to determining whether
to tender your Notes and consent to the Proposed Amendments, and prior to
determining whether to accept the Prepackaged Plan. There is no voting or
approval relationship between your decision to tender your Notes and a decision
to accept the Prepackaged Plan. You may do either, both or neither.
Risks to Noteholders If the Tender Offer Is Not Successfully Completed or the
Prepackaged Plan Is Not Consummated
The successful completion of the Tender Offer, or the consummation of
the Prepackaged Plan, is critical to our financial plan. If we are unable to
complete the Tender Offer or to consummate the Prepackaged Plan, it is likely
that we will be unable to obtain financing to continue our operations and will
be required to file for protection under the bankruptcy laws without a
pre-approved plan. The outcome of such a filing is highly uncertain. We cannot
predict when we would emerge from such filing, how our creditors, including the
holders of the Notes, would be treated and whether and in what manner we would
continue as a going concern.
Both the Tender Offer and the Prepackaged Plan are subject to our
receiving the equity and term loan financing discussed above. Although we have
received commitments for this financing, these commitments are subject to a
number of conditions. Among these conditions are that our credit facility
continues to be available to us on terms that are mutually acceptable to us, the
senior lenders, the New Investors and the New Lender. We cannot assure you that
this will be the case.
Risks If the Tender Offer Is Completed
Consequences to Non-Tendering Noteholders. If we successfully complete
the Tender Offer, Noteholders who do not tender their Notes will lose the
benefit and protection of numerous provisions in the Indenture. In addition,
because the number of Noteholders after the completion of the Tender Offer will
be extremely limited, it is unlikely that there will be any active trading in
the Notes. Finally, non-tendering Noteholders will be giving up the opportunity
to receive for their Notes the consideration that we are offering in the Tender
Offer.
Consequences to Tendering Noteholders. If the Tender Offer is
consummated, Noteholders who tender Notes will receive cash but will lose all
rights associated with their Notes, including the right to receive any future
interest payments at the rate prescribed under the Indenture of 11% per year.
Noteholders should be aware, however, that our senior lenders have issued the
Standstill Notice that prohibits us from making any payments of principal or
interest under the Notes. It is not clear when this Standstill Notice will be
lifted, if at all, and it is unlikely that this block will be lifted in the
absence of a capital restructuring of our company that would impair the rights
of the Noteholders. The Standstill Notice must also be lifted in order for us to
consummate the Tender Offer.
If we were to become subject to a petition for relief under the
Bankruptcy Code within 90 days after the consummation of the Tender Offer (or,
with respect to any insiders specified in the Bankruptcy Code, within one year
after consummation of the Tender Offer) and certain other conditions are met,
the consideration paid to Noteholders in the Tender Offer, absent the presence
of one of the Bankruptcy Code defenses to avoidance, could be avoided as a
preferential transfer and, to the extent avoided, the value of such
consideration could be recovered from the Noteholder and possibly from
subsequent transferees.
Risks Relating to the Prepackaged Plan
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Whether or not the conditions to our completing the Tender Offer are
satisfied, we may nonetheless file the Prepackaged Plan in bankruptcy; provided
that we have received the necessary acceptances to do so. Filing of the
Prepackaged Plan will entail certain risks for the Noteholders.
Noteholders May Become Stockholders. The Prepackaged Plan provides
that, if our parent does not receive an investment of $16.2 million upon
consummation of the Prepackaged Plan, then, instead of receiving cash for their
Notes, Noteholders would receive 100% of the equity of one of our affiliates.
Although we and our affiliates have received a commitment for this investment,
we cannot assure you that this investment will be made.
Disruption of Our Business. Even if confirmed on a timely basis, a
bankruptcy case to confirm the Prepackaged Plan could have a material adverse
effect on our business. Among other things, it is possible that a bankruptcy
case could adversely affect:
o Our relationships with our key suppliers, including the credit
terms extended by our suppliers for imported goods and raw
materials;
o Our relationships with our customers, particularly those that
depend on us as a primary supplier; and
o Our relationship with our employees.
A bankruptcy case also will involve additional expenses and will divert
the attention of our management team from the operation of our business and
implementation of our financial plan. Finally, even if successfully completed on
a timely basis, a bankruptcy case most likely will delay the implementation of
our financial plan.
The extent to which a bankruptcy case disrupts our business will likely
be directly related to the length of time it takes us to complete the case. The
Prepackaged Plan is designed to minimize the length of the bankruptcy case, but
if we are unable to confirm the plan, we will necessarily be required to operate
in bankruptcy for a longer period of time than anticipated.
Possible Invalidation of the Solicitation by the Bankruptcy Court.
Section 1126(b) of the Bankruptcy Code provides that the holder of a claim or
equity interest who accepts or rejects a plan of reorganization before the
commencement of a Chapter 11 case is deemed to have accepted or rejected such
plan under the Bankruptcy Code so long as the solicitation of the acceptance was
made in accordance with applicable non-bankruptcy law governing the adequacy of
disclosure in connection with the solicitation, or, absent any such applicable
non-bankruptcy law, such acceptance was solicited after disclosure of "adequate
information" as defined in section 1125(a)(1) of the Bankruptcy Code. This
Statement, including the Disclosure Statement, is being presented to all
Noteholders in order to satisfy the requirements of section 1126(b) of the
Bankruptcy Code.
Even if we do receive the acceptances necessary to confirm the
Prepackaged Plan and attempt to have the Prepackaged Plan confirmed, the
bankruptcy court may find that the Noteholders have not validly accepted the
Prepackaged Plan if it determines that the solicitation did not comply with the
requirements of section 1126(b) of the Bankruptcy Code and the Federal Rules of
Bankruptcy Procedure. In such an event, we could be required to resolicit
acceptance of the Prepackaged Plan, and confirmation could be delayed and
possibly jeopardized. We believe that the solicitation being made pursuant to
this Statement is being conducted in accordance with applicable non-bankruptcy
law and applicable
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provisions of the Bankruptcy Code and the Bankruptcy Rules. However, there can
be no assurance that a bankruptcy court will reach the same conclusion.
Risk of Non-Confirmation of the Prepackaged Plan or of Non-Occurrence
of Effective Date. Section 1129 of the Bankruptcy Code, which sets forth the
requirements for confirmation of a plan of reorganization, requires, among other
things, a finding by a bankruptcy court that the confirmation of a plan is not
likely to be followed by the need for further financial reorganization, that all
claims and interests have been classified in compliance with the provisions of
section 1122 of the Bankruptcy Code and that holders of claims and equity
interests within impaired classes receive or retain under the plan cash or
property of a value, as of the date the plan becomes effective, that is not less
than the value such holders would receive or retain if the debtor were
liquidated under Chapter 7 of the Bankruptcy Code. There can be no assurance
that the bankruptcy court will conclude that these tests and the other
requirements of section 1129 of the Bankruptcy Code have been met with respect
to the Prepackaged Plan.
If the Prepackaged Plan is filed, there can be no assurance that
modifications thereof would not be required for confirmation, or that such
modifications would not require a resolicitation of the Prepackaged Plan. We
believe that if the Prepackaged Plan or another plan is confirmed, it will not
be followed by the need for further financial reorganization of the Company and
that the Noteholders (and all other Classes under the Plan) will receive or
retain under the Prepackaged Plan value that is not less than the value they
would receive or retain if we were liquidated under Chapter 7 of the Bankruptcy
Code. We also believe that all requirements for confirmation, as set forth in
Section 1129 of the Bankruptcy Code, would be met with respect to the
Prepackaged Plan. However, there can be no assurance that the bankruptcy court
will reach the same conclusions.
The effectiveness of the Prepackaged Plan is also subject to certain
conditions, and no assurances can be given that these conditions will be
satisfied or waived or that any necessary consent will be obtained. Failure to
confirm the Prepackaged Plan would likely result in a protracted bankruptcy
case, which would exacerbate the factors described above.
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THE TENDER OFFER
Consideration
We are offering to purchase for cash any and all of our outstanding
Notes at a price equal to 17% of the principal amount of the Notes, or $170 per
$1,000 of principal. If you tender your Notes, you will not receive any accrued
and unpaid interest on the Notes.
We will complete the Tender Offer only if the Minimum Tender Condition
is satisfied. The means that unless al lower percentage is otherwise consented
to by Citicorp Venture Capital and the holders of a majority of the Notes
subject to the Lock-Up Letter, we must receive acceptances from the holders of
99% of the aggregate principal amount of the Notes. We may terminate the Tender
Offer at any time, even if we have already received the acceptances required to
complete the Tender Offer. Even if all of the conditions necessary for our
completion of the Tender Offer have been satisfied, we may nonetheless terminate
the Tender Offer and file the Prepackaged Plan in bankruptcy; provided that we
have received the acceptances necessary for us to do so. Our strong preference
is to avoid commencing a bankruptcy case, but there may be claims against us
that cannot be resolved except pursuant to the Prepackaged Plan.
If you tender your Notes, your tender may NOT be withdrawn, except
under certain very limited circumstances.
Proposed Amendments
We are also seeking consents to the Proposed Amendments, which would
eliminate substantially all of the restrictive covenants and most of the events
of default in the Indenture. The Supplemental Indenture, which incorporates the
Proposed Amendments, will not become effective unless and until the Tender Offer
is completed. You should refer to the attached Annex I for a complete copy of
the Supplemental Indenture.
The valid tender of your Notes will constitute consent to the proposed
amendments. You may not tender your Notes without consenting to the Proposed
Amendments or consent to the Proposed Amendments without tendering your Notes.
Expiration; Extension; Termination
The Tender Offer will expire at 12:00 Midnight., New York City time, on
August 3, 2000, the Expiration Date. We reserve the right to extend the
Expiration Date for the Tender Offer from time to time and at any time.
During any extension of the Tender Offer, all Notes previously tendered
will remain subject to the terms and conditions set forth in this Statement and
may, subject to the terms and conditions set forth herein, be accepted for
purchase by us.
We expressly reserve the absolute right, in our sole discretion, to:
o Amend or modify any or all of the terms of any or all of the
Tender Offer; or
o Terminate the Tender Offer and the consent solicitations and/or
delay acceptance for tenders and/or consents delivered pursuant
thereto at any time and for any reason, even if all of the
conditions necessary for our completion of the Tender Offer have
been satisfied.
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Our right to delay acceptance of tendered Notes for payment is subject,
however, to Rule 14e-1(c) under the Securities Exchange Act of 1934, as amended,
which requires us to promptly pay for or return tendered Notes following the
termination or expiration of the Tender Offer.
Any extension or termination of the Tender Offer, or any amendment or
modification of any of the terms of the Tender Offer, will be followed as
promptly as practicable by public announcement thereof. In the case of an
extension, such announcement will be issued no later than 9:00 a.m., New York
City time, on the next business day after the previously scheduled Expiration
Date. Without limiting the manner by which we may choose to make such
announcement, we will not, unless otherwise required by law, have any obligation
to publish, advertise or otherwise communicate any such public announcement
other than by making a release to the Dow Jones News Service or such other means
of announcement as we deem reasonably appropriate.
Upon any termination of the Tender Offer without our acceptance of the
Notes for purchase, all Notes previously tendered will be promptly returned to
the tendering holders.
If you tender your Notes, you will not be able to withdraw your tender
unless the Tender Offer expires without our accepting your Notes for payment,
except in limited circumstances. Because we may extend the Tender Offer in our
discretion, the Notes that you tender could be held subject to the Tender Offer
for an indefinite period of time.
Conditions of the Tender Offer
Our completion of the Tender Offer is subject to the following
conditions:
Minimum Tender Condition. It is a condition to the Tender Offer that at
least 99% of the principal amount of the Notes be tendered. This percentage may
be reduced to a lower percentage only with the consent of Citicorp Venture
Capital and the consent of the holders of a majority in principal amount of the
Notes subject to the Lock-Up Letter. We cannot unilaterally waive this Minimum
Tender Condition.
Holders of approximately 83% of the outstanding principal amount of the
Notes have agreed to tender their Notes under the Lock-Up Letter. The Lock-up
Letter may be terminated, however, if we do not obtain financing sufficient to
meet our working capital needs under arrangements that are reasonably
satisfactory to the holders of a majority in principal amount of the Notes that
have executed the Lock-up Letter by July 18, 2000. This date may be extended
with the consent of the holders of a majority in principal amount of the Notes
that have executed the Lock-up Letter. The Lock-up Letter will also terminate if
the Tender Offer or Prepackaged Plan is not consummated by November 15, 2000.
Other Conditions. In addition to the Minimum Tender Condition, the
Tender Offer is also subject to the following conditions:
o We shall have obtained the funds necessary to purchase the
tendered Notes and to pay expenses that we incur in connection
with the Tender Offer;
o Our senior lenders must waive the Standstill Notice and consent
to our completion of the Tender Offer, including our payment of
the Tender Offer consideration to the Noteholders and their
acceptance of such consideration;
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o There shall not have been instituted or threatened before any
court or governmental agency, authority or body, or any
arbitrator, any action or proceeding:
(i) challenging the Tender Offer and/or the consent
solicitations, including, without limitation, our
purchase of the Notes and payment therefor; or
(ii) in our sole judgment, otherwise materially adversely
affecting the transactions contemplated by the Tender
Offer or the contemplated benefits of the Tender
Offer to us;
o There shall not have been proposed or enacted any statute or
other legislation, rule or regulation, and no action shall have
been taken by any governmental authority, which would or might,
in our sole judgment, prohibit, restrict or delay consummation of
the Tender Offer or materially impair the contemplated benefits
of the Tender Offer to us;
o There shall not exist, in our sole judgment, any other actual or
threatened legal impediment to our purchase of the Notes or any
other circumstances that would materially adversely affect the
transactions contemplated by the Tender Offer or the contemplated
benefits of the Tender Offer to us;
o There shall not have occurred or be likely to occur an event or
events which, in our sole judgment, would or might prohibit,
restrict or delay the consummation of the Tender Offer or
materially impair the contemplated benefits of the Tender Offer
to us or otherwise result in consummation of the Tender Offer not
being in our best interests; and
o There shall not have occurred, in our sole judgment, any of the
following:
(i) any general suspension of trading in, or limitation
on prices for, securities listed on the NYSE, Nasdaq
or in the over-the-counter market;
(ii) a declaration of a banking moratorium or any
suspension of payments in respect of the banks in the
United States (whether or not mandatory);
(iii) a commencement of a war, armed hostilities or other
international or national emergency directly or
indirectly involving the United States;
(iv) any significant change in the United States or any
other currency exchange rates or a suspension of, or
limitation on, the markets therefor (whether or not
mandatory);
(v) any limitation (whether or not mandatory) by any
governmental authority on, or any other event having
reasonable likelihood of affecting, the extension of
credit by banks or other lending institutions in the
United States; or
(vi) in the case of any of the foregoing existing at the
time of the commencement of the Tender Offer, in our
sole judgment, a material acceleration or worsening
thereof.
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If any of the foregoing conditions are not satisfied, we may either:
o Terminate the Tender Offer and return all Notes tendered;
o Extend the Tender Offer and retain all tendered Notes until the
final Expiration Date for the extended Tender Offer; or
o Waive the unsatisfied conditions with respect to the Tender Offer
and accept all Notes tendered pursuant to the Tender Offer,
except that we cannot unilaterally waive the Minimum Tender
Condition or the Standstill Notice without the consent of other
parties.
We may assert any of the foregoing conditions regardless of the
circumstances giving rise to such condition, and we may waive any such condition
(other than as stated in the preceding paragraph), in whole or in part, at any
time and from time to time, in our sole discretion. Our failure at any time to
exercise any of the foregoing rights shall not be deemed a waiver of that right
and each right shall be deemed an ongoing right which may be asserted at any
time and from time to time.
Noteholders validly tendering their Notes will, by tendering such Notes
and upon acceptance of the cash consideration therefor, on their own behalf and
on behalf of their affiliates, release, waive and covenant not to assert, any
claims, debts, obligations, rights, causes of action or liabilities now existing
or hereafter arising out of, or relating to, the Notes or the Tender Offer, or
otherwise relating to us or any of our affiliates, in each case arising from or
relating to any fact or circumstance through the date of consummation of the
Tender Offer, against any of us, our affiliates, our senior lenders and the
agent under our credit facility, any person who is or was in control of any of
the foregoing, and any of the respective present and former officers, directors,
stockholders, trustees, partners, members, agents, employees, representatives,
financial advisors, accountants, attorneys and other professionals of the
foregoing, other than the following "Reserved Claims:"
o Claims relating to our obligation to deliver the cash offered
pursuant to the Tender Offer in accordance with the terms
thereof, including if we were subject to a petition under the
bankruptcy laws within 90 days after consummation of the Tender
Offer and the consideration paid in the Tender Offer is recovered
as a preferential transfer;
o Claims, if any, against us or any of our affiliates under federal
securities laws that this Statement includes any untrue statement
of a material fact or omits to state a material fact required to
be stated herein or necessary to make the statements herein not
misleading.
By accepting any tendered Notes for exchange, we, and our officers and
directors, shall likewise be deemed to have released each tendering Noteholder,
and its agents and advisors, from any liability for any act or omission in
connection with or arising out of any actions taken by any of them in connection
with the Tender Offer, except for liability arising from gross negligence,
willful misconduct or fraud.
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Sources of Funds for the Tender Offer
We estimate that the expenses to be incurred in connection with the
Tender Offer, including the fees and expenses of the Information and Balloting
Agent, the Depositary, and printing, filing, accounting, legal and financial
advisor fees, will be approximately $1.0 million. A portion of this amount has
already been paid, and we may pay additional amounts prior to the completion of
the Tender Offer. This amount does not include expenses expected to be incurred
solely as a result of the filing and consummation of the Prepackaged Plan in
bankruptcy, which we estimate to be approximately $1.0 million.
The payment of these expenses and the cash payment to tendering
Noteholders will be funded by:
o The $16.2 million investment which the New Investors have
committed to make; and
o A portion of the approximately $15 million of term debt that the
New Lender has committed to extend to us.
Appraisal Rights
Noteholders do not have any appraisal or similar statutory rights in
connection with the Tender Offer or the consent solicitation.
THE PROPOSED AMENDMENTS
General
We are seeking the consent of the Noteholders to the Proposed
Amendments to the Indenture described below. The Proposed Amendments would,
among other things, eliminate substantially all restrictive covenants and events
of default currently contained in the Indenture. If the Tender Offer is
consummated, we will, together with the Trustee, execute the Supplemental
Indenture, which will amend the Indenture. You should refer to the attached
Annex I for a complete copy of the Supplemental Indenture.
The Supplemental Indenture will be executed promptly after our receipt
of the requisite consents, but will not become effective unless and until the
Tender Offer is completed. Thereafter, any non-tendering Noteholders will be
bound by the Supplemental Indenture regardless of whether they consent to the
Proposed Amendments.
Description and Effect
This section sets forth a brief description of the Proposed Amendments
to the Indenture. The summaries of provisions of the Indenture set forth below
are qualified in their entirety by reference to the full and complete terms
contained in the Indenture. Capitalized terms appearing below but not defined in
this Statement have the meanings assigned to such terms in the Indenture.
Holders may obtain copies of the Indenture without charge by contacting us with
their request.
Deletion of Restrictive Covenants. The Proposed Amendments would delete
in their entirety the following restrictive covenants and references thereto
from the Indenture as well as the events of default related to such restrictive
covenants:
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Section 4.03 o Limitation on Indebtedness. Prevents us and our
Restricted Subsidiaries from incurring a substantial
amount of Indebtedness without satisfying the
Consolidated Coverage Ratio.
Section 4.04 o Limitation on Restricted Payments. Restricts our ability
and the ability of our Restricted Subsidiaries to make
Restricted Payments, including (i) paying dividends,
making any other distributions on, or redeeming our (or
their) capital stock, (ii) purchasing, repurchasing,
redeeming, defeasing or otherwise acquiring or retiring
for value, prior to any scheduled payment, scheduled
sinking fund payment or maturity any Subordinated
Obligations, (iii) the payment of any amount pursuant to
any agreement with Holdings or any officer, director or
employee of Holdings and (iv) making any loan, Incurring,
or suffering to exist any Guarantee of Indebtedness of,
or making any investment in, any of our Affiliates, other
than us or one of our Restricted Subsidiaries.
Section 4.05 o Limitation on Restrictions on Distributions from
Restricted Subsidiaries. Restricts our ability and the
ability of our Restricted Subsidiaries from permitting to
exist any encumbrance or restriction on the ability of
any Restricted Subsidiary to (i) pay dividends or make
any other distributions on their Capital Stock or pay any
Indebtedness owed to us, (ii) make any loans or advances
to us, or (iii) transfer any of their property or assets
to us.
Section 4.06 o Limitation on Sales of Assets and Subsidiary Stock.
Restricts our ability and the ability of our Restricted
Subsidiaries to make certain dispositions of assets and
shares of Capital Stock of our Restricted Subsidiaries
unless certain conditions are satisfied.
Section 4.07 o Limitation on Affiliate Transactions. Restricts our
ability and the ability of our Restricted Subsidiaries to
engage in certain transactions with Affiliates
Section 4.08 o Limitation on the Sale or Issuance of Capital Stock of
Restricted Subsidiaries. Restricts our ability and the
ability of our Restricted Subsidiaries to sell or
otherwise dispose of shares of Capital Stock of any
Restricted Subsidiary other than to us or a Wholly Owned
Subsidiary.
Section 4.09 o Change of Control. Obligates us, upon a Change of
Control, to repurchase, on specified terms, the Notes of
any Noteholder who elects to cause us to do so.
Section 4.10 o Limitation on Liens. Restricts our ability and the
ability of our Restricted Subsidiaries to incur Liens
with respect to our (or their) property and assets.
Section 4.13 o Future Guarantors. Obligates us to cause each Domestic
Restricted Subsidiary formed or acquired after the date
of the Indenture to deliver to the Trustee a supplemental
indenture pursuant to which such Subsidiary shall
Guarantee payment of the Securities.
Section 4.14 o Tax Sharing Agreement. Requires certain amendments to the
Tax Sharing Agreement in the event that more than a
nominal amount of gross income will arise in Holdings, us
or any other member of the Holding's Federal Consolidated
tax group other than Mills and its Subsidiaries.
Amendment to Section 5.01 (When We May Merge or Transfer Assets). The
Proposed Amendments would amend Section 5.01 of the Indenture to (i) delete the
requirement that, after giving
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effect to the merger, consolidation or asset sale by us, the Successor Company
must be able to Incur at least $1.00 of additional Indebtedness, and (ii) delete
the requirement that immediately after giving effect to such transaction, the
Successor Company have Consolidated Net Worth in an amount not less than our
Consolidated Net Worth immediately prior to such transaction.
Amendment to Section 5.02 (When a Subsidiary Guarantor May Merge or
Transfer Assets). The Proposed Amendments would amend Section 5.02 of the
Indenture to delete the requirements that (i) the surviving entity be organized
under the laws of the United States, a State or the District of Columbia and
assume all obligations of the Subsidiary under its guarantee of the Notes; (ii)
there be no Default or Event of Default either before or after such transaction;
and (iii) we deliver a notice to the Trustee that the transaction complies with
the Indenture.
Amendment to Section 6.01 (Events of Default). The Proposed Amendments
would amend Section 6.01 of the Indenture to delete as an Event of Default (i)
our failure to comply with Section 5.01 of the Indenture, (ii) our failure to
comply with Section 4.03, 4.04, 4.05, 4.06 4.07, 4.08, 4.10 or 4.13 of the
Indenture and such failure continues for 30 days after notice, (iii) our
failure, or the failure of any Restricted Subsidiary, to pay, after final
maturity, or acceleration due to default, any Indebtedness in excess of $5
million and such non-payment or acceleration continues for 10 days after notice,
and (iv) our failure, or the failure of any Restricted Subsidiary, to discharge,
waive or stay the execution thereof within 10 days after notice any judgment or
decree in excess of $5 million, where such judgment remains undischarged,
unstayed and unwaived for more than 60 days.
Amendment to Section 8.02 (Conditions to Defeasance). The Proposed
Amendments would amend Section 8.02 to delete the requirements that, (i) in the
event of a legal defeasance or a covenant defeasance, we must deliver to the
Trustee a certificate from a nationally recognized firm of independent accounts
expressing their opinion that the payment of principal and interest when due and
without reinvestment on the deposited U.S. Government Obligations plus any
deposited money without investment will provide cash at such times and in such
amounts as will be sufficient to pay principal and interest when due on all the
Securities to maturity or redemption, (ii) in the event of a legal defeasance or
a covenant defeasance, the deposit does not constitute a default under any other
agreement binding us, (iii) in the event of a legal defeasance or a covenant
defeasance, we deliver to the Trustee an Opinion of Counsel to the effect that
the trust resulting from the deposit does not constitute a regulated investment
company under the Investment Company Act of 1940, (iv) in the event of a legal
defeasance, we must deliver to the Trustee an Opinion of Counsel stating that
(x) we have received from, or there has been published by, the IRS a ruling, or
(y) since the date of the Indenture there has been a change in the applicable
Federal income tax law, in either case to the effect that the Securityholders
will not recognize income, gain or loss for Federal income tax purposes as a
result of such defeasance and will be subject to Federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such defeasance had not occurred, (v) in the event of a covenant defeasance, we
must deliver to the Trustee an Opinion of Counsel to the effect that the
Securityholders will not recognize income, gain or loss for Federal income tax
purposes as a result of such covenant defeasance and will be subject to Federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such covenant defeasance had not occurred, and (vi)
in the event of a legal defeasance or a covenant defeasance, we must deliver to
the Trustee an Officer's Certificate and an Opinion of Counsel, each stating
that all conditions precedent to the defeasance have been satisfied.
Deletion of Definitions. The Proposed Amendments would delete those
definitions from the Indenture when references to such definitions would be
eliminated as a result of the foregoing.
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The Proposed Amendments constitute a single proposal and a tendering
and consenting Noteholder must consent to the Proposed Amendments as an entirety
and may not consent selectively with respect to certain of the Proposed
Amendments.
If the Proposed Amendments become operative, the holders of untendered
Notes will be bound thereby.
Pursuant to the terms of the Indenture, the Proposed Amendments require
the written consent of the Holders of not less than a majority in aggregate
principal amount of the outstanding Notes.
The valid tender by a Noteholder pursuant to the Tender Offer will be
deemed to constitute the giving of a consent by such Noteholder to the Proposed
Amendments. We are not soliciting, and will not accept consents from,
Noteholders who are not tendering their Notes pursuant to the Tender Offer.
PROCEDURES FOR TENDERING YOUR NOTES AND
DELIVERING YOUR CONSENTS
General
You should follow the procedures described below in tendering your
Notes and delivering consents to the Proposed Amendments. The following does not
describe the procedures for delivering a Ballot, or a Master Ballot, as
applicable, to vote to accept or reject the Prepackaged Plan. For a description
of the procedures for delivery by beneficial owners, nominees and securities
clearing agencies of Ballots and Master Ballots, you should refer to the
attached Annex A, which contains complete copies of both the Disclosure
Statement and the Prepackaged Plan.
If you tender your Notes in the Tender Offer in accordance with the
procedures described below, you will also be deemed to have delivered consents
to the Proposed Amendments. You may not deliver your consent to the Proposed
Amendments without validly tendering your Notes pursuant to the Tender Offer. We
reserve the right to reject any Notes tendered which do not comply with the
stated procedures.
Tender of Notes; Delivery of Consents
You may tender your Notes by:
o Delivering a properly completed and duly executed Letter of
Transmittal or manually-signed facsimile thereof (or, in the case
of a book-entry transfer, an Agent's Message as defined below
under the subsection entitled "--Book-Entry Transfers") and any
other documents required by the Letter of Transmittal, to the
Depositary at the address set forth below and on the back cover
page of this document, and
o Either:
(a) Delivering certificates representing your Notes to
the Depositary; or
(b) Complying with the book-entry transfer procedures
described below under the section entitled
"--Book-Entry Transfers."
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In either case, you must complete the foregoing actions prior to the
Expiration Date for your tender to be effective. If you cannot comply with these
procedures on a timely basis, or if your Notes are not immediately available,
you may tender your Notes pursuant to the guaranteed delivery procedures as
described below in the subsection entitled "--Guaranteed Delivery Procedures."
You should send your completed Letter of Transmittal and the
certificates representing your Notes to the Depositary only, and not to us, the
Information and Balloting Agent or any other person. Please use the following
address for hand deliveries and delivery by overnight courier to the Depositary:
<TABLE>
<CAPTION>
<S> <C>
By Mail (Whether Certified or Registered): By Overnight Courier:
United States Trust Company of New York United States Trust Company of New York
P.O. Box 84 30 Broad Street
Bowling Green Station 14th Floor
New York, New York 10274-0084 New York, New York 10004-2304
Attention: Corporate Trust Services Attention: Corporate Trust Services
</TABLE>
By Facsimile Transmission:
(212) 422-0183 or (646) 458-8104
(For Eligible Institutions Only)
To Confirm Facsimile by Telephone:
(800) 548-6565
For Information Call:
(800) 548-6565
If the certificates for your Notes are registered in the name of a
person other than the person who will be signing the Letter of Transmittal,
then, in order to tender your Notes pursuant to the Tender Offer, you must
ensure that the certificates representing your Notes are endorsed or accompanied
by appropriate bond powers, signed exactly as the name or names of the
Noteholder or Noteholders appear on the certificates, with the signatures on the
certificates or bond powers guaranteed as provided below. In the event such
procedures are followed by a beneficial owner tendering Notes, the registered
Noteholder or Noteholders must sign a valid proxy pursuant to the Letter of
Transmittal, because Notes may not be tendered without also consenting to the
Proposed Amendments, and only Noteholders are entitled to deliver consents.
Any beneficial owner whose Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee, or held through
a book-entry transfer facility, and who wishes to tender Notes and deliver a
consent to the Proposed Amendments should contact such registered holder
promptly and instruct such registered holder to tender Notes on such beneficial
owner's behalf. If such beneficial owner wishes to tender such Notes himself or
herself, such beneficial owner must either make appropriate arrangements to
register ownership of the Notes in such beneficial owner's name prior to
completing and executing the Letter of Transmittal (and, where applicable,
tendering such Notes,) or follow the procedures described in the immediately
preceding paragraph.
To effectively tender Notes that are held through The Depository Trust
Company, or "DTC," DTC participants should transmit their acceptance through the
DTC Automated Tender Offer Program, or "ATOP" (and thereby provide their
consents to the Proposed Amendments), and DTC will then edit and verify the
acceptance and send an Agent's Message to the Depositary for its acceptance.
Delivery of tendered Notes held through DTC must be made to the Depositary Agent
pursuant to the book-entry
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delivery procedures set forth below or the tendering DTC participant must comply
with the guaranteed delivery procedures set forth below.
The method of delivery of Notes and all other required documents to the
Depositary is at the election and risk of the Noteholder tendering the Notes.
Instead of delivery by mail, we recommend that you use an overnight or hand
delivery service. If delivery is by mail, we suggest that you use properly
insured, registered mail with return receipt requested, and that the mailing be
made sufficiently in advance of the Expiration Date to permit delivery to the
Depositary prior to such date.
A valid tender of your Notes will constitute an agreement with us in
accordance with the terms and conditions set forth in this Statement and in the
Letter of Transmittal. You should read the Letter of Transmittal carefully.
The entire principal amount of Notes deposited with the Depositary
will be deemed to have been tendered unless otherwise indicated. If less than
the entire principal amount of any Notes evidenced by a submitted certificate is
tendered, the tendering Noteholder should fill in the principal amount tendered
in the appropriate box on the Letter of Transmittal with respect to the deposit
being made. Such tender will also constitute a consent to the Proposed
Amendments, but only to the extent of the principal amount of Notes being
tendered. If the Tender Offer is completed outside of bankruptcy, the Depositary
will then return to the tendering Noteholder (unless otherwise requested under
"Special Delivery Instructions" in the Letter of Transmittal), as promptly as
practicable following the Expiration Date, Notes in principal amount equal to
the portion of such delivered Notes not tendered.
Signature Guarantees
All signatures on a Letter of Transmittal or a notice of withdrawal, as
the case may be, must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or by a commercial bank or trust company having an office in the United
States (each of which is an "Eligible Institution") unless the Notes tendered
pursuant thereto are tendered:
o by a registered holder of Notes (or by a participant in DTC whose
name appears on a security position listing such participant as
the owner of such Notes) who has not completed the box entitled
"Special Issuance Instructions" or "Special Delivery
Instructions" on the Letter of Transmittal, or
o for the account of an Eligible Institution.
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Book-Entry Transfers
The Depositary will establish an account with respect to the Notes at
DTC promptly after the date of this Statement. A financial institution that is a
participant in DTC's system may make book-entry delivery of the Notes by causing
DTC to transfer such Notes into the Depositary's account at DTC in accordance
with DTC's procedures for such transfer. Although delivery of Notes may be
effected through book-entry transfer into the Depositary's account at DTC, in
any case either (i) the Letter of Transmittal (or manually-signed facsimile
thereof), with any required signature guarantees, or an Agent's Message,
together with any other required documents, must be transmitted to and received
by the Depositary on or prior to the Expiration Date, or (ii) the guaranteed
delivery procedures set forth below must be followed. Delivery of documents to
DTC in accordance with DTC's procedure does not constitute delivery to the
Depositary.
The term "Agent's Message" means a message transmitted by DTC to, and
received by, the Depositary and forming a part of a book-entry confirmation,
which states that DTC has received an express acknowledgment from the
participant in DTC tendering the Notes stating (i) the aggregate principal
amount of Notes which have been tendered by such participant and for which
consents to the Proposed Amendments have been thereby delivered, (ii) that such
participant has received and agrees to be bound by the terms of the Tender Offer
and (iii) that we may enforce such agreement against the participant.
Guaranteed Delivery Procedures
If a Noteholder desires to tender Notes and consent to the Proposed
Amendments to the Indenture and (i) the holder's Notes are not lost but are not
immediately available, (ii) time will not permit the holder's Notes or other
required documents to reach the Depositary before the Expiration Date, or (iii)
the procedures for book-entry transfer cannot be completed on a timely basis, a
tender and consent may be effected if the following conditions are satisfied:
o the tender is made through an Eligible Institution; and
o prior to the Expiration Date, the Depositary receives from the
Eligible Institution a properly completed Notice of Guaranteed
Delivery (by telegram, telex, facsimile transmission, mail or
hand delivery) substantially in the form we provide which sets
forth the name and address of the holder and the amount of the
Notes tendered; and
o a Letter of Transmittal (or a manually signed facsimile thereof),
properly completed and validly executed with any required
signature guarantees, or, in the case of a book-entry transfer,
an Agent's Message, together with certificates for all Notes in
proper form for transfer (or a book-entry confirmation with
respect to all tendered Notes), and any other required documents
are received by the Depositary within two business days after the
date of execution of the Notice of Guaranteed Delivery.
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Transfers of Ownership of Tendered Notes
Noteholders may not transfer record ownership of any Notes validly
tendered into the Tender Offer. Beneficial ownership in tendered Notes may be
transferred by the Noteholder by delivering to the Depositary, at one of its
addresses set forth on the back cover of this Statement, an executed Letter of
Transmittal identifying the name of the person who deposited the Notes to be
transferred, and completing the special payment instructions box with the name
of the transferee (or, if tendered by book-entry transfer, the name of the
participant in DTC whose name appears on the security position listing as the
transferee of such Notes) and the principal amount of the Notes to be
transferred. If certificates have been delivered or otherwise identified
(through a book-entry confirmation with respect to such Notes) to the
Depositary, the name of the Noteholder who deposited the Notes, the name of the
transferee and the certificate numbers relating to such Notes should also be
provided in the Letter of Transmittal. A person who succeeds to the beneficial
ownership of tendered Notes pursuant to the procedures set forth herein will be
entitled to receive the Tender Offer consideration if the Notes are accepted for
tender, or to the receipt of the tendered Notes if the Tender Offer is
terminated or the Prepackaged Plan filed.
Lost or Missing Certificates
If a holder desires to tender Notes pursuant to the Tender Offer, but
the certificates representing such Notes have been mutilated, lost, stolen or
destroyed, such holder should write to or telephone the Depositary, at the
address or numbers listed below, about procedures for obtaining replacement
certificates for such notes, arranging for indemnification or about any other
matter that requires handling by the Depositary:
<TABLE>
<CAPTION>
<S> <C>
By Mail (Whether Certified or Registered): By Overnight Courier:
United States Trust Company of New York United States Trust Company of New York
P.O. Box 84 30 Broad Street
Bowling Green Station 14th Floor
New York, New York 10274-0084 New York, New York 10004-2304
Attention: Corporate Trust Services Attention: Corporate Trust Services
</TABLE>
By Facsimile Transmission:
(212) 422-0183 or (646) 458-8104
(For Eligible Institutions Only)
To Confirm Facsimile by Telephone:
(800) 548-6565
For Information Call:
(800) 548-6565
Backup Withholding
Each tendering Noteholder must complete and deliver the Substitute Form
W-9 provided in the Letter of Transmittal to the Depositary and either:
o provide a correct taxpayer identification number (social security
number, for individuals) and certify that the taxpayer
identification number provided is correct (or that such
Noteholder is awaiting a taxpayer identification number) and that
either (A) the Noteholder has not been notified by the Internal
Revenue Service that he is subject to backup withholding as a
result
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of failure to report all interest or dividends or (B) the
Internal Revenue Service has notified the Noteholder that he
is no longer subject to backup withholding or
o otherwise provide an adequate basis for exemption from backup
withholding.
Noteholders who do not satisfy these conditions may be subject to a $50
(or greater) penalty imposed by the Internal Revenue Service and may be subject
to backup withholding (as discussed below). Exempt Noteholders (including, among
others, corporations and certain foreign individuals) are not subject to these
requirements if they satisfactorily establish their status as such. Certain
foreign Noteholders may be required to provide a Form W-8 or Form 1001 (or
successor form) in order to avoid or reduce withholding tax.
Pursuant to the backup withholding provisions of U.S. federal income
tax law, unless the conditions described above are satisfied, we or the
Depositary, as the case may be, will withhold an amount of any cash proceeds
payable to a tendering Noteholder that will enable us or the Depositary, as the
case may be, to remit the appropriate amount of backup withholding due to the
Internal Revenue Service with respect to the tender. Backup withholding is 31%.
Amounts paid as backup withholding do not constitute an additional tax and
generally will be credited against the Noteholder's federal income tax
liabilities. Different withholding rates and rules may apply in the case of
foreign Noteholders. By tendering Notes pursuant to the Tender Offer, a
Noteholder that does not comply with the conditions described in the preceding
paragraph authorizes us or the Depositary, as the case may be, to pay cash in an
amount sufficient to satisfy the Noteholder's withholding obligations.
Acceptance of Notes, Delivery of Payment
The acceptance of Notes validly tendered under the terms and subject to
the conditions of the Tender Offer (including if the Offer is extended or
amended, the terms and conditions of any such extension or amendment), and the
payment of cash in exchange for the Notes will be made as promptly as
practicable after the Expiration Date. However, we expressly reserve the right
to delay acceptance of any of the Notes or to terminate the Tender Offer and not
accept for tender any Notes not theretofore accepted if any of the conditions
set forth under the section entitled "The Tender Offer--Conditions of the Tender
Offer" shall not have been satisfied or waived by us. For purposes of the Tender
Offer, we will be deemed to have accepted validly tendered Notes if and when we
give oral or written notice thereof to the Depositary. Subject to the following
paragraph and the other terms and conditions of the Tender Offer, payment of
cash for Notes accepted pursuant to the Tender Offer will be made by the
Depositary as soon as practicable after receipt of such notice. The Depositary
will act as agent for the tendering Noteholders for the purposes of receiving
cash from us and transmitting the cash to the tendering Noteholders. We will
return any tendered Notes not accepted for exchange without expense to the
tendering Noteholder as promptly as practicable following the Expiration Date.
Notwithstanding any other provision hereof, delivery of Tender Offer
consideration for Notes accepted for tender pursuant to the Tender Offer will in
all cases be made only after timely receipt by the Depositary of (a)
certificates for (or a timely book-entry confirmation with respect to) such
Notes, (b) a Letter of Transmittal (or a manually signed facsimile thereof),
properly completed and validly executed, with any required signature guarantees,
or, in the case of a book-entry transfer, an Agent's Message, and (c) any other
documents required by the applicable Letter of Transmittal and the instructions
thereto. Accordingly, tendering Noteholders whose certificates for Notes or
book-entry confirmation with respect to such Notes are actually received by the
Depositary after the Expiration Date may be paid later than other tendering
Noteholders. Under no circumstances will interest be paid on the Tender Offer
consideration to be paid by us because of any delay in making such delivery or
otherwise.
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All tendering Noteholders, by execution of the Letter of Transmittal
(or facsimile thereof), waive any right to receive notice of acceptance of their
Notes for tender.
Withdrawal of Tenders
Noteholders who tender Notes pursuant to the Tender Offer may NOT
withdraw such Notes unless:
o we reduce the Tender Offer consideration deliverable to such
Noteholders;
o we reduce the principal amount of the Notes subject to the Offer;
or
o we are otherwise required by law to permit your withdrawal.
In the case of a reduction in the Tender Offer consideration or the
principal amount of Notes subject to the Tender Offer, you may validly withdraw
any previously tendered Notes until the expiration of five business days after
the date that notice of any such reduction is first published, given or sent to
you by us. Prior to the execution of the Supplemental Indenture, your withdrawal
of the tender of your Notes will also effect a revocation of a consent to the
Proposed Amendments. In no event, however, may consents to the Proposed
Amendments be revoked after execution of the Supplemental Indenture.
Noteholders who wish to exercise their right of withdrawal must give
notice of withdrawal in writing or by telegram, telex or facsimile transmission,
which notice must be received by the Depositary at the address set forth on the
back cover page of this Statement. Except as provided in the preceding
paragraph, such notice must be received on or prior to the Expiration Date. Any
such notice of withdrawal must specify the name of the person who tendered the
Notes to be withdrawn; the name in which the Notes are registered (or, if
tendered by book-entry transfer, the name of the participant in DTC whose name
appears on the security position listing as the owner of such notes), if
different from that of the depositor; and the principal amount of Notes to be
withdrawn. If Notes have been delivered or otherwise identified (through
book-entry confirmation) to the Depositary, the name of the registered
Noteholder and the serial numbers of the particular Notes to be so withdrawn
(or, in the case of notes transferred by book-entry transfer, the name and
number of the account at DTC to be credited with withdrawn notes) must also be
furnished to the Depositary prior to the physical release of the withdrawn
Notes. Such notice of withdrawal must be signed by the Noteholder in the same
manner as the original signature on the Letter of Transmittal or be accompanied
by evidence satisfactory to us that the person withdrawing the tender has
succeeded to the beneficial ownership of the Notes.
Any permitted withdrawals of tenders of Notes may not be rescinded, and
any Notes withdrawn will thereafter be deemed not validly tendered for purposes
of the Tender Offer; however, withdrawn Notes may be re-tendered by following
one of the procedures for tendering described herein at any time on or prior to
the Expiration Date.
Interpretation
We, in our sole discretion, will determine all questions as to the form
of all documents and the validity (including time of receipt), eligibility,
acceptance and withdrawal of tendered Notes. Our determination shall be final
and binding. We reserve the absolute right to reject any and all tenders not in
proper form or the acceptance of which would, in the opinion of our legal
counsel, be unlawful. Neither
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<PAGE>
we, the Depositary, nor any other person will be under any duty to give
notification of any defects or irregularities in tenders or withdrawals nor
shall any of the foregoing incur any liability for failure to give any such
notification. The Depositary will return any Notes it receives that are not
properly tendered and as to which irregularities have not been cured or waived.
Our interpretation of the terms and conditions of the Tender Offer (including
the Letter of Transmittal and the Instructions thereto) will be final and
binding on all parties.
Payments for Solicitation
We have not retained any dealer-manager or similar agent in connection
with the Tender Offer and will not make any payments to any broker, dealer or
other person for soliciting tenders of Notes or consents to the Proposed
Amendments to the Indenture. We will pay brokerage houses and other custodians,
nominees and fiduciaries the reasonable out-of-pocket expenses incurred by them
in forwarding copies of this Statement and related documents to the beneficial
owners of Notes, and in handling and forwarding tenders to us.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a summary of certain anticipated U.S.
federal income tax consequences of the Tender Offer and the consent
solicitations to Noteholders. This discussion is general in nature, and does not
discuss all aspects of U.S. federal income taxation that may be relevant to you
in light of your particular circumstances, or to certain types of Noteholders
subject to special treatment under U.S. federal income tax laws (such as
insurance companies, tax-exempt organizations, financial institutions, brokers,
dealers in securities, and taxpayers that are neither citizens nor residents of
the United States, or that are foreign corporations, foreign partnerships or
foreign estates or trusts as to the United States). In addition, the discussion
does not consider the effect of any foreign, state, local or other tax laws, or
any U.S. tax considerations (e.g., estate or gift tax) other than U.S. federal
income tax considerations, that may be applicable to particular Noteholders.
Further, this summary assumes that Noteholders hold their Notes as "capital
assets" (generally, property held for investment) within the meaning of section
1221 of the Internal Revenue Code of 1986, as amended, which is referred to
below as the "Code."
This summary is based on the Code and Treasury Regulations, rulings,
administrative pronouncements and decisions in effect as of the date hereof, all
of which are subject to change or differing interpretations at any time with
possible retroactive effect.
EACH NOTEHOLDER IS URGED TO CONSULT ITS OWN TAX ADVISOR TO DETERMINE
THE FEDERAL, STATE, LOCAL, FOREIGN, AND OTHER TAX CONSEQUENCES TO IT OF THE
OFFER AND THE SOLICITATION
Tax Considerations for Tendering Noteholders. Your sale of Notes
pursuant to the Tender Offer will be a taxable transaction to you for U.S.
federal income tax purposes. Generally, you will recognize capital gain (subject
to the market discount rules discussed below) or loss on the sale of your Notes
in an amount equal to the difference between:
(i) the amount of cash that you received for your Notes, other
than the portion of such amount, if any, that is properly allocable to
accrued interest, which will be taxed as ordinary income; and
(ii) your "adjusted tax basis" for your Notes at the time of
sale.
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Such capital gain or loss will be long-term if you have held your Notes
for more than one year at the time of such sale. In certain circumstances, you
may be entitled to preferential treatment for net long-term capital gains, in
the case of a capital asset held for more than 12 months at the time of the
disposition. Generally, your adjusted tax basis for your Notes will be equal to
the cost of the Notes to you, increased by the amount of any original issue
discount previously includable in your gross income up to the date of
disposition, less payments (other than interest payments) received on the Notes.
If applicable, your tax basis in your Notes also would be increased by any
market discount previously included in income by you pursuant to an election to
include market discount in gross income currently as it accrues, and would be
reduced by the accrual of amortizable bond premium which you have previously
elected to deduct from your gross income on an annual basis.
An exception to the capital gain treatment described above may apply if
you purchased your Notes at a "market discount." Subject to a statutory de
minimis exception, market discount is the excess of the "face amount" of such
Note over your tax basis in such Note immediately after its acquisition by you.
In general, unless you have elected to include market discount in income
currently as it accrues, any gain realized by you on the sale of your Notes
having market discount in excess of a de minimis amount will be treated as
ordinary income to the extent of the market discount that has accrued (on a
straight line basis or, at your election, on a constant interest basis) while
such Note was held by you.
Tax Considerations for Non-Tendering Noteholders. If you do not
participate in the Tender Offer, you should not recognize any income, gain, or
loss for U.S. federal income tax purposes as a result of the Proposed
Amendments. The IRS could assert, however, that, as a result of the
modifications to the Notes pursuant to the Proposed Amendments, if you retain
your Notes, you should be treated as having exchanged your Notes for new Notes.
For purposes of this section such exchanges is referred to as a "Deemed
Exchange," and such new Notes are referred to as "New Notes."
If the Proposed Amendments were treated as resulting in a Deemed
Exchange of the Notes for New Notes, the tax treatment to you, if you do not
tender, would depend upon whether the Notes and New Notes constitute
"securities" for federal income tax purposes and the extent to which the Notes
are deemed to be "publicly traded" within the meaning of the Treasury
Regulations. If either the Notes or the New Notes are not treated as
"securities" for federal income tax purposes, you, as a non-tendering
Noteholder, would realize taxable gain (all or a portion of which would
constitute ordinary income if you acquired your Notes at a market discount) or
capital loss equal to the difference between the amount deemed realized by you
in the Deemed Exchange and your tax basis in the Notes deemed to have been
surrendered. The amount deemed realized by you would likely be the issue price
of the New Notes, which would likely be the principal amount of the New Notes
(assuming that the Notes are not "publicly traded" within the meaning of the
Treasury Regulations). If, however, the Notes are "publicly traded" within the
meaning of the Treasury Regulations, the issue price of the New Notes (and a
Holder's amount deemed realized) would be the fair market value of the Notes at
the time the exchange is deemed to occur. If, however, the Notes and New Notes
qualify as "securities" for federal income tax purposes, the exchange may
qualify as a tax-free recapitalization. Generally, although the matter is not
free from doubt, debt instruments with terms of less than five years are not
treated as "securities." If the exchange qualifies for recapitalization
treatment, you would recognize no loss and would recognize gain only to the
extent, if any, of (i) the fair market value of the excess of the "principal
amount" (within the meaning of section 354 of the Code) of the New Notes over
the "principal amount" of the Notes or, if less, (ii) the excess of the amount
deemed realized by you, over your tax basis in the Notes.
Regardless of whether the Notes and/or New Notes are securities, if the
Proposed Amendments constitute an exchange for U.S. federal income tax purposes
and the New Notes have an issue price (as discussed above) that is less than
their principal amount, the New Notes would generally have original
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issue discount, or "OID," for U.S. federal income tax purposes. In such a case,
you, as a holder of a New Note, may be required to include such OID in income as
it accrues under a constant yield method in advance of cash payments
attributable to such income (regardless of whether you are a cash or accrual
basis taxpayer).
Backup Withholding. If you tender your Notes, your receipt of cash may
be subject to backup withholding at the rate of 31% with respect to such
payments unless you (i) are a corporation or come within certain other exempt
categories and, when required, demonstrate this fact, or (ii) provide a correct
taxpayer identification number, certify as to no loss of exemption from backup
withholding and otherwise comply with applicable requirements of the backup
withholding rules. Any amount withheld under these rules will be credited
against your U.S. federal income tax liability. If you do not provide your
correct taxpayer identification number, you may be subject to penalties imposed
by the IRS.
THE FOREGOING SUMMARY DOES NOT DISCUSS ALL ASPECTS OF U.S. FEDERAL
INCOME TAXATION THAT MAY BE RELEVANT TO YOU IN LIGHT OF YOUR PARTICULAR
CIRCUMSTANCES AND INCOME TAX SITUATIONS. YOU SHOULD CONSULT YOUR TAX ADVISORS AS
TO THE PARTICULAR TAX CONSEQUENCES TO YOU OF THE TENDER OFFER AND THE
SOLICITATIONS, INCLUDING, WITHOUT LIMITATION, THE EFFECT OF ANY FEDERAL, STATE,
LOCAL, FOREIGN OR OTHER LAWS.
THE PREPACKAGED PLAN
General
Together with our affiliates, we are soliciting acceptances of the
Prepackaged Plan so that we may file the Prepackaged Plan in bankruptcy to
expedite our bankruptcy cases. Even if all of the conditions necessary for our
completion of the Tender Offer have been satisfied, we may nonetheless file the
Prepackaged Plan in bankruptcy; provided that we have received the acceptances
necessary for us to do so. For the Prepackaged Plan to be approved, we must
receive acceptances of the Prepackaged Plan from holders of Notes representing
more than half of all holders who respond and more than two-thirds of the
principal and interest of those responding.
If we elect to commence a bankruptcy case under Chapter 11 of the
Bankruptcy Code, we must seek confirmation of the Prepackaged Plan. If confirmed
by the bankruptcy court, the Prepackaged Plan will be binding upon all holders
of Notes regardless of whether they have voted to accept the Prepackaged Plan.
Under the Prepackaged Plan, Noteholders are intended to receive 17% of
the principal amount of the Notes, or $170 per $1,000 of principal. Under
certain circumstances, however, Noteholders could become the owners of 100% of
the equity in our parent, in which case they would receive no cash.
A copy of the Disclosure Statement, which describes the Prepackaged
Plan and provides you with certain information required by the bankruptcy laws,
is attached to this Statement as Annex A and is incorporated herein by
reference. A copy of the Prepackaged Plan is included as part of the Disclosure
Statement.
You should carefully read and review the Disclosure Statement and the
Prepackaged Plan prior to determining whether to accept the Prepackaged Plan.
You should also refer to the Disclosure Statement also contains the instructions
and procedures for voting on the Prepackaged Plan.
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Potential Consequences of the Prepackaged Plan
While we hope that a bankruptcy filing solely for the purpose of
implementing an agreed-upon restructuring would be of short duration and would
not be seriously disruptive to our business, we cannot be certain that this
would be the case. Although the Prepackaged Plan is designed to minimize the
length of the bankruptcy case, it is impossible to predict with certainty the
amount of time any money that we may spend in bankruptcy or to assure that the
Prepackaged Plan will be confirmed.
Even if confirmed on a timely basis, a bankruptcy case to confirm the
Prepackaged Plan could have an adverse effect on our business. Among other
things, it is possible that a bankruptcy case could adversely affect:
o Our relationships with our key suppliers, including our credit
lines for raw materials;
o Our relationships with our customers, particularly those that
depend on us as a primary supplier; and
o Our relationship with our employees.
A bankruptcy case also will involve additional expenses and will divert
the attention of our management from the operation of our business and the
implementation of our financial plan.
The extent to which a bankruptcy case disrupts our business will likely
be directly related to the length of time it takes to complete the case. If we
are unable to obtain confirmation of the Prepackaged Plan on a timely basis
because of a challenge to the Prepackaged Plan or a failure to satisfy the
conditions to the Prepackaged Plan, we may be forced to operate in bankruptcy
for an extended period while we try to develop a different plan of
reorganization that can be confirmed. Extended operations in bankruptcy would
likely increase both the probability and the magnitude of the adverse effects
described above.
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IMPORTANT
Any Noteholder who wishes to accept the Tender Offer should complete
the Letter of Transmittal and forward it with such Notes and any other required
documents to the Depositary. Noteholders whose Notes are registered in the name
of a broker, dealer, bank, trust company or other nominee should contact such
institution to tender their Notes.
THE DEPOSITARY:
<TABLE>
<CAPTION>
<S> <C>
By Mail (Whether Certified or Registered): By Overnight Courier:
United States Trust Company of New York United States Trust Company of New York
P.O. Box 84 30 Broad Street
Bowling Green Station 14th Floor
New York, New York 10274-0084 New York, New York 10004-2304
Attention: Corporate Trust Services Attention: Corporate Trust Services
</TABLE>
By Facsimile Transmission:
(212) 422-0183 or (646) 458-8104
(For Eligible Institutions Only)
To Confirm Facsimile by Telephone:
(800) 548-6565
For Information Call:
(800) 548-6565
THE INFORMATION AND BALLOTING AGENT:
If you have any additional questions, or need additional copies of this
Statement, the Letter of Transmittal or any other Tender Offer or consent
solicitation materials, please contact the Information and Balloting Agent at
the address or telephone number as listed below.
Beacon Hill Partners, Inc.
90 Broad Street
New York, New York 10004
Telephone: (212) 843-8500 or (800) 755-5001
