<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL , 1997
REGISTRATION NO. 333-22121
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
KOLL REAL ESTATE GROUP, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 6749 02-0426634
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) Number)
</TABLE>
4343 VON KARMAN AVENUE, NEWPORT BEACH, CALIFORNIA 92660
(714) 833-3030
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
--------------------------
RAYMOND J. PACINI
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
Koll Real Estate Group, Inc.
4343 Von Karman
Newport Beach, CA 92660
714-833-3030
(Name and address, including zip code, of agent for service)
--------------------------
COPIES TO:
GREGORY W. PRESTON, ESQ.
ROBERT I. NEWTON, ESQ.
McDermott, Will & Emery
1301 Dove Street
Newport Beach, CA 92660-2444
telephone (714) 851-0633
facsimile (714) 851-9348
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: SECURITIES
WILL BE DISTRIBUTED TO EXCHANGING DEBENTUREHOLDERS, COMMON AND PREFERRED
STOCKHOLDERS OF KOLL REAL ESTATE GROUP, INC. (THE "COMPANY") AND TO CERTAIN
FINANCIAL ADVISORS UPON CONSUMMATION OF THE EXCHANGE OFFER AND CAPITAL STOCK
COMBINATION TRANSACTIONS DESCRIBED IN THIS REGISTRATION STATEMENT.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED(1) PER UNIT OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, par value $0.05 per share
("Common Stock") to be offered in exchange
for 12% Senior Subordinated Pay-In-Kind
Debentures due March 15, 2002 ("Senior
Debentures")................................. 9,359,208 (2) (2) (2)
Common Stock to be offered in exchange for 12%
Subordinated Pay-In-Kind Debentures due March
15, 2002 ("Subordinated Debentures")......... 1,169,901 (3) (3) (3)
Common Stock to be issued in the Capital Stock
Combination described in this Registration
Statement upon the reclassification and
consolidation of outstanding shares of Series
A Convertible Redeemable Preferred Stock
("Preferred Stock").......................... 680,516(4) (5) (5) (5)
Common Stock to be issued in the Capital Stock
Combination described in this Registration
Statement upon the reclassification and
consolidation of outstanding shares of Class
A Common Stock............................... 489,385(4) (6) (6) (6)
Warrants to acquire Common Stock and the shares
of Common Stock to be issued upon exercise
thereof in payment of financial advisory
services..................................... 107,636(7) (8) (8) (8)
Total shares of Common Stock to be issued under
this Registration Statement.................. 11,806,646(9) $40,411(9)
</TABLE>
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
(1) The shares of Common Stock offered hereby are on a post-Capital Stock
Combination and post-Reverse Stock Split basis as described in this
Registration Statement.
(2) For the purpose of calculating the registration fee in connection with the
Common Stock offered hereby in exchange for Senior Debentures, the aggregate
value of the shares of Common Stock has been computed in accordance with
Rule 457(f) by calculating the aggregate value of the Senior Debentures, on
the basis of the average of the bid and asked price of the Senior Debentures
($.645 per $1.00 face amount) in the over-the-counter market on February 12,
1997. The resulting aggregate value of $100,152,679 was then multiplied by
1/33 of one percent to arrive at a registration fee for the shares of Common
Stock offered in exchange for the Senior Debentures equal to $30,349.
(3) For the purpose of calculating the registration fee in connection with the
Common Stock offered hereby in exchange for Subordinated Debentures, the
aggregate value of the shares of Common Stock has been computed in
accordance with Rule 457(f) by calculating the aggregate value of the
Subordinated Debentures, on the basis of the average of the bid and asked
price of the Subordinated Debentures ($.325 per $1.00 face amount) in the
over-the-counter market on February 18, 1997. The resulting aggregate value
of $12,612,962 was then multiplied by 1/33 of one percent to arrive at a
registration fee for the shares of Common Stock offered in exchange for the
Subordinated Debentures equal to $3,822.
(4) Includes such presently indeterminate number of shares of Common Stock as
may be sold by the Exchange Agent in payment of fractional shares in
connection with the Reverse Stock Split described in the Registration
Statement.
(5) For the purpose of calculating the registration fee in connection with the
Common Stock to be issued hereby upon the reclassification of all
outstanding shares of Preferred Stock pursuant to the Capital Stock
Combination and Reverse Stock Split described in this Registration
Statement, the aggregate value of the shares of Common Stock has been
computed in accordance with Rule 457(f) by calculating the aggregate value
of the currently outstanding shares of Preferred Stock, on the basis of the
average of the high and low prices per share of the Preferred Stock
($.265625) as reported on NASDAQ-NMS on February 18, 1997. The resulting
aggregate value of $10,329,260 was then multiplied by 1/33 of one percent to
arrive at a registration fee for the shares of Common Stock deemed to be
issued with respect to the outstanding shares of Preferred Stock pursuant to
the Capital Stock Combination equal to $3,130.
(6) For the purpose of calculating the registration fee in connection with the
Common Stock to be issued hereby upon the reclassification of all
outstanding shares of Class A Common Stock pursuant to the Capital Stock
Combination and Reverse Stock Split described in this Registration
Statement, the aggregate value of the shares of Common Stock has been
computed in accordance with Rule 457(f) by calculating the aggregate value
of the currently outstanding shares of Class A Common Stock, on the basis of
the average of the high and low prices per share of the Class A Common Stock
($.171876) as reported on NASDAQ-NMS on February 18, 1997. The resulting
aggregate value of $8,411,312 was then multiplied by 1/33 of one percent to
arrive at a registration fee for the shares of Common Stock deemed to be
issued with respect to the outstanding shares of Class A Common Stock
pursuant to the Capital Stock Combination equal to $2,549.
(7) Includes such presently indeterminate number of shares of Common Stock,
currently estimated to equal 107,636, on a post Capital Stock Combination
and Reverse Stock Split basis, as are issuable pursuant to the exercise of
warrants described in this Registration Statement to be issued in payment of
financial advisory services in connection with the Recapitalization
described in this Registration Statement. Such shares are expected to be
reoffered by the financial advisors within the next two (2) years pursuant
to Rule 415. The exact number of shares issuable upon exercise of such
warrants is equal to that number of shares which have an aggregate market
value equal to $1,850,000 based upon the 20-day average trading price
immediately following the consummation of the Recapitalization described in
this Registration Statement. Such shares include 33,955 shares of Common
Stock currently held at record by Libra Invest & Trade Ltd. ("Libra") for
the benefit of the Company pursuant to a custody agreement between Libra and
the Company and such number of newly issued shares of Common Stock necessary
to satisfy the terms of the warrants.
(8) For the purpose of calculating the registration fee in connection with the
Common Stock to be issued in payment of financial advisory fees upon
exercise of the warrants to be issued to the respective financial advisors,
the aggregate value of the shares of Common Stock has been computed based on
the market value of such shares as described in such warrants. The resulting
aggregate value of $1,850,000 was then multiplied by 1/33 of one percent to
arrive at a registration fee for the shares of Common Stock to be issued
pursuant to the warrants in payment of financial advisory fees and reoffered
by such financial advisor hereunder equal to $561.
(9) Previously paid. The aggregate registration fee of $40,411 was calculated by
adding the registration fees calculated pursuant to notes (2), (3), (5), (6)
and (8) above.
<PAGE>
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
LOCATION IN
FORM S-4 ITEM NO. AND CAPTION PROXY STATEMENT/PROSPECTUS
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<C> <C> <S> <C>
A. Information About the Transaction
1. Forepart of Registration Statement and Outside Front
Cover Page of Prospectus.......................... Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus........................................ AVAILABLE INFORMATION; TABLE OF CONTENTS
3. Risk Factors, Ratio of Earnings to Fixed Charges and
Other Information................................. SUMMARY; INTRODUCTION; RISK FACTORS
4. Terms of the Transaction............................ SUMMARY--The Recapitalization;
SUMMARY--The Exchange Offers and Related Consent
Solicitations;
SUMMARY--The Prepackaged Plan; THE COMPANY
RECAPITALIZATION; THE EXCHANGE OFFERS; THE
PREPACKAGED PLAN; SHARES SUBJECT TO FUTURE SALE BY
FINANCIAL ADVISORS; DESCRIPTION OF THE COMMON
STOCK; POSSIBLE ACCOUNTING TREATMENTS
5. Pro Forma Financial Information..................... SUMMARY--Selected Historical and Pro Forma Financial
Data; UNAUDITED HISTORIC AND PRO FORMA CONSOLI-
DATED FINANCIAL STATEMENTS
6. Material Contacts with the Company Being Acquired... Not Applicable
7. Additional Information Required for Reoffering by
Persons and Parties Deemed to be Underwriters..... SHARES SUBJECT TO FUTURE SALE BY FINANCIAL ADVISORS
8. Interests of Named Experts and Counsel.............. Not Applicable
9. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities.................... Not Applicable
B. Information About the Registrant
10. Information with Respect to S-3 Registrants......... Not Applicable
11. Incorporation of Certain Information by Reference... Not Applicable
12. Information with Respect to S-2 or S-3
Registrants....................................... Not Applicable
13. Incorporation of Certain Information by Reference... Not Applicable
14. Information with Respect to Registrants Other Than
S-3 or S-2 Registrants............................ SUMMARY--The Company; BUSINESS AND PROPERTIES OF THE
COMPANY; LEGAL PROCEEDINGS; MARKET PRICE AND
DIVIDENDS ON THE COMPANY'S COMMON STOCK AND
RELATED STOCKHOLDER MATTERS;
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LOCATION IN
FORM S-4 ITEM NO. AND CAPTION PROXY STATEMENT/PROSPECTUS
- -------------------------------------------------------------------------- ----------------------------------------------------
SELECTED FINANCIAL DATA; MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS; BUSINESS AND PROPERTIES OF THE COM-
PANY--Principal Properties; INDEX TO FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
<C> <C> <S> <C>
C. Information About the Company Being Acquired
15. Information with Respect to S-3 Companies........... Not Applicable
16. Information with Respect to S-2 or S-3 Companies.... Not Applicable
17. Information with Respect to Companies Other Than S-3
or S-2 Companies.................................. Not Applicable
D. Voting and Management Information
18. Information if Proxies, Consents or Authorizations
are to be Solicited
(1) Date, Time and Place Information................ Cover Page of Prospectus; INTRODUCTION; THE COMPANY
ANNUAL MEETING; PLAN SOLICITATION-VOTING PROCE-
DURES
(2) Revocability of Proxy........................... THE COMPANY ANNUAL MEETING-Proxy Solicitation; PLAN
SOLICITATION--VOTING PROCEDURES-Withdrawal of
Ballots; Revocation
(3) Dissenters' Rights of Appraisal................. Not Applicable
(4) Persons Making the Solicitation................. THE COMPANY ANNUAL MEETING-- Proxy Solicitation
(5) (i) Interest of Certain Persons in Matters to be
Acted Upon.................................. EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY;
EXECUTIVE COMPENSATION; PROPOSAL NO. 6 ELECT SLATE
OF DIRECTORS TO RECONSTITUTE THE BOARD OF
DIRECTORS
(ii) Voting Securities and Principal Holders
Thereof........................................ SECURITY OWNERSHIP OF CERTAIN BENEFICIAL INTEREST
HOLDERS AND MANAGEMENT
(6) Vote Required for Approval...................... THE COMPANY ANNUAL MEETING
(7) (i) Directors and Executive Officers............ EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY;
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS;
EXECUTIVE COMPENSATION
(ii) Executive Compensation......................... EXECUTIVE COMPENSATION
(iii) Certain Relationships and Related
Transactions.................................. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
</TABLE>
<PAGE>
PROXY STATEMENT/PROSPECTUS
AND DISCLOSURE STATEMENT
KOLL REAL ESTATE GROUP, INC.
THIS PROXY STATEMENT, PROSPECTUS AND DISCLOSURE STATEMENT (COLLECTIVELY
REFERRED TO HEREIN AS THE "PROSPECTUS") RELATES TO THE SOLICITATION OF SECURITY
HOLDERS AND IMPAIRED CREDITORS OF KOLL REAL ESTATE GROUP, INC., A DELAWARE
CORPORATION (THE "COMPANY") TO ACCEPT, CONSENT TO AND APPROVE VARIOUS
TRANSACTIONS WHICH COLLECTIVELY MAKEUP A PROPOSED RECAPITALIZATION (THE
"RECAPITALIZATION") OF THE COMPANY, TO BE CONSUMMATED EITHER (I) THROUGH THE
PROPOSED EXCHANGE OFFERS, THE CAPITAL STOCK COMBINATION, THE REVERSE STOCK SPLIT
(AS THESE TERMS ARE DEFINED BELOW) AND CERTAIN RELATED TRANSACTIONS DESCRIBED IN
THIS PROSPECTUS; OR (II) THROUGH OBTAINING AN ORDER OF A FEDERAL BANKRUPTCY
COURT CONFIRMING THE PREPACKAGED PLAN OF REORGANIZATION OF THE COMPANY (THE
"PREPACKAGED PLAN") WHICH CONTAINS, GENERALLY, THE SAME ELEMENTS AS THE
FOREGOING EXCHANGE OFFERS, CAPITAL STOCK COMBINATION, REVERSE STOCK SPLIT AND
RELATED TRANSACTIONS (AS DESCRIBED BELOW).
--------------------------
I. OFFER TO EXCHANGE ALL OUTSTANDING 12% SENIOR SUBORDINATED PAY-IN-KIND
DEBENTURES DUE MARCH 15, 2002
("SENIOR DEBENTURES") FOR UP TO A MAXIMUM OF 9,359,208 SHARES OF COMMON STOCK,
PAR VALUE $0.05 PER SHARE
("COMMON STOCK"); AND OFFER TO EXCHANGE ALL OUTSTANDING 12% SUBORDINATED
PAY-IN-KIND DEBENTURES
DUE MARCH 15, 2002 ("SUBORDINATED DEBENTURES" AND COLLECTIVELY WITH THE
SENIOR DEBENTURES, THE "OUTSTANDING DEBENTURES") FOR UP TO A MAXIMUM OF
1,169,901 SHARES OF COMMON STOCK
(COLLECTIVELY THE "EXCHANGE OFFERS")
The Exchange Offers are conditioned upon the acceptance and tender of at
least 90% of the aggregate principal amount of Outstanding Debentures (the "90%
Requisite Exchange Acceptance"). If the 90% Requisite Exchange Acceptance is not
obtained, the Company intends to effect the Recapitalization by seeking a Court
order confirming the Prepackaged Plan. Representatives of the members of a
committee of institutional investors, whose members hold, in the
aggregate, approximately 70% of the Outstanding Debentures (the "Debentures
Holders' Committee"), have indicated to the Company that the members intend to
accept the Exchange Offers.
--------------------------
II. SOLICITATION OF CONSENTS OF HOLDERS OF OUTSTANDING DEBENTURES
Concurrently with the Exchange Offers, the Company is soliciting the
consents of holders of the Outstanding Debentures (the "Consent Solicitations")
to certain amendments to the respective indentures (the "Indentures") to remove
certain restrictive covenants which (i) prohibit certain payments and
distributions by the Company to any debt subordinated to the Outstanding
Debentures and to equity holders of the Company and (ii) prohibit non-arm's
length transactions between the Company and its non-subsidiary affiliates
(collectively, the "Proposed Amendments"). See "Proposed Amendments." Holders of
the Outstanding Debentures who accept the Exchange Offers must consent to the
Proposed Amendments which, if effected, will be binding upon all holders
retaining Outstanding Debentures, whether or not such holders consented to the
adoption of such amendments. Written Consents to the Proposed Amendments will be
solicited as part of the Consents and Letters of Transmittal to be delivered to
holders of Outstanding Debentures in connection with the Exchange Offers. In
order to approve the Proposed Amendments, the consent of the record holders of
at least a majority of the aggregate principal amount of the outstanding Senior
Debentures and Subordinated Debentures, respectively, is required.
Representatives of the members of the Debenture Holders' Committee, whose
members hold approximately 70% of the Outstanding Debentures entitled to vote
have indicated to the Company that the members intend to consent to the Proposed
Amendments. For additional information regarding the Consent Solicitations, see
"Proposed Amendments to Indentures."
--------------------------
III. SOLICITATION OF PROXIES FOR THE ANNUAL MEETING OF STOCKHOLDERS (THE
"ANNUAL MEETING") OF KOLL REAL ESTATE GROUP, INC.
TO BE HELD ON MAY , 1997 TO:
(I) ratify the Exchange Offers; (II) approve an amendment to the Company's
Restated Certificate of Incorporation (the "Restated Certificate") to effect a
reclassification and combination of the Company's Series A Convertible Preferred
Stock ("Preferred Stock"), Class A Common Stock ("Class A Common Stock") and
Class B Common Stock into one class and series of stock to be designated "Common
Stock," whereby each outstanding share of Preferred Stock will be reclassified
to constitute one and three quarter (1.75) shares of Common Stock and each
outstanding share of Class A Common Stock will be reclassified to constitute one
(1) share of Common Stock, and the elimination of the Board's ability to issue
preference stock without stockholders approval (together, the "Capital Stock
Combination"); (III) approve an amendment to the Restated Certificate to effect
a one for one hundred (1:100) reverse stock split (the "Reverse Stock Split") of
each outstanding share of Preferred Stock and Class A Common Stock; (IV) approve
a reduction of the Company's authorized capital to 18 million shares of Common
Stock in the event proposals (i), (ii) and (iii) above are approved; (V) approve
amendments to the Restated Certificate and to the Company's Amended Bylaws (the
"Bylaws") to eliminate the provisions providing for the Company's Board of
Directors (the "Board") to be classified into three classes and to remove all
supermajority voting provisions and certain other anti-takeover provisions as
described in this Prospectus; (VI) elect a slate of ten (10) directors made up
of certain incumbent directors and new director nominees to reconstitute the
Board if the Recapitalization is consummated and to elect a slate of only
incumbent directors otherwise up for re-election in the event the
Recapitalization is not consummated; (VII) ratify the appointment of Deloitte &
Touche LLP as independent auditors; and (VIII) transact such other business as
may properly come before the Annual Meeting. The affirmative vote of the holders
of a majority of the outstanding shares of Class A Common Stock and Preferred
Stock, voting as separate classes, in person or by proxy at a meeting where a
quorum is present, will be required to approve the proposals described in (i),
(ii), (iii) and (iv) above; the affirmative vote of the holders of 80% of the
outstanding shares of Class A Common Stock, in person or by proxy at a meeting
where a quorum is present, will be required to approve the proposals described
in (v) above; and the affirmative vote of a majority of the outstanding shares
of Class A Common Stock will be required to approve the proposals described in
(vi) and (vii) above. Representatives of the members of the Debenture Holders'
Committee, whose members hold approximately 33% and 13%, respectively, of the
Preferred Stock and Class A Common Stock have indicated that the members intend
to vote in favor of each of the above described proposals. In addition, the
Holder of approximately 30.5% and 11.5%, respectively, of the Preferred Stock
and Class A Common Stock has indicated to the Company that it intends to vote in
favor of each of the above described proposals.
--------------------------
(COVER CONTINUED ON THE FOLLOWING PAGES)
The date of this Proxy Statement/Prospectus and Disclosure Statement is April
, 1997.
<PAGE>
(COVER PAGE CONTINUED)
IV. SOLICITATION OF ACCEPTANCES OF PREPACKAGED PLAN IN ORDER TO EFFECT THE
RECAPITALIZATION PURSUANT TO THE PREPACKAGED PLAN, INCLUDING THE EXCHANGE OF ALL
OUTSTANDING DEBENTURES FOR COMMON STOCK, THE CAPITAL STOCK COMBINATION AND
REVERSE STOCK SPLIT
Pursuant to Chapter 11, Title 11 of the United States Code (the "Bankruptcy
Code"), upon confirmation by a United States Bankruptcy Court (the "Bankruptcy
Court"), the Prepackaged Plan would substantially give effect to the Exchange
Offers and the Annual Meeting Proposals. In order to be confirmed by the
Bankruptcy Court, among certain other requirements, the Prepackaged Plan must be
approved by at least two-thirds in amount and more than one-half in number of
holders, who have voted to accept or reject the Prepackaged Plan, of Impaired
Classes of Claims (which generally include the holders of Senior Debentures and
other liquidated and non-Contingent Claims, as a separate class of claims, and
the holders of Subordinated Debentures, as a separate class of claims), and by
at least two-thirds in amount of holders, who have voted to accept or reject the
Prepackaged Plan, of impaired interests (which includes the holders of Preferred
Stock and Class A Common Stock, as separate classes of interests).
Alternatively, under the terms of the Prepackaged Plan, the Company intends to
seek to have the Prepackaged Plan confirmed by the Bankruptcy Court pursuant to
"cram-down" provisions of the Bankruptcy Code, I.E., if any impaired junior
Class of Claims or Interests does not vote to accept the Prepackaged Plan. Under
the Prepackaged Plan, such non-accepting Class of Claims and/or Interests would
have their respective claims/interests cancelled and would receive no
consideration provided the Bankruptcy Court determines as to each non-accepting
class, the Prepackaged Plan "does not discriminate unfairly" and is "fair and
equitable" as to such non-accepting class. See "Summary--The Prepackaged Plan"
and "The Prepackaged Plan" for a more detailed discussion. The Company is
soliciting acceptances of the Prepackaged Plan by means of Ballots and Master
Ballots (as defined in "Summary--Prepackaged Plan--Voting Procedures") and will
not hold meetings to vote on the Prepackaged Plan. Representatives of the
members of the Debenture Holders' Committee, whose members hold approximately
70%, 30% and 13%, respectively, of the Outstanding Debentures, the Preferred
Stock and the Class A Common Stock and a holder of approximately 30.5% and
11.5%, respectively, of the Preferred Stock and Class A Common Stock have
indicated that the members and such holders intend to vote in favor of the
Prepackaged Plan.
--------------------------
THE EXCHANGE OFFERS, ALL WITHDRAWAL RIGHTS WITH RESPECT THERETO, AND THE
CONSENT SOLICITATIONS WILL EXPIRE AT 12:00 MIDNIGHT, EASTERN STANDARD TIME ON
JUNE , 1997 (THE "EXPIRATION DATE"), UNLESS EXTENDED, CONSENTS MAY BE REVOKED
AT ANY TIME PRIOR TO (BUT NOT AFTER) THE EXPIRATION DATE.
THE SOLICITATION OF APPROVAL OF THE PREPACKAGED PLAN WILL EXPIRE AT 12:00
MIDNIGHT, EASTERN STANDARD TIME, ON THE EXPIRATION DATE, UNLESS EXTENDED. A
HOLDER OF SENIOR DEBENTURES, SUBORDINATED DEBENTURES, PREFERRED STOCK, CLASS A
COMMON STOCK OR LIQUIDATED NON-CONTINGENT CLAIMS IS ENTITLED TO VOTE ON THE
PREPACKAGED PLAN, REGARDLESS OF WHETHER SUCH HOLDER TENDERS IN AN EXCHANGE OFFER
OR APPROVES THE ANNUAL MEETING PROPOSALS, AND SUCH HOLDER OR A HOLDER OF OTHER
CLAIMS AGAINST OR EQUITY INTERESTS IN THE COMPANY IMPAIRED UNDER THE PREPACKAGED
PLAN MAY REVOKE ITS ACCEPTANCE OF THE PREPACKAGED PLAN AT ANY TIME PRIOR TO THE
COMMENCEMENT BY THE COMPANY OF JUDICIAL PROCEEDINGS TO CONFIRM THE PREPACKAGED
PLAN. THE COMPANY'S BOARD OF DIRECTORS HAS NOT, AT THIS TIME, APPROVED
COMMENCEMENT OF SUCH JUDICIAL PROCEEDINGS.
CERTAIN CAPITALIZED TERMS USED HEREIN ARE DEFINED ELSEWHERE AND AN INDEX OF
CERTAIN DEFINED TERMS IS SET FORTH ON PAGES XVI-XVII HERETO.
ii
<PAGE>
(COVER PAGE CONTINUED)
Set forth below are charts which reflect the issuance/exchange of securities
of the Company pursuant to the Recapitalization:
In the Exchange Offer:
[GRAPHIC]
In the Capital Stock Combination and Reverse Stock Split:
[GRAPHIC]
Set forth below are charts which reflect the voting power of the Company,
assuming a 100% acceptance rate for the Exchange Offers and the approval of the
Capital Stock Combination and Reverse Stock Split. The chart does not adjust for
fractional shares of Common Stock which will be bundled and sold by the Exchange
Agent as described in this Prospectus and does not give effect to the exercise
of warrants and stock options that will be outstanding upon completion of the
Recapitalization. Moreover, the chart does not reflect shares of Common Stock
issuable pursuant to the Prepackaged Plan to holders of certain liquidated
non-Contingent Claims. (See "The Prepackaged Plan," "The Company
Recapitalization--Description of the Recapitalization--Amendment to Stock Option
Plan" and "Shares Subject to Future Sale by Financial Advisors" "The Exchange
Offers--Treatment of Fractional Shares").
iii
<PAGE>
(COVER PAGE CONTINUED)
Prior to Recapitalization:
[GRAPHIC]
After Recapitalization:
[GRAPHIC]
iv
<PAGE>
(COVER PAGE CONTINUED)
COMPARISON OF EXCHANGE OFFER RECAPITALIZATION
AND PREPACKAGED PLAN RECAPITALIZATION
The following is a brief tabular comparison of certain elements of, and
differences between, the Recapitalization (i) proposed to be effected pursuant
to the Exchange Offers, the Proposed Amentments, the Capital Stock Combination,
the Reverse Stock Split and related transactions and alternatively, (ii)
proposed to be effected pursuant to the Prepackaged Plan. Please refer to the
discussions of these transactions within this Prospectus for more detailed and
complete descriptions.
<TABLE>
<CAPTION>
EXCHANGE OFFER RECAPITALIZATION PREPACKAGED PLAN RECAPITALIZATION
------------------------------------------ ------------------------------------------
<S> <C> <C>
Key Transactions........... Exchange of at least 90%, and up to 100%, Exchange 100% of the Outstanding
of the Outstanding Debentures for Common Debentures for Common Stock; combine all
Stock; amendment to Indentures pursuant to outstanding capital stock into one class
the Proposed Amendments to delete certain and series designated "Common Stock" where
payment distribution and affiliated trans- each outstanding Share of Preferred Stock
actions restrictive covenants in the event is reclassified to be one and three
100% of the Outstanding Debentures are not quarter (1.75) shares of "Common Stock"
tendered; combine all outstanding capital and each outstanding share of Class A
stock into one class and series designated Common Stock is reclassified to be one (1)
"Common Stock" where each outstanding share of Common Stock; reverse split all
Share of Preferred Stock is reclassified outstanding shares of capital stock on a
to be one and three quarter (1.75) shares one for one hundred (1:100) basis; delete
of "Common Stock" and each outstanding the classified Board and reconstitute the
share of Class A Common Stock is Board with an expanded ten (10) member
reclassified to be one (1) share of Common Board consisting of four (4) incumbent
Stock; reverse split all outstanding directors and six (6) new director
shares of capital stock on a one for one nominees each to serve for one (1) year
hundred (1:100) basis; delete the terms; amend the Company's charter docu-
classified Board and reconstitute the ments to delete various takeover pro-
Board with an expanded ten (10) member tective provisions, including all
Board consisting of four (4) incumbent supermajority voting requirements and
directors and six (6) new director restrictions on stockholders' ability to
nominees each to serve for one (1) year call special meetings and act by written
terms; amend the Company's charter consent; and amend the 1993 Stock Option
documents to delete various takeover Plan to reduce the aggregate number of
protective provisions, including all shares available thereunder from
supermajority voting requirements and approximately 15% to 6% of the post
restrictions on stockholders' ability to Recapitalization fully diluted equity. The
call special meetings and act by written executive officers of the Company will
consent; and amend the 1993 Stock Option continue to serve the Company in the same
Plan to reduce the aggregate number of capacities as they did prior to the
shares available thereunder from Recapitalization.
approximately 15% to 6% of the post
Recapitalization fully diluted equity. The
executive officers of the Company will
continue to serve the Company in the same
capacities as they did prior to the
Recapitalization.
</TABLE>
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COMPARISON OF EXCHANGE OFFER RECAPITALIZATION
AND PREPACKAGED PLAN RECAPITALIZATION (CONTINUED)
<TABLE>
<CAPTION>
EXCHANGE OFFER RECAPITALIZATION PREPACKAGED PLAN RECAPITALIZATION
------------------------------------------ ------------------------------------------
<S> <C> <C>
Material Differences....... Recapitalization may be consummated with All Outstanding Debentures will be
only 90% exchange of Outstanding exchanged for Common Stock and the
Debentures; the Company's ability to Proposed Amendments will be irrelevant;
utilize its net operating losses will be the Company may preserve and be able to
substantially limited such that the utilize up to $195 million of net
Company will only be able to utilize operating losses (less any net operating
approximately $1.1 million of net oper- losses disallowed as a result of the
ating losses per year (plus recognized ongoing IRS examinations) which would be
built-in gains) to offset taxable income; limited outside of bankruptcy; and certain
certain liquidated and non-Contingent liquidated and non- Contingent Claims
Claims that would be exchanged for Common which would remain outstanding pursuant to
Stock under the Prepackaged Plan will the Recapitalization outside of bankruptcy
remain outstanding; the Recapitalization would be exchanged for Common Stock under
pursuant to the Exchange Offers does not the Prepackaged Plan. The Prepackaged Plan
contain any "cram-down" procedures and, as also provides that the Company will seek
such, no holders will have their claims or to confirm the Prepackaged Plan pursuant
interests cancelled without considera- to "cramdown" provisions of the Bank-
tion. ruptcy Code, if all classes of Impaired
Claims and Interests do not vote to accept
the Prepackaged Plan, provided however,
that the class of Claims comprised of
Senior Debentures and liquidated
non-Contingent Claims vote to accept the
Prepackaged Plan. If the "cram-down"
provisions are invoked, such non-accepting
Class of Claims and/or Interests would
receive no distribution under the
Prepackaged Plan on account of their
respective claim or interest provided the
Bankruptcy Court determined, as to such
non-accepting Class, the Prepackaged Plan
"does not unfairly discriminate" and is
"fair and equitable". Consequently, if
holders of the Subordinated Debentures,
Preferred Stock or Common Stock, as
separate classes, do not vote to accept
the Prepackaged Plan, such non-accepting
holders could receive nothing.
</TABLE>
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COMPARISON OF EXCHANGE OFFER RECAPITALIZATION
AND PREPACKAGED PLAN RECAPITALIZATION (CONTINUED)
<TABLE>
<CAPTION>
EXCHANGE OFFER RECAPITALIZATION PREPACKAGED PLAN RECAPITALIZATION
------------------------------------------ ------------------------------------------
<S> <C> <C>
Mechanics of
Participation............ Holders of Outstanding Debentures may Holders of impaired claims (including
accept the Exchange Offers and may consent holders of Outstanding Debentures and
to the Proposed Amendments by executing, holders of liquidated non-Contingent
completing and delivering the Consent and Claims) and interests (including holders
Consent and Letter of Transmittal provided of Preferred Stock and Class A Common
herewith as described therein; and holders Stock) who desire to vote on the
of Preferred Stock and Class A Common Prepackaged Plan must properly complete a
Stock may vote to approve the Annual Ballot or Master Ballot, as applicable,
Meeting Proposals, including proposals to and deliver it to the Exchange Agent in
effect the Exchange Offers, the Capital accordance with the voting instructions
Stock Combination, the Reverse Stock Split contained therein. The Company will not
and the related Annual Meeting Proposals, hold a meeting to solicit acceptances of
as applicable, by executing and delivering the Prepackaged Plan.
the applicable proxy card enclosed
herewith to the Exchange Agent as
described herein or by attending and
voting at the Annual Meeting of Stock-
holders.
</TABLE>
vii
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COMPARISON OF EXCHANGE OFFER RECAPITALIZATION
AND PREPACKAGED PLAN RECAPITALIZATION (CONTINUED)
<TABLE>
<CAPTION>
EXCHANGE OFFER RECAPITALIZATION PREPACKAGED PLAN RECAPITALIZATION
------------------------------------------ ------------------------------------------
<S> <C> <C>
Acceptances, Consents
and Votes Needed to
Consummate the
Recapitalization......... Holders of at least (i) 90% of the prin- In order for the Prepackaged Plan to be
cipal amount of Outstanding Debentures confirmed and implemented by the
must accept the Exchange Offers, (ii) a Bankruptcy Court, the Prepackaged Plan
majority of the outstanding principal must be accepted by holders of at least
amount of Outstanding Debentures must (i) two-thirds in amount and more than one
consent to the Proposed Amendments and half in number, that have voted to accept
(iii) a majority of the outstanding shares or reject the Prepackaged Plan, of each
of Preferred Stock and Class A Common impaired class of claims (which generally
Stock, voting as separate classes, which include the holders of Senior Debentures
are present in person or by proxy at the and other liquidated non-Contingent
Annual Meeting with a quorum present, must creditors, as a separate class of claims,
approve the Capital Stock Combination and and the holders of Subordinated
the Reverse Stock Split. Debentures, as a separate class of claims)
and (ii) two-thirds in amount that have
voted to accept or reject the Prepackaged
Plan of each impaired class of interests
(which include the holders of Preferred
Stock and Class A Common Stock, as sepa-
rate classes of interests). Alternatively,
if the Prepackaged Plan is not so
accepted, the Company will attempt to
confirm the Prepackaged Plan pursuant to
the "cram-down" provisions of the
Bankruptcy Code described above.
Company's Intention
to Pursue................ The Company currently intends to pursue The Company currently intends to file a
the Recapitalization without the voluntary petition for relief pursuant to
Prepackaged Plan, if it receives (i) Chapter 11 of the Bankruptcy Code seeking
tenders of at least 90% of the out- to confirm and implement the Prepackaged
standing principal amount of Outstanding Plan if it does not receive the 90%
Debentures, (ii) consents to the Proposed Requisite Exchange Acceptance, the
Amendments from the holders of a majority Requisite Consents and approval of the
of the Outstanding principal amount of Capital Stock Combination and Reverse
Outstanding Debentures and (iii) approval Split Proposals at the Annual Meeting as
of the Capital Stock Combination and described herein, provided, however, it
Reverse Split Proposals at the Annual does receive the requisite acceptances of
Meeting by the holders of Preferred Stock the Prepackaged Plan necessary to confirm
and Class A Common Stock as described the Prepackaged Plan as described above.
above.
</TABLE>
viii
<PAGE>
(COVER PAGE CONTINUED)
The applicable record date (the "Record Date") for purposes of determining
the holders of Outstanding Debentures entitled to vote in the Consent
Solicitations and the holders of (i) Outstanding Debentures, (ii) Preferred
Stock, (iii) Class A Common Stock, and (iv) liquidated non-Contingent Claims
entitled to vote on the Prepackaged Plan is April , 1997. The record date for
purposes of determining the holders of Preferred Stock and Class A Common Stock
entitled to vote at the Annual Meeting is April , 1997 (the "Annual Meeting
Record Date").
It is important that the holders of the Company's outstanding debt and
equity securities (other than unexercised warrants) and the holders of other
impaired claims against the Company read and carefully consider the matters
described in this Prospectus, including, without limitation, all of the factors
set forth under the heading "Risk Factors," and that such holders respond
promptly.
This Prospectus relates to an aggregate of approximately 11,806,646 shares
of Common Stock on a post-Capital Stock Combination and Reverse Stock Split
basis which consist of (i) an estimated maximum of 9,359,208 shares of Common
Stock issuable to the tendering holders of Senior Debentures; (ii) an estimated
maximum of 1,169,901 shares of Common Stock issuable to the tendering holders of
Subordinated Debentures; (iii) an estimated additional 680,516 shares of Common
Stock issuable to holders of Preferred Stock pursuant to the Capital Stock
Combination and the Reverse Stock Split; (iv) an estimated additional 489,385
shares of Common Stock issuable to holders of Class A Common Stock pursuant to
the Capital Stock Combination and the Reverse Stock Split; and (v) the Advisor
Warrants and an indeterminate number of Warrant Shares which are subject to
future sale hereunder for the accounts of financial advisors currently estimated
to be approximately 107,636 shares of Common Stock as described in this
Prospectus under the heading "Shares Subject to Future Sale by Financial
Advisors."
The Board has determined that the Recapitalization is in the best interest
of the Company and its securityholders and recommends that (i) the holders of
the Outstanding Debentures accept the Exchange Offers and grant the consents to
the Proposed Amendments; (ii) the holders of the Preferred Stock and Class A
Common Stock approve the proposed Recapitalization transactions and the other
matters being considered at the Annual Meeting upon which they are entitled to
vote; and (iii) the holders of the Outstanding Debentures, holders of the
Preferred Stock, holders of the Class A Common Stock and holders of liquidated
non-Contingent Claims vote to accept the Prepackaged Plan.
THE EXCHANGE OFFERS, CONSENT SOLICITATIONS, CAPITAL STOCK COMBINATION,
REVERSE STOCK SPLIT, PREPACKAGED PLAN SOLICITATION, PROXY SOLICITATION AND OTHER
OFFERS BEING MADE HEREBY ARE NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
VOTES OR TENDERS FROM, HOLDERS IN ANY JURISDICTION IN WHICH THE EXCHANGE OFFERS,
CONSENT SOLICITATIONS, CAPITAL STOCK COMBINATION, REVERSE STOCK SPLIT,
PREPACKAGED PLAN SOLICITATION, PROXY SOLICITATION AND SUCH OTHER OFFERS WOULD
NOT BE IN COMPLIANCE WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE EXCHANGE OFFERS, CONSENT SOLICITATIONS,
CAPITAL STOCK COMBINATION, PREPACKAGED PLAN SOLICITATION, PROXY SOLICITATION AND
OTHER OFFERS BEING MADE HEREBY OTHER THAN THOSE CONTAINED HEREIN. IF GIVEN OR
MADE, ANY SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY.
ix
<PAGE>
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EACH HOLDER OF OUTSTANDING DEBENTURES, PREFERRED STOCK AND COMMON STOCK AND
EACH OTHER HOLDER OF CLAIMS OR EQUITY INTERESTS UNDER THE PREPACKAGED PLAN
SHOULD CONSULT WITH ITS OWN LEGAL, BUSINESS, FINANCIAL AND TAX ADVISORS AS TO
ANY MATTERS CONCERNING THE EXCHANGE OFFERS, THE CONSENT SOLICITATIONS, THE
CAPITAL STOCK COMBINATION, THE REVERSE STOCK SPLIT, THE PROXY SOLICITATION, THE
PREPACKAGED PLAN SOLICITATION AND THE RECAPITALIZATION TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY.
------------------------
SINCE NO JUDICIAL PROCESS HAS BEEN COMMENCED, THIS PROSPECTUS HAS NOT BEEN
APPROVED BY ANY COURT WITH RESPECT TO ADEQUACY OF INFORMATION. HOWEVER, IF A
JUDICIAL PROCESS IS SUBSEQUENTLY COMMENCED AND AN ORDER FOR RELIEF IS ENTERED,
THE COMPANY WILL PROMPTLY SEEK AN ORDER OF SUCH COURT THAT THE SOLICITATION OF
CONSENTS TO THE PREPACKAGED PLAN BY MEANS OF THIS PROSPECTUS WAS IN COMPLIANCE
WITH APPLICABLE LAW.
------------------------
The Company's Class A Common Stock and Preferred Stock is quoted on the
National Association of Securities Dealers, Inc. Automatic Quotation National
Market-SM- ("NASDAQ-NM"). However, the Company has been notified that its
securities are subject to delisting unless the Company is successful with an
appeal scheduled on April 23, 1997. See "RISK FACTORS--Potential NASDAQ
Delisting." The Company has filed an application for the inclusion of the shares
of Common Stock to be issued pursuant to this Prospectus and which have not
previously been approved for inclusion on NASDAQ NM. There can be no assurance
that the Company's appeal will be successful or that the Company's application
for the shares of Common Stock will be accepted for quotation on NASDAQ NM. The
Company expects that, after the consummation of the Exchange Offers, the trading
market for any Outstanding Debentures not tendered will be extremely limited, if
any market exists for the trading thereof. See "Risk Factors--Certain
Consequences to Non-Tendering Holders of Outstanding Debentures" and "The
Exchange Offers-- Effects of Consummation of Exchange Offers on Non-Tendering
Holders of Outstanding Debentures." However, the Company expects that the
liquidity of the Common Stock will be enhanced following consummation of the
Recapitalization.
Neither the delivery of this Prospectus nor any sale hereunder shall, under
any circumstances, create any implication that the information herein is correct
as of any time subsequent to the date hereof, or that there has been no change
in the affairs of the Company as of such date.
------------------------
THIS PROSPECTUS IS FIRST BEING SENT TO THE HOLDERS OF THE COMPANY'S
OUTSTANDING DEBENTURES, PREFERRED STOCK AND CLASS A COMMON STOCK ON APRIL ,
1997.
EXCHANGE AGENT AND INFORMATION AGENT
ChaseMellon Shareholder Services, Inc. will act as Exchange Agent for the
Exchange Offers (the "Exchange Agent") and as ballot agent for the Prepackaged
Plan Solicitation with respect to the holders of Outstanding Debentures, the
Preferred Stock, the Common Stock, and the holders of claims and interests under
the Prepackaged Plan. All correspondence in connection with the Exchange Offers,
Consent Solicitations or Prepackaged Plan Solicitation, including the Consent
and Consent and Letter of Transmittal and Prepackaged Plan Ballots (each a
"Consent and Letter of Transmittal"), should be addressed to the Exchange Agent
as set forth on the back cover page hereof. The Exchange Agent will also serve
as proxy agent with respect to the Annual Meeting.
Georgeson & Company, Inc. has been appointed as Information Agent for the
Exchange Offers, Consent Solicitations, the Annual Meeting and the Prepackaged
Plan Solicitation (the "Information Agent"). All inquiries relating to the
Exchange Offers, Consent Solicitation, the Annual Meeting and the Prepackaged
Plan Solicitation should be directed to the Information Agent at the address and
telephone number set forth on the back cover page hereof.
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
x
<PAGE>
(COVER PAGE CONTINUED)
and other information filed by the Company with the Commission may be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549-1004
and at the following Regional Offices of the Commission: Chicago Regional
Office, Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60621-2511; and New York Regional Office, 7 World Trade Center, 13th Floor, New
York, New York 10048. Copies of such material may also be obtained at prescribed
rates from the Public Reference Section of the Commission at its principal
office at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549-1004
or from the Commission's Website at http://www.sec.gov.
The Company has filed with the Commission a Registration Statement on Form
S-4 (the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the securities offered by this
Prospectus. This Prospectus does not contain all the information set forth in
the Registration Statement and the exhibits and schedules thereto, to which
reference is hereby made. Statements made in this Prospectus as to the contents
of any contract, agreement or other document referred to are not necessarily
complete. With respect to each such contract, agreement or other document filed
as an exhibit to the Registration Statement, reference is made to the exhibit
for a complete description of the matter involved, and each such statement is
qualified in its entirety by such reference. The Registration Statement,
including the exhibits and schedules thereto, may be inspected and copied at the
principal offices of the Commission in Washington, D.C. without charge, and
copies of the material contained therein may be obtained from the Commission
upon payment of prescribed fees.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of this offering will be deemed to be incorporated by reference in
and will be a part of this Prospectus from the date of filing of such documents.
Any statement contained in a document incorporated or deemed to be incorporated
by reference into this Prospectus will be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained in this
Prospectus or in any other subsequently filed document which also is or is
deemed to be incorporated by reference into this Prospectus modifies or
supersedes such statement. Any statement so modified or superseded will not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE RELATING TO THE COMPANY
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THE COMPANY WILL PROVIDE
WITHOUT CHARGE TO EACH PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM A COPY OF
THIS PROSPECTUS IS DELIVERED, UPON THE REQUEST OF SUCH PERSON, A COPY OF ANY OR
ALL OF THE DOCUMENTS WHICH ARE INCORPORATED BY REFERENCE INTO THIS PROSPECTUS,
OTHER THAN EXHIBITS TO SUCH DOCUMENTS (UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS).
THESE TRANSACTIONS AND THE SECURITIES OFFERED HEREBY ARE SUBJECT TO CERTAIN
MATERIAL RISKS DESCRIBED HEREIN. SEE "RISK FACTORS" BEGINNING ON PAGE 21 OF THIS
PROSPECTUS.
------------------------
NEITHER THESE TRANSACTIONS NOR THESE SECURITIES HAVE BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
THESE TRANSACTIONS OR THE ACCURACY OR ADEQUACY OF THE INFORMATION
CONTAINED IN THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
------------------------
xi
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
EXCHANGE AGENT AND INFORMATION AGENT......................................................................... x
AVAILABLE INFORMATION........................................................................................ x
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.............................................................. xi
INDEX OF CERTAIN DEFINED TERMS............................................................................... xvi
SUMMARY...................................................................................................... 1
The Company................................................................................................ 1
The Recapitalization....................................................................................... 1
The Company Annual Meeting................................................................................. 6
The Exchange Offers and Related Consent Solicitations...................................................... 6
Tendering and Consenting Procedures for Exchange Offers and Consent Solicitations.......................... 7
The Prepackaged Plan....................................................................................... 9
Other Significant Provisions in the Prepackaged Plan....................................................... 14
Appraisal Rights........................................................................................... 17
Summary Selected Historical and Pro Forma Financial Data................................................... 18
Market Prices of the Company's Common Stock and Dividends Paid............................................. 20
Comparative Historical and Pro Forma Per Share Data........................................................ 20
RISK FACTORS................................................................................................. 21
THE COMPANY RECAPITALIZATION................................................................................. 30
Background of the Recapitalization......................................................................... 30
Description of the Recapitalization........................................................................ 31
Purposes and Certain Results of Recapitalization........................................................... 32
Operations After the Recapitalization...................................................................... 33
Determinations and Recommendations of the Board of Directors............................................... 33
Determinations and Recommendations of Members of the Debenture Holders' Committee.......................... 33
THE EXCHANGE OFFERS.......................................................................................... 34
General.................................................................................................... 34
Expiration Date; Extensions; Amendments.................................................................... 34
Proposed Amendments........................................................................................ 35
Procedure for Tendering Outstanding Debentures and Giving Consents......................................... 36
Book-Entry Transfer Procedures............................................................................. 39
Guaranteed Delivery Procedures............................................................................. 39
Acceptance of Outstanding Debentures, Delivery of Common Stock............................................. 40
Treatment of Fractional Shares............................................................................. 40
Withdrawal Rights.......................................................................................... 40
Revocation of Consents; Defective Tenders.................................................................. 41
No Payments on Tendered Debentures......................................................................... 41
Conditions of the Exchange Offers.......................................................................... 41
Exchange Agent............................................................................................. 43
Information Agent.......................................................................................... 43
Effects of Consummation of Exchange Offers on Non-Tendering Holders of Outstanding Debentures.............. 43
PROPOSED AMENDMENTS TO INDENTURES............................................................................ 43
Proposed Amendments to Outstanding Debentures.............................................................. 44
THE COMPANY ANNUAL MEETING................................................................................... 45
Proxy Solicitation......................................................................................... 46
PROPOSAL NO. 1 APPROVAL OF EXCHANGE OFFERS (INCLUDING THE ISSUANCE OF SHARES OF COMMON STOCK)................ 49
</TABLE>
xii
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
PROPOSAL NO. 2 AMENDMENT OF ARTICLES FOURTH, FIFTH AND SIXTH OF RESTATED CERTIFICATE OF INCORPORATION TO
EFFECT A COMBINATION OF THE CLASS A COMMON STOCK AND PREFERRED STOCK....................................... 50
PROPOSAL NO. 3 AMENDMENT OF ARTICLES FIFTH OF RESTATED CERTIFICATE OF INCORPORATION TO EFFECT A ONE FOR ONE
HUNDRED (1:100) REVERSE STOCK SPLIT OF THE OUTSTANDING CAPITAL STOCK....................................... 52
PROPOSAL NO. 4 AMENDMENT OF ARTICLES FOURTH OF RESTATED CERTIFICATE OF INCORPORATION TO AMEND THE COMPANY'S
AUTHORIZED CAPITAL......................................................................................... 53
PROPOSAL NO. 5 AMENDMENT OF ARTICLES EIGHTH AND THIRTEENTH OF THE RESTATED CERTIFICATE AND ARTICLES III AND
XI OF THE BYLAWS TO DELETE CLASSIFIED BOARD AND SUPERMAJORITY VOTING PROVISIONS............................ 53
PROPOSAL NO. 6 AMENDMENT OF ARTICLES NINTH AND THIRTEENTH OF THE RESTATED CERTIFICATE AND ARTICLES II AND XI
OF THE BYLAWS TO DELETE SUPERMAJORITY VOTING PROVISIONS APPLICABLE TO SPECIAL MEETINGS AND TO PERMIT
STOCKHOLDERS TO CALL SPECIAL MEETINGS OF STOCKHOLDERS...................................................... 56
PROPOSAL NO. 7 AMENDMENT OF ARTICLE TENTH OF THE RESTATED CERTIFICATE TO DELETE PROHIBITION OF STOCKHOLDER
ACTION BY WRITTEN CONSENT AND SUPERMAJORITY VOTING PROVISIONS APPLICABLE THERETO........................... 57
PROPOSAL NO. 8 ELECT SLATE OF DIRECTORS TO RECONSTITUTE THE BOARD OF DIRECTORS............................... 58
PROPOSAL NO. 9 RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS............................................. 59
OTHER MATTERS................................................................................................ 59
THE PREPACKAGED PLAN......................................................................................... 59
Brief Explanation of Reorganization under the Bankruptcy Code.............................................. 59
Treatment of Unclassified Claims........................................................................... 60
Classification and Treatment of Claims and Interests Under the Prepackaged Plan............................ 61
Means for Implementation of the Prepackaged Plan........................................................... 65
Distributions Under the Prepackaged Plan................................................................... 66
Summary of Other Provisions of the Prepackaged Plan........................................................ 67
Intended Actions During the Chapter 11 Case................................................................ 69
Confirmation Standards..................................................................................... 70
Confirmation of the Prepackaged Plan Without Acceptance by All Voting Classes.............................. 71
Alternatives to Confirmation and Consummation of the Prepackaged Plan...................................... 72
PREPACKAGED PLAN SOLICITATION--VOTING PROCEDURES............................................................. 74
General.................................................................................................... 74
Record Date................................................................................................ 74
Voting Expiration Date; Extensions; Amendments............................................................. 74
Voting Procedures and Other Requirements................................................................... 75
Beneficial Interest Holders................................................................................ 76
Agreements Upon Furnishing Ballots......................................................................... 79
Method of Delivery of Ballots.............................................................................. 79
Withdrawal of Ballots; Revocation.......................................................................... 79
Waivers of Defects, Irregularities, Etc.................................................................... 80
SHARES SUBJECT TO FUTURE SALE BY FINANCIAL ADVISORS.......................................................... 81
HISTORIC AND UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL
STATEMENTS................................................................................................. 82
SELECTED FINANCIAL DATA...................................................................................... 88
</TABLE>
xiii
<PAGE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PROJECTIONS OF CERTAIN FINANCIAL DATA OF THE COMPANY......................................................... 90
PROJECTED FINANCIAL DATA--THE EXCHANGE OFFERS.............................................................. 91
PROJECTED FINANCIAL DATA--THE PREPACKAGED PLAN............................................................. 94
POSSIBLE ACCOUNTING TREATMENTS............................................................................... 97
LIQUIDATION ANALYSIS......................................................................................... 97
DESCRIPTION OF THE COMMON STOCK.............................................................................. 104
MARKET PRICE OF AND DIVIDENDS ON THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.................. 104
DESCRIPTION OF OUTSTANDING DEBENTURES........................................................................ 105
Terms...................................................................................................... 105
Optional Redemption........................................................................................ 106
Change of Control.......................................................................................... 106
Subordination.............................................................................................. 106
Certain Covenants.......................................................................................... 107
Successor Company.......................................................................................... 108
Defaults and Certain Rights on Default..................................................................... 108
Amendment, Supplement, Waiver.............................................................................. 109
Transfer................................................................................................... 110
Defeasance................................................................................................. 110
Concerning the Trustees.................................................................................... 110
Governing Law.............................................................................................. 110
Certain Definitions........................................................................................ 111
BUSINESS AND PROPERTIES OF THE COMPANY....................................................................... 114
Business................................................................................................... 114
Principal Properties....................................................................................... 114
Environmental and Regulatory Matters....................................................................... 117
Corporate Indemnification Matters.......................................................................... 117
Employees.................................................................................................. 118
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995........................... 118
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS........................ 119
General.................................................................................................... 119
Liquidity and Capital Resources............................................................................ 120
Financial Condition........................................................................................ 121
Results of Operations...................................................................................... 122
LEGAL PROCEEDINGS............................................................................................ 124
EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY.............................................................. 125
EXECUTIVE COMPENSATION....................................................................................... 128
Summary Compensation Table................................................................................. 128
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End Option/SAR Value................... 129
Executive Retirement and Savings Program................................................................... 129
Compensation of Directors.................................................................................. 130
Employment Agreements...................................................................................... 133
Committee Interlocks and Insider Participation............................................................. 133
Report of the Compensation Committee....................................................................... 134
Stock Price Performance Comparison......................................................................... 136
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL INTEREST HOLDERS AND MANAGEMENT..................................... 137
</TABLE>
xiv
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............................................................... 138
License and Non-Competition Agreements..................................................................... 138
Construction Management Agreements......................................................................... 139
Service Agreements......................................................................................... 139
Sublease Agreements........................................................................................ 139
Development Fees........................................................................................... 139
Joint Business Opportunity Agreement....................................................................... 139
Director Resignation and Termination of Stock Pledge....................................................... 140
Note Receivable............................................................................................ 140
Other Transactions......................................................................................... 140
MATERIAL FEDERAL INCOME TAX CONSEQUENCES..................................................................... 141
FEDERAL INCOME TAX CONSEQUENCES OF THE EXCHANGE OFFERS TO HOLDERS OF OUTSTANDING DEBENTURES.................. 141
General.................................................................................................... 141
Federal Income Tax Consequences of the Exchange Offers or the Prepackaged Plan to Holders of Preferred
Stock.................................................................................................... 143
Federal Income Tax Consequences of the Exchange Offers or the Prepackaged Plan to Holders of Class A Common
Stock.................................................................................................... 143
Backup Withholding and Information Reporting............................................................... 143
Federal Income Tax Consequences of the Exchange Offers to the Company; Cancellation of Indebtedness
Income................................................................................................... 143
FEDERAL INCOME TAX CONSEQUENCES OF PREPACKAGED PLAN.......................................................... 144
LEGAL MATTERS................................................................................................ 145
EXPERTS...................................................................................................... 145
INDEX TO AUDITED HISTORIC FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA........................................ F-1
APPENDIX A--PREPACKAGED PLAN OF REORGANIZATION............................................................... A-1
</TABLE>
xv
<PAGE>
INDEX OF CERTAIN DEFINED TERMS
Set forth below are certain defined terms used in this Prospectus the
definitions for which are indicated herein and in Appendix A hereto.
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Administrative Claim.................................................................................... 60
Advisor Warrants........................................................................................ 81
Affiliate............................................................................................... 111
Allowed Administrative Claim............................................................................ A-3
Allowed Claim........................................................................................... A-3
Allowed Interest........................................................................................ A-3
Amended Indentures...................................................................................... 26
Annual Meeting Proposals................................................................................ 46
Annual Meeting Record Date.............................................................................. ix
Auditor Proposal........................................................................................ 46
Authorized Capital Proposal............................................................................. 45
Ballot.................................................................................................. 16
Bankruptcy Code......................................................................................... ii; A-4
Bankruptcy Court........................................................................................ ii; A-5
Bankruptcy Rules........................................................................................ 9
Beneficial Interest Holders............................................................................. 75
Best Interests Test..................................................................................... 70
Board................................................................................................... i
Board Election Proposal................................................................................. 46
Board Proposal.......................................................................................... 46
Book-Entry Transfer..................................................................................... 39
Book-Entry Transfer Facility............................................................................ 39
Bylaws.................................................................................................. i
Capital Stock Combination............................................................................... i; A-4
Capital Stock Combination Proposal...................................................................... 45
Cash.................................................................................................... A-4
Chapter 11 Case......................................................................................... 9
Claim................................................................................................... A-4
Class................................................................................................... A-4
Class A Common Stock.................................................................................... i
Commencement Date....................................................................................... 7
Commission.............................................................................................. x
Common Stock............................................................................................ i; A-4
Company................................................................................................. i
Confirmation Date....................................................................................... A-4
Confirmation Order...................................................................................... A-4
Consent and Letter of Transmittal....................................................................... x
Consent Solicitations................................................................................... i
Contested Claim or Interest............................................................................. A-4
Contingent.............................................................................................. A-5
Creditor................................................................................................ A-5
Debenture Holders' Committee............................................................................ i
Distribution Record Date................................................................................ 66; A-5
Effective Date.......................................................................................... A-5
Eligible Institution.................................................................................... 37
Equity Holder........................................................................................... A-5
Exchange Act............................................................................................ x
Exchange Agent.......................................................................................... x
Exchange Offers......................................................................................... i
Exchange Offers Proposal................................................................................ 45
</TABLE>
xvi
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Expiration Date......................................................................................... ii
Future Shares........................................................................................... 23
HLHZ.................................................................................................... 1
Impaired................................................................................................ A-5
Impaired Securities..................................................................................... 66
Indentures.............................................................................................. i
Information Agent....................................................................................... x
Interest................................................................................................ A-5
IRS..................................................................................................... 26
LCP..................................................................................................... 115
Master Ballot........................................................................................... 16
Merger.................................................................................................. 30
MWE..................................................................................................... 1
NASDAQ-NM............................................................................................... x
Notice of Guaranteed Delivery........................................................................... 39
Outstanding Debentures.................................................................................. i; A-5
Prepackaged Plan........................................................................................ i
Prepackaged Plan Solicitation........................................................................... 4
Prepackaged Plan Solicitation Materials................................................................. 16
Preferred Stock......................................................................................... i
Project Debt............................................................................................ 5
Projections............................................................................................. 29
Proposed Amendments..................................................................................... i
Prospectus.............................................................................................. i
Proxy................................................................................................... 6
Recapitalization........................................................................................ i; A-6
Record Date............................................................................................. ix
Record Holder........................................................................................... 8
Registration Statement.................................................................................. xi
Requisite Acceptance Condition.......................................................................... 41
90% Requisite Exchange Acceptances...................................................................... i
Requisite Claims Acceptances............................................................................ 14
Requisite Consents...................................................................................... 7
Requisite Interest Acceptances.......................................................................... 14
Requisite Prepackaged Plan Acceptances.................................................................. 14
Restated Certificate.................................................................................... i
Reverse Split Proposal.................................................................................. 45
Reverse Stock Split..................................................................................... i
Rothschild.............................................................................................. 1
Securities Act.......................................................................................... xi
Senior Debentures....................................................................................... i
Special Meetings Proposal............................................................................... 46
Subordinated Debentures................................................................................. i
Tax Claim............................................................................................... 61; A-6
Trustees................................................................................................ 106
Unimpaired.............................................................................................. A-7
Unliquidated............................................................................................ A-7
Voting Expiration Date.................................................................................. 74
Warrant Shares.......................................................................................... 81
WGM..................................................................................................... 1
Written Consent Proposal................................................................................ 46
</TABLE>
xvii
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY IS INTENDED ONLY TO HIGHLIGHT CERTAIN INFORMATION
CONTAINED ELSEWHERE IN THIS PROSPECTUS. THIS SUMMARY IS QUALIFIED IN ITS
ENTIRETY BY THE MORE DETAILED INFORMATION, THE FINANCIAL STATEMENTS, INCLUDING
THE NOTES THERETO AND THE PRO FORMA INFORMATION APPEARING ELSEWHERE IN THIS
PROSPECTUS, THE APPENDICES HERETO, AND THE OTHER DOCUMENTS REFERENCED HEREIN.
CERTAIN CAPITALIZED TERMS USED IN THIS SUMMARY ARE DEFINED ELSEWHERE IN THIS
PROSPECTUS, AND AN INDEX OF SUCH DEFINED TERMS IS SET FORTH ON PAGE 13 HERETO.
THE COMPANY
Koll Real Estate Group, Inc. is a real estate holding company with
properties principally in Southern California. The principal activities of the
Company and its consolidated subsidiaries include: (i) obtaining zoning and
other entitlements for land it owns and improving the land for residential
development; (ii) single and multi-family residential construction in Southern
California; and (iii) providing commercial, industrial, retail and residential
real estate development services to third parties, including feasibility
studies, entitlement coordination, project planning, construction management,
financing, marketing, acquisition, disposition and asset management services on
a national and international basis, through its offices throughout California,
and in Dallas, Phoenix, Seattle, Shanghai, China and Taipei, Taiwan. Once the
residential land owned by the Company is entitled, the Company may sell
unimproved land to other developers or investors; sell improved land to
homebuilders; or participate in joint ventures with other developers, investors
or homebuilders to finance and construct infrastructure and homes.
The Company's executive offices are located at 4343 Von Karman Avenue,
Newport Beach, California 92660; telephone number (714) 833-3030.
THE RECAPITALIZATION
DESCRIPTION OF DEBENTURE HOLDERS' COMMITTEE PROCESS. In February 1996, the
Company engaged Houlihan Lokey Howard & Zukin ("HLHZ") and McDermott, Will &
Emery ("MWE") to act as its financial and legal advisors, respectively. In
August 1996, in order to pursue the Company's stated strategic objective to
evaluate alternatives to deleverage the Company's capital structure, the Company
commenced negotiations with representatives of members of the Debenture Holders'
Committee, who, as of the Record Date, hold approximately 70% of the Outstanding
Debentures. In May 1996, the members of the Debenture Holders' Committee
retained Rothschild and Weil, Gotshal & Manges L.L.P. ("WGM") as its financial
and legal advisors, respectively. The interest of the holders of Preferred Stock
and Class A Common Stock were represented by HLHZ, MWE and management of the
Company. The proposed Recapitalization is the result of extensive negotiations
and is supported by the representatives of the members of the Debenture Holders'
Committee who have indicated the intention of the members to accept the Exchange
Offers and to vote in favor of the Prepackaged Plan. Unless exchanged for Common
Stock, the aggregate principal amount of the Outstanding Debentures will
increase through continuing "in-kind" interest payments from approximately $206
million as of March 31, 1997, to approximately $368 million on the March 15,
2002 maturity date. The Company's financial advisors have assisted the Company
in preparing an analysis which indicates that the Company would need to earn a
compounded return of greater than 30% per annum on the free cashflow generated
by the Company's assets between 1997 and 2002 in order to fully pay the face
amount of the Senior Debentures and Subordinated Debentures at maturity in 2002.
See "Liquidation Analysis." The Company believes that it is unlikely that it
could achieve this 30% return over the next five (5) years or that other capital
resources would be available to repay the Outstanding Debentures at maturity;
nor does the Company believe, in view of its current and prospective capital
structure if the Recapitalization is not effected, that this payment could be
made in shares of its Class A Common Stock because of the substantial
unliklihood that the trading price requirement of greater than $.50 per share
would be met. Therefore, as an alternative to waiting until the 2002 maturity
date, the Company has engaged in extensive negotiations with the members of the
Debenture Holders' Committee and its financial advisors in order to develop a
proposal to currently
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exchange the Outstanding Debentures for Common Stock. The Company believes that
the Recapitalization represents the only viable alternative to the substantial
risks of payment default that would exist in 2002. Based on the current
valuation prepared by the Company with the assistance of HLHZ, which is subject
to the assumptions detailed in the Prospectus, holders of Senior Debentures
would receive Common Stock worth approximately $0.532 per $1.00 of principal
amount outstanding on March 15, 1997 and holders of Subordinated Debentures
would receive Common Stock worth approximately $0.266 per $1.00 of principal
amount outstanding on March 15, 1997 if they accept the Exchange Offers. If the
90% Requisite Exchange Acceptance is not obtained, the Company intends to effect
the Recapitalization by seeking a Court order confirming the Prepackaged Plan.
The representatives of the members of the Debenture Holders' Committee, whose
members hold approximately 70% of the Outstanding Debentures and approximately
33% and 13%, respectively, of the Preferred Stock and Class A Common Stock, have
indicated that the members intend to support the Prepackaged Plan. In addition,
the holder of 30.5% and 11.5%, respectively, of the Preferred Stock and Class A
Common Stock has indicated to the Company that it intends to approve the
Prepackaged Plan. Officers, directors and affiliates of the Company control less
than 1% of Preferred Stock and Class A Common Stock; however, they have
indicated their intention to vote such controlled shares in favor of all aspects
of the Recapitalization.
Also, without the Recapitalization, concerns about the Company's financial
strength will continue to adversely affect the Company's commercial and
residential development business opportunities. Of particular concern to the
Company's current and prospective client base, is the consistent reporting of
quarterly losses and impending negative net worth which are primarily a result
of the interest expense associated with the Outstanding Debentures. In addition
to lost commercial and residential development opportunities, the Company has
experienced problems with its ability to attract and retain key commercial and
residential development team personnel due to the negative impact on competing
for new business which has resulted from the Company's continued reporting of
losses. Therefore, the Company believes that the Recapitalization will
substantially enhance its current and prospective business opportunities by
eliminating the financial concern that the Outstanding Debentures have caused.
DESCRIPTION OF RECAPITALIZATION. The proposed Recapitalization consists of
the major elements summarized below. The Company is seeking to effect the
Recapitalization through either (i) the consummation of the Exchange Offers, the
Capital Stock Combination and the Reverse Stock Split; or alternatively, through
(ii) the confirmation of the Prepackaged Plan, which generally gives effect to
the same transactions as contemplated under (i) above, pursuant to chapter 11 of
the Bankruptcy Code. The term "Recapitalization" as used throughout this
Prospectus means the financial restructuring of the Company pursuant to either
(i) or (ii) above. See "Comparison of Exchange Offer Recapitalization and
Prepackaged Plan Recapitalization" on the cover page of this Prospectus.
If 90% of holders of Outstanding Debentures do not consent to the Exchange
Offers, but the Company receives sufficient acceptances of the Prepackaged Plan
to seek confirmation thereof by the Bankruptcy Court, the Company plans to
continue to operate in the ordinary course of business and intends to seek
relief under chapter 11 of the Bankruptcy Code and to attempt to use such
acceptances to obtain confirmation of the Prepackaged Plan. There is no
assurance that the Bankruptcy Court will confirm the Prepackaged Plan even if
the Company receives the necessary acceptances from the holders of impaired
claims and interests although the Company believes that the Bankruptcy Court
will confirm the Prepackaged Plan. See "Risks Factors--Considerations Relating
to the Filing of a Chapter 11 Case."
In connection with the successful completion of the Recapitalization,
certain officers and directors of the Company will receive employment contracts,
stock options and bonus payments. See "Executive Compensation--Employment
Agreements" and "--Report of the Compensation Committee."
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<PAGE>
The Recapitalization and the securities offered hereby are subject to
certain material risks and other factors which should be considered in
connection therewith. See "Risk Factors."
EXCHANGE OFFERS FOR THE OUTSTANDING DEBENTURES AND RELATED CONSENT
SOLICITATIONS. Pursuant to the Exchange Offers being made hereby, as more fully
described herein under "The Exchange Offers," the Company is offering to
exchange (i) 56 shares of Common Stock, on a post-Capital Stock Combination and
a post-Reverse Stock Split basis, for each $1,000 in principal amount of the
Senior Debentures outstanding as of March 15, 1997, without subsequent accrued
and unpaid interest; and (ii) 28 shares of Common Stock, on a post-Capital Stock
Combination and a post-Reverse Stock Split basis, for each $1,000 in principal
amount of Subordinated Debentures outstanding as of March 15, 1997, without
subsequent accrued and unpaid interest. Tendering holders of Outstanding
Debentures will not receive payment of, and waive all rights and claims to,
accrued and unpaid interest on the Outstanding Debentures tendered for exchange.
No fractional shares of Common Stock will be issued in the Exchange Offers.
Instead, whenever a fraction of a share of Common Stock would otherwise be
issuable to an exchanging holder of Outstanding Debentures, the Exchange Agent
will aggregate all such fractional shares of Common Stock that would otherwise
result from the Exchange Offers and will sell such aggregated fractional shares
of Common Stock, rounded to the nearest whole share, as whole shares in an
orderly manner. Upon completion of such sales, exchanging holders will receive
in lieu of such fractional shares, the relative cash proceeds from such sales
(without interest) in amounts proportionate to the fractional shares of Common
Stock which such exchanging holders would have otherwise received. See "The
Exchange Offers-- Treatment of Fractional Shares." Concurrently with the
Exchange Offers, the Company is soliciting the consent of the holders of the
Outstanding Debentures to certain amendments to the Indentures (the "Proposed
Amendments"). See "Proposed Amendments to Indentures."
If the Company does not receive valid tenders of at least the 90% Requisite
Exchange Acceptance, the Company intends to pursue the Recapitalization through
the Prepackaged Plan if the Company receives the Requisite Prepackaged Plan
Acceptances. If the Recapitalization is not consummated either through the
Exchange Offers and related transactions or through the Prepackaged Plan, the
Company currently intends to consider a variety of alternatives, including, but
not limited to (i) securing financing from new equity or debt sources, (ii)
forming joint ventures with other homebuilders in exchange for equity or debt
capital, (iii) selling options to other homebuilders to acquire land parcels at
Bolsa Chica currently owned by the Company, or (iv) pursuing other alternative
strategic transactions. Any of the above alternatives may result in a lower
recovery of asset values by the Company and its current securityholders than is
likely to occur if the Recapitalization is consummated.
The Recapitalization will result in substantial dilution to the holders of
the Preferred Stock and Class A Common Stock. Pursuant to the terms of the
Exchange Offers or the Prepackaged Plan, the holders of Class A Common Stock
would receive, in the aggregate, approximately 4.2% of the Common Stock
outstanding thereafter, and the holders of Preferred Stock would receive, in the
aggregate, approximately 5.8% of the Common Stock. However, such holders would
be subject to substantially greater dilution if the Outstanding Debentures were
paid at maturity in shares of Common Stock trading below $.50 per share. Given
the Company's current and prospective capital structure if the Recapitalization
is not completed, it is unlikely that the Class A Common Stock would trade at
prices per share in excess of $.50. Shares of Class A Common Stock were
authorized and approved for future issuance, without restriction by the holders
of the Company's securities entitled to vote in connection with such holders'
approval of the Company's merger with The Henley Group, Inc. in 1992. These
additional shares are sufficient in number to repay the Outstanding Debentures
at maturity at the $.50 per share minimum trading price.
Consummation of the Exchange Offers is subject to certain conditions which
may be waived or amended by the Company in whole or in part at any time and from
time to time in the Company's reasonable discretion. See "The Exchange
Offers--Conditions of the Exchange Offers."
3
<PAGE>
The Company reserves the right to amend, modify or supplement the Exchange
Offers, the Consent Solicitations and the solicitation of acceptances of the
Prepackaged Plan (the "Prepackaged Plan Solicitation") prior to their respective
expiration dates. The Company also reserves the right to cancel the Exchange
Offers, the Consent Solicitations and the Prepackaged Plan Solicitation at any
time prior to their respective expiration dates. The Company will give the
holders of Outstanding Debentures, Preferred Stock and Common Stock and holders
of other Impaired Claims and Interests under the Prepackaged Plan notice of any
amendments, modifications or supplements as may be required by applicable law.
See "The Exchange Offers General--Expiration Date; Extensions; Amendments" and
"The Prepackaged Plan." Neither the holders of the Company's debt securities nor
the holders of the Company's equity securities will have appraisal rights in
connection with the Recapitalization or the Prepackaged Plan, including the
Exchange Offers or the Capital Stock Combination.
CONSENT SOLICITATION WITH RESPECT TO THE OUTSTANDING
DEBENTURES. Concurrently with the making of the Exchange Offers, the Company is
soliciting from the holders of the Outstanding Debentures their consents to the
Proposed Amendments to remove certain restrictive covenants under the Indentures
in the event all Outstanding Debentures are not exchanged pursuant to the
Exchange Offers. The Proposed Amendments, if implemented, would remove
restrictive covenants from the Indentures which currently prohibit the Company
from making payments or distributions to debt subordinated to the Outstanding
Debentures or to equity holders prior to repayment of the Outstanding Debentures
and which prohibit the Company from entering into non-arms length transactions
with non-subsidiary affiliates.
CAPITAL STOCK COMBINATION AND REVERSE STOCK SPLIT. As part of the
Recapitalization, the Company is recommending to the holders of Class A Common
and Preferred Stock that they approve proposals at the Annual Meeting, which
among other things, approve amendments to the Restated Certificate in order to
effect the Capital Stock Combination and to effect the Reverse Stock Split.
Pursuant to the Capital Stock Combination, all classes and series of capital
stock will be reclassified and combined into one class of capital stock
designated "Common Stock." Each outstanding share of Preferred Stock will be
reclassified to be one and three quarter (1.75) shares of Common Stock and each
outstanding share of Class A Common Stock will be reclassified to be one (1)
share of Common Stock. After the Capital Stock Combination, the Common Stock
will have the same rights, preferences and privileges that the Class A Common
Stock had prior to the Capital Stock Combination. As part of the Capital Stock
Combination the ability of the Board to issue preference shares of Capital Stock
will be eliminated. Pursuant to the Reverse Stock Split each outstanding share
of capital stock will be reverse split on a one for one hundred (1:100) basis.
Representatives of the members of the Debenture Holders' Committee, whose
members hold approximately 33% and 13%, respectively, of the Preferred Stock and
Class A Common Stock have indicated to the Company that the members intend to
approve the Capital Stock Combination and the Reverse Stock Split. In addition,
the holder of 30.5% and 11.5%, respectively, of the Preferred Stock and Class A
Common Stock has indicated to the Company that it intends to approve the Capital
Stock Combination and the Reverse Stock Split. Therefore, in the aggregate,
approximately 63.5% and 24.5% of the holders of Preferred Stock and Class A
Common Stock, respectively, have indicated their intent to approve the Capital
Stock Combination and Reverse Stock Split. No fractional shares of Common Stock
will be issued pursuant to the Capital Stock Combination and/or Reverse Stock
Split. See "The Company Annual Meeting--Proposal No. 2."
OTHER CHARTER AMENDMENTS AND BOARD DECLASSIFICATION AND RECONSTITUTION. As
part of the Recapitalization, various amendments to the Company's charter
documents and related actions are being proposed to be implemented either
pursuant to the Annual Meeting or under the Prepackaged Plan. See "The Company
Annual Meeting" and "The Prepackaged Plan." The charter amendments are intended
to delete the classified Board and to remove all anti-takeover provisions,
including all supermajority voting provisions, restrictions on stockholders'
ability to call special meetings and restrictions on stockholders' ability
4
<PAGE>
to act by written consent. The Company is also proposing to reconstitute and
expand the Board in connection with the Recapitalization to include four (4)
incumbent directors and six (6) new director nominees each to serve for one (1)
year terms.
AMENDMENT OF STOCK OPTION PLAN. As part of the Recapitalization, the
Company's 1993 Stock Option/Stock Issuance Plan (the "1993 Stock Option Plan")
will be amended effective upon the consummation of the Recapitalization to
reduce the aggregate number of shares of Common Stock that may be issued under
the 1993 Stock Option Plan, on a post-Capital Stock Combination and post-Reverse
Stock Split basis, to approximately 751,449 shares of Common Stock, representing
6% of the Company's fully diluted equity. The holders of all outstanding options
previously issued under the 1993 Stock Option Plan have agreed to the
cancellation of such options upon completion of the Recapitalization. See "The
Company Recapitalization--Description of the Recapitalization--Amendment of
Stock Option Plan."
PURPOSES OF THE RECAPITALIZATION. The proposed Recapitalization, whether
achieved pursuant to the Exchange Offers and the Annual Meeting Proposals or
pursuant to the Prepackaged Plan, is primarily intended to deleverage the
Company's capital structure in order to maximize realization of the Company's
asset values and the growth of its business. As an alternative to waiting until
the Debentures maturity date in 2002, the Company engaged in extensive
negotiations with representatives of the members of the Debenture Holders'
Committee and its financial advisors in order to develop a proposal to exchange
the Outstanding Debentures for Common Stock. Based on the current valuation
prepared by the Company with the assistance of HLHZ, holders of Senior
Debentures would receive Common Stock worth approximately $0.532 per $1.00 of
principal amount outstanding on March 15, 1997 and holders of Subordinated
Debentures would receive Common Stock worth approximately $0.266 per $1.00 of
principal amount outstanding on March 15, 1997 if they accept the Exchange
Offers. If the 90% Requisite Exchange Acceptance is not obtained, the Company
intends to seek a Bankruptcy Court order confirming the Prepackaged Plan.
Representatives of the members of the Debenture Holders' Committee, whose
members hold approximately 70% of the Outstanding Debentures and approximately
33% and 13%, respectively, of the Preferred Stock and Class A Common Stock, have
indicated that the members intend to support the Prepackaged Plan. In addition,
the holder of 30.5% and 11.5%, respectively, of the Preferred Stock and Class A
Common Stock has indicated to the Company that it intends to approve the
Prepackaged Plan. The interests of the holders of Preferred Stock and Class A
Common Stock were represented by HLHZ, MWE and management of the Company. The
Company believes that such deleveraging will permit it to obtain financing on
more favorable terms, which financing would facilitate the growth of the
Company's business, including, but not limited to, the commercial and
residential real estate development business and the development of its Bolsa
Chica project. This new financing is not expected to exceed $30 million,
exclusive of project debt facilities ("Project Debt") currently providing lines
of credit up to approximately $70 million obtained by certain of the Company's
subsidiaries in connection with build-to-suits and other development of
pre-leased projects, as well as speculative development where market conditions
warrant, which credit lines carried outstanding balances aggregating
approximately $21.5 million as of March 31, 1997. If the Recapitalization is not
consummated, either through the Exchange Offers or through the Prepackaged Plan,
the Company believes that its current leveraged capital structure will cause the
Company to incur substantially higher costs with respect to any such necessary
financing, which will negatively impact the realization of asset values and will
limit the Company's growth. In addition, concern about the Company's continued
reporting of operating losses and impending negative net worth is of particular
concern to the Company's current and prospective client base and will continue
to adversely affect the Company's commercial and residential development
business opportunities. The quarterly losses and negative net worth are
primarily a result of the "in-kind" interest expense associated with the
Outstanding Debentures. In addition to lost commercial development
opportunities, the Company has experienced problems with its ability to attract
and retain key commercial and residential development team personnel due to
their concern as to the ability of the Company to compete for new business.
Therefore, the Company believes that the Recapitalization will substantially
enhance its current and prospective business opportunities by eliminating the
financial concern and confusion that the
5
<PAGE>
Outstanding Debentures have caused. See "The Company Recapitalization--Purposes
of the Recapitalization." The Recapitalization will have an important impact on
the Company and on the current holders of the Preferred Stock, Common Stock and
Outstanding Debentures, including a significant dilution of the beneficial
ownership interests and voting power of current holders of the Preferred Stock
and Common Stock. See "Risk Factors--Dilution; Shares Eligible for Future
Sales."
THE COMPANY ANNUAL MEETING
DATE, TIME AND PLACE OF ANNUAL MEETING. The Annual Meeting of Stockholders
will be held at a.m. Eastern Standard time, on June , 1997 at
unless postponed or adjourned. Only holders of record of the Class A
Common Stock and Preferred Stock at the close of business on the Annual Meeting
Record Date are entitled to notice of, and to vote at, the Annual Meeting.
PURPOSE OF THE ANNUAL MEETING. The purpose of the Annual Meeting is to
consider and vote upon the following proposals: (i) ratification of the Exchange
Offers, (ii) amendments to the Restated Certificate to effect the Capital Stock
Combination and the Reverse Stock Split, (iii) amendments to the Restated
Certificate and the Bylaws to eliminate the provisions providing for the Board
to be classified into three classes and to remove all supermajority voting
provisions and certain other restrictive provisions contained in the Restated
Certificate and Bylaws, (iv) election of directors to reconstitute the
declassified Board; (v) ratification of the selection of Deloitte & Touche LLP
as the Company's independent auditors; and (vi) approval of such other matters
as may properly come before the Annual Meeting, including to adjourn the Annual
Meeting under certain circumstances (collectively, the "Annual Meeting
Proposals"). The current directors, executive officers and their respective
Affiliates own less than one percent (1%) of the outstanding Class A Common
Stock and less than one percent (1%) of the outstanding Preferred Stock,
respectively, as of the Annual Meeting Record Date. Representatives of the
members of the Debenture Holders' Committee, whose members hold approximately
33% and 13%, respectively, of the Preferred Stock and Class A Common Stock have
indicated to the Company that the members intend to approve each of the
proposals. In addition, the holder of 30.5% and 11.5%, respectively, of the
Preferred Stock and Class A Common Stock has indicated to the Company that it
intends to approve the foregoing proposals. Therefore, in the aggregate,
approximately 63.5% and 24.5% of the holders of Preferred Stock and Class A
Common Stock, respectively, have indicated their intent to approve the Capital
Stock Combination and Reverse Stock Split. For more information regarding the
votes needed to approve each of the Annual Meeting Proposals, see "The Company
Annual Meeting Proxy Solicitation."
THE SOLICITATION OF ACCEPTANCES OF THE PREPACKAGED PLAN FROM THE HOLDERS OF
PREFERRED STOCK AND CLASS A COMMON STOCK IS BEING CONDUCTED PURSUANT TO SEPARATE
BALLOTS AND IS DESCRIBED UNDER "THE PREPACKAGED PLAN--PREPACKAGED PLAN
SOLICITATION--VOTING PROCEDURES." THE PREPACKAGED PLAN DOES NOT HAVE A QUORUM
REQUIREMENT. AS A RESULT, APPROVAL OF THE PREPACKAGED PLAN IS NOT BEING
CONSIDERED AT THE ANNUAL MEETING.
HOW TO VOTE FOR THE ANNUAL MEETING PROPOSALS. A holder of Class A Common
Stock or Preferred Stock wishing to vote for the Annual Meeting Proposals upon
which such holder is entitled to vote should either (i) complete and sign the
enclosed proxy (the "Proxy") and mail or deliver such Proxy to the Exchange
Agent at the address set forth on the back cover of this Prospectus; or (ii)
request its broker, dealer, commercial bank, trust company or other nominee to
vote on its behalf. Holders may also vote their shares of Class A Common Stock
or Preferred Stock in person at the Annual Meeting. Stockholders who have
executed and returned a Proxy may revoke it at any time before it is voted by
returning a Proxy bearing a later date, by giving written notice of revocation
to the Secretary of the Company or by attending the Annual Meeting and voting in
person. See "The Company Annual Meeting--Proxy Solicitation."
6
<PAGE>
THE EXCHANGE OFFERS AND RELATED CONSENT SOLICITATIONS
GENERAL. Pursuant to the Exchange Offers, the Company is offering to
exchange (i) 56 shares of Common Stock, on a post-Capital Stock Combination and
a post-Reverse Stock Split basis, for each $1,000 principal amount of Senior
Debentures, outstanding as of March 15, 1997, without subsequent accrued and
unpaid interest and 28 shares of Common Stock, on a post-Capital Stock
Combination and a post-Reverse Stock Split basis, for each $1,000 principal
amount of Subordinated Debentures, outstanding as of March 15, 1997, without
subsequent accrued and unpaid interest. Tendering holders of Outstanding
Debentures will not receive payment of, and waive all rights and claims to,
accrued and unpaid interest on all Outstanding Debentures tendered for exchange.
See "The Exchange Offers--Payments on Outstanding Debentures."
CERTAIN CONDITIONS TO EXCHANGE OFFERS. The Exchange Offers are conditioned
on, among other things, the 90% Requisite Exchange Acceptances and receipt by
the Company of consents to the Proposed Amendments representing more than 50% of
the outstanding principal amount of each of the Senior Debentures and the
Subordinated Debentures (the "Requisite Consents"). The Exchange Offers are also
conditioned on approval of the Prepackaged Plan and the Annual Meeting Proposals
described below and upon the Company's final determination to accept any
tendered Outstanding Debentures pursuant to the Exchange Offers and its
determination not to pursue the Recapitalization by seeking confirmation of the
Prepackaged Plan. The Company may waive certain of the conditions to the
Exchange Offers, in whole or in part, at any time and from time to time in its
reasonable discretion. See "The Exchange Offers-- Conditions of the Exchange
Offers."
EFFECTS OF CONSUMMATION OF EXCHANGE OFFERS ON NON-TENDERING HOLDERS OF
OUTSTANDING DEBENTURES. The successful completion of the Exchange Offers will
have certain adverse consequences to holders of Outstanding Debentures who do
not tender in the Exchange Offers. See "Risk Factors--Certain Consequences to
Non-Tendering Holders of Outstanding Debentures." IN ORDER FOR THE
RECAPITALIZATION TO BE CONSUMMATED WITHOUT RESORT TO THE PREPACKAGED PLAN,
HOLDERS OF AT LEAST 90% OF THE OUTSTANDING PRINCIPAL AMOUNT OF THE OUTSTANDING
DEBENTURES MUST TENDER IN THE EXCHANGE OFFERS. If the Company does not receive
the 90% Requisite Exchange Acceptances, but does receive the Requisite
Prepackaged Plan Acceptances, the Company intends to effect the Recapitalization
by seeking a judicial confirmation of the Prepackaged Plan. See "Risk
Factors--Certain Consequences to Non-Tendering Holders of Outstanding
Debentures." See also "The Exchange Offers--Effects of Consummation of Exchange
Offers on Non-Tendering Holders of Outstanding Debentures" and "Proposed
Amendments to Outstanding Debentures of the Company."
The Company is soliciting the Requisite Consents to the Proposed Amendments
which, if obtained, will eliminate certain of the restrictive covenants
contained in the Indentures. The provisions to be eliminated include the
restrictive covenants prohibiting the Company from paying cash dividends on its
capital stock or purchasing or redeeming capital stock or certain subordinated
obligations for consideration other than capital stock, and restrictive
covenants prohibiting the Company from entering into certain transactions with
related entities.
CONSENTS REQUIRED TO ADOPT THE PROPOSED AMENDMENTS. In order for the
Proposed Amendments to be effective, the Company must receive the Requisite
Consents from holders of at least a majority in outstanding principal amount of
the Senior Debentures and Subordinated Debentures, respectively, held by persons
other than the Company or its Affiliates. As of the Record Date, approximately
$165 million aggregate principal amount of the Senior Debentures and
approximately $41 million aggregate principal amount of the Subordinated
Debentures, respectively, were outstanding and not owned by the Company or its
Affiliates. The Exchange Offers are conditioned on the Company receiving the
Requisite Consents. Notwithstanding the foregoing, if the Requisite Consents are
not received by the Company, but 90% Requisite Exchange Acceptances are
received, the Company reserves the right to waive this condition and accept all
Outstanding Debentures tendered in the Exchange Offers even if the holders
thereof did not
7
<PAGE>
grant consents to the Proposed Amendments, and such holders will receive the
same consideration as if they had granted such consents.
TENDERING AND CONSENTING PROCEDURES FOR EXCHANGE OFFERS AND CONSENT
SOLICITATIONS
COMMENCEMENT AND EXPIRATION DATES. Holders of Outstanding Debentures who
wish to tender in the Exchange Offers, may do so beginning on May , 1997 (the
"Commencement Date"). The Expiration Date for the Exchange Offers and the
Consent Solicitations is 12:00 midnight, Eastern Standard time, May , 1997
subject to extension by the Company in its sole discretion. If the period for
the Exchange Offers or the Consent Solicitations is extended, the Expiration
Date with respect to that specific offer or solicitation shall be the last date
to which that specific offer or solicitation has been extended. The Company may
extend one or more of such offers and solicitations independently of the other
offers and solicitations, subject to certain limitations. See "The Exchange
Offers--Expiration Date; Extensions; Amendments." With respect to tendering
Outstanding Debentures and voting on the Consent Solicitations, the term "Record
Holder" means any person in whose name the Outstanding Debentures were
registered on the books of the Company on the Record Date.
HOW TO TENDER, CONSENT AND APPROVE. Holders wishing to tender Outstanding
Debentures in the Exchange Offers and to consent to the Proposed Amendments
should either (i) complete and sign the applicable Consent and Letter of
Transmittal or a copy thereof, and have the signature thereon guaranteed if
required by the instructions thereto and mail or deliver such Consent and Letter
of Transmittal, together with certificates representing the Outstanding
Debentures and any other required documents, to the Exchange Agent at its
address set forth on the back cover page of this Prospectus; or (ii) request its
broker, dealer, commercial bank, trust company or other nominee to effect the
transaction for it. A holder of Outstanding Debentures who wishes to vote on the
Prepackaged Plan should follow the instructions for voting on the Prepackaged
Plan. See "The Exchange Offers--Procedure for Tendering Outstanding Debentures
and Giving Consents." The tendering of Outstanding Debentures pursuant to the
Exchange Offers will not constitute an acceptance or rejection of the
Prepackaged Plan. Holders of Outstanding Debentures, Preferred Stock and Class A
Common Stock wishing to vote to approve the Prepackaged Plan should follow the
procedures described in "Prepackaged Plan Solicitation--Voting Procedures."
Holders of Outstanding Debentures will not be obligated to pay any brokerage
commissions or solicitation fees in connection with the Exchange Offers.
WITHDRAWAL RIGHTS AND REVOCATION. Tenders of Outstanding Debentures may be
withdrawn (i) at any time until 12:00 midnight, Eastern Standard time, on the
Expiration Date, and (ii) for any period of time required by applicable law
following the public announcement of a waiver of a Requisite Acceptance
Condition with respect to the Exchange Offers. Outstanding Debentures which have
been tendered but which are not accepted for exchange will be returned to the
holder thereof promptly after withdrawal, rejection of tender or termination of
the Exchange Offers. A Record Holder who has delivered a consent to the Proposed
Amendments may effectively revoke such consent by filing written notice with the
Exchange Agent at any time prior to (but not after) the date and time of
delivery of Requisite Consents effecting the Proposed Amendments. See "The
Exchange Offers--Withdrawal Rights," "The Exchange Offers--Revocation of
Consents."
ACCEPTANCE OF OUTSTANDING DEBENTURES AND DELIVERY OF COMMON STOCK. Subject
to the satisfaction or waiver of all conditions of the Exchange Offers and to
any extension or termination of the Exchange Offers, the Company will accept on
or promptly after the Expiration Date all Outstanding Debentures validly
tendered (and not withdrawn) on or prior to 12:00 midnight, Eastern Standard
time, on the Expiration Date. Shares of Common Stock will be issued, in exchange
for the Outstanding Debentures accepted in the Exchange Offers, promptly after
acceptance of such Outstanding Debentures. See "The Exchange Offers--General."
8
<PAGE>
SPECIAL PROCEDURE FOR BENEFICIAL OWNERS AND GUARANTEED DELIVERY
PROCEDURES. Any beneficial owner whose Outstanding Debentures are registered or
held of record in the name of its broker, dealer, commercial bank, trust company
or other nominee and who wishes to tender in the Exchange Offers or consent to
the Proposed Amendments should (i) contact such registered holder promptly and
instruct such holder to tender on its behalf, (ii) obtain and include with the
Consent and Letter of Transmittal the Outstanding Debentures properly endorsed
for transfer by the Record Holder or accompanied by a properly completed bond
power from the holder of record, together with a properly completed irrevocable
proxy that authorizes such person to consent to the Proposed Amendments on
behalf of such Record Holder, with signatures on the endorsement or bond power
guaranteed by an Eligible Institution, or (iii) effect a record transfer of such
Outstanding Debentures from the Record Holder to such beneficial owner and
comply with the requirements applicable to Record Holders for tendering
Outstanding Debentures and delivering Consents prior to 12:00 midnight, Eastern
Standard Time, on the Expiration Date, as the case may be. The transfer of
record ownership of Outstanding Debentures may take considerable time and,
depending on when such transfer is requested, may not be accomplished prior to
the Expiration Date.
Holders of Outstanding Debentures who wish to tender their Outstanding
Debentures and (i) whose Outstanding Debentures are not immediately available,
or (ii) who cannot deliver their Outstanding Debentures and Consent and Letter
of Transmittal to the Exchange Agent on or prior to the Expiration Date, must
tender their Outstanding Debentures according to the guaranteed delivery
procedures set forth in "The Exchange Offers--Guaranteed Delivery Procedures."
Financial institutions which are participants in certain book-entry transfer
facility systems may effect delivery of Outstanding Debentures to the Exchange
Agent by book-entry transfer according to the procedures set forth in "The
Exchange Offers-- Book-Entry Transfer Procedures."
THE PREPACKAGED PLAN
If the 90% Requisite Exchange Acceptances are not obtained, the Company
intends to commence a Chapter 11 Case ("Chapter 11 Case") by filing a voluntary
petition for relief under chapter 11, of the Bankruptcy Code, provided that the
Company receives the Requisite Prepackaged Plan Acceptances. In connection
therewith, section 1126(b) of the Bankruptcy Code and Rule 3018(b) of the
Federal Rule of Bankruptcy Procedure (the "Bankruptcy Rules") allows the Company
to solicit votes for the Prepackaged Plan prior to actual commencement of the
Chapter 11 Case. Under Section 1126(b) of the Bankruptcy Code, a holder of a
claim or equity interest that has accepted or rejected a plan of reorganization
before the commencement of a Chapter 11 Case will be deemed to have accepted or
rejected the plan for purposes of confirmation of such plan under chapter 11 of
the Bankruptcy Code if the solicitation of such acceptance or rejection was in
compliance with any applicable non-bankruptcy law, rule or regulation governing
the adequacy of disclosure in connection with such solicitation, or if there is
not any such law, rule or regulation, if such acceptance or rejection was
solicited after disclosure to such holder of adequate information as defined in
section 1125(a) of the Bankruptcy Code. Section 1125(a) defines adequate
information as information of a kind and in sufficient detail that would enable
a hypothetical reasonable investor typical of holders of claims and interests to
make an informed judgment about a plan of reorganization. The Company believes
that this Prospectus complies with the requirements of section 1126(b)
(including compliance with the Securities Act 1933, as amended, the Securities
Exchange Act of 1934, as amended, and any rules or regulations promulgated
thereunder) for purposes of solicitation of acceptances, although there can be
no assurance that the Bankruptcy Court will reach the same conclusion. See "Risk
Factors." For instructions on how to vote on the Prepackaged Plan see
"Prepackaged Plan Solicitation--Voting Procedures."
The Prepackaged Plan would generally give effect to the same transactions
contemplated by the Recapitalization pursuant to the Exchange Offers and related
transactions. This Prepackaged Plan Solicitation is being conducted at this time
to obtain the Requisite Prepackaged Plan Acceptances. In the
9
<PAGE>
event the 90% Requisite Exchange Acceptance is not obtained and the Requisite
Prepackaged Plan Acceptances are obtained, the Company intends to seek relief
under chapter 11 of the Bankruptcy Code and to use such Requisite Prepackaged
Plan Acceptances to obtain confirmation of the Prepackaged Plan as promptly as
practicable. If the Company commences a Chapter 11 Case and files the
Prepackaged Plan with the Bankruptcy Court, the Company will promptly seek to
obtain an order of the Court finding that the Prepackaged Plan Solicitation was
in compliance with applicable non-bankruptcy laws, rules or regulations
governing the adequacy of disclosure, including the Securities Act of 1933, as
amended, the Securities Exchange Act of 1934, as amended, and any rules or
regulations promulgated thereunder, and otherwise contains "adequate
information," and therefore, that holders of Impaired Claims and Interests (as
defined in the Prepackaged Plan) that have accepted or rejected the Prepackaged
Plan pursuant to this Prepackaged Plan Solicitation are deemed to have accepted
or rejected the Prepackaged Plan for purposes of confirmation of the Prepackaged
Plan under chapter 11 of the Bankruptcy Code.
The Company believes that it will have the best opportunity to complete the
Recapitalization and to confirm the Prepackaged Plan if the Requisite
Prepackaged Plan Acceptances are obtained prior to the commencement of a Chapter
11 Case. In addition, the Company believes that the prior acceptance of the
Prepackaged Plan would minimize disputes during a Chapter 11 Case concerning the
reorganization of the Company and would therefore shorten the time required to
complete the Recapitalization, reduce the expenses of the proceedings and
minimize the disruption of the Company's business that would likely result from
a protracted and contested Chapter 11 Case. If the Company was forced to
commence a Chapter 11 Case without prior receipt of the Requisite Prepackaged
Plan Acceptances, the Company believes that there is a substantial risk that the
Recapitalization would not be accomplished and that such Chapter 11 Case would
be protracted, costly and disruptive to the operations of the Company's
business.
The Prepackaged Plan defines two significant dates--the Confirmation Date
and the Effective Date. The Confirmation Date is the date on which the Court
enters the Confirmation Order on its docket, within the meaning of Bankruptcy
Rules 5003 and 9021. The Effective Date (I.E., the date on which the Prepackaged
Plan will be consummated) is the date selected by the Company that will not be
more than ten Business Days following the date in which the conditions specified
in Section 8.2 of the Prepackaged Plan have been satisfied or waived.
The Prepackaged Plan designates nine (9) separate Classes of Claims and
Interests, one of which contains the Net Claims of Affiliate Companies (as
defined in the Prepackaged Plan). The following table summarizes the
classification and treatment of the various Classes of Claims and Interests
under the Prepackaged Plan. The following description is qualified in its
entirety by reference to the detailed provisions of the Prepackaged Plan set
forth in Appendix A to the Prospectus. Also, see "The Prepackaged Plan" for a
more detail summary of the Prepackaged Plan.
<TABLE>
<CAPTION>
CLASS DESCRIPTION STATUS TREATMENT UNDER THE PREPACKAGED PLAN
- -------------- ------------------------- --------------------------- ---------------------------------------------
<S> <C> <C> <C>
Unclassified Administrative Claims Unimpaired; deemed to have Holders will be paid in full in Cash on the
accepted the Prepackaged Effective Date (as defined in the Prepackaged
Plan Plan) or upon such other terms as may be
agreed upon by the holder and the Company or
upon order of the Bankruptcy Court; provided
that if the Claim is incurred in the ordinary
course of business, such Administrative
Claims will be paid or performed when due in
accordance with the terms and conditions of
the particular agreements governing them.
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
CLASS DESCRIPTION STATUS TREATMENT UNDER THE PREPACKAGED PLAN
- -------------- ------------------------- --------------------------- ---------------------------------------------
<S> <C> <C> <C>
Unclassified Priority Tax Claims Unimpaired; deemed to have Holders will be paid in Cash on the Effective
accepted the Prepackaged Date (or such later date on which such Claim
Plan becomes an Allowed Claim), or the Company may
elect to pay holders of an Allowed Tax Claim
deferred cash payments in equal quarterly
installments, with interest, over a period
not to exceed six years after the date of
assessment of such Tax Claim, of a value, as
of the Effective Date, equal to the Allowed
amount of such Tax Claim, or holders will
retain unaltered their legal, equitable and
contractual rights; provided that such
Priority Tax Claims arise out of the IRS
Dispute (as defined in the Prepackaged Plan).
Class 1 Priority Claims Unimpaired; deemed to have Holders will be paid in full in Cash to the
accepted the Prepackaged extent such Claims are due on the Effective
Plan Date unless the holder and the Company agree
to a different treatment. Any such Claims not
due and owing on the Effective Date will be
paid in full in Cash when due.
Class 2 Secured Claims Unimpaired; deemed to have Holders will retain unaltered their legal,
accepted the Prepackaged equitable and contractual rights, or, at the
Plan option of the Company, such Claims will be
treated in any other manner so that they will
otherwise be rendered Unimpaired. To the
extent not previously paid, any accrued and
unpaid interest due on the Secured Claims
will be paid in Cash on the Effective Date.
Class 3 Unliquidated or Unimpaired; deemed to have Holders will retain unaltered their legal,
Contingent Claims accepted the Prepackaged equitable and contractual rights. The rights
Plan of a holder of a Class 3 Claim, including
payment, if any, will be determined in the
manner in which the amount of such Claim and
the rights of the holder of such Claim would
have been resolved or adjudicated if a Case
had not been commenced.
Class 4 Affiliates' Claims Impaired; while deemed to Holders will receive no distributions and
have rejected the retain no property under the Prepackaged
Prepackaged Plan, this Plan.
Class is expected to vote
in favor of the Prepackaged
Plan
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
CLASS DESCRIPTION STATUS TREATMENT UNDER THE PREPACKAGED PLAN
- -------------- ------------------------- --------------------------- ---------------------------------------------
<S> <C> <C> <C>
Class 5 General Unsecured Claims, Impaired; entitled to vote The aggregate value of Class 5 claims
including liquidated non- approximates $173 million, of which holders
Contingent Claims and of $110 million have indicated their intent
Claims of Holders of to approve the Prepackaged Plan. Provided
Senior Debentures that holders of Claims in Class 6 and holders
of Interests in Classes 7 and 8 vote to
accept the Prepackaged Plan, holders will
receive their pro rata share of 9,359,208
shares of Common Stock so that collectively
holders of Class 5 Claims will hold 80% of
the outstanding shares of the Common Stock of
the Company on the Effective Date. If Class
6, 7, or 8 fail to accept the Prepackaged
Plan, the subordination provisions in the
Senior Debenture Indenture will be enforced
and any distribution due such rejecting Class
of Claims or Interests under the Prepackaged
Plan will be distributed pro rata to the
holders of Class 5 Claims.
Class 6 Claims of Holders Impaired; entitled to vote The aggregate value of Class 6 Claims
of Subordinated approximates $41 million, of which holders of
Debentures $29 million have indicated their intent to
approve the Prepackaged Plan. Provided
holders of Class 6 Claims accept the
Prepackaged Plan, holders will receive their
pro rata share of 1,169,901 shares of Common
Stock so that collectively holders of Class 6
Claims will hold 10% of the outstanding
shares of the Common Stock of the Company on
the Effective Date. If holders of Class 6
Claims fail to accept the Prepackaged Plan,
such holders will receive no distributions
nor will they retain any property under the
Prepackaged Plan. The distributions which
would otherwise be made to holders of Allowed
Class 6 Claims will be made to the holders of
Allowed Claims in Class 5.
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
CLASS DESCRIPTION STATUS TREATMENT UNDER THE PREPACKAGED PLAN
- -------------- ------------------------- --------------------------- ---------------------------------------------
<S> <C> <C> <C>
Class 7 Interests of Holders Impaired; entitled to vote Provided that holders of Class 7 Interests
of Preferred Stock vote to accept the Prepackaged Plan, and
after giving effect to the Capital Stock
Combination and the Reverse Stock Split,
holders will be deemed to hold on a one and
three quarter for one (1.75:1) basis Common
Stock. After the dilutive effect of the
distribution of Common Stock as provided
under the Prepackaged Plan, collectively
holders of Preferred Stock will hold
approximately 5.8% of the outstanding shares
of the Common Stock of the Company on the
Effective Date. If holders of Class 7
Interests fail to accept the Prepackaged
Plan, such holders will receive no
distributions nor will they retain any
property under the Prepackaged Plan. The
distributions which would otherwise be made
to holders of Allowed Class 7 Interests will
be made to the holders of Allowed Claims in
Class 5.
Class 8 Interests of Holders Impaired; entitled to vote Provided that holders of Class 8 Interests
of Class A Common Stock vote to accept the Prepackaged Plan, and
after giving effect to the Capital Stock
Combination and the Reverse Stock Split,
holders of will be deemed to hold on a one
for one (1:1) basis Common Stock. After the
dilutive effect of the distribution of Common
Stock as provided under the Prepackaged Plan,
collectively holders of Allowed Class 8
Interests will hold approximately 4.2% of the
outstanding shares of the Common Stock of the
Company on the Effective Date. If holders of
Class 8 Interests fail to accept the
Prepackaged Plan, such holders will receive
no distributions nor will they retain any
property under the Prepackaged Plan. The
distributions which would otherwise be made
to the holders of Allowed Class 8 Interests
will be made to the holders of Allowed Claims
in Class 5.
Class 9 Interests of Holders Impaired; deemed to have Holders will receive no distributions and
of Warrants rejected the Prepackaged retain no property under the Prepackaged
Plan Plan.
</TABLE>
MEANS OF IMPLEMENTATION OF THE PREPACKAGED PLAN. The Prepackaged Plan
provides that certain transactions must occur on the Effective Date, or as soon
as practicable thereafter, including (i) the
13
<PAGE>
adoption and filing of amendments to the Company's Restated Certificate, (ii)
the adoption of amendments to the Company's Restated Bylaws, (iii) the
effectuation of the Capital Stock Combination, (iv) the effectuation of the
Reverse Stock Split, (vi) the issuance of authorized Common Stock, and (vii) the
implementation of the amended 1993 Stock Option Plan.
OTHER SIGNIFICANT PROVISIONS IN THE PREPACKAGED PLAN
- Distributions of Common Stock to holders of Outstanding Debentures will be
based upon the principal amount of Outstanding Debentures as of the
Petition Date plus accrued interest through the Petition Date.
- Except as otherwise expressly provided, the Prepackaged Plan provides for
a discharge and broad release of the Company from all Claims and causes of
action which are held by holders of Impaired Claims against and Impaired
Interests in the Company.
- The Prepackaged Plan provides for the release by the Company of the
present and former directors and officers of the Company for certain
claims related to their respective employment or service with the Company.
- The Prepackaged Plan provides for the assumption of all executory
contracts and unexpired leases of the Company, except for those expressly
rejected by the Company.
- The Prepackaged Plan provides that fractional shares of Common Stock that
would be distributable on the basis of the Capital Stock Combination and
Reverse Stock Split or distributions of the Common Stock on account of
Allowed Claims will not be issued or distributed. Instead all such
fractional shares will be aggregated and after the Effective Date, the
shares will be sold in the market by the Exchange Agent and the net
proceeds thereof disbursed prorata to such holders based on the fraction
of shares such holders would have been entitled to receive or deemed to
have held had the Company authorized the issuance of such fractional
shares.
- The Prepackaged Plan provides for the amendment or modification of the
Prepackaged Plan under certain circumstances, and the right to withdraw
the Prepackaged Plan anytime prior to the entry of the Court order
confirming the Prepackaged Plan.
PREPACKAGED PLAN ACCEPTANCE. All holders of Claims in an Unimpaired Class
are conclusively presumed under the Bankruptcy Code to have accepted the
Prepackaged Plan. All holders (as of the Record Date) of Claims in an Impaired
Class (except Classes 4 and 9) are entitled to vote on the Prepackaged Plan. A
Class of Claims will be found to have accepted the Prepackaged Plan if votes to
accept are cast by the holders of at least two-thirds in amount and more than
one-half in number of Claims of such Class that vote on the Prepackaged Plan
(the "Requisite Claims Acceptances"). Holders of Impaired Interests will be
found to have accepted the Prepackaged Plan if votes to accept are cast by the
holders of at least two-thirds in amount of outstanding Preferred Stock and
Class A Common Stock that vote on the Prepackaged Plan (the "Requisite Interest
Acceptances," and together with the Requisite Claims Acceptances, the "Requisite
Prepackaged Plan Acceptances"). Representatives of the members of the Debenture
Holders' Committee, whose members hold approximately 70% of the Outstanding
Debentures and approximately 33% and 13%, respectively of the Preferred Stock
and Class A Common Stock, have indicated that [the members of the Debenture
Holders' Committee] intend[s] to support the Prepackaged Plan. In addition, the
holder of 30.5% and 11.5%, respectively, of the Preferred Stock and Class A
Common Stock has indicated to the Company that it intends to approve the
Prepackaged Plan. Therefore, holders aggregating approximately 63.5% and 24.5%,
respectively, of the Preferred Stock and Class A Common Stock have indicated to
the Company that they intend to approve the Prepackaged Plan. Any Class (other
than Class 4 but including Class 9) not receiving or retaining anything under
the Prepackaged Plan will be deemed to have rejected the Prepackaged Plan.
Because only votes for or against the Prepackaged Plan are counted, an
abstention or a failure to vote will not be counted for purposes of determining
acceptance or rejection
14
<PAGE>
of the Prepackaged Plan by any Class of Claims or Interests. Therefore, the
Prepackaged Plan could be approved by any Class of Claims by holders with
significantly less than two-thirds in amount and one-half in number of Claims in
such Class and by any Class of Interests by holders with significantly less than
two-thirds in amount of Interests in such Class. ACCORDINGLY, IT IS IMPORTANT
THAT ALL HOLDERS OF IMPAIRED CLAIMS AND IMPAIRED INTERESTS, INCLUDING HOLDERS OF
OUTSTANDING DEBENTURES, PREFERRED STOCK AND CLASS A COMMON STOCK, VOTE ON THE
PREPACKAGED PLAN. A VALID TENDER PURSUANT TO AN EXCHANGE OFFER WILL NOT
CONSTITUTE ACCEPTANCE OF THE PREPACKAGED PLAN.
Even if all Classes of Impaired Claims and Impaired Interests vote to accept
the Prepackaged Plan, the Prepackaged Plan might not be confirmed by the Court.
See "Risk Factors--Considerations Relating to the Filing of the Case--Risk of
Non-Confirmation of the Prepackaged Plan."
CONFIRMATION OF THE PREPACKAGED PLAN. If the Company seeks to implement the
Prepackaged Plan by commencing a Chapter 11 Case under the Bankruptcy Code, the
Company will promptly request that the Bankruptcy Court hold a confirmation
hearing as promptly as practicable (including a determination that the
Prepackaged Plan Solicitation was in compliance with section 1126(b) of the
Bankruptcy Code), upon such notice to parties in interest as is required by the
Bankruptcy Code and the Bankruptcy Court. Parties in interest, including all
holders of Impaired Claims and Interests, will receive notice of the date and
time fixed by the Court for the Confirmation Hearing. Section 1128(b) of the
Bankruptcy Code provides that any party in interest may object to confirmation
of the Prepackaged Plan. The Bankruptcy Court will also establish procedures for
the filing and service of objections to confirmation of the Prepackaged Plan.
See "The Prepackaged Plan--Confirmation Standards."
BINDING EFFECT. If the Prepackaged Plan is confirmed by the Bankruptcy
Court, each holder of a Claim or Interest in an Impaired Class will receive the
same consideration as other holders of Claims or Interests in such Impaired
Class, whether or not such holder voted to accept the Prepackaged Plan.
Moreover, upon confirmation, the Prepackaged Plan will be binding upon all
holders regardless of whether or not such holders voted to accept the
Prepackaged Plan. For example, if the Prepackaged Plan is confirmed, 100% of
each issue of Outstanding Debentures will be exchanged for shares of Common
Stock.
LIQUIDATION ANALYSIS/FEASIBILITY. The Company believes that the Prepackaged
Plan has been proposed in good faith and contains the relevant information
required under the Bankruptcy Code. The Company believes the Prepackaged Plan is
feasible and is not likely to be followed by a liquidation or further
reorganization of the Company. Further, the Company believes that holders of
Impaired Claims and Interests will receive more under the Prepackaged Plan than
they would if the Company was liquidated under Chapter 7 of the Bankruptcy Code
and the proceeds distributed.
Set forth below is a summary of proposed distributions to Impaired Claims
and Interests pursuant to the Prepackaged Plan verses estimated recoveries under
a Chapter 7 liquidation of the Company:
<TABLE>
<CAPTION>
NET PRESENT VALUE
OF CHAPTER 7 PREPACKAGED PLAN
ESTIMATED LIQUIDATION ESTIMATED PERCENTAGE
DESCRIPTION PERCENTAGE RECOVERY(A) RECOVERY(B)
- ------------------------------------------------------------------- ----------------------- ---------------------
<S> <C> <C>
Class 5--General Unsecured Claims.................................. 42.6% 61.4%
Class 6--Subordinated Debentures................................... 0.0% greater than 0%(c )
Class 7--Preferred Stock........................................... 0.0% greater than 0%(c )
Class 8--Class A Common Stock...................................... 0.0% greater than 0%(c )
Class 9--Warrants.................................................. 0.0% 0.0%
</TABLE>
- ------------------------
(a) Cash amount in aggregate after the application of a present value discount.
Percentage shown in the table as Net Present Value of Chapter 7 Estimated
Liquidation Percentage Recovery is the quotient of the present value of the
available liquidation proceeds divided by the estimated amount of claims in
such class. The resulting percentage has been discounted back to its net
present value as of January 1,
15
<PAGE>
1997 (the date on which the Liquidation period is assumed to begin) from
January 1, 1999 (the assumed Liquidation Distribution Date) applying a
discount rate of 5.8%.
(b) Amount shown in the table as Prepackaged Plan Estimated Percentage Recovery
is the assumed value of the equity securities to be distributed to all
holders of claims in such class under the Prepackaged Plan divided by the
estimated amount of claims. It should be noted that depending on general
market conditions and other factors prevailing at the relevant times the
equity securities may trade at a price other than that which was assumed for
purposes of this analysis. Accordingly, no representation can be, or is
being, made with respect to whether the percentage recoveries shown in the
table above will actually be realized by the holder of claims in any
particular class under the Prepackaged Plan.
(c) Assuming acceptance of the Prepackaged Plan by each Impaired Class and
Interest entitled to vote thereon, under the Prepackaged Plan, these Holders
will receive New Common Stock.
VOTING PROCEDURES. The Company will not hold a meeting to vote on the
Prepackaged Plan. Rather, except for holders of Affiliates' Claims which the
Company will cause to support the Prepackaged Plan, the Company is soliciting
acceptances of the Prepackaged Plan by means of "Ballots" and "Master Ballots."
Holders of Outstanding Debentures, Preferred Stock, Class A Common Stock and
liquidated non-Contingent Claims should read this Prospectus, with the
Prepackaged Plan, the form of Ballot and or Master Ballot, as applicable
(collectively the "Prepackaged Plan Solicitation Materials"), in their entirety
before voting on the Prepackaged Plan. Any holder of Impaired Claims or Impaired
Interests who wishes to vote with respect to the Prepackaged Plan should
complete, sign and return the applicable Ballot or Master Ballot and check the
box entitled "Accepts the Prepackaged Plan" or "Rejects the Prepackaged Plan,"
as appropriate. Except as provided on the applicable Ballot or Master Ballot,
the applicable duly completed Ballot or Master Ballot must be mailed or
delivered to the Exchange Agent at the address listed on the back cover of this
Prospectus. Unless extended by the Company, Ballots and Master Ballots must be
received no later than 12:00 midnight, Eastern Standard Time, on June , 1997.
Any beneficial owner whose securities were registered or held of record in the
name of his broker, dealer, commercial bank, trust company, savings and loan or
other nominee and who wishes to vote on the Prepackaged Plan, but who does not
have a Ballot, should contact such nominee and request a Ballot from such
nominee and return a completed Ballot to such nominee. In the event that the
Court determines that the Prepackaged Plan Solicitation Materials were not
transmitted to substantially all Impaired Creditors and holders of Preferred
Stock and Class A Common Stock, the Bankruptcy Court could void the Prepackaged
Plan Solicitation or require further solicitation or resolicitation. For more
detail instructions on how to vote on the Prepackaged Plan see "Prepackaged Plan
Solicitation--Voting Procedures."
Under appropriate written notice, votes on the Prepackaged Plan may be
revoked as described herein at any time prior to the earlier of (i) the
commencement by the Company of the Chapter 11 Case, and (ii) the Record Date, as
well as in certain other circumstances. See "Prepackaged Plan Solicitation
Voting--Procedures--Withdrawal of Ballots and Revocation."
DETERMINATIONS AND RECOMMENDATIONS OF THE BOARD OF DIRECTORS OF THE
COMPANY. The Board has determined that (i) the Recapitalization is in the best
interests of the Company and its security holders; (ii) it is in the best
interests of the Company and its security holders to solicit acceptances of the
Prepackaged Plan to be implemented if and at such time as the Board deems it may
be in the best interests of the Company and its security holders and other
holders of claims against or interests in the Company to commence a judicial
process to effect the Prepackaged Plan, including in the event that the
Recapitalization is not consummated through the Exchange Offers and the Annual
Meeting Proposals; and (iii) it is in the best interests of the Company and its
security holders that the Annual Meeting Proposals be approved. The Board also
recommends that (i) the holders of the Outstanding Debentures accept the
Exchange Offers; (ii) the holders of the Outstanding Debentures grant the
consents to the Proposed Amendments; (iii) the holders of the Outstanding
Debentures, the Preferred Stock and Class A Common Stock and
16
<PAGE>
holders of other Impaired Claims and Interests approve the Prepackaged Plan; and
(iv) the holders of the Preferred Stock and Class A Common Stock approve the
Annual Meeting Proposals.
DETERMINATIONS AND RECOMMENDATION OF THE MEMBERS OF THE DEBENTURE HOLDERS'
COMMITTEE. Representatives of the members of the Debenture Holders' Committee,
constituting approximately 70% of the Outstanding Debentures and approximately
33% and 13%, respectively, of the Preferred Stock and Class A Common Stock, have
indicated to the Company that the members intend to support the
Recapitalization. The Company has been informed by the representatives of the
members of the Debenture Holders' Committee that their decision to support the
Recapitalization was based upon, among other things, their determination that
(i) the consideration to be received by the holders of Outstanding Debentures
will provide such holders with a significant equity interest in the Company,
(ii) the value of the Company will be enhanced by the Recapitalization, and
(iii) the Company will have greater opportunities in the event the Company is
deleveraged as a result of the Recapitalization.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES. The federal income tax
consequences to the Company and holders of the Company's securities as a result
of the transactions occurring as part of and in connection with the Exchange
Offers or the Prepackaged Plan may be material. Neither the Company nor its tax
counsel is expressing any opinion with respect to these tax consequences. The
tax consequences to holders of the Company's securities depend on the type of
security held and the resolution of various uncertain issues. See "Material
Federal Income Tax Consequences" and "Risk Factors--Tax Matters."
APPRAISAL RIGHTS
No appraisal rights are available to holders of the Company's Outstanding
Debentures, Preferred Stock or Class A Common Stock in connection with the
Exchange Offers or the Capital Stock Combination or Reverse Stock Split.
17
<PAGE>
SUMMARY SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
Set forth below is selected financial data of the Company and its
consolidated subsidiaries. The following information should be read in
conjunction with (i) the Company's financial statements and notes thereto
contained in this Prospectus commencing on Page F-1; and (ii) the Unaudited pro
forma consolidated financial information contained in this Prospectus under the
heading "The Company Recapitalization--Unaudited Pro Forma Consolidated
Financial Information."
SELECTED FINANCIAL DATA
YEARS ENDED DECEMBER 31,
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
------------------------------
EXCHANGE THE PRE-
1992 1993 1994 1995 1996 OFFERS(H) PACKAGED PLAN(I)
--------- --------- --------- --------- --------- ----------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and
short-term investments (a)..... $ 41.6 $ 43.5 $ 13.0 $ 4.9 $ 2.1 $ 16.0 $ 16.0
Total assets (a)................. 486.1 436.0 414.0 272.4 272.2 261.1 193.5
Senior bank debt (b)............. 65.4 7.0 -- 16.6 7.1 -- --
Project debt..................... -- -- -- -- 12.5 12.5 12.5
Subordinated debentures (b)...... 165.1 134.9 152.9 173.2 195.9 19.6 --
Total stockholders' equity (c)... $ 149.6 $ 163.5 $ 145.5 $ 29.6 $ 1.1 $ 160.1 $ 129.4
Fully diluted shares outstanding
at end of period (g)........... 86.4 91.4 102.5 102.4 102.4 11.3 12.4
Book value per fully diluted
share.......................... $ 1.73 $ 1.79 $ 1.42 $ .29 $ .01 $ 14.17 $ 10.44
STATEMENT OF OPERATIONS DATA:
Revenues (d),(e)................. $ 28.3 $ 16.7 $ 21.4 $ 34.0 $ 44.8 $ 44.8 $ 44.8
Loss from continuing operations
(e),(f)........................ (41.9) (20.1) (18.7) (116.9) (28.9) (8.5) (73.8)
Net income (loss) (f)............ (38.4) 14.3 (18.0) (116.9) (28.9)
Per common share:
Loss from continuing operations
(c),(e),(f).................... (1.44) (.24) (.43) (2.48) (.60) $ (.80) $ (6.36)
Net income (loss) (f),(g)........ $ (1.32) $ .17 $ (.41) $ (2.48) $ (.60)
Weighted average shares outstanding
(g)............................... 29.0 83.0 43.8 47.1 48.3 10.6 11.6
</TABLE>
- ------------------------
(a) The decrease in total assets at December 31, 1993 is primarily due to the
disposition of the Company's investment in Deltec Panamerica S.A. ("Deltec")
and the sale of Lake Superior Land Company ("Lake Superior"). The decrease
in total assets and cash, cash equivalents and short-term investments at
December 31, 1994 is primarily attributable to the funding of project
development costs and general and administrative expenses, as well as funds
deposited into a restricted cash account to secure a $25 million letter of
credit facility related to the Abex litigation. The decreases in cash, cash
equivalents and short term investments at December 31, 1995 and 1996 are
primarily attributable to the funding of project development and
infrastructure costs and general and administrative expenses, partially
offset by sales of real estate held for development or sale. The decrease in
total assets at December 31, 1995 is primarily due to the asset revaluation
of Bolsa Chica and the decrease in cash described above.
18
<PAGE>
(b) The decrease in debt at December 31, 1993 reflects principal repayments on
senior bank debt and the exchange of subordinated debentures in connection
with the sale of Lake Superior and the issuance of 3.4 million shares of
Class A Common Stock of the Company to Libra. The increase in debt at
December 31, 1995 reflects borrowings under new credit agreements to settle
the Abex litigation and construct infrastructure improvements at Rancho San
Pasqual. The decrease in senior bank debt at December 31, 1996 reflects
principal repayments in excess of borrowings for construction of
infrastructure improvements at Rancho San Pasqual. The increase in project
debt at December 31, 1996 reflects borrowings from banks for build-to-suit
projects.
(c) The increase in equity at December 31, 1993 primarily reflects net income
for the year then ended. The decrease in equity at December 31, 1995
reflects the net loss for the year then ended, including the asset
revaluation of Bolsa Chica. The decrease in equity at December 31, 1996
reflects the net loss for the year then ended, primarily due to interest
expense on subordinated debentures.
(d) The decrease in 1993 revenues is principally due to a decrease in land sales
and the absence of revenues from a hotel disposed of in 1992, partially
offset by revenues from the Eagle Crest Golf Course which opened in May
1993, and development fees generated by the business acquired from The Koll
Company in September 1993. The increase in 1995 revenues is due to an
increase in land sales and Wentworth By The Sea residential and marina
sales. The increase in 1996 revenues reflects the sale of residential lots
and the Eagle Crest Golf Course at Rancho San Pasqual, the formation of the
Fairbanks Highlands joint venture and the sale of resort/residential lots in
Michigan.
(e) Amounts have been reclassified to present Lake Superior and Deltec as
discontinued operations.
(f) The loss from continuing operations for the year ended December 31, 1993
reflects lower interest expense related to lower debt outstanding, as well
as nonrecurring income of $3 million received upon termination of a put
option agreement with Abex Inc. and a $2 million insurance reimbursement
related to costs incurred in 1992. Net income and net income per common
share for 1993 reflect gains on the dispositions of Lake Superior and Deltec
and an extraordinary gain on debt extinguishment. The loss from continuing
operations, net loss and loss per common share for the year ended December
31, 1995 reflect approximately $121.1 million of charges related to
write-downs of real estate properties, including Bolsa Chica. The loss from
continuing operations, net loss and loss per common share for the year ended
December 31, 1996 is primarily the result of noncash interest charged on the
subordinated debentures.
(g) In July 1992, approximately 19.7 million shares of Class A Common Stock and
42.5 million shares of Series A Preferred Stock were issued in connection
with the merger of a subsidiary of Henley Properties with and into the
Henley Group. The Preferred Stock is not included in the loss per share
calculations except for 1993 since the effect is antidilutive. In December
1993, the Company issued 3.4 million shares of its Common Stock in exchange
for all of Libra's approximately $10.6 million in aggregate principal amount
plus accrued interest of Subordinated Debentures issued by the Company. The
1993 earnings per share calculation includes these newly issued shares,
along with the Preferred Stock and stock options outstanding. In November
1994, the Company issued 2.0 million shares (along with warrants for the
purchase of an additional 2.0 million shares) of its Class A Common Stock in
connection with the acquisition of the Kathryn G. Thompson Company. The
1994, 1995 and 1996 amounts reflect conversion of 1.2 million, an additional
1.0 million and an additional 1.4 million shares, respectively of Preferred
Stock to Class A Common Stock.
(h) The Pro Forma--Exchange Offers amounts reflect December 31, 1996 historical
amounts, giving effect to (i) the February 14, 1997 sale of the Bolsa Chica
lowlands, (ii) the issuance of Common Stock to holders of Senior
Subordinated and Subordinated Debentures pursuant to the Exchange Offers
(assuming only the minimum 90% are tendered), including the resulting
extraordinary gain on extinguishment of debt of approximately $57.7 million,
net of income taxes (See "Historic and Unaudited Pro Forma Consolidated
Financial Statements--The Exchange Offers") and (iii) the Capital Stock
Combination and Reverse Stock Split described in this Prospectus.
19
<PAGE>
(i) The Pro-Forma--The Prepackaged Plan amounts reflect December 31, 1996
historical amounts, giving effect to (i) the February 1997 sale of the Bolsa
Chica lowlands, (ii) the issuance of Common Stock to holders of Senior
Debentures and Subordinated Debentures pursuant to the Prepackaged Plan,
including the resulting extraordinary gain on extinguishment of debt of
approximately $83.3 million and the write-down of Bolsa Chica to fair value
under Fresh Start Accounting (see "Historic and Unaudited Pro Forma
Consolidated Financial Statements--The Prepackaged Plan"), and (iii) the
Capital Stock Combination and Reverse Stock Split described in this
Prospectus.
MARKET PRICES OF THE COMPANY'S COMMON STOCK AND DIVIDENDS PAID
The following tables set forth information with respect to bid quotations
for the Class A Common Stock of the Company for the periods indicated as
reported by NASDAQ. These quotations are interdealer prices without retail
markup, markdown or commission and may not necessarily represent actual
transactions.
<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
1997
First Quarter................................................................ $ .188 $ .125
1996
First Quarter................................................................ $ .531 $ .250
Second Quarter............................................................... .313 .156
Third Quarter................................................................ .250 .156
Fourth Quarter............................................................... .250 .125
1995
First Quarter................................................................ $ .500 $ .344
Second Quarter............................................................... .469 .313
Third Quarter................................................................ .594 .344
Fourth Quarter............................................................... .469 .250
1994
First Quarter................................................................ $ .531 $ .250
Second Quarter............................................................... .406 .125
Third Quarter................................................................ .344 .188
Fourth Quarter............................................................... .625 .281
</TABLE>
The number of holders of record of the Company's Class A Common Stock as of
December 31, 1996 was approximately 25,000. The Company has not paid any cash
dividends on its Class A Common Stock to date, nor does the Company currently
intend to pay regular cash dividends on the Class A Common Stock. Such dividend
policy is and will continue to be subject to prohibitions on the declaration or
payment of dividends contained in debt agreements of the Company.
COMPARATIVE HISTORICAL AND PRO FORMA PER SHARE DATA
<TABLE>
<CAPTION>
PRO FORMA
YEARS ENDED DECEMBER 31, --------------------------
----------------------------------------------------- EXCHANGE THE PRE-
1992 1993 1994 1995 1996 OFFERS PACKAGED PLAN
--------- --------- --------- --------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Book value per fully diluted share..... $ 1.73 $ 1.79 $ 1.42 $ .29 $ .01 $ 14.17 $ 10.44
Cash dividends per share............... -- -- -- -- -- -- --
Net income (loss) per share............ $ (1.32) $ .17 $ (.41) $ (2.48) $ (.60)
</TABLE>
See footnotes to "Selected Financial Data" on pages 18 and 19.
20
<PAGE>
RISK FACTORS
RETENTION OF OUTSTANDING DEBENTURES (UPON COMPLETION OF THE EXCHANGE OFFERS)
AND ACQUISITION OF THE COMMON STOCK (BY TENDERING IN THE EXCHANGE OFFERS OR
APPROVING THE CAPITAL STOCK COMBINATION) ARE SUBJECT TO A NUMBER OF MATERIAL
RISKS INCLUDING THOSE ENUMERATED BELOW, EACH OF WHICH SHOULD BE CAREFULLY
CONSIDERED BY HOLDERS OF THE OUTSTANDING DEBENTURES, PREFERRED STOCK AND CLASS A
COMMON STOCK. HOLDERS OF OUTSTANDING DEBENTURES AND HOLDERS OF PREFERRED STOCK
AND CLASS A COMMON STOCK SHOULD CAREFULLY CONSIDER, AMONG OTHER MATTERS
DISCUSSED IN THIS PROSPECTUS, THE FOLLOWING INFORMATION AND CONSIDERATIONS PRIOR
TO DETERMINING WHETHER TO TENDER OUTSTANDING DEBENTURES, GRANT CONSENTS AND/OR
APPROVE THE PREPACKAGED PLAN AND/OR APPROVE THE CAPITAL STOCK COMBINATION. IN
ADDITION, HOLDERS OF IMPAIRED CLAIMS AND INTERESTS SHOULD CAREFULLY CONSIDER,
AMONG OTHER MATTERS DISCUSSED IN THIS PROSPECTUS, THE FOLLOWING INFORMATION AND
CONSIDERATIONS PRIOR TO VOTING ON THE PREPACKAGED PLAN, AND HOLDERS OF THE
COMPANY'S VOTING SECURITIES SHOULD ALSO CAREFULLY CONSIDER, AMONG OTHER MATTERS
DISCUSSED IN THIS PROSPECTUS, SUCH CONSIDERATIONS PRIOR TO VOTING ON THE
PREPACKAGED PLAN, VOTING AT THE ANNUAL MEETING PROPOSALS OR GRANTING A PROXY
WITH RESPECT THERETO.
RISK FACTORS APPLICABLE TO HOLDERS OF OUTSTANDING DEBENTURES, PREFERRED STOCK
AND/OR COMMON STOCK.
FINANCIAL CONDITION OF THE COMPANY. As described below under the headings
"The Company Recapitalization--Background of the Recapitalization--Purposes and
Certain Results of the Recapitalization," the Company's capital structure is
currently highly leveraged primarily due to the $205.7 million aggregate
outstanding principal amounts of the Outstanding Debentures as of March 15,
1997. If the Outstanding Debentures remain outstanding until their respective
March 15, 2002 maturity dates, the Company will incur approximately $162.8
million in additional debt with respect to the Outstanding Debentures, resulting
in approximately $368.5 million in outstanding principal amount at maturity.
Given this highly leveraged capital structure, the Company believes it may not
be able to obtain financing on favorable terms, which financing is necessary for
the Company to maximize the realization of asset values and to grow its
business, including, but not limited to, the commercial real estate development
business and the development of its Bolsa Chica project. Such new financing is
currently expected not to exceed $30 million (exclusive of Project Debt). While
the Company believes the Recapitalization will allow the Company to obtain the
necessary financing on more favorable terms, the Company does not currently have
any commitments to provide such financing in the event the Recapitalization is
effected. The Company has commenced discussions with several commercial banks
who have expressed an interest in providing such financing subject to completion
of the Recapitalization and certain other conditions. However, there can be no
assurance that such financing will be available to the Company.
The Company reported losses of $18 million, $116.9 million and $28.9 million
during the years ended December 31, 1994, 1995 and 1996, respectively, primarily
reflecting non-cash interest on the Outstanding Debentures in all three years,
along with writedowns of real estate properties of $121.1 million in 1995. As a
result of such losses, the Company's stockholders' equity was reduced to $1.1
million as of December 31, 1996. Upon completion of the sale of the Bolsa Chica
lowlands in February of 1997, the Company's working capital approximated $15
million as of March 31, 1997.
FAILURE TO RECEIVE 90% REQUISITE EXCHANGE ACCEPTANCES; FAILURE TO CONSUMMATE
THE RECAPITALIZATION. In order to effect the Recapitalization, other than
through the filing and confirmation of the Prepackaged Plan, it is necessary for
the Company to receive the 90% Requisite Exchange Acceptances and the Requisite
Consents. These percentages may not be attained and, therefore, the Company may
not be able to effectuate the Recapitalization. The Company's financial advisors
have assisted the Company in preparing an analysis which indicates that the
Company would need to earn a compounded return of greater than 30% per annum on
the free cashflow generated by the Company's assets between 1997 and 2002 in
order to fully satisfy the face amount of the Senior Debentures and Subordinated
Debentures at maturity in 2002. As an alternative to waiting until the 2002
maturity, the Company has engaged in extensive negotiations with representatives
of the members of the Debenture Holders' Committee and its advisors in order to
effect a current exchange of the Outstanding Debentures for Common Stock. The
representatives of the members of the Debenture Holders' Committee retained
Rothschild and WGM as
21
<PAGE>
its financial and legal advisors, respectively. The interest of the holders of
Preferred Stock and Class A Common Stock were represented by HLHZ, MWE and
management of the Company. Inherent conflicts of interest exist between the
holders of the Outstanding Debentures and the holders of the Class A Common
Stock and Preferred Stock. Management of the Company holds stock and options in
substantially equal amounts of the Class A Common Stock and Preferred Stock, and
believes that its interests are wholly neutral as between the two classes of
stock; however, such interests are clearly aligned towards maximizing the
returns for the holders of its equity as opposed to its debt securities. Based
on the current valuation prepared by the Company with the assistance of HLHZ
which relied on Company projections, holders of Senior Debentures would receive
Common Stock worth approximately $0.532 per $1.00 of principal amount
outstanding on March 15, 1997 and holders of Subordinated Debentures would
receive Common Stock worth approximately $0.266 per $1.00 of principal amount
outstanding on March 15, 1997 if they accept the Exchange Offers. If the 90%
Requisite Exchange Acceptance is not obtained, the Company will consider
effecting the Recapitalization by seeking a Court order confirming the
Prepackaged Plan. Under such circumstances, if the holders of Preferred Stock as
a class, holders of Class A Common Stock as a class or holders of Subordinated
Debentures as a class, as the case may be, have not approved the Prepackaged
Plan, then under the terms of the Prepackaged Plan, such respective holders of
the disapproving class will have such respective claims or interests cancelled
and they will receive no property or distributions in exchange. See "Risk
Factors--Additional Risks to Holders of Outstanding Debentures--Possible Effect
of Non-Acceptance of Recapitalization on Holders of Subordinated Debentures,"
"Risk Factors--Additional Risk Factors Applicable to Holders of Preferred and
Class A Common Stock-- Possible Effect of Non-Approval of Capital Stock
Combination, Reverse Stock Split and the Prepackaged Plan by Holders of
Preferred Stock and Class A Common Stock," "Risk Factors--Considerations
Relating to Filing a Case--Non-Acceptance of the Prepackaged Plan" and "The
Prepackaged Plan--Confirmation of the Prepackaged Plan Without Acceptance by All
Voting Classes." Representatives of the members of the Debenture Holders'
Committee, whose members hold approximately 70% of the Outstanding Debentures
and approximately 33% and 13%, respectively, of the Preferred Stock and Class A
Common Stock, have indicated that the members intend to support the Prepackaged
Plan. In addition, the holder of 30.5% and 11.5%, respectively, of the Preferred
Stock and Class A Common Stock has indicated to the Company that it intends to
approve the Prepackaged Plan. If the Recapitalization is not consummated, the
Company is also likely to incur substantially higher costs and less favorable
terms with respect to the necessary financing described above. The Company will
also continue to experience the negative effect on its development business
caused by the continued reporting of operating losses which are primarily a
result of interest expense associated with the Outstanding Debentures, and
continue to experience problems in attracting and retaining key commercial and
residential development team personnel due to concerns as to the ability of the
Company to compete for new business. Accordingly, the Company may pursue
alternative restructuring transactions which may be less favorable to the
Company's current securityholders than the Recapitalization.
POSSIBLE EFFECT OF NON-APPROVAL OF CAPITAL STOCK COMBINATION, REVERSE STOCK
SPLIT AND THE PREPACKAGED PLAN BY HOLDERS OF PREFERRED STOCK AND CLASS A COMMON
STOCK. Under certain circumstances the holders of shares of Preferred Stock and
Class A Common Stock could have their shares cancelled in the Recapitalization
and receive no consideration. This could occur if the holders of Preferred Stock
and Class A Common Stock voting as separate classes do not approve the Capital
Stock Combination and Reverse Stock Split or the 90% Requisite Exchange
Acceptances are not received and the holders of shares of Preferred Stock and
Class A Common Stock do not accept the Prepackaged Plan. Under such
circumstances, if the holders of Class 5 Claims have accepted the Prepackaged
Plan the Company intends to proceed with filing its Chapter 11 Case and to seek
Bankruptcy Court confirmation of the Prepackaged Plan. If the holders of
Preferred Stock or Class A Common Stock have not approved the Prepackaged Plan,
under such circumstances, then the Prepackaged Plan would be deemed
automatically amended to provide that the distributions which would otherwise
have been made to holders of Preferred Stock and Class A Common Stock would be
made to holders of Allowed Claims in Class 5 if the Prepackaged Plan is
confirmed by the Bankruptcy Court. Moreover, the holders of Preferred Stock and
Class A Common Stock
22
<PAGE>
would receive no distributions nor retain any property under the Prepackaged
Plan. The Bankruptcy Code provides a procedure by which the Prepackaged Plan may
be confirmed despite the non-acceptance of the Prepackaged Plan by the holders
of the Preferred Stock and Class A Common Stock. The procedure is known as a
"cram down." The Company believes that the Prepackaged Plan does "not
discriminate unfairly" and is "fair and equitable" with respect to the rejecting
classes of holders of Preferred Stock and Class A Common Stock. See "Risk
Factors--Confirmation of the Prepackaged Plan Without Acceptance by All Voting
Classes."
OWNERSHIP INTERESTS, ABILITY TO ELECT DIRECTORS, AND BENEFITS TO CERTAIN
PARTIES. After the various issuances of Common Stock as part of the
Recapitalization, assuming a 100% acceptance of the Exchange Offers, the current
holders of Outstanding Debentures, will have aggregate ownership of
approximately 90% of the Common Stock and voting power of the Company. In
addition, current holders of Preferred Stock will have ownership of
approximately 5.8% of the Common Stock and of the then combined voting power of
the Company, and the current holders of Class A Common Stock will own the
remaining 4.2% of the Common Stock and voting power. Because the Company's
Restated Certificate does not provide for cumulative voting in the election of
directors, the current holders of Outstanding Debentures will be in a position,
if acting together, effectively to elect all of the Company's directors. See
"The Company Recapitalization--Purposes and Certain Results of
Recapitalization."
DILUTION; SHARES ELIGIBLE FOR FUTURE SALES. The issuance of the Common
Stock as part of the Recapitalization will result in significant dilution of the
beneficial ownership interests and voting power of the current holders of the
Company's Preferred and Class A Common Stock. As of the date of this Prospectus,
approximately 38.9 million shares of the Company's Preferred Stock and 48.9
million shares of the Company's Class A Common Stock were outstanding (excluding
1.4 million shares held in treasury). A substantial number of shares of Common
Stock could potentially be offered for sale in the public market in the future
(the "Future Shares"). The Future Shares consist of shares of Common Stock that
may be offered for sale pursuant to (i) registration statements prepared by the
Company, (ii) Rule 144 under the Securities Act or other applicable exemptions,
(iii) shares subject to issuance upon the exercise of stock options, and (iv)
the Warrant Shares subject to issuance and resale by the financial advisors. See
"Shares Subject to Future Sale by Financial Advisors." There is no way of
knowing with any certainty what number, if any, of Future Shares will be
actually offered for sale in the public market in the future. Sales of
substantial amounts of Future Shares in the public market, and the perception by
investors, investment professionals and others of the possibility that such
sales may occur, could adversely affect the market price of the Common Stock (as
well as the ability of the Company to raise capital in the public markets at
times and at prices favorable to the Company). There is a risk that if
substantial amounts of Future Shares are offered for sale and there is an
insufficient number of buyers willing to purchase such shares, the market price
of the Common Stock may decrease.
CERTAIN COMPETITION AGREEMENTS. The Company and certain of its subsidiaries
have amended certain agreements with Donald M. Koll, the Chairman of the Board
and Chief Executive Officer of the Company, which amendments modify an existing
license to use the "Koll" name and certain non-compete provisions upon the
occurrence of certain conditions following the Recapitalization. Pursuant to
such amendments, upon consummation of the Recapitalization and the occurrence of
certain specified events thereafter, Mr. Koll would be released from currently
existing covenants not to compete with the Company and its subsidiaries and upon
such release, the Company and its subsidiaries would be obligated to change
their respective names to delete all usage of the name "Koll." See "Certain
Relationships and Related Transactions."
OPERATIONS AFTER THE RECAPITALIZATION. While the proposed Recapitalization
is expected to reduce financial leverage, there can be no assurance that
liquidity problems will not occur sometime in the future. In addition, no
assurances can be given that operations of the Company following consummation of
the Recapitalization necessarily will be profitable. See "Risk Factors--Real
Estate Industry and Development Activities." In addition, the market prices of
the Company's securities in the future may be affected by
23
<PAGE>
factors not within the control of the Company, including, without limitation,
public statements from securities analysts and others concerning the Company's
operations and prospects.
USE OF DEBT FINANCING. The Company is currently subject to the risks
normally associated with debt financing, including the risk that the Company
will have insufficient cash available to meet required payments of principal and
interest. If the Recapitalization is effected, these risks will remain, although
to a significantly lesser extent, because the Company intends to pursue
additional debt financing, currently expected not to exceed $30 million
(exclusive of Project Debt), in order to obtain funds necessary to develop Bolsa
Chica and continue its business. As a result of the Company's use of
indebtedness and leverage, including the potential use of debt to finance
development and acquisitions and the use of variable rate financing, the
cumulative effect of the risks associated with borrowing is greater than that of
each of these risks considered individually. In addition, if properties are
mortgaged to secure payment of indebtedness and the Company is unable to meet
mortgage payments or if certain other events of default occur, such properties
could be foreclosed upon by, or otherwise transferred to, the mortgagee with a
consequent loss of income and asset value to the Company.
RISK OF RISING INTEREST RATES. The Company has incurred and expects in the
future to incur variable rate indebtedness in connection with its operations. An
increase in interest rates would increase the interest on variable rate
indebtedness, and could have an adverse effect on net income and funds available
for distribution to stockholders. Additionally, rising interest rates could have
an adverse impact on the trading price of the Company's outstanding capital
stock as potential purchasers may demand a higher annual yield from an
investment in response to such higher rates.
REAL ESTATE INDUSTRY AND DEVELOPMENT ACTIVITIES. While the Company believes
that its properties have significant potential future value, its business is
subject to a number of factors which could adversely affect such values. These
factors include the availability of adequate financing on commercially
reasonable terms and cash flow from operations, delays in obtaining zoning and
regulatory approvals, and litigation or appeals of regulatory approvals. In
addition, future values may be adversely affected by heightened environmental
scrutiny, limitations on the availability of water in Southern California,
increases in property taxes, increases in the costs of labor and materials and
other development risks, changes in general economic conditions, including
higher mortgage interest rates, and other real estate risks such as the demand
for residential lots and housing generally and the supply of competitive
products. Real estate properties and real estate joint venture interests do not
constitute liquid assets and, at any given time, it may be difficult to sell a
particular property or interest for an appropriate price. The depressed
condition of the California's economy in the first half of this decade has had a
negative impact on the real estate market generally, on the availability of
potential purchasers for such properties and upon the availability of sources of
financing for carrying and developing such properties. This economic trend and
the substantial costs and delays in developing the Company's Bolsa Chica project
contributed significantly to the Company's need to currently effect the
Recapitalization. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations." There can be no assurance that future
negative economic trends or the costs or delays of future development projects
will not cause the Company to again become substantially overleveraged following
the Recapitalization.
REGULATORY APPROVAL. Before the Company can develop a property, it must
obtain a variety of discretionary approvals from local and state governments, as
well as the federal government in certain circumstances, with respect to such
matters as zoning, grading, architecture and environmental matters. The approval
process is often a lengthy and complex procedure requiring, among other things,
the submission of development plans and reports and presentations at public
hearings. Because of the provisional nature of these approvals and the concerns
of various environmental and public interest groups, the approval process can be
delayed by litigation and appeals challenging development rights previously
granted to the Company. Accordingly, the ability of the Company to develop
properties and realize income from such projects could be delayed or prevented
due to difficulties in obtaining necessary governmental approvals. After the
Recapitalization, including if implemented through the Prepackaged
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Plan, the Company will continue to be subject to such appeals processes,
including the litigation challenging the approved development plans with respect
to its principal asset, the Bolsa Chica property, a large undeveloped coastal
property approximately 35 miles south of downtown Los Angeles. See "Business and
Properties of the Company--Legal Proceedings."
ENVIRONMENTAL MATTERS. The Company's business activities and properties are
subject to a variety of environmental regulations under federal, state and local
laws. While the Company believes that it conducts its businesses in an
environmentally acceptable manner and that it is in compliance with applicable
laws and regulations, claims against the Company have been made in the past and
may be made against the Company in the future seeking to impose liability for
alleged environmental violations. Adverse judgements with respect to
environmental claims could adversely affect the Company's cash flow and, in
turn, its business operations.
HOLDING COMPANY STRUCTURE. The Company is a holding company. Claims of
creditors, including trade creditors, of the subsidiaries will generally have
priority as to the assets of such subsidiaries over the claims of the Company
and its security holders. In addition, substantially all of the Company's
operating income and cash flow will be generated by its subsidiaries. In order
to make cash payments on its direct liabilities the Company will have to rely on
dividends or loans from its subsidiaries to generate the funds for such
payments. The ability of such subsidiaries to pay such dividends is subject to
applicable state laws and may be subject to senior debt or Project Debt
contractual restrictions.
ABSENCE OF DIVIDENDS. The Company does not anticipate paying cash dividends
to its stockholders after the Recapitalization or in the foreseeable future. To
the extent that contractual provisions permit the payment of dividends at some
future date, the Company's dividend policy will be reviewed from time to time by
the Board in light of the Company's earnings and financial position and such
other business considerations as the Board considers relevant. In this regard,
because the Company is a holding company, it will have to rely on dividends from
its subsidiaries to generate the funds for any payment of dividends on the
capital stock of the Company. The ability of such subsidiaries to pay dividends
is subject to applicable state laws and may be subject to contractual
restrictions.
CERTAIN ANTI-TAKEOVER EFFECTS. Certain provisions of the Restated
Certificate and the Bylaws will not continue if the Annual Meeting Proposals
with respect thereto are approved or the Prepackaged Plan is effected. These
provisions include classification of the Board, limitations on stockholders
ability to call special meetings, prohibition on stockholder action by written
consent and requirements that the affirmative vote of at least 80% of the
Company's outstanding voting stock approve certain actions, including an
increase in the size of the Board, the removal of directors for cause or the
amendment of any such anti-takeover provisions. These provisions were intended
to provide stability and continuity for the Company and if removed, may have the
effect of increasing the risk of an acquisition of control of the Company in a
transaction not approved by the Board. However, these risks may be decreased by
the capital structure resulting from the Recapitalization due to the resulting
deleveraging and greater concentration of ownership.
POTENTIAL NASDAQ DELISTING. The Class A Common Stock and Preferred Stock
are currently listed on NASDAQ-NM. The Company has been notified by The Nasdaq
Stock Market Inc. that the Class A Common Stock and the Preferred Stock are
subject to delisting from the NASDAQ-NM as a result of the Company's net
tangible assets falling below $4 million as of December 31, 1996 upon reporting
a fourth quarter 1996 net loss of $6.7 million, which was primarily due to
noncash (pay-in-kind) interest on the Outstanding Debentures. However, the
Company would meet this continued listing criteria upon a successful completion
of the Recapitalization. Therefore, the Company has appealed the Nasdaq
determination. Until the Company's appeal is heard on April 23, 1997 and a final
decision is reached, the Company's securities will continue to be listed on the
NASDAQ-NM. There can be no assurance that Company's appeal will be successful in
obtaining continued listing on the NASDAQ-NM. If Nasdaq does not continue to
list the Company's securities during the pendency of the Recapitalization
process, the Company intends to reapply for listing on the NASDAQ-NM to become
effective following completion of
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the Recapitalization. In the interim, the Class A Common Stock and the Preferred
Stock would continue to be traded on the Nasdaq OTC Bulletin Board or on the
National Quotation Bureau's Pink Sheets, however, delisting from the NASDAQ-NM
could reduce the liquidity of and the market for the Company's common and
preferred stock. Nasdaq's action would not have any impact on the continued
operations or financial condition of the Company or on its ability to continue
to pursue the Recapitalization.
TAX CONSEQUENCES OF THE RECAPITALIZATION. The federal income tax
consequences to the Company and holders of its securities as a result of the
transactions occurring as part of and in connection with the Recapitalization
may be material. Although a securityholder generally will not recognize gain or
loss on its participation in the Recapitalization, a securityholder may
recognize ordinary income to the extent it receives Common Stock in exchange for
accrued interest or original issue discount. Although the Company intends to
take the position that the Common Stock will be allocated first to the stated
amount of the Outstanding Debentures, with only the excess over such principal
amount applied to accrued interest (or original issue discount), there can be no
assurance that the Internal Revenue Service ("IRS") will respect this
allocation. See "Material Federal Income Tax Consequences."
FEDERAL INCOME TAX AUDIT OF THE COMPANY. The IRS has completed its
examinations of the tax returns of the Company and its consolidated
subsidiaries, including formerly affiliated entities, for the years ended
December 31, 1989, 1990 and 1991. With respect to each examination, the IRS has
proposed material audit adjustments. The Company disagrees with the positions
taken by the IRS and has filed a protest with the IRS to vigorously contest the
proposed adjustments. After review of the IRS's proposed adjustments, the
Company estimates that, if upheld, the adjustments could result in Federal tax
liability, before interest, of approximately $17 million (net of amounts which
may be payable by former affiliates pursuant to tax sharing agreements). The IRS
proposed adjustments, if upheld, could also result in a disallowance of up to
$147 million of available net operating loss carryforwards, of which none are
recognized, after consideration of the valuation allowance, as of December 31,
1996. The Company has not determined the extent of potential accompanying state
tax liability adjustments should the proposed IRS adjustments be upheld. The
Company's protest was filed in August 1995 and is still being considered by the
IRS Appeals Division. Management currently believes that the IRS's positions
will not ultimately result in any material adjustments to the Company's
financial statements. The Company is prepared to pursue all available
administrative and judicial appeal procedures with regard to this matter and the
Company is advised that its dispute with the IRS could take up to five years to
resolve.
ADDITIONAL RISK FACTORS APPLICABLE TO HOLDERS OF OUTSTANDING DEBENTURES
CERTAIN CONSEQUENCES TO NON-TENDERING HOLDERS OF OUTSTANDING DEBENTURES. If
the Recapitalization is consummated without the Prepackaged Plan, any holders of
remaining Outstanding Debentures who do not accept the Exchange Offers may lose
the benefit of certain restrictive provisions in the Indentures that are
intended to provide protection to the holders thereof. See "Proposed Amendments
to the Indentures."If the Proposed Amendments are approved and these restrictive
covenants are eliminated, the Company and its subsidiaries will be permitted to
make the payments or distributions and take the actions with respect to the
Company's outstanding capital stock and subordinated debt obligations (as
described above in the restrictive covenants) prior to repayment of the
Outstanding Debentures, regardless of the total amount of any such payments or
distributions. Accordingly, elimination of such restrictive covenants could lead
to a reduction in the amount of cash that the Company has available to make any
required payments on the Outstanding Debentures and could increase the risk of a
Company default on the payment of the Outstanding Debentures. The Company would
also no longer be obligated to set forth the terms of all transactions with
affiliates of the Company in writing and would no longer be subject to the
requirements set forth above that all such transactions be arm's-length
transactions. Accordingly, elimination of these restrictive covenants will
increase the risk to non-tendering holders of Outstanding Debentures that the
Company could engage in non-arm's-length transactions with its affiliates, which
transactions could reduce the financial strength of the Company and increase the
risk of a default by the Company on the Outstanding Debentures. These risks also
will only apply to holders of Outstanding Debentures which do not tender all of
their Outstanding Debentures in the Exchange Offers. In addition, because the
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number of holders of Outstanding Debentures and the outstanding principal amount
of the Outstanding Debentures after the consummation of the Recapitalization
will be substantially reduced, the trading market will likely become even more
limited. These events are likely to have a material adverse effect on the
liquidity and market price of any remaining Outstanding Debentures following
consummation of the Recapitalization.
EFFECT OF DELAY IN CONSUMMATION OF THE EXCHANGE OFFERS ON OUTSTANDING
DEBENTURES. The Company will execute amended Indentures (the "Amended
Indentures") effectuating the Proposed Amendments after receipt of the Requisite
Consents from the Outstanding Debentures. Although the Amended Indentures will
not become operative until consummation of the Exchange Offers, after execution
of the Amended Indentures, the Requisite Consents will be irrevocable. While the
period of time between execution of the Amended Indentures and the consummation
of all of the Exchange Offers may be short, it is possible that such time period
could be substantial due to the conditions that must be satisfied prior to
consummation of the Exchange Offers. See "The Exchange Offers--Conditions to the
Exchange Offers."
POSSIBLE EFFECT OF NON-ACCEPTANCES OF RECAPITALIZATION ON HOLDERS OF
SUBORDINATED DEBENTURES. Under certain circumstances the holders of Subordinated
Debentures could have their interests cancelled in the Recapitalization and
receive no consideration. This could occur if insufficient Outstanding
Debentures are tendered to the Company pursuant to the Exchange Offers such that
the 90% Requisite Acceptances are not received by the Company. As a result, the
Company could elect to proceed with a Case and seek judicial confirmation of the
Prepackaged Plan. Under such circumstances, if the holders of Subordinated
Debentures have not approved the Prepackaged Plan as a class, the Prepackaged
Plan provides that the Subordinated Debentures will be cancelled and the holders
of Subordinated Debentures will receive no property or distributions in
exchange. See "Risk Factors--Considerations Relating to the Filing of a Case,"
and "The Prepackaged Plan--Confirmation of the Prepackaged Plan Without
Acceptance by All Voting Classes."
CONSIDERATIONS RELATING TO THE FILING OF A CHAPTER 11 CASE.
CONSIDERATIONS RELATING TO ANY FUTURE BANKRUPTCY OF THE
COMPANY. Consummation of the Recapitalization through the Prepackaged Plan may
have significant consequences in the event of a subsequent bankruptcy for
holders of Outstanding Debentures and liquidated non-Contingent Claims. Since
holders of Outstanding Debentures and liquidated non-Contingent Claims will
receive Common Stock under the Prepackaged Plan, such holders will have only an
equity interest in the Company. Consequently, in any subsequent bankruptcy case,
such holders' Interests would rank in priority below all holders of Claims.
EFFECT ON OPERATIONS. The Company's operations are conducted through its
subsidiaries. Since the subsidiaries are not parties to the Prepackaged Plan and
will not file Chapter 11 Cases in connection with the Prepackaged Plan, the
Company believes that the Prepackaged Plan Solicitation and the subsequent
commencement of a Chapter 11 Case will not materially adversely affect the
subsidiaries' relationships with customers, employees and suppliers, given that
the subsidiaries can demonstrate sufficient liquidity to continue to operate
their businesses and provided that the Company can demonstrate a likelihood of
success for the Recapitalization in a reasonably short time frame. The Company
believes that Prepackaged Plan Solicitation offers the most expeditious means to
complete the Recapitalization.
It is possible that, despite the belief and intent of the Company, the
Prepackaged Plan Solicitation or any subsequent commencement of the Chapter 11
Case could adversely affect the relationships between the subsidiaries and their
customers, employees and suppliers. There is a risk that, due to uncertainty
about the Company's future, (i) employees may be distracted from performance of
their duties or more easily attracted to competitors or other career
opportunities; (ii) customers may seek alternative sources of supply or require
financial assurances of future performance; and (iii) suppliers may restrict
ordinary credit terms and require financial assurances of performance.
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
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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 such
acceptance was made in accordance with applicable law governing the adequacy of
disclosure in connection with such solicitation, or, if such law does not apply,
such acceptance was solicited after disclosure of "adequate information" as
defined in section 1125(a)(1) of the Bankruptcy Code. This Prospectus is being
presented to all holders of Impaired Claims against and Interests in the
Company, except for the holders of Affiliates' Claims in order to satisfy the
requirements of section 1126(b) of the Bankruptcy Code.
Even if the Requisite Prepackaged Plan Acceptances are received from each
Impaired Class, the Bankruptcy Court may find that the holders of Claims and
Interests in Impaired Classes have not validly accepted the Prepackaged Plan if
the Bankruptcy Court determines that the Prepackaged Plan Solicitation did not
comply with the requirements of section 1126(b) of the Bankruptcy Code and the
applicable Rules. In such an event, the Company may seek to resolicit votes on
the Prepackaged Plan, but confirmation of the Prepackaged Plan could be delayed
and possibly jeopardized. The Company believes (i) that the Prepackaged Plan
Solicitation is being conducted in accordance with applicable law and section
1125(a)(1) of the Bankruptcy Code and therefore complies with the requirements
of section 1126(b) of the Bankruptcy Code and applicable Bankruptcy Rules, and
(ii) that each duly executed Ballot and Master Ballot will be in compliance with
applicable provisions of the Bankruptcy Code and Bankruptcy Rules. However,
there can be no assurance that the Bankruptcy Court will reach the same
conclusions. See "The Prepackaged Plan--Confirmation of the Prepackaged Plan."
CLASSIFICATION IN TREATMENT OF CLAIMS AND INTERESTS. Section 1122 of the
Bankruptcy Code requires that the Prepackaged Plan classify the Claims of the
Company's Creditors and the Interests of its Equity Holders. The Code also
provides that, except for certain Claims classified for administrative
convenience, the Prepackaged Plan may place a Claim or Interest of a Creditor or
Equity Holder in a particular Class only if such Claim or Interest is
substantially similar to the other Claims or Interests of such class. The
Company believes that all Claims and Interests have been appropriately
classified in the Prepackaged Plan. The Company believes separate classification
of the unsecured claims of holders of Unliquidated or Contingent Claims, General
Unsecured Claims and Subordinated Debentures is appropriate. The separate
classification for Unliquidated or Contingent Claims is necessary because of the
nature of such claims. Specifically, such classification will allow for the
Recapitalization of the Company in the quickest and least costly manner.
Moreover, the separate classification recognizes the prospect of contractual
subordination to which the holders of Senior Debentures and Subordinated
Debentures are subject. To the extent that the Bankruptcy Court finds that a
different classification is required for the Prepackaged Plan to be confirmed,
the Company presently anticipates that it would seek (i) to modify the
Prepackaged Plan to provide for whatever reasonable classification might be
required for confirmation, and (ii) to use the acceptances received from any
Creditor or Equity Holder pursuant to the solicitation for the purposes of
obtaining the approval of the Class or Classes for which such Creditor or Equity
Holder ultimately is deemed to be a member. Any such reclassification of
Creditors or Equity Holders, although subject to notice and hearing requirements
in the Bankruptcy Code, could adversely affect the Class in which such Creditor
or Equity Holder was initially a member, or any other Class under the
Prepackaged Plan, by changing the composition of such Class and a vote required
for approval of the Prepackaged Plan. There can be no assurance that the
Bankruptcy Court, after finding that a classification was inappropriate and in
requiring a reclassification, would approve the Prepackaged Plan based on such
reclassification. Except to the extent that modification of classification in
the Prepackaged Plan adversely affects the treatment of a Creditor or Equity
Holder and requires resolicitation, the Company will, in accordance with the
Bankruptcy Code and the Rules, seek a determination by the Bankruptcy Court that
acceptance by any Creditor or Equity Holder of the Prepackaged Plan pursuant to
the solicitation will constitute a consent to the Prepackaged Plans' treatment
of such Creditor or Equity Holder regardless of the Class as to which such
Creditor or Equity Holder is ultimately deemed to be a member.
The Bankruptcy Code also requires that the Prepackaged Plan provide the same
treatment for each claim or interest of a particular class unless the holder of
the particular claim or interest agrees to a less
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favorable treatment of its claim or interest. The Company believes it has
complied with requirements of equal treatment. To the extent that the Bankruptcy
Court finds that the Prepackaged Plan does not satisfy such requirements the
Bankruptcy Court could deny confirmation of the Prepackaged Plan if the
creditors or equity holders affected do not otherwise consent to the treatment
afforded to them under the Prepackaged Plan.
Issues or disputes relating to classification and/or treatment could result
in a delay in the confirmation and consummation of the Prepackaged Plan and
could increase the risk that the Prepackaged Plan will not be consummated.
RISK OF NON-CONFIRMATION OF THE PREPACKAGED PLAN. 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 under the plan, holders of claims and equity interests within
impaired classes receive or retain 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 the Bankruptcy Code. See
"The Prepackaged Plan--Confirmation of the Prepackaged Plan."
There can be no assurance that the Bankruptcy Court will conclude that these
tests and 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
votes on the Prepackaged Plan. The Company believes that if the Prepackaged Plan
is confirmed, it would not be followed by an immediate need for further
financial reorganization and that holders of Claims and Interests in any
Impaired Class will receive or retain value that is significantly greater than
the value such holders would receive or retain if the Company were liquidated
under the Bankruptcy Code. See "The Prepackaged Plan--Confirmation of the
Prepackaged Plan." However, there can be no assurance that the Court will reach
the same conclusions.
Confirmation and effectiveness of the Prepackaged Plan is also subject to
certain conditions being satisfied on or prior to the Effective Date. No
assurances can be given that these conditions will be satisfied or waived or
that any necessary consent, including the Requisite Prepackaged Plan Acceptances
from each Impaired Class, will be obtained.
NONACCEPTANCE OF THE PREPACKAGED PLAN--CONFIRMATION UNDER SECTION 1129(B) OF
THE BANKRUPTCY CODE. In the event any Impaired Class of Claims or Interests
rejects the Prepackaged Plan, the Bankruptcy Court, pursuant to section 1129(b)
of the Bankruptcy Code, may nevertheless confirm the Prepackaged Plan at the
Company's request if at least one Impaired Class of Claims or Interests has
accepted the Prepackaged Plan (with such acceptance being determined without
including the acceptance of any "insider" in such Class) and, as to each
Impaired Class which has not accepted the Prepackaged Plan, the Bankruptcy Court
determines that the Prepackaged Plan "does not discriminate unfairly" and is
"fair and equitable" with respect to such Impaired Class. In the event Classes
6, 7 or 8 do not vote to accept the Prepackaged Plan, the Company intends (and
the Prepackaged Plan so provides) to seek confirmation of the Prepackaged Plan
under section 1129(b) provisions with respect to such rejecting Class or
Classes. Under such circumstances, the subordination provisions of the Senior
Debenture Indenture will be strictly construed and the holders of such rejecting
Class or Classes will retain no property nor receive any distributions under the
Prepackaged Plan. Any distributions otherwise due such rejecting Class or
Classes will be given to the holders of Class 5 Claims. See "The Prepackaged
Plan--Confirmation Without Acceptance of All Impaired Classes."
The Company believes that it will meet the requirements of section 1129(b)
of the Code with respect to the Prepackaged Plan; however, there can be no
assurance that the Court will reach the same conclusion.
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PROJECTIONS INHERENTLY UNCERTAIN. The "Projections of Certain Financial
Data of the Company" set forth on page 90 of this Prospectus (the
"Projections"), were developed by the Company and its financial advisors in
connection with the planning and development of the Recapitalization and the
development of the Prepackaged Plan and illustrate the estimated effects of the
Prepackaged Plan and certain related transactions on the results of operations
and financial position of the Company and its subsidiaries for the periods
indicated. The Projections are qualified by the introductory paragraphs thereto
and the accompanying assumptions and must be read in conjunction with such
introductory paragraphs and assumptions which constitute an integral part of the
Projections. The Projections assume that all aspects of the Prepackaged Plan
will be successfully implemented on the terms outlined in this Prospectus. The
Projections were not prepared with a view towards public disclosure or
compliance with the published guidelines of the American Institute of Certified
Public Accountants regarding financial projections, nor have they been presented
in lieu of pro forma historical financial information and, accordingly, are not
intended to comply with Rule 11-03 of Regulation S-X. Neither the independent
auditors for the Company nor any other independent auditors have examined,
reviewed, compiled or performed any procedures with respect to these projections
and, accordingly, do not express an opinion or any other form of assurance on
them and assume no responsibility for them. These Projections are based upon a
variety of assumptions and the Company's future operating results are subject to
and likely to be affected by a number of factors, including significant
economic, regulatory and competitive uncertainties and the availability of
financing, all which are beyond the control of the Company. There can be no
assurance that the Projections (which are only estimates) will be realized and
actual results may vary materially from those shown. Because the Projections are
subject to significant uncertainties and are based upon assumptions that may not
prove to be correct, holders of Impaired Claims and Interests are cautioned not
to place undue reliance on these Projections. The Projections should not be
relied on for any purpose other than in considering whether to vote to accept or
reject the Prepackaged Plan. See "Projections of Certain Financial Data of the
Company" and "The Prepackaged Plan--Feasibility" for certain additional
considerations regarding the Projections.
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THE COMPANY RECAPITALIZATION
BACKGROUND OF THE RECAPITALIZATION. The Company originally issued the
Outstanding Debentures in 1989 to its affiliate, The Henley Group, Inc. ("Henley
Group"). The Outstanding Debentures were then publicly distributed to Henley
Group stockholders in 1992 prior to a merger (the "Merger") by and among the
Company (then originally known as Henley Properties, Inc.), HP Merger Co. and
Henley Group pursuant to which Henley Group became a wholly owned subsidiary of
the Company. The Outstanding Debentures were distributed in 1992 in the
respective principal amounts of $127.52 million of Senior Debentures and $31.8
million of Subordinated Debentures. Interest on the Outstanding Debentures is
currently payable, and historically has been paid, "in kind" through the
issuance of additional Senior and Subordinated Debentures, respectively. As of
March 15, 1997, there was an aggregate of $205.7 million in principal amount of
the Outstanding Debentures of which amount $164.6 million and $41.1 million,
respectively, was attributable to the Senior Debentures and Subordinated
Debentures. If the Outstanding Debentures remain outstanding until their March
15, 2002 maturity date, the Company will incur approximately $162.8 million in
additional debt with respect to the Outstanding Debentures, resulting in
approximately $368.5 million in outstanding principal amount of the Outstanding
Debentures at maturity. Upon maturity, the Outstanding Debentures are payable in
shares of Common Stock, valued at the fair market value based on a 20-day
average closing price, provided that such price is not less than $0.50 per
share. The Company's financial advisors have assisted the Company in preparing
an analysis which indicates that the Company would need to earn a compounded
return of greater than 30% per annum on the free cashflow generated by the
Company's assets between 1997 and 2002 in order to fully pay the face amount of
the Senior Debentures and Subordinated Debentures at maturity in 2002. As an
alternative to waiting until the 2002 maturity date, the Company engaged in
extensive negotiations with representatives of the members of the Debenture
Holders' Committee in order to develop a proposal to exchange the Outstanding
Debentures for Common Stock. Based on the current valuation prepared by the
Company with the assistance of HLHZ, holders of Senior Debentures would receive
Common Stock worth approximately $0.532 per $1.00 of principal amount
outstanding on March 15, 1997 and holders of Subordinated Debentures would
receive Common Stock worth approximately $0.266 per $1.00 of principal amount
outstanding on March 15, 1997 if they accept the Exchange Offers. If the 90%
Requisite Exchange Acceptance is not obtained, the Company intends to effect the
Recapitalization by seeking a Court order confirming the Prepackaged Plan.
Representatives of the members of the Debenture Holders' Committee, whose
members hold approximately 70% of the Outstanding Debentures, have indicated to
the Company that they intend to support the Exchange Offers and the Prepackaged
Plan if the 90% Requisite Exchange Acceptance are not obtained.
As discussed below, the Outstanding Debentures have created a highly
leveraged capital structure which is restricting the Company's ability to obtain
financing on favorable terms, which financing is necessary for the Company to
maximize the growth of its business, including, but not limited to, its
commercial and residential real estate development business and development of
its Bolsa Chica project. Such new financing currently is not expected to exceed
$30 million (exclusive of Project Debt). In addition, concern about the
Company's financial strength has adversely affected the Company's commercial
development business opportunities. Of particular concern to the Company's
current and prospective client base, has been the consistent reporting of
quarterly losses and the impending negative net worth which are primarily a
result of the "in-kind" interest expense associated with the Outstanding
Debentures. In addition to lost commercial development opportunities, the
Company has experienced problems with its ability to attract and retain key
commercial and residential development team personnel due to their concern as to
the ability of the Company to compete for new business. Therefore, the Company
believes that the Recapitalization will substantially enhance its current and
prospective business opportunities by eliminating the financial concern that the
Outstanding Debentures have caused. Commencing in August 1996, in order to
pursue the Company's stated strategic objective to evaluate alternatives to
deleverage the Company's capital structure in order to address the above
described concerns, the Company began negotiations with representatives of the
members of the Debenture Holders' Committee. The proposed Recapitalization is
the result of those negotiations and is supported by the Company and the
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representatives of the members of the Debenture Holders' Committee and their
financial advisors who urge all holders of Outstanding Debentures to tender
their Outstanding Debentures pursuant to the Exchange Offers and to vote in
favor of the Prepackaged Plan.
DESCRIPTION OF THE RECAPITALIZATION. The proposed Recapitalization consists
of the major elements summarized below. The Company is seeking to exchange all
of the Outstanding Debentures for Common Stock pursuant to the Exchange Offers
and is seeking acceptances of the Prepackaged Plan from the holders of the
Outstanding Debentures, Preferred Stock, Common Stock and the holders of other
Impaired Claims and Interests. If the Company does not receive the 90% Requisite
Exchange Acceptances but does receive the Requisite Prepackaged Plan Acceptances
(as described below in "Summary-- Prepackaged Plan--Prepackaged Plan
Acceptances"), the Company intends to seek judicial relief and use such
acceptances to obtain confirmation of the Prepackaged Plan. See "Summary--The
Prepackaged Plan" and "The Prepackaged Plan."
EXCHANGE OFFERS FOR THE OUTSTANDING DEBENTURES. As of the date of this
Prospectus, $162.8 million and $41.1 million in principal amount of the Senior
Debentures and Subordinated Debentures, respectively, were outstanding. Pursuant
to the Exchange Offers, the Company is offering to exchange (i) 56 shares of
Common Stock, on a post-Capital Stock Combination and a post-Reverse Stock Split
basis, for each $1,000 principal amount of Senior Debentures, outstanding,
without subsequent accrued and unpaid interest, and (ii) 28 shares of Common
Stock, on a post-Capital Stock Combination and a post-Reverse Stock Split basis,
for each $1,000 principal amount of Subordinated Debentures, outstanding,
without subsequent accrued and unpaid interest. Tendering holders of Outstanding
Debentures will not receive payment of, and will waive all rights and claims to,
accrued and unpaid interest on all Outstanding Debentures tendered for exchange.
See "The Exchange Offers." See "The Exchange Offers--Treatment of Fractional
Shares."
CONSENT SOLICITATION WITH RESPECT TO THE OUTSTANDING
DEBENTURES. Concurrently with the making of the Exchange Offers, the Company is
soliciting from the holders of the Outstanding Debentures their consents to the
Proposed Amendments to remove certain restrictive covenants under the Indentures
in the event all Outstanding Debentures are not exchanged in the
Recapitalization. See "Proposed Amendments to Indentures." The Proposed
Amendments, if implemented, would remove restrictive covenants from the
Indentures which currently prohibit the Company from making payments or
distributions to debt subordinated to the Outstanding Debentures or to equity
holders prior to repayment of the Outstanding Debentures and which prohibit the
Company from entering into non-arms length transactions with non-subsidiary
affiliates.
CAPITAL STOCK COMBINATION AND REVERSE STOCK SPLIT. As part of the
Recapitalization, the Company is recommending to the holders of Class A Common
and Preferred Stock that they approve proposals at the Annual Meeting, which
among other things, approve amendments to the Restated Certificate in order to
effect the Capital Stock Combination and to effect the Reverse Stock Split.
Pursuant to the Capital Stock Combination, all classes and series of capital
stock would be reclassified and combined into one class of capital stock
designated "Common Stock." Each outstanding share of Preferred Stock will be
reclassified to be one and three quarter (1.75) shares of Common Stock and each
outstanding share of Class A Common Stock will be reclassified to be one (1)
share of Common Stock. After the Capital Stock Combination, the Common Stock
will have the same rights, preferences and privileges that the Class A Common
Stock had prior to the Capital Stock Combination. As part of the Capital Stock
Combination the ability of the Board to issue preference shares of capital stock
without stockholder approval will be eliminated. Pursuant to the Reverse Stock
Split each outstanding share of capital stock will be reverse split on a one for
one hundred (1:100) basis. Representatives of members of the the Debenture
Holders' Committee, whose members hold approximately 33% and 13%, respectively,
of the Preferred Stock and Class A Common Stock have indicated to the Company
that the members intend to approve the Capital Stock Combination and the Reverse
Stock Split. In addition, the holder of 30.5% and 11.5%, respectively, of the
Preferred Stock and Class A Common Stock has indicated to the Company that it
intends to approve the Capital Stock Combination and the Reverse Stock Split. No
fractional shares of Common
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Stock will be issued pursuant to the Capital Stock Combination and/or Reverse
Stock Split. See "The Company Annual Meeting--Proposal No. 2."
OTHER CHARTER AMENDMENTS AND BOARD DECLASSIFICATION AND RECONSTITUTION. As
part of the Recapitalization, various amendments to the Company's charter
documents and related actions are being proposed to be implemented either
pursuant to the Annual Meeting or under the Prepackaged Plan. See "The Company
Annual Meeting" and "The Prepackaged Plan." The charter amendments are intended
to delete the classified Board and to remove all anti-takeover provisions,
including all supermajority voting provisions, restrictions on stockholders'
ability to call special meetings and restrictions on stockholders' ability to
act by written consent. The Company is also proposing to reconstitute and expand
the Board in connection with the Recapitalization to include four (4) incumbent
directors and six (6) new director nominees each to serve one (1) year terms.
AMENDMENT OF 1993 STOCK OPTION PLAN. In connection with the
Recapitalization, the Company will amend the 1993 Stock Option Plan to (i)
provide that only shares of the Company's Common Stock, rather than both Common
Stock and Preferred Stock (which are being converted into Common Stock upon
consummation of the Capital Stock Combination) shall be issuable under the 1993
Stock Option Plan, and (ii) reduce the aggregate number of shares that may be
issued under the 1993 Stock Option Plan from 7,500,000 shares of the Company's
Preferred Stock and 7,500,000 shares of the Company's Common Stock (as
determined on a pre-Capital Stock Combination and pre-Reverse Stock Split basis)
to 751,449 shares of the Company's Common Stock (as determined on a post-Capital
Stock Combination and post-Reverse Stock Split basis) which would represent 6%
of the Company's equity on a fully diluted basis. Except for such amendments,
the 1993 Stock Option Plan will continue to function in the same manner as prior
to the Recapitalization, except that appropriate adjustments will be made to the
1993 Stock Option Plan to reflect the changes in the Company's capital structure
upon consummation of the Recapitalization.
In addition, and in connection with such amendments to the 1993 Stock Option
Plan, each of the current holders of outstanding options granted under the 1993
Stock Option Plan have agreed to cancel their existing outstanding options to
purchase an aggregate of (i) 6,275,000 shares of the Company's Common Stock, and
(ii) 6,275,000 shares of the Company's Preferred Stock as determined on a pre-
Capital Stock Combination and pre-Reverse Stock Split basis, which would
approximate 12% of the Company's equity on a fully diluted basis. The Company
currently intends to grant new options to purchase an aggregate of 751,449
shares of the Company's Common Stock, as determined on a post-Capital Stock
combination and post-Reverse Stock Split basis. The exercise price per share of
the Company's Common Stock for each such newly granted option will be equal to
the average of the per share trading price of the Company' Common Stock on
NASDAQ for the first 20 trading day period commencing immediately following the
consummation of the Recapitalization. Such newly granted options will vest,
subject to the 1993 Stock Option Plan's existing option vesting provisions, over
a three year period with 40%, 30% and 30% vesting on each of the first, second
and third anniversaries, respectively, of the consummation of the
Recapitalization. Upon consummation of the Recapitalization, the shares issuable
under such newly granted options will represent 6% of the Company's fully
diluted equity.
THE PREPACKAGED PLAN. As described above, if the Company does not receive
the 90% Requisite Exchange Acceptance but does receive the Requisite Prepackaged
Plan Acceptances, the Company intends to effect the Recapitalization by seeking
a judicial confirmation of the Prepackaged Plan. See "Summary The Prepackaged
Plan" and "The Prepackaged Plan."
PURPOSES AND CERTAIN RESULTS OF RECAPITALIZATION. The proposed
Recapitalization, whether achieved pursuant to the Exchange Offers and the
Annual Meeting Proposals or pursuant to the Prepackaged Plan, is intended to
deleverage the Company's capital structure for the reasons described above.
The following table sets forth the beneficial ownership of the Common Stock
which management estimates will be held by classes of current security holders
of the company, assuming the effectiveness of the Recapitalization, including
the acceptance of the Exchange Offers by 100% of the holders of
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Outstanding Debentures and approval and effectiveness of the Reverse Stock Split
and Capital Stock Combination.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
FOLLOWING
CLASS OF CURRENT SECURITY RECAPITALIZATION PERCENT OF CLASS
- -------------------------------------------------- ------------------------ ----------------
<S> <C> <C>
Senior Debentures................................. 9,359,208 80.0%
Subordinated Debentures........................... 1,169,901 10.0%
Preferred Stock................................... 680,516 5.8%
Common Stock...................................... 489,385 4.2%
</TABLE>
OPERATIONS AFTER THE RECAPITALIZATION. If the Recapitalization is
consummated, the Company currently anticipates that it will continue to pursue
its operations and strategic goals, including to (i) obtain new financing for
development of the Bolsa Chica mesa; (ii) successfully defend against litigation
challenging Coastal Commission approval of the Bolsa Chica project; (iii)
complete the secondary permitting for development of the Bolsa Chica mesa; (iv)
commence infrastructure construction on the Bolsa Chica mesa in the fourth
quarter of 1997; and (v) continue the growth of its commercial development
business on a national and international basis. There can be no assurance that
the Company will accomplish, in whole or in part, all or any of these strategic
goals.
DETERMINATIONS AND RECOMMENDATIONS OF THE BOARD OF DIRECTORS. The Board has
determined that (i) the Recapitalization is in the best interests of the Company
and its securityholders, (ii) it is in the best interests of the Company and its
securityholders to solicit pre-petition acceptances of the Prepackaged Plan, to
be implemented in the event that the Recapitalization is not consummated,
provided that at such time the Board deems it in the best interests of the
Company and its securityholders to file a petition, and (iii) it is in the best
interests of the Company and its securityholders that the Annual Meeting
Proposals be approved. The Board also recommends that (i) the holders of the
Outstanding Debentures accept the Exchange Offers, and grant consents to the
Proposed Amendments, (ii) the holders of the Outstanding Debentures, Preferred
Stock and Class A Common Stock and holders of other claims or equity interests
Impaired under the Prepackaged Plan approve the Prepackaged Plan, and (iii) the
holders of the Common Stock and the Preferred Stock entitled to vote approve the
Annual Meeting Proposals. In arriving at its decision, the Board considered,
among other things, the following factors:
1. The Board's familiarity with the Company's business, operations and
financial condition and its future prospects, including the current cost and
availability of capital as a result of its leveraged capital structure, the
continued reporting of operating losses and the resulting loss of business
opportunities;
2. The fact that consummation of the Recapitalization would
substantially deleverage the Company's capital structure which the Board
believes would allow the Company to obtain financing on more favorable terms
which is necessary for the Company to maximize realization of asset values
and the growth of its business, including, but not limited to, its
commercial and residential real estate development business and the
development of the Bolsa Chica property;
3. The fact that confirmation of the Prepackaged Plan, if necessary and
approved by the Board, would generally give effect to the same transactions
as the Recapitalization through a judicial proceeding; and
4. Presentations by the Company's management and its financial and
legal advisors.
Based on the foregoing, the Board determined that the Recapitalization was
in the best interests of the Company and its securityholders and decided to
recommend approval of all elements of the Recapitalization. Each of the
foregoing factors supported the Board's determination, and the Board did not
assign relative weight to any of the foregoing factors.
DETERMINATIONS AND RECOMMENDATIONS OF THE MEMBERS OF THE DEBENTURE HOLDERS'
COMMITTEE. The representatives of the members of the Debenture Holders'
Committee have indicated to the Company that the members support the
Recapitalization and intend to vote in favor of it. The representatives of the
members of the Debenture Holders' Committee recommend that all holders of
Outstanding Debentures vote to accept the Recapitalization. The members of the
Debenture Holders' Committee's decision to support the Recapitalization and to
recommend that all holders of Outstanding Debentures vote to accept the
Recapitalization was based upon, among other things, its determination that (i)
the consideration to be received by the holders of Outstanding Debentures will
provide such holders with a significant equity interest in the Company, (ii) the
value of the Company will be significantly enhanced by the Recapitalization, and
(iii) the Company will have substantially greater financing and development
opportunities in the event the Company is deleveraged.
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<PAGE>
THE EXCHANGE OFFERS
GENERAL. As of the date of this Prospectus, $164.6 million and $41.1
million in principal amount of Senior Debentures and Subordinated Debentures,
respectively, were outstanding. Upon the terms and subject to the conditions of
the Exchange Offers, the Company is offering to exchange (i) 56 shares of Common
Stock, on a post-Capital Stock Combination and a post-Reverse Stock Split basis,
for each $1,000 principal amount of Senior Debentures, outstanding, without
subsequent accrued and unpaid interest, and (ii) 28 shares of Common Stock, on a
post-Capital Stock Combination and a post-Reverse Stock Split basis, for each
$1,000 principal amount of Subordinated Debentures, outstanding, without
subsequent accrued and unpaid interest. Tendering holders of Outstanding
Debentures will not receive payment of, and waive all rights and claims to,
accrued and unpaid interest on all Outstanding Debentures tendered for exchange.
No fractional shares of Common Stock will be issued in the Exchange Offers. See
"The Exchange Offers-- Treatment of Fractional Shares." Copies of this
Prospectus and the Consent and Letter of Transmittal are being sent to the
Record Holders and to all known beneficial holders of the Outstanding
Debentures. If all of the Outstanding Debentures are exchanged pursuant to the
Exchange Offers, the Company will be required to issue a total of 9,359,208
shares of Common Stock in payment for the tendered Outstanding Debentures.
The Company shall be deemed to have accepted validly tendered Outstanding
Debentures in the Exchange Offers and validly delivered consents in the Consent
Solicitations when, as and if, the Company has given oral or written notice
thereof to the Exchange Agent. The Exchange Agent will act as agent for the
tendering holders of Outstanding Debentures for the purposes of receiving the
shares of Common Stock from the Company. Subject to the satisfaction of the
conditions set forth below under "Conditions of the Exchange Offers," the
Company will accept on or promptly after the Expiration Date, all Outstanding
Debentures validly tendered (and not withdrawn) on or prior to 12:00 midnight,
Eastern Standard Time, on the Expiration Date. The shares of Common Stock will
be delivered in exchange for the Outstanding Debentures accepted in the Exchange
Offers promptly after acceptance.
Holders of Outstanding Debentures who tender in the Exchange Offers will not
be required to pay brokerage commissions or fees, or, subject to the
instructions in the Consent and Letter of Transmittal, transfer taxes with
respect to the exchange of Outstanding Debentures pursuant to Exchange Offers.
The Company will pay all charges and expenses, other than any applicable
income/capital gains taxes, in connection with the Exchange Offers.
The background and purpose of the Exchange Offers are discussed under "The
Company Recapitalization--Background of the Recapitalization" and "Purposes and
Certain Results of the Recapitalization."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS. The Expiration Date is 12:00
midnight, Eastern Standard Time on June , 1997, unless the Company, in its
sole discretion (as limited by applicable law), extends the Exchange Offers or
Consent Solicitations, in which case the Expiration Date shall be the latest
date to which the Exchange Offers or the Consent Solicitation is extended.
In order to extend the Expiration Date, the Company will notify the Exchange
Agent of any extension by oral or written notice and will make a public
announcement thereof, each prior to 9:00 a.m. Eastern Standard Time, on the next
business day after the previously scheduled Expiration Date. Such announcement
may state that the Company is extending the Exchange Offers or Consent
Solicitations, as the case may be, for a specified period of time or on a daily
basis until 12:00 midnight, Eastern Standard Time, on the date on which the
Requisite Consents have been received or on which a specified percentage of
Outstanding Debentures has been tendered, as applicable. Any such notice shall
also include disclosure of the approximate principal amount of Outstanding
Debentures theretofore validly tendered pursuant to the Exchange Offers and not
properly withdrawn. If the Exchange Offers are extended, the Company may, but
shall not be required to, postpone or adjourn the Annual Meeting. See "The
Company Annual Meeting-- Proxy Solicitation."
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<PAGE>
The Company expressly reserves the right to (i) delay accepting any consents
or Outstanding Debentures, to extend the Exchange Offers or Consent
Solicitation, or to terminate the Exchange Offers or Consent Solicitations and
not accept consents or Outstanding Debentures not previously accepted if any of
the conditions set forth herein under "Conditions of the Exchange Offers" shall
not have been satisfied and shall not have been waived by the Company, by giving
oral or written notice of such delay, extension or termination to the Exchange
Agent, (ii) amend at any time, or from time to time, the terms of any of the
Exchange Offers or Consent Solicitations in any manner, and (iii) modify the
form or amount of the consideration to be paid pursuant to the Exchange Offers,
provided that any such modified consideration will be provided to all tendering
holders of Outstanding Debentures, even if they tendered their Outstanding
Debentures in the Exchange Offers prior to the modification, and provided
further that no increase or decrease in the amount of Outstanding Debentures
being sought or in the consideration offered in the Exchange Offers will be
made, unless such Exchange Offers will remain open for at least ten (10)
business days from the date that notice of such increase or decrease is first
publicized, sent or given to the holders of Outstanding Debentures. Any such
delay in acceptance, extension, termination or amendment will be followed as
promptly as practicable by public announcement thereof. If the terms of any of
the Exchange Offers are amended in a manner determined by the Company to
constitute a material change, the Company will promptly disclose any such
amendment in a manner reasonably calculated to inform the holders of Outstanding
Debentures of such amendment and the Company will extend the Exchange Offers or
Consent Solicitations, as the case may be, for a period which the Company in its
discretion deems appropriate, depending upon the significance of the amendment
and the manner of disclosure to holders of the Outstanding Debentures, if the
Exchange Offers or Consent Solicitation would otherwise expire during such
period. During any such delay or extension, all Outstanding Debentures
previously tendered and not accepted for exchange or withdrawn will remain
subject to the Exchange Offers (including the right to withdraw tendered
Outstanding Debentures as set forth under "Withdrawal Rights" below) and may be
accepted for exchange by the Company. The rights reserved by the Company in this
paragraph are in addition to its rights set forth under "Conditions of the
Exchange Offers."
Without limiting the manner in which the Company may choose to make a public
announcement of any extension, amendment or termination of the Exchange Offers
or Consent Solicitations, the Company shall have no obligation to publish,
advertise, or otherwise communicate any such public announcement.
PROPOSED AMENDMENTS. In order to effect a valid tender of the Outstanding
Debentures, tendering holders of Outstanding Debentures are required to consent
to the Proposed Amendments in respect of the Senior Debentures or Subordinated
Debentures, as applicable. The Exchange Offers are conditioned upon the Company
obtaining the Requisite Consents. The Company may, in its sole discretion, waive
this condition and reserves the right to accept Outstanding Debentures tendered
in the Exchange Offers even if the Requisite Consents are not obtained,
provided, if such condition is waived, holders of Outstanding Debentures
tendered in the Exchange Offers will receive the same consideration whether or
not they granted consents to the Proposed Amendments.
For the Proposed Amendments to become effective with respect to the
Outstanding Debentures, holders (other than the Company and its affiliates) of
not less than a majority of the aggregate principal amount of the Senior
Debentures and Subordinated Debentures, respectively, must grant Consents with
respect thereto and such valid and unrevoked consents must have been delivered
to the Exchange Agent. As of March 15, 1997, $164.6 million aggregate principal
amount of Senior Debentures and $41.1 million aggregate principal amount of
Subordinated Debentures, respectively, was outstanding and owned by persons
other than the Company and its affiliates. Subject to the conditions set forth
in the Indentures, upon the Company's receipt of the Requisite Consents to the
Proposed Amendments, the Company will cause such consents to be delivered to the
appropriate persons as promptly as possible and the Amended Indentures will be
executed and delivered immediately thereafter, provided, however, that the
provisions of the Amended Indentures will not become operative until the
Exchange Offers are consummated.
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<PAGE>
Only a Record Holder of the Outstanding Debentures can effectively consent
to the Proposed Amendments. See "Procedure for Tendering Outstanding Debentures
and Giving Consents" for information concerning tendering procedures for persons
who are not Record Holders. No transfer of Outstanding Debentures on the
register for such Outstanding Debentures prior to the Expiration Date therefore
will have the effect of revoking any consent theretofore given by the Record
Holder of such Outstanding Debentures, and such consent will remain valid unless
revoked by the person in whose name the Outstanding Debentures are then
registered on the register for the Outstanding Debentures. Such revocation will
become effective only if the Exchange Agent receives the notice of revocation
before the Expiration Date. See "Revocation of Consents; Defective Tenders"
below. As set forth below under "Withdrawal Rights," the withdrawal of
Outstanding Debentures in accordance with the procedures set forth thereunder
will not effect revocation of a Consent.
PROCEDURE FOR TENDERING OUTSTANDING DEBENTURES AND GIVING CONSENTS. The
acceptance by a holder of Outstanding Debentures of an Exchange Offer pursuant
to one of the procedures set forth below will constitute an agreement between
the holder and the Company in accordance with the terms and subject to the
conditions set forth in this Prospectus and in the Consent and Letter of
Transmittal.
A holder of Outstanding Debentures electing to tender Outstanding Debentures
in the Exchange Offers and, with respect to Outstanding Debentures, to consent
to the Proposed Amendments should either (i) complete and sign the Consent and
Letter of Transmittal or a facsimile thereof, and have the signature thereon
guaranteed if required by the instructions thereof and mail or otherwise deliver
such Consent and Letter of Transmittal, or such facsimile, together with
certificates representing the Outstanding Debentures and any other required
documents, to the Exchange Agent at its address set forth on the back cover of
the Prospectus, or (ii) request its broker, dealer, commercial bank, trust
company or other nominee to effect the transaction for it. A holder of
Outstanding Debentures who wishes to vote on the Prepackaged Plan should follow
the instructions for voting on the Prepackaged Plan. For the additional
procedures necessary to vote on the Prepackaged Plan, see "Prepackaged Plan
Solicitation--Voting Procedures."
NO CONSENTS AND LETTERS OF TRANSMITTAL AND NO OUTSTANDING DEBENTURES SHOULD
BE SENT TO THE COMPANY OR TO THE TRUSTEE UNDER EITHER OF THE INDENTURES.
All signatures on a Consent and Letter of Transmittal or a notice of
withdrawal, as the case may be, must be guaranteed by an Eligible Institution
(as defined below) unless the Outstanding Debentures tendered pursuant thereto
are tendered (i) by a Record Holder who has not completed the box entitled
"Special Issuance Instructions" or "Special Delivery Instructions" on the
relevant Consent and Letter of Transmittal, or (ii) for the account of an
Eligible Institution (as defined below). If Outstanding Debentures are
registered in the name of a person other than the signer of a Consent and Letter
of Transmittal or a notice of withdrawal, as the case may be, then the
Outstanding Debentures must be endorsed by the registered holder. Holders who
are the registered holders of Outstanding Debentures and who seek to tender
Outstanding Debentures, but who were not the Record Holders of such Outstanding
Debentures on the Record Date, should obtain and include with the Consent and
Letter of Transmittal a properly completed proxy from the Record Holder, with
signatures on the proxy guaranteed by an Eligible Institution. Any beneficial
owner whose Outstanding Debentures are registered or held of record in the name
of its broker, dealer, commercial bank, trust company or other nominee and who
wishes to tender its Outstanding Debentures in the Exchange Offers and, with
respect to Outstanding Debentures, to grant its consent in the Consent
Solicitation should (i) contact such registered holder promptly and instruct
such holder to tender on its behalf, (ii) obtain and include with the Consent
and Letter of Transmittal the Outstanding Debentures properly endorsed for
transfer by the Record Holder or accompanied by a properly completed bond power
from the holder of record, together with a properly completed irrevocable proxy
that authorizes such person to consent to the Proposed Amendments on behalf of
such Record Holder, with signatures on the endorsement or bond power guaranteed
by an Eligible Institution, or
37
<PAGE>
(iii) effect a record transfer of such Outstanding Debentures from the Record
Holder to such beneficial owner and comply with the requirements applicable to
Record Holders for tendering Outstanding Debentures and delivering Consents
prior to 12:00 midnight, Eastern Standard Time, on the Expiration Date, as the
case may be. The transfer of record ownership of Outstanding Debentures may take
considerable time and, depending on when such transfer is requested, may not be
accomplished prior to the Expiration Date. If signatures on a Consent and Letter
of Transmittal are required to be guaranteed, such guarantees must be by a
member firm of a registered national securities exchange, a member of the
National Association of Securities Dealers, Inc. ("NASD"), or by a commercial
bank, trust company, credit union or savings association having an office in the
United States (each of which is an "Eligible Institution").
THE METHOD OF DELIVERY OF THE OUTSTANDING DEBENTURES AND ALL OTHER REQUIRED
DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE HOLDER OF THE
OUTSTANDING DEBENTURES, BUT, IF SUCH DELIVERY IS EFFECTED BY MAIL, IT IS
RECOMMENDED THAT THE HOLDER USE PROPERLY INSURED, REGISTERED MAIL WITH RETURN
RECEIPT REQUESTED, AND THAT THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE
EXPIRATION DATE AS TO ASSURE DELIVERY TO THE EXCHANGE AGENT ON OR BEFORE THE
EXPIRATION DATE.
Unless the Outstanding Debentures being tendered are deposited with the
Exchange Agent prior to the Expiration Date (accompanied by a properly completed
Consent and Letter of Transmittal and any other documents required by the
Consent and Letter of Transmittal), or tendered pursuant to the guaranteed
delivery procedures or book-entry transfer procedures set forth below, the
Company may, at its option, reject such tender. In addition, if the Company
receives the 90% Requisite Exchange Acceptances, then the Company reserves the
right to accept all properly tendered Outstanding Debentures whether or not,
with respect to Outstanding Debentures, the holder thereof has granted the
applicable Consent. Issuance of shares of Common Stock in exchange for
Outstanding Debentures will be made only against deposit of the tendered
Outstanding Debentures. If less than the entire principal amount of any
Outstanding Debentures evidenced by a submitted certificate is tendered, the
tendering holder should fill in the principal amount tendered in the appropriate
box on the Consent and Letter of Transmittal with respect to the deposit being
made, but only to the extent of the principal amount of Outstanding Debentures
being tendered. The Exchange Agent will then return to the tendering holder
(unless otherwise requested by the holder under "Special Delivery Instructions"
in the relevant Consent and Letter of Transmittal), as promptly as practicable
following the Expiration Date, Outstanding Debentures in principal amount equal
to the portion of such delivered Outstanding Debentures not tendered. The entire
principal amount of Outstanding Debentures deposited with the Exchange Agent
will be deemed to have been tendered, unless otherwise indicated.
Holders of Outstanding Debentures who do not tender their Outstanding
Debentures and who wish to vote on the Prepackaged Plan and/or who wish to
consent to the Proposed Amendments with respect to Outstanding Debentures should
complete the Consent and Letter of Transmittal (which will serve as the form of
consent and/or ballot) in accordance with the instructions thereto and return it
promptly to the Exchange Agent, who will transmit it to the Company.
If a holder of Outstanding Debentures desires to tender Outstanding
Debentures pursuant to an Exchange Offer, but is unable to locate the
Outstanding Debentures to be tendered, such holder may tender up to an aggregate
of up to $500 in Outstanding Debentures by executing the Affidavit of Loss in
the Consent and Letter of Transmittal. Holders of Outstanding Debentures who are
unable to locate an aggregate amount of more than $500 should contact the
Information Agent for further instructions.
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<PAGE>
Each tendering holder of Outstanding Debentures must complete the Substitute
Form W-9 provided in the Consent and Letter of Transmittal and either (i)
provide his correct taxpayer identification number (social security number, for
individuals) and certify that the taxpayer identification number provided is
correct (or that such holder is awaiting a taxpayer identification number) and
that (A) the holder of Outstanding Debentures has not been notified by the IRS
that he is subject to backup withholding as a result of failure to report all
interest or dividends or (B) the IRS has notified the holder that he is no
longer subject to backup withholding, or (ii) provide an adequate basis for
exemption from backup withholding. Holders of Outstanding Debentures who do not
satisfy these conditions may be subject to a $50 (or greater) penalty imposed by
the IRS and may be subject to backup withholding (as discussed below). Exempt
holders of Outstanding Debentures (including, among others, corporations and
certain foreign individuals) are not subject to these requirements if they
satisfactorily establish their status as such. Certain foreign holders of
Outstanding Debentures may be required to provide a Form W-8, Form 1001 or Form
4224 in order to avoid or reduce withholding tax.
By tendering Outstanding Debentures pursuant to the Exchange Offers, a
holder of Outstanding Debentures that does not comply with the conditions
described in the preceding paragraph authorizes the Exchange Agent, the Company
or its paying agents, as the case may be, to sell shares of Common Stock
withheld in an amount sufficient to enable it to satisfy its backup or other
withholding obligations.
Pursuant to the backup withholding provisions of federal income tax law,
unless the conditions described above are satisfied, the Exchange Agent, the
Company or their paying agents, as the case may be, will withhold a number of
shares of Common Stock otherwise to be delivered to a tendering holder of
Outstanding Debentures pursuant to the Exchange Offers such that the proceeds
from the sale of the shares so withheld will enable the Exchange Agent or the
Company, as the case may be, after selling such shares so withheld, to remit the
appropriate amount of backup withholding due to the IRS. Upon any such sale, the
Exchange Agent or the Company, as the case may be, will be entitled to seek
reimbursement for the costs, fees or expenses of such sale incurred by it.
Alternatively, the Exchange Agent or the Company, as the case may be, may
require such a holder of Outstanding Debentures to remit a payment (in cash or
certified check) sufficient to cover the holder's backup withholding tax
liability prior to the release of any shares of Common Stock withheld from such
holder. Any shares of Common Stock sold pursuant to this paragraph shall be
treated for tax reporting purposes as if they were delivered to the exchanging
holder of Outstanding Debentures and sold on its behalf. Backup withholding is
applied at a 31% rate. Amounts paid as backup withholding do not constitute an
additional tax and generally will be credited against the holder's federal
income tax liabilities. Different withholding rates and rules may apply in the
case of certain foreign holders of Outstanding Debentures.
All questions as to the form of all documents and the validity (including
time or receipt), eligibility, acceptance and withdrawal of tendered Outstanding
Debentures will be determined by the Company, in its reasonable discretion,
which determination shall be final and binding. The Company reserves the
absolute right to reject any and all tenders not in proper form or the
acceptance of which would, in the opinion of the Company's counsel, be unlawful.
The Company also reserves the absolute right, subject to applicable law, to
waive any of the conditions of the Exchange Offers (other than the condition
that all applicable requirements of the Trust Indenture Act of 1939, as amended,
have been satisfied and that the Registration Statement shall be effective and
no stop order shall be issued by the Commission with respect thereto, which
conditions may not be waived by the Company) or any defect or irregularity in
the tender of any of the Outstanding Debentures; provided that the Company will
not waive the Requisite Acceptance Condition with respect to the Exchange Offers
without making a public announcement thereof and permitting the withdrawal of
Outstanding Debentures tendered pursuant to the Exchange Offers to the extent
required by applicable law. Neither the Company, the Exchange Agent, the
Information Agent nor any other person will be under any duty to give
notification of any defects or irregularities in tenders or will incur any
liability for failure to give any such notification. Any Outstanding Debentures
received by the Exchange Agent that are not properly tendered and as to which
irregularities have not been cured or
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waived will be returned by the Exchange Agent to the appropriate tendering
holder of Outstanding Debentures as soon as practicable. The Company's
interpretation of the terms and conditions of the Exchange Offers (including the
Consent and Letter of Transmittal and the instructions thereto) will be final
and binding on all parties.
BOOK-ENTRY TRANSFER PROCEDURES. The Exchange Agent will establish an
account with respect to the Senior Debentures and an account with respect to the
Subordinated Debentures at each of The Depository Trust Company (the "Book-Entry
Transfer Facility") within two business days after the commencement date of the
Exchange Offers. Any financial institution that is a participant in the
Book-Entry Transfer Facility's system may make book-entry delivery of
Outstanding Debentures into the Exchange Agent's account at the Book-Entry
Transfer Facility. However, although delivery of Outstanding Debentures may be
effected through a timely confirmation of book-entry transfer at the Book-Entry
Transfer Facility ("Book-Entry Transfer"), together with the receipt by the
Exchange Agent of an agent's message (the "Agent's Message") stating that the
Book-Entry Transfer Facility has received an express acceptance from each Record
Holder identified in the Agent's message that each such Record Holder has
received a Consent and Letter of Transmittal and has agreed to be bound by the
terms and conditions thereof. The Consent and Letter of Transmittal or facsimile
thereof with any required signature guarantees and any other required documents,
must be transmitted to and received by the Exchange Agent at its address set
forth on the back cover of this Prospectus prior to the Expiration Date, or the
guaranteed delivery procedures described below must be complied with.
GUARANTEED DELIVERY PROCEDURES. If a holder of Outstanding Debentures
desires to tender Outstanding Debentures and the holder's Outstanding Debentures
are not immediately available or time will not permit the holder's Outstanding
Debentures or other required documents to reach the Exchange Agent before the
Expiration Date, or a holder cannot complete a Book-Entry Transfer before the
Expiration Date, a tender may be effected if:
(a) the tender is made by or through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed notice of guaranteed delivery (by
telegram, facsimile transmission, mail or hand delivery) substantially in
the form provided by the Company which (i) includes the duly executed
Consent of the Record Holder of tendered Outstanding Debentures or is
accompanied by such a Consent with respect to Outstanding Debentures (unless
in either case the Company has otherwise received the 90% Requisite Exchange
Acceptances), and (ii) sets forth the name and address of the holder and the
amount and type of Outstanding Debentures tendered, states that the tender
is being made thereby and guarantees that within five (5) business days
after the execution date of the notice of guaranteed delivery, all tendered
Outstanding Debentures, in proper form for transfer (or a Book-Entry
Transfer confirmation) together with the Consent and Letter of Transmittal
(or facsimile thereof) and any other documents required by such Consent and
Letter of Transmittal, will be deposited by the Eligible Institution with
the Exchange Agent, or in the case of a Book-Entry Transfer by the
Book-Entry Transfer Facility with an appropriate Agent's message with
respect thereto (collectively, the "Notice of Guaranteed Delivery"); and
(c) all tendered Outstanding Debentures, as well as all other documents
required by the Consent and Letter of Transmittal, shall be received by the
Exchange Agent, or in the case of a Book-Entry Transfer received by the
Book-Entry Transfer Facility with an appropriate Agent's Message with
respect thereto, within five (5) business days days after the execution of
the Notice of Guaranteed Delivery.
A consent to the Proposed Amendments with respect to Outstanding Debentures
delivered in connection with a Notice of Guaranteed Delivery will be effective
upon receipt thereof by the Exchange Agent, or in the case of a Book-Entry
Transfer, upon the receipt of an appropriate Agent's Message with
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respect thereto, regardless of whether or when the certificates for the tendered
Outstanding Debentures, an executed Consent and Letter of Transmittal and the
other required documents are received.
ACCEPTANCE OF OUTSTANDING DEBENTURES, DELIVERY OF COMMON STOCK. The
acceptance for exchange and payment of Outstanding Debentures validly tendered
and not withdrawn and the delivery of shares of Common Stock will be made as
promptly as practicable after the Expiration Date. The Company, however,
expressly reserves the right to delay acceptance of any of the Outstanding
Debentures or terminate the Exchange Offers and not accept for exchange any
Outstanding Debentures not theretofore accepted if any of the conditions set
forth under "Conditions of the Exchange Offers" shall not have been satisfied or
waived by the Company. For purposes of the Exchange Offers, the Company will be
deemed to have accepted for exchange validly tendered Outstanding Debentures if,
as and when the Company gives oral or written notice thereof to the Exchange
Agent. Subject to the terms and conditions of the Exchange Offers, the delivery
of shares of Common Stock for Outstanding Debentures accepted pursuant to an
Exchange Offer, will be made by the Exchange Agent as soon as practicable after
receipt of such notice. The Exchange Agent will act as agent for the tendering
holders of Outstanding Debentures for the purposes of receiving shares of Common
Stock from the Company and transmitting such shares to the tendering holders.
Tendered Outstanding Debentures not accepted for exchange by the Company, if
any, will be returned without expense to the tendering holder as promptly as
practicable following the Expiration Date.
All tendering holders of Outstanding Debentures, by execution of the Consent
and Letter of Transmittal (or facsimile thereof), waive any right to receive
notice of acceptance of the Outstanding Debentures for exchange.
TREATMENT OF FRACTIONAL SHARES. No fractional shares of Common Stock will
be issued to tendering holders of Outstanding Debentures in the Exchange Offers.
Instead, whenever a fraction of a share of Common Stock would otherwise be
issuable to an exchanging holder of Outstanding Debentures, the Exchange Agent
will aggregate all such fractional shares of Common Stock that would otherwise
result from the Exchange Offers and will sell such aggregated fractional shares
of Common Stock, rounded to the nearest whole share, as whole shares in an
orderly manner. Upon completion of such sales, exchanging holders will receive
in lieu of such fractional shares, the relative cash proceeds from such sales
(without interest) in amounts proportionate to the fractional shares of Common
Stock which such exchanging holders would have otherwise received.
WITHDRAWAL RIGHTS. Tenders of Outstanding Debentures are irrevocable,
except that tendered Outstanding Debentures may be withdrawn (a) at any time
prior to 12:00 midnight, Eastern Standard Time on the Expiration Date, and (b)
for any period of time required by applicable laws following public announcement
of a waiver of the Requisite Acceptance Condition (as defined under "Conditions
of the Exchange Offers") in respect of the Exchange Offers. Holders of
Outstanding Debentures 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 timely received by the Exchange Agent at its address set
forth on the back cover page of this Prospectus. Any such notice of withdrawal
must specify the name of the person who tendered the Outstanding Debentures to
be withdrawn and the principal amount of Outstanding Debentures to be withdrawn.
If Outstanding Debentures have been delivered to the Exchange Agent identified
in another manner, the name of the registered holder and the serial numbers of
the particular Outstanding Debentures to be so withdrawn must also be furnished
to the Exchange Agent prior to the physical release of the withdrawn Outstanding
Debentures. If Outstanding Debentures have been tendered pursuant to the
procedures for Book-Entry Transfer, any notice of withdrawal must specify the
name and number of the account at the appropriate Book-Entry Transfer Facility
to be credited with the withdrawn Outstanding Debentures. Any notice of
withdrawal must be signed by the registered holder of Outstanding Debentures in
the same manner as the original signature on the Consent and Letter of
Transmittal (including any required signature guarantees) or be accompanied by
evidence satisfactory to the Company that the person withdrawing the tender has
succeeded to the ownership of the Outstanding Debentures.
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Any permitted withdrawals of tenders of Outstanding Debentures may not be
rescinded, and any Outstanding Debentures withdrawn will thereafter be deemed
not validly tendered for purposes of the Exchange Offers; however, withdrawn
Outstanding Debentures may be re-tendered by following one of the procedures
described herein at any time on or prior to the Expiration Date. Withdrawal of
Outstanding Debentures will not effect a revocation of a consent. See
"Revocation of Consents; Defective Tenders" below.
All questions as to validity, form and eligibility (including time of
receipt) of the notice of withdrawal will be determined by the Company in its
sole discretion, which determination will be final and binding. None of the
Company, the Exchange Agent, the Information Agent, or any other person will be
under any duty to give notification of any defects or irregularities in any
notice of withdrawal or will incur any liability for failure to give any such
notification.
REVOCATION OF CONSENTS; DEFECTIVE TENDERS. Any Record Holder of Outstanding
Debentures who has delivered a consent to the Proposed Amendments may
effectively revoke such consent by filing written notice with the Exchange Agent
at any time prior to (but not after) the date and time of delivery of Requisite
Consents effecting the Proposed Amendments with respect to the Outstanding
Debentures. The Company reserves the right to contest the validity of any such
revocations. A purported notice of revocation which is not received by the
Exchange Agent in a timely fashion will not be effective to revoke a consent
previously given.
NO PAYMENTS ON TENDERED DEBENTURES. Tendering holders of Outstanding
Debentures will not receive payment of principal due or accrued but unpaid
interest on such tendered Outstanding Debentures and will waive their right to
receive such payments.
CONDITIONS OF THE EXCHANGE OFFERS. Notwithstanding any other provisions of
the Exchange Offers, the Company will not be required to accept any Outstanding
Debentures tendered for exchange and may terminate or amend the Exchange Offers
as provided herein if any of the following conditions shall not be satisfied:
(a) Holders of at least 90% in aggregate principal amount of the
Outstanding Debentures shall have validly tendered and not withdrawn such
Outstanding Debentures pursuant to the Exchange Offers prior to the
Expiration Date and the holders of more than 50% in aggregate principal
amount of the Outstanding Debentures shall have given and not revoked their
consents to the Proposed Amendments (the "Requisite Acceptance Condition");
(b) Prior to the Expiration Date, (i) the holders of at least a majority
of the combined voting power of the Class A Common Stock and Preferred Stock
entitled to vote with respect to the Exchange Offers present (in person or
by proxy) at the Annual Meeting, shall have approved the Capital Stock
Combination and the Reverse Stock Split;
(c) 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 exchange of Outstanding Debentures or the
issuance of shares of Common Stock in exchange therefor pursuant to the
Exchange Offers, or (ii) in the sole judgment of the Company, otherwise
materially adversely affecting the transactions contemplated by the
Recapitalization or the contemplated benefits of the Recapitalization to the
Company;
(d) 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 the reasonable judgment of
the Company, prohibit, restrict or delay consummation of the
Recapitalization or materially impair the contemplated benefits of the
Recapitalization to the Company;
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(e) There shall not exist, in the reasonable judgment of the Company,
any other actual or threatened legal impediment to the exchange by the
Company of the Outstanding Debentures or to the issuance of the shares of
Common Stock in exchange therefor pursuant to the Exchange Offers or any
other circumstances that would materially adversely affect the transactions
contemplated by the Exchange Offers or the contemplated benefits of the
Exchange Offers to the Company;
(f) There shall not have occurred, in the reasonable judgment of the
Company, (i) any general suspension of trading in, or limitation on prices
for, securities listed on NASDAQ NMS; or (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); or (iii) a commencement of a war,
armed hostilities or other international or national emergency directly or
indirectly involving the United States; or (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); or (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 sole judgment of the Company, a material acceleration or
worsening of any of the foregoing;
(g) All applicable requirements of the Trust Indenture Act of 1939, as
amended, shall have been satisfied;
(h) The Common Stock to be issued shall have been registered under the
Securities Act, there shall not be issued and in effect a stop order issued
by the Commission with respect to the Registration Statement and issuance of
the foregoing;
(i) There shall not have occurred or be likely to occur an event
affecting the business or financial affairs of the Company and its
subsidiaries or the Exchange Offers which, in the sole judgment of the
Company, would or might prohibit, restrict or delay the consummation of the
Exchange Offers or materially impair the contemplated benefits of the
Exchange Offers to the Company or otherwise result in consummation of the
Exchange Offers not being in the best interests of the Company; and
(j) The Company shall have reached a final determination to accept the
tendered Outstanding Debentures pursuant to the Exchange Offers and not to
pursue the Recapitalization by seeking confirmation of the Prepackaged Plan.
If any of the foregoing conditions shall not be satisfied, the Company may
(i) terminate the Exchange Offers and return all Outstanding Debentures tendered
pursuant to such terminated Exchange Offers to exchanging holders of Outstanding
Debentures, (ii) extend the Exchange Offers and retain all tendered Outstanding
Debentures until the final Expiration Date for the extended Exchange Offers, or
(iii) waive the unsatisfied conditions with respect to the Exchange Offers,
other than the conditions referred to in paragraphs (b)(ii), (g) and (h) above,
which may not be waived by the Company with respect to the Exchange Offers, and
provided that the Company will not waive the condition referred to in paragraph
(a) above with respect to the Exchange Offers without making a public
announcement thereof and permitting the withdrawal of Outstanding Debentures
tendered pursuant to the Exchange Offers to the extent required by applicable
law.
All the foregoing conditions, except for the conditions in paragraphs
(b)(ii), (g) and (h) above, are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to such
conditions and may be waived by the Company (other than as stated in the
preceding paragraph), in whole or in part, at any time and from time to time, in
the sole discretion of the Company. The failure by the Company at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be asserted
at any time and from time to time.
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EXCHANGE AGENT. ChaseMellon Shareholder Services, L.L.C. will act as
Exchange Agent for the Exchange Offers. All correspondence in connection with
the Exchange Offers and the Consent and Letter of Transmittal should be
addressed to the Exchange Agent as follows:
<TABLE>
<S> <C>
By Hand or Overnight Courier: By Facsimile: (201) 329-8936
120 BROADWAY Telephone: (201) 296-4209
13TH FLOOR (201) 296-4381
NEW YORK, NEW YORK 10271
ATTN: REORGANIZATION DEPT.
By Mail:
P.O. BOX 3301
SOUTH HACKENSACK, NJ 07606
ATTN: REORGANIZATION DEPT.
</TABLE>
INFORMATION AGENT. Georgeson & Company Inc. will act as Information Agent
for the Exchange Offers. All inquiries relating to the Exchange Offers should be
directed to the Information Agent at the address and telephone number set forth
below.
<TABLE>
<S> <C>
By Mail, Hand or Telephone: (800) 223-2064
Overnight Courier:
GEORGESON & COMPANY, INC.
WALL STREET PLAZA
88 PINE STREET, 30TH FLOOR
NEW YORK, NY 10005
</TABLE>
EFFECTS OF CONSUMMATION OF EXCHANGE OFFERS ON NON-TENDERING HOLDERS OF
OUTSTANDING DEBENTURES. The completion of the Exchange Offers may have
significant adverse consequences for the holders of untendered Outstanding
Debentures. Generally, a security with a smaller outstanding principal amount
available for trading may command a lower price than that of a comparable
security with a greater outstanding principal amount, and thus as a result of
the Exchange Offers the price which may be commanded for the untendered
Outstanding Debentures could be adversely affected. In addition, because the
number of holders of Outstanding Debentures after consummation of the
Recapitalization will be extremely limited, it is unlikely that there will be
any active trading in the untendered Outstanding Debentures. Moreover, upon
effectiveness of the Proposed Amendments numerous provisions that were intended
to provide protection to the holders of the Outstanding Debentures will be
deleted. As a result, the adoption of the Proposed Amendments may have a
material adverse effect on the value of the Outstanding Debentures. See
"Proposed Amendments to Indentures."
NO APPRAISAL RIGHTS ARE AVAILABLE TO HOLDERS OF THE COMPANY'S OUTSTANDING
DEBENTURES, PREFERRED STOCK OR CLASS A COMMON STOCK IN CONNECTION WITH THE
EXCHANGE OFFERS.
PROPOSED AMENDMENTS TO INDENTURES
The Company is soliciting consents to the Proposed Amendments from holders
of Outstanding Debentures whether or not they desire to tender their Outstanding
Debentures pursuant to the Exchange Offers. In order to approve the Proposed
Amendments to the respective Indentures described below, the consent of the
Record Holders of at least a majority of the aggregate principal amount of the
then outstanding Senior Debentures and Subordinated Debentures, respectively,
which are not owned by the Company or its affiliates, is required. As of the
date hereof, $165 million aggregate principal amount of Senior Debentures and
$41 million aggregate principal amount of Subordinated Debentures, respectively,
are issued and outstanding and owned by persons other than the Company and its
affiliates. Only Record Holders of the Outstanding Debentures may consent to the
Proposed Amendments. The Proposed
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Amendments will become operative when the Exchange Offers are consummated, and
thereupon any non-tendering holders of Outstanding Debentures will be bound by
the Proposed Amendments regardless of whether they consented to the Proposed
Amendments. See "The Exchange Offers--Effects of Consummation of Exchange Offers
on Non-Tendering Holders of Outstanding Debentures."
All holders of Outstanding Debentures should carefully consider the effects
of the Proposed Amendments before determining whether to consent or to withhold
consent to the Proposed Amendments and whether or not to tender into the
Exchange Offer. The Company is seeking elimination of certain restrictive
covenants in the Indentures through the adoption of the Proposed Amendments. A
discussion of the effects on the holders of Outstanding Debentures if each of
these provisions is eliminated is set forth below.
PROPOSED AMENDMENTS TO OUTSTANDING DEBENTURES. The discussion below is
qualified in its entirety by reference to the Indentures relating to the Senior
Debentures and the Subordinated Debentures. Capitalized terms used and not
otherwise defined herein have the meanings given to them in the respective
Indentures.
If the Requisite Consents are received by the Company, the Proposed
Amendments to Indentures will be implemented by the execution of the Amended
Senior Indenture and the Amended Subordinated Indenture upon certification to
the respective Indenture trustees that the Company has obtained Requisite
Consents of holders of the Senior Debentures and/or Subordinated Debentures, but
will not become effective until consummation of the applicable Exchange Offer.
ELIMINATION OF RESTRICTIVE COVENANTS. The Proposed Amendments include the
elimination of certain restrictive covenants found in the Indentures under the
captions "Limitation on Restricted Payments" (Section 4.03) and "Limitation on
Transactions with Affiliates" (Section 4.06 of the Senior Debenture Indenture
and Section 4.07 of the Subordinated Debenture Indenture). The first Proposed
Amendments would delete the provisions of Section 4.03 in each of the
Indentures, which currently provide as follows:
"The Corporation shall not, and shall not permit any Subsidiary to,
directly or indirectly, (i) declare or pay any dividend or make any
distribution on its Capital Stock or to the Holders of its Capital Stock
(except dividends or distributions payable to the Corporation or a wholly
owned Subsidiary), (ii) purchase, redeem or otherwise acquire or retire for
value any Capital Stock of the Corporation, or (iii) purchase, repurchase,
redeem, defease or otherwise acquire or retire for value, prior to scheduled
maturity, scheduled repayment or scheduled sinking fund payment, any
Subordinated Obligations (other than the acquisition of Subordinated
Obligations purchased in anticipation of satisfying a sinking fund
obligation, principal installment or final maturity, in each case due within
one year of the date of acquisition). Notwithstanding the foregoing, the
Corporation may purchase or redeem shares of any class of Capital Stock or
any Debt of the Corporation by exchange for, or out of the proceeds of the
substantially concurrent sale of, shares of its Capital Stock."
If the above described Proposed Amendments are approved and these covenants
are eliminated, the Company and its subsidiaries will be permitted to make the
payments or distributions and take the actions with respect to the Company's
outstanding capital stock and subordinated debt obligations (as described above
in the restrictive covenants) prior to repayment of the Outstanding Debentures,
regardless of the total amount of any such payments or distributions.
Accordingly, elimination of such restrictive covenants could lead to a reduction
in the amount of cash that the Company has available to make any required
payments on the Outstanding Debentures and could increase the risk of a Company
default on the payment of the Outstanding Debentures. These risks will only
apply to holders of Outstanding Debentures which do not tender all of their
Outstanding Debentures in the Exchange Offers.
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The next Proposed Amendments would delete in their entirety the respective
provisions of Section 4.06 of the Senior Debenture Indenture and Section 4.07 of
the Subordinated Debenture Indenture each of which currently provide as follows:
"The Corporation shall not, and shall not permit any Subsidiary to,
conduct any business or enter into any transaction or series of similar
transactions (including the purchase, sale, lease or exchange of any
property or the rendering of any service) with any Affiliate (other than a
wholly owned Subsidiary) unless the terms of such business, transaction or
series of transactions are (i) set forth in writing, and (ii) as favorable
to the Corporation or such Subsidiary as terms that would be obtainable at
the time for a comparable transaction or series of similar transactions in
arm's-length dealings with an unrelated third person. This Section shall not
be construed to prohibit payment by the Corporation or a Subsidiary of
compensation to officers, directors or employees of the Corporation or such
Subsidiary for services rendered in such capacity."
If the above described Proposed Amendments are approved and these covenants
are eliminated, the Company will no longer be obligated to set forth the terms
of all transactions with affiliates of the Company in writing and will no longer
be subject to the requirements set forth above that all such transactions be
arm's-length transactions. Accordingly, elimination of these restrictive
covenants will increase the risk to non-tendering holders of Outstanding
Debentures that the Company could engage in non-arm's-length transactions with
its affiliates, which transactions could reduce the financial strength of the
Company and increase the risk of a default by the Company on the Outstanding
Debentures. These risks also will only apply to holders of Outstanding
Debentures which do not tender all of their Outstanding Debentures in the
Exchange Offers.
THE COMPANY ANNUAL MEETING
An Annual Meeting of Stockholders of the Company will be held at
on June , 1997 at a.m. Eastern Standard Time, for the
following purposes:
1. To consider and act upon a proposal to ratify the terms of the
Exchange Offers, including the issuance of shares of Common Stock pursuant
to the Exchange Offers, (the "Exchange Offers Proposal");
2. To consider and act upon a proposal to amend Articles Fourth, Fifth
and Sixth of the Restated Certificate, subject to the consummation of the
Recapitalization, to provide for a combination of the Class A Common Stock
and Preferred Stock and to provide for the elimination of the Board's
authority to issue classes or series of stock with preferences over the
combined Common Stock (the "Capital Stock Combination Proposal");
3. To consider and act upon a proposal to amend Article Fifth of the
Restated Certificate to provide for a one for one hundred (1:100) reverse
stock split of each outstanding share of the Company's capital stock (the
"Reverse Split Proposal");
4. To consider and act upon a proposal to amend Article Fourth of the
Restated Certificate, subject to the consummation of the Recapitalization
and the approval and implementation of both the Capital Stock Combination
and Reverse Stock Split, to reduce the authorized capital stock to 18
million shares of the combined Common Stock (the "Authorized Capital
Proposal");
5. To consider and act upon a proposal to amend the Restated
Certificate and Bylaws, subject to the consummation of the Recapitalization,
to delete provisions of Articles Eighth and Thirteenth of the Restated
Certificate and Articles III and XI of the Bylaws currently providing for
(i) the Board to be classified into three classes with staggered terms, (ii)
an 80% supermajority vote of the shares of outstanding capital stock of the
Company entitled to vote in elections of directors in order to change the
authorized number of directors by vote of stockholders, (iii) a similar 80%
supermajority vote in order to remove any director for cause, and (iv) a
similar 80% supermajority vote in order to amend
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<PAGE>
or repeal any of the above described provisions of the Restated Certificate
or Bylaws; and to increase the size of the Board from seven (7) to ten (10)
members, subject to the consummation of the Recapitalization (the "Board
Proposal");
6. To consider and act upon a proposal to amend the Restated
Certificate and Bylaws, subject to the consummation of the Recapitalization,
to delete provisions of Articles Ninth and Thirteenth of the Restated
Certificate and Article XI of the Bylaws which currently provide that an 80%
supermajority vote of the shares of the outstanding capital stock of the
Company entitled to vote in elections of directors is required to amend or
repeal any provisions of Article Ninth of the Restated Certificate or
Article II, Section 3 of the Bylaws applicable to special meetings of the
stockholders of the Company and to amend Article Ninth of the Restated
Certificate and Article II, Section 3 of the Bylaws to permit stockholders
representing at least ten percent (10%) of outstanding shares of capital
stock of the Company entitled to vote in the election of directors to call a
special meeting of the Company's stockholders (the "Special Meetings
Proposal");
7. To consider and act upon a proposal to amend the Restated
Certificate, subject to the consummation of the Recapitalization, to delete
provisions of Article Tenth of the Restated Certificate which currently
prohibit stockholders of the Company from acting by written consent and
which require an 80% supermajority vote of the shares of the outstanding
capital stock of the Company entitled to vote in elections of directors to
amend or repeal such provisions (the "Written Consent Proposal");
8. To consider and act upon a proposal to elect a slate of director
nominees in the event the Recapitalization is consummated to reconstitute
the declassified Board or, if the Board is not declassified then to
reconstitute the classified Board, or in the event the Recapitalization is
not consummated, to elect incumbent directors to serve until the expiration
of the terms of their respective classes and until their respective
successors are elected and qualified (the "Board Election Proposal");
9. To ratify the Company's selection of Deloitte & Touche LLP as the
Company's independent auditors for the fiscal year ending December 31, 1997
(the "Auditor Proposal"); and
10. To transact such other business as may properly come before the
Annual Meeting or any postponements or adjournments thereof (collectively,
the "Annual Meeting Proposals.")
PROXY SOLICITATION.
GENERAL. This Prospectus is furnished to stockholders of the Company's
Class A Common Stock and Preferred Stock in connection with the solicitation of
proxies by and on behalf of the Board for use at the Annual Meeting, and at any
postponements or adjournments thereof. The approximate date on which this
Prospectus and accompanying form of Proxy is first being mailed to stockholders
is April , 1997.
A holder of Class A Common Stock or Preferred Stock wishing to vote for the
Annual Meeting Proposals upon which such holder is entitled to vote should
either (i) complete and sign the enclosed Proxy and mail or deliver such Proxy
to the Exchange Agent at one of the addresses set forth on the back cover of
this Prospectus; or (ii) request its broker, dealer, commercial bank, trust
company or other nominee to vote on its behalf. Holders may also vote their
shares of Class A Common Stock or Preferred Stock in person at the Annual
Meeting. Holders of such Class A Common Stock or Preferred Stock of record whose
purchase is registered after the Annual Meeting Record Date and who wish to vote
on the Annual Meeting Proposals must arrange with their seller to receive a
proxy from the holder of such Class A Common Stock or Preferred Stock of record
on the Annual Meeting Record Date.
Proxies, in the form attached, are being solicited by the Board for use at
the Annual Meeting. The persons named as proxies were selected by the Board and
are officers of the Company. Proxies may be revoked by a stockholder prior to
exercise by filing with the Secretary of the Company a written instrument
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revoking the same or a duly executed proxy bearing a later date. In addition, a
stockholder who attends the Annual Meeting may vote shares personally and
thereby revoke any prior proxy at that time. All shares represented by valid
proxies received pursuant to this solicitation, and not subsequently revoked,
will be voted as provided in the proxy.
If immediately prior to the commencement of the Annual Meeting (or any
adjourned session thereof) it appears that all of the conditions to consummation
of the Exchange Offers (other than those conditions to be satisfied at the
Annual Meeting) have not been or will not be satisfied or waived, or if the
Exchange Offers or Consent Solicitations are extended as a result of material
amendments thereto, the Board of Directors may postpone or the officers named as
proxies may vote to adjourn the Annual Meeting until such time as the conditions
are satisfied or waived, or until just prior to any extended Expiration Date of
the Exchange Offers and Consent Solicitations, as the case may be. The Company's
Bylaws permit the Annual Meeting to be adjourned by the vote of a majority of
the shares represented either in person or by proxy at the Annual Meeting,
whether or not a quorum is present.
The expense of preparing, printing and mailing this Prospectus and the
proxies solicited hereby will be borne by the Company. In addition to the use of
the mails, proxies may be solicited by officers, directors and regular employees
of the Company, without extra remuneration, in person, by telephone, telegraph
or otherwise. The Company will also request brokerage firms, nominees,
custodians and fiduciaries to forward proxy materials to the beneficial owners
of shares held of record and will reimburse such persons for their reasonable
out-of-pocket expenses in connection therewith. The Company has engaged
Georgeson & Company Inc. to serve as "Information Agent" for the
Recapitalization. In connection with such arrangement, Georgeson & Company Inc.
will also solicit proxies on behalf of the Company. See "The Exchange
Offers--Information Agent" herein. The Company estimates that the total cost to
the Company of this proxy solicitation will be approximately $ .
THE HOLDERS OF PREFERRED STOCK AND/OR CLASS A COMMON STOCK ARE NOT ENTITLED
TO ANY APPRAISAL RIGHTS IN CONNECTION WITH THE MATTERS SUBMITTED FOR THEIR
APPROVAL.
STOCKHOLDER PROPOSALS. It is presently contemplated that the next annual
meeting of stockholders will be held in May, 1998. Stockholders may submit
proposals on matters appropriate for stockholder action at the Company's annual
meetings consistent with regulations adopted by the Securities and Exchange
Commission and the Bylaws. Proposals to be considered for inclusion in the
Company's proxy statement relating to the 1998 annual meeting must be received
by the Company at its principal executive offices not later than December 16,
1997. Proposals should be directed to the attention of the Secretary, Koll Real
Estate Group, Inc., 4343 Von Karman Avenue, Newport Beach, California 92660.
VOTE REQUIRED FOR APPROVAL. The Recapitalization must be consummated in
order for the following Annual Meeting Proposals to become effective: Capital
Stock Combination Proposal, Authorized Capital Proposal, Board Proposal, Special
Meetings Proposal, Written Consent Proposal, and the expanded director nominees
in the Board Election Proposal. Stockholder approval of the various proposals is
required as follows: (i) the Capital Stock Combination Proposal, Reverse Split
Proposal, Authorized Capital Proposal and the Auditor Proposal at the Annual
Meeting will each require the affirmative vote of the holders of at least a
majority of the outstanding shares of Class A Common Stock and Preferred Stock
entitled to vote, present (in person or by proxy) at the Annual Meeting, in
order to be approved; (ii) the Board Proposal, the Special Meetings Proposal and
the Written Consent Proposal at the Annual Meeting will require the affirmative
vote of the holders of at least 80% of the outstanding shares of Class A Common
Stock entitled to vote, whether or not present (in person or by proxy) at the
Annual Meeting, in order to be approved; and (iii) the Board Election Proposal
will require the affirmative vote of the holders of at least a plurality of the
outstanding shares of Class A Common Stock entitled to vote, present (in person
or by proxy) at the Annual Meeting, voted for each director nominee in order for
each such nominee to be elected. Representatives of the members of the Debenture
Holders' Committee, whose members hold approximately 33% and 13%, respectively,
of the Preferred Stock and Class A Common
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Stock have indicated to the Company that they intend to approve the foregoing
proposals. In addition the holder of 30.5% and 11.5%, respectively, of the
Preferred Stock and Class A Common Stock has indicated to the Company that it
intends to approve the foregoing proposals.
The Company is seeking ratification of the Exchange Offers Proposal from the
holders of a majority of the outstanding shares of Class A Common Stock, present
(in person or by proxy) at the Annual Meeting, and voting separately as a class,
and from the holders of a majority of the outstanding shares of Preferred Stock,
present (in person or by proxy) at the Annual Meeting, and voting separately as
a class. HOWEVER, PURSUANT TO THE DELAWARE GENERAL CORPORATION LAW AND THE
COMPANY'S RESTATED CERTIFICATE AND BYLAWS, SUCH RATIFICATION IS NOT REQUIRED FOR
THE COMPANY TO CONSUMMATE THE EXCHANGE OFFERS. IF SUCH APPROVALS ARE NOT
OBTAINED AT THE ANNUAL MEETING, THE COMPANY IN ITS REASONABLE DISCRETION MAY
STILL CONSUMMATE THE EXCHANGE OFFERS.
The presence, in person or by proxy, of a majority of the outstanding shares
of the Company's Class A Common Stock entitled to vote is necessary to
constitute a quorum to transact business at the Annual Meeting with respect to
the Board Election Proposal and the Auditors Proposal. The presence, in person
or by proxy, of a majority of the outstanding shares of Class A Common Stock and
Preferred Stock, respectively, is necessary to transact business at the Annual
Meeting with respect to the Capital Stock Combination Proposal, Reverse Split
Proposal, Authorized Capital Proposal and the Exchange Offers Proposal. In
addition,the presence (in person or by proxy) of the holders of at least 80% of
the outstanding shares of Class A Common Stock will be necessary to transact
business at the Annual Meeting with respect to the Board Proposal, the Special
Meetings Proposal and the Written Consent Proposal, however, in the event only
80% of such shares are present (in person or by proxy) at the Annual Meeting,
the affirmative vote of 100% of such shares which are present would then be
required to approve the Board Proposal, the Special Meetings Proposal and the
Written Consent Proposal. Those shares present (in person or by proxy),
including shares as to which authority to vote on an Annual Meeting Proposal is
withheld, shares abstaining as to any Annual Meeting Proposal and broker
non-votes (where a broker submits a proxy but does not have authority to vote a
customer's shares on one or more matters) on any Annual Meeting Proposal, will
be considered present at the Annual Meeting for purposes of establishing a
quorum.
With respect to each of the Annual Meeting Proposals, neither shares as to
which authority to vote has been withheld (to the extent withheld) nor broker
non-votes will be considered affirmative votes. With respect to each of the
Annual Meeting Proposals, (i) abstentions on any Annual Meeting Proposal,
pursuant to Delaware law, will be considered present and entitled to vote and
thus will have the effect of a vote against such Annual Meeting Proposal, and
(ii) broker non-votes will be considered not entitled to vote on such Annual
Meeting Proposal and thus will not be counted in determining whether such Annual
Meeting Proposal has received the requisite votes.
PERSONS ENTITLED TO VOTE AT THE ANNUAL MEETING. The Board has fixed the
close of business on April , 1997 as the Annual Meeting Record Date for the
determination of stockholders entitled to receive notice of and to vote at the
Annual Meeting. Only holders of record of the Company's Class A Common Stock and
Preferred Stock, at the close of business on the Annual Meeting Record Date,
will be entitled to notice of, and to vote at, the Annual Meeting. At the close
of business on the Annual Meeting Record Date, the Company had outstanding
48,938,543 shares of Class A Common Stock and 38,886,626 shares of Preferred
Stock, respectively, not including 1,425,833 shares of Class A Common Stock held
by the Company as treasury stock. Each share of Class A Common Stock is entitled
to one (1) vote on all matters which may come before the Annual Meeting for
which shares of Class A Common Stock are entitled to vote and each share of
Preferred Stock is entitled to one (1) vote on all matters which may come before
the Annual Meeting for which shares of Preferred Stock are entitled to vote.
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ACTION TO BE TAKEN UNDER PROXY. All proxies in the accompanying form that
are properly executed and returned will be voted at the Annual Meeting and any
postponements or adjournments thereof in accordance with the specifications
thereon or, if no specifications are made, will be voted:
(i) For approval of the terms of the Exchange Offer Proposal;
(ii) For approval of the Capital Stock Combination Proposal;
(iii) For approval of the Reverse Split Proposal;
(iv) For approval of the Authorized Capital Proposal;
(v) For approval of the Board Proposal;
(vi) For approval of the Special Meetings Proposal;
(vii) For approval of the Written Consent Proposal;
(viii) For approval of each of the director nominees as described in the
Board Election Proposal; and
(ix) For approval of the Auditor Proposal.
The Board of Directors knows of no matters, other than those stated above,
to be presented and considered at the Annual Meeting. If, however, any other
matters properly come before the Annual Meeting, or any postponements or
adjournments thereof, it is the intention of the persons named in the enclosed
proxy to vote such proxy in accordance with their judgment on such matters. The
persons named in the enclosed proxy may also vote such proxy to adjourn the
Annual Meeting.
PROPOSAL NO. 1
APPROVAL OF EXCHANGE OFFERS (INCLUDING THE
ISSUANCE OF SHARES OF COMMON STOCK)
The Board has adopted a resolution approving the Exchange Offers pursuant to
which the Company is offering to exchange Common Stock for Outstanding
Debentures. See "The Company Recapitalization" and "The Exchange Offers."
Pursuant to the Exchange Offers, the Company is offering to exchange each $1,000
principal amount of Senior Debentures for 56 shares of the Company's post
Capital Stock Combination and post Reverse Stock Split Common Stock and to
exchange each $1,000 principal amount of Subordinated Debentures for 28 shares
of such Common Stock. The Exchange Offers are conditioned upon, among certain
other conditions, the valid tender of at least 90% of the Outstanding
Debentures. If the Exchange Offers are consummated and 100% of the Outstanding
Debentures are exchanged for Common Stock (assuming the conversion of all
outstanding shares of Preferred Stock pursuant to the Capital Stock Combination
proposed below), the holders of Outstanding Debentures will hold 90% of the
voting power of the Company's outstanding capital stock and, if acting together,
will be able to control all matters put before the Company's stockholders for a
vote, including the election of directors. Also, under such circumstances, the
Preferred Stock and Class A Common Stock will be diluted to an aggregate of 10%
of the voting capital stock of the Company (prior to adjustments for fractional
shares and without consideration of unexercised options and warrants). See,
"Risk Factors--Ownership Interests, Ability to Elect Directors, and Benefits to
Certain Parties--Dilution; Shares Eligible for Future Sale."
The purpose of the Exchange Offers is to deleverage the Company's capital
structure in order to maximize realization of the Company's asset values and
growth of its business. The exchange of the Outstanding Debentures would
eliminate the "in-kind" interest expense associated with the Outstanding
Debentures, which has substantially contributed to the Company's historic
reporting of losses. The Company believes the deleveraging resulting from the
exchanges would also allow the Company to obtain financing (currently expected
not to exceed $30 million dollars exclusive of Project Debt) on terms more
favorable to the Company, which financing would facilitate the growth of the
Company's business,
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including, but not limited to, the development of the Bolsa Chica property and
other commercial real estate development business. While the Company does not
currently have any commitments to provide the necessary financing in the event
the Exchange Offers are consummated, the Company believes the resulting
deleveraged capital structure will put the Company in a stronger position to
obtain such favorable terms financing. Failure to consummate the Exchange
Offers, however, will continue the Company's leveraged financial condition and
increase the Company's debt by approximately $162.8 million by the maturity date
of the Outstanding Debentures on March 15, 2002, resulting in approximately
$368.5 million in outstanding principal amount of the Outstanding Debentures at
maturity. Under such circumstances, the Company believes it will incur
substantially higher costs with respect to any such financing, which will
negatively impact realization of asset values and the Company's growth. If the
90% Requisite Exchanges are not received by the Company, but the Company does
receive acceptance of the Prepackaged Plan by at least the holders of Class 5
Claims, the Company currently intends to pursue the exchange of the Outstanding
Debentures by seeking confirmation of the Prepackaged Plan.
THE BOARD RECOMMENDS A VOTE "FOR" PROPOSAL NO. 1
PROPOSAL NO. 2
AMENDMENT OF ARTICLES FOURTH, FIFTH AND SIXTH OF
RESTATED CERTIFICATE OF INCORPORATION TO EFFECT A COMBINATION OF
THE CLASS A COMMON STOCK AND PREFERRED STOCK
The Board has adopted a resolution setting forth, and declaring the
advisability of, the Capital Stock Combination Proposal, which proposes
amendments to Articles Fourth, Fifth and Sixth of the Restated Certificate to
effect a combination of the Class A Common Stock and Preferred Stock and to
delete the authority of the Board to issue any class or series of stock other
than the Combined Common Stock. Pursuant to the Capital Stock Combination, each
outstanding share of Preferred Stock will be automatically reclassified to be
1.75 shares of Common Stock and each outstanding share of Class A Common Stock
will be automatically reclassified to be one share of Common Stock.
If the Capital Stock Combination Proposal is approved, no fractional shares
of Common Stock will be issued as a result of the Capital Stock Combination.
Instead, the Exchange Agent will aggregate all such fractional shares of Common
Stock that would otherwise result from the Capital Stock Combination and will
sell such aggregated fractional shares of Common Stock, rounded to the nearest
whole share, as whole shares, in an orderly manner. Upon completion of such
sales, stockholders who would otherwise have held such fractional shares of
Common Stock as a result of the Capital Stock Combination, will receive in lieu
thereof, the cash proceeds from such sales (without interest) in amounts
proportionate to the fractional shares of Common Stock which such stockholders
would otherwise have held.
The Capital Stock Combination Proposal is intended to adjust the Company's
capital structure in response to negotiations with representatives of the
members of the Debenture Holders' Committee to permit the Company to
successfully induce the holders of the Outstanding Debentures to accept the
Exchange Offers by eliminating the preferences currently held by the Preferred
Stock over the Class A Common Stock and by eliminating the Board's authority to
issue any classes or series of the Company's capital stock preferences over the
Common Stock. If the Capital Stock Combination Amendment is approved and filed,
the recapitalized Preferred Stock will no longer be entitled to the rights,
preferences and privileges provided in Article Sixth of the Restated
Certificate, including any dividend preference which would result if the
"Conversion Rate" defined in Article Sixth, Section (b) (vi) of the Restated
Certificate were to be adjusted pursuant to the Restated Certificate to provide
for a Conversion Rate greater than a one (1) share of Class A Common Stock for
one (1) Share of Preferred Stock (the Conversion Rate is currently on a one (1)
for one (1) basis) and the "Liquidation Preference" defined in Article Sixth,
Section (b)(iii), which currently provides for a $.75 per share of Series A
Preferred Stock Liquidation Preference. However, if the Capital Stock
Combination is effected, the recapitalized Preferred Stock will receive the
right to vote in all matters put before the Company's stockholders for a vote,
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including the election of directors. The Preferred Stock currently is not
entitled to vote on any matters, except those required by law.
If the Capital Stock Combination Proposal is implemented, the Company will
also no longer have the takeover defense provided by authorizing the Board to
issue additional classes or series of stock with preferences over the
outstanding capital stock. However, the Company believes that given the
concentration of ownership which will result upon consummation of the
Recapitalization such defense will no longer be necessary because the Company
will be unlikely to be subject to coercive takeover tactics.
If the Capital Stock Combination Proposal is approved and the
Recapitalization is consummated, the Restated Certificate will be amended to
provide that the text of Article Fourth, Article Fifth and of Article Sixth of
the Restated Certificate will be deleted in their respective entireties and
replaced with the following language:
Article Fourth "FOURTH: The Corporation shall have the authority to issue
one class of stock. The total number of shares of stock which the
Corporation shall have the authority to issue is 900 million shares of
Common Stock, par value $0.05 per share (the "Common Stock")."
Article Fifth "(a) Intentionally Omitted."
Article Fifth "(b) Effective upon the filing of this amendment to the
Restated Certificate of Incorporation, the Class A Common Stock, Class B
Common Stock and Series A Convertible Preferred Stock shall be
reclassified and combined to create one class and series of stock
designated "Common Stock." Effective immediately upon the filing of this
amendment to the Restated Certificate of Incorporation, each outstanding
share of Class A Common Stock shall be automatically reclassified to be
one (1) share of Common Stock and each outstanding share of Series A
Convertible Preferred Stock shall be automatically reclassified to be one
and three quarter (1.75) shares of Common Stock. The Company shall not
issue, and no stockholder of the Company shall be deemed to hold,
fractional shares of Common Stock as a result of the above described
capital stock combination. Instead, the Corporation's agent will
aggregate all such fractional shares of Common Stock that would otherwise
result from the above described capital stock combination and sell such
aggregated shares of Common stock, rounded to the nearest whole share, as
whole shares, in an orderly manner. Upon completion of such sales,
stockholders who would otherwise have held such fractional shares of
Common Stock, will receive in lieu thereof, the cash proceeds from such
sales (without interest) in amounts proportionate to the fractional
shares of Common Stock which such stockholders would otherwise have held.
The designations and the powers, preferences and rights, and
qualifications, limitations or restrictions thereof, of each share of
Common Stock shall be governed by the following:
(i) Identical Rights. All shares of Common Stock shall be identical and
shall entitle the holders thereof to the same rights and privileges.
(ii) Voting Rights. On all matters submitted to the Corporation's
stockholders, the holders of Common Stock shall be entitled to one
vote per share.
(iii) Dividend Rights. When and as dividends or other distributions are
declared, whether in cash, in property or in securities of the
Corporation, the holders of shares of Common Stock shall be
entitled to share equally, share for share, in such dividends or
distributions.
(iv) Stock Splits. If the Corporation shall in any manner subdivide,
split or combine the outstanding shares of Common Stock, each share
of outstanding Common Stock shall be proportionately subdivided,
split or combined.
(v) No Charge. The issuance of certificates representing shares of
Common Stock in exchange for outstanding certificates of Class A
Common Stock or Series A Preferred Stock shall be made without
charge to the holders of such certificates, PROVIDED that the
Corporation shall
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not be required to pay any tax which may be payable in respect of
any transfer involving the issuance and delivery of any certificate
in a name other than that of the holder of record of such shares of
Class A Common Stock or Series A Preferred Stock exchanged."
Article Sixth "SIXTH: Intentionally Omitted."
FAILURE TO CONSUMMATE THE RECAPITALIZATION. If the Recapitalization is not
consummated for any reason (including the failure of the Prepackaged Plan to be
confirmed by a Bankruptcy Court in the event of a Chapter 11 filing), the
Capital Stock Combination shall not be deemed to have been approved and the
foregoing amendments to the Restated Certificate will NOT become effective.
THE BOARD RECOMMENDS A VOTE "FOR" PROPOSAL NO. 2
PROPOSAL NO. 3
AMENDMENT OF ARTICLE FIFTH OF RESTATED CERTIFICATE OF INCORPORATION
TO EFFECT A ONE FOR ONE HUNDRED (1:100) REVERSE STOCK SPLIT
OF THE OUTSTANDING CAPITAL STOCK
The Board has adopted a resolution setting forth, and declaring the
advisability of, the Reverse Split Proposal, which proposes amendments to
Articles Fifth and Sixth of the Restated Certificate to effect a one for one
hundred (1:100) reverse stock split of all of the outstanding shares of capital
stock of the Company.
If the Reverse Split Proposal is approved, no fractional shares of stock
will be issued as a result of the Reverse Stock Split. Instead, the Exchange
Agent will aggregate all such fractional shares of stock that would otherwise
result from the Reverse Stock Split and will sell such aggregated fractional
shares of stock, rounded to the nearest whole share, as whole shares, in an
orderly manner. Upon completion of such sales, stockholders who would otherwise
have held such fractional shares of stock as a result of the Reverse Stock
Split, will receive in lieu thereof, the cash proceeds from such sales (without
interest) in amounts proportionate to the fractional shares of stock which such
stockholders would otherwise have held.
The Reverse Split Proposal is intended to adjust the Company's capital
structure to permit the Company to issue shares of stock to the holders of the
Outstanding Debentures pursuant to the Exchange Offers without dramatically
increasing the number of shares of the Company's capital stock outstanding. In
order to successfully induce the holders of the Outstanding Debentures to accept
the Exchange Offers, the number of outstanding shares of the Company's capital
stock must be reduced to establish a higher price per share and to create
greater liquidity for the Company's capital stock.
If the Reverse Split Proposal is approved, the Restated Certificate will be
amended to provide that the text of Article Fifth of the Restated Certificate
will be amended to add the following additional language:
Article Fifth "(c) Effective upon the filing of this amendment to the
Restated Certificate of Incorporation, each outstanding share of the
Corporation's capital stock shall be reverse split so that each 100
shares of such outstanding stock shall be automatically reclassified into
one share of stock. The Company shall not issue, and no stockholder of
the Company shall be deemed to hold, fractional shares of the
Corporation's capital stock as a result of the above described reverse
stock split. Instead, the Corporation's agent will aggregate all such
fractional shares of stock that would otherwise result from the above
described reverse stock split and sell such aggregated shares of stock,
rounded to the nearest whole share, as whole shares, in an orderly
manner. Upon completion of such sales, stockholders who would otherwise
have held such fractional shares, will receive in lieu thereof, the cash
proceeds from such sales (without interest) in amounts proportionate to
the fractional shares of stock which such stockholders would otherwise
have held.
FAILURE TO CONSUMMATE THE RECAPITALIZATION. If the Recapitalization is not
consumated for any reason (including the failure of the Prepackaged Plan to be
confirmed by a Bankruptcy Court in the event of a Chapter 11 filing), the
Reverse Stock Split shall not be deemed to have been approved and the foregoing
amendment to the Restated Certificate will NOT become effective.
THE BOARD RECOMMENDS A VOTE "FOR" PROPOSAL NO. 3
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PROPOSAL NO. 4
AMENDMENT OF ARTICLE FOURTH OF RESTATED CERTIFICATE OF
INCORPORATION TO AMEND THE COMPANY'S AUTHORIZED CAPITAL
The Board has adopted a resolution setting forth, and declaring the
advisability of, the Authorized Capital Proposal, which proposes an amendment to
Article Fourth of the Restated Certificate to provide for total authorized
capital of 18 million shares of Common Stock, par value $0.05 per share, to be
effective only upon approval by the Company's stockholders of both the Capital
Stock Combination Proposal and the Reverse Split Proposal.
In response to negotiations with representatives of the members of the
Debenture Holders' Committee, the Company agreed to propose a reduction to its
authorized capital to eliminate the Company's ability to significantly dilute
the stockholder's ownership following the Recapitalization without stockholder
approval.
If the Authorized Capital Proposal is approved and the Recapitalization is
consummated following the approval and implementation of both the Capital Stock
Combination Proposal and Reverse Stock Split Proposal, the Restated Certificate
will be amended to provide that the text of Article Fourth of the Restated
Certificate will be deleted in its entirety and replaced with the following
language:
Article Fourth "FOURTH: The Corporation shall have the authority to issue
one class and series of stock. The total number of shares of stock which
the Corporation shall have the authority to issue is 18 million shares of
Common Stock, par value $0.05 per share (the "Common Stock")."
FAILURE TO CONSUMMATE THE RECAPITALIZATION. If the Recapitalization is not
consummated for any reason (including the failure of the Prepackaged Plan to be
confirmed by a Bankruptcy Court in the event of a judicial filing) or if both
the Capital Stock Combination and Reverse Split Proposals are not approved and
implemented, the Authorized Capital Proposal shall not be deemed to have been
approved and the foregoing amendment to the Restated Certificate will NOT become
effective.
THE BOARD RECOMMENDS A VOTE "FOR" PROPOSAL NO. 4
PROPOSAL NO. 5
AMENDMENT OF ARTICLES EIGHTH AND THIRTEENTH
OF THE RESTATED CERTIFICATE AND ARTICLES III AND XI OF THE BYLAWS
TO DELETE CLASSIFIED BOARD AND SUPERMAJORITY VOTING PROVISIONS
The Board has adopted a resolution setting forth, and declaring the
advisability of, the Board Proposal, which proposes amendments to the Restated
Certificate and Bylaws to delete the certain provisions in Article Eighth and
Article Thirteenth of the Restated Certificate and Articles III and XI of the
Bylaws which currently provide for (i) the Board to be classified into three
classes with staggered terms, (ii) an 80% supermajority vote of the shares of
outstanding capital stock of the Company entitled to vote in elections of
directors in order to change the authorized number of directors by vote of the
Company's stockholders, (iii) a similar 80% supermajority vote in order to
remove any director for cause, and (iv) a similar 80% supermajority vote in
order to amend any of the above described provisions of the Restated Certificate
or Bylaws.
GENERAL. The Company currently has a classified Board of Directors. The
Company's directors serve in three separate classes, each such class being
elected for alternating three-year terms. The Bylaws currently authorize the
Company to have a Board of Directors with a maximum of fifteen (15) directors
and a minimum of five (5) directors among its three classes, and provide that
the authorized number of directors may be fixed from time to time by duly
adopted resolution of the Board or the stockholders. The size of the Board is
currently fixed at seven (7) directors. There are currently six (6) directors
and one (1) vacancy on the Board. The vacancy resulted from the resignation of
Ms. Thompson. Messrs. Koll and Hegness have terms which expired in 1996, Messrs.
Wirta and Ellis have terms expiring at the Annual
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Meeting, and Messrs. Talbot and Vitulli have terms expiring at the annual
meeting of stockholders in 1998. See "Executive Officer and Directors of the
Company" for information concerning the Company's current directors.
PRINCIPAL EFFECT. The principal effect of the Board Proposal will be as
follows:
(i) Each director of the Company will serve for only a one-year term,
rather than a three-year term. As a result, at each annual meeting of
stockholders beginning with the June 1997 annual meeting, the Company's
stockholders will be asked to elect (or re-elect, as the case may be) a full
slate of directors to the Board;
(ii) The number of directors will be fixed at ten (10) and may be
changed from time to time by a resolution of the Board or by the vote of a
majority of shares of capital stock of the Company entitled to vote (rather
than 80%);
(iii) Any director may be removed, with or without cause, by the vote of
a majority of shares of capital stock of the Company entitled to vote
(rather than only for cause by 80%); and
(iv) The provisions of Articles Eighth and Thirteenth of the Restated
Certificate and Articles III and XI of the Bylaws may be amended by the vote
of the holders of a majority (rather than 80%) of the Company's capital
stock entitled to vote.
In connection with the Company's negotiations with representatives of the
members of the Debenture Holder's Committee, the Company agreed to propose
elimination of the classified Board of Directors and related supermajority
voting provisions described above in light of the anticipated ownership
structure of the Company following consummation of the Recapitalization. Because
of the concentration of such ownership, the Company believes the classified
Board provisions and supermajority voting provisions will be unnecessary and may
inadvertently work against the best interests of the Company and its
stockholders in the event the Recapitalization is consummated. The Company
adopted the classified Board and supermajority voting provisions under
circumstances materially different from those which will face the Company upon
consummation of the Recapitalization. The classified Board structure was
intended to increase the likelihood of continuity and experience among Board
members and to make the Company less likely to face coercive takeover tactics
which the Company is not likely to face after the Recapitalization because of
its changed ownership structure. However, it should be noted that the removal of
the supermajority voting provisions will allow the holders of only a majority of
the combined voting power with respect to all of the Company's outstanding
voting securities subsequently to adopt amendments to the Restated Certificate
which would alter, amend or repeal the provisions of Article Eighth of the
Restated Certificate and Article III of the Bylaws. Under Delaware law, any such
amendments would first have to be approved by the Board.
The Board Proposal is not the result of, or in response to, any specific
effort to accumulate the Company's securities or to obtain control of the
Company by means of a merger, tender offer, solicitation in opposition to
management or otherwise.
IMPLEMENTATION. If the Board Proposal is approved and the Recapitalization
is consummated, the Restated Certificate and Bylaws will be amended to provide
that the text of Article Eighth, Sections (a), (b), (c), and (d) of the Restated
Certificate and of Article III, Sections 2 and 10 of the Bylaws will be deleted
in their respective entireties and replaced with the following language:
Restated Certificate Article Eighth "(a) The number of directors of the
Corporation shall be determined from time to time in the manner described in
the Bylaws. Each director shall serve for a term ending on the next annual
meeting following the meeting at which such director was elected, or on such
later date as such director's successor shall have been elected and
qualified."
Restated Certificate Article Eighth "(b) Newly created directorship
resulting from any increase in the number of directors and any vacancies on
the Board of Directors resulting from death, resignation,
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disqualification, removal or other cause shall be filled by the affirmative
vote of a majority of the remaining directors then in office, even if less
than a quorum of the Board of Directors, or by a sole remaining director.
Any director elected in accordance with the preceding sentence shall hold
office until the next annual meeting of stockholders and until such
director's successor shall have been duly elected and qualified. No decrease
in the number of directors constituting the Board of Directors shall shorten
the term of any incumbent director."
Restated Certificate Article Eighth "(c) Any director may be removed from
office, with or without cause, by the affirmative vote of the holders of a
majority of the voting power of the then outstanding shares of capital stock
of the Corporation entitled to vote generally in the election of directors
(the "Voting Stock"), voting together as a single class."
Restated Certificate Article Eighth "(d) Intentionally Omitted."
Bylaws Article III "Section 2. NUMBER, ELECTION AND TERMS. The authorized
number of directors may be determined from time to time by a vote of a
majority of the then authorized number of directors or by the affirmative
vote of a majority of the voting power of the then outstanding shares of
capital stock of the Corporation entitled to vote generally in the election
of directors, voting together as a single class; provided, however, that
such number initially shall be ten (10). Except as otherwise provided in the
Certificate of Incorporation, newly created directorships resulting from any
increase in the number of directors and any vacancies on the Board resulting
from death, resignation, disqualification, removal or other cause shall be
filled by the affirmative vote of a majority of the remaining directors then
in office, even if less than a quorum of the Board, or by a sole remaining
director. Any director elected in accordance with the preceding sentence
shall hold office until the next Annual Meeting and until such director's
successor shall have been duly elected and qualified. No decrease in the
number of directors constituting the Board shall shorten the term of any
incumbent director."
Bylaws Article III "Section 10. REMOVAL OF DIRECTORS. Subject to the rights
of any series or class of Common Stock or Preferred Stock, any director may
be removed from office, with or without cause, by the affirmative vote of a
majority of the voting power of all shares of capital stock of the
Corporation entitled to vote generally in the election of directors, voting
together as a single class."
In addition to the above deleted and replaced language, if the Board
Proposal is approved, Article Thirteenth of the Restated Certificate will be
amended to delete the following language:
"...Notwithstanding the foregoing and anything contained in this Restated
Certificate of Incorporation to the contrary, Section 3 ("Special Meetings")
of Article II ("Meetings of Stockholders") of the Bylaws, Section 2
("Number, Election and Terms") or Section 10 ("Removal of Directors") of
Article III ("Directors") of the Bylaws, or the final sentence of Article XI
("Amendments") of the Bylaws shall not be amended or repealed, and no
provision inconsistent with any thereof shall be adopted, without the
affirmative vote of the holders of at least 80% of the voting power of the
Voting Stock, voting together as a single class. Notwithstanding anything
contained in this Restated Certificate of Incorporation to the contrary, the
affirmative vote of the holders of at least 80% of the voting power of the
Voting Stock, voting together as a single class, shall be required to amend
or repeal, or adopt any provision inconsistent with, any provision of this
Article Twelfth."
and Article XI of the Bylaws will be amended to delete the following language:
"...Notwithstanding the preceding sentence, the affirmative vote of holders
of at least 80% of the voting power of the then outstanding shares of
capital stock of the Corporation entitled to vote generally in the election
of directors, voting together as a single class, shall be required to amend
or repeal, or adopt any provisions inconsistent with, Section 3 of Article
II of these By-laws, Section 2 or Section 10 of Article III of these
By-laws, or this sentence."
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FAILURE TO CONSUMMATE THE RECAPITALIZATION. If the Recapitalization is not
consummated for any reason (including the failure of the Prepackaged Plan to be
confirmed by a Court in the event of a judicial filing), the Board Proposal
shall not be deemed to have been approved and the Board will not be
reconstituted as set forth in Proposal No. 6 below and the foregoing amendments
to the Restated Certificate and Bylaws will NOT become effective.
THE BOARD RECOMMENDS A VOTE "FOR" PROPOSAL NO. 5
PROPOSAL NO. 6
AMENDMENT OF ARTICLES NINTH AND THIRTEENTH OF THE RESTATED
CERTIFICATE AND ARTICLES II AND XI OF THE BYLAWS TO DELETE SUPERMAJORITY
VOTING PROVISIONS APPLICABLE TO SPECIAL MEETINGS AND TO
PERMIT STOCKHOLDERS TO CALL SPECIAL MEETINGS OF STOCKHOLDERS
The Board has adopted a resolution setting forth, and declaring the
advisability of, the Special Meetings Proposal, which proposes amendments to
delete the provisions of Articles Ninth and Thirteenth of the Restated
Certificate and Article XI of the Bylaws which currently provide that an 80%
supermajority vote of the shares of the outstanding capital stock of the Company
entitled to vote in elections of directors is required to amend or repeal any
provisions of Article Ninth of the Restated Certificate or Article II, Section 3
of the Bylaws, which provisions also generally provide that special meetings of
the Company's stockholders, except as otherwise required by law, can only be
called by the Board or by the Company's Chief Executive Officer pursuant to
resolutions approved by the Board. The Special Meetings Proposal also proposes
to amend Article Ninth of the Restated Certificate and Article II, Section 3 of
the Bylaws, to permit the holders of capital stock of the Company representing
at least ten percent (10%) of the outstanding shares of capital stock of the
Company entitled to vote in the election of directors to call a special meeting
of the Company's stockholders.
As discussed above, in connection with the Company's negotiations with
representatives of the members of the Debenture Holder's Committee the Company
agreed to propose elimination of the above described provisions in light of the
changed ownership structure of the Company following consummation of the
Recapitalization. Because of such concentration of ownership following the
Recapitalization the Company believes such supermajority voting provisions
applicable to amendments of the special meeting provisions contained in the
Restated Certificate and Bylaws will become unnecessary, may inadvertently work
against the best interests of the Company and its stockholders and deletion of
such provisions following consummation of the Recapitalization should not
materially affect the Company's vulnerability to coercive takeover tactics.
If the Special Meetings Proposal is approved, the Restated Certificate will
be amended to provide that the text of Article Ninth of the Restated Certificate
be deleted in its entirety and replaced with the following language:
Restated Certificate Article "Ninth: Special meetings of stockholders may be
called either (i) by the Board of Directors or by the Chief Executive
Officer, pursuant to a resolution approved by a majority of the then
authorized number of directors of the Corporation (as determined in
accordance with the Bylaws), or (ii) by holders of capital stock of the
Company representing at least ten percent (10%) of the outstanding shares of
capital stock of the Company entitled to vote in the election of directors."
and the Bylaws will be amended to provide that the text of Article II,
Section 3 of the Bylaws will be deleted in its entirety and replaced with the
following language:
"Special meetings of stockholders, unless otherwise provided by law, may be
called at any time by the Board pursuant to a resolution adopted by a
majority of the then authorized number of directors (as determined in
accordance with Section 2 of Article III of these By-laws), by the Chief
Executive Officer or by holders of capital stock of the Company representing
at least ten percent (10%) of the
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outstanding shares of capital stock of the Company entitled to vote in the
election of directors. Any such call must specify the matter or matters to
be acted upon at such meeting and only such matter or matters shall be acted
upon thereat."
In addition to the above deleted and replaced language as part of the
Special Meetings Proposal, Article Thirteenth of the Restated Certificate will
also be amended to delete the following language:
"...Section 3 ("Special Meetings") of Article II of the Bylaws..."
and Article XI of the Bylaws will be amended to delete the following language:
"...Section 3 of Article II of these Bylaws..."
FAILURE TO CONSUMMATE THE RECAPITALIZATION. If the Recapitalization is not
consummated for any reason (including the failure of the Prepackaged Plan to be
confirmed by a Court in the event of a judicial filing), the Special Meeting
Proposal shall not be deemed to have been approved and the foregoing amendments
to the Restated Certificate will NOT become effective.
THE BOARD RECOMMENDS A VOTE "FOR" PROPOSAL NO. 6
PROPOSAL NO. 7
AMENDMENT OF ARTICLE TENTH OF THE RESTATED CERTIFICATE TO DELETE
PROHIBITION OF STOCKHOLDER ACTION BY WRITTEN CONSENT AND SUPERMAJORITY
VOTING PROVISIONS APPLICABLE THERETO
The Board has adopted a resolution setting forth, and declaring the
advisability of the Written Consent Proposal, which proposes an amendment to
delete the provisions of Article Tenth of the Restated Certificate which
currently prohibit the stockholders from acting by written consent without a
meeting and require an 80% supermajority vote of the shares of outstanding
capital stock of the Company entitled to vote in elections of directors in order
to amend or repeal the provisions of Article Tenth.
As discussed above, in connection with the Company's negotiations with the
representatives of members of the Debenture Holder's Committee the Company
agreed to propose elimination of the above described provisions in light of the
changed ownership structure of the Company following consummation of the
Recapitalization. Because of such concentration of ownership following the
Recapitalization the Company believes the provisions of Article Tenth of the
Restated Certificate will be unnecessary, may inadvertently work against the
best interests of the Company and its stockholders and the deletion of such
provisions following consummation of the Recapitalization should not materially
affect the Company's vulnerability to coercive takeover tactics.
If the Written Consent Proposal is approved, the Restated Certificate will
be amended to provide for the text of Article Tenth is to be deleted in its
entirety and replaced with the following language: "Tenth: Intentionally
Omitted."
FAILURE TO CONSUMMATE THE RECAPITALIZATION. If the Recapitalization is not
consummated for any reason (including the failure of the Prepackaged Plan to be
confirmed by a Court in the event of a judicial filing), the Written Consent
Proposal shall not be deemed to have been approved and the foregoing amendments
to the Restated Certificate and Bylaws will NOT become effective.
THE BOARD RECOMMENDS A VOTE "FOR" PROPOSAL NO. 7
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PROPOSAL NO. 8
ELECT SLATE OF DIRECTORS TO
RECONSTITUTE THE BOARD OF DIRECTORS
The Board currently consists of Donald M. Koll (Chairman), Harold A. Ellis,
Jr., Paul C. Hegness, J. Thomas Talbot, Marco Vitulli and Ray Wirta. Under the
Restated Certificate and Bylaws, the Board is divided into three classes with
each class having a term of three years.
If the Recapitalization is consummated and the Board Proposal is approved
and implemented, the Company is seeking to reconstitute its Board pursuant to
the Board Election Proposal and to elect an expanded ten (10) member Board with
each director serving for one year terms. Upon recommendation of the Nominating
Committee, the Board has nominated incumbent Directors, Messrs. Koll, Talbot,
Vitulli, Wirta, and as new directors, Phillip R. Burnaman II, James J. Gaffney,
Robert J. Gagalis, Thomas W. Sabin, Jr., P. John Wickser II and Paul M. Zeller,
each to serve until the next Annual Meeting of Stockholders and until their
successors are elected and qualified. If any nominee should be unavailable for
election at the Annual Meeting, the proxies will be voted for the election of
such other person as may be recommended by the Board.
The Board has also adopted a resolution which provides that in the event the
Recapitalization is consummated, but the Board Proposal is not approved, and,
therefore, the classified Board continues, the Board shall be expanded to ten
(10) members pursuant to the powers of the Board provided in the Bylaws to
increase the size of the Board. In such event, the Company is seeking to elect,
and the Board has nominated, Mr. Gagalis to serve for a term expiring at the
annual meeting of stockholders in 1998, Messrs. Koll, Sabin and Wickser to serve
for terms expiring at the annual meeting of stockholders in 1999 and Messrs.
Wirta, Gaffney, Burnaman and Zeller for terms expiring at the annual meeting of
stockholders in 2000. Incumbent directors Messrs. Talbot and Vitulli would
continue to serve their current terms, expiring at the annual meeting of
stockholders in 1998.
If the Recapitalization is not consummated, the Board Proposal will be
deemed not to have been approved or implemented regardless of the approval by
the stockholders, and, therefore, the classified Board will continue. In such
event, the Company is seeking to elect, and the Board has nominated, Messrs.
Koll and Hegness to serve for terms expiring at the annual meeting of
stockholders in 1999 and Messrs. Wirta and Ellis for terms expiring at the
annual meeting of stockholders in 2000. Incumbent directors Messrs. Talbot and
Vitulli would continue to serve their current terms expiring at the annual
meeting of stockholders in 1998.
Information about the nominees for election as directors and incumbent
directors, including biographical and employment information is set forth in
this Prospectus under the headings "Executive Officers and Directors of the
Company," "Executive Compensation" and "Security Ownership of Certain Beneficial
Owners and Management." Those incumbent directors whose terms as directors have
not otherwise expired have agreed to resign from the Board effective upon the
election of the director nominees.
FAILURE TO CONSUMMATE THE RECAPITALIZATION. If the Recapitalization is not
consummated for any reason (including the failure of the Prepackaged Plan to be
confirmed by a Court in the event of a judicial filing) the foregoing expansion
and reconstitution of the Board will NOT occur pursuant to the Board Election
Proposal and only the incumbent directors referred to above will be deemed
nominated or elected.
THE BOARD RECOMMENDS A VOTE "FOR" EACH OF THE DIRECTOR NOMINEES
DESCRIBED IN PROPOSAL NO. 8
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PROPOSAL NO. 9
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The stockholders of the Company are being asked to consider a proposal to
ratify the selection of Deloitte & Touche LLP as the Company's independent
auditors for the fiscal year ending December 31, 1997. Deloitte & Touche LLP
served as the Company's auditors for the fiscal years ended December 31, 1992
through December 31, 1996. Representatives of Deloitte & Touche LLP are not
expected to attend the Annual Meeting.
THE BOARD RECOMMENDS A VOTE "FOR" PROPOSAL NO. 9
OTHER MATTERS
The Board of Directors is not aware of any other matter that may properly
come before the Annual Meeting. If any other matter not mentioned in this
Prospectus is property brought before the Annual Meeting, the persons named in
the enclosed form of proxy will have discretionary authority to vote all proxies
with respect thereto in accordance with their judgment and applicable law.
STOCKHOLDERS ARE URGED TO DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN
THE ENCLOSED ENVELOPE. PROMPT RESPONSE IS HELPFUL AND YOUR COOPERATION WILL BE
APPRECIATED.
THE PREPACKAGED PLAN
BRIEF EXPLANATION OF REORGANIZATION UNDER THE BANKRUPTCY CODE. Chapter 11
is the principal business reorganization chapter of the Bankruptcy Code.
Pursuant to chapter 11, a debtor attempts to reorganize its business for the
benefit of its creditors, stockholders, and other parties-in-interest. In
furtherance of this goal, the Bankruptcy Code provides that a debtor may
continue to operate its business and remain in possession of its property as a
"debtor in possession" unless the Bankruptcy Court orders the appointment of a
trustee. Also, upon the filing of a petition for reorganization under chapter
11, section 362 of the Bankruptcy Code generally provides, among other things,
for an automatic stay of all attempts to collect pre-petition claims from the
debtor or otherwise interfere with its property or business. Except as otherwise
ordered by the Court, the automatic stay remains in full force and effect until
confirmation of a plan of reorganization.
Upon the filing of a petition under Chapter 11 of the Bankruptcy Code, all
creditors and equity interest holders have standing to be heard in the Chapter
11 proceedings pursuant to Section 1109(b) of the Bankruptcy Code. If
appropriate, the United States Trustee Office will establish an official
committee of unsecured creditors, bondholders, and/or equity interest holders,
the powers and duties of which are governed by Section 1103 of the Bankruptcy
Code.
The consummation of a plan of reorganization is the principal objective of a
chapter 11 reorganization case. The plan sets forth the means for satisfying the
holders of claims against and interests in the debtor. Confirmation of a plan of
reorganization by the Bankruptcy Court makes the plan binding upon the debtor,
any issuer of securities under the plan, any person acquiring property under the
plan, and any creditor, equity security holder or general partner of the debtor.
Subject to certain limited exceptions, the confirmation order discharges the
debtor from any debt that arose prior to the date of confirmation of the plan
and substitutes therefor the obligations specified under the confirmed plan. If
the Company does not receive the 90% Requisite Exchange Acceptance and Requisite
Consents, but does receive the Requisite Prepackaged Plan Acceptances from the
Senior Debentures then the Company intends to file a voluntary petition for
reorganization under chapter 11 of the Bankruptcy Code. The Company currently
estimates that its total expenses to be incurred in connection with the
Recapitalization will be approximately $4 million if the 90% Requisite Exchange
Acceptances are received and approximately $4.5 million if the Recapitalization
is effected through the Prepackaged Plan.
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The Prepackaged Plan provides specified distributions to the various Classes
of holders of Claims against and Interests in the Company. The Company believes
the Prepackaged Plan provides consideration to all Classes of Creditors and
Equity Holders that reflects an appropriate resolution of their Claims against
and Interests in the Company taking into account the differing nature and
priority (including applicable contractual subordination) of such Claims and
Interests.
The Bankruptcy Court must find, however, that a number of statutory tests
have been met before it may confirm the Prepackaged Plan. See "Confirmation
Standards." Many of these tests are designed to protect the interests of holders
of Claims and Interests who do not vote to accept the Prepackaged Plan but who
will be bound by the provisions of the Prepackaged Plan if it is confirmed by
the Bankruptcy Court.
THE FOLLOWING IS A SUMMARY OF CERTAIN OF THE MORE SIGNIFICANT MATTERS TO
OCCUR EITHER PURSUANT TO OR IN CONNECTION WITH CONFIRMATION OF THE PREPACKAGED
PLAN, A COPY OF WHICH ACCOMPANIES THIS PROSPECTUS AS APPENDIX A AND TO WHICH
REFERENCE SHOULD BE MADE FOR A FULL STATEMENT OF ITS TERMS. THIS SUMMARY ONLY
HIGHLIGHTS CERTAIN SUBSTANTIVE PROVISIONS OF THE PREPACKAGED PLAN AND IS NOT,
NOR IS IT INTENDED TO BE, A COMPLETE DESCRIPTION OF, OR A SUBSTITUTE FOR, A FULL
AND COMPLETE READING OF THE PREPACKAGED PLAN, WHICH ALL HOLDERS OF CLAIMS AND
INTERESTS ARE URGED TO REVIEW CAREFULLY. THE PREPACKAGED PLAN, IF CONFIRMED,
WILL BE BINDING UPON THE COMPANY AND ALL HOLDERS OF CLAIMS AND INTERESTS. THIS
SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE PREPACKAGED PLAN. IN
ADDITION, REPRESENTATIVES OF HOLDERS OF A SIGNIFICANT AMOUNT (ESTIMATED AT
APPROXIMATELY 70%) OF THE OUTSTANDING DEBENTURES HAVE EXPRESSED AN INTENT TO
VOTE IN FAVOR OF THE EXCHANGE OFFER AND THE PREPACKAGED PLAN.
For a discussion of certain risks associated with the Prepackaged Plan and
the transactions contemplated thereunder, see the section titled "Risk Factors."
You are also urged to consult your counsel about the Prepackaged Plan and its
effect on your legal rights before voting. IN THE OPINION OF THE COMPANY, THE
TREATMENT OF CREDITORS AND EQUITY HOLDERS UNDER THE PREPACKAGED PLAN
CONTEMPLATES A GREATER RECOVERY THAN THAT WHICH IS LIKELY TO BE ACHIEVED UNDER
THE LIQUIDATION OF THE COMPANY UNDER THE CODE. ACCORDINGLY, THE COMPANY BELIEVES
THAT CONFIRMATION OF THE PREPACKAGED PLAN WOULD BE IN THE BEST INTERESTS OF ALL
CREDITORS AND EQUITY HOLDERS AND RECOMMENDS THAT YOU VOTE TO ACCEPT THE
PREPACKAGED PLAN.
The Company is unaware of any material transactions which prior to the
filing under Chapter 11 may constitute voidable preferences or fraudulent
conveyances.
TREATMENT OF UNCLASSIFIED CLAIMS. The Bankruptcy Code does not require
classification of certain priority claims against a debtor. In this case, these
unclassified claims include Administrative Claims and Tax Claims.
1. ADMINISTRATIVE CLAIMS. An "Administrative Claim" is any actual and
necessary cost or expense incurred during the pendency of the Company's Chapter
11 Case. These Claims include, without limitation, (a) any actual and necessary
costs and expenses of (i) preserving the estate, (ii) operating the business
during the Chapter 11 Case, (iii) managing, preserving or selling of assets
during the Chapter 11 Case, and (iv) administering, prosecuting or defending
claims by or against the Company and for making distributions under the
Prepackaged Plan; (b) any indebtedness or obligations incurred or assumed by the
Company as a debtor in possession in connection with the conduct of its business
or for the acquisition or lease of property or for the rendition of services;
(c) any allowances of compensation or reimbursement of expenses of professionals
retained by the Company to the extent allowed by a Final Order; and (d) any fees
or charges assessed against the estate under Chapter 123 of Title 28 of the
United States Code. Pursuant to
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the Prepackaged Plan, each holder of an Administrative Claim that is an Allowed
Claim will receive cash equal to the unpaid portion of such Allowed
Administrative Claim on the Effective Date (or such later date on which such
Claim becomes an Allowed Claim). However, any Administrative Claim representing
a liability incurred in the ordinary course of business by the Company during
the Chapter 11 Case, including in its capacity as a debtor in possession, will
be paid by the Company in the ordinary course of business and in accordance with
the terms and conditions of the particular transaction and any agreements
relating thereto.
2. TAX CLAIMS. A "Tax Claim" is that portion of any Claim for unpaid taxes
which is entitled to priority in right of payment under section 507(a)(7) of the
Code. The Company anticipates that it will be current on its tax obligations at
the time it commences its Chapter 11 Case. In the event, however, that there are
tax obligations as of the Petition Date, each holder of a Tax Claim that holds
an Allowed Claim will receive cash equal to the unpaid portion of such Allowed
Tax Claim on the Effective Date (or such later date on which such Claim becomes
an Allowed Claim), except that the Company may elect to pay such holder of an
Allowed Tax Claim deferred cash payments in equal quarterly installments, with
interest, over a period in each case not to exceed six years after the date of
assessment of such Tax Claim, of a value, as of the Effective Date, equal to the
allowed amount of such Tax Claim.
Notwithstanding the above treatment of Allowed Tax Claims, the Company is
appealing to the IRS regarding material audit adjustments proposed by the IRS
for the tax years ended December 31, 1989, 1990 and 1991. The Company is
prepared to pursue all available administrative and judicial appeal procedures
with regard to this matter. The Company has been advised that resolution of this
dispute with the IRS could take up to five years. Under the Prepackaged Plan,
the rights of the IRS and the amount of any such Claim will be resolved or
adjudicated as if the Chapter 11 Case had not been commenced. Any Claim in
connection therewith will survive the Effective Date and the Consummation of the
Prepackaged Plan as if the Chapter 11 Case had not been commenced, and will not
be discharged pursuant to Section 9.1 of the Prepackaged Plan and section 1141
of the Bankruptcy Code.
CLASSIFICATION AND TREATMENT OF CLAIMS AND INTERESTS UNDER THE PREPACKAGED
PLAN. Section 1122 of the Bankruptcy Code requires that the Prepackaged Plan
classify the Claims of the Company's Creditors and the Interests of its Equity
Holders. The Bankruptcy Code also provides that the Prepackaged Plan may place a
Claim or Interest of a Creditor or Equity Holder in a particular Class only if
such Claim or Interest is substantially similar to the other Claims or Interests
of such Class. The Company believes that its Claims and Interests have been
appropriately classified in the Prepackaged Plan. The Company believes separate
classification of the unsecured Claims of the holders of Unliquidated or
Contingent Claims, General Unsecured Claims and Subordinated Debentures is
appropriate. The separate classification for Unliquidated or Contingent Claims
is necessary because of the nature of such Claims. This will allow for the
recapitalization of the Company in the quickest and least costly manner.
Moreover, the separate classification recognizes the potential for contractual
subordination to which the holders of Senior Debentures and Subordinated
Debentures are subject. To the extent that the Bankruptcy Court finds a
different classification is required for the Prepackaged Plan to be confirmed,
the Company would seek (i) to modify the Prepackaged Plan to provide for
whatever reasonable classification might be required for confirmation, and (ii)
to use the acceptances received from any Creditor or Equity Holder pursuant to
this solicitation for the purpose of obtaining the approval of the Class or
Classes of which such Creditor or Equity Holder ultimately is deemed to be a
member. Any such reclassification of Creditors or Equity Holders, although
subject to the notice and hearing requirements of the Bankruptcy Code, could
adversely affect the Class in which such Creditor or Equity Holder was initially
a member, or any other Class under the Prepackaged Plan, by changing the
composition of such Class and the vote required for approval of the Prepackaged
Plan. There can be no assurance that the Bankruptcy Court, after finding that a
classification was inappropriate and requiring a reclassification, would approve
the Prepackaged Plan based upon such reclassification. Except to the extent that
modification of classification in the Prepackaged Plan adversely affects the
treatment of a Creditor or Equity Holder and requires resolicitation, the
Company will, in
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accordance with the Bankruptcy Code and the Bankruptcy Rules, seek a
determination by the Bankruptcy Court that acceptance by any Creditor or an
Equity Holder of the Prepackaged Plan pursuant to this solicitation will
constitute a consent to the Prepackaged Plan's treatment of such Creditor or
Equity Holder regardless of the Class to which such Creditor or Equity Holder is
ultimately deemed to be a member. See Risk Factors--Classification of Claims and
Interests.
The Bankruptcy Code also requires that the Prepackaged Plan provide the same
treatment for each Claim or Interest of a particular Class unless the holder of
a particular Claim or Interest agrees to a less favorable treatment of its Claim
or Interest. The Company believes it has complied with the requirements of equal
treatment. To the extent that the Bankruptcy Court finds that the Prepackaged
Plan does not satisfy such requirements, the Bankruptcy Court could deny
Confirmation of the Prepackaged Plan if the Creditors or Equity Holders affected
do not otherwise consent to the treatment afforded them under the Prepackaged
Plan.
Classes that are Impaired under the Prepackaged Plan are entitled to vote to
accept or reject the Prepackaged Plan. As a general matter, a Class of Claims or
Interests is considered to be "unimpaired" under a plan of reorganization if (i)
the plan does not alter the legal, equitable and contractual rights of the
holders of such Claims or Interests, or (ii) the plan provides for full cash
satisfaction of such Claims or Interests. Under the Bankruptcy Code, holders of
Claims in the Unimpaired Classes are conclusively presumed to have accepted the
Prepackaged Plan. Holders of Claims or Interests which do not receive or retain
anything under the Prepackaged Plan are deemed to have rejected the Prepackaged
Plan requiring Confirmation pursuant to Section 1129(b) of the Bankruptcy Code.
The following Classes of Claims are Unimpaired under the Prepackaged Plan
and, therefore, the holders of such Claims are not entitled to vote on the
Prepackaged Plan:
Administrative Claims and Tax Claims (see "Treatment of Administrative and
Priority Claims")
Class 1--Priority Claims
Class 2--Secured Claims
Class 3--Unliquidated or Contingent Claims
The following Classes of Claims and Interests are Impaired under the
Prepackaged Plan and, therefore, the holders of such Claims and Interests are
entitled to vote on the Prepackaged Plan:
Class 5--General Unsecured Claims
Class 6--Claims of Holders of Subordinated Debentures
Class 7--Interests of Holders of Preferred Stock
Class 8--Interests of Holders of Class A Common Stock
The holders of Affiliates' Claims do not receive or retain anything under
the Prepackaged Plan and although they are deemed to reject the Prepackaged
Plan, the Company will cause the holders of such Claims to support the
Prepackaged Plan. The holders of warrants will not receive or retain anything
under the Prepackaged Plan and are deemed to reject the Prepackaged Plan.
Subsequent to the filing by the Company of its Chapter 11 Case, the
Bankruptcy Court will determine whether sufficient votes to accept the
Prepackaged Plan have been obtained from the holders of Claims and Interests in
each Impaired Class. An Impaired Class of Claims will be determined to have
accepted the Prepackaged Plan if votes to accept the Prepackaged Plan are cast
by the holders of at least two-thirds of the dollar amount and more than
one-half in number of Claims in such Class that have voted on the Prepackaged
Plan. An Impaired Class of Interests will be determined to have accepted the
Prepackaged Plan if votes to accept the Prepackaged Plan are cast by the holders
of at least two-thirds in amount of Interests in such Class that have voted on
the Prepackaged Plan.
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The Prepackaged Plan divides Claims against the Company into six classes and
puts Interests in the Company into three Classes. Distributions will be made to
persons holding Claims and Interests in various Classes as described below.
CLASS 1--PRIORITY CLAIMS. Class 1 consists of all Priority Claims excluding
Tax Claims. The Company estimates that on the Effective Date, Priority Claims
will be approximately $ . Under the Prepackaged Plan, all Allowed Priority
Claims, to the extent then due and owing, will be paid in full in Cash on the
Effective Date unless the holder of such Claims and the Company agree to a
different treatment. Any Allowed Priority Claims not due on the Effective Date
will be paid in full in Cash when such Claims become due. Class 1 Claims are
Unimpaired and holders of Class 1 Claims are not entitled to vote on the
Prepackaged Plan.
CLASS 2--SECURED CLAIMS. Class 2 consists of each Claim secured by a
security interest in or lien upon property of the Company, including, but not
limited to, other Claims secured by (i) mortgages or trust deeds on real
property, (ii) mechanics' or materialmen's liens, (iii) security deposits, or
(iv) liens on miscellaneous personal property such as office furniture,
telephone systems, copiers and mailing equipment. Each Class 2 Secured Claim
will be treated for all purposes of the Prepackaged Plan and under the Code as a
separate Subclass of Class 2. Unless otherwise agreed to by the parties, either
(a) the legal, equitable and contractual rights of each holder of an Allowed
Claim in any Subclass of Class 2 will be unaltered by the Prepackaged Plan, or
(b) at the option of the Company, any Allowed Claim in any Subclass of Class 2
will be treated in any other manner that will result in such Allowed Claim being
deemed Unimpaired. To the extent not previously paid, any accrued and unpaid
interest due on the Secured Claims will be paid in cash on the Effective Date.
Class 2 Claims are Unimpaired and holders of such Class 2 Claims are not
entitled to vote on the Prepackaged Plan.
CLASS 3--UNLIQUIDATED OR CONTINGENT CLAIMS. Class 3 consists of all Claims
of holders of Unliquidated or Contingent Claims, including but not limited to,
Litigation Claims. The legal, equitable and contractual rights of the holders of
Class 3 Claims will not be affected by the Prepackaged Plan. Class 3 Claims will
survive the discharge provided for in Section 9.1 of the Prepackaged Plan and
section 1141 of the Code and the rights of a holder of such Claim, including
payment, if any, will be determined in the manner in which the amount of such
Claim and the rights of the holder of such Claim would have been resolved or
adjudicated if the Chapter 11 Case had not been commenced. Class 3 Claims are
Unimpaired and holders of Class 3 Claims are not entitled to vote on the
Prepackaged Plan.
CLASS 4--AFFILIATES CLAIMS. Class 4 consists of all Net Claims of
Affiliates. The holders of Allowed Net Claims in Class 4 will receive no
distributions nor retain any property under the Prepackaged Plan on account of
their Allowed Net Claims. Although, such holders are deemed to have rejected the
Prepackaged Plan, the Company will cause such holders to accept the Prepackaged
Plan.
CLASS 5--GENERAL UNSECURED CLAIMS. Class 5 consists of all general
unsecured Claims of Creditors against the Company, however arising, and not
included in any other Class in the Prepackaged Plan or otherwise provided for in
the Prepackaged Plan, including, but not limited to, liquidated non-Contingent
Claims, Senior Debentures, and Claims for damages resulting from the rejection
of leases or executory contracts. On the Effective Date, the Company anticipates
that Allowed Class 5 Claims will aggregate approximately $173 million, of which
$164.6 million relate to the Claims of holders of the Senior Debentures.
Provided Classes 6, 7 and 8 accept the Prepackaged Plan, without regard to the
subordination provisions in the Senior Debenture Indenture but giving effect to
the rights of Senior Debt, each holder of an Allowed Claim in Class 5 will
receive its pro rata share of 9,359,208 shares of Common Stock so that
collectively holders of Class 5 Claims will hold 80% of the outstanding shares
of the Common Stock of the Company on the Effective Date. If Class 6, 7, or 8
fail to accept the Prepackaged Plan, the Prepackaged Plan will be automatically
amended pursuant to Article V of the Prepackaged Plan. As a result, the holders
of the Senior Debentures will enforce the subordination provisions of the Senior
Debenture Indenture with respect to such rejecting Class of Claims and/or
Interests and any distribution due such rejecting
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Class of Claims or Interests under the Prepackaged Plan will be given to the
holders of Class 5 Claims. Class 5 Claims are Impaired; consequently, such
holders are entitled to vote on the Prepackaged Plan.
CLASS 6--CLAIMS OF HOLDERS OF SUBORDINATED DEBENTURES. Class 6 consists of
all Claims of holders of Subordinated Debentures. On the Effective Date, the
Company anticipates that Allowed Class 6 Claims will aggregate approximately
$41.1 million. Provided that holders of Subordinated Debentures vote to accept
the Prepackaged Plan, each holder of an Allowed Class 6 Claim will receive its
pro rata share of 1,169,901 shares of Common Stock so that collectively holders
of Class 6 Claims will hold 10% of the outstanding shares of the Common Stock of
the Company on the Effective Date. If holders of Class 6 Claims fail to accept
the Prepackaged Plan, the holders of Allowed Claims in Class 6 will receive no
distributions nor will they retain any property under the Prepackaged Plan. The
distributions which would otherwise have been made to holders of Allowed Class 6
Claims will be made to holders of Allowed Claims in Class 5. Class 6 Claims are
Impaired; consequently, such holders are entitled to vote on the Prepackaged
Plan.
CLASS 7--INTERESTS OF HOLDERS OF PREFERRED STOCK. Class 7 consists of all
Interests of holders of Preferred Stock. Provided that holders of Class 7
Interests vote to accept the Prepackaged Plan, after giving effect to the
Capital Stock Combination and the Reverse Stock Split, each holder of an Allowed
Interest in Class 7 will be deemed to hold on a one and three quarter for one
(1.75:1) basis Common Stock. After the dilutive effect of the distribution of
Common Stock under the Prepackaged Plan, collectively holders of Allowed Class 7
Interests will hold 5.8% of the outstanding shares of the Common Stock of the
Company on the Effective Date. If holders of Class 7 Interests fail to accept
the Prepackaged Plan, such holders will receive no distributions nor will they
retain any property under the Prepackaged Plan. The distributions which would
otherwise have been made to the holders of Allowed Class 7 Interests will be
made to the holders of Allowed Claims in Class 5. Class 7 Interests are
Impaired; consequently, such holders are entitled to vote on the Prepackaged
Plan.
CLASS 8--INTERESTS OF HOLDERS OF CLASS A COMMON STOCK. Class 8 consists of
all Interests of holders of Class A Common Stock. Provided that holders of Class
8 Interests vote to accept the Prepackaged Plan, after giving effect to the
Capital Stock Combination and the Reverse Stock Split, each holder of an Allowed
Interest in Class 8 will be deemed to hold on a one for one (1:1) basis Common
Stock. After the dilutive effect of the distribution of Common Stock under the
Prepackaged Plan, collectively holders of Allowed Class 8 Interests will hold
4.2% of the outstanding shares of the Common Stock of the Company on the
Effective Date. If holders of Class 8 Interests fail to accept the Prepackaged
Plan, such holders will receive no distributions nor will they retain any
property under the Prepackaged Plan. The distributions which would otherwise
have been made to holders of Allowed Class 8 Interests will be made to holders
of Allowed Claims in Class 5. Class 8 Interests are Impaired; consequently, such
holders are entitled to vote on the Prepackaged Plan.
CLASS 9--INTERESTS OF HOLDERS OF WARRANTS. Class 9 consists of all
Interests of Holders of warrants. The warrants have an exercise price of $.25
per share, and are exercisable over a ten year period ending in 2004, vesting in
equal installments over five years. After giving effect to the Reverse Stock
Split, the exercise price would be $25.00. Consequently, the warrants have no
economic value and, consequently, will be cancelled on the Effective Date. Class
9 Interests are Impaired. Because holders of Class 9 Interests will receive no
distributions and will retain no property under the Prepackaged Plan, such
holders are deemed to have rejected the Prepackaged Plan and are not entitled to
vote on the Prepackaged Plan.
Distributions of Common Stock to holders of Outstanding Debentures will be
based upon the principal amount of the Outstanding Debentures as of the Petition
Date plus interest accrued through the Petition Date at the applicable
non-default interest rate.
MEANS FOR IMPLEMENTATION OF THE PREPACKAGED PLAN. On or prior to the
Effective Date (except as otherwise indicated), the following actions will be
effectuated:
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AMENDMENTS TO CERTIFICATE OF INCORPORATION AND BYLAWS. The Bankruptcy Code
requires that upon the confirmation of a plan of reorganization a debtor's
charter documents must contain certain provisions including a provision
prohibiting the issuance of non-voting equity securities. To comply with this
requirement and to effect certain other changes, including the Capital Stock
Combination and the Reverse Stock Split and the authorization of 18 million
shares of Common Stock, the Prepackaged Plan provides that the Company will file
its Restated and Amended Certificate of Incorporation with the office of the
Secretary of State of the State of Delaware in the form of Exhibit 1 attached to
the Prepackaged Plan. The Prepackaged Plan also provides for the adoption of the
Amended and Restated By-Laws in the form of Exhibit 2 attached to the
Prepackaged Plan.
CAPITAL STOCK COMBINATION. To the extent necessary to effectuate the
Prepackaged Plan, the Company will effect the Capital Stock Combination whereby
the Class A Common Stock, Class B Common Stock (none of which is outstanding),
and Preferred Stock will be combined into one (1) class and series designated
"Common Stock." Pursuant to the Capital Stock Combination each share of
outstanding Preferred Stock will be reclassified to be one and three quarter
(1.75) shares of Common Stock and each outstanding share of Class A Common Stock
will be reclassified to be one share of Common Stock. The Common Stock will have
the same rights as the Class A Common Stock had prior to the Capital Stock
Combination.
REVERSE STOCK SPLIT. To the extent necessary to effectuate the Prepackaged
Plan, the Company will effect a one for one hundred (1:100) reverse stock split
of the outstanding Common Stock immediately following the Capital Stock
Combination.
CANCELLATION OF SECURITIES AND AGREEMENTS. The Company will cancel all the
Outstanding Debentures, the Class A Common Stock, the Class B Common Stock (none
of which is outstanding), the Preferred Stock and the warrants. In addition, the
Senior Debenture Indenture and the Subordinated Debenture Indenture will be
cancelled and will have no further force and effect.
ISSUANCE OF NEW SECURITIES. The Company will issue 11,772,691 shares of
Common Stock.
SUBORDINATION. Provided that Classes 6, 7 and 8 vote to accept the
Prepackaged Plan, the classification and manner of satisfying all Claims and
Interests and the respective distributions and treatments under the Prepackaged
Plan do not give effect to the contractual, legal and equitable subordination
rights of the holders of Senior Debentures; however, such rights have been
agreed to be settled, compromised and released under the Prepackaged Plan.
Accordingly, without limitation, the distributions to the holders of Claims in
Class 6 and the Interests in Classes 7 and 8 will not be subject to levy,
garnishment, attachment or other legal process by the holders of Senior
Debentures. The Confirmation Order will permanently enjoin, effective as of the
Effective Date, all persons and entities from enforcing or attempting to enforce
any such contractual, legal and equitable subordination rights compromised and
settled under the Prepackaged Plan. For a description of the contractual
subordination provisions of the Senior Debentures and the Subordinated
Debentures, see "Description of Outstanding Debentures."
EXEMPTION FROM SECURITIES REGISTRATION. The shares of Common Stock issued
pursuant to the Prepackaged Plan will be issued pursuant to the exemption from
securities registration contained in section 1145 of the Code.
DISTRIBUTIONS UNDER THE PREPACKAGED PLAN. The Prepackaged Plan provides
that the Company may designate an entity or entities to serve as the Exchange
Agent to distribute all the property to be distributed under the Prepackaged
Plan.
GENERAL. Distributions to holders of Allowed Claims will be made at the
addresses set forth on the respective proofs of claim filed by such holders or,
if no such proof of claim has been required to be filed, at the address of the
holder of such Claim as indicated on the records of the Company. Distributions
on account of Claims that are Allowed as of the Effective Date and are entitled
to receive distributions under
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the Prepackaged Plan will be made on the Effective Date. Distributions to
holders of Senior Debentures will be made on the Effective Date or as soon as
practicable thereafter. Provided holders of Subordinated Debentures vote to
accept the Prepackaged Plan, distributions to such holders will be made on the
Effective Date or as soon as practicable thereafter. Provided that holders of
Preferred Stock and Class A Common Stock vote to accept the Prepackaged Plan,
distributions will be made upon presentment to the Exchange Agent of
certificates evidencing such Preferred Stock and Class A Common Stock.
DISTRIBUTION RECORD DATE. As of the close of business on June , 1997 (the
"Distribution Record Date"), the respective transfer registers for the Senior
Debentures, Subordinated Debentures, Preferred Stock and Class A Common Stock
(collectively, "Impaired Securities") as maintained by the Company, the
respective Indenture Trustees, or their respective agents, will be closed and
the transfers of the Impaired Securities, or any interest therein, will be
prohibited. The Exchange Agent will have no obligation to recognize the transfer
of any Impaired Securities occurring after the Distribution Record Date and will
be entitled to recognize and deal only with those holders of record as of the
close of business on the Distribution Record Date.
SURRENDER OF INSTRUMENTS--DEBENTURE HOLDERS. As a condition to
participation under the Prepackaged Plan, each holder of Senior Debentures and
Subordinated Debentures, provided that Class 6 voted to accept the Prepackaged
Plan, that desires to receive the Common Stock to be distributed on account of
an Allowed Claim based on such debenture will have to surrender its Outstanding
Debentures to the Company, or its designee, and execute and deliver such other
documents as are necessary. If a holder does not surrender the Outstanding
Debentures or provide an affidavit that such debenture was lost, in a form
acceptable to the Company, within one year of the Effective Date, then no
distribution will be made to such holder whose Allowed Claim is based on such
Outstanding Debentures. Such holder will be deemed to forfeit all rights under
the Prepackaged Plan.
UNCLAIMED DISTRIBUTIONS. If any Allowed Claim holders' distribution is
returned to the Exchange Agent as undeliverable, no further distributions will
be made to that holder unless and until the Exchange Agent is notified in
writing of the holder's then-current address. Undeliverable distributions will
remain in the possession of the Exchange Agent. If the person is located within
one year of the Effective Date, then the securities will be distributed to such
person; otherwise, the securities will become the property of and will be
released to the Company.
FRACTIONAL SHARES. Fractional shares of Common Stock resulting from the
Capital Stock Combination or Reverse Stock Split and the exchange of Outstanding
Debentures for Common Stock will be dealt with as follows:
CAPITAL STOCK COMBINATION AND REVERSE STOCK SPLIT. If the Capital Stock
Combination or Reverse Stock Split creates a fraction of a share of
Common Stock, holders of an Allowed Class 7 or 8 Interest, respectively,
will not receive or be deemed to hold any fractional shares. All
fractional shares which would otherwise have been created by the Capital
Stock Combination and Reverse Stock Split will be aggregated and after
the Effective Date, the shares will be sold in the market by the Exchange
Agent and the net proceeds thereof disbursed pro rata to the holders of
Allowed Class 7 and 8 Interests based upon the fraction of the shares
each holder would have been entitled to receive or would have been deemed
to hold had the Company authorized the issuance of fractional shares.
DEBENTURE EXCHANGE. Whenever any distribution of a fraction of a share of
Common Stock to any holder of an Allowed Class 5 or Class 6 Claim would
otherwise result from the exchanges all such fractional shares will be
aggregated and after the Effective Date, the shares will be sold in the
market by the Exchange Agent and the net proceeds thereof disbursed
prorata to the holders of Allowed Class 5 and Class 6 Claims based upon
the fraction of the shares each such holder would
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have been entitled to receive or deemed to hold had the Company
authorized the issuance of fractional shares.
MISCELLANEOUS DISTRIBUTION PROVISIONS. In connection with the Prepackaged
Plan, to the extent applicable, the Exchange Agent will comply with all tax
withholding and reporting requirements imposed on it by any governmental unit,
and all distributions pursuant to the Prepackaged Plan will be subject to such
withholding and reporting requirements.
SUMMARY OF OTHER PROVISIONS OF THE PREPACKAGED PLAN.
LIMITED RELEASE OF DIRECTORS, OFFICERS AND EMPLOYEES. The Prepackaged Plan
provides for the release by the Company of the present and former directors and
officers of the Company from certain claims related to their respective
employment or service with the Company. The releases extend to claims by or
through the Company other than (i) in respect to any loan, advance or similar
payment of the Company to any such person; (ii) in respect of any contractual
obligation owed by such person to the Company; or (iii) to the extent based upon
or attributable to such person gaining a personal profit to which such person
was not legally entitled, including, without limitation, profits made from the
purchase or sale of equity securities of the Company which are recoverable by
the Company pursuant to section 16(b) of the Exchange Act. The Company does not
believe that there are circumstances which would give rise to valid claims
against such officers or directors.
INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES. The Prepackaged Plan
provides that the obligations of the Company to indemnify any person serving at
any time on or prior to the Effective Date as one of its directors, officers or
employees by reason of such person's service in such capacity, to the extent
provided in the Company's constituent documents or by written agreement or
Delaware law, will be treated as executory contracts that are assumed by the
Company as of the Effective Date. Accordingly, such indemnification obligations
will survive unimpaired and unaffected by entry of the Confirmation Order,
irrespective of whether the indemnification is owed for an act or event
occurring before or after the filing of the Chapter 11 Case. The Company is
unaware of any pending claims that may have to be indemnified.
RELEASES OF CLAIMS. The Prepackaged Plan provides that on the Effective
Date, in consideration for the treatment accorded to the holders of Impaired
Claims and Interests under the Prepackaged Plan, each holder of such Impaired
Claim or Interest will be deemed to have released the Company from any and all
causes of action and claims, whether based on tort, fraud or contract, which
they individually or collectively possess.
EXECUTORY CONTRACTS AND UNEXPIRED LEASES. Under the Bankruptcy Code, the
Company may assume or reject executory contracts and unexpired leases. As a
general matter, an "executory contract" has been determined to be a contract
under which material performance (other than solely the payment of money)
remains to be made by each party. On the Effective Date, all executory contracts
and unexpired leases of the Company will be deemed assumed in accordance with
the provisions and requirements of section 365 and 1123 of the Bankruptcy Code,
except those executory contracts and unexpired leases that (i) have been
rejected by order of the Bankruptcy Court, (ii) are the subject of a motion to
reject pending on the Effective Date, (iii) are identified on a list to be filed
with the Bankruptcy Court on or before the Confirmation Date, as to be rejected,
or (iv) are rejected pursuant to the terms of the Prepackaged Plan. All proofs
of claims with respect to Claims arising from rejection must be filed with the
Bankruptcy Court within the time set by any Final Order rejecting an executory
contract or unexpired lease or thirty (30) days after the Confirmation Date. Any
Claims not filed within such time will be forever barred from being asserted
against the Company. All such Claims will be treated as General Unsecured Claims
in Class 5.
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Contracts or leases entered into after the Petition Date will be performed
by the Company in the ordinary course of business. Without limiting the
generality of the foregoing, the agreements set forth on Exhibit 4 of the
Prepackaged Plan will be deemed assumed immediately prior to the Effective Date:
RETENTION OF JURISDICTION BY THE BANKRUPTCY COURT. Under the terms of the
Prepackaged Plan, the Court will retain jurisdiction in the following instances
notwithstanding entry of the Confirmation Order or the occurrence of the
Effective Date. The Bankruptcy Court will retain exclusive jurisdiction over the
reorganization proceedings relating to the Company for the purposes of making
determinations of (i) allowance, disallowance, determination, liquidation,
classification, estimation, establishment of priority or status of any Claim,
including Administrative Claims, and the resolution of objections to the
allowance of Claims; (ii) all matters related to the assumption, assignment and
assumption or rejection of any executory contract or unexpired lease to which
the Company is a party or to which the Company may be liable; (iii) payments due
under the Prepackaged Plan and performance of the provisions of the Prepackaged
Plan; (iv) all pending applications, motions, adversary proceedings and
contested or litigated matters; (v) such orders as may be necessary or
appropriate to implement or consummate the provisions of the Prepackaged Plan
and all agreements or documents created in connection with the Prepackaged Plan
or this Prospectus; (vi) all controversies arising in connection with the
Prepackaged Plan and other matters provided for in the Confirmation Order; (vii)
any injunctions or orders necessary or appropriate to restrain interference by
any entity with consummation or enforcement of the Prepackaged Plan; (viii) such
orders as may be appropriate in the event the Confirmation Order is stayed,
revised, revoked, modified or vacated: (ix) any other matter that may arise in
connection with or relate to the Prepackaged Plan, this Prospectus, the
Confirmation Order or any document created in connection with the Prepackaged
Plan or Prospectus; and (x) all other matters not inconsistent with the
Bankruptcy Code.
RESOLUTION OF CONTESTED CLAIMS AND INTERESTS. With respect to holders of
Unimpaired Claims, their legal, equitable and contractual rights will be
unaltered by the Prepackaged Plan. Consequently, it is anticipated that any
disputes with respect to such Claims will be resolved outside of the Chapter 11
Case. All Unliquidated or Contingent Claims, including current litigation
against the Company will be unaffected by the Chapter 11 Case and will remain
subject to all legal and equitable defenses of the Company. Nothing under the
Prepackaged Plan will affect the Company's rights, including, but not limited
to, all rights in respect of legal and equitable defenses to or setoffs or
recoupments against such Unimpaired Claims, except as expressly provided in the
Prepackaged Plan.
After the Confirmation Date, only the Company will have the authority to
file objections to Claims and Interests or settle, compromise, withdraw or
litigate to judgment objections to Claims and Interests. As of the Confirmation
Date, the Company can settle or compromise Contested Claims and Contested
Interests without Bankruptcy Court approval. The Company reserves the right to
ask the Bankruptcy Court to estimate any contingent Contested Claim or Interest.
The estimated amount will be either the allowed amount or a maximum limitation
on such Claim or Interest, as determined by the Bankruptcy Court. If the
estimated amount constitutes a maximum limitation, the Company can pursue a
supplemental proceeding to object to the payment of such Claim or Interest.
DISCHARGE. Except as specifically provided for in the Prepackaged Plan, the
Company will, upon Consummation, be discharged from all Impaired Claims and
Impaired Interests arising prior to the Confirmation Date of the Prepackaged
Plan. The effect of discharging an Impaired Claim or Impaired Interest is to
release the Company in full from any obligations to make payments with respect
to such Impaired Claim or Impaired Interest, other than those specifically
provided by the Prepackaged Plan, and to prohibit any collection efforts by the
holder of the Impaired Claim or Impaired Interest.
BINDING EFFECT. The provisions of the Prepackaged Plan, if confirmed, will
bind all Creditors and Equity Holders regardless of whether they accept the
Prepackaged Plan. The distributions provided for in the Prepackaged Plan will be
in exchange for and in complete satisfaction, discharge and release of all
Impaired Claims against and Impaired Interests in the Company or any of its
assets or properties,
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including any Impaired Claim or Impaired Interest accruing after the Petition
Date and prior to the Confirmation Date. All holders of Impaired Claims and
Interests will be precluded from asserting any Claim against the Company or its
assets or properties or other interests in the Company based on any transaction
or other activity of any kind that occurred prior to the Confirmation Date,
except to the extent such Claim is Unimpaired and reinstated pursuant to the
Prepackaged Plan or as otherwise provided in the Prepackaged Plan.
MODIFICATION OF THE PREPACKAGED PLAN. Amendments to the Prepackaged Plan
may be made by the Company either before or after the Petition Date. Any
amendments or modifications to the Prepackaged Plan made after the Petition Date
and before or after the Confirmation Date shall be made in accordance with the
provisions of section 1127 of the Bankruptcy Code and the Bankruptcy Rules.
At all times, but except as otherwise discussed herein in the event of a
cram down, the Company reserves the right in its sole discretion not to file the
Prepackaged Plan, or, if it files the Prepackaged Plan, to withdraw the
Prepackaged Plan at any time prior to confirmation, in which case the
Prepackaged Plan will be deemed to be null and void. In such an event, nothing
contained in the Prepackaged Plan will be deemed to constitute a waiver or
release of any claims by or against the Company or any other person or to
prejudice in any manner the rights of the Company or any other person.
INTENDED ACTIONS DURING THE CHAPTER 11 CASE. In addition to seeking
Confirmation of the Prpackaged Plan, during the pendency of the Chapter 11 Case,
the Company intends to seek relief from the Bankruptcy Court as to various
matters, certain of which are described below. While the Company believes each
of the requests, if granted, would facilitate its Chapter 11 Case, there can be
no assurance that the Bankruptcy Court will grant any such relief.
PROVISIONS FOR EMPLOYEES. The Company believes that salaries or wages, as
the case may be, accrued vacation, health benefits, severance benefits and
similar employee benefits should be unaffected by the filing of the Chapter 11
Case. The Company intends to seek the approval of the Court, immediately upon
commencement of the Chapter 11 Case, to honor payroll checks outstanding as of
the Petition Date, to permit employees to utilize their paid vacation time which
was accrued prior to the filing and to continue paying medical benefits under
the applicable health plans. There can be no assurance, however, that any
necessary approval will be obtained. Employee claims and benefits not paid or
honored, as the case may be, prior to the Consummation of the Prepackaged Plan,
will be paid or honored upon Consummation or as soon thereafter as such payment
or other obligation becomes due or payable. Employee benefit claims that accrue
prior to the Petition Date will receive unimpaired treatment under the terms of
the Prepackaged Plan. The Company also intends to leave unaltered all other
legal, equitable and contractual rights of employees under its employment and
severance policies and agreements, compensation and benefit plans and all other
agreements, contracts and programs applicable to its employees.
CASH MANAGEMENT. The Company believes it would be disruptive to the
operations of its subsidiaries if it were forced to significantly change or
uncouple its consolidated cash management system upon the commencement of the
Chapter 11 Case. The Company intends to seek the approval of the Bankruptcy
Court immediately upon commencement of the Chapter 11 Case to maintain its
consolidated cash management system. The relief the Company intends to seek from
the Bankruptcy Court will provide that the subsidiaries of the Company would be
granted Allowed Administrative Claims equal to the net cash upstreamed to the
Company, if any, by such subsidiaries through the consolidated cash management
system during the Chapter 11 Case.
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RETENTION OF PROFESSIONALS. The Company intends to seek Bankruptcy Court
approval for the retention of certain "Professionals" to represent or assist the
Company in the Chapter 11 Case. With the Bankruptcy Court's approval, the
Company will employ McDermott, Will & Emery and Morris, Nichols, Arsht & Tunnell
as its attorneys, and Deloitte & Touche LLP as its independent auditors.
INSURANCE PROGRAMS. The Company intends to seek the authority to maintain
and continue its insurance programs, including workers' compensation, as such
programs are presently administered.
THE SUBSIDIARIES OF KOLL REAL ESTATE GROUP, INC. ARE NOT PARTIES TO THE
PREPACKAGED PLAN AND WILL NOT FILE A CASE AS PART OF THE PREPACKAGED PLAN.
ACCORDINGLY, THE SUBSIDIARIES INTEND TO CONTINUE TO OPERATE THEIR BUSINESSES IN
THE ORDINARY COURSE AND PAY THEIR TRADE AND OTHER CREDITORS IN FULL.
CONFIRMATION STANDARDS. Section 1129 of the Bankruptcy Code requires that a
plan of reorganization be proposed in good faith and disclose certain relevant
information regarding payments due and the nature of compensation to insiders.
Further, the Bankruptcy Court must determine that the solicitation period was
adequate and that the Prospectus and Prepackaged Plan were transmitted to
substantially all Impaired Creditors and equityholders pursuant to Bankruptcy
Rule 3018(b). See "Risk Factors--Possible Invalidation of the Solicitation by
the Court." The Company believes it has satisfied these requirements and will
seek a ruling to that effect from the Bankruptcy Court in connection with
Confirmation of the Prepackaged Plan.
BEST INTERESTS TEST. Section 1129(a)(7) of the Bankruptcy Code requires
that even if the Prepackaged Plan is accepted by each Impaired Class of Claims
and Interests, in order to confirm the Prepackaged Plan, the Court must
independently determine that either each member of an Impaired Class of Claims
or Interests has accepted the Prepackaged Plan or that the Prepackaged Plan will
provide such non-accepting member a recovery that has a value at least equal to
the value of the distribution that each such member would receive if the Company
was liquidated under chapter 7 of the Bankruptcy Code (the "Best Interests
Test"). If all members of an Impaired Class of Claims or Interests accept the
Prepackaged Plan, the Best Interests Test would not apply with respect to that
Class. Based on the foregoing, the Best Interests Test will be applicable only
to the holders of Impaired Claims against and Interests in the Company of
Classes which do not accept the Prepackaged Plan.
To determine what holders of each Impaired Class of Claims and Interests
would receive if the Company was liquidated, the Bankruptcy Court must determine
the dollar amount that would be generated from a liquidation of the Company's
assets and properties in the context of a chapter 7 liquidation case. Secured
Claims and the costs and expenses of a liquidation case or resulting from an
original Chapter 11 Case would be paid in full from the liquidation proceeds
before the balance of those proceeds would be made available to pay pre-petition
unsecured Claims and Interests.
Under chapter 7, absent subordination in accordance with Section 510 of the
Bankruptcy Code, the rule of absolute priority of distributions would apply.
Under that rule, no junior creditor would receive any distribution until the
Allowed Claims of all senior creditors are paid in full, and no holder of an
Interest would receive any distribution until the Allowed Claims of all
creditors are paid in full.
After consideration of the effect that chapter 7 liquidation proceedings
would have on the ultimate proceeds available for distribution to the holders of
Impaired Claims and Interests, including (i) the increased costs and expenses of
liquidation under chapter 7 arising from fees payable to a trustee in bankruptcy
and professional advisors to such trustee, (ii) the erosion in value of assets
in the context of the expeditious liquidation required under chapter 7 and the
"forced sale" atmosphere that would prevail, (iii) the adverse effects on the
salability of business segments that could result from the probable departure of
key employees and the loss of customers, (iv) the costs attributable to the time
value of money resulting from what is likely to be a more protracted proceeding
than if the Prepackaged Plan is confirmed (because of the time required to
liquidate the assets of the Company, resolve claims and related litigation and
prepare for distributions), and (v) the application of the rule of absolute
priority (as described in the
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immediately preceding paragraph), the Company has determined that confirmation
of the Prepackaged Plan will provide each holder of a Claim or Interest in an
Impaired Class with a substantially greater recovery than such holder would
receive pursuant to a liquidation of the assets of the Company and its
subsidiaries under chapter 7 of the Bankruptcy Code.
The Liquidation Analysis for the Company is set forth on page 99 of this
Prospectus. The Company substantially completed the Liquidation Analysis by
February 20, 1997 and the Company is not aware of any events subsequent to such
date which would materially impact the Liquidation Analysis.
The Company's estimate of the liquidation value of the assets of the Company
and its subsidiaries that is set forth in the Liquidation Analysis for the
purpose of providing the Company's Creditors and Equity Holders with an estimate
of the amount of the net liquidation proceeds that would result upon the
hypothetical liquidation of the Company. HLHZ was selected by the Company to
assist the Company in preparing the Liquidation Analysis because of its
experience in valuing businesses in connection with various types of
transactions. A description of the procedures followed and the material
assumptions and qualifications made in connection with the analysis are set
forth under the headings "Projected Financial Data--The Prepackaged Plan" and
"The Liquidation Analysis" of this Prospectus. There can be no assurance,
however, that such assumptions will be accepted by the Bankruptcy Court.
FEASIBILITY. The Court must also determine that the Prepackaged Plan is
feasible and is not likely to be followed by liquidation or further
reorganization of the Company. To determine whether the Prepackaged Plan meets
this requirement, the Company has analyzed its ability to meet its obligations
under the Prepackaged Plan. This analysis includes a forecast of financial
performance of the reorganized Company. Such forecast, together with the
underlying assumptions, is set forth on page 94 of this Prospectus entitled
"Projections of Certain Financial Data of the Company." Based upon such
forecast, the Company believes that it will have the financial capability to
satisfy its obligations following the Effective Date. Accordingly, the Company
will seek a ruling to that effect in connection with the Confirmation of the
Prepackaged Plan.
PREPACKAGED PLAN ACCEPTANCE. The Bankruptcy Code requires, subject to
certain exceptions, that the Prepackaged Plan be accepted by all Impaired
Classes of holders of Claims and Interests. The Company may, however, request
Confirmation of the Prepackaged Plan even though some Impaired Classes have not
accepted the Prepackaged Plan. See "Confirmation of the Prepackaged Plan Without
Acceptance by All Voting Classes."
The Bankruptcy Code provides that acceptances obtained prior to the filing
of a petition will be effective in a Chapter 11 Case only if the pre-petition
solicitation of the acceptances complied with applicable non-bankruptcy law
governing the adequacy of disclosure or, if there is no such applicable non-
bankruptcy law, "adequate information" as defined under the Bankruptcy Code.
This Prospectus is furnished in connection with the solicitation. The Company
intends to use the ballots received pursuant to this solicitation to confirm the
Prepackaged Plan once it has filed its Chapter 11 Case. The Company believes
that this solicitation complies with such applicable non-bankruptcy law,
including the Securities Act of 1933, as amended, the Securities Exchange Act of
1934, as amended, and any rules or regulations promulgated thereunder and
otherwise contains "adequate information" and will seek appropriate findings
from the Bankruptcy Court in this regard.
CONFIRMATION OF THE PREPACKAGED PLAN WITHOUT ACCEPTANCE BY ALL VOTING
CLASSES. The requirements for acceptance of the Prepackaged Plan by Impaired
Classes are described under "Classification and Treatment of Claims and
Interests under the Prepackaged Plan." The Bankruptcy Code also provides a
procedure by which the Prepackaged Plan may be confirmed despite the
non-acceptance of one or more Impaired Classes. This procedure is known as a
"cram down." If less than all of the Impaired Classes accept the Prepackaged
Plan, the Prepackaged Plan may nevertheless be confirmed by the Bankruptcy Court
under section 1129(b) of the Bankruptcy Code, so long as at least one Impaired
Class has affirmatively voted to accept the Prepackaged Plan, ignoring for this
purpose any acceptance by insiders of
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the debtor as defined under the Bankruptcy Code. To obtain Confirmation pursuant
to section 1129(b) of the Code, the Company must demonstrate to the Bankruptcy
Court that, as to each non-accepting Class, the Prepackaged Plan "does not
discriminate unfairly" and is "fair and equitable" with respect to that Class.
In general, it would be determined that the Prepackaged Plan did not
discriminate unfairly if, among other things, a dissenting Class is treated
substantially equally with respect to other Classes of equal rank, taking into
account for this purpose the effect of applicable subordination rights. The
Company believes that the Prepackaged Plan does not discriminate unfairly
against any Class. The Bankruptcy Code establishes different "fair and
equitable" tests for Secured Creditors, Unsecured Creditors and Equity Holders
as follows:
1. SECURED CREDITORS. A secured creditor in a dissenting class of
secured claims must retain the lien(s) securing its claim and receive under
the plan cash payments that have a present value at least equal to such
creditor's allowed secured claim, or otherwise receive the "indubitable
equivalent" of the value of the interest in property upon which it holds a
lien.
2. UNSECURED CREDITORS. An unsecured creditor in a dissenting class of
unsecured claims must receive or retain under the plan (i) property of a
value at least equal to the amount of its allowed claim, or (ii) the holders
of the claims or equity interests junior to the claims of the dissenting
class of unsecured creditors must neither receive nor retain any property
under the plan on account of such junior claim or interest.
3. EQUITY HOLDERS. An equity holder must receive and retain under the
plan, property of a value equal to (i) the greatest of the allowed amount of
any fixed liquidation preference to which such holder is entitled, any fixed
redemption price to which such holder is entitled, or the value of such
interest, or (ii) the holder of any interest that is junior to the interests
of such class must neither receive nor retain any property under the plan on
account of such junior interest.
The Company intends to seek Confirmation of the Prepackaged Plan under
section 1129(b) of the Code, to the extent applicable, in view of the deemed
rejection by Class 9. In the event that Class 6, Class 7 or Class 8 do not vote
to accept the Prepackaged Plan, the Prepackaged Plan will be automatically
amended as set forth in Article V therein, and the Company intends to seek
Confirmation of the Prepackaged Plan, as amended, under section 1129(b) of the
Bankruptcy Code. Furthermore, the Company reserves the right to modify the
Prepackaged Plan in accordance with Section 13.4 of the Prepackaged Plan.
There can be no assurance that any Class of Creditors or Equity Holders will
accept the Prepackaged Plan or that, in the absence of such acceptance, the
Company would be able to use the provisions of section 1129(b) of the Bankruptcy
Code to confirm the Prepackaged Plan. The Company believes that the Prepackaged
Plan meets the standards of section 1129(b) with respect to the deemed rejection
of Class 9. In the event that Classes 6, 7 or 8 do not vote to accept the
Prepackaged Plan, the Company intends (and the Prepackaged Plan so provides) to
seek confirmation of the Prepackaged Plan under the section 1129(b) provisions
with respect to such rejecting Class or Classes. Under such circumstances, the
subordination provisions of the Senior Debenture Indenture will be strictly
construed and the holders of such rejecting Class or Classes will retain no
property nor receive any distributions under the Prepackaged Plan. Any
distributions otherwise due such rejecting Class will be given to the holders of
Class 5 Claims. The Company believes that the Prepackaged Plan meets the
requirements of section 1129(b) with respect to Classes 6, 7 and 8, if such
procedure becomes necessary. However, the use of the section 1129(b) provisions
by the Company on any of the Impaired Classes, other than Class 9, could result
in litigation which could delay the Confirmation of the Prepackaged Plan.
ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE PREPACKAGED PLAN.
If the Company commences the Chapter 11 Case and the Prepackaged Plan is not
subsequently confirmed by the Bankruptcy Court and consummated, the alternatives
include (i) confirmation of an
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alternative plan of reorganization under chapter 11 of the Bankruptcy Code, or
(ii) liquidation of the Company under chapter 7 of the Code.
ALTERNATIVE PLANS OF REORGANIZATION. If the Prepackaged Plan is not
confirmed, the Company (or, if the Company's exclusive period in which to file a
plan of reorganization has expired or is terminated by the Bankruptcy Court, any
other party in interest) could attempt to formulate a different plan of
reorganization. The Company has not currently formulated any such alternative
plan. However, such a plan might involve either a reorganization and
continuation of the Company's business or an orderly liquidation of its assets.
In either scenario, creditors or other parties in interest could have an
enhanced opportunity to influence the course of the proceeding and the structure
and substance of the Company's ultimate reorganization or liquidation.
With respect to an alternative plan, the Company and its financial advisors
have explored a liquidation under chapter 11, the Company's assets could be sold
in an orderly fashion over a more extended period of time than in a liquidation
under chapter 7, potentially resulting in somewhat greater (but indeterminate)
recoveries. Although preferable to a chapter 7 liquidation, the Company believes
that any alternative under chapter 11 is a much less attractive alternative to
Creditors and holders of Preferred Stock and Class A Common Stock than the
Prepackaged Plan because of the greater recovery provided for by the Prepackaged
Plan.
LIQUIDATION UNDER CHAPTER 7. If no plan of reorganization is confirmed (and
in certain other circumstances), the Company's Chapter 11 Case may be converted
to a case under chapter 7 of the Bankruptcy Code, pursuant to which a trustee
would be elected or appointed to liquidate the assets of the Company for
distribution to Creditors in accordance with the priorities established by the
Bankruptcy Code. A discussion of the potential effects that a chapter 7
liquidation would have on the recovery of holders of Claims and Interests is set
forth under "Liquidation Analysis." In a liquidation, the assets of the Company
would be sold in exchange for cash, securities or other property, which would
then be distributed to Creditors. In contrast to the Prepackaged Plan (or an
alternative reorganization under chapter 11 of the Bankruptcy Code) in which
Creditors would receive equity securities of the Company and would be subject to
the risks associated with holding such securities, in a liquidation Creditors
might receive cash or other assets which are not subject to those risks. See
"Risk Factors." However, the Company believes that liquidation under chapter 7
would result in significantly smaller distributions (and, as to certain Classes,
no distributions) as compared to those provided for in the Prepackaged Plan. In
addition, a chapter 7 liquidation is likely to result in substantial litigation
and delays in ultimate distributions to Creditors. In the event of a chapter 7
liquidation, the Company believes that there would not be sufficient assets to
make any distribution to the holders of the Subordinated Debentures, the
Preferred Stock and the Class A Common Stock. See "Liquidation Analysis" and
"Confirmation Standards Best Interest Tests."
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PREPACKAGED PLAN SOLICITATION--VOTING PROCEDURES
GENERAL
The Company upon the terms and subject to the conditions set forth herein,
is soliciting an acceptance of the Prepackaged Plan from each holder that was a
beneficial owner as of the Record Date of: Senior Debentures, Subordinated
Debentures, liquidated non-Contingent Claims, Preferred Stock and Class A Common
Stock. This Prospectus together with the accompanying forms of Ballot and Master
Ballot, pre-addressed postage-paid envelope and other materials are being
furnished to (i) registered holders of Senior Debentures and Subordinated
Debentures (I.E., holders whose respective names (or the names of whose
nominees) appear as of the Record Date on the securityholder lists maintained by
the applicable registrar pursuant to the applicable Indenture or, if applicable,
who are listed as participants in a clearing agency's security position
listing); (ii) record holders of Preferred Stock and Class A Common Stock (I.E.,
holders whose respective names (or the names of whose nominees) appear as of the
Record Date on the Company's securityholder lists or, if applicable, who are
listed as participants in a clearing agency's security position listing); and
(iii) holders of liquidated non-Contingent Claims. Registered or record holders
may include brokerage firms, commercial banks, trust companies or other
nominees. IF SUCH PERSONS OR ENTITIES DO NOT HOLD FOR THEIR OWN ACCOUNT, THEY
SHOULD PROVIDE COPIES OF THIS PROSPECTUS AND THE APPROPRIATE PREPACKAGED PLAN
SOLICITATION MATERIALS TO THEIR CUSTOMERS AND TO BENEFICIAL INTEREST HOLDERS FOR
WHOSE ACCOUNT THEY HOLD. A Beneficial Interest Holder is a holder of a
beneficial interest in a Claim, Preferred Stock or Class A Common Stock which
entitles such holder to rights or benefits of ownership even though such holder
may not be the holder of record at the Record Date. Securities owned
beneficially would include not only securities held by such Beneficial Interest
Holder for its own benefit in its own name, but would also include securities
held by others for such Beneficial Interest Holder's benefit, such as securities
held by banks or other custodians, brokers (whether in such Beneficial Interest
Holder's name, the nominee's name or "street name"), executors, administrators
or trustees, guardians, attorneys-in-fact, officers of a corporation, general
partners of a partnership or other persons acting in a fiduciary or
representative capacity. ANY BENEFICIAL INTEREST HOLDER WHO HAS NOT RECEIVED
THIS PROSPECTUS AND A BALLOT SHOULD CONTACT HIS, HER OR ITS BROKERAGE FIRM OR
NOMINEE, OR THE INFORMATION AGENT AT THE ADDRESS AND/OR TELEPHONE NUMBER SET
FORTH ON THE BACK COVER OF THIS PROSPECTUS. IN THE EVENT THAT THE COURT
DETERMINES THAT THE PREPACKAGED PLAN SOLICITATION MATERIALS WERE NOT TRANSMITTED
TO SUBSTANTIALLY ALL IMPAIRED CREDITORS AND IMPAIRED EQUITY HOLDERS, THE COURT
COULD VOID THE PREPACKAGED PLAN SOLICITATION OR REQUIRE A FURTHER PREPACKAGED
PLAN SOLICITATION OR RESOLICITATION.
RECORD DATE
Consistent with the provisions of Rule 3018, the Company has fixed
p.m., Eastern Standard Time, on April , 1997 as the time and date for
determining which holders of Claims and Interests are eligible to vote on the
Prepackaged Plan pursuant to the procedures set forth herein.
VOTING EXPIRATION DATE; EXTENSIONS; AMENDMENTS
THE PREPACKAGED PLAN SOLICITATION PURSUANT TO THIS PROSPECTUS WILL EXPIRE ON
JUNE , 1997. TO BE COUNTED, BALLOTS AND, WHEN APPROPRIATE, MASTER BALLOTS MUST
BE RECEIVED BY 12:00 MIDNIGHT, EASTERN STANDARD TIME, ON JUNE , 1997 (THE
"VOTING EXPIRATION DATE"), UNLESS THE COMPANY, IN ITS SOLE DISCRETION, EXTENDS
OR WAIVES THE PERIOD DURING WHICH BALLOTS AND MASTER BALLOTS WILL BE ACCEPTED BY
THE COMPANY, IN WHICH CASE THE TERM "VOTING EXPIRATION DATE" FOR SUCH
PREPACKAGED PLAN SOLICITATION SHALL MEAN THE LAST TIME AND DATE TO WHICH SUCH
PREPACKAGED PLAN SOLICITATION IS EXTENDED. IN THE EVENT THAT THE COURT
DETERMINES THAT THE PERIOD OF THE PREPACKAGED PLAN SOLICITATION WAS NOT LONG
ENOUGH FOR BENEFICIAL INTEREST HOLDERS TO CONSIDER THE SOLICITATION MATERIALS,
THE COURT COULD VOID
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THE PREPACKAGED PLAN SOLICITATION OR REQUIRE A FURTHER PREPACKAGED PLAN
SOLICITATION OR RESOLICITATION.
Except to the extent the Company so determines or as permitted by the Court,
Ballots and Master Ballots received after the Voting Expiration Date will not be
accepted or counted by the Company in connection with the Company's request for
Confirmation of the Prepackaged Plan.
The Company expressly reserves the right, at any time or from time to time,
to extend the period during which the Prepackaged Plan Solicitation is open.
During any extension of the Prepackaged Plan Solicitation, all Ballots and
Master Ballots previously given will remain subject to all the terms and
conditions of the Prepackaged Plan Solicitation, including the revocation rights
specified herein. To extend the Voting Expiration Date, the Company will notify
the Exchange Agent of any extension by oral or written notice and will make a
public announcement thereof, each at any time prior to a.m. Eastern
Standard Time, on the next Business Day after the previously scheduled Voting
Expiration Date. Without limiting the means by which the Company may choose to
make any public announcement, the Company will not have any obligation, unless
otherwise required by law, to publish, advertise or otherwise communicate any
such public announcement other than by issuing a news release through the Dow
Jones News Service. There can be no assurance that the Company will exercise its
right to extend the Prepackaged Plan Solicitation period for the receipt of
Ballots and Master Ballots.
The Company expressly reserves the right to amend, at any time and from the
time to time, the terms of the Prepackaged Plan Solicitation or the Prepackaged
Plan (subject to compliance with the requirements of section 1127 of the
Bankruptcy Code and the Bankruptcy Rules). If the Company makes a material
change in the terms of the Prepackaged Plan Solicitation or the Prepackaged
Plan, or if it waives a material conditions, the Company will disseminate
additional solicitation materials and will extend the Prepackaged Plan
Solicitation, in each case to the extent required by law.
VOTING PROCEDURES AND OTHER REQUIREMENTS
PERSONS ENTITLED TO VOTE. The following Classes of Claims and Interests are
Impaired under the Prepackaged Plan and all holders of such Claims or Interests
in such Classes as of the Record Date are entitled to vote to accept or reject
the Prepackaged Plan upon the terms and subject to the conditions set forth
herein and in the Prepackaged Plan:
Class 5--General Unsecured Claims
Class 6--Claims of Holders of Subordinated Debentures
Class 7--Interests of Holders of Preferred Stock
Class 8--Interests of Holders of Class A Common Stock
To be entitled to vote to accept or reject the Prepackaged Plan, a holder of
Senior Debentures, Subordinated Debentures, liquidated non-Contingent Claims,
Preferred Stock or Class A Common Stock must be the Beneficial Interest Holder
of such security or other Claims on the Record Date, regardless of whether such
Claims, Preferred Stock or Class A Common Stock are held of record on the Record
Date in such holder's name or in the name of such holder's broker, dealer,
commercial bank, trust company or other nominee. For purposes of determining
whether the requisite number of acceptances is received to approve the
Prepackaged Plan, only votes which are cast at the direction of Beneficial
Interest Holders in accordance with the procedures set forth herein may be
counted.
As described below, the Company is soliciting both Ballots and Master
Ballots. Ballots are to be used by the beneficial owners of the Company's debt,
equity securities, and liquidated non-Contingent Claims (the "Beneficial
Interest Holders"), regardless of whether such Beneficial Interest Holders are
also record holders or hold through record holders. Master Ballots are to be
used by holders of record of Senior Debentures, Subordinated Debentures,
Preferred Stock, or Class A Common Stock that are not Beneficial Interest
Holders. A record holder which holds Senior Debentures, Subordinated Debentures,
Preferred
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Stock, or Class A Common Stock on behalf of one or more Beneficial Interest
Holders should collect completed Ballots from such Beneficial Interest Holders
and should complete a Master Ballot reflecting the votes of such Beneficial
Interest Holders, as indicated on their respective Ballots.
VOTING PROCEDURES. Holders of Senior Debentures, liquidated non-Contingent
Claims, Subordinated Debentures, Preferred Stock, or Class A Common Stock are
requested to complete an appropriate Ballot and, when appropriate, Master
Ballot, in accordance with the instructions set forth thereon and the procedures
set forth below and in the Prepackaged Plan.
BENEFICIAL INTEREST HOLDERS
Any Beneficial Interest Holder of Claims or Interests can vote on the
Prepackaged Plan through a nominee by following these instructions:
1. Provide all the applicable information on the Ballot in accordance
with the instructions set forth thereon.
2. Indicate acceptance or rejection of the Prepackaged Plan by checking
either the box entitled "Accepts the Prepackaged Plan" or "Rejects the
Prepackaged Plan" set forth on the Ballot.
3. Sign and date the Ballot and provide your name and mailing address
if different from the printed address which appears on the Ballot or if no
preprinted address appears on the Ballot. If you are completing the Ballot
on behalf of another entity, indicate the name of such entity, your
relationship with such entity and/or the capacity in which you are signing.
4. (a) If you hold Senior Debentures, Subordinated Debentures,
Preferred Stock, or Class A Common Stock in "street name" through a
brokerage firm, bank, trust company or other source, return the Ballot to
the nominee as promptly as possible so that the nominee may complete and
submit a Master Ballot prior to the Voting Expiration Date. If no
pre-addressed, postage-paid envelope was enclosed, contact the Information
Agent for instructions.
(b) If you are both the Beneficial Interest Holder and the record
holder of Claims or Interests, return the Ballot directly to the Exchange
Agent in the enclosed pre-addressed envelope so that it will be received
prior to the Voting Expiration Date.
BROKERAGE FIRMS, BANKS AND OTHER NOMINEES. A brokerage firm which is the
registered or record holder of Senior Debentures, Subordinated Debentures,
Preferred Stock, or Class A Common Stock for a Beneficial Interest Holder can
vote on behalf of such Beneficial Interest Holder by (i) distributing a copy of
this Prospectus, all appropriate Ballots and other Prepackaged Plan Solicitation
Materials to such Beneficial Interest Holder for execution; (ii) collecting all
such completed and executed Ballots; (iii) completing a Master Ballot compiling
the votes and other information from the Ballots collected; and (iv)
transmitting such Master Ballot to the Exchange Agent on or before the Voting
Expiration Date. A proxy intermediary acting on behalf of a brokerage firm or
bank may follow the procedures outlined in the preceding sentence to vote on
behalf of such Beneficial Interest Holder.
Each brokerage firm, bank, or other nominee which submits a Master Ballot
must retain all Ballots submitted to it by Beneficial Interest Holders for
disclosure to the Court, if so ordered.
Any Ballot submitted to a brokerage firm, proxy intermediary or other
nominee will not be counted until such nominee properly completes and delivers
to the Exchange Agent a corresponding Master Ballot that reflects such
Beneficial Interest Holder's vote. Any record holder which is also a Beneficial
Interest Holder of Senior Debentures, liquidated non-Contingent Claims,
Subordinated Debentures, Preferred Stock, and Class A Common Stock should, with
respect to such security, either (i) return a Ballot to the Exchange Agent, or
(ii) prepare and retain a Ballot and include the information from such Ballot on
the Master Ballot submitted to the Exchange Agent.
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HOLDERS MAY RECEIVE MULTIPLE MAILINGS CONTAINING BALLOT(S), ESPECIALLY IF
HOLDERS OWN SENIOR DEBENTURES, SUBORDINATED DEBENTURES, PREFERRED STOCK, OR
CLASS A COMMON STOCK IN STREET NAME THROUGH MORE THAN ONE BROKER, BANK OR OTHER
NOMINEE. A BENEFICIAL INTEREST HOLDER WHO HOLDS (I) SENIOR DEBENTURES, (II)
SUBORDINATED DEBENTURES, (III) PREFERRED STOCK, OR (IV) CLASS A COMMON STOCK
THROUGH MORE THAN ONE BROKER, BANK OR OTHER NOMINEE MUST SO DISCLOSE ON EACH
BALLOT SUCH HOLDER COMPLETES AND MUST CAST THE SAME VOTE ON THE PREPACKAGED PLAN
ON EACH BALLOT SUCH HOLDER COMPLETES. A BENEFICIAL INTEREST HOLDER'S VOTE EITHER
TO ACCEPT OR TO REJECT THE PREPACKAGED PLAN WILL BE COUNTED ONLY ONCE FOR EACH
CLASS OF CLAIMS HELD BY THE HOLDER, REGARDLESS OF THE NUMBER OF RECORD HOLDERS
THROUGH WHICH SUCH CLAIMS ARE HELD. BY EXECUTING A BALLOT A HOLDER CERTIFIES,
AMONG OTHER THINGS, THAT, TO THE EXTENT APPLICABLE, SUCH HOLDER HAS DISCLOSED
ANY BIFURCATION OF BENEFICIAL OWNERSHIP OF SENIOR DEBENTURES, SUBORDINATED
DEBENTURES, PREFERRED STOCK, AND CLASS A COMMON STOCK AND THAT SUCH HOLDER HAS
CAST THE SAME VOTE ON ANY MULTIPLE BALLOTS FOR HOLDINGS IN A SINGLE CLASS OF
CLAIMS OR CLASS OF INTERESTS. THE NAMES OF ALL BROKER-DEALERS OR OTHER
INTERMEDIARIES OR PERSONS WHO HOLD SENIOR DEBENTURES, SUBORDINATED DEBENTURES,
PREFERRED STOCK, OR CLASS A COMMON STOCK FOR A BENEFICIAL INTEREST HOLDER SHOULD
BE INDICATED ON THE BALLOTS. AUTHORIZED SIGNATORIES (OTHER THAN BROKERAGE FIRMS
AND OTHER PARTICIPANTS) SHOULD SUBMIT SEPARATE BALLOTS FOR EACH BENEFICIAL
INTEREST HOLDER FOR WHOM THEY ARE VOTING.
OTHER. If a Ballot is signed by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations, or others acting in a
fiduciary or representative capacity, such persons should indicate such capacity
when signing in accordance with the procedures set forth under "Certifications"
below and, unless otherwise determined by the Company, must submit proper
evidence satisfactory to the Company of authority to so act on behalf of a
Beneficial Interest Holder.
The Company, in its sole discretion, may waive any defect in any Ballot or
Master Ballot at any time, either before or after the close of voting, and
without notice. Except as provided below, unless the Ballot or Master Ballot
being furnished is timely submitted to the Exchange Agent on or prior to the
Voting Expiration Date together with any other documents required by such Ballot
or Master Ballot, as the case may be, the Company may, in its sole discretion,
reject such Ballot or Master Ballot as invalid and, therefore, decline to
utilize it in connection with seeking Confirmation of the Prepackaged Plan by
the Court.
In the event a Claim or Interest is disputed or designated under section
1126(e) of the Bankruptcy Code, any vote to accept or reject the Prepackaged
Plan cast with respect to such Claim or Interest will not be counted for
purposes of determining whether the Prepackaged Plan has been accepted or
rejected, the Court orders otherwise.
CERTIFICATIONS. FOR PURPOSES OF DETERMINING WHETHER THE REQUISITE NUMBER OF
ACCEPTANCES IS RECEIVED TO APPROVE THE PREPACKAGED PLAN, ONLY VOTES WHICH ARE
CAST BY OR AT THE DIRECTION OF BENEFICIAL INTEREST HOLDERS OF SENIOR DEBENTURES,
LIQUIDATED NON-CONTINGENT CLAIMS, SUBORDINATED DEBENTURES, PREFERRED STOCK, AND
CLASS A COMMON STOCK MAY BE COUNTED. By executing and returning a Ballot, a
person or entity (i) will certify to the Court and the Company that either (a)
such person or entity is the Beneficial Interest Holder of the Claims or
securities being voted or (b) such person or entity is an authorized signatory
for someone or some entity who or which is a Beneficial Interest Holder of the
Claims or securities being voted; (ii) will certify to the Court and the Company
that such person or entity (or in the case of an authorized signatory, the
Beneficial Interest Holder) has received a copy of this Prospectus and
Prepackaged Plan Solicitation Materials and will acknowledge that the
Prepackaged Plan Solicitation is being made pursuant to the terms and conditions
set forth therein; (iii) will certify to the record holder, the Court and the
Company (or in the case of an authorized signatory, such authorized signatory)
that either (a) such person or entity has not submitted any other Ballots for
such Class of Claims, as the case may be, held in other accounts or other
registered names or (b) such person or entity has disclosed on each Ballot
completed by such person or entity the existence of Claims in the same Class
held in other accounts, or
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other registered names and the submission of other Ballots for such Claims; (iv)
will certify to the record holder, the Court and the Company that such person or
entity has cast the same vote on every multiple Ballot completed by such person
or entity with respect to holdings in a single Class of Claims; and (v) will
request that such person or entity (or in the case of an authorized signatory,
the Beneficial Interest Holder) be treated as the record holder of such
securities for purposes of voting on the Prepackaged Plan.
A brokerage firm or other nominee which is a registered holder will prepare,
execute and deliver a Master Ballot to the Exchange Agent to reflect the votes
of the Beneficial Interest Holders it represents. By executing and returning a
Master Ballot, such nominee (i) will certify to the Court and the Company that
(a) such nominee has received a copy of this Prospectus, Ballot and other
Prepackaged Plan Solicitation Materials and has delivered the same to the
Beneficial Interest Holders listed thereon by such nominee, (b) such nominee has
received a completed and signed Ballot from each such Beneficial Interest
Holder, (c) such nominee is the registered holder of the securities being voted,
(d) such nominee has been authorized by each such Beneficial Interest Holder to
vote on the Prepackaged Plan, and (e) the Beneficial Interest Holder has
certified to such nominee that such Beneficial Interest Holder has not submitted
any other Ballots for such Class of Claims held in other accounts or other
registered names, or, if held in other accounts or registered names, that the
Beneficial Interest Holder has certified to such nominee that such Beneficial
Interest Holder has cast the same vote for such Class of Claims, and such
nominee will disclose such other accounts or registered holders and such other
Ballots; (ii) will request that such nominee be treated as the Beneficial
Interest Holder of the securities for purposes of voting on the Prepackaged
Plan, unless otherwise authorized by the Court; (iii) will disclose (a) the
number of such Beneficial Interest Holders, (b) the respective principal amounts
of Senior Debentures and/or Subordinated Debentures owned, or the number of
shares held, as the case may be, by each such Beneficial Interest Holder, (c)
each Beneficial Interest Holder's respective vote concerning the Prepackaged
Plan, (d) the customer account or other identification number for each such
Beneficial Interest Holder; and (iv) will agree to maintain Ballots returned by
Beneficial Interest Holders (whether properly completed or defective) for
disclosure to the Court if so ordered.
BALLOTS. A separate form of Ballot and, when applicable, Master Ballot, is
to be used for each Class of Impaired Claims and Equity Interests. The Ballots
are color-coded as follows:
<TABLE>
<CAPTION>
BALLOT
COLOR
CLASS DESCRIPTION STRIPE
- --------- -------------------------------------------------------------------------- ---------
<S> <C> <C>
Class 5: Senior Debentures......................................................... Green
Class 5: All general Unsecured Claims, other than Senior Debentures................ Pink
Class 6: Subordinated Debentures................................................... Yellow
Class 7: Preferred Stock........................................................... Blue
Class 8: Common Stock.............................................................. White
</TABLE>
Holders of Claims and Interests should take care to use the correct
Ballot(s) in voting on the Prepackaged Plan. See "Incomplete Ballots." If any
Ballots are damaged or lost, or if a holder has any questions concerning the
voting instructions, it may contact the Information Agent at the address or
telephone number listed on the back cover of this Prospectus.
VOTING MULTIPLE CLAIMS AND EQUITY INTERESTS. EACH BENEFICIAL INTEREST
HOLDER WHICH HOLDS CLAIMS OR INTERESTS IN MORE THAN ONE CLASS IS REQUIRED TO
VOTE SEPARATELY WITH RESPECT TO EACH CLASS IN WHICH SUCH BENEFICIAL INTEREST
HOLDER HOLDS CLAIMS OR INTERESTS.
A separate ballot of the appropriate form should be used to vote on the
Prepackaged Plan with respect to each Impaired Class of Claims or Interests.
Votes must be made on the appropriate Ballot in order to be counted. A
Beneficial Interest Holder's vote on the Prepackaged Plan will be counted only
79
<PAGE>
once for each Class of Claims or Interests held by the holder, regardless of the
number of ballots submitted for such class.
A holder may not split its vote within a Class of Impaired Claims or
Interests. If a holder of Claims or Interests in more than one Class executes
one or more Ballots for only one such Class, such holder's vote will count as a
vote only once with respect to such Class and will not count as a vote with
respect to any Claims or Interests in other Classes held by such holder.
INCOMPLETE BALLOTS. It is important that all holders of Impaired Claims and
Interests vote to accept or reject the Prepackaged Plan, because under the Code,
for purposes of determining whether the requisite acceptances have been received
by an Impaired Class of Claims or Interests, the vote will be tabulated based on
the ratio of accepting holders of Impaired Claims and/or Interests to all voting
holders of Impaired Claims and/or Interests. Therefore, it is possible that the
Prepackaged Plan could be approved by any Impaired Class of Claims with the
affirmative vote of significantly less than two-thirds in amount and one-half in
number of the entire Class of Claims, or by holders of Interests with the
affirmative vote of significantly less than two-thirds in amount of the shares
of Preferred Stock and Common Stock. Failure by a holder of an Impaired Claim or
Interest to submit a properly executed Ballot or Master Ballot (as appropriate)
or to indicate acceptance or rejection of the Prepackaged Plan in accordance
with the instructions set forth thereon and the procedures set forth herein
shall be deemed to constitute an abstention by such holder with respect to a
vote regarding the Prepackaged Plan, unless cured or waived. Abstentions as a
result of failing to submit a properly executed Ballot or Master Ballot (when
appropriate) or failing to indicate a vote either for acceptance or rejection of
the Prepackaged Plan will not be counted as votes for or against the Prepackaged
Plan. The Company, in its sole discretion, may waive any defect in any Ballot or
Master Ballot at any time, either before or after the close of voting, and
without notice. No assurance can be given, however, that the Court will
recognize any such wavier.
AGREEMENTS UPON FURNISHING BALLOTS
The delivery of a Ballot or Master Ballot indicating a vote to accept the
Prepackaged Plan by a holder of an Impaired Claim or Interest pursuant to the
procedures set forth above will constitute an agreement between such holder and
the Company to accept (i) all the terms of, and conditions to, this Prepackaged
Plan Solicitation, and (ii) all the terms of the Prepackaged Plan.
METHOD OF DELIVERY OF BALLOTS
The method of delivery of Ballots and Master Ballots to be delivered to the
Exchange Agent is at the election and risk of each holder of Claims and/or
Interests. Except as otherwise provided herein, such delivery will be deemed
made only when actually received by the Exchange Agent. Instead of effecting
delivery by mail, it is recommended that such holders use an overnight or hand
delivery service or telecopy promptly followed by overnight or hand delivery
service. In all cases, sufficient time should be allowed to assure timely
delivery. No Ballots or Master Ballots should be sent to the Company, any
indenture trustee, or the Company's financial or legal advisors.
WITHDRAWAL OF BALLOTS; REVOCATION
Any holder of Senior Debentures, liquidated non-Contingent Claims,
Subordinated Debentures, Preferred Stock, and Class A Common Stock who has
delivered a valid Ballot or Master Ballot, as appropriate, voting on the
Prepackaged Plan may withdraw such vote by delivery of a written notice of
withdrawal to the Exchange Agent at any time prior to the earlier of (i) the
commencement by the Company of the Chapter 11 Case, or (ii) the Voting
Expiration Date. Thereafter, Ballots or Master Ballots may be revoked only with
the approval of the Bankruptcy Court. Votes cast pursuant to a Master Ballot may
be withdrawn or modified on an individual Beneficial Interest Holder basis. In
the case where more than one timely, properly completed Ballot or Master Ballot
relating to a particular Class of Claims or
80
<PAGE>
Interests held by a particular holder is received, only the Ballot or Master
Ballot, as the case may be, which bears the latest date will be counted for
purposes of determining the vote.
A notice of withdrawal, to be valid, must (i) contain the description of the
Claim or Interest to which it relates and the aggregate principal amount or
number of shares, as the case may be, represented by such Claim or Interest,
(ii) be signed by the holder of such Claim or Interest in the same manner as the
original Ballot or Master Ballot, (iii) contain a certification that the
withdrawing party was the Beneficial Interest Holder of the Claim and/or
Interest on the Record Date and possesses the right to withdraw the vote sought
to be withdrawn, and (iv) be received by the Exchange Agent in a timely manner
as described above. Prior to the filing of the Prepackaged Plan, the Company
intends to consult with the Exchange Agent to determine whether any withdrawals
of Ballots were received. The Company expressly reserves the absolute right to
contest the validity of any such withdrawals of Ballots. See "Waivers of
Defects, Irregularities, Etc."
Unless otherwise determined by the Company or directed by the Court, a
purported notice of withdrawal of a Ballot or Master Ballot which is not
received in a timely manner by the Exchange Agent will not be effective to
withdraw a previously furnished Ballot or Master Ballot.
THE COMPANY WILL PAY ALL REASONABLE AND CUSTOMARY COSTS, FEES AND EXPENSES
RELATING TO THE PREPACKAGED PLAN SOLICITATION, INCLUDING WITHOUT LIMITATION,
MAILING AND HANDLING COSTS OF BROKERS, DEALERS, COMMERCIAL BANKS, TRUSTEES,
INDENTURE TRUSTEES AND OTHER NOMINEES. THE COMPANY WILL NOT PAY ANY INCENTIVE OR
ACCEPTANCE FEES IN CONNECTION WITH THE PREPACKAGED PLAN SOLICITATION.
REQUESTS FOR INFORMATION OR ADDITIONAL COPIES OF THIS PROSPECTUS, BALLOTS OR
MASTER BALLOTS SHOULD BE DIRECTED TO THE INFORMATION AGENT.
WAIVERS OF DEFECTS, IRREGULARITIES, ETC.
Unless otherwise directed by the Bankruptcy Court, all questions as to the
validity, form, eligibility (including time of receipt), acceptance and
revocation or withdrawal of Ballots or Master Ballots will be determined by the
Company in its sole discretion, which determination shall be final and binding.
The Company reserves the absolute right to reject any and all Ballots or Master
Ballots not in proper form, the acceptance of which, in the opinion of the
Company or its counsel, would not be in accordance with the provisions of the
Bankruptcy Code. The Company further reserves the right to waive any defects or
irregularities or conditions of delivery as to any particular Ballot, unless
otherwise directed by the Court. The Company's interpretation of the terms and
conditions of the Prepackaged Plan (including the Ballot or Master Ballot and
the respective voting instructions thereto), unless otherwise directed by the
Bankruptcy Court, shall be final and binding on all parties. Unless waived, any
defects or irregularities in connection with deliveries of Ballots or Master
Ballots must be cured within such time as the Company (or the Bankruptcy Court)
determines. Neither the Company nor any other person or entity will be under any
duty to provide notification of defects or irregularities with respect to
deliveries of Ballots or Master Ballots nor will any of them incur any
liabilities for failure to provide such notification. Unless otherwise directed
by the Bankruptcy Court, delivery of such Ballots or Master Ballots will not be
deemed to have been made until such irregularities have been cured or waived.
Ballots or Master Ballots previously furnished (and as to which any
irregularities have not theretofore been cured or waived) will not be counted.
81
<PAGE>
SHARES SUBJECT TO FUTURE SALE BY FINANCIAL ADVISORS
The Company has agreed to issue warrants (the "Advisor Warrants") in payment
of financial advisory fees due to HLHZ and Rothschild for services provided in
connection with the Recapitalization. The issuance of the Advisor Warrants is
contingent upon the consummation of the Recapitalization. When issued, the
Advisor Warrants will be charged as an expense in the Company's Statement of
Operations. The Advisor Warrants and the underlying shares of Common Stock to be
issued upon exercise thereof (the "Warrant Shares") are being registered as part
of the Recapitalization. The Advisor Warrants will be exercisable for no
additional consideration for a period of two (2) years following their issuance.
When issued, the Advisor Warrants will be exercisable for that number of shares
of Common Stock which has a market value equal to $1,100,000 in the case of HLHZ
and $750,000 in the case of Rothschild as determined by the 20-day average per
share closing price of the Common Stock immediately following consummation of
the Recapitalization. It is currently expected that the Advisor Warrants will be
exercised by HLHZ and Rothschild and the Warrant Shares so acquired will be sold
for the accounts of such financial advisors within two (2) years of the
effective date of the registration statement filed with the Commission in
connection with the Recapitalization of which this Prospectus is a part. Neither
HLHZ nor Rothschild is currently a record or beneficial owner of any shares of
the Company's capital stock.
The Warrant Shares issuable upon exercise of the Advisor Warrants shall
consist of (i) 33,955 shares of Common Stock, on a post-Capital Stock
Combination and post-Reverse Stock Split basis, currently held of record by
Libra Invest & Trade Ltd. ("Libra") for the benefit of the Company pursuant to a
custody agreement between Libra and the Company; and (ii) such currently
indeterminate number of newly issued shares of Common Stock as is necessary to
satisfy the exercise of the Advisor Warrants pursuant to the terms thereof. The
Company believes that Libra is not currently, and after the consummation of the
Recapitalization, will not be a record or beneficial owner of any shares of the
Company's capital stock other than those described above.
82
<PAGE>
HISTORIC AND UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The pro forma financial statements set forth below as of and for the year
ended December 31, 1996 give effect to the Recapitalization pursuant to (i) the
Exchange Offers or (ii) the Prepackaged Plan as if it had occurred at the
beginning of the period. The pro forma adjustments are based upon currently
available information and certain assumptions that management of the Company
believes are reasonable under current circumstances. The accompanying historic
and unaudited pro forma statements of operations do not reflect the
extraordinary gain on extinguishment of debt resulting from (i) the Exchange
Offers or (ii) the Prepackaged Plan.
KOLL REAL ESTATE GROUP, INC.
HISTORIC AND UNAUDITED PRO FORMA BALANCE SHEET -- THE EXCHANGE OFFERS
DECEMBER 31, 1996
(IN MILLIONS)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
-----------------------------------------
BOLSA
LOWLAND STOCK EXCHANGE
HISTORICAL SALE(A) CONVERSION(B) OFFER(C) PRO FORMA
----------- ----------- --------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents........................... $ 2.1 $ 13.9 $ -- $ -- $ 16.0
Restricted cash..................................... .2 -- -- -- .2
Real estate held for development or sale............ 25.2 -- -- -- 25.2
Land held for development........................... 223.5 (25.0) -- -- 198.5
Other assets........................................ 21.2 -- -- -- 21.2
----------- ----------- ----- ----------- -----------
$ 272.2 $ (11.1) $ -- $ -- $ 261.1
----------- ----------- ----- ----------- -----------
----------- ----------- ----- ----------- -----------
Accounts payable and accrued liabilities............ $ 11.7 $ (4.0) $ -- $ -- $ 7.7
Senior bank debt.................................... 7.1 (7.1) -- -- --
Project debt........................................ 12.5 -- -- -- 12.5
Subordinated debentures............................. 195.9 -- -- (176.3) 19.6
Other liabilities................................... 43.9 -- 17.3 61.2
----------- ----------- ----- ----------- -----------
Total liabilities............................. 271.1 (11.1) -- (159.0) 101.0
----------- ----------- ----- ----------- -----------
Stockholders' equity:...............................
Series A Preferred Stock.......................... .4 -- (.4) -- --
Class A Common Stock.............................. 2.4 -- (2.4) -- --
Common Stock...................................... .1 .4 .5
Capital in excess of par value.................... 229.2 -- 2.7 100.9 332.8
Deferred proceeds from stock issuance............. (.4) -- -- -- (.4)
Minimum pension liability......................... (.6) -- -- -- (.6)
Accumulated deficit............................... (229.9) -- -- 57.7 (172.2)
----------- ----------- ----- ----------- -----------
Total stockholders' equity.......................... 1.1 -- -- 159.0 160.1
----------- ----------- ----- ----------- -----------
$ 272.2 $ (11.1) $ -- $ -- $ 261.1
----------- ----------- ----- ----------- -----------
----------- ----------- ----- ----------- -----------
</TABLE>
- ------------------------
(a) To reflect the sale of the Bolsa Chica lowlands, at net book value, which
occurred on February 14, 1997, and the subsequent payment of senior bank
debt and certain liabilities.
(b) To reflect conversion of each outstanding share of Preferred Stock to 1.75
shares of Common Stock pursuant to the Capital Stock Combination and the
Reverse Stock Split of 1 share for each 100 shares of all existing issued
and outstanding shares of Common Stock.
(c) To reflect the issuance of Common Stock in exchange for $176.3 million of
Outstanding Debentures (assuming only the minimum 90% are tendered) and the
resulting extraordinary gain on extinguishment of debt, net of the related
write-off of deferred tax assets due to limitations on utilization of net
operating losses.
83
<PAGE>
KOLL REAL ESTATE GROUP, INC.
HISTORIC AND UNAUDITED PRO FORMA STATEMENT OF OPERATIONS --
THE EXCHANGE OFFERS
(IN MILLIONS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1996
-------------------------------------------------
PRO FORMA ADJUSTMENTS
HISTORICAL EXCHANGE OFFER(A) PRO FORMA
----------- ----------------------- -----------
<S> <C> <C> <C>
Revenues:
Asset Sales............................................... $ 33.6 $ 33.6
Operations................................................ 11.2 11.2
----------- -----
44.8 44.8
----------- -----
Costs of:
Asset Sales............................................... 30.2 30.2
Operations................................................ 10.0 10.0
----------- -----
40.2 40.2
----------- -----
Gross operating margin.................................... 4.6 4.6
General and administrative expenses (b)..................... 9.6 9.6
Interest expense............................................ 24.9 $ (20.4)(a) 4.5
Other expense (income), net................................. (1.1) (1.1)
----------- ------ -----
Income (loss) from continuing operations before income
taxes..................................................... (28.8) 20.4 (8.4)
Income tax expense (benefit)................................ .1 -- .1
----------- ------ -----
Loss from continuing operations............................. $ (28.9) $ 20.4 $ (8.5)
----------- ------ -----
----------- ------ -----
</TABLE>
- ------------------------
(a) To reflect the reduction of interest expense resulting from the Exchange
Offers (assuming only the minimum 90% of Outstanding Debentures are
tendered).
(b) Pro forma adjustments do not reflect any eliminations of non-recurring
general and administrative expenses and non-recurring other expense of $2.5
million and $1.5 million, respectively, related to the Bolsa Chica lowland
sale and the Exchange Offers.
84
<PAGE>
HISTORIC AND UNAUDITED PRO FORMA CAPITALIZATION
OF THE COMPANY -- THE EXCHANGE OFFERS
The table below sets forth the capitalization of the Company and its
subsidiaries as of December 31, 1996. The Pro Forma financial information set
forth below gives effect to the Exchange Offers as of December 31, 1996.
<TABLE>
<CAPTION>
AT DECEMBER 31, 1996
-------------------------------------------------------------------
PRO FORMA ADJUSTMENTS
-----------------------------------------
BOLSA
LOWLAND STOCK EXCHANGE
HISTORICAL SALE(A) CONVERSION(B) OFFER(C) PRO FORMA
----------- ----------- --------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
(IN MILLIONS)
Senior bank debt (d)................................. $ 7.1 $ (7.1) $ -- $ -- $ --
Project debt (d)..................................... 12.5 -- -- 12.5
Outstanding Debentures (d)........................... 195.9 -- -- (176.3) 19.6
Stockholders' equity (e):
Series A (convertible redeemable nonvoting)
Preferred Stock, $.01 par value, 42,505,504 shares
authorized, 38,886,626 (historical) and no (pro
forma) shares outstanding.......................... 0.4 -- (.4) -- --
Class A Common Stock, $.05 par value, 625,000,000
shares authorized, 48,938,543 (historical) and no
(pro forma) shares outstanding..................... 2.4 -- (2.4) -- --
Class B (convertible nonvoting) Common Stock, $.05
par value, 25,000,000 shares authorized, no shares
outstanding........................................ -- -- -- -- --
Common Stock, $.05 par value, 18,000,000 shares
authorized, no (historical) and 10,609,823 (pro
forma) shares outstanding.......................... -- -- .1 .4 .5
Capital in excess of par value....................... 229.2 -- 2.7 100.9 332.8
Deferred proceeds from stock issuance................ (.4) -- -- -- (.4)
Minimum pension liability............................ (.6) -- -- -- (.6)
Accumulated deficit.................................. (229.9) -- -- 57.7 (172.2)
----------- ----- ----- ----------- -----------
Total Stockholders' Equity......................... 1.1 -- -- 159.0 160.1
----------- ----- ----- ----------- -----------
Total capitalization................................. $ 216.6 $ (7.1) $ -- $ (17.3) $ 192.2
----------- ----- ----- ----------- -----------
----------- ----- ----- ----------- -----------
</TABLE>
- ------------------------
(a) To reflect repayment of senior bank debt following the sale of the Bolsa
Chica lowlands, at net book value, in February 1997.
(b) To reflect conversion of each outstanding share of Preferred Stock to 1.75
shares of Common Stock pursuant to the Capital Stock Combination and the
Reverse Stock Split of 1 share for each 100 shares of all existing issued
and outstanding shares of Common Stock.
(c) To reflect the issuance of Common Stock in exchange for $176.3 million of
Outstanding Debentures (assuming only the minimum 90% are tendered) and the
resulting extraordinary gain on extinguishment of debt, net of the related
write-off of deferred taxes.
(d) See Note 6 of Notes to Audited Historic Financial Statements.
(e) See Note 12 of Notes to Audited Historic Financial Statements.
85
<PAGE>
KOLL REAL ESTATE GROUP, INC.
HISTORIC AND UNAUDITED PRO FORMA BALANCE SHEET -- THE PREPACKAGED PLAN
DECEMBER 31, 1996
(IN MILLIONS)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
---------------------------------------------------------
BOLSA
LOWLAND STOCK PREPACKAGED FRESH START
HISTORICAL SALE(A) CONVERSION(B) PLAN(C) ACCOUNTING(D) PRO FORMA
----------- ----------- --------------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents......... $ 2.1 $ 13.9 $ -- $ -- $ -- $ 16.0
Restricted cash................... .2 -- -- -- -- .2
Real estate held for development
or sale......................... 25.2 -- -- -- -- 25.2
Land held for development......... 223.5 (25.0) -- -- (68.5) 130.0
Other assets...................... 21.2 -- -- -- .9 22.1
----------- ----------- ----- ------------ ------ -----------
$ 272.2 $ (11.1) $ -- $ -- $ (67.6) $ 193.5
----------- ----------- ----- ------------ ------ -----------
----------- ----------- ----- ------------ ------ -----------
Accounts payable and accrued
liabilities..................... $ 11.7 $ (4.0) $ -- $ -- $ -- $ 7.7
Senior bank debt.................. 7.1 (7.1) -- -- -- --
Project debt...................... 12.5 -- -- -- -- 12.5
Subordinated debentures........... 195.9 -- -- (195.9) -- --
Other liabilities................. 43.9 -- -- -- 43.9
----------- ----------- ----- ------------ ------ -----------
Total liabilities........... 271.1 (11.1) -- (195.9) 64.1
----------- ----------- ----- ------------ ------ -----------
Stockholders' equity:
Series A Preferred Stock........ .4 -- (.4) -- -- --
Class A Common Stock............ 2.4 -- (2.4) -- -- --
Common Stock.................... -- -- .1 .5 -- .6
Capital in excess of par
value......................... 229.2 -- 2.7 112.1 -- 344.0
Deferred proceeds from stock
issuance...................... (.4) -- -- -- -- (.4)
Minimum pension liability....... (.6) -- -- -- -- (.6)
Accumulated deficit............. (229.9) -- -- 83.3 (67.6) (214.2)
----------- ----------- ----- ------------ ------ -----------
Total stockholders' equity........ 1.1 -- -- 195.9 (67.6) 129.4
----------- ----------- ----- ------------ ------ -----------
$ 272.2 $ (11.1) $ -- $ -- $ (67.6) $ 193.5
----------- ----------- ----- ------------ ------ -----------
----------- ----------- ----- ------------ ------ -----------
</TABLE>
- ------------------------
(a) To reflect the sale of the Bolsa Chica lowlands, at net book value, which
occurred on February 14, 1997, and the subsequent payment of senior bank
debt and certain liabilities.
(b) To reflect conversion of each outstanding share of Preferred Stock to 1.75
shares of Common Stock pursuant to the Capital Stock Combination and the
Reverse Stock Split of 1 share for each 100 shares of all existing issued
and outstanding shares of Common Stock.
(c) To reflect the issuance of Common Stock in exchange for all Outstanding
Debentures and the resulting extraordinary gain on extinguishment of debt.
(d) To reflect the write-down of Bolsa Chica to fair value of $130 million and
the adjustment of the Company's interest in the Fairbanks Highlands LLC to
fair value under "Fresh Start Accounting" as required in utilizing the
American Institute of Certified Public Accountants' Statement of Position
90-7, "Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code."
86
<PAGE>
KOLL REAL ESTATE GROUP, INC.
HISTORIC AND UNAUDITED PRO FORMA
STATEMENT OF OPERATIONS -- THE PRE-PACKAGED PLAN
(IN MILLIONS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1996
----------------------------------------------------------------
PRO FORMA ADJUSTMENTS
--------------------------------------
EXCHANGE FRESH START ADJUSTED
HISTORICAL OFFER(A) ACCOUNTING(B) PRO FORMA
----------- ----------------------- ------------- -----------
<S> <C> <C> <C> <C>
Revenues:
Asset Sales................................ $ 33.6 $ 33.6
Operations................................. 11.2 11.2
----------- -----------
44.8 44.8
----------- -----------
Costs of:
Asset Sales................................ 30.2 30.2
Operations................................. 10.0 10.0
----------- -----------
40.2 40.2
----------- -----------
Gross operating margin..................... 4.6 4.6
General and administrative expenses (b)...... 9.6 9.6
Interest expense............................. 24.9 $ (22.7) 2.2
Write-down of real estate properties, net.... -- $ 67.6 67.6
Other expense (income), net.................. (1.1) (1.1)
----------- ------ ------ -----------
Income (loss) from continuing operations
before income taxes........................ (28.8) 22.7 (67.6) (73.7)
Income tax expense (benefit)................. .1 -- -- .1
----------- ------ ------ -----------
Loss from continuing operations.............. $ (28.9) $ 22.7 $ (67.6) $ (73.8)
----------- ------ ------ -----------
----------- ------ ------ -----------
</TABLE>
- ------------------------
(a) To reflect the reduction of interest expense resulting from the
Recapitalization pursuant to the Prepackaged Plan.
(b) To reflect the write-down of Bolsa Chica to fair value of $130 million and
the adjustment of the Company's interest in the Fairbanks Highlands LLC to
fair value under "Fresh Start Accounting" as required in utilizing the
American Institute of Certified Public Accountants' Statement of Position
90-7, "Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code."
(c) Pro forma adjustments do not reflect any eliminations of non-recurring
general and administrative expenses and non-recurring other expense of $2.5
million and $1.5 million, respectively, related to the Bolsa Chica lowland
sale and the Prepackaged Plan.
87
<PAGE>
HISTORIC AND UNAUDITED PRO FORMA CAPITALIZATION
OF THE COMPANY -- THE PREPACKAGED PLAN
The table below sets forth the capitalization of the Company and its
subsidiaries as of December 31, 1996. The Pro Forma financial information set
forth below gives effect to the Prepackaged Plan as of December 31, 1996.
<TABLE>
<CAPTION>
AT DECEMBER 31, 1996
----------------------------------------------------------------------------------
PRO FORMA ADJUSTMENTS
--------------------------------------------------------
BOLSA
LOWLAND STOCK EXCHANGE FRESH START
HISTORICAL SALE(A) CONVERSION(B) OFFER(C) ACCOUNTING(D) PRO FORMA
----------- ----------- --------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
(IN MILLIONS)
Senior bank debt (e).................. $ 7.1 $ (7.1) $ -- $ -- $ -- $ --
Project debt (e)...................... 12.5 -- -- -- -- 12.5
Outstanding Debentures (e)............ 195.9 -- -- (195.9) -- --
Stockholders' equity (f):
Series A (convertible redeemable
nonvoting) Preferred Stock, $.01 par
value, 42,505,504 shares authorized,
38,886,626 (historical) and no (pro
forma) shares outstanding........... 0.4 -- (.4) -- -- --
Class A Common Stock, $.05 par value,
625,000,000 shares authorized,
48,938,543 (historical) and no (pro
forma) shares outstanding........... 2.4 -- (2.4) -- -- --
Class B (convertible nonvoting) Common
Stock, $.05 par value, 25,000,000
shares authorized, no shares
outstanding......................... -- -- -- -- -- --
Common Stock, $.05 par value,
18,000,000 shares authorized, no
(historical) and 11,646,743 (pro
forma) shares outstanding........... -- -- .1 .5 -- .6
Capital in excess of par value........ 229.2 -- 2.7 112.1 -- 344.0
Deferred proceeds from stock
issuance............................ (.4) -- -- -- -- (.4)
Minimum pension liability............. (.6) -- -- -- -- (.6)
Accumulated deficit................... (229.9) -- -- 83.3 (67.6) (214.2)
----------- ----- ----- ----------- ------ -----------
Total Stockholders' Equity.......... 1.1 -- -- 195.9 (67.6) 129.4
----------- ----- ----- ----------- ------ -----------
Total capitalization.................. $ 216.6 $ (7.1) $ -- $ -- $ (67.6) $ 141.9
----------- ----- ----- ----------- ------ -----------
----------- ----- ----- ----------- ------ -----------
</TABLE>
- ------------------------
(a) To reflect repayment of senior bank debt following the sale of the Bolsa
Chica lowlands, at net book value, in February 1997.
(b) To reflect conversion of each outstanding share of Preferred Stock to 1.75
shares of Common Stock pursuant to the Capital Stock Combination and the
Reverse Stock Split of 1 share for each 100 shares of all existing issued
and outstanding shares of Common Stock.
(c) To reflect the issuance of Common Stock in exchange for all Outstanding
Debentures and the resulting extraordinary gain on extinguishment of debt.
(d) To reflect the write-down of Bolsa Chica to fair value of $130 million and
the adjustment of the Company's interest in the Fairbanks Highlands LLC to
fair value under "Fresh Start Accounting" as required in utilizing the
American Institute of Certified Public Accountants' Statement of Position
90-7, "Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code."
(e) See Note 6 of Notes to Audited Historic Financial Statements.
(f) See Note 12 of Notes to Audited Historic Financial Statements.
88
<PAGE>
SELECTED FINANCIAL DATA
Set forth below is selected financial data of the Company and its
consolidated subsidiaries. The following information should be read in
conjunction with the financial statements contained in the Company's Annual
Report for the year ended December 31, 1996 and notes thereto (which are
included herein by reference) and in conjunction with the Unaudited pro forma
consolidated financial information contained in this Prospectus. See "The
Company Recapitalization--Unaudited Pro Forma Condensed Consolidated Financial
Information."
<TABLE>
<CAPTION>
PRO FORMA
YEARS ENDED DECEMBER 31, ------------------------------
----------------------------------------------------- EXCHANGE THE PRE-
1992 1993 1994 1995 1996 OFFERS(H) PACKAGED PLAN(I)
--------- --------- --------- --------- --------- ----------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
BALANCE SHEET DATA:
Cash, cash equivalents and
short-term investments (a)...... $ 41.6 $ 43.5 $ 13.0 $ 4.9 $ 2.1 $ 16.0 $ 16.0
Total assets (a).................. 486.1 436.0 414.0 272.4 272.2 261.1 193.5
Senior bank debt (b).............. 65.4 7.0 -- 16.6 7.1 -- --
Project debt...................... -- -- -- -- 12.5 12.5 12.5
Subordinated debentures (b)....... 165.1 134.9 152.9 173.2 195.9 19.6 --
Total stockholders' equity (c).... $ 149.6 $ 163.5 $ 145.5 $ 29.6 $ 1.1 $ 160.1 $ 129.4
Fully diluted shares outstanding
at end of period (g)............ 86.4 91.4 102.5 102.4 102.4 11.3 12.4
Book value per fully diluted
share........................... $ 1.73 $ 1.79 $ 1.42 $ .29 $ .01 $ 14.17 $ 10.44
STATEMENT OF OPERATIONS DATA:
Revenues (d),(e).................. $ 28.3 $ 16.7 $ 21.4 $ 34.0 $ 44.8 $ 44.8 $ 44.8
Loss from continuing operations
(e),(f)......................... (41.9) (20.1) (18.7) (116.9) (28.9) (8.5) (73.8)
Net income (loss) (f)............. (38.4) 14.3 (18.0) (116.9) (28.9)
Per common share:
Loss from continuing operations
(c),(e),(f)..................... (1.44) (.24) (.43) (2.48) (.60) $ (.80) $ (6.36)
Net income (loss) (f),(g)......... $ (1.32) $ .17 $ (.41) $ (2.48) $ (.60)
Weighted average shares
outstanding (g)................. 29.0 83.0 43.8 47.1 48.3 10.6 11.6
</TABLE>
- ------------------------
(a) The decrease in total assets at December 31, 1993 is primarily due to the
disposition of the Company's investment in Deltec Panamerica S.A. ("Deltec")
and the sale of Lake Superior Land Company ("Lake Superior"). The decrease
in total assets and cash, cash equivalents and short-term investments at
December 31, 1994 is primarily attributable to the funding of project
development costs and general and administrative expenses, as well as funds
deposited into a restricted cash account to secure a $25 million letter of
credit facility related to the Abex litigation. The decreases in cash, cash
equivalents and short term investments at December 31, 1995 and 1996 are
primarily attributable to the funding of project development and
infrastructure costs and general and administrative expenses, partially
offset by sales of real estate held for development or sale. The decrease in
total assets at December 31, 1995 is primarily due to the asset revaluation
of Bolsa Chica and the decrease in cash described above.
(b) The decrease in debt at December 31, 1993 reflects principal repayments on
senior bank debt and the exchange of subordinated debentures in connection
with the sale of Lake Superior and the issuance of 3.4 million shares of
Class A Common Stock of the Company to Libra. The increase in debt at
December 31, 1995 reflects borrowings under new credit agreements to settle
the Abex litigation and construct infrastructure improvements at Rancho San
Pasqual. The decrease in senior bank debt at
89
<PAGE>
December 31, 1996 reflects principal repayments in excess of borrowings for
construction of infrastructure improvements at Rancho San Pasqual. The
increase in project debt at December 31, 1996 reflects borrowings from banks
for build-to-suit projects.
(c) The increase in equity at December 31, 1993 primarily reflects net income
for the year then ended. The decrease in equity at December 31, 1995
reflects the net loss for the year then ended, including the asset
revaluation of Bolsa Chica. The decrease in equity at December 31, 1996
reflects the net loss for the year then ended, primarily due to interest
expense on subordinated debentures.
(d) The decrease in 1993 revenues is principally due to a decrease in land sales
and the absence of revenues from a hotel disposed of in 1992, partially
offset by revenues from the Eagle Crest Golf Course which opened in May
1993, and development fees generated by the business acquired from The Koll
Company in September 1993. The increase in 1995 revenues is due to an
increase in land sales and Wentworth By The Sea residential and marina
sales. The increase in 1996 revenues reflects the sale of residential lots
and the Eagle Crest Golf Course at Rancho San Pasqual, the formation of the
Fairbanks Highlands joint venture and the sale of resort/residential lots in
Michigan.
(e) Amounts have been reclassified to present Lake Superior and Deltec as
discontinued operations.
(f) The loss from continuing operations for the year ended December 31, 1993
reflects lower interest expense related to lower debt outstanding, as well
as nonrecurring income of $3 million received upon termination of a put
option agreement with Abex Inc. and a $2 million insurance reimbursement
related to costs incurred in 1992. Net income and net income per common
share for 1993 reflect gains on the dispositions of Lake Superior and Deltec
and an extraordinary gain on debt extinguishment. The loss from continuing
operations, net loss and loss per common share for the year ended December
31, 1995 reflect approximately $121.1 million of charges related to
write-downs of real estate properties, including Bolsa Chica. The loss from
continuing operations, net loss and loss per common share for the year ended
December 31, 1996 is primarily the result of noncash interest charged on the
subordinated debentures.
(g) In July 1992, approximately 19.7 million shares of Class A Common Stock and
42.5 million shares of Series A Preferred Stock were issued in connection
with the merger of a subsidiary of Henley Properties with and into the
Henley Group. The Preferred Stock is not included in the loss per share
calculations except for 1993 since the effect is antidilutive. In December
1993, the Company issued 3.4 million shares of its Common Stock in exchange
for all of Libra's approximately $10.6 million in aggregate principal amount
plus accrued interest of Subordinated Debentures issued by the Company. The
1993 earnings per share calculation includes these newly issued shares,
along with the Preferred Stock and stock options outstanding. In November
1994, the Company issued 2.0 million shares (along with warrants for the
purchase of an additional 2.0 million shares) of its Common Stock in
connection with the acquisition of the Kathryn G. Thompson Company. The
1994, 1995 and 1996 amounts reflect conversion of 1.2 million, an additional
1.0 million and an additional 1.4 million shares, respectively of Preferred
Stock to Common Stock.
(h) The Pro Forma--Exchange Offers amounts reflect December 31, 1996 historical
amounts, giving effect to (i) the February 1997 sale of the Bolsa Chica
lowlands, (ii) the issuance of Common Stock to holders of Senior
Subordinated and Subordinated Debentures pursuant to the Exchange Offers
(assuming only the minimum 90% are tendered), including the resulting
extraordinary gain on extinguishment of debt of approximately $57.7 million,
net of income taxes (see "Historic and Unaudited Pro Forma Consolidated
Financial Statements--The Exchange Offers"), and (iii) the Capital Stock
Combination and Reverse Stock Split described in this Prospectus.
(i) The Pro-Forma--The Prepackaged Plan amounts reflect December 31, 1996
historical amounts, giving effect to (i) the February 1997 sale of the Bolsa
Chica lowlands, (ii) the issuance of Common Stock to holders of Senior
Debentures and Subordinated Debentures pursuant to the Prepackaged Plan,
including the resulting extraordinary gain on extinguishment of debt of
approximately $83.3 million and the write-down of Bolsa Chica to fair value
under Fresh Start Accounting (see "Historic and Unaudited Pro Forma
Consolidated Financial Statements--The Prepackaged Plan"), and (iii) the
Capital Stock Combination and Reverse Stock Split described in this
Prospectus.
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<PAGE>
PROJECTIONS OF CERTAIN FINANCIAL DATA OF THE COMPANY
Set forth below are projections of certain financial data that illustrate
the estimated effects of the Recapitalization and certain related transactions,
as effected pursuant to (i) the Exchange Offers and related transactions, or
(ii) the Prepackaged Plan, on the results of operations and financial position
of the Company and subsidiaries for the periods indicated. The Projections are
presented for the effectuation of the Recapitalization pursuant to the Exchange
Offers or pursuant to the Prepackaged Plan. For purposes of these projections,
the Recapitalization and certain related transactions are assumed to be
effective as of June 30, 1997 pursuant to (i) the Exchange Offers and related
transactions, and (ii) the Prepackaged Plan. The projections set forth below
were developed by the Company and its financial advisors in June 1996 in
connection with the planning, development and negotiation of its proposed
Recapitalization. The material assumptions underlying the projections which
constitute an integral part of the projections are set forth immediately
following such projections and should be carefully reviewed along with the
information set forth under "Risk Factors" with an understanding that these
risks and uncertainties include, but are not limited to, litigation or appeals
of regulatory approvals (including pending litigation challenging the California
Coastal Commission's approval of the Company's Bolsa Chica project), and
availability of adequate capital, financing and cash flow. In addition, future
values may be adversely affected by increases in property taxes, increases in
the costs of labor and materials and other development risks such as the demand
for housing generally and the supply of competitive products. Real estate
properties do not constitute liquid assets and, at any given time, it may be
difficult to sell a particular property for an appropriate price. The
projections also should be read in conjunction with the Audited Historical
Financial Statements and Unaudited Pro Forma Consolidated Financial Statements
of the Company and subsidiaries included elsewhere in this Prospectus. See
"Index to Financial Statements and Supplementary Data" and "Unaudited Pro Forma
Consolidated Financial Statements."
The following projected financial information was not prepared with a view
towards public disclosure or compliance with the published guidelines of the
American Institute of Certified Public Accountants regarding financial
projections, nor have they been presented in lieu of pro forma historical
financial information and, accordingly, are not intended to comply with Rule
11-03 of Regulation S-X. Neither the independent accountants for the Company nor
any other independent auditors have examined, reviewed, compiled or performed
any procedures with respect to these projections and, accordingly, do not
express an opinion or any other form of assurance on them and assume no
responsibility for them. The projected information necessarily makes numerous
assumptions as set forth below and the Company's future operating results are
subject to and likely to be affected by a number of factors, including timely
resolution of the pending Bolsa Chica litigation, industry performance, general
business and economic conditions, taxes, and other matters, many of which are
beyond the Company's control. The Company believes that while all of its
assumptions are reasonable, such projected information and assumptions are not
necessarily indicative of current values or future performance, which may be
significantly less favorable or more favorable than as reflected in the
projected information and assumed by the Company in its preparation of such
information. Although the projected information represents the best estimate of
the Company (for which the Company believes it has a reasonable basis as of the
time of the preparation thereof) of the results of operations of the Company, it
represents only an estimate, and actual results may vary considerably from the
projected information included herein. Consequently, the inclusion of the
projections herein is not a representation by the Company or its financial
advisors that the projections will be realized. Because the projections are
subject to significant uncertainties and are based upon assumptions that may not
prove to be correct, holders of Impaired Claims and Interests are cautioned not
to place undue reliance on these projections. The projections should not be
relied on for any purpose other than in considering whether to vote to accept or
reject the Prepackaged Plan. The Company does not intend to update or otherwise
revise these projections to reflect circumstances existing after the date of
this Prospectus or to reflect the occurrence of any other events, even in the
event that the assumptions underlying the projections are shown to be in error
(including if the projections become false by reason of
91
<PAGE>
subsequent events), except as may be required by applicable law prior to the
Confirmation Date of the Prepackaged Plan.
KOLL REAL ESTATE GROUP, INC.
PROJECTED FINANCIAL DATA--THE EXCHANGE OFFERS(A)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------------
HISTORIC PROJECTED
----------- ------------------------------------------
1996 1997 1998 1999 2000
----------- --------- --------- --------- ---------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash, cash equivalents and short-term investments.............. $ 2.1 $ 8.4 $ 52.3 $ 130.7 $ 192.9
Total assets (b)............................................... 272.2 286.3 248.3 229.2 230.5
Senior bank debt (b)........................................... 7.1 -- -- -- --
Project debt................................................... 12.5 47.0 -- -- --
Subordinated debentures........................................ 195.9 22.0 24.9 28.1 31.6
Total stockholders' equity (c)................................. 1.1 155.9 153.2 155.5 165.4
Fully diluted shares outstanding at end of year................ 102.4 11.3 11.3 11.3 11.3
Book value per fully diluted share............................. .01 13.80 13.56 13.76 14.64
Statement of Operations Data:
Revenues (a)(d)................................................ 44.8 83.2 85.9 109.8 109.1
Costs of sale.................................................. 40.2 79.5 82.1 98.0 84.0
Income (loss) from continuing operations....................... (28.9) (15.8) (2.7) 2.3 9.9
Extraordinary Gain on extinguishment of debt................... -- 69.4 -- -- --
Net income (loss) (c).......................................... (28.9) 53.6 (2.7) 2.3 9.9
Per common share:
Income (loss) from continuing operations....................... (.60) (.53) (.25) .22 .93
Net income (loss).............................................. (.60) 1.80 (.25) .22 .93
Weighted average shares outstanding.............................. 48.3 29.8 10.6 10.6 10.6
</TABLE>
- ------------------------
(a) The above financial projections are based on the assumption that the
Recapitalization and certain related transactions are effective as of June
30, 1997 pursuant to the Exchange Offers and related transactions and not
pursuant to the Prepackaged Plan. The Company has prepared the Financial
Projections based on generally accepted accounting principles. In addition,
the Company has assumed in the above financial projections that cash flow
generated by its current assets is reinvested in new projects that earn a
15% annual rate of return.
(b) The Bolsa Chica lowlands were sold for $25 million in February 1997, with a
portion of the proceeds utilized to repay remaining senior bank debt and
certain liabilities.
(c) The net income (loss), net income (loss) per share and total stockholders'
equity reflect the projected gain on the retirement of the Outstanding
Debentures, net of taxes of $16.1 million (due to limitations on utilization
of net operating losses).
(d) Projected revenues for the year ended December 31, 1997 include
approximately $31.8 million from the sale of build-to-suit projects.
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<PAGE>
ASSUMPTIONS
BOLSA CHICA--Infrastructure construction on the Bolsa Chica mesa is assumed
to begin during the fourth quarter of 1997, assuming timely resolution of
outstanding litigation, which management believes will not have a significant
financial impact on the project.
Absorption of approximately 1,835 Mesa lots over a four year period
(1998-2001) as follows:
<TABLE>
<CAPTION>
1998 1999 2000 2001
- --------------------------- ----- ----- -----
<S> <C> <C> <C>
500 606 593 136
</TABLE>
Range of initial home prices (including premiums) and sizes as follows:
<TABLE>
<CAPTION>
PRICE/
SQ. FT. PRICE SQ. FT.
----------- ---------- -----------
<S> <C> <C> <C>
High............................................................ 3,200 $ 595,000 $ 186
Low............................................................. 1,100 $ 179,000 $ 163
Average......................................................... 1,700 $ 286,000 $ 168
</TABLE>
The associated lot price, including view premium, for the high and low
initial home price is $257,000 and $56,000, respectively.
Inflation assumed as follows:
<TABLE>
<CAPTION>
1998 &
1996 1997 THEREAFTER
--------- --------- -----------
<S> <C> <C> <C>
Home prices..................................................... 0.0% 3.0% 7.0%
Lot prices...................................................... 0.0% 4.5% 10.5%
Costs........................................................... 2.0% 3.0% 3.5%
</TABLE>
The Company is assumed to capture 25% of the projected home builder profit,
estimated at 8.0% of the initial home price, through joint ventures or in-house
home building.
The projection assumes a Revolving Construction Loan Facility of $25 million
is established during the second half of 1997. Funds are borrowed as needed to
maintain zero cash balance. Interest expense is calculated at a rate of 10.0%
based on the estimated maximum average balance outstanding, which is based on an
average of the prior year's ending balance and the current year's maximum
potential draw. An unused line fee of 0.5% is also assumed.
Sales revenues and costs of sales, including participation in home builder
profits are projected as follows:
<TABLE>
<CAPTION>
1996 1997 1998 1999 2000
--------- --------- --------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Sales..................................................... -- 25.0 67.0 85.7 70.0
Costs of Sales............................................ -- 25.0 67.0 85.7 70.0
--- --- --- --- ---
-- -- -- -- --
--- --- --- --- ---
--- --- --- --- ---
</TABLE>
RANCHO SAN PASQUAL--Residential lots at Rancho San Pasqual are projected to
be sold on a timely basis to homebuilders which have rolling options, or in
comparable transactions. Historic and projected sales revenues for 1996, 1997
and 1998 amount to $10.1 million, $8.8 million and $3.9 million, respectively.
COMMERCIAL DEVELOPMENT BUSINESS--The commercial development business is
assumed to achieve 10% fee revenue growth and 4% annual expense growth in years
after 1996.
93
<PAGE>
GENERAL AND ADMINISTRATIVE EXPENSES--Recurring general and administrative
expenses are projected to grow at a 5% annual rate from 1997 through 2000 and
held constant thereafter.
OTHER LIABILITIES--Payments on other liabilities are assumed to be $5.5
million, $2.3 million, $5.8 million, and $1.8 million respectively for the years
of 1997, 1998, 1999 and 2000.
TAX ATTRIBUTES--Utilization of net operating losses and certain other tax
attributes is assumed to be limited under IRS Section382 as a result of the
Recapitalization. The annual limitation calculation assumes a value of the old
loss corporation of approximately $20.0 million (the approximate recent stock
market value) times the long-term tax-exempt bond rate of 5.48% (for February
1997), for an annual limitation of $1.1 million per annum. Net income and
stockholders' equity reflect the write-off of $16.1 million of deferred tax
assets as a result of the limitations.
See "Risk Factors--Tax Matters" for a discussion of a pending dispute
between the Company and the IRS which, if decided adversely to the Company,
could affect the Company's tax attributes under the Recapitalization.
94
<PAGE>
KOLL REAL ESTATE GROUP, INC.
PROJECTED FINANCIAL DATA--THE PREPACKAGED PLAN(A)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------
PRECONFIRMATION
--------------- PROJECTED
HISTORIC ------------------------------------------
1996 1997 1998 1999 2000
--------------- --------- --------- --------- ---------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash, cash equivalents and short-term investments................ $ 2.1 $ 7.9 $ 53.7 $ 147.4 $ 225.9
Total assets (b)................................................. 272.2 215.8 206.4 226.9 264.3
Senior bank debt (b)............................................. 7.1 -- -- -- --
Project debt..................................................... 12.5 47.0 -- -- --
Subordinated debentures.......................................... 195.9 -- -- -- --
Total stockholders' equity (c)................................... 1.1 123.5 141.2 166.5 203.9
Fully diluted shares outstanding at end of year.................. 102.4 12.4 12.4 12.4 12.4
Book value per fully diluted share............................... .01 9.96 11.39 13.42 16.44
Statement of Operations Data:
Revenues (a)(d).................................................. 44.8 83.2 86.2 110.5 111.3
Costs of sale (e)................................................ 40.2 79.5 63.3 73.5 64.0
Income (loss) from continuing operations......................... (28.9) (85.1) 17.7 25.3 37.4
Extraordinary gain on extinguishment of debt..................... -- 95.0 -- -- --
Net income (loss) (c)............................................ (28.9) 9.9 17.7 25.3 37.4
Per common share:
Income (loss) from continuing operations......................... (.60) (2.82) 1.53 2.18 3.22
Net income (loss) (c)............................................ (.60) .33 1.53 2.18 3.22
Weighted average shares outstanding................................ 48.3 30.2 11.6 11.6 11.6
</TABLE>
- ------------------------
(a) The above financial projections are based on the assumption that the
Recapitalization and certain related transactions are effective as of June
30, 1997 pursuant to the Prepackaged Plan. The Company based the above
projections on its financial position as of December 31, 1996, adjusted to
take into account the effects of the Prepackaged Plan and certain related
transactions assumed to close as of June 30, 1997. The above projections
have been prepared using the principles required by the American Institute
of Certified Public Accountants' Statement of Position 90-7, FINANCIAL
REPORTING BY ENTITIES IN REORGANIZATION UNDER THE BANKRUPTCY CODE ("FRESH
START ACCOUNTING"). The Company has prepared the Financial Projections based
on generally accepted accounting principles as such rules and practices are
applied to the real estate industry. In addition, the Company has assumed in
the above financial projections that cash flow generated by its current
assets is reinvested in new projects that earn a 15% annual rate of return.
(b) The Bolsa Chica lowlands were sold for $25 million in February 1997, with a
portion of the proceeds utilized to repay remaining senior bank debt and
certain liabilities. The decrease in total assets at December 31, 1997
reflects the write-down of land held for development pursuant to the
application of fresh start accounting.
(c) The Net income (loss), net income (loss) per share and total stockholders
equity reflect the projected gain on the retirement of the Outstanding
Debentures.
(d) Projected revenues for the year ended December 31, 1997 include
approximately $31.8 million from the sale of build-to-suit projects.
(e) Costs of sale for the years ended December 31, 1998 through 2000 reflect the
reduced land basis resulting from the write-down of land held for
development in 1997 upon confirmation of the Prepackaged Plan pursuant to
the application of fresh start accounting.
95
<PAGE>
ASSUMPTIONS
BOLSA CHICA--Infrastructure construction on the Bolsa Chica mesa is assumed
to begin during the fourth quarter of 1997, assuming timely resolution of
outstanding litigation, which management believes will not have a significant
financial impact on the project.
Absorption of approximately 1,835 Mesa lots over a four year period
(1998-2001) as follows:
<TABLE>
<CAPTION>
1998 1999 2000 2001
- --------------------------- ----- ----- -----
<S> <C> <C> <C>
500 606 593 136
</TABLE>
Range of initial home prices (including premiums) and sizes as follows:
<TABLE>
<CAPTION>
PRICE/
SQ. FT. PRICE SQ. FT.
----------- ---------- -----------
<S> <C> <C> <C>
High............................................................ 3,200 $ 595,000 $ 186
Low............................................................. 1,100 $ 179,000 $ 163
Average......................................................... 1,700 $ 286,000 $ 168
</TABLE>
The associated lot price, including view premium, for the high and low
initial home price is $257,000 and $56,000, respectively.
Inflation assumed as follows:
<TABLE>
<CAPTION>
1998 &
1996 1997 THEREAFTER
--------- --------- -----------
<S> <C> <C> <C>
Home prices..................................................... 0.0% 3.0% 7.0%
Lot prices...................................................... 0.0% 4.5% 10.5%
Costs........................................................... 2.0% 3.0% 3.5%
</TABLE>
The Company is assumed to capture 25% of the projected home builder profit,
estimated at 8.0% of the initial home price, through joint ventures or in-house
home building.
The projection assumes a Revolving Construction Loan Facility of $25 million
is established during the second half of 1997. Funds are borrowed as needed to
maintain zero cash balance. Interest expense is calculated at a rate of 10.0%
based on the estimated maximum average balance outstanding, which is based on an
average of the prior year's ending balance and the current year's maximum
potential draw. An unused line fee of 0.5% is also assumed.
Sales revenues and costs of sales, including participation in home builder
profits are projected as follows:
<TABLE>
<CAPTION>
1996 1997 1998 1999 2000
--------- --------- --------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Sales..................................................... -- 25.0 67.0 85.7 70.0
Costs of Sales............................................ -- 25.0 48.1 60.7 49.3
--- --- --- --- ---
-- -- 18.9 25.0 20.7
--- --- --- --- ---
--- --- --- --- ---
</TABLE>
RANCHO SAN PASQUAL--Residential lots at Rancho San Pasqual are projected to
be sold on a timely basis to homebuilders which have rolling options, or in
comparable transactions. Historic and projected sales revenues for 1996, 1997
and 1998 amount to $10.1 million, $8.8 million and $3.9 million, respectively.
COMMERCIAL DEVELOPMENT BUSINESS--The commercial development business is
assumed to achieve 10% fee revenue growth and 4% annual expense growth in years
after 1996.
96
<PAGE>
GENERAL AND ADMINISTRATIVE EXPENSES--Recurring general and administrative
expenses are projected to grow at a 5% annual rate from 1997 through 2000 and
held constant thereafter.
OTHER LIABILITIES--Payments on other liabilities are assumed to be $5.5
million, $1.1 million, $1.3 million, and $1.8 million respectively for the years
of 1997, 1998, 1999 and 2000.
TAX ATTRIBUTES--Unless the Company elects out, IRC 382 provides for certain
reductions of tax attributes for a corporation which undergoes an ownership
change in connection with a Case. See "Material Federal Income Tax Consequences
Federal Income Tax Consequences of Prepackaged Plan."
See also "Risk Factors--Tax Matters" for a discussion of a pending dispute
between the Company and the IRS which, if decided adversely to the Company,
could affect the Company's tax attributes under the Prepackaged Plan.
97
<PAGE>
POSSIBLE ACCOUNTING TREATMENTS
The Company proposes to account for the Recapitalization, assuming holders
of the Senior Debentures and Subordinated Debentures exchange 90% or more of the
Outstanding Debentures and related accrued interest, by recording the shares of
Common Stock issued at the agreed-upon value for all Outstanding Debentures
tendered; any difference between the value of such shares issued and the related
outstanding debt balance will result in the recognition of an extraordinary gain
on extinguishment of debt. The Company will continue to report its historical
Accumulated Deficit balance (net of the extraordinary gain referred to above) in
stockholders' equity. As discussed in "Material Federal Income Tax Consequences
of the Exchange Offers; Cancellation of Indebtedness--Income Limitation on Net
Operating Losses" herein, certain net operating loss carryforwards ("NOLS") will
become unusable as a result of the Recapitalization through the Exchange Offers,
resulting in the write-off of the related deferred tax assets. With the
consummation of the Recapitalization through the Exchange Offers, no adjustment
to the net realizable values of assets and liabilities, other than to the
deferred tax assets discussed above, is required.
In the event that the Company seeks judicial confirmation of the Prepackaged
Plan, the Company proposes to account for the exchange of shares of Common Stock
for Outstanding Debentures using the principles of fresh start accounting
pursuant to Statement of Position 90-7 ("FINANCIAL REPORTING BY ENTITIES IN
REORGANIZATION UNDER THE BANKRUPTCY CODE"). Pursuant to such principles, in
general, the Corporation's assets (principally the Bolsa Chica property) and
liabilities will be revalued to their fair market values. The aggregation of any
adjustments to the asset and liability accounts will be recorded as adjustments
to results of operations. Additionally, the difference between the value of
shares issued and the related outstanding debt balance will result in the
recognition of an extraordinary gain on extinguishment of debt. The Company will
recast its balance sheet based on the aforementioned revalued assets and
liabilities, and restate retained earnings to zero. As discussed below in
"Federal Income Tax Consequences of Prepackaged Plan," under judicial
confirmation of the Prepackaged Plan there will be no loss of available NOLS.
LIQUIDATION ANALYSIS
Pursuant to the Best Interests Test, the Bankruptcy Court must determine
that each nonaccepting Holder of an Impaired Claim or Impaired Interest will
receive or retain property of a value as of the Effective Date of the
Prepackaged Plan at least equal to the amount such Holder would receive or
retain on account of such Claim or Interest if the Company were liquidated under
chapter 7 of the Bankruptcy Code (a "Liquidation"). In applying the Best
Interests Test, the Bankruptcy Court will ascertain the hypothetical
distributions in a Liquidation to Secured Creditors, holders of priority Claims,
general unsecured Creditors and Equity Interest Holders. In such analysis, the
Court will take into account applicable structural and contractual subordination
rights among Creditors, as well as give effect to valid liens and security
interests held by certain Creditors. Hypothetical distributions to Creditors and
Equity Holders would then be determined based upon rules of "absolute priority"
established by the Bankruptcy Code as more fully described below. The Court will
compare these hypothetical chapter 7 liquidation distributions with the
distributions offered to each class of Impaired Claims or Impaired Interests
under the Prepackaged Plan to determine if the Prepackaged Plan satisfies the
Best Interests Test set forth in section 1129(a)(7) of the Bankruptcy Code.
The Company believes that the value of the property to be distributed or
retained by each holder of an Impaired Claim and Impaired Interest under the
Prepackaged Plan exceeds the value, if any, the Holder would receive in a
Liquidation and thus believes that the requirements of the best interest test
are satisfied. In order to arrive at that judgment, the Company, with the
assistance of Houlihan Lokey which relied on Company projections, estimated and
compared the theoretical returns to each holder of an Impaired Claim and
Impaired Interest under a hypothetical Liquidation with those under the
Prepackaged Plan. The results of such analysis are set forth below.
98
<PAGE>
It should be noted that underlying this analysis are a number of estimates
and assumptions which are inherently subject to significant uncertainties and
contingencies, many of which are beyond the control or otherwise not accurately
predictable by the Company. Moreover, there can be no assurance that the values
assumed in the following analysis would be realized if in fact the Company was
liquidated. Accordingly, while the analysis that follows is necessarily
presented with numerical specificity, if the Company's assets were in fact
liquidated, the actual liquidation proceeds would likely vary from the amounts
set forth below and no representation or warranty can be, or is being made with
respect to the proceeds that could be received in an actual chapter 7
liquidation of the Company. The Liquidation valuations have been prepared solely
for purposes of permitting the comparison required by section 1129(a)(7) of the
Bankruptcy Code and do not represent a value that may be appropriate for any
other purpose. Nothing contained in these valuations is intended to be or
constitutes a concession or admission of the Company for any other purpose.
LIQUIDATION ANALYSIS
The following principal assumptions and considerations were used to prepare
the liquidation analysis:
ESTIMATED LIQUIDATION PROCEEDS. The Company is a real estate development
company with properties, located principally in Southern California, in various
stages of development. The business of the Company is conducted through
subsidiaries. The principal assets of the Company consist of the stock of the
subsidiaries. For purposes of the liquidation analysis, it is assumed that the
properties owned by the Company, which are held in the Company's subsidiaries,
would be sold on a going concern basis, and that the other assets of the
Company, which are not material in aggregate, would be sold in a liquidation
sale over the period described below. It is believed that the sales of
subsidiaries assets would result in greater proceeds to the Company than
liquidating the stock of the individual subsidiaries. There can be no assurance,
however, that any asset sales could be consummated. Further, the Company did not
solicit inquiries with respect to an acquisition of the Company or any of its
businesses or assets. The following information and factors, not listed in order
of importance, were, among others, considered by the Company in estimating the
proceeds which might be received from the sale of the properties owned, or
businesses being operated, by the Company:
(a) The Company's historical financial statements, relevant historical
operating information and projected financial and operating performance,
including financial information for the twelve-month period ended
December 31, 1996 and projections through December 31, 2003 (the
"Projections").
(b) Valuations of properties comparable to those held by the Company and
market valuations of public companies in similar businesses as the
Company.
(c) Bids received by the Company for certain of the Company's properties.
(d) The primary characteristics of the properties owned by the Company, as
well as the Company's development expertise, operating advantages and
disadvantages, and other relevant aspects of their business.
(e) The limited base of potential buyers for the Company's primary asset,
310 acres of undeveloped land known as Bolsa Chica.
(f) The potential impact of a chapter 7 proceeding upon potential buyers'
pricing strategies.
(g) The relative timing of potential sales of the Company's assets.
(h) The liabilities and obligations of the Company's subsidiaries.
In estimating the liquidation proceeds and applying the foregoing factors
and considerations to make such estimates, both the general economic and real
estate environment in Southern California and the
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current status of the Company's assets were considered. As has been described in
detail in this Prospectus, the Company has been adversely impacted by a
prolonged downturn in the California real estate markets, delays in receiving
the entitlements necessary to develop the Bolsa Chica property and litigation
challenging such entitlements. These factors have had a significant adverse
affect upon the Company's revenues and operating income. These factors would
also likely adversely affect the price which could be realized in a near-term
disposition of the Company's assets. In addition, this analysis includes
estimates related to the acceleration of certain unliquidated and contingent
claims that might be triggered by a chapter 7 liquidation.
IMPACT OF CHAPTER 7 UPON SUBSIDIARY OPERATIONS AND VALUES. A decision to
liquidate the Company under chapter 7 could cause the withdrawal of, or delay in
receiving, development capital for certain of the Company's properties held in
various subsidiaries. In addition, in the event of a chapter 7 proceeding by the
Company, as a result of the co-obligation of certain of the subsidiaries on a
portion of the Company's indebtedness and other factors, it is likely that some
or all of the subsidiaries would be required to commence cases under the
Bankruptcy Code. Any such filings would further result in substantial
uncertainty and in disruption of the operating businesses, including a potential
loss of management. A potential lack of liquidity, combined with poor industry
conditions and the adverse effect of the commencement of bankruptcy cases by the
subsidiaries, could lead to further reductions in operating performance and,
subsequently, less realizable value to creditors and stockholders of the Company
from the ultimate disposition of such subsidiaries. The following analysis
considers such effects through the assumption that potential acquirors of the
Company's assets would require higher rates of return as a result of such
factors.
NATURE AND TIMING OF THE LIQUIDATION PROCESS. Under section 704 of the
Bankruptcy Code, a chapter 7 trustee must, among other duties, collect and
convert the property of the debtor's estate to cash and close the estate as
expeditiously as is compatible with the best interests of the parties in
interest. Solely for purposes of preparing this liquidation analysis, (a) the
liquidation was assumed to commence in January 1997, (b) the Company's assets
were assumed to be sold during the 12-month period ending in January 1998 (the
"Liquidation Period") and (c) distributions from the liquidations were assumed
to be made in their entirety in January 1999 (the "Liquidation Distribution
Date"). Depending upon actual circumstances, the 12-month Liquidation Period or
24 month Liquidation Distribution Date could be significantly longer or, while
the Company believes it unlikely, shorter. In this connection, it should be
noted that bankruptcy proceedings involving the subsidiaries, the necessity for
the determination and satisfaction of claims at the subsidiary level prior to
any distribution of liquidation proceeds to the Company, the potential for
inter-company and inter-creditor claims disputes and the likelihood of
significant contingent and other claims and related litigation could
substantially delay both the sale of some or all subsidiaries and the ultimate
distribution of the proceeds of asset liquidations to the Company's Creditors
and Interest Holders.
While for purposes of this analysis the Liquidation Period is assumed to
begin approximately six months before the Effective Date of the Prepackaged
Plan, the Company does not expect any material events to occur over this time
frame that will significantly impact this analysis, with the exception of the
sale of the Lowlands. This analysis has been adjusted to reflect the sale of the
Lowlands, which occurred in February 1997, and is discussed in more detail
below.
LIQUIDATION TAX LIABILITIES. As members of the consolidated tax group, each
subsidiary of the Company is jointly liable with the Company for federal tax
liabilities, including liabilities that arise from the disposition of the
subsidiaries themselves. As such, the proceeds available for distribution to
holders of Claims against and Interests in the Company are assumed to be reduced
by the tax obligations expected to be triggered by the sale of the subsidiaries
in the liquidation whether such obligations are triggered at the Company or
subsidiary level. After considering the tax basis of each asset and the
application of $282 million of available net operating loss carryforwards
(assuming $147 million of such net operating loss
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carryforwards are disallowed as a result of the ongoing Internal Revenue Service
audit for the Company's 1989 through 1991 tax years), the Company estimates no
tax liability as a result of the disposition of the assets of the subsidiaries.
DISTRIBUTION; ABSOLUTE PRIORITY. Prior to distribution of any proceeds to
creditors at the Company level, claims and obligations of the subsidiaries to
the extent not assumed in the particular subsidiary sale transactions themselves
would have to be paid. For purposes of this liquidation analysis it has been
assumed that no Claims will be assumed by the buyers of the Company's respective
subsidiaries and thus will be paid at the subsidiary level out of the proceeds
of subsidiary sales and prior to any distribution to the Creditors of the
Company. Under a chapter 7 liquidation, all Secured Claims would be satisfied
from the proceeds of the collateral securing such Claims before any such
proceeds would be distributed to the Holders of Unsecured Claims. To the extent
that proceeds remain after satisfaction of all Secured Claims, Administrative
Claims and Priority Claims, the following analysis assumes the application of
the rule of absolute priority of distributions with respect to the remaining
proceeds of the Company. Under that rule, no junior Creditor receives any
distribution until all senior Creditors are paid in full. As such, and as a
result of applicable contractual subordination provisions, no distributions
would be made to holders of the Subordinated Debentures until all "senior
indebtedness" (as defined in the applicable indenture), including the Senior
Debentures, were paid in full.
PRIMARY ASSUMPTIONS USED TO VALUE THE COMPANY'S PRINCIPAL ASSETS UNDER A
PREPACKAGED PLAN AND A HYPOTHETICAL LIQUIDATION.
The following section details, on an asset by asset basis, the major
assumptions that were used to value the Company's principal assets under the
Prepackaged Plan and Liquidation scenarios.
BOLSA CHICA--MESA.
In a Prepackaged Plan, it is assumed that outstanding litigation is resolved
in a timely manner and infrastructure construction on the Bolsa Chica mesa (the
"Mesa") begins during the fourth quarter of 1997. This scenario also assumes a
$25 million Revolving Construction Loan Facility is established in the second
half of 1997 at a 10% interest rate with funds borrowed as needed to maintain a
zero cash balance. The present value of the Mesa in a Prepackaged Plan is equal
to the Company's projected cash flows from this project, discounted at a 15%
rate.
Based on conversations with local real estate experts, and after considering
various factors such as the additional government approvals that are required
before the Mesa can be developed and, the prospect of continued litigation
related to, or appeals of, regulatory approvals (e.g., the pending litigation
challenging the California Coastal Commission's approval of the Company's Bolsa
Chica project), the estimated present value of the proceeds to be received for
the Mesa in a Liquidation scenario (discounted at 15%) is equal to approximately
54% of the estimated present value of the property in a Prepackaged Plan
(discounted at 40%).
BOLSA CHICA--LOWLANDS.
In February 1997, the Company sold approximately 880 lowland acres (the
"Lowlands") to the California State Lands Commission for $25 million. The
proceeds from the Lowlands sale were used to repay the $6.6 million balance on
the Nomura Loan and reduce other outstanding liabilities by approximately $4.0
million. The remaining portion of the proceeds is currently held in the
Company's cash account.
RANCHO SAN PASQUAL.
In a Prepackaged Plan, the estimated value of Rancho San Pasqual is based on
management's estimate of the cash flows that will be generated by the sale of
residential lots which are projected to be
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sold on a timely basis to homebuilders with rolling options, or in comparable
transactions, discounted at a 15% rate.
The accelerated time frame under Chapter 7 for disposition may have an
adverse effect on realized value in a Liquidation. Consequently, in a
Liquidation scenario, it is estimated that the Company realizes a present value
equal to its projected cash receipts from Rancho San Pasqual, discounted at a
25% rate.
FAIRBANKS
A subsidiary of the Company recently formed a joint venture with a prominent
Southern California homebuilder through which Fairbanks, a 390 acre residential
property in North San Diego County, California, will be developed. The estimated
value of Fairbanks in a Prepackaged Plan scenario is based on the approximately
$7.2 million in cash flows projected to be received by the Company as a result
of the development of the project in 1998 through 2000, discounted at 15%.
The decision to liquidate the Company's interest in Fairbanks under chapter
7 of the Bankruptcy Code would likely result in the Company selling its rights
to certain future cash flows generated by the joint venture. In a Liquidation
scenario, it is estimated that the Company realizes a present value equal to its
projected cash receipts from Fairbanks, discounted at a 25% rate.
THE COMMERCIAL DEVELOPMENT BUSINESS
In a Prepackaged Plan, the Commercial Development Business is assumed to
achieve 10% annual revenue growth and 4% annual expense growth in years after
1996. The value of the Commercial Development Business in a Prepackaged Plan is
estimated to be equal to four times the selected representative EBITDA level for
this business which is equal to the average of the 1996 actual and 1997
projected EBITDA.
In a Liquidation scenario, the Commercial Development Business is estimated
to have no value as it is assumed that the Commercial Development Business could
not be sold in an expedited time frame due to the sensitivity of this business
to (1) access to capital to finance new projects and (2) the business
relationships of the personnel employed in the Commercial Development Business,
whom would likely choose to terminate their employment in a Liquidation
scenario.
GENERAL AND ADMINISTRATIVE EXPENSES
In a Prepackaged Plan scenario, recurring general and administrative
expenses ("G&A Expenses") are projected to grow at a 5% annual rate from 1997
through 2000 and held constant thereafter. The estimated G&A Expenses necessary
to manage the Company's current asset base is equal to approximately four times
the Company's actual G&A expenses in fiscal year 1996.
In a Liquidation scenario, it is assumed that the Company does not retain
any full-time general and administrative-related personnel. As a result,
additional general unsecured claims related to employee severance packages would
result from a chapter 7 liquidation. Employee severance packages are estimated
to approximate $1.5 million based on contractual obligations.
LIQUIDATION-RELATED EXPENSES
In the Liquidation scenario, it is assumed that asset disposition fees and
expenses would aggregate approximately 3% of estimated gross liquidation
proceeds.
BASIC ADMINISTRATION EXPENSES
In both the Prepackaged Plan and Liquidation scenarios, the proceeds that
would be available to the holders of the Claims and Interests would be reduced
by administrative expenses. Administrative expenses
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in a Prepackaged Plan scenario would include expenses related to counsel,
financial advisors, accountants and other professionals. Administrative expenses
in a Liquidation scenario would include similar expenses, as well as expenses
related to a trustee (including financial advisors and accountants retained by
the trustee). Administrative expenses are estimated to aggregate $3.0 million in
both the Prepackaged Plan and the Liquidation scenario.
The following table details the computation of liquidation proceeds:
LIQUIDATION PROCEEDS COMPUTATION
($ IN 000S)
<TABLE>
<S> <C>
Hypothetical gross liquidation proceeds(a)......................... $ 96,603
LESS: Chapter 7 basic administration costs......................... 3,000
LESS: Payment of taxes............................................. 0
---------
Liquidation value available for distribution to creditors and
equity interest holders of the Company........................... $ 93,603
---------
---------
</TABLE>
(a) Hypothetical net liquidation proceeds, as estimated by the Company. The
hypothetical net liquidation proceeds includes interest on cash balances
during the Liquidation Period at an assumed pretax rate of 4% per annum and
reflects the estimated value of the assets available to creditors and equity
interest holders of the Company after the payment of specific claims at each
of the Company's individual Subsidiaries, including: (i) disposition-related
costs, (ii) taxes, (iii) severance payments, and (iv) liabilities at each
subsidiary.
COMPARISON OF ESTIMATED DISTRIBUTION
The table below sets forth a comparison of the estimated distributions to
Holders of Impaired Claims and Equity Interests under the Prepackaged Plan with
the estimated recoveries of such Holders in a chapter 7 liquidation of the
Company after giving effect to all contractual subordination provisions and the
corporate structure of the Corporation and its Subsidiaries. The comparison
should be read in conjunction with all other information set forth under
"LIQUIDATION ANALYSIS."
COMPARISON OF ESTIMATED DISTRIBUTION
($IN 000S)
<TABLE>
<CAPTION>
CASH
AVAILABLE FOR NET PRESENT VALUE
DISTRIBUTION OF CHAPTER 7 ESTIMATED
DESCRIPTION OF CLAIMS/EQUITY APPROXIMATE IN LIQUIDATION PERCENTAGE PREPACKAGED PLAN ESTIMATED
INTERESTS(A) CLAIM AMOUNT CHAPTER 7(B) RECOVERY(B) PERCENTAGE RECOVERY(C)
- --------------------------------- ------------ -------------- ------------------------ --------------------------
<S> <C> <C> <C> <C>
Liquidation proceeds available
for distribution............... $ 93,603
Class 3--Unliquidated or
Contingent Claims(d)........... $ 17,217 $ 11,151 57.9% 100.0%
Class 5--General Unsecured Claims
(e)............................ $ 172,992 $ 82,452 42.6% 61.4%
Class 6--Subordinated
Debentures..................... $ 41,138 $ 0 0.0% greater than 0%(f)
Class 7--Preferred Stock......... NA $ 0 0.0% greater than 0%(f)
Class 8--Class A Common Stock.... NA $ 0 0.0% greater than 0%(f)
Class 9--Warrants(g)............. NA $ 0 0.0% 0.0%
</TABLE>
- ------------------------
(a) For purposes of the liquidation analysis, claims and interests have been
grouped together in accordance with rules of absolute priority under the
Bankruptcy Code which the Company believes would be applied in a
Liquidation. For this purpose, the Company has assumed that, except for the
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contractual subordination provisions applicable to the Subordinated
Debentures, no claims would be subject to subordination at the Company
level.
(b) Cash amount in aggregate after the application of a present value discount.
Percentage shown in the table as Net Present Value of Chapter 7 Estimated
Liquidation Percentage Recovery is the quotient of the present value of the
available liquidation proceeds divided by the estimated amount of claims in
such class. The resulting percentage has been discounted back to its net
present value as of January 1, 1997 (the date on which the Liquidation
Period is assumed to begin) from January 1, 1999 (the assumed Liquidation
Distribution Date) applying a discount rate of 5.8%
(c) Amount shown in the table as Prepackaged Plan Estimated Percentage Recovery
is the quotient of the cash plus the assumed value of the equity securities
to be distributed to all holders of claims in such class under the
Prepackaged Plan divided by the estimated amount of claims. It should be
noted that depending on general market conditions and other factors
prevailing at the relevant times the equity securities may trade at a price
other than that which was assumed for purposes of this analysis.
Accordingly, no representation can be, or is being, made with respect to
whether the percentage recoveries shown in the table above will actually be
realized by the holder of claims in any particular class under the
Prepackaged Plan.
(d) In a Liquidation Scenario, certain unliquidated or contingent liabilities
are assumed to be accelerated. In the Prepackaged Plan, these liabilities
are assumed to be satisfied in the ordinary course of business, in a
Liquidation, they are assumed to be pari passu with the General Unsecured
Claims, except for Senior Debt as such term is defined in the Senior
Debenture Indenture, which must be paid in full before General Unsecured
Claims. It should be noted that underlying the $17.2 million claim shown
above are a number of estimates and assumptions which are inherently subject
to significant uncertainties and contingencies, many of which are beyond the
control or otherwise not accurately predictable by the Company. Moreover,
should the unliquidated or contingent claims be higher than estimated, the
recoveries available to certain other classes of claims would be lower than
those shown above.
(e) Includes the Senior Debentures and liquidated and non-contingent liabilities
of the Company.
(f) Assuming acceptance of the Prepackaged Plan by each Impaired Class and
Interest entitled to vote thereon, under the Prepackaged Plan, these Holders
will receive New Common Stock.
(g) The Warrants are deemed to have no economic value and, consequently, will be
canceled on the Effective Date. Class 9 Interests are impaired; because
holders of Class 9 Interests will receive no distributions and will retain
no property under the Prepackaged Plan, such holders are deemed to have
rejected the Prepackaged Plan and are not entitled to vote on the
Prepackaged Plan.
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DESCRIPTION OF THE COMMON STOCK
Subject to the prior rights of the holders of any Preferred Stock which may
be issued and outstanding from time to time, the holders of Common Stock will be
entitled to receive dividends from funds of the Company legally available
therefor, when, as and if declared by the Board and will be entitled to share
ratably in all of the assets of the Company available for distribution to
holders of Common Stock upon the liquidation, dissolution, or winding up of the
affairs of the Company. Holders of the Common Stock will not have any
preemptive, subscription, redemption or conversion rights. Holders of the Common
Stock will be entitled to one vote per share on all matters which they will be
entitled to vote upon at meetings of stockholders or upon actions taken by
written consent pursuant to Delaware law. The holders of Common Stock will not
have cumulative voting rights, which means that the holders of more than 50% of
such outstanding shares can elect all of the directors of the Company. All of
the shares of Common Stock to be issued upon the consummation of the
Recapitalization will be fully paid and nonassessable. No dividends have been
paid to holders of the capital stock of the Company since the inception of the
Company, and no dividends are anticipated to be declared or paid in the
foreseeable future. The Exchange Agent for the Common Stock will be ChaseMellon
Shareholder Services, P.O. Box 3301, South Hackensack, NJ 07606, Attn:
Reorganization Department.
MARKET PRICE OF AND DIVIDENDS ON THE COMPANY'S
COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The following tables set forth information with respect to bid quotations
for the Common Stock of the Company for the periods indicated as reported by
NASDAQ. These quotations are interdealer prices without retail markup, markdown
or commission and may not necessarily represent actual transactions.
<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
1997
First Quarter............................................ $ .188 $ .125
1996
First Quarter............................................ $ .531 $ .250
Second Quarter........................................... .313 .156
Third Quarter............................................ .250 .156
Fourth Quarter........................................... .250 .125
1995
First Quarter............................................ $ .500 $ .344
Second Quarter........................................... .469 .313
Third Quarter............................................ .594 .344
Fourth Quarter........................................... .469 .250
1994
First Quarter............................................ $ .531 $ .250
Second Quarter........................................... .406 .125
Third Quarter............................................ .344 .188
Fourth Quarter........................................... .625 .281
</TABLE>
The number of holders of record of the Company's Common Stock as of December
31, 1996 was approximately 25,000. The Company has not paid any cash dividends
on its Common Stock to date, nor does the Company currently intend to pay
regular cash dividends on the Common Stock. Such dividend policy is and will
continue to be subject to prohibitions on the declaration or payment of
dividends contained in debt agreements of the Company.
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DESCRIPTION OF OUTSTANDING DEBENTURES
The Senior Debentures were issued under the Senior Indenture between the
Company and First Trust National Association, as trustee (the "Senior Trustee"),
which is incorporated by reference as an exhibit to the Registration Statement
which this prospectus is a part, to which exhibit reference is hereby made. The
Subordinated Debentures were issued under the Subordinated Indenture between the
Company and The Bank of New York, as trustee (the "Subordinated Trustee" and,
together with the Senior Trustee, the "Trustees"), which is incorporated by
reference as an exhibit to the Registration Statement which this prospectus is a
part, to which exhibit reference is hereby made. The Indentures were qualified
under the Trust Indenture Act of 1939. The following summaries of certain
provisions of the Indentures and the Outstanding Debentures do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, the Indentures and the Outstanding Debentures, including the definitions
therein of terms not defined herein. Certain terms used in this section are
defined at the end of this section under the heading "Certain Definitions."
TERMS. The Outstanding Debentures bear interest at 12% per annum from March
15, 1992, payable semiannually in arrears on March 15 and September 15 of each
year, commencing September 15, 1992, to the persons who are registered holders
thereof at the close of business on the March 1 or September 1 immediately
preceding such Interest payment Date. The Outstanding Debentures mature on March
15, 2002.
Subject to the conditions set forth below, the Company at any time, at its
option and in its sole discretion, in lieu of paying some or all of any payment
of interest on the Senior Debentures or the Subordinated Debentures, as the case
may be, in cash: (a) issue additional Senior Debentures (the "Secondary Senior
Debentures") or Subordinated Debentures (the "Secondary Subordinated
Debentures"), as the case may be, in an aggregate principal amount equal to the
amount of cash interest not paid on the last day of the Interest Period; (b)
issue shares of Common Stock having a Fair Market Value on the date of such
issuance equal to the amount of cash interest not paid on the last day of the
Interest Period; or (c) issue a combination of Secondary Senior Debentures or
Secondary Subordinated Debentures, as the case may be, and Common Stock having a
combined aggregate principal amount (in the case of the Secondary Senior
Debentures or Secondary Subordinated Debentures) and Fair Market Value on the
date of such issuance (in the case of the Common Stock) equal to the amount of
cash interest not paid on the last day of the Interest Period. In the event of
any such issuance of Secondary Senior Debentures, Secondary Subordinated
Debentures and/or shares of Common Stock in lieu of cash interest, the Company
may at its option pay cash in lieu of issuing Secondary Senior Debentures or
Secondary Subordinated Debentures in any denomination of less than $100 and/or
in lieu of issuing fractional shares of Common Stock. Notwithstanding the
foregoing, the Company may not issue any shares of Common Stock in lieu of cash
interest at any time unless (i) no Default under the Indenture pursuant to which
such interest is being paid shall have occurred and then be continuing, and (ii)
the Fair Market Value of the Common Stock on the date of such issuance exceeds
$.50 per share.
If, but only if, (i) no Default under the Indenture pursuant to which such
principal is being paid shall have occurred and then be continuing, and (ii) the
Fair Market Value of the Common Stock on the date of issuance exceeds $.50 per
share and, then the Company may, but only at the final maturity of the
respective Outstanding Debentures, pay some or all of the principal amount of
such Outstanding Debentures by issuing shares of Common Stock having a Fair
Market Value on the date of such issuance equal to the amount of principal not
paid in cash.
Interest on the Outstanding Debentures will be computed on the basis of a
360-day year of twelve 30-day months. Principal and interest is payable at the
offices of the respective Trustees, but, at the option of the Company, interest
may be paid by check (or, at the Company's option, additional debentures or
stock) mailed to the registered holders at their registered addresses. The
Outstanding Debentures are transferable and exchangeable at the offices of their
respective Trustees and were issued in fully registered
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form, without coupons, in denominations of $1,000 and any integral multiple
thereof, and in denominations of $100 and integral multiples thereof less than
$1,000, except for additional Outstanding Debentures issued in lieu of cash
payments of interest, which have been issued in smaller denominations. However
Outstanding Debentures issued upon any transfer or exchange are issued in (i)
the same denomination as the Outstanding Debentures transferred or exchanged,
(ii) denominations of $1,000 or integral multiples of $1,000, with a single
Outstanding Debenture in an amount less than $1,000 if necessary to effectuate
the transfer or exchange, or (iii) such other denominations as may be authorized
by the Company for purposes of transfer or exchange.
OPTIONAL REDEMPTION. The Company may redeem all or any of the Outstanding
Debentures for cash at any time at 100% of the aggregate principal amount of the
Outstanding Debentures outstanding plus accrued interest to but excluding the
redemption date upon 30 days' prior written notice to all holders thereof.
CHANGE OF CONTROL. If a majority of the board of directors of the Company
were to be comprised of individuals other than Continuing Directors (such event
being referred to herein as a "Change of Control" and the date on which any such
event occurs being referred to herein as the "Change of Control Date"), then the
Company would be required to notify the holders of Outstanding Debentures in
writing of such occurrence and will be required to make an offer to redeem (the
"Change of Control Offer") such securities on the last day of its fiscal quarter
following the change of Control Date (the "Change of Control Payment Date") for
cash at 101% of the principal amount of Outstanding Debentures then outstanding
plus accrued interest to but excluding the Change of Control Payment Date.
SUBORDINATION. All indebtedness evidenced by the Outstanding Debentures is
subordinated in right of payment, as set forth in the respective Indentures, to
the prior payment in full of all Senior Debt of the Company.
"Senior Debt" is defined for purposes of each of the Indentures to include
as (i) any and all amounts payable by the Company or any Subsidiary under or in
respect of (1) with respect to the Subordinated Debentures, the Senior
Debentures, (2) indebtedness of the Company for money borrowed, (3) express
written guaranties of the Company of Debt (as defined on page 111 below) of any
other person, and (4) indebtedness evidenced by notes, debentures, bonds or
other instruments of indebtedness for the payment of which the Company is
responsible or liable, by guaranties or otherwise, in each of cases (1), (2),
(3) or (4) whether now or hereafter existing; and (ii) modifications, renewals,
extensions, refinancings, replacements and fundings of any such amounts,
indebtedness, obligations or guaranties; unless, in any of clauses (i) or (ii)
above, in the instrument creating or evidencing such indebtedness or pursuant to
which the same is outstanding it is provided that such amounts, indebtedness,
obligations or guaranties, or such modifications, renewals, extensions or
refundings thereof, are not superior in right of payment to the Outstanding
Debentures. Notwithstanding anything to the contrary in the foregoing, Senior
Debt does not include (a) the Senior Debentures (provided, however, that for
purposes of the Subordinated Debentures, the Senior Debentures are included in
the definition of Senior Debt), (b) the Subordinated Debentures, (c) any
accounts payable or other Debt of the Company or any Subsidiary to trade
creditors created, incurred, assumed or guaranteed by the Company in the
ordinary course of business in connection with obtaining goods, materials or
services, (d) amounts payable on any indebtedness or other obligations to any
employee or Affiliate of the Company or any Subsidiary (except for any Debt
evidenced by any debt securities of the Company purchased by such an employee or
Affiliate after such debt securities have been registered and sold under the
Securities Act of 1933, as amended, to a Person who is not an Affiliate of the
Company or any Subsidiary, provided that such debt securities rank senior in
right of payment to the Outstanding Debentures and the issuance of such debt
securities was permitted to be incurred under the Indentures), (i) any liability
for federal, state, local or other taxes owed or owing by The Company, or (f)
any indebtedness or other obligations created incurred, assumed or guaranteed by
the Company which by the terms of the document or instrument by which it is
created provides that it is subordinate in right of
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payment, with respect to the Senior Debentures, to any other indebtedness or
other obligation of the company or any Subsidiary or, with respect to the
Subordinated Debentures, to the Senior Debentures.
Only indebtedness of the Company which is Senior Debt (as defined in each
Indenture) ranks senior to the securities issued under such Indenture in
accordance with the provisions of such Indenture.
The Company may not pay principal of, premium, if any, or interest on the
Outstanding Debentures, other than in additional debentures or in shares of
Common Stock, and may not repurchase, redeem or otherwise retire any Outstanding
Debentures (collectively, "pay the Outstanding Debentures") if (i) any Senior
Debt is not paid when due, or (ii) any other default on Senior Debt occurs and
is continuing that then permits holders of such Senior Debt to accelerate its
maturity in accordance with its terms unless, in either case, the default has
been cured or waived or such Senior Debt has been paid in full.
The holders of Senior Debt may (a) renew, compromise, extend, accelerate or
otherwise change the time of payment, or any other terms, of any existing or
future Senior Debt, (b) increase or decease the rate of interest payable thereon
or on any part thereof, (c) exchange, enforce, waive or release any security
therefor, (d) apply such security and direct the order or manner of sale thereof
in such manner such holders may at their discretion determine, (e) release the
Company or any guarantor of such Senior Debt from liability, and (f) make
optional future advances of Senior Debt to the Company, all without the consent
of or notice to, and without affecting the liabilities and obligations of, the
parties to the Indentures or the holders of Outstanding Debentures.
Upon any distribution or payment to creditors of the Company in a
liquidation, dissolution, winding up or reorganization of the Company of any
kind or character and whether voluntary or involuntary or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to the
Company, to its property or to its creditors as such or in an assignment for the
benefit of creditors or any marshalling of assets and liabilities of the
Company, the holders of Senior Debt will be entitled to receive payment in full
before the holders of the Outstanding Debentures being subordinated thereto are
entitled to receive any payment. Upon an event of default under either Indenture
(other than any event of default as a result of the bankruptcy of the Company),
the respective Trustee thereunder or the holders of the securities seeking to
accelerate such Outstanding Debentures must give the Representative of the
holders of the Senior Debt 10 days' prior written notice before accelerating
such Outstanding Debentures.
By reason of such subordination provisions contained in the Indentures, in
the event of insolvency, creditors of the Company who are holders of Senior Debt
may recover more, ratably, than the holders of Outstanding Debentures being
subordinated thereto and creditors of the Company who are not holders of Senior
Debt or the Outstanding Debentures being subordinated thereto may recover less,
ratably, than holders of Senior Debt and may recover more, ratably, than the
holders of Outstanding Debentures. In addition, in the event of insolvency,
holders of Senior Debentures may recover more, ratably, than the holders of
Subordinated Debentures.
CERTAIN COVENANTS.
LIMITATION ON RESTRICTED PAYMENTS. The Company may not, and may not permit
any Subsidiary to, directly or indirectly, (i) declare or pay any dividend or
make any distribution on its Capital Stock or to the holders of its Capital
Stock (except dividends or distributions payable to the Company or a wholly
owned Subsidiary), (ii) purchase, redeem or otherwise acquire or retire for
value any Capital Stock of the Company, or (iii) purchase, repurchase, redeem,
decease or otherwise acquire or retire for value, prior to scheduled maturity,
scheduled repayment or scheduled sinking fund payment, any Subordinated
Obligations (other than the acquisition of Subordinated Obligations purchased in
anticipation of satisfying a sinking fund obligation, principal installment or
final maturity, in each case due within one year of the date of acquisition).
Notwithstanding the foregoing, the Company may purchase or redeem shares of any
class of Capital Stock or any Debt of the Company by exchange for, or out of the
proceeds of the substantially concurrent sale of, shares of its Capital Stock.
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LIMITATION ON ISSUANCE OF CERTAIN SUBORDINATED DEBT. The Subordinated
Indenture provides that the Company may not issue, assume, guarantee, incur or
otherwise become liable, directly or indirectly, for any Debt subordinate or
junior in ranking in any respect to the Senior Debentures but senior in ranking
to the Subordinated Debentures.
LIMITATION ON TRANSACTIONS WITH AFFILIATES. The Indentures currently
provide that the Company may not, and may not permit any Subsidiary to, conduct
any business or enter into any transaction or series of similar transactions
(including the purchase, sale, lease or exchange of any property or the
rendering of any service) with any Affiliate (other than a wholly owned
Subsidiary) unless the terms of such business, transaction or series of
transactions are (i) set forth in writing, and (ii) as favorable to the Company
or such Subsidiary as terms that would be obtainable at the time for a
comparable transaction or series of similar transactions in arm's-length
dealings with an unrelated third person. The Indentures further provide,
however, that this restriction shall not be construed to prohibit payment by the
Company or a Subsidiary of compensation to officers, directors or employees of
the Company or such Subsidiary for services rendered in such capacity.
SUCCESSOR COMPANY. The Company may not consolidate with or merge with or
into, or convey, transfer or lease all or substantially all its assets to,
another Person unless (i) the resulting, surviving or transferee Person is a
Person organized and existing under the laws of the United States, any state
thereof or the District of Columbia and such entity assumes by supplemental
indenture all the obligations of the Company under the Outstanding Debentures
and the Indentures, (ii) the Company delivers to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger or transfer and such supplemental indenture comply with the Indentures,
(ii) the resulting, surviving or transferee Person shall have Consolidated Net
Worth after giving effect to such transaction which is not less than the
Consolidated Net Worth of the Company prior to such transaction, and (iv)
immediately after giving effect to such transaction, no Default has occurred and
is continuing.
DEFAULTS AND CERTAIN RIGHTS ON DEFAULT. An "Event of Default" occurs under
each Indenture if: (a) the Company fails to make any payment of principal or
premium, if any, when due thereunder upon stated maturity, upon redemption, upon
declaration or otherwise; (b) the Company fails to make any payment of interest
(in cash or, as otherwise permitted thereunder) when due, or fails to make
payment of any other amount thereunder when due, and such default continues for
a period of 30 days; (c) the Company or any Subsidiary thereof fails to comply
with any other term, condition, provision, covenant or obligation contained
therein or required thereunder, or contained in or required under the securities
issued thereunder or any other instrument or agreement required thereunder, and
such failure continues for a period of 30 days after (i) its occurrence, in the
event the President, any Managing Director or any Vice President of the Company
or any Subsidiary thereof knew or had reason to know of such failure, or (ii)
notice to the Company from the Trustee or the Required Holders; (d) the Company
or any Subsidiary thereof or any Joint Venture (i) applies for or consents to
the appointment of, or the taking of possession by, a receiver, custodian,
trustee or liquidator of itself or of all or a substantial part of its property,
(ii) admits in writing its inability to pay its debts as such debts become due,
(iii) makes a general assignment for the benefit of its creditors, (iv)
commences or consents to proceedings under the federal Bankruptcy Code (as now
or thereafter in effect), (v) files a petition to take advantage of any other
law relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or adjustment of debtors, (vi) fails to controvert in a timely
manner, or acquiesces in writing to, any action filed against the Company or any
Subsidiary thereof or any Joint Venture in an involuntary case under such
Bankruptcy Code, (vii) fails to pay its debts generally as they come due, or
(viii) takes any corporate action for the purpose of effecting any of the
foregoing; (e) a proceeding or case is commenced, without the application or
consent of the Company or any Subsidiary thereof or any Joint Venture in any
Court of competent jurisdiction, seeking (i) the liquidation, reorganization,
dissolution, winding-up or composition or readjustment of debts of the Company
or any Subsidiary thereof or any Joint Venture, (ii) the appointment of a
trustee, receiver, custodian, liquidator or the like for the Company or any
Subsidiary thereof or any Joint Venture or of all
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or any substantial part of its respective assets, or any substantial part of its
respective assets, or (iii) similar relief in respect of the Company or any
Subsidiary thereof or any Joint Venture under any law relating to bankruptcy,
insolvency, reorganization, winding-up or composition or adjustment of debts and
any such case or proceedings shall not be dismissed or withdrawn or released,
vacated or fully bonded within 60 days thereafter; (f) such of the property of
the Company or any Subsidiary thereof or any Joint Venture shall have been
condemned, seized or appropriated as shall, in the opinion of the Required
Holders, have a material adverse effect on the ability of the Company to pay its
obligations under the securities issued thereunder; (g) any final action is
taken by any governmental or other regulatory authority having jurisdiction over
the Company or any Subsidiary thereof or any Joint Venture which will have a
material adverse effect on the ability of the Company to repay its obligations
under the securities issued thereunder; (h) any breach, default or event of
default shall occur under any other indenture, credit or loan agreement or other
agreement or instrument under which indebtedness for borrowed money of the
Company or any Subsidiary thereof or any Joint Venture (or any obligation of the
Company or any Subsidiary thereof or any Joint Venture under any agreement for
the issuance of a letter or letters of credit) shall have occurred, and shall
(i) relate to the failure to pay principal within any applicable grace period
after final maturity, or (ii) result in the acceleration of Debt of the Company
or any Subsidiary thereof or any Joint Venture, if the total amount of such Debt
unpaid or accelerated exceeds $10,000,000 in aggregate amounts.
If an Event of Default (other than certain events of bankruptcy, insolvency
or reorganization) occurs and is continuing with respect to the Senior Indenture
or the Subordinated Indenture, the relevant Trustee or the holders of 25% in
principal amount of the outstanding Senior Debentures or Subordinated
Debentures, respectively, may declare the principal and the accrued but unpaid
interest on all such Senior Debentures or Subordinated Debentures, as the case
may be, to be due and payable. Notwithstanding the foregoing, upon an Event of
Default (other than certain events of bankruptcy, insolvency or reorganization)
of the Company, the applicable Trustee or the holders electing to accelerate
must give the Representative of the holders of the Senior Debt 10 days' prior
written notice before acceleration. If an Event of Default relating to certain
events of bankruptcy, insolvency or reorganization of the Company occurs and is
continuing, the principal of and interest on all the Outstanding Debentures will
IPSO FACTO become and be immediately due and payable without any declaration or
other act on the part of the Trustees or any holders of the securities. Under
certain circumstances, the holders of a majority in principal amount of the
outstanding Senior Debentures or Subordinated Debentures may rescind any such
acceleration with respect to such series of securities and its consequences.
Subject to the provisions of each Indenture relating to the duties of the
Trustee in case of an Event of Default thereunder should occur and be
continuing, the Trustee will be under no obligation to exercise any of the
rights or powers under the relevant Indenture at the request or direction of any
of the holders of the applicable securities unless such holders have offered to
the Trustee reasonable indemnity or security against any loss or expense.
Subject to such provisions for security or indemnification and certain
limitations contained in each Indenture, the holders of a majority in principal
amount of the applicable securities at the time outstanding have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the relevant Trustee or exercising any trust or power conferred on
such Trustee.
AMENDMENT, SUPPLEMENT, WAIVER. Subject to certain exceptions, each
Indenture may be amended or supplemented with the consent of the holders of at
least a majority in principal amount of the relevant Senior Debentures or
Subordinated Debentures then outstanding thereunder, and any past default or
compliance with any provision may be waived with the consent of the holders of
at least a majority in principal amount of the relevant Senior Debentures or
Subordinated Debentures then outstanding. However, without the consent of each
holder of an Outstanding Debenture affected thereby, no amendment may, among
other things: (i) reduce the amount of Outstanding Debentures whose holders must
consent to any amendment; (ii) reduce the rate of or extent the time for payment
of interest on any Outstanding Debenture; (iii) reduce the principal of or
extend the fixed maturity of any Outstanding
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Debenture; (iv) reduce the premium payable upon redemption of any Outstanding
Debenture; (v) change the currency or consideration for payment of any
Outstanding Debenture; (vi) change the subordination provisions of the relevant
Indenture in any manner which adversely affects the rights of any holder of
Outstanding Debentures; or (vii) amend the sections of the relevant Indenture
relating to waiver of past defaults, rights of holders to receive payment and
amendments of such Indenture. Without the consent of any holder of the
Outstanding Debentures, the Company and the relevant Trustee may amend or
supplement the relevant Indenture to cure any ambiguity, omission, defect or
inconsistency, to provide for the assumption by a successor corporation of the
obligations of the Company under the relevant Indenture, to provide for
uncertificated Outstanding Debentures in addition to or in place of certificated
Outstanding Debentures so long as such uncertificated Outstanding Debentures are
in registered form for purposes of the Code, to add guarantees with respect to
the Outstanding Debentures or to reflect the release of guarantees in accordance
with the terms of the Indentures, to add to the covenants of the Company for the
benefit of the holders of Outstanding Debentures or to surrender any right or
power herein conferred upon the Company to make any change that does not
adversely affect the rights of any holder of the Outstanding Debentures or to
comply with any requirement of the SEC in connection with the qualification of
the Indentures under the TIA. No amendment may be made to the subordination
provisions of either Indenture that adversely affects the rights of any holder
of Senior Debt then outstanding unless the holders of such Senior Debt (as
required pursuant to the terms of such Senior Debt) consent to such change.
TRANSFER. The Outstanding Debentures were issued in registered form and are
transferable only upon the surrender of such securities being transferred for
registration of transfer.
DEFEASANCE. The Indentures provide that the Company at any time may
terminate all of its obligations under the Outstanding Debentures and the
Indentures ("legal defeasance"), except for certain obligations, including ones
respecting the defeasance trust and obligations to register the transfer or
exchange of the Outstanding Debentures, to replace mutilated, destroyed, lost or
stolen Outstanding Debentures and to maintain agencies in respect of the
Outstanding Debentures. Subject to the conditions described below, the Company
at any time may terminate its obligations under the covenants described under
"Description of the Outstanding Debentures--Certain Covenants" ("covenant
defeasance"). Legal defeasance and/or covenant defeasance may be made with
respect to one series of the Outstanding Debentures and not the other.
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option, payment of the series of Outstanding Debentures with
respect to which such defeasance was made may not be accelerated because of an
Event of Default with respect thereto. If the Company exercises its covenant
defeasance option, payment of the series of Outstanding Debentures with respect
to which such defeasance was made may not be accelerated by reference to the
covenants described under "Description of the Outstanding Debentures--Certain
Covenants."
In order to exercise either defeasance option under either Indenture, the
Company must irrevocably deposit in trust (the "defeasance trust") with the
Trustee under the respective Indenture money of U.S. Government Obligations for
the payment of principal and interest on the respective Outstanding Debentures
to redemption or maturity, as the case may be, and must comply with certain
other conditions.
CONCERNING THE TRUSTEES. First Trust National Association is to be the
Trustee under the Senior Indenture and was appointed by the Company as Registrar
and Paying Agent with regard to the Senior Debentures. The Bank of New York is
the Trustee under the Subordinated Indenture and was appointed by the Company as
Registrar and Paying Agent with regard to the Subordinated Debentures.
GOVERNING LAW. Each Indenture provides that it will be governed by the laws
of the State of New York.
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CERTAIN DEFINITIONS. The following definitions apply to the foregoing
description of the Outstanding Debentures:
"Affiliate" of any Person means (i) any Person which, directly or
indirectly, is in control of, is controlled by or is under common control with
such Person, or (ii) any Person who is a director or officer (A) of such Person
or (B) of any Person described in clause (i) above who is in control of such
Person. For purposes of this definition, control of a Person means the power,
direct or indirect, to direct or cause the direction of the management and
policies of such Person whether by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
Without limiting the generality of the foregoing, beneficial ownership of 20% or
more of the voting common equity (on a fully diluted basis) or warrants to
purchase such equity (whether or not currently exercisable) of a Person shall in
any event be deemed to be control of such Person.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligations" of a Person means any obligation which is
required to be classified and accounted for as a capital lease on the face of a
balance sheet of such Person prepared in accordance with generally accepted
accounting principles; the amount of such obligation shall be the capitalized
amount thereof, determined in accordance with generally accepted accounting
principles, and the stated maturity thereof shall be the date of the last
payment of rent or any other amount due under such lease prior to the first date
upon which such lease may be terminated by the lessee without payment of a
penalty.
"Capital Stock" means any and all shares, interests, rights to purchase,
warrants, options, participations or other equivalents of or interests in
(however designated) corporate stock, including any preferred stock.
"Closing Date" means the date of the issuance of the Outstanding Debentures
to the initial holders thereof.
"Consolidated Net Worth" means at any time, for any specified Person or
Persons, on a consolidated basis, that amount by which total assets, excluding
goodwill and other intangible assets, exceeds total liabilities, on a
consolidated basis, all determined in accordance with generally accepted
accounting principles.
"Continuing Directors" means the numbers of the Company's Board as of March
15, 1992 and any other director of the Company whose nomination or election to
the Board was approved by a majority of the Continuing Directors then in office.
"Debt" means with respect to any Person, without duplication: (i) all
obligations of such Person for borrowed money; (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments; (iii)
all Capital Lease Obligations of such Person; (iv) all obligations of such
Person issued or assumed as the deferred purchase price of property, any
conditional sale obligation and all obligations under any title retention
agreement (but excluding trade accounts payable arising in the ordinary course
of business); (v) all obligations of such Person issued or contracted for as
payment in consideration of the purchase by such Person of the stock or
substantially all of the assets of other Persons or a merger or consolidation to
which such Person was a party; (vi) all obligations of such Person for the
reimbursement of any obligor on any letter of credit, banker's acceptance or a
similar credit transaction (other than obligations with respect to letters of
credit securing obligations (other than obligations described in clause (i),
(ii), (iii), (iv), or (v) of this definition) entered into in the ordinary
course of business of such Person to the extent such letters of credit are not
drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no
later than the third Business Day following receipt by such Person of a demand
for reimbursement following payment on the letter of credit); (vii) all
obligations of the type referred to in clauses (i) through (vi) of this
definition of other Persons and all dividends of other Persons for the payment
of which, in either case, such Person is responsible or liable as obligor,
guarantor or otherwise; or (xiii) all obligations of the type referred to in
clauses (i) through (vii) of this definition of other Persons
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secured by any lien on any property or asset of such Person (whether or not such
obligation is assumed by such Person), the amount of such obligation being
deemed to be the lesser of the value of such property or assets or the amount of
the obligations so secured.
"Default" means any event which is, or after notice or passage of time or
both would be, an event of default under the respective Indenture.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" of a share of Common Stock on any date means the average
of the daily closing prices per share of Common Stock for the 20 consecutive
Trading Days (as such term is hereinafter defined) immediately prior to such
date (appropriately adjusted to reflect any stock split, stock dividend,
subdivision, combination, reclassification or other extraordinary dividend or
distribution with respect to the Common Stock having a record date or effective
date on or after the commencement of such 20-Trading Day period and prior to the
close of business on the date of determination of such Fair Market Value). The
closing price for each day shall be the last sale price, regular way, as
reported in the principal national securities exchange on which the Common Stock
is listed or admitted to trading or, if the Common Stock is not listed or
admitted to trading on any national securities exchange, the last quoted price
or, if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotations System ("NASDAQ") or such other system then
in use. The term "Trading Day" shall mean a day on which at least 10,000 shares
of Common Stock were traded on any national securities exchanges or in the
over-the-counter market. Notwithstanding the foregoing, the Fair Market Value of
the Common Stock shall be deemed to be less than $.50 per share in the event
that either (i) on the date of determination of Fair Market Value, the Common
Stock is not listed or admitted to trading on any national securities exchange
or reported by NASDAQ or such other system then in use, or (ii) there are fewer
than 20 Trading Days within the 40 Business Days, or fewer than five (5) Trading
Days within the 10 Business Days, immediately preceding the date of
determination of Fair Market Value.
"Interest Payment Dates" means the dates on which interest payments on the
Outstanding Debentures are due, as set forth therein.
"Interest Period" means each six-month period ending on an Interest Payment
Date.
"Joint Venture" means any partnership, joint venture or similar entity in
which the Company or any of its Subsidiaries owns or controls any interest.
"Legal Holiday" is a Saturday, Sunday or a day on which banking institutions
are not required to be open in the States of New York and Connecticut. If a
payment date with respect to the Outstanding Debentures is a Legal Holiday,
payment is made on the next succeeding day that is not a Legal Holiday, and no
interest accrues for the intervening period. If a regular record date with
respect to the Outstanding Debentures is a Legal Holiday, the record dates
affected.
"Officer" means the Chairman of the Board, the President, any Vice
President, the Treasurer or the Secretary of the Company.
"Officers' Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the relevant Trustee. The counsel may be an employee of or counsel
to the Company or the Trustee.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
"Representative" means the bank agent, indenture trustee or other trustee,
or other agent or representative for the holders of Senior Debt.
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"Required Holders" means, under each Indenture, holders of at least 51% in
aggregate principal amount of the then outstanding securities issued thereunder.
"Subordinated Obligations" means (i) any Debt of the Company (other than the
Outstanding Debentures) which is not Senior Debt of the Company, and (ii) any
preferred stock of the Company.
"Subsidiary" means any corporation, association, partnership or other
business entity of which more than 50% of the total voting power of shares of
capital stock or other interests (including partnership interests) entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by (i) the Company, or (ii) one or more Subsidiaries;
PROVIDED, HOWEVER, that the term "Subsidiary" shall not include Henley Holdings
Two, Inc. or any corporation that has no assets as determined in accordance with
generally accepted accounting principles consistently applied, and PROVIDED,
FURTHER, that a Joint Venture shall constitute a Subsidiary if such Joint
Venture is required to be treated as a Subsidiary pursuant to the definition
herein.
"Trustee" means the party named as such in the respective Indenture until a
successor replaced it and, thereafter, means the successor.
"U.S. Government Obligations" means securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged, or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case under
clause (i) or (ii) are not callable or redeemable at the option of the issuer
thereof.
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BUSINESS AND PROPERTIES OF THE COMPANY
BUSINESS. The Company is a real estate development company with properties
principally in Southern California. The principal activities of the Company and
its consolidated subsidiaries include: (i) obtaining zoning and other
entitlements for land it owns and improving the land for residential
development; (ii) single and multi-family residential construction in Southern
California; and (iii) providing commercial, industrial, retail and residential
real estate development services to third parties, including feasibility
studies, entitlement coordination, project planning, construction management,
financing, marketing, acquisition, disposition and asset management services on
a national and international basis, through its offices throughout California,
and in Dallas, Phoenix, Seattle, Shanghai, China and Taipei, Taiwan. Once the
residential land owned by the Company is entitled, the Company may sell
unimproved land to other developers or investors; sell improved land to
homebuilders; or participate in joint ventures with other developers, investors
or homebuilders to finance and construct infrastructure and homes. The Company
intends to consider additional real estate acquisition and joint venture
opportunities; however, the Company's immediate strategic goals are to (i)
obtain new financing for development of the Bolsa Chica mesa; (ii) successfully
defend against the litigation challenging the California Coastal Commission's
approval of the Bolsa Chica project; (iii) complete the secondary permitting for
development of the Bolsa Chica mesa; (iv) commence infrastructure construction
on the Bolsa Chica mesa in the fourth quarter of 1997; (v) continue the growth
of the Company's commercial development business on a national and international
basis; and (vi) complete the Recapitalization to deleverage the Company's
capital structure. There can be no assurance that the Company will accomplish,
in whole or in part, all or any of these strategic goals.
The Company's executive offices are located at 4343 Von Karman Avenue,
Newport Beach, California 92660 (telephone: (714) 833-3030).
PRINCIPAL PROPERTIES. The Company's principal executive offices are located
in Newport Beach, California. The Company and each of its subsidiaries believe
that their properties are generally well maintained, in good condition and
adequate for their present and proposed uses. The inability to renew any
short-term real property lease would not be expected to have a material adverse
effect on the Company's results of operations.
The principal properties of the Company and its subsidiaries, which are
owned in fee unless otherwise indicated, are as follows:
<TABLE>
<CAPTION>
PROPERTY LOCATION ACRES PRESENT OR PLANNED USE
- ---------------------------- -------------------------- --------- --------------------------------------
<S> <C> <C> <C>
Newport Beach* Newport Beach, CA -- Headquarters
Bolsa Chica Huntington Beach, CA 310 Oceanfront residential community
Rancho San Pasqual Escondido, CA [650] Residential community
Fairbanks Highlands** San Diego, CA 390 Residential community
Aliso Viejo** Aliso Viejo, CA 230 Residential community
Michigan Land Upper Peninsula, MI 1,100 Resort/residential lots
Signal Hill Signal Hill, CA 2 Commercial/industrial land
PetsMart Phoenix, AZ 20 Corporate headquarters
EDS*** Allen, TX 14 Office/distribution center
Nokia**** Irving-Las Colinas, TX 11 Office building
</TABLE>
- ------------------------
*Leased
**Minority interest in partnership or limited liability company
***Majority interest in partnership
****50% interest in partnership
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The following sections describe the Company's principal properties.
BOLSA CHICA. The Bolsa Chica property is the principal property in the
Company's portfolio. Following completion of the Company's recent sale of
approximately 880 lowland acres of its Bolsa Chica property to the State of
California on February 14, 1997, as described below, the Company owns
approximately 310 acres of the 1,600 acres of undeveloped Bolsa Chica land,
approximately 1,200 acres of which will be devoted to the restoration, creation
and preservation of wetlands, open space, parks and trails. Bolsa Chica is
located adjacent to the Pacific Ocean in northwestern Orange County, California.
Bolsa Chica is bordered on the north and east by residential development, to the
south by open space and residential development, and to the west by the Pacific
Coast Highway and the Bolsa Chica State Beach. Bolsa Chica is one of the last
large undeveloped coastal properties in Southern California, and is located
approximately 35 miles south of downtown Los Angeles.
The planned community at Bolsa Chica is expected to offer a broad mix of
home choices, including single-family homes, townhomes and condominiums at a
wide range of prices. In December 1994, the Orange County Board of Supervisors
unanimously approved a Local Coastal Program ("LCP") for up to 3,300 units of
residential development and a wetlands restoration plan for this property. The
3,300-unit LCP provides for development of up to 2,500 homes on the mesa (high
ground) portion of the property and up to 900 homes on the lowland portion of
the property, not to exceed 3,300 homes in the aggregate. The related
Development Agreement was unanimously approved by the Orange County Board of
Supervisors in April 1995. The California Coastal Commission approved the LCP in
January 1996 subject to suggested modifications. These suggested modifications
were approved by the Orange County Board of Supervisors in June 1996, and on
July 11, 1996 the California Coastal Commission certified the LCP for the
Company's Bolsa Chica property.
On February 14, 1997, the Company completed the sale of approximately 880
lowland acres owned by the Company at Bolsa Chica to the California State Lands
Commission for $25 million, and will, therefore, forego opportunities to develop
up to 900 homes in the lowland. Under an interagency agreement among various
state and federal agencies, these agencies have agreed to restore the Bolsa
Chica lowlands utilizing escrowed funds from the Ports of Los Angeles and Long
Beach. A reserve of $1.5 million has been included in the Company's Balance
Sheet as of December 31, 1996, with respect to potential costs payable by the
Company under agreements negotiated with the State Lands Commission and certain
oil field operators regarding environmental clean-up at the Bolsa Chica
lowlands. See Note 5 to "Audited Historic Financial Statements." In connection
with the lowlands sale, the Company paid $833,333 of these costs at closing,
leaving a reserve balance of $700,000 on its financial statements for potential
additional clean-up costs.
The Company is now pursuing the secondary permitting process for the Mesa
through the County of Orange in order to implement the approved development plan
for up to 2,500 homes. This process is currently expected to be completed in the
fourth quarter of 1997. The Company expects, subject to its ability to obtain
financing on a commercially reasonable and timely basis, and subject to
obtaining the secondary permits, to commence infrastructure construction on the
mesa in the fourth quarter of 1997. However, due to certain factors beyond the
Company's control, including possible objections of various environmental and
so-called public interest groups that may be made in legislative, administrative
or judicial forums, the start of construction could be delayed. In this regard,
on March 6, 1996 and March 11, 1996, two lawsuits were filed against the Coastal
Commission, the Company and other Bolsa Chica landowners as real parties in
interest, alleging that the Coastal Commission's approval of the LCP is not in
compliance with the Coastal Act and other statutory requirements. These lawsuits
seek to set aside the approval of the Bolsa Chica project and are currently
scheduled to be tried in April 1997. Given the recent sale of the Bolsa Chica
lowlands described above, the primary issues which were the subject of this
litigation have been eliminated. Furthermore, the plaintiffs in one of these
lawsuits have informed the Company that given the sale of the lowlands, they
will work with the Company in an effort to resolve the remaining issues of their
lawsuit. The Company believes that the remaining litigation issues which
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challenge development of the Bolsa Chica mesa are without merit. Furthermore,
the Company does not believe that these lawsuits will be successful in
permanently preventing the Company from completing the Bolsa Chica project,
however, there can be no assurance in this regard or that these suits will not
result in delays.
Realization of the Company's investment in Bolsa Chica will depend upon
various economic factors, including the demand for residential housing in the
Southern California market and the availability of credit to the Company and to
the housing industry. See Notes 2 and 5 to "Audited Historic Financial
Statements."
RANCHO SAN PASQUAL (FORMERLY EAGLE CREST). In the City of Escondido in San
Diego County, approximately 30 miles north of downtown San Diego, the Company is
developing an 850-acre, gated community consisting of 580 residential lots
surrounding an 18-hole championship golf course which the Company operated from
May 1993 to June 1996. The Company sold its Eagle Crest Golf Course at Rancho
San Pasqual in June 1996, to a nationally recognized owner/operator of high-end
daily fee golf courses and private country clubs for $6.1 million. On-going
infrastructure construction was partially financed in 1995 and 1996 with a major
financial institution which provided a total of $10 million in construction
loans for the project. During the year ended December 31, 1996, the Company
completed sales of 218 residential lots at Rancho San Pasqual to four
homebuilders for gross proceeds aggregating approximately $10.1 million. These
four homebuilders have rolling options which if exercised would result in the
sale of an additional 230 lots over the next eighteen (18) months for aggregate
gross proceeds approximating $10.4 million. Under loan agreements with Nomura
Asset Capital Corporation, the Company utilized 90% of such sales proceeds and
proceeds from formation of the Fairbanks Highlands joint venture described
below, along with 50% of the net proceeds from Rancho San Pasqual assessment
district reimbursements, to prepay approximately $18.2 million of outstanding
senior bank debt during the year ended December 31, 1996. As of December 31,
1996, the Company had fully utilized its availability under the construction
loan.
FAIRBANKS HIGHLANDS. This property consists of approximately 390 acres near
the communities of Fairbanks Ranch and Rancho Santa Fe in the northern part of
the City of San Diego. In December 1995 the Company received approval of a
vesting tentative map from the City of San Diego's City Council. The approved
plan includes 93 single-family residential lots averaging 1.34 acres each and
approximately 215 acres of open space. In December 1996, the Company formed a
joint venture with a major homebuilder to develop this property. Under the terms
of the joint venture agreement, the Company contributed its land to the venture
at market value of $7.6 million in exchange for an initial cash payment of $4
million, a preferred return on its $3.6 million capital contribution and a
continuing partnership interest in the venture. The Company's partner will
manage the day-to-day operations of the venture, provide all construction
financing and expects to build the majority of the homes at the site.
ALISO VIEJO. Through a subsidiary, the Company owns a 49% general
partnership interest in a 230-acre project, planned for approximately 1,200
single family residential units in southern Orange County. The property is well
located, within close proximity to transportation infrastructure, employment
centers and other attractions, including the Orange County (John Wayne) Airport
(approximately 15 miles), the San Joaquin Hills Transportation Corridor (a
quarter mile) and Laguna Beach (approximately 10 minutes). Homes are now offered
for sale at seven of twelve planned communities, and a total of 254 homes have
been sold and 58 homes were in escrow as of February 9, 1997. However, due to a
significant shortfall in sales during 1995 versus forecast, the financial
structure of the partnership and the significant amount of participating
mortgages with preference to the Company's equity interest, the Company does not
expect to receive a financial return from this partnership and established a
reserve in 1995 as discussed below in Note 3 to "Audited Historic Financial
Statements."
OTHER PROPERTIES. The Company owns land zoned for commercial/industrial use
in Signal Hill, California, and resort/residential property in Michigan. These
properties are currently held for sale, subject
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to market conditions. A portion of the Signal Hill property has been improved
with a 45,000 square foot distribution building, which was sold during March
1997. In addition, during 1996, the Company acquired property in Phoenix,
Arizona and Allen, Texas and is constructing a corporate headquarters facility
and office/distribution center, respectively, on a build-to-suit basis. The
Company has contracted for the sale of each of these buildings, which sales are
expected to close in the third quarter of 1997.
PROPERTY DISPOSITIONS. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" for a description of the
Company's property dispositions during 1994, 1995 and 1996.
ENVIRONMENTAL AND REGULATORY MATTERS. Before the Company can develop a
property, it must obtain a variety of discretionary approvals from local and
state governments, as well as the federal government in certain circumstances,
with respect to such matters as zoning, subdivision, grading, architecture and
environmental matters. The entitlement approval process is often a lengthy and
complex procedure requiring, among other things, the submission of development
plans and reports and presentations at public hearings. Because of the
provisional nature of these approvals and the concerns of various environmental
and public interest groups, the approval process can be delayed by withdrawals
or modifications of preliminary approvals and by litigation and appeals
challenging development rights. Accordingly, the ability of the Company to
develop properties and realize income from such projects could be delayed or
prevented due to litigation challenging recently obtained governmental
approvals.
As more fully described above, in July 1996, the California Coastal
Commission certified Orange County's residential development plan for Bolsa
Chica. The Company now has the necessary primary approvals to proceed with
development of up to 2,500 homes on the Bolsa Chica mesa. Secondary approvals of
the details of the development plan, such as tentative tract maps and grading
approvals from the County of Orange's planning staff, as well as a master
coastal development permit from the County of Orange, must still be obtained.
Nevertheless, the approval process for the Bolsa Chica property remains subject
to the litigation described above, and there can be no assurance that such
litigation will not result in delays.
The Company has expended and will continue to expend significant financial
and managerial resources to comply with environmental regulations and local
permitting requirements. Although the Company believes that its operations are
in general compliance with applicable environmental regulations, certain risks
of unknown costs and liabilities are inherent in developing and owning real
estate. However, the Company does not believe that such costs will have a
material adverse effect on its business, financial condition or results of
operations, including the potential remediation expenditures proposed in
connection with certain indemnity obligations discussed below in "Corporate
Indemnification Matters."
CORPORATE INDEMNIFICATION MATTERS. The Company and its predecessors have,
through a variety of transactions effected since 1986, disposed of several
assets and businesses, many of which are unrelated to the Company's current
operations. By operation of law or contractual indemnity provisions, the Company
may have retained liabilities relating to certain of these assets and
businesses, including certain tax liabilities. See Note 8 to "Audited Historic
Financial Statements." Many of such liabilities are supported by insurance or by
indemnities from certain of the Company's predecessors and currently or
previously affiliated companies. The Company believes its balance sheet reflects
adequate reserves for these matters.
The United States Environmental Protection Agency ("EPA") has designated
Universal Oil Products ("UOP"), among others, as a Potentially Responsible Party
("PRP") with respect to an area of the Upper Peninsula of Michigan (the "Torch
Lake Site") under the Federal Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended ("CERCLA"). UOP is allegedly the successor
in interest to one of the companies that conducted mining operations in the
Torch Lake area and an affiliate of Allied Signal Inc., a predecessor of the
Company. The Company has not been named as a PRP at the site. However, Allied
Signal has, through UOP, asserted a contractual indemnification claim
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against the Company for all claims that may be asserted against UOP by EPA or
other parties with respect to the site. EPA has proposed a clean-up plan which
would involve covering certain real property both contiguous and non-contiguous
to Torch Lake with soil and vegetation in order to address alleged risks posed
by copper tailings and slag at an estimated cost of $6.2 million. EPA estimates
that it has spent approximately $3.9 million to date in performing studies of
the site. Under CERCLA, EPA could assert claims against the Torch Lake PRPs,
including UOP, to recover the cost of these studies, the cost of all remedial
action required at the site, and natural resources damages. In June 1995, EPA
proposed a CERCLA settlement pursuant to which UOP would pay between $2.6 and
$3.3 million in exchange for a limited covenant by EPA not to sue UOP in the
future. The Company, without admission of any obligation to UOP, has determined
to vigorously defend UOP's position that the EPA's proposed cleanup plan is
unnecessary and inconsistent with the requirements of CERCLA given that the
EPA's own Site Assessment and Record of Decision found no immediate threat to
human health. In the Company's view the proposed remediation costs would be in
excess of any resulting benefits.
EMPLOYEES. As of December 31, 1996 the Company and its subsidiaries had
approximately 125 employees.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995. Certain of the foregoing information as well as certain information set
forth in "Legal Proceedings" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" is forward looking in nature and
involves risks and uncertainties that could significantly impact the ability of
the Company to achieve its currently anticipated goals and objectives. These
risks and uncertainties include, but are not limited to, litigation or appeals
of regulatory approvals (including pending litigation challenging the California
Coastal Commission's approval of the Bolsa Chica project) and availability of
adequate capital, financing and cash flow. In addition, future values may be
adversely affected by increases in property taxes, increases in the costs of
labor and materials and other development risks, changes in general economic
conditions, including higher mortgage interest rates, and other real estate
risks such as the demand for housing generally and the supply of competitive
products. Real estate properties do not constitute liquid assets and, at any
given time, it may be difficult to sell a particular property for an appropriate
price.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL. The principal activities of the Company include: (i) obtaining
zoning and other entitlements for land it owns and improving the land for
residential development; (ii) single and multi-family residential construction
in Southern California; and (iii) providing commercial, industrial, retail and
residential development services to third parties, including feasibility
studies, entitlement coordination, project planning, construction management,
financing, marketing, acquisition, disposition and asset management services on
a national and international basis, through its offices throughout California,
and in Dallas, Phoenix, Seattle, Shanghai, China and Taipei, Taiwan. Once the
residential land owned by the Company is entitled, the Company may sell
unimproved land to other developers or investors; sell improved land to
homebuilders; or participate in joint ventures with other developers, investors
or homebuilders to finance and construct infrastructure and homes. The Company
intends to consider additional real estate acquisition and joint venture
opportunities; however, the Company's immediate strategic goals are to (i)
obtain new financing for development of the Bolsa Chica mesa; (ii) successfully
defend against the litigation challenging the California Coastal Commission's
approval of the Bolsa Chica project; (iii) complete the secondary permitting for
development of the Bolsa Chica mesa; (iv) commence infrastructure construction
on the Bolsa Chica mesa in the fourth quarter of 1997; (v) continue the growth
of the Company's commercial development business on a national and international
basis; and (vi) complete the Exchange Offer to deleverage the Company's capital
structure. There can be no assurance that the Company will accomplish, in whole
or in part, all or any of these strategic goals.
The Company has been over-leveraged since its December 1989 spin-off from
The Henley Group, Inc. when it had $290 million of debt (including $144 million
of subordinated debt due to The Henley Group, Inc.) and $268 million of accounts
payable and other liabilities against $707 million of assets and stockholders
equity of $149 million. This excessive leverage was exacerbated by continual
delays between 1990 and 1996 in obtaining the governmental approvals necessary
to develop the Company's principal asset, the Bolsa Chica property. At the time
of the 1989 spin-off from The Henley Group, Inc., the Company expected that the
Bolsa Chica property would be fully entitled and under construction as early as
1991. During the last seven years, the Company has generated approximately $300
million in cash from asset sales. The Company has utilized the majority of the
proceeds of such asset sales to repay approximately $131 million of senior debt,
to pay various liabilities, and to fund project development and infrastructure
costs for its principal residential development projects, including Bolsa Chica.
With the California Coastal Commission's approval of the LCP for Bolsa Chica in
1996 and the sale of the Bolsa Chica lowlands in February 1997 to the California
State Lands Commission, the Company is proceeding with residential development
on the Bolsa Chica mesa and expects to commence infrastructure construction in
the fourth quarter of 1997. While litigation challenging the Coastal
Commission's approval of Bolsa Chica remains outstanding, the Company does not
expect such litigation to delay the start of infrastructure construction.
The Company has not been able to generate significant gross operating
margins or cash flows from operating activities due to the nature of its
principal assets. The substantial majority of the Company's assets are
residential land which has required significant investments before the land
could be sold to homebuilders or developed in joint ventures. In addition, the
relatively high book value of these assets has resulted in sales approximating
break-even. While future land sales are also expected to approximate, or only
modestly exceed, break-even, the net cash flow to be generated by residential
land development and sales is expected to exceed $200 million in the aggregate
over the next three to five years. In addition, the continuing real estate
recovery has increased the demand for the Company's commercial real estate
development services. Accordingly, the Company expects that these operations
will make a greater contribution to gross operating margins over the next
several years. Absent a write-down of Bolsa Chica (which would reduce future
cost of sales) under Fresh Start Accounting in the event the Recapitalization is
implemented through the Prepackaged Plan, the Company does not expect to be
profitable until 1999
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when it expects to generate income by reinvesting cash to be generated by the
Bolsa Chica project in other development activities.
Real estate held for development or sale and land held for development (real
estate properties) are carried at the lower of cost or estimated net realizable
value based on undiscounted cash flows. The Company's real estate properties are
subject to a number of uncertainties which can affect the future values of those
assets. These uncertainties include litigation or appeals of regulatory
approvals and availability of adequate capital, financing and cash flow. In
addition, future values may be adversely affected by increases in property
taxes, increases in the costs of labor and materials and other development
risks, changes in general economic conditions, including higher mortgage
interest rates, and other real estate risks such as the demand for housing
generally and the supply of competitive products. Real estate properties do not
constitute liquid assets and, at any given time, it may be difficult to sell a
particular property for an appropriate price. The state of California's economy
has had a negative impact on the real estate market generally, on the
availability of potential purchasers for such properties and upon the
availability of sources of financing for carrying and developing such
properties. However, over the past year, the number of potential purchasers and
capital sources interested in Southern California residential properties appears
to have increased.
LIQUIDITY AND CAPITAL RESOURCES. The principal assets in the Company's
portfolio are residential land which must be held over an extended period of
time in order to be developed to a condition that, in management's opinion, will
ultimately maximize the return to the Company. Consequently, the Company
requires significant capital to finance its real estate development operations.
During the year ended December 31, 1996, the Company borrowed $8.7 million
under its construction loan agreement with Nomura Asset Capital Corporation
("Nomura") to fund infrastructure improvements at its Rancho San Pasqual golf
and residential community in San Diego county. During the year ended December
31, 1996, the Company also completed sales of 218 residential lots at Rancho San
Pasqual to four homebuilders for gross proceeds aggregating approximately $10.1
million. These four homebuilders have rolling options which if exercised would
result in the sale of an additional 230 lots over the next eighteen (18) months
for aggregate gross proceeds approximating $10.4 million. In June 1996, the
Company sold its Eagle Crest Golf Course at Rancho San Pasqual to a nationally
recognized owner/ operator of high-end daily fee golf courses and private
country clubs for $6.1 million. After paying termination related costs to the
operator of the golf course and closing costs, the Company realized net proceeds
of approximately $5 million. During 1996, the Company also formed a joint
venture to develop the Fairbanks Highlands property. Under the terms of the
joint venture agreement, the Company contributed its land to the venture at
market value of $7.6 million in exchange for an initial cash payment of $4
million, a preferred return on its $3.6 million capital contribution and a
continuing partnership interest in the venture. The Company's partner will
manage the day-to-day operations of the venture, provide all construction
financing and expects to build the majority of the homes at the site. Under loan
agreements with Nomura, the Company utilized 90% of such sales and joint venture
proceeds, along with 50% of the net proceeds from Rancho San Pasqual assessment
district reimbursements, to prepay approximately $18.2 million of outstanding
senior bank debt during the year ended December 31, 1996. As of December 31,
1996, the Company had fully utilized its availability under the construction
loan. On February 18, 1997, the Company repaid the remaining balance of its
senior bank debt with a portion of the proceeds from the sale of the Bolsa Chica
lowlands and the Nomura credit facility was terminated.
Historically, sources of capital have included bank lines of credit,
specific property financings, asset sales and available internal funds. The
Company has reported losses since 1991, with the exception of 1993 results which
included gains on dispositions and extinguishment of debt, and expects to report
losses in the foreseeable future. However, a significant portion of such losses
is attributable to non-cash asset revaluations and non-cash interest expense on
the Company's subordinated debentures. The Company will continue to be dependent
primarily on real estate asset sales, and cash and cash equivalents on-hand to
fund project development costs for Bolsa Chica and general and administrative
expenses during 1997.
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Following completion of the sale of the Bolsa Chica lowlands in February 1997
and utilization of $6.6 million to repay Nomura, the Company's cash balance
exceeded $15 million. The Company is also seeking new financing for development
of Bolsa Chica and implementing the Recapitalization to deleverage the Company's
capital structure.
If the Recapitalization is not consummated, the Company will continue to
incur in excess of $20 million of interest expense on the Debentures per year.
However, since the Debentures do not mature until March 2002, it is possible
that the Company could continue to operate without facing a liquidity problem
until 2002. Nevertheless, the Company believes the current capital structure
restricts its ability to maximize asset values and grow its business. If the
Company does not receive valid tenders of at least the 90% Requisite Exchange
Acceptance, the Company intends to pursue the Recapitalization through the
Prepackaged Plan.
FINANCIAL CONDITION.
DECEMBER 31, 1996 COMPARED WITH DECEMBER 31, 1995. The $2.8 million
decrease in cash and cash equivalents primarily reflects spending for Bolsa
Chica project development costs, and general and administrative expenses,
partially offset by approximately $3.6 million in proceeds from land sales at
the Company's resort/residential property in Michigan during the year ended
December 31, 1996, as well as other activity presented in the Statement of Cash
Flows. Restricted cash of $.2 million at December 31, 1996 reflects funds
remaining in escrow accounts for funding certain infrastructure costs at Rancho
San Pasqual.
The $2.9 million decrease in real estate held for development or sale
primarily reflect the sales of residential lots at Rancho San Pasqual, formation
of the Fairbanks Highlands joint venture and the disposition of Oceanside Hills,
partially offset by construction costs for build-to-suit projects in Signal
Hill, California, Phoenix, Arizona and Allen, Texas. The Company has contracted
for these buildings to be sold upon completion of construction in the first
quarter, third quarter and third quarter, respectively, of 1997.
The $4.8 million decrease in operating properties reflects the June 1996
sale of the Eagle Crest Golf Course at Rancho San Pasqual.
The $4.3 million increase in other assets primarily reflects the Company's
$3.6 million joint venture interest in Fairbanks Highlands.
The $6.8 million increase in accounts payable and accrued liabilities
primarily reflects accruals related to the sale of the Bolsa Chica lowlands and
the Recapitalization, along with contractor payments on build-to-suit projects.
The $9.5 million decrease in senior bank debt reflects net prepayments on
the Nomura loans, resulting primarily from sales of 218 residential lots and the
Eagle Crest Golf Course at Rancho San Pasqual and formation of the Fairbanks
Highlands joint venture, partially offset by construction borrowings during the
year ended December 31, 1996.
The $12.5 million increase in project debt reflects borrowings from banks
for the three build-to-suit projects discussed above by subsidiaries of the
Company. The Company has entered into purchase and sale agreements for the sale
of each building upon completion.
The $9.0 million decrease in other liabilities primarily reflects a $4.3
million decrease in accrued pensions and benefits and a $4.2 million decrease
related to the disposition of the Company's interest in the Oceanside Hills
partnership. See Note 7 to "Audited Historic Financial Statements."
DECEMBER 31, 1995 COMPARED WITH DECEMBER 31, 1994. Cash and cash
equivalents aggregated $4.9 million at December 31, 1995 compared with $13.0
million at December 31, 1994. The decrease in cash and cash equivalents
primarily reflects continued investments in Bolsa Chica and Rancho San Pasqual
along with general and administrative expenses, partially offset by proceeds
from asset sales, as well as
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other activity presented in the Statements of Cash Flows. Restricted cash of
$2.5 million at December 31, 1995 reflects funds deposited into escrow accounts
for funding infrastructure costs at Rancho San Pasqual. Restricted cash of $7.5
million at December 31, 1994 reflects funds on deposit to secure a $25 million
letter of credit facility arranged to finance the settlement of the Abex
litigation described above. See Notes 6 and 8 to "Audited Historic Financial
Statements."
The $5.6 million decrease in real estate held for development or sale is
primarily due to the sale of all residential property at Wentworth, offset by
investments in Rancho San Pasqual infrastructure. The $4.5 million decrease in
operating properties, net is primarily due to the sale of the Wentworth marina
in December 1995.
The $105.8 million decrease in land held for development reflects the
revaluation of the Bolsa Chica property resulting primarily from management's
decision in the fourth quarter of 1995 (following approval of additional funding
by the Ports) to make completing the sale of the lowlands to a public agency a
strategic goal of the Company, along with updated estimates of future cash flows
for the mesa portion of the project reflecting recent market conditions.
The $6.9 million decrease in other assets primarily reflects the March 1995
collection of a note receivable from AV Partnership, the reclassification of a
note receivable to real estate held for development or sale upon acquisition of
title to industrial property in Ontario, California and the refund of a deposit
upon termination of a purchase contract for property adjacent to the Bolsa Chica
site.
The $23.2 million decrease in accounts payable and accrued liabilities
primarily reflects the $22 million settlement of the Abex litigation in February
1995. See Notes 6 and 8 to "Audited Historic Financial Statements."
The $16.6 million increase in senior bank debt reflects the borrowing of
$15.5 million to fund the Abex settlement and $1.1 million of net borrowings to
fund infrastructure construction at Rancho San Pasqual. See Note 8 to "Audited
Historic Financial Statements."
The $39.4 million decrease in other liabilities primarily reflects the
recognition of $25.4 million of deferred tax benefits and a reduction of $10.0
million of other tax liabilities during 1995.
RESULTS OF OPERATIONS. The nature of the Company's business is such that
individual transactions often cause significant fluctuations in operating
results from year to year.
1996 COMPARED WITH 1995. The $10.1 million increase in asset sales revenues
from $23.5 million in 1995 to $33.6 million in 1996 and the related $8.6 million
increase in costs of asset sales from $21.6 million in 1995 to $30.2 million in
1996 primarily reflect the sale of the residential lots and Eagle Crest Golf
Course at Rancho San Pasqual, formation of the Fairbanks Highlands joint venture
and sales of resort/ residential lots in Michigan during the year ended December
31, 1996. These increases were partially offset by the absence in 1996 of
Wentworth residential sales as a result of the sale of the entire Wentworth
project in the fourth quarter of 1995. The $1.5 million improvement in gross
margin on asset sales primarily reflects gains on sales of Michigan lots,
partially offset by the absence in 1996 of the gains on sales of the Coronado
wharfage rights and leasehold interest in 1995.
The $.7 million and $1.0 million increases in revenues and gross margin,
respectively, from operations primarily reflect higher revenues in the Company's
commercial development business during the year ended December 31, 1996,
partially offset by the absence of Wentworth marina revenues throughout 1996 and
the sale of the Eagle Crest Golf Course in June 1996.
The $1.9 million increase in general and administrative expenses primarily
reflects costs incurred in connection with the Recapitalization and the sale of
the Bolsa Chica lowlands.
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The $2.3 million increase in interest expense from $22.6 million in 1995 to
$24.9 million in 1996 principally reflects compounded noncash interest on the
Company's Senior Debentures and Subordinated Debentures.
The $4.2 million decrease in other expense, net primarily reflects the
absence in 1996 of a $3.0 million reserve recorded in 1995 related to the
Company's investment in AV Partnership, and a decrease in accrued pensions and
benefits approximating $4.3 million, primarily due to termination of certain
group annuity contracts for the pension plan of a discontinued operation,
partially offset by a $1.5 million reserve for environmental clean up costs for
the Bolsa Chica lowlands.
The benefit for income taxes for the year ended December 31, 1996 has been
offset by a corresponding valuation allowance.
1995 COMPARED WITH 1994. The $12.6 million increase in revenues from $21.4
in 1994 to $34.0 in 1995 and the increase in cost of sales from $20.2 million in
1994 to $31.9 million in 1995 was primarily due to the sale of residential
property and the marina at Wentworth, along with the sale of industrial property
in Murietta, California, and the sale of wharfage rights in Coronado,
California.
The write-down of real estate properties of $121.1 million in 1995 reflects
the valuation adjustments recorded to reflect current estimates of net
realizable value for the Company's Bolsa Chica property as well as the Wentworth
project and the golf course at Rancho San Pasqual. See Note 5 to "Audited
Historic Financial Statements."
The change in other expense (income), net from $2.1 million of expense in
1994 to $3.1 million of expense for 1995 primarily reflects a loss reserve of
approximately $3 million related to the Company's investment in AV Partnership.
See Note 3 to "Audited Historic Financial Statements."
The improvement in provision (benefit) for income taxes of $25.2 million
primarily reflects the benefit related to the write-down of real estate
properties. See Note 8 to "Audited Historic Financial Statements."
1994 COMPARED WITH 1993. The $4.7 million increase in revenues from $16.7
million in 1993 to $21.4 million in 1994 and the increase in cost of sales from
$16.3 million in 1993 to $20.2 million in 1994 were both principally related to
operations of the domestic real estate development business acquired from The
Koll Company in September 1993, as well as residential home sales and the golf
course sale at the Company's Wentworth By The Sea project during 1994, offset by
the absence in 1994 of the Company's November 1993 sale of two office buildings
in La Jolla, California.
The decrease in interest expense from $24.4 million in 1993 to $19.4 million
in 1994 reflects both the reductions in outstanding subordinated debt in
connection with the Libra transaction in December 1993 and prepayments of senior
bank debt principally during 1993. See Note 6 to "Audited Historic Financial
Statements."
The change in other expense (income), net from $2.4 million of income in
1993 to $2.1 million of expense for 1994 primarily reflects nonrecurring income
of $3.0 million received in August 1993 in connection with the termination of a
put option agreement with Abex a former subsidiary of The Henley Group, Inc.,
and a $2.0 million insurance reimbursement received in February 1993, offset by
$.7 million of carrying costs related to the two La Jolla office buildings sold
in November 1993.
The gain on disposition of discontinued operations, net of income taxes in
1994 reflects the receipt of cash for the February 1994 termination of the
contingent payment provision of a December 1993 agreement with Libra whereby the
Company exchanged its Lake Superior Land Company subsidiary for approximately
$42.4 million face amount of the Company's Senior Debentures held by Libra and
other consideration. See Note 3 to "Audited Historic Financial Statements."
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995. Certain of the foregoing information is forward looking in nature and
involves risks and uncertainties that could
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significantly impact the ability of the Company to achieve its currently
anticipated goals and objectives. These risks and uncertainties include, but are
not limited to, litigation or appeals of regulatory approvals (including pending
litigation challenging the California Coastal Commission's approval of the Bolsa
Chica project) and availability of adequate capital, financing and cash flow. In
addition, future values may be adversely affected by increases in property
taxes, increases in the costs of labor and materials and other development risks
such as the demand for housing generally and the supply of competitive products.
Real estate properties do not constitute liquid assets and, at any given time,
it may be difficult to sell a particular property for an appropriate price.
LEGAL PROCEEDINGS
On January 13, 1995, the Hungtington Beach City School District and the
Huntington Beach Union High School District (collectively, the "School
Districts") and the Bolsa Chica Land Trust, et al. each filed a lawsuit naming
the County of Orange as defendant, with the Company as real party in interest,
(the "School Districts Action" and the "Environmental Action," respectively) in
Orange County Superior Court (the "Superior Court") challenging the Orange
County Board of Supervisors' approval of the Bolsa Chica project, which lawsuits
generally alleged, among other things, violations of the California
Environmental Quality Act and violations of the California Government Code
planning and zoning laws. The plaintiffs in the School Districts Action sought
monetary damages. The School Districts Action has been settled with an agreement
regarding school fees to be paid by the Company to the plaintiff districts. The
plaintiffs in the "Environmental Action" did not seek monetary damages, but
instead asked the Superior Court to set aside the approval of the Bolsa Chica
project. In February 1996, the Superior Court ruled on the Environmental
Action," rejecting all but one of the arguments, and requiring an additional
45-day public review and comment period regarding the tidal inlet portion of the
wetlands restoration plan, which was completed in the second quarter of 1996.
The County reapproved the plan without change in June 1996 and the Superior
Court approved a judgment dismissing the lawsuit on January 24, 1997.
On March 6, 1996 and March 11, 1996 two lawsuits were filed in the San
Francisco County Superior Court by the Bolsa Chica Land Trust, et al. and the
League for Coastal Protection et al., respectively, against the Coastal
Commission, the Company and other Bolsa Chica landowners as real parties in
interest, alleging that the Coastal Commission's approval of the 3,300-unit LCP
is not in compliance with the Coastal Act and other statutory requirements.
These lawsuits, which have subsequently been transferred to, and are currently
pending in, the San Diego County Superior Court, seek to set aside the approval
of the Bolsa Chica project. These lawsuits are currently scheduled to be tried
in May 1997. Given the recent sale of the Bolsa Chica lowlands described above,
the primary issues which were the subject of this litigation have been
eliminated. Furthermore, the plaintiffs in one of these lawsuits have informed
the Company that given the sale of the lowlands, they will work with the Company
in an effort to resolve the remaining issues of their lawsuit. The Company
believes that there is no factual basis to support the remaining litigation
issues which challenge development of the Bolsa Chica mesa. Furthermore, the
Company does not believe that these lawsuits will be successful in permanently
preventing the Company from completing the Bolsa Chica project, however, there
can be no assurance in this regard or that these suits will not result in
delays. See also "Business and Properties of the Company--Environmental and
Regulatory Matters, and --Corporate Indemnification Matters."
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EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY
Certain of the executive officers of the Company are also executive officers
of The Koll Company and its affiliates. Accordingly, they will devote less than
all of their working time to the businesses of the Company. Set forth below is
information with respect to each executive officer, director and director
nominee of the Company.
<TABLE>
<CAPTION>
NAME AND TITLE AGE* BUSINESS EXPERIENCE
- -------------------------------------- ----------- -----------------------------------------------------------------
<S> <C> <C>
Donald M. Koll ....................... 64 Chairman of the Board of the Company since March 1993 and Chief
Chairman of the Board Executive Officer since October 1996. Managing
and Chief Executive Officer Director--President and Director of the Company prior to July of
1992. Chairman of the Board and Chief Executive Officer of Koll
(general contracting and international real estate development
since prior to 1992) and Chairman of the Board of Koll Management
Services, Inc., also known as Koll Real Estate Services ("KRES")
(real estate management) since prior to 1992. Also a Director of
Fidelity National Financial, Inc. since March 1995. Mr. Koll's
director class will be up for election in connection with the
Company's 1997 Annual Meeting.
Ray Wirta ............................ 53 Director of the Company since March 1993. Chief Executive Officer
Director of the Company from March 1993 until October 1996. President and
Chief Operating Officer of Koll since prior to 1992. Vice
Chairman of the Board and Chief Executive Officer of KRES since
prior to 1992. Mr. Wirta's director class will be up for election
in connection with the Company's 1997 Annual Meeting.
Harold A. Ellis ...................... 65 Director of the Company since August 1993. Managing Partner of
Director Ellis Partners, Inc., a real estate asset management and
consulting firm since 1992. Chairman and Chief Executive Officer
of Grubb & Ellis Company, a diversified real estate service
company prior to 1992. Mr. Ellis's director class will be up for
election in connection with the Company's 1997 Annual Meeting.
Paul C. Hegness ...................... 50 Director of the Company since March 1993. Partner in the law firm
Director of Good, Wildman, Hegness & Walley since prior to 1992. Also a
Director of Walter Foster Publishing, a publisher and marketer of
art instructional materials. Mr. Hegness's director class will be
up for election in connection with the Company's 1997 Annual
Meeting.
J. Thomas Talbot ..................... 61 Director of the Company since August 1993. Owner of The Talbot
Director Company, an investment and asset management company since prior
to 1992. Chief Executive Officer of HAL, Inc., the parent company
of Hawaiian Airlines prior to 1992. Also a Director of The
Baldwin Company, a developer of residential real estate; The
Hallwood Group, Inc., a corporate rescue firm; Showbiz Pizza
Time, Inc., a restaurant chain; and Fidelity National Financial,
Inc., a title company. Mr. Talbot's term expires in 1998.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
NAME AND TITLE AGE* BUSINESS EXPERIENCE
- -------------------------------------- ----------- -----------------------------------------------------------------
Marco F. Vitulli ..................... 62 Director of the Company since March 1993. President of Vitulli
Director Ventures, Ltd., a real estate development, investment management
and consulting services company since prior to 1992. Also,
Chairman of Elk River Enterprises, a lumber company, and Director
of Pope Resources, a land, timber, mineral and recreational
properties company. Mr. Vitulli's term expires in 1998.
<S> <C> <C>
Richard M. Ortwein ................... 55 President of the Company since October 1993. President, Southern
President California Division of Koll from prior to 1992. Executive Vice
President of KRES from prior to 1992, and Director of KRES from
1992 to March 1994.
Raymond J. Pacini .................... 41 Executive Vice President and Secretary of the Company since 1993;
Executive Vice President, Chief Chief Financial Officer and Treasurer of the Company since June
Financial Officer, Treasurer and of 1992. Managing Director of the Company prior to June of 1992.
Secretary Executive Vice President and Chief Financial Officer of KRES from
March to November 1993.
Philip R. Burnaman II ................ 37 A Managing Director and head of New York Proprietary Trading Desk
Director Nominee of ING Barings (U.S.) Capital Corp., which is a subsidiary of the
ING Group, an Amsterdam-based banking, investment banking and
insurance institution since 1994. Whole loan commercial mortgage
trader of Citicorp Securities prior to 1992 until 1994.
James J. Gaffney ..................... 56 President and Chief Executive Officer of General Aquatics, Inc.
Director Nominee (formerly known as KDI Corp.). Director of Insilco Corp. and C.R.
Anthony. Former Chief Executive Officer or Chairman of the
following: International Tropic-Cal, Brown Jordan Company,
Meyercord Company and Washington Industries. Also, former Vice
President of a subsidiary of Unocal, and former Executive Vice
President of Finance of General Refractories Company.
Robert J. Gagalis .................... 42 Chief Financial Officer and Treasurer of Wheelabrator
Director Nominee Technologies, Inc., an environmental services company since
January 1997. Formerly served Wheelabrator Technologies as
Vice-President Finance, Director of Corporate Development and
Staff Vice President of Corporate Development.
Thomas W. Sabin, Jr. ................. 39 President of Thomas Sabin, Inc. Manager and Vice President of
Director Nominee BGFRIS, a limited liability partnership. From 1992 until 1996,
formed and operated GSSW, L.P., a limited partnership, the
purpose of which was to acquire real estate assets from the
Resolution Trust Corporation. Former President of a subsidiary of
Southland Corporation.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
NAME AND TITLE AGE* BUSINESS EXPERIENCE
- -------------------------------------- ----------- -----------------------------------------------------------------
P. John Wickser II ................... 43 Managing Director of ING Barings--ING Real Estate Finance, Inc.,
Director Nominee which is a subsidiary of the ING Group, an Armsterdam-based
banking, investment banking and insurance institution, since
1993. Real estate investment banker at Citicorp based in London,
England from prior to 1992 until 1993.
<S> <C> <C>
Paul M. Zeller ....................... 47 President of Zeller Realty Corporation since 1988. Former General
Director Nominee Partner of The Buck Company, a commercial real estate development
firm. Founding stockholder and former Director of Buck Investment
Company. In 1988, founded Asian Capital Corporation, a merchant
banking and investment firm specializing in real property secured
debt and equity placements and merchant banking, which maintains
offices in Chicago, New York and Tokyo.
</TABLE>
- ------------------------
* As of March 31, 1997
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The following table summarizes the compensation
paid during the previous three fiscal years to the Chief Executive Officer and
the Company's other executive officers whose salary and bonus during 1996
exceeded $100,000 (the "Named Executives") for services in all capacities to the
Company.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION AWARDS
ANNUAL COMPENSATION --------------------------------------
------------------------------------- 1993
OTHER RESTRICTED PLAN ALL
ANNUAL STOCK OPTIONS OTHER
SALARY BONUS COMPENSATION AWARD (# OF COMPENSATION
NAME AND PRINCIPAL POSITION ($)(1) ($) ($) ($) SHARES) ($)
- ------------------------------------- ------------ ------------ -------------- ----------- --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Donald M. Koll ...................... 1996 330,200 275,000(3) -- -- -- --
Chairman of the Board and 1995 325,000 -- -- -- -- --
Chief Executive Officer 1994 325,000 -- -- -- -- --
Ray Wirta ........................... 1996 103,750(2) 125,000(3) -- -- -- --
Former Chief Executive 1995 225,000 -- -- -- -- --
Officer 1994 225,000 -- -- -- -- --
Richard Ortwein ..................... 1996 359,600 250,000(3) 13,841(5) -- -- --
President 1995 359,858 -- -- -- -- --
1994 274,197 18,500 -- -- -- --
--
Raymond J. Pacini ................... 1996 268,000 100,000(3) -- -- -- 76,725(6)
Executive Vice President 1995 268,000 200,000(4) -- -- -- --
and Chief Financial 1994 268,000 150,000 -- -- -- --
Officer
</TABLE>
- ------------------------
(1) Includes auto allowance and amounts electively deferred by each Named
Executive under the Company's 401(k) Savings and Profit Sharing Plan. Mr.
Koll and Mr. Wirta are also executive officers of The Koll Company and its
affiliates and accordingly devote less than all of their working time to the
Company's business matters.
(2) Reduced to $95,000 per year effective April 1, 1996 and to $0 effective
October 1, 1996 to reflect a reduction in his day-to-day involvement with
the Company in view of his commitment to devote a greater percentage of his
time to the business of an affiliate of the Company. Effective October 1,
1996, Mr. Wirta receives a consulting fee equivalent to $50,000 per year.
(3) Bonuses for 1996 were paid following the closing of the Bolsa Chica lowlands
sale in February 1997.
(4) In the first quarter of 1996, Mr. Pacini voluntarily elected to defer
consideration of his 1995 bonus given the Company's liquidity situation. In
September 1996, the Compensation Committee of the Company's Board of
Directors approved Mr. Pacini's bonus for accomplishments during 1995, which
was paid following the closing of the Bolsa Chica lowlands sale in February
1997.
(5) Partnership distributions.
(6) Reflects a one-time payment representing Mr. Pacini's pro-rata share of
assets distributed from a trust in connection with termination of the
Company's Executive Retirement and Savings Program.
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<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUE. The following table sets forth information for each Named
Executive with regard to the aggregate stock options exercised during the 1996
fiscal year, and stock options held as of December 31, 1996. On December 31,
1996, options exercisable by the Named Executives were for 2,400,000 shares,
2,000,000 shares, 2,400,000 shares and 2,200,000 shares under options granted to
Messrs. Koll, Wirta, Ortwein and Pacini, respectively. No stock appreciation
rights were exercised by the Named Executives during the 1996 fiscal year, nor
did such individuals hold any stock appreciation rights at the end of such
fiscal year.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED
VALUE UNEXERCISED IN-THE-MONEY
SHARES ACQUIRED REALIZED OPTIONS/SARS OPTIONS/SARS
NAME ON EXERCISE (#) ($)(1) AT FY-END AT FY-END ($)(2)
- ------------------------------------ --------------- ------------- --------------------- -------------------
<S> <C> <C> <C> <C>
Donald M. Koll...................... -- -- 2,400,000 --
Ray Wirta........................... -- -- 2,000,000 --
Richard Ortwein..................... -- -- 2,400,000 --
Raymond J. Pacini................... -- -- 2,200,000 $ 27,490
</TABLE>
- ------------------------
(1) Market value of underlying securities on exercise date, minus the exercise
price.
(2) Based upon market value of $.1250 for the Class A Common Stock and $.28125
for the Preferred Stock as of December 31, 1996 less the aggregate exercise
price payable for such shares. Includes the value of the 2,400,000 shares,
2,000,000 shares, 2,400,000 shares and 2,200,000 shares subject to currently
exercisable options by Messrs. Koll, Wirta, Ortwein and Pacini,
respectively.
EXECUTIVE RETIREMENT AND SAVINGS PROGRAM
The Company maintains two retirement benefit programs, one of which was
terminated in 1996: a tax-qualified defined benefit pension plan which was
available generally to all employees (the "Pension Plan") and the Retirement and
Savings Program, a non-qualified supplemental benefit plan pursuant to which
retirement benefits were provided to executive officers and other eligible key
management employees who were designated by the Compensation Committee, which
determined the service recognized under the program in calculating a
participant's vested interest and retirement income (the "Supplemental Plan"
and, together with the Pension Plan the "Retirement Program"). As of December
31, 1993, all benefits under the Pension Plan were frozen, and no further
compensation or years of service will be taken into account for additional
benefit accrual purposes, under the Pension Plan. The Supplemental Plan was
terminated effective November 15, 1996 through the distribution of assets held
in trust to the beneficiaries of the Supplemental Plan in exchange for the
beneficiaries release of all claims to any future benefits under the
Supplemental Plan.
The following table shows as of the date the Pension Plan was frozen the
total estimated annual benefits payable under the Retirement Program in the form
of a 50% joint and survivor annuity to hypothetical participants upon retirement
at normal retirement age, in the compensation and years-of-service categories
indicated in the table.
<TABLE>
<CAPTION>
ESTIMATED ANNUAL BENEFITS
ANNUALIZED -----------------------------------------------
AVERAGE 10 YEARS 20 YEARS 30 YEARS 40 YEARS
EARNINGS OF SERVICE OF SERVICE OF SERVICE OF SERVICE
- ----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
$ 100,000 $ 15,000 $ 30,000 $ 45,000 $ 60,000
200,000 30,000 60,000 90,000 120,000
400,000 60,000 120,000 180,000 240,000
</TABLE>
The years of service recognized under the Retirement Program generally
included all service with the Company and its subsidiaries and their
predecessors. The only credited years of service to the Named Executives as of
the date the Pension Plan was frozen were seven years to Mr. Pacini.
Compensation
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<PAGE>
recognized under the Retirement Program generally included a participant's base
salary (including any portion deferred) and annual bonus compensation.
COMPENSATION OF DIRECTORS. The non-employee directors of the Company are
entitled to receive cash compensation and compensation pursuant to the plans
described below.
CASH COMPENSATION. Non-employee directors of the Company receive
compensation of $30,000 per year, with no additional fees for attendance at
Board or committee meetings. Messrs. Ellis, Hegness and Vitulli were paid an
additional $10,000, $20,000 and $7,000, respectively, for consulting services
rendered during 1996. Employee directors are not paid any fees or additional
compensation for service as members of the Board or any of its committees. All
directors are reimbursed for expenses incurred in attending Board and committee
meetings. Pursuant to the Deferred Compensation Plan for Non-Employee Directors,
a non-employee director may elect, generally prior to the commencement of any
calendar year, to have all or any portion of the director's compensation for
such calendar year credited to a deferred compensation account. Amounts credited
to the director's account will accrue interest based upon the average quoted
rate for ten-year U.S. Treasury Notes. Deferred amounts will be paid in a lump
sum or in installments commencing on the first business day of the calendar year
following the year in which the director ceases to serve on the Board, or of a
later calendar year specified by the director.
1993 STOCK OPTION/STOCK ISSUANCE PLAN. The Company's 1993 Stock
Option/Stock Issuance Plan (the "1993 Stock Option Plan") contains three
separate equity incentive programs in which members of the Board may be eligible
to participate: (i) a Discretionary Option Grant Program, under which eligible
non-employee members of the Board, along with officers, key employees and
consultants, may be granted options to purchase shares of Preferred Stock and
Class A Common Stock, (ii) a Director Fee Program, under which each non-employee
member of the Board may elect to apply all or any portion of his or her annual
retainer fee (currently $30,000) to the acquisition of unvested shares of
Preferred Stock or Class A Common Stock, and (iii) an Automatic Option Grant
Program, under which option grants will be made to non-employee members of the
Board.
Options granted under the Discretionary Option Grant Program may be either
incentive stock options designed to meet the requirements of Section 422 of the
Internal Revenue Code or non-statutory options not intended to satisfy such
requirements. All grants under the Automatic Option Grant Program will be
non-statutory options.
No individual participating in the 1993 Stock Option Plan may be granted
stock options or separately exercisable stock appreciation rights for more than
5,000,000 shares of Class A Common Stock and Preferred Stock in the aggregate
over the term of the 1993 Stock Option Plan.
PLAN ADMINISTRATION. The Discretionary Option Grant Program is administered
by the Compensation Committee of the Board, which is comprised of two or more
non-employee Board members appointed by the Board. The Compensation Committee,
as "Plan Administrator," has complete discretion (subject to the express
provisions of the 1993 Stock Option Plan) to authorize stock option grants. All
grants under the Automatic Option Grant and Director Fee Programs are made in
strict compliance with the express provisions of those programs, and no
administrative discretion is exercised by the Plan Administrator with respect to
the grants or stock issuances made under those programs.
DISCRETIONARY OPTION GRANT PROGRAM. The principal features of the
Discretionary Option Grant Program may be summarized as follows:
The exercise price per share of the Preferred Stock or Class A Common Stock
subject to a stock option will not be less than 100% of the fair market value
per share of that security on the grant date. No option will have a maximum term
in excess of ten years measured from the grant date. The Plan Administrator has
complete discretion to grant options (i) which are immediately exercisable for
vested shares, (ii) which are immediately exercisable for unvested shares
subject to the Company's repurchase
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rights, or (iii) which become exercisable in installments for vested shares over
the optionee's period of service. Non-employee members of the Board who serve as
Plan Administrator are not eligible to participate in the Discretionary Option
Grant Program.
The exercise price may be paid in cash or in shares of Preferred Stock or
Class A Common Stock valued at fair market value on the exercise date. The
option may also be exercised for vested shares through a same-day sale program
pursuant to which the purchased shares are to be sold immediately and a portion
of the sale proceeds applied to the payment of the exercise price for those
shares on the settlement date.
Any option held by the optionee at the time of cessation of service will
normally not remain exercisable beyond the limited period designated by the Plan
Administrator (not to exceed 36 months) at the time of the option grant. During
that period, the option will generally be exercisable only for the number of
shares in which the optionee is vested at the time of cessation of service. For
purposes of the 1993 Stock Option Plan, an individual will be deemed to continue
in service for so long as that person performs services on a periodic basis for
the Company or any parent or subsidiary corporations, whether as an employee, a
non-employee member of the Board or an independent consultant or advisor.
The Plan Administrator has complete discretion to extend the period
following the optionee's cessation of service during which his or her
outstanding options may be exercised and/or to accelerate the exercisability of
such options in whole or in part. Such discretion may be exercised at any time
while the options remain outstanding, whether before or after the optionee's
actual cessation of service.
Any unvested shares of Preferred Stock and Class A Common Stock are subject
to repurchase by the Company, at the original exercise price paid per share,
upon the optionee's cessation of service prior to vesting in those shares. The
Plan Administrator has complete discretion in establishing the vesting schedule
for any such unvested shares and has full authority to cancel the Company's
outstanding repurchase rights with respect to those shares in whole or in part
at any time.
The optionee is not to have any stockholder rights with respect to the
option shares until the option is exercised and the exercise price is paid for
the purchased shares. Options are not assignable or transferable other than by
will or by the laws of inheritance following the optionee's death, and the
option may, during the optionee's lifetime, be exercised only by the optionee.
The Plan Administrator may grant options with stock appreciation rights.
Stock appreciation rights provide the holders with the right to surrender their
options for an appreciation distribution from the Company equal in amount to the
excess of (i) the fair market value of the vested shares of Preferred Stock or
Class A Common Stock subject to the surrendered option over (ii) the aggregate
exercise price payable for such vested shares. Such appreciation distribution
may, in the discretion of the Plan Administrator, be made in cash or in shares
of the Preferred Stock or Class A Common Stock.
DIRECTOR FEE PROGRAM. Under the Director Fee Program, each individual
serving as a non-employee Board member is eligible to elect to apply all or any
portion of the annual retainer fee otherwise payable in cash to such individual
(currently $30,000) to the acquisition of unvested shares of Preferred Stock
and/or Class A Common Stock. The non-employee Board member must make the stock
election prior to the start of the calendar year for which the election is to be
in effect. On the first trading day in January of the calendar year for which
the election is in effect, the portion of the retainer fee subject to such
election will be applied to the acquisition of the selected shares of Preferred
Stock and/or Class A Common Stock by dividing the elected dollar amount by the
closing selling price per share of Preferred Stock or Class A Common Stock (as
the case may be) on that trading day. The issued shares will be held in escrow
by the Company until the individual vests in those shares. The non-employee
Board member will have full stockholder rights, including voting and dividend
rights, with respect to all issued shares held in escrow on his or her behalf.
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<PAGE>
Upon completion of each calendar quarter of Board service during the year
for which the election is in effect, the non-employee Board member will vest in
one-fourth of the issued shares, and the stock certificate for those shares will
be released from escrow. Immediate vesting in all the issued shares will occur
in the event the individual dies or becomes disabled during his or her period of
Board service or certain changes in control or ownership of the Company are
effected during such period. Should the Board member cease service prior to
vesting in one or more quarterly installments of the issued shares, then those
installments will be forfeited, and the individual will not be entitled to any
cash payment from the Company with respect to the forfeited shares.
In 1996 no shares were received in lieu of the cash retainer fee.
AUTOMATIC OPTION GRANT PROGRAM. Under the Automatic Option Grant Program
which will be terminated if the Recapitalization is consummated, each individual
who was serving as a non-employee Board member on November 29, 1993 (the "Grant
Effective Date") was automatically granted a non-statutory option to purchase
125,000 shares of Preferred Stock and a non-statutory option to purchase 125,000
shares of Class A Common Stock. In addition, each individual who first becomes a
non-employee Board member on or after the Grant Effective Date, whether through
election by the Company's stockholders or appointment by the Board, will be
automatically granted at the time of such election or appointment a
non-statutory option to purchase 125,000 shares of Preferred Stock and a
non-statutory option to purchase 125,000 shares of Common Stock. However, no
non-employee Board member who has previously been in the employ of the Company
or any parent or subsidiary corporation will be eligible to receive these
automatic stock option grants.
Each option granted under the Automatic Option Grant Program is subject to
the following terms and conditions:
(1) The exercise price per share of the Preferred Stock or Class A
Common Stock subject to an automatic option grant will be equal to 100% of
the fair market value per share of that security on the automatic option
grant date.
(2) Each option will have a maximum term of ten years measured from the
grant date.
(3) Each option will be immediately exercisable for all the option
shares, but any purchased shares will be subject to repurchase by the
Company at the exercise price paid per share. Each option will vest, and the
Company's repurchase right will lapse as to (i) 40% of the option shares
upon the optionee's completion of one year of Board service measured from
the automatic grant date, and (ii) the remaining option shares in two equal
and successive annual installments over the optionee's period of continued
Board service, with the first such installment to vest two years after the
automatic option grant date.
(4) The option will remain exercisable for a six-month period following
the optionee's cessation of Board service for any reason other than death or
permanent disability. Should the optionee die while holding an automatic
option grant, then such option will remain exercisable for a twelve-month
period following the optionee's death and may be exercised by the personal
representative of the optionee's estate or the person to whom the grant is
transferred by the optionee's will or the laws of inheritance. In no event,
however, may the option be exercised after the expiration date of the option
term. During the applicable exercise period, the option may not be exercised
for more than the number of shares (if any) in which the optionee is vested
at the time of cessation of Board service.
(5) Should the optionee die or become permanently disabled while serving
as a Board member, then the shares of the Preferred Stock and Class A Common
Stock subject to any automatic option grant held by that optionee will
immediately vest in full, and those vested shares may be purchased at any
time within the twelve-month period following the date of the optionee's
cessation of Board service.
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<PAGE>
(6) The shares subject to each automatic option grant will vest in full
upon the occurrence of certain changes in control or ownership of the
Company, as explained in more detail below in the subsection entitled
Option/Vesting Acceleration.
(7) Upon the successful completion of a hostile tender offer for
securities possessing more than 50% of the combined voting power of the
Company's outstanding securities, each automatic option grant which has been
outstanding for at least six months may be surrendered to the Company for a
cash distribution per surrendered option share in an amount equal to the
excess of (i) the highest price per share of the Preferred Stock or Class A
Common Stock paid in such tender offer over (ii) the exercise price payable
for such share.
(8) The remaining terms and conditions of the option will in general
conform to the terms described above for option grants made under the
Discretionary Option Grant Program and will be incorporated into the option
agreement evidencing the automatic option grant.
FINANCIAL ASSISTANCE. The Plan Administrator may institute a loan program
in order to assist one or more optionees in financing their exercise of
outstanding options under the Discretionary Option Grant Program. The form in
which such assistance is to be made available (including loans or installment
payments) and the terms upon which such assistance is to be provided will be
determined by the Plan Administrator. However, the maximum amount of financing
provided any individual may not exceed the amount of cash consideration payable
for the issued shares plus all applicable Federal, state and local income and
employment taxes incurred in connection with the acquisition of the shares. Any
such financing may be subject to forgiveness in whole or in part, at the
discretion of the Plan Administrator, over the individual's period of service.
EMPLOYMENT AGREEMENTS. The Company has entered into employment agreements
with each of Messrs. Koll, Ortwein and Pacini with respect to an employment term
commencing upon the closing of the Recapitalization and ending three (3) years
thereafter. Under the employment agreements each of Messrs. Koll, Ortwein and
Pacini has agreed to serve in their current capacities as the Company's Chief
Executive Officer, President and Chief Financial Officer, respectively, at their
current base salaries. The employment agreements provide that if an officer is
terminated without cause (as defined) during such three (3) year period, the
officer shall receive a severance payment equal to his current annual salary for
twelve (12) months plus the amount of his most recent annual bonus for the prior
fiscal year, and any unvested stock options shall immediately become 100%
vested. The employment agreements also provide for bonuses payable upon
completion of the Recapitalization. Given the significance to the Company of
completing the Recapitalization, the Compensation Committee has approved bonuses
of [$ , $ , $ , and $ ] payable upon completion of the
Recapitalization to Messrs. Koll, Wirta, Ortwein and Pacini, respectively. These
bonuses are intended to (i) retain these individuals during the pendency of the
Recapitalization; (ii) incentivize the completion of the Recapitalization on a
timely basis; and (iii) to reward these individuals for their substantial
efforts during the past several years, which efforts have been necessary
prerequisites to completing the Recapitalization.
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. The Compensation Committee,
and its members are named below. No member of the Compensation Committee was at
any time during the 1996 fiscal year or at any other time an officer or employee
of the Company. No executive officer of the Company serves as a member of the
board of directors or compensation committee of any entity which has one or more
executive officers serving as a member of the Company's Board of Directors or
Compensation Committee. Good, Wildman, Hegness & Walley, a law firm with which
Mr. Hegness is a senior partner, provides legal services to the Company.
THE FOLLOWING REPORT OF THE COMPENSATION COMMITTEE AND STOCK PRICE
PERFORMANCE COMPARISON GRAPH SHALL NOT BE DEEMED TO BE SOLICITING MATERIAL AND
SHALL NOT BE DEEMED INCORPORATED BY REFERENCE BY ANY GENERAL
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STATEMENT INCORPORATING BY REFERENCE THIS PROXY STATEMENT INTO ANY FILING UNDER
THE SECURITIES ACT OF 1933 OR UNDER THE SECURITIES EXCHANGE ACT OF 1934, AND
SHALL NOT OTHERWISE BE DEEMED FILED UNDER SUCH ACTS.
REPORT OF THE COMPENSATION COMMITTEE. The overall objectives of the Company
compensation program are to attract and retain the best possible executive
talent, to motivate these executives to achieve the goals inherent in the
Company's business strategy, to maximize the link between executive and
stockholder interests through an equity based plan and to recognize individual
contributions as well as overall business results.
The key elements of the Company's executive compensation program consist of
fixed compensation in the form of base salary, and variable compensation in the
forms of annual incentive compensation and stock options. An executive officer's
annual base salary represents the fixed component of his total compensation;
however, variable compensation is intended to comprise a substantial portion of
an executive's total annual compensation. The Compensation Committee also takes
into account the fact that executives may also provide services to, and receive
compensation from, other entities. In addition, while the elements of
compensation described below are considered separately, the Compensation
Committee takes into account the full compensation package afforded by the
Company to the individual, including any pension benefits, supplemental
retirement benefits, insurance and other benefits, as well as the programs
described below.
BASE SALARIES. Base salaries for executive officers are determined by
evaluating the responsibilities of the position held and the experience of the
individual, and by reference to the competitive marketplace for executive talent
including, where appropriate, a comparison to base salaries for comparable
positions at other companies, and to historical levels of salary paid by the
Company and its predecessors. Current base salaries for the Company's executive
officers are at or below the 75th percentile of the compensation data surveyed
during the first quarter of 1994. Since then, the only executive officer salary
increase granted was to Mr. Ortwein in order to bring his salary closer to
comparable levels.
Salary adjustments are based on a periodic evaluation of the performance of
the Company and of each executive officer, and also take into account new
responsibilities as well as changes in the competitive market place. The
Compensation Committee, where appropriate, also considers non-financial
performance measures.
ANNUAL INCENTIVE COMPENSATION AWARDS. The variable compensation payable
annually to executive officers is intended to consist principally of annual
incentive compensation awards, based on various factors, including both
corporate and individual performance, established by the Compensation Committee
each fiscal year. The executive officer bonuses for 1996 were paid upon
completion of the Bolsa Chica lowlands sale in February 1997 in recognition of
such officers' accomplishments during 1996, particularly with respect to
obtaining the California Coastal Commission's approval of the Bolsa Chica
project and progress made towards the ultimate sale of the lowlands.
OTHER INCENTIVE COMPENSATION. Participation of executives in equity-based
compensation programs is reviewed annually, and awards under such programs,
primarily in the form of stock option grants under the Company's 1993 Stock
Option Plan, are made periodically to the executives. Each option grant is
designed to align the interests of the executive with those of the stockholders
and provide each individual with a significant incentive to manage the Company
from the perspective of an owner with an equity stake in the business. The
number of shares subject to each option grant is based upon the executive's
tenure, level of responsibility and relative position in the Company. The
Compensation Committee has established certain general guidelines in making
option grants to the executives in an attempt to target a fixed number of option
shares based upon the individual's position with the Company and his existing
holdings of options. However, the Company does not adhere strictly to these
guidelines and will vary the size of the option grant made to each executive
officer as it feels the circumstances warrant. In connection with the
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Recapitalization, the Compensation Committee approved the grant of options
effective upon the consummation of the Recapitalization equivalent to 2.5%, .5%,
1.5% and 1.5% of the Company's fully diluted equity to Messrs. Koll, Wirta,
Ortwein and Pacini, respectively. The price of such options will be determined
by the 20-day average closing price following completion of the
Recapitalization. Each grant allows the executive to acquire shares of the
Company's stock at a fixed price per share (the market price on the grant date)
over a specified period of time (up to 10 years). The options vest in periodic
installments over a three-year period, generally contingent upon the executive
officer's continued employment with the Company, provided, that if the executive
is terminated without cause, such options shall immediately become 100% vested.
Accordingly, the option will generally provide a return to the executive only if
he remains in the Company's employ and the market price of the Common Stock and
Preferred Stock appreciates over the option term.
CEO COMPENSATION. The base salary established for the Company's current and
former Chief Executive Officer, Messrs. Koll and Wirta, respectively, reflects
the Committee's policy to maintain a relative level of stability and certainty
with respect to the CEO's base salary from year to year. In setting the CEO's
base salary, the Committee sought to accomplish three objectives: provide a
level of base salary competitive to that paid to other chief executive officers
in the industry (recognizing that Messrs. Koll and Wirta are each an executive
officer of affiliate companies and accordingly devote less than all of their
working time to the Company's business matters), maintain internal comparability
and have their base salary play a less central role in their overall
compensation package by reason of the option grants made to them in lieu of a
more substantial increase in their level of base salary. The CEO's current base
salary is below the average of the surveyed compensation data for similarly
situated chief executive officers in the industry. The CEO's bonus for 1996 was
paid upon completion of the Bolsa Chica lowlands sale in February 1997 in
recognition of such officer's accomplishments during 1996, particularly with
respect to obtaining the California Coastal Commission's approval of the Bolsa
Chica project and progress made towards the ultimate sale of the lowlands.
TAX LIMITATION. The cash compensation to be paid to each of the Company's
executive officers for the 1995 fiscal year is not expected to exceed the
$1,000,000 limit on the tax deductibility of such compensation imposed under
federal tax legislation enacted in 1993. In addition, the Company's 1993 Stock
Option Plan imposes a limit on the maximum number of shares of the Company's
common and preferred stock for which any one participant may be granted stock
options over the remaining term of the plan. Any compensation deemed paid to an
executive officer upon the exercise of an outstanding option under the 1993
Stock Option Plan will qualify as performance-based compensation which will not
be subject to the $1,000,000 limitation. No other changes to the Company's
executive compensation programs will be made as a result of the new limitation
until final Treasury Regulations are issued with respect to such limitation.
The Compensation Committee
of the Board of Directors:
J. Thomas Talbot, Chairman
Harold A. Ellis, Jr.
Paul C. Hegness
Marco F. Vitulli
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STOCK PRICE PERFORMANCE COMPARISON. The following graph illustrates the
return during the past five years that would have been realized on December 31
of each year (assuming reinvestment of dividends) by an investor who invested
$100 on December 31, 1991 in each of (i) the Company's Class A Common Stock,
(ii) the Media General Composite Market Value Index ("Media General Index"), and
(iii) the Wilshire Real Estate Securities Index of Real Estate Operating
Companies ("Real Estate Index") which consists of 12 real estate operating and
development companies.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG
THE COMPANY, REAL ESTATE INDEX AND MEDIA GENERAL INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
THE COMPANY REAL ESTATE INDEX MEDIA GENERAL INDEX
<S> <C> <C> <C>
12/31/1991 $100.00 $100.00 $100.00
12/31/1992 $36.36 $90.61 $104.00
12/31/1993 $63.64 $108.18 $119.39
12/31/1994 $68.19 $102.10 $118.39
12/31/1995 $45.45 $125.34 $153.50
12/31/1996 $18.18 $171.55 $185.38
</TABLE>
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL INTEREST HOLDERS AND MANAGEMENT
The following table sets forth, as of March 31, 1997, the name and address
of each person believed to be a beneficial interest holder of more than 5% of
the Common Stock, the number of shares beneficially owned and the percentage so
owned. Except as set forth below, management knows of no person who, as of March
31, 1997, owned beneficially more than 5% of the Company's outstanding Class A
Common Stock.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
TITLE OF CLASS BENEFICIAL INTEREST HOLDER BENEFICIAL OWNERSHIP CLASS(1)
- ------------------------------------- -------------------------------------- ----------------------- -------------
<S> <C> <C> <C>
Class A Common Stock................. Bridge Partners, L.P. 17,518,200 shares(2) 28.8(2)
115 East Putnam Avenue
Greenwich, CT 06830
Class A Common Stock................. Wheelabrator Technologies Inc. 5,097,207 shares(3) 9.8(3)
Liberty Lane
Hampton, NH 03842
Class A Common Stock................. Asher B. Edelman 3,477,700 shares(4) 6.6(4)
717 Fifth Avenue
New York, NY 10022
Class A Common Stock................. Merrill Lynch & Co., Inc. 2,851,692 shares(5) 5.6(5)
World Financial Center
North Tower
250 Vesey Street
New York, NY 10281
</TABLE>
- ------------------------
(1) These percentages are calculated assuming the conversion of all securities
convertible within 60 days into the Company's Class A Common Stock which are
held by the individual beneficial interest holder of more than 5% listed in
the table above, but not those held by others.
(2) According to Schedule 13D dated July 14, 1995 filed jointly with the
Securities and Exchange Commission (the "SEC") by Mr. John W. Gildea
("Gildea"), Carson Street Partners, Inc. ("Carson"), and Bridge Partners,
L.P. ("Bridge"). Carson is the sole general partner of Bridge and has the
power to vote and dispose of shares. Gildea is the Chairman of the Board of
Directors, Chief Executive Officer, President and controlling stockholder of
Carson. As a result, Gildea and Carson may be deemed to be the indirect
beneficial interest holders of the shares held by Bridge, a partnership
whose general partner is controlled by Gildea. Gildea disclosed that through
Bridge and Carson, as of that date, he was the beneficial interest holder of
17,518,200 shares of Class A Common Stock, as to which he had sole voting
and dispositive power. This number includes 11,878,800 shares of Preferred
Stock which shares are generally nonvoting and are currently convertible
into shares of the Class A Common Stock on a share-for-share basis.
(3) According to the Company's records, including shares held by wholly-owned
subsidiaries. This number includes 3,339,198 shares of Preferred Stock which
shares are generally nonvoting and are currently convertible into shares of
the Class A Common Stock on a share-for-share basis.
(4) According to Schedule 13D (Amendment No. 1) dated December 5, 1996 filed
jointly with the SEC by Mr. Asher B. Edelman; Edelman Value Partners, L.P.;
Edelman Value Fund, Ltd.; and A.B. Edelman Management Company, Inc.
(collectively, "Edelman"). Edelman is the beneficial owner of 3,477,700
shares of Preferred Stock which shares are generally non-voting and are
currently convertible into shares of the Class A Common Stock on a
share-for-share basis.
(5) According to Schedule 13G dated February 11, 1994 filed jointly with the SEC
by Merrill Lynch & Co., Inc. and Merrill Lynch Pierce, Fenner & Smith
Incorporated (collectively "Merrill"). Merrill
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beneficially owns an aggregate of 2,851,692 shares, including 957,246 shares
of Class A Common Stock and 1,894,446 shares of Preferred stock which shares
are generally non-voting and are currently convertible into shares of the
Class A Common Stock on a share-for-share basis.
Information about the beneficial ownership of the Common Stock as of
December 1, 1996 by each nominee, director, executive officer named in the
Summary Compensation Table, and all directors and executive officers of the
Company as a group is set forth below:
<TABLE>
<CAPTION>
SHARES OF CLASS A PERCENT OF
NAME OF BENEFICIAL INTEREST HOLDER COMMON STOCK(1) CLASS(2)
- --------------------------------------------------------------- ----------------- -------------
<S> <C> <C>
Donald M. Koll(3).............................................. 2,436,701 4.7
Ray Wirta(4)................................................... 2,040,000 4.0
Harold A. Ellis, Jr.(5)........................................ 293,263 *
Paul C. Hegness(5)............................................. 360,571 *
J. Thomas Talbot(5)............................................ 252,000 *
Marco F. Vitulli(5)............................................ 371,000 *
Richard Ortwein(3)............................................. 2,407,340 4.7
Raymond J. Pacini(6)........................................... 2,223,434 4.3
Directors and Executive Officers as a group (8 persons
including the above named).................................... 10,384,309 17.6
</TABLE>
- ------------------------
(1) Except as otherwise indicated in the notes below, the persons indicated have
sole voting and investment power with respect to shares listed. In addition
to the specific shares indicated in the following footnotes, this column
includes shares held directly and shares subject to stock options which are
currently exercisable.
(2) These percentages are calculated assuming the conversion of all securities
convertible within 60 days into Class A Common Stock, which are held by the
executive officer or director listed above but not those held by others.
Asterisks indicate beneficial ownership of 1% or less of the class.
(3) Includes vested options to purchase 1,200,000 shares each of Class A Common
Stock and Series A Convertible Preferred Stock granted pursuant to the
Company's 1993 Stock Option/Stock Issuance Plan and which options are
subject to certain restrictions on disposition.
(4) Includes vested options to purchase 1,000,000 shares each of Class A Common
Stock and Preferred Stock granted pursuant to the Company's 1993 Stock
Option/Stock Issuance Plan and which options are subject to certain
restrictions on disposition.
(5) Includes 2,000 shares of Common Stock granted pursuant to the Company's
Restricted Stock Plan for Non-Employee Directors, and vested options to
purchase 125,000 shares each of Class A Common Stock and Preferred Stock
granted pursuant to the Company's Automatic Option Grant Program which
shares and options are subject to certain restrictions on disposition.
(6) Includes vested options to purchase 1,100,000 shares each of Class A Common
Stock and Series A Convertible Preferred Stock granted pursuant to the
Company's 1993 Stock Option/Stock Issuance Plan which options are subject to
certain restrictions on disposition.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
LICENSE AND NON-COMPETITION AGREEMENTS. A wholly-owned subsidiary of the
Company has amended certain agreements with Donald M. Koll, the Chairman of the
Board and Chief Executive Officer of the Company, which agreements include a
license to use the "Koll" name and which contain certain non-compete provisions.
Pursuant to such amendments, upon consummation of the Recapitalization, and the
occurrence of any one of the following (i) the resignation of Mr. Koll as an
officer and director of the Company after the first anniversary of the
Recapitalization, (ii) the resignation of Mr. Koll as an officer and director of
the Company at any time following the consummation of the Recapitalization in
the event
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the Board duly resolves to authorize any sale of all or substantially all of the
properties or interests in the properties of the Company, any merger or
consolidation of the Company with any other entity, other than a merger or
consolidation in which the Company will control the merged or consolidated
entity, any dissolution of the Company, any cessation of a present operation of
the Company or any other extraordinary corporate transaction involving
properties or interests in property of the Company, (iii) the removal of Mr.
Koll from his positions as an officer or director of the Company, or (iv) the
failure to elect Mr. Koll to such offices at any future meeting of stockholders
held after consummation of the Recapitalization, Mr. Koll will be released from
currently existing covenants not to compete with the Company, the Company and
its subsidiaries will be obligated to change their respective names to delete
all usage of the name "Koll" and any officer, director or employee of the
Company who thereafter leaves the Company to join Mr. Koll, The Koll Company or
its affiliates, will be released from any liability for such actions.
CONSTRUCTION MANAGEMENT AGREEMENTS. In 1993, the Company entered into a
construction management agreement with Koll Construction, a wholly owned
subsidiary of The Koll Company, for demolition of bunkers at Bolsa Chica. In
1995, the Company also entered into a construction management agreement with
Koll Construction for infrastructure construction at Rancho San Pasqual. In
1996, the Company entered into a general contractor agreement with Koll
Construction in conjunction with a build-to-suit project for a third party
corporate office building in Nevada. During 1994, 1995 and 1996, the Company
incurred fees aggregating approximately $100,000, $500,000 and $1.7 million,
respectively, to Koll Construction in consideration for these services and
related reimbursements.
SERVICE AGREEMENTS. In September 1993, the Company entered into a Financing
and Accounting Services Agreement to provide The Koll Company with financing,
accounting, billing, collections and other related services until 30 days' prior
written notice of termination is given by one company to the other. Fees earned
for the years ended December 31, 1994, 1995 and 1996 were approximately
$400,000, $100,000 and $100,000, respectively.
The Company also entered into a Management Information Systems and Human
Resources Services Agreement in September 1993 with Koll Management Services,
Inc., also known as Koll Real Estate Services ("KRES"), a company approximately
14% owned by a subsidiary of The Koll Company. Under this agreement, KRES
provides computer programming, data organization and retention, record keeping,
payroll and other related services until 30 days' prior written notice of
termination is given by one company to the other. Fees and related
reimbursements incurred were approximately $200,000 for each of the years ended
December 31, 1994, 1995 and 1996.
SUBLEASE AGREEMENTS. In September 1993, the Company entered into an annual
Sublease Agreement with The Koll Company to sublease a portion of The Koll
Company affiliate's office building located in Newport Beach, California. The
Company also entered into lease agreements on a month-to-month basis, which were
terminated in 1996, for office space in Northern California and San Diego,
California with KRES. Combined lease costs on these leases were approximately
$400,000 for each of the years ended December 31, 1994, 1995 and 1996.
DEVELOPMENT FEES. For the years ended December 31, 1994, 1995 and 1996, the
Company earned fees of approximately $3.5 million, $2.7 million and $1.9
million, respectively, for real estate development and disposition services
provided to partnerships in which The Koll Company and certain directors and
officers of the Company have an ownership interest. In addition, the Company
paid $300,000 to, and received $100,000 from Koll Construction for services
provided to each other in conjunction with two separate development service
transactions for the year ended December 31, 1994. The Company paid $100,000 and
$400,000 to Koll Construction for construction services in the years ended
December 31, 1995 and 1996, respectively.
JOINT BUSINESS OPPORTUNITY AGREEMENT. The Company and The Koll Company
entered into an agreement to jointly develop business opportunities in the
Pacific Rim effective February 1, 1994. Effective
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February 1, 1995 The Koll Company assigned its interests under this agreement to
KRES. Under the terms of the agreement, the Company and KRES share on a 50% -
50% basis all costs and expenses incurred in connection with identifying and
obtaining business opportunities and will share in all revenues generated from
any such opportunities on a 50% - 50% basis. The Company's share of net loss was
$200,000, $300,000 and $100,000 for the years ended December 31, 1994, 1995 and
1996, respectively. Service contracts entered into under this agreement in 1995
included construction services from Koll Construction, for which the venture
paid $100,000 to Koll Construction for services rendered for each of the years
ended December 31, 1995 and 1996. In February 1997, KRES notified the Company
that it plans to terminate the venture effective March 5, 1997, and its interest
will be adjusted accordingly.
In March 1995, the Company and The Koll Company entered into an agreement to
jointly develop commercial development business opportunities in Mexico. Under
the terms of the agreement, the Company and The Koll Company share on a 50% -
50% basis all costs and expenses incurred in connection with identifying and
obtaining business opportunities and will share in all revenues generated from
such opportunities on a 50% - 50% basis. The Company's share of such net costs
and expenses was approximately $300,000 and $100,000 for the ten months ended
December 31, 1995 and for the year ended December 31, 1996, respectively. During
the first quarter of 1996, the Company determined that, given current economic
conditions in Mexico, it could more efficiently service opportunities in Mexico
from its offices in California and Dallas and closed its Mexico City office. The
Koll Company informed the Company that effective March 1, 1996 it would no
longer fund costs and expenses related to the pursuit of commercial development
opportunities in Mexico, and The Koll Company's interest was diluted
accordingly.
Effective April 1, 1994, the Company and KRES entered into an agreement to
combine operations in the Northwest Region in order to become a full service
real estate company in that region. This agreement was terminated effective June
30, 1996. Operating profits and losses were split on a 50% - 50% basis at the
end of each calendar year or portion thereof. The Company's share of profits was
approximately $500,000, $600,000 and $200,000 for the nine months ended December
31, 1994, the year ended December 31, 1995, and the six months ended June 30,
1996, respectively.
DIRECTOR RESIGNATION AND TERMINATION OF STOCK PLEDGE. In December of 1995,
the Company accepted pledges of all of the Common Stock and warrants convertible
into the Common Stock of the Company owned by Ms. Kathryn G. Thompson as
security against any potential construction liability which could be asserted
against the Company as a result of the 1994 acquisition by the Company of
Kathryn G. Thompson Company and in exchange for the Company releasing Ms.
Thompson from a covenant to maintain insurance with respect to such potential
liability. Ms. Thompson resigned as a director of the Company, and as an officer
of certain wholly-owned subsidiaries of the Company effective November 1, 1996.
Ms. Thompson received compensation of $300,000 during each of the years ended
December 31, 1995 and 1996, for her services rendered as an officer of these
subsidiaries. In connection with her resignation, Ms. Thompson received a
release from certain non-competition covenants and the stock pledge agreement
described above.
NOTE RECEIVABLE. In December 1994, the Company entered into a promissory
note agreement to lend up to $6 million to AV Partnership (See Note 3 to the
Audited Historic Financial Statements). The note, secured principally by an
interest in AV Partnership, bore interest on the outstanding balance at 12% per
annum. The note balance of $2 million as of December 31, 1994 was included in
other assets and was repaid along with additional advances on March 15, 1995,
the maturity date.
OTHER TRANSACTIONS. See Notes 3, 8 and 9 of the Audited Historic Financial
Statements for descriptions of other transactions and agreements with Koll,
Libra, Abex and WTI.
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MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion addressing all of the anticipated
material federal income tax consequences of the Exchange Offers and the
Prepackaged Plan. This summary is based upon laws, regulations, rulings and
decisions currently in effect, all of which are subject to change, potentially
with retroactive effect. This discussion does not address the foreign, state or
local tax consequences of the transactions to be accomplished pursuant to the
Exchange Offers or Prepackaged Plan, nor does it address the tax consequences to
taxpayers subject to special treatment under the federal income tax laws
(including dealers in securities, foreign persons, life insurance companies,
tax-exempt organizations, financial institutions and taxpayers subject to the
alternative minimum tax). The discussion below is limited to the Company and
those persons who hold the Outstanding Debentures, Preferred and Common Stock as
capital assets within the meaning of Section 1221 of the Code and who also will
hold the newly issued or reclassified/combined Common Stock as capital assets.
Securityholders should note that no rulings have been or will be sought from the
IRS with respect to any of the federal income tax consequences discussed below,
and no assurance can be given that the IRS will not take contrary positions.
DUE TO THE UNCERTAINTY CONCERNING CERTAIN OF THE TAX CONSEQUENCES OF THE
TRANSACTIONS TO BE ACCOMPLISHED PURSUANT TO THE EXCHANGE OFFERS OR THE
PREPACKAGED PLAN, AND THE POSSIBLE EFFECT A SECURITY HOLDER'S PARTICULAR
SITUATION MAY HAVE ON SUCH TAX CONSEQUENCES, HOLDERS OF OUTSTANDING DEBENTURES,
SERIES A PREFERRED STOCK, CLASS A COMMON STOCK AND ALL OTHER CLASSES OF CLAIMS
OR INTERESTS ARE ADVISED TO CONSULT WITH THEIR OWN TAX ADVISORS REGARDING THE
FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THEIR PARTICIPATION IN THE
EXCHANGE OFFERS OR THE PREPACKAGED PLAN.
FEDERAL INCOME TAX CONSEQUENCES OF THE EXCHANGE OFFERS
TO HOLDERS OF OUTSTANDING DEBENTURES
GENERAL. The exchange of Outstanding Debentures for Common Stock will
generally constitute a recapitalization. Except as discussed below under
"Accrued Interest and Discount on Outstanding Debentures," a holder generally
will not be allowed to recognize any gain or loss it may realize on the
exchange. A holder's tax basis in the Common Stock received in the exchange
will, immediately after the exchange, equal the holder's aggregate tax basis in
the Outstanding Debentures exchanged therefor (less any portion of such tax
basis which is attributable to previously unpaid interest or original issue
discount ("OID") on the Outstanding Debentures). The holding period for the
Common Stock received in the exchange will generally include the period during
which the Outstanding Debentures were held.
ACCRUED INTEREST AND ORIGINAL ISSUE DISCOUNT ON OUTSTANDING
DEBENTURES. Under Section 354(a)(2)(B) of the Code, the general rule regarding
nonrecognition of gain or loss in a recapitalization will not apply to the
portion, if any, of the Common Stock deemed to be received in exchange for
previously unpaid interest (including OID) on the Outstanding Debentures which
has accrued after the holder acquired the Outstanding Debentures. If a portion
of the Common Stock is deemed to be received in payment of accrued interest (or
OID), the amount of such interest payment should be equal to the fair market
value of such portion of the Common Stock.
The Internal Revenue Service, in a recent Technical Advice Memorandum, has
privately ruled that a holder of indebtedness is not entitled to recognize a
loss to the extent the amount of accrued but unpaid OID exceeds the amount of
OID deemed paid in a recapitalization. Although this ruling is not binding, it
represents the position the Internal Revenue Service would be expected to take
in any audit involving an analogous transaction.
As no Treasury regulation or other relevant guidance has been issued under
Section 354(a)(2)(B), it is unclear whether or to what extent the Common Stock
will be considered to be issued in payment of
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previously accrued but unpaid interest (or OID) on the Outstanding Debentures.
The legislative history of Section 354(a)(2)(B) indicates, however, that if the
Prepackaged Plan explicitly allocates the value of the Common Stock between the
principal amount of the Outstanding Debentures and accrued interest (or OID) on
the Outstanding Debentures, both the Company and the holders should utilize that
allocation for federal income tax purposes. The Prepackaged Plan provides that
the Common Stock generally will be applied first to the stated amount of the
Outstanding Debentures, with only the excess over such principal amount applied
to accrued interest (or OID). However, there can be no assurance that the
Internal Revenue Service will agree with this allocation. Consequently, holders
should consult their own tax advisors on this issue. Moreover, holders should be
aware that the resolution of this issue will affect the determination of a
holder's tax basis and holding period for the Common Stock.
SALE OR EXCHANGE OF COMMON STOCK. Generally, if Common Stock is sold or
exchanged (including in a redemption or retirement), the disposing holder will
recognize gain or loss in an amount equal to the difference between the amount
realized on the sale or exchange and the holder's tax basis in the Common Stock.
Except as provided in the recapture or market discount rules (each discussed
below), any gain or loss on the sale or exchange of Common Stock will be capital
gain or loss, provided the Common Stock is held as a capital asset. Any capital
gain or loss recognized on the sale or exchange of Common Stock will be
long-term gain or loss if the Common Stock was held for more than one year
(including the period during which the holder held Outstanding Debentures if the
Common Stock is not treated as received in payment of accrued interest or OID)
as of the time of its disposition.
Common Stock received in exchange for Outstanding Debentures will be subject
to the recapture rules of IRC Section 108(e)(7). Under this provision, when
Common Stock is sold or exchanged (including in certain nonrecognition
transactions), a portion of the gain recognized (if any) will be treated as
depreciation recapture and taxed to the holder at the rates applicable to
ordinary income.
MARKET DISCOUNT. Any gain realized on the exchange of Outstanding
Debentures, and any gain realized upon the sale or redemption of Common Stock,
may be affected by the "market discount" provisions of the Code. Market discount
is defined as the excess of a bond's "stated redemption price at maturity" over
the holder's tax basis in such bond immediately after its acquisition. The
market discount provisions generally require a holder of a bond acquired at a
market discount to recognize as ordinary interest income any gain realized on
the disposition of such bond to the extent of the "accrued market discount" on
such bond at the time of disposition. In addition, if a holder of a bond
acquired at a market discount receives a partial principal payment prior to
maturity, that payment may be treated as ordinary income to the extent of the
accrued market discount on the bond at the time the payment is received. These
rules will not apply to the extent the holder has made an election to include
market discount in income as it accrues.
The Code provides that "under regulations" (which have not yet been issued),
accrued market discount on a market discount bond is not recognized as ordinary
income at the time of the bond's disposition if the disposition occurs in a
"nonrecognition transaction," including a recapitalization. Instead, accrued
market discount on a market discount bond disposed of in a nonrecognition
transaction is converted into accrued market discount on the property received
in the transaction if that property qualifies as a market discount bond. If the
property received is not a market discount bond, accrued market discount on the
old market discount bond is treated as ordinary income on the disposition of the
property received in exchange therefor.
Under the market discount rules, holders of Outstanding Debentures with
accrued market discount may have been required to defer the deduction of a
portion of the interest on any indebtedness incurred or maintained to purchase
or carry their Outstanding Debentures. Any interest expense which has been
deferred by holders of Outstanding Debentures who participate in the exchange
may be claimed to the extent such holders recognize gain (including accrued
interest income or OID) in the exchange. The
143
<PAGE>
balance of such deferred deductions will be deductible on disposition of the
Common Stock received in the exchange.
FEDERAL INCOME TAX CONSEQUENCES OF THE EXCHANGE OFFERS OR THE PREPACKAGED
PLAN TO HOLDERS OF PREFERRED STOCK. The exchange of Preferred Stock for Common
Stock will constitute a nontaxable recapitalization. As such, holders of
Preferred Stock will not be allowed to recognize any gain or loss they may
realize on the exchange. A holder's tax basis in the Common Stock received in
the exchange will equal its basis in the Preferred Stock surrendered in exchange
therefor. The holding period for the Common Stock received in the exchange will
include the period during which the holder held the Preferred Stock surrendered
in the exchange.
FEDERAL INCOME TAX CONSEQUENCES OF THE EXCHANGE OFFERS OR THE PREPACKAGED
PLAN TO HOLDERS OF CLASS A COMMON STOCK. Holders of Class A Common Stock
immediately prior to the Exchange Offers or the Prepackaged Plan will not
recognize any income, gain or loss for federal income tax purposes as a result
of the Exchange Offers or the Prepackaged Plan.
BACKUP WITHHOLDING AND INFORMATION REPORTING. Under the "backup
withholding" provisions of federal income tax law, unless the conditions
described in the next sentence are satisfied and except in the case of certain
foreign persons, the Exchange Agent, the Company or their paying agents, as the
case may be, will be required to withhold (i) a number of shares of Common Stock
having a fair market value equal to 31 percent of the amount deemed to be
received by a tendering holder of Outstanding Debentures in exchange for accrued
interest (or OID) on the Outstanding Debentures, (ii) 31 percent of any
dividends paid on the Common Stock and, under certain circumstances, (iii) 31%
of any proceeds realized on any redemption or retirement of the Common Stock.
Backup withholding will not apply to a payment if the payee either (i) provides
his taxpayer identification number to the payor and certifies under penalties of
perjury that such number is correct (or that he is awaiting a taxpayer
identification number) and that (A) the payee has not yet been notified by the
Internal Revenue Service that he is subject to backup withholding as a result of
a failure to report all interest or dividends or (B) the Internal Revenue
Service has notified the payee that he is no longer subject to backup
withholding, or (ii) provides an adequate basis for an exemption. Therefore,
unless an exemption exists and is proved in a satisfactory manner, (i) each
tendering holder should complete and sign the Substitute Form W-9 provided in
the applicable Consent and Letter of Transmittal, and (ii) each holder of Common
Stock should, when requested, provide the Exchange Agent, the Company or their
paying agents, as the case may be, with a Form W-9 to provide the information
and certification necessary to prevent backup withholding. Backup withholding is
not an additional tax. Rather, any amount paid as backup withholding will be
creditable against the holder's income tax liability.
The Company will, where required, report to the holders of the Common Stock
and to the Internal Revenue Service the amount of any dividends paid on the
Common Stock in each calendar year and the amounts of tax withheld, if any, with
respect to such payments.
FEDERAL INCOME TAX CONSEQUENCES OF THE EXCHANGE OFFERS TO THE COMPANY;
CANCELLATION OF INDEBTEDNESS INCOME. Consummation of the Exchange Offers will
reduce the amount of the Company's outstanding indebtedness. A debtor generally
realizes income for federal income tax purposes when his debt is canceled in
exchange for an amount less than its adjusted issue price. Therefore, if the
aggregate fair market value of the Common Stock distributed to tendering holders
of the Outstanding Debentures is less than the adjusted issue price of such
Outstanding Debentures, the Company would generally recognize cancellation of
indebtedness income. Under the Code, however, income will not be recognized as a
result of a cancellation of indebtedness to the extent the amount of debt
canceled does not exceed the amount by which the debtor is insolvent. Insolvency
is defined for this purpose as the excess of the debtor's liabilities over the
fair market value of its assets immediately before the discharge of
indebtedness. The Code also provides, however, that if a debtor's insolvency
enables it to avoid recognizing income on account of a cancellation of
indebtedness, the debtor must generally reduce its tax attributes (such as net
operating
144
<PAGE>
losses and the basis of assets) by an amount equal to the amount of debt
canceled. These rules apply on an entity-by-entity basis; therefore, the
Company's subsidiaries will not be required to reduce their separate tax
attributes.
The Company does not expect to pay any current federal income taxes from any
discharge of indebtedness resulting from the Exchange Offers because the Company
believes that the total amount of indebtedness to be discharged will not exceed
the amount by which the Company is insolvent immediately before the discharge of
indebtedness plus the anticipated losses from operations in 1997. However, no
assurance can be given with respect to the accuracy of the Company's assessment.
Further, no assurance can be given that the Internal Revenue Service will agree
with this assessment. If the total amount of indebtedness canceled in the
Exchange Offers were to exceed the amount by which the Company is insolvent
immediately before the cancellation of indebtedness and projected losses from
operations in 1997, the Company may recognize income in the amount of such
excess.
Even if the Company does not recognize income due to the cancellation of
indebtedness in the Exchange Offers, its net operating losses for the current
and preceding years would be reduced and/or eliminated and other tax attributes
(such as the basis of assets) could be reduced.
LIMITATION ON NET OPERATING LOSSES. Section 382 of the Code will limit the
Company's use of its net operating losses after the Exchange Offers if the
Exchange Offers constitutes an "ownership change." An ownership change will
occur if the percentage of the Company's stock by value held by certain persons
(including creditors who exchange debt for stock) is increased by more than 50
percentage points over a three-year testing period. The Exchange Offers will
cause an ownership change. When the ownership change occurs, the Company's
annual use of its net operating losses will be limited to the value of the
Corporation's equity immediately before the ownership change multiplied by the
"long-term tax-exempt rate," which is published monthly by the Internal Revenue
Service. The long-term tax-exempt rate for ownership changes occurring in April
1997, is 5.50%.
If the Company has net unrealized built-in gains at the time of the Exchange
Offers, the Section 382 limitation which would otherwise apply to the Company
for any tax year following the Exchange Offers will be increased by the amount
of these built-in gains which existed at the date of the ownership change and
are recognized during the 5-year recognition period following the ownership
change. The overall limitation to this increase in the Section 382 limitation is
the amount of the Company's net unrealized built-in gains at the time of the
ownership change.
FEDERAL INCOME TAX CONSEQUENCES OF PREPACKAGED PLAN
Unless a corporation "elects out," an exception to the general rules of
Section 382 of the Code provides that the rules described in the preceding
paragraph will not apply if the increase in ownership occurs in a case under the
Bankruptcy Code and if the shareholders and certain "qualifying creditors" of
the corporation before such increase occurs own at least 50 percent of the
corporation's stock after such increase. When this exception to the general rule
applies, the corporation is required to reduce its net operating losses by the
amount of interest accrued on any debt exchanged for stock in the bankruptcy
proceeding during the year of the proceeding and the three prior taxable years.
To the extent the net operating losses have been reduced by this interest, the
attribute reduction of Section 108(b) does not apply. In addition, if another
ownership change occurs within two years, the corporation's use of its net
operating losses would be disallowed in its entirety.
If a corporation "elects out" of Section 382(l)(5), the general rules of
Section 382 apply. However, in determining the limitation placed on the
corporation's annual use of its net operating losses under those general rules,
Section 382(l)(6) provides that the value of the equity of the corporation
immediately before the ownership change is deemed to include the increase in the
value of the corporation's equity resulting from any surrender or cancellation
of creditors' claims in the bankruptcy proceeding.
145
<PAGE>
THE FEDERAL INCOME TAX CONSEQUENCES OF THE TRANSACTIONS CONTEMPLATED BY THE
EXCHANGE OFFERS AND THE PREPACKAGED PLAN ARE COMPLEX. THE FOREGOING SUMMARY DOES
NOT DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE RELEVANT TO A
PARTICULAR HOLDER OF OUTSTANDING DEBENTURES, SERIES A PREFERRED STOCK OR COMMON
STOCK IN LIGHT OF SUCH HOLDER'S PARTICULAR CIRCUMSTANCES AND INCOME TAX
SITUATION. EACH SUCH HOLDER SHOULD CONSULT WITH SUCH HOLDER'S TAX ADVISOR AS TO
THE SPECIFIC TAX CONSEQUENCES TO SUCH HOLDER OF THE TRANSACTIONS CONTEMPLATED BY
THE EXCHANGE OFFERS AND THE PREPACKAGED PLAN, INCLUDING THE APPLICATION AND
EFFECT OF STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon by McDermott, Will & Emery, Newport Beach, California.
EXPERTS
The financial statements of the Company as of December 31, 1995 and 1996,
and the related statements of operations, cash flows and changes in
stockholder's equity for each of the three years in the period ended December
31, 1996, have been audited by Deloitte & Touche LLP, independent auditors, as
indicated in their report dated February 18, 1997, and have been included in
this Prospectus in reliance upon such report given upon the authority of said
firm as experts in accounting and auditing.
146
<PAGE>
INDEX TO AUDITED HISTORIC FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA:
Independent Auditor's Report............................................................................. F-2
Audited Historic Financial Statements.................................................................... F-3
Notes to Audited Historic Financial Statements........................................................... F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To The Board of Directors and Stockholders
of Koll Real Estate Group, Inc.:
We have audited the accompanying balance sheets of Koll Real Estate Group,
Inc. as of December 31, 1996 and 1995, and the related statements of operations,
cash flows and changes in stockholders' equity for each of the three years in
the period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Koll Real Estate Group, Inc.
at December 31, 1996 and 1995, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.
The Company carries its real estate properties at cost, net of impairment
losses. As discussed in Note 2, the estimation process is inherently uncertain
and relies to a considerable extent on future events and market conditions. As
discussed in Note 5, the development of the Company's Bolsa Chica project is
dependent upon various governmental approvals and various economic factors.
Accordingly, the amount ultimately realized from such project may differ
materially from the current estimate of fair value.
DELOITTE & TOUCHE LLP
Costa Mesa, California
February 18, 1997
F-2
<PAGE>
KOLL REAL ESTATE GROUP, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
1995 1996
--------- ---------
DECEMBER 31,
--------------------
(IN MILLIONS)
<S> <C> <C>
ASSETS
Cash and cash equivalents...................................................................... $ 4.9 $ 2.1
Restricted cash................................................................................ 2.5 .2
Real estate held for development or sale....................................................... 28.1 25.2
Operating properties, net...................................................................... 4.8 --
Land held for development...................................................................... 220.0 223.5
Other assets................................................................................... 16.9 21.2
--------- ---------
$ 277.2 $ 272.2
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued liabilities................................................... $ 4.9 $ 11.7
Senior bank debt........................................................................... 16.6 7.1
Project debt............................................................................... -- 12.5
Subordinated debentures.................................................................... 173.2 195.9
Other liabilities.......................................................................... 52.9 43.9
--------- ---------
Total liabilities........................................................................ 247.6 271.1
--------- ---------
Commitments and Contingencies
Stockholders' equity:
Series A (convertible redeemable nonvoting) Preferred Stock--$.01 par value; 42,505,504
shares authorized; 40,290,735 and 38,886,626 shares outstanding, respectively............ .4 .4
Class A (voting) Common Stock--$.05 par value; 625,000,000 shares authorized; 47,534,472
and 48,938,543 shares outstanding, respectively.......................................... 2.4 2.4
Class B (convertible nonvoting) Common Stock--$.05 par value; 25,000,000 shares authorized
and no shares outstanding................................................................ -- --
Capital in excess of par value............................................................. 229.9 229.2
Deferred proceeds from stock issuance...................................................... (1.1) (.4)
Minimum pension liability.................................................................. (1.0) (.6)
Accumulated deficit........................................................................ (201.0) (229.9)
--------- ---------
Total stockholders' equity............................................................... 29.6 1.1
--------- ---------
$ 277.2 $ 272.2
--------- ---------
--------- ---------
</TABLE>
See the accompanying notes to financial statements.
F-3
<PAGE>
KOLL REAL ESTATE GROUP, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-------------------------------
1994 1995 1996
--------- --------- ---------
(IN MILLIONS EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
Revenues:
Asset sales........................................................................ $ 11.1 $ 23.5 $ 33.6
Operations......................................................................... 10.3 10.5 11.2
--------- --------- ---------
21.4 34.0 44.8
--------- --------- ---------
Costs of:
Asset sales........................................................................ 10.7 21.6 30.2
Operations......................................................................... 9.5 10.3 10.0
--------- --------- ---------
20.2 31.9 40.2
--------- --------- ---------
Gross operating margin............................................................... 1.2 2.1 4.6
General and administrative expenses.................................................. 8.7 7.7 9.6
Interest expense..................................................................... 19.4 22.6 24.9
Write-down of real estate properties................................................. -- 121.1 --
Other expense (income), net.......................................................... 2.1 3.1 (1.1)
--------- --------- ---------
Loss from continuing operations before income taxes.................................. (29.0) (152.4) (28.8)
Provision (benefit) for income taxes................................................. (10.3) (35.5) .1
--------- --------- ---------
Loss from continuing operations...................................................... (18.7) (116.9) (28.9)
Discontinued operations:
Gain on disposition, net of income taxes of $.3.................................... .7 -- --
--------- --------- ---------
Net loss............................................................................. $ (18.0) $ (116.9) $ (28.9)
--------- --------- ---------
--------- --------- ---------
Earnings (loss) per common share:
Continuing operations.............................................................. $ (0.43) $ (2.48) $ (.60)
Discontinued operations............................................................ 0.02 -- --
--------- --------- ---------
Net loss per common share............................................................ $ (0.41) $ (2.48) $ (.60)
--------- --------- ---------
--------- --------- ---------
</TABLE>
See the accompanying notes to financial statements.
F-4
<PAGE>
KOLL REAL ESTATE GROUP, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-------------------------------
1994 1995 1996
--------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss........................................................................... $ (18.0) $ (116.9) $ (28.9)
Adjustments to reconcile net loss to cash used by operating activities:
Depreciation and amortization.................................................... 1.2 1.2 1.2
Non-cash interest expense........................................................ 18.0 20.5 23.2
Write-down of real estate properties............................................. -- 121.1 --
Gains on asset sales............................................................. (.4) (1.9) (3.4)
Gains on dispositions of discontinued operations................................. (.7) -- --
Proceeds from asset sales, net................................................... 10.5 22.5 31.5
Investments in real estate held for development or sale.......................... (6.1) (18.2) (20.4)
Investment in land held for development.......................................... (9.9) (7.8) (3.5)
Decrease (increase) in other assets.............................................. (.6) 11.9 (5.5)
Decrease in accounts payable, accrued and other liabilities...................... (9.7) (61.8) (2.7)
Other, net....................................................................... (.1) -- .4
--------- --------- ---------
Cash used by operating activities.............................................. (15.8) (29.4) (8.1)
--------- --------- ---------
Cash flows from investing activities:
Sale of short-term investments..................................................... 21.7 -- --
Proceeds from disposition of discontinued operation................................ 1.0 -- --
Acquisitions....................................................................... (1.2) (.3) --
--------- --------- ---------
Cash provided (used) by investing activities................................... 21.5 (.3) --
--------- --------- ---------
Cash flows from financing activities:
Borrowings of senior bank debt..................................................... -- 21.6 8.7
Repayments of senior bank debt..................................................... (7.0) (5.0) (18.2)
Borrowings of project debt......................................................... -- -- 12.5
Use of restricted cash............................................................. -- 10.0 2.3
Deposits of restricted cash........................................................ (7.5) (5.0) --
--------- --------- ---------
Cash provided (used) by financing activities................................... (14.5) 21.6 5.3
--------- --------- ---------
Net decrease in cash and cash equivalents............................................ (8.8) (8.1) (2.8)
Cash and cash equivalents--beginning of year......................................... 21.8 13.0 4.9
--------- --------- ---------
Cash and cash equivalents--end of year............................................... $ 13.0 $ 4.9 $ 2.1
--------- --------- ---------
--------- --------- ---------
</TABLE>
See the accompanying notes to financial statements.
F-5
<PAGE>
KOLL REAL ESTATE GROUP, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE YEARS ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
DEFERRED
CAPITAL PROCEEDS
IN EXCESS FROM MINIMUM
PREFERRED COMMON OF PAR STOCK PENSION ACCUMULATED
STOCK STOCK VALUE ISSUANCE LIABILITY DEFICIT TOTAL
-------- -------- --------- --------- --------- ------------- ------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance January 1, 1994............ $ .4 $ 2.2 $ 230.0 $ (1.5) $ (1.5) $ (66.1) $163.5
Net Loss......................... -- -- -- -- -- (18.0) (18.0)
Minimum pension liability........ -- -- -- -- (.5) -- (.5)
Valuation adjustment to deferred
proceeds from stock issuance... -- -- .1 (.1) -- -- --
Issuance of stock related to
acquisition.................... -- .1 .4 -- -- -- .5
--- --- --------- --------- --------- ------------- ------
Balance December 31, 1994.......... .4 2.3 230.5 (1.6) (2.0) (84.1) 145.5
Net loss......................... -- -- -- -- -- (116.9) (116.9)
Minimum pension liability........ -- -- -- -- 1.0 -- 1.0
Valuation adjustment to deferred
proceeds from stock issuance... -- -- (.5) .5 -- -- --
Conversion of preferred to
common......................... -- .1 (.1) -- -- -- --
--- --- --------- --------- --------- ------------- ------
Balance December 31, 1995.......... .4 2.4 229.9 (1.1) (1.0) (201.0) 29.6
Net loss......................... -- -- -- -- -- (28.9) (28.9)
Minimum pension liability........ -- -- -- -- .4 -- .4
Valuation adjustment to deferred
proceeds from stock issuance... -- -- (.7) .7 -- -- --
--- --- --------- --------- --------- ------------- ------
Balance December 31, 1996.......... $ .4 $ 2.4 $ 229.2 $ (.4) $ (.6) $ (229.9) $ 1.1
--- --- --------- --------- --------- ------------- ------
--- --- --------- --------- --------- ------------- ------
</TABLE>
See the accompanying notes to financial statements.
F-6
<PAGE>
KOLL REAL ESTATE GROUP, INC.
NOTES TO AUDITED HISTORIC FINANCIAL STATEMENTS
NOTE 1--FORMATION AND BASIS OF PRESENTATION
The principal activities of Koll Real Estate Group, Inc. and its
consolidated subsidiaries (the "Company", formerly known as The Bolsa Chica
Company and Henley Properties Inc.) include: (i) obtaining zoning and other
entitlements for land it owns and improving the land for residential
development; (ii) single and multi-family residential construction in Southern
California; and (iii) providing commercial, industrial, retail and residential
real estate development services to third parties, including feasibility
studies, entitlement coordination, project planning, construction management,
financing, marketing, acquisition, disposition and asset management services on
a national and international basis, through its offices throughout California,
and in Dallas, Phoenix, Seattle, Shanghai, China and Taipei, Taiwan. Once the
residential land owned by the Company is entitled, the Company may sell
unimproved land to other developers or investors; sell improved land to
homebuilders; or participate in joint ventures with other developers, investors
or homebuilders to finance and construct infrastructure and homes.
On December 31, 1989, The Henley Group, Inc. separated its business into two
public companies through a distribution to its Class A and Class B common
stockholders of all of the common stock of a newly formed Delaware corporation
to which The Henley Group, Inc. had contributed its non-real estate development
operations, assets and related liabilities. The new company was named The Henley
Group, Inc. ("Henley Group") immediately following the distribution. The
remaining company was renamed Henley Properties Inc. ("Henley Properties") and
consisted of the real estate development business and assets of Henley Group,
including its subsidiary Signal Landmark.
On July 16, 1992, a subsidiary of Henley Properties merged with and into
Henley Group (the "Merger") and Henley Group became a wholly owned subsidiary of
Henley Properties. In the Merger, Henley Properties, through its Henley Group
subsidiary, received net assets having a book value as of July 16, 1992 of
approximately $45.3 million, consisting of approximately $103.6 million of
assets, including $58.3 million of cash and a 44% interest in Deltec Panamerica
S.A. ("Deltec"), and $58.3 million of liabilities. In connection with the
Merger, Henley Properties was renamed The Bolsa Chica Company.
On September 30, 1993, a subsidiary of The Bolsa Chica Company acquired the
domestic real estate development business and related assets of The Koll
Company. In connection with this acquisition, The Bolsa Chica Company was
renamed Koll Real Estate Group, Inc.
The accompanying financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated. Certain amounts have been reclassified to
conform with the current year presentation.
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid instruments with a maturity of three
months or less when purchased to be cash equivalents.
REAL ESTATE
Real estate held for development and land held for development (real estate
properties) are carried at cost net of impairment losses based on undiscounted
cash flows. Real estate held for sale is carried at cost, net of impairment
losses and selling costs based on undiscounted cash flows. The estimation
process involved in the determination of fair value is inherently uncertain
since it requires estimates as to future
F-7
<PAGE>
KOLL REAL ESTATE GROUP, INC.
NOTES TO AUDITED HISTORIC FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
events and market conditions. Such estimation process assumes the Company's
ability to complete development and dispose of its real estate properties in the
ordinary course of business based on management's present plans and intentions.
Economic, market, environmental and political conditions may affect management's
development and marketing plans. In addition, the implementation of such
development and marketing plans could be affected by the availability of future
financing for development and construction activities. Accordingly, the ultimate
fair values of the Company's real estate properties are dependent upon future
economic and market conditions, the availability of financing, and the
resolution of political, environmental and other related issues.
In March 1995, the Financial Accounting Standards Board issued Statement No.
121 "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to
be Disposed of" ("SFAS 121"), which requires an impaired asset (real property or
intangible) to be written down to fair value. If an impairment occurs, the fair
value of an asset for purposes of SFAS 121 is deemed to be the amount a willing
buyer would pay a willing seller for such asset in a current transaction. As
required, the Company adopted SFAS 121 during the quarter ended March 31, 1996
which did not have any effect on its financial statements. The Company is
currently implementing an Exchange Offer to deleverage its capital structure as
discussed in Note 6. Under the Exchange Offer as proposed, no revaluation of
real estate properties would be required based on undiscounted cash flows. If an
alternative recapitalization is implemented by the Company pursuant to Court
confirmation of a Prepackaged Plan of reorganization, the Company would apply
the principles required by the American Institute of Certified Public
Accountant's Statement of Position 90-7, "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code" ("Fresh Start Accounting") and the
carrying value of real estate properties would be adjusted to fair value.
The cost of sales of multi-unit projects is generally computed using the
relative sales value method, with direct construction costs and property taxes
accumulated by phase, using the specific identification method. Interest cost is
capitalized to real estate projects during their development and construction
period.
Operating properties are generally depreciated utilizing the straight-line
method over estimated lives ranging principally from 5 to 7 years. Accumulated
depreciation amounted to $1.1 million and $1.0 million at December 31, 1995 and
1996, respectively.
INTANGIBLE ASSETS
Goodwill, which represents the difference between the purchase price of a
business acquired in 1993 and the related fair value of net assets acquired, is
amortized on a straight-line basis over 15 years. Goodwill of $7.9 million and
$7.3 million as of December 31, 1995, and 1996, respectively, is included in
other assets. The carrying value of goodwill is reviewed periodically based on
projected cash flows to be received from related operations over the remaining
amortization period of the goodwill. If such projected cash flows were less than
the carrying value of the goodwill, the difference would be charged to
operations.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company accounted for the cost of post-retirement benefits other than
pensions, which are primarily health care related, during each employee's active
working career under a plan which was frozen in 1993. As of December 31, 1995,
and 1996, the accrued unfunded costs totaled $1.3 million and $.9 million,
respectively.
F-8
<PAGE>
KOLL REAL ESTATE GROUP, INC.
NOTES TO AUDITED HISTORIC FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
The Company accounts for income taxes on the liability method. Deferred
income taxes are determined based on the difference between the financial
statement and tax bases of assets and liabilities, using enacted tax rates in
effect in the years in which these differences are expected to reverse.
RECOGNITION OF REVENUES
Sales are recorded using the full accrual method when title to the real
estate sold is passed to the buyer and the buyer has made an adequate financial
commitment. When it is determined that the earning process is not complete,
income is deferred using the installment, cost recovery or percentage of
completion methods of accounting.
ACCOUNTING FOR STOCK-BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," ("SFAS 123") which required the Company to adopt disclosure
provisions for stock-based compensation effective January 1, 1996. The standard
defines a fair value method of accounting for stock options and other equity
instruments. Under the fair value method, compensation is measured at the grant
date based on the fair value of the award and is recognized over the service
period, which is usually the vesting period. This standard encourages rather
than requires adoption of the fair value method of accounting for employee
stock-based transactions. Companies are permitted to continue to account for
such transactions under Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees," but will be required to disclose in
a note to the financial statements pro forma net income and net income per share
as if the new method of accounting had been applied. The Company has elected to
continue to apply APB Opinion No. 25 in its financial statements and no pro
forma disclosure was required as of and for the year ended December 31, 1996.
EARNINGS PER COMMON SHARE
The weighted average numbers of common shares outstanding for the years
ended December 31, 1994, 1995 and 1996 were 43.8 million, 47.1 million, and 48.3
million, respectively. The Series A Preferred Stock, as well as outstanding
stock options are not included in the loss per share calculation for each year
because the effect is antidilutive. The earnings per share calculations include
the effect of 2.0 million shares of Class A Common Stock issued on November 9,
1994, in connection with the acquisition of the Kathryn G. Thompson Company
(Note 3). The 1994, 1995 and 1996 earnings per share calculations reflect the
conversion of 1.2 million shares, an additional 1.0 million shares, and an
additional 1.4 million shares, respectively, of Series A Preferred Stock to an
equal number of shares of Class A Common Stock.
NOTE 3--ACQUISITIONS AND DISPOSITIONS
In November 1994, the Company acquired the stock of Kathryn G. Thompson
Company ("KGTC") and related assets. The principal activities of the acquired
business are residential real estate development and homebuilding, focusing on
the entry-level and first time move-up market segments. The principal project of
the acquired business is a 49% general partnership interest in a 230-acre
project planned for approximately 1,200 residential units in Aliso Viejo in
southern Orange County ("AV Partnership"). In connection with the acquisition,
the Company paid $1.2 million in cash and a $.5 million note, issued 2
F-9
<PAGE>
KOLL REAL ESTATE GROUP, INC.
NOTES TO AUDITED HISTORIC FINANCIAL STATEMENTS (CONTINUED)
NOTE 3--ACQUISITIONS AND DISPOSITIONS (CONTINUED)
million shares of Class A Common Stock and warrants to purchase an additional 2
million shares. The Company guaranteed approximately $4.8 million of capital
contribution notes related to the Aliso Viejo partnership interest, which notes
are primarily payable out of positive net cash flow to be generated by the
partnership interest and are not due until the earlier of the completion of the
project or April 1999. In addition, in November 1994, Ms. Kathryn G. Thompson,
who was appointed as a director of the Company, entered into a covenant not to
compete with the Company with respect to real estate development, subject to
certain limited exceptions. Ms. Thompson resigned as an officer and director of
the Company effective November 1, 1996. In conjunction with her resignation, the
covenant of Ms. Thompson was released.
Summarized financial information of AV Partnership is presented below at
December 31, 1995 and 1996 and for the years then ended (in millions):
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Balance Sheet Data:
Total assets........................................................ $ 111.9 $ 102.5
Total project debt and other liabilities............................ 107.9 110.5
----------- -----------
Partners' capital................................................... $ 4.0 $ (8.0)
----------- -----------
----------- -----------
Statement of Operations Data:
Revenues............................................................ $ -- $ 44.3
Expenses............................................................ (4.1) (55.3)
----------- -----------
Net loss............................................................ $ (4.1) $ (11.0)
----------- -----------
----------- -----------
</TABLE>
The Company uses the equity method to account for its investment in AV
Partnership and accordingly, the statement of operations includes a $.1 million
loss for the period from the acquisition date through December 31, 1994, and
losses of $2.0 million and $1.2 million, respectively, for the years ended
December 31, 1995 and 1996. The loss recorded in 1996 reflects accrued interest
on guaranteed capital contribution notes only, as the Company's net investment
is $0 and the recorded liability reflects the Company's guaranty of capital
contribution notes due to the partnership discussed below. Due to a significant
shortfall in sales during 1995 versus forecast, the financial structure of the
partnership and the significant amount of participating mortgages with
preference to the Company's equity interest, the Company does not expect to
receive a financial return from this partnership and in 1995 reserved for its
guaranty of $4.8 million of capital contribution notes. The liability relating
to the guaranteed capital contribution notes, including accrued interest, for
this partnership of $4.8 million and $6.0 million at December 31, 1995 and 1996,
respectively, are included in other liabilities.
In December 1993, the Company completed a transaction with Libra whereby it
exchanged the Company's Lake Superior Land Company subsidiary for approximately
$42.4 million in aggregate face amount of Senior Subordinated Debentures held by
Libra, and net cash proceeds to be generated by Libra's periodic sale of up to
approximately 3.4 million shares of the Company's Class A Common Stock held by
Libra through a series of transactions to be effected in an orderly manner. The
Company also completed a separate transaction with Libra in December 1993,
whereby the Company exchanged approximately 3.4 million newly issued shares of
its Class A Common Stock for approximately $10.6 million in aggregate face
amount of Subordinated Debentures held by Libra. The shares issued to Libra were
deposited in a custodial account for periodic sale in accordance with
instructions from the Company. In
F-10
<PAGE>
KOLL REAL ESTATE GROUP, INC.
NOTES TO AUDITED HISTORIC FINANCIAL STATEMENTS (CONTINUED)
NOTE 3--ACQUISITIONS AND DISPOSITIONS (CONTINUED)
February 1994, the Company received $1 million in cash from Libra in exchange
for the immediate termination of a contingent payment provision of the December
1993 transaction with Libra.
NOTE 4--REAL ESTATE HELD FOR DEVELOPMENT OR SALE
Real estate held for development or sale consists of the following at
December 31 (in millions):
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Residential.................................................................. $ 26.3 $ 12.4
Commercial/industrial........................................................ 1.8 12.8
--------- ---------
$ 28.1 $ 25.2
--------- ---------
--------- ---------
</TABLE>
NOTE 5--LAND HELD FOR DEVELOPMENT
Following completion of the Company's sale of approximately 880 lowland
acres of its Bolsa Chica property to the State of California on February 14,
1997 as described below, land held for development consists of approximately 310
acres located in Orange County, California, adjacent to the Pacific Ocean,
surrounded by the City of Huntington Beach and approximately 35 miles south of
downtown Los Angeles ("Bolsa Chica").
The planned community at Bolsa Chica is expected to offer a broad mix of
home choices, including single-family homes, townhomes and condominiums at a
wide range of prices. In December 1994, the Orange County Board of Supervisors
unanimously approved a Local Coastal Program ("LCP") for up to 3,300 units of
residential development and a wetlands restoration plan for this property. The
3,300-unit LCP provides for development of up to 2,500 homes on the mesa (high
ground) portion of the property and up to 900 homes on the lowland portion of
the property, not to exceed 3,300 homes in the aggregate. The related
Development Agreement was unanimously approved by the Orange County Board of
Supervisors in April 1995. The California Coastal Commission approved the LCP in
January 1996 subject to suggested modifications. These suggested modifications
were approved by the Orange County Board of Supervisors in June 1996, and on
July 11, 1996 the California Coastal Commission certified the LCP for the
Company's Bolsa Chica property.
On February 14, 1997, the Company completed the sale of approximately 880
lowland acres owned by the Company at Bolsa Chica to the California State Lands
Commission for $25 million and will, therefore, forego opportunities to develop
900 homes in the lowland. Under an interagency agreement among various state and
federal agencies, these agencies have agreed to restore the Bolsa Chica lowlands
utilizing escrowed funds from the Ports of Los Angeles and Long Beach. A reserve
of $1.5 million has been included in other liabilities as of December 31, 1996,
with respect to potential costs payable by the Company under agreements
negotiated with the State Lands Commission and certain oil field operators
regarding environmental clean-up at the Bolsa Chica lowlands. In connection with
the lowlands sale, the Company paid $833,333 of these costs at closing, leaving
a reserve balance of $700,000 on its financial statements for potential
additional clean-up costs.
The Company is now pursuing the secondary permitting process for the mesa
through the County of Orange in order to implement the approved development plan
for up to 2,500 homes. This process is currently expected to be completed in the
fourth quarter of 1997. The Company expects, subject to its ability to obtain
financing on a commercially reasonable and timely basis, and subject to
obtaining the
F-11
<PAGE>
KOLL REAL ESTATE GROUP, INC.
NOTES TO AUDITED HISTORIC FINANCIAL STATEMENTS (CONTINUED)
NOTE 5--LAND HELD FOR DEVELOPMENT (CONTINUED)
secondary permits, to commence infrastructure construction on the mesa in the
fourth quarter of 1997. However, due to certain factors beyond the Company's
control, including possible objections of various environmental and so-called
public interest groups that may be made in legislative, administrative or
judicial forums, the start of construction could be delayed. In this regard, on
January 13, 1995, two lawsuits challenging the Orange County Board of
Supervisors' approval of the Bolsa Chica project were filed in Orange County
Superior Court (the "Court"). Although the lawsuits differed in the particular
issues they raised, generally they each alleged, among other things, violations
of the California Environmental Quality Act and violations of the California
Government Code planning and zoning laws. One lawsuit, which was brought by the
school districts, has been settled with an agreement regarding school fees to be
paid to the plaintiff districts. In the other "environmental lawsuit", the
plaintiffs did not seek monetary damages, but instead asked the Court to set
aside the approval of the Bolsa Chica project. In February 1996, the Court ruled
on the "environmental lawsuit", rejecting all but one of the arguments, and
requiring an additional 45-day public review and comment period regarding the
tidal inlet portion of the wetlands restoration plan, which was completed in the
second quarter of 1996. The County reapproved the plan without change in June
1996. On January 24, 1997 this lawsuit was dismissed by the Court. In filing the
judgement, the Court ruled that the County had fulfilled all requirements for
approval of the Bolsa Chica development plans, without the Court requiring any
change to the plans.
In addition, on March 6, 1996 and March 11, 1996 two lawsuits were filed
against the Coastal Commission, the Company and other Bolsa Chica landowners as
real parties in interest, alleging that the Coastal Commission's approval of the
LCP is not in compliance with the Coastal Act and other statutory requirements.
These lawsuits seek to set aside the approval of the Bolsa Chica project, and
are currently scheduled to be tried in April 1997. Given the recent sale of the
Bolsa Chica lowlands described above, the primary issues which were the subject
of this litigation have been eliminated. Furthermore, the plaintiffs in one of
these lawsuits have informed the Company that given the sale of the lowlands,
they will work with the Company in an effort to resolve the remaining issues of
their lawsuit. The Company believes that the remaining litigation issues which
challenge development of the Bolsa Chica mesa are without merit. Furthermore,
the Company does not believe that these lawsuits will be successful in
permanently preventing the Company from completing the Bolsa Chica project,
however, there can be no assurance in this regard or that these suits will not
result in delays.
In 1995, in accordance with Statement of Financial Accounting Standard No.
67, "Accounting for Costs and Initial Rental Operations of Real Estate Projects"
("SFAS 67"), the Company carried real estate properties, including Bolsa Chica,
at the lower of cost or net realizable value, with net realizable value defined
as the undiscounted estimated future cash flows from the project. As of December
31, 1995, the Company's review of the current estimated cash flows for Bolsa
Chica indicated that a reserve of approximately $113.6 million was required to
adjust the carrying value of Bolsa Chica to its then estimated net realizable
value of $220 million pursuant to SFAS 67. The valuation reserve primarily
reflects management's decision in the fourth quarter of 1995 (following the
approval of additional funding by the Ports) to make completing the sale of the
lowlands to a government agency a strategic goal of the Company, along with
updated estimates of future cash flows for the mesa portion of the project
reflecting recent market conditions. During 1995, the Southern California
residential real estate market continued to decline, affecting estimated sale
pricing, housing mix and number of units planned. The Company's decision in 1995
to pursue a sale of the lowlands was expected to, and subsequently has, resulted
in the elimination of up to 900 units previously planned in the lowlands, which,
in turn, resulted in a significant reduction as of December 31, 1995 in
projected future cash flows previously anticipated from the Bolsa
F-12
<PAGE>
KOLL REAL ESTATE GROUP, INC.
NOTES TO AUDITED HISTORIC FINANCIAL STATEMENTS (CONTINUED)
NOTE 5--LAND HELD FOR DEVELOPMENT (CONTINUED)
Chica project. Realization of the Company's investment in Bolsa Chica will also
depend upon various economic factors, including the demand for residential
housing in the Southern California market and the availability of credit to the
Company and to the housing industry.
NOTE 6--DEBT
SENIOR BANK DEBT
In December 1994, the Company entered into a letter of credit and
reimbursement agreement with Nomura Asset Capital Corporation ("Nomura") to fund
payment of the settlement of the Abex litigation in excess of $7.5 million to be
funded by the Company. In February 1995, the Company paid an aggregate of $22
million to settle the litigation, of which $15.5 million was funded by
borrowings under the letter of credit and reimbursement agreement and the
balance of $6.5 million from restricted cash. Since this financing agreement was
solely for the purpose described above, no additional funds are available under
this facility. The Company repaid $8.4 million of such borrowings during 1996.
In December 1994, the Company also entered into a construction loan agreement
with Nomura to partially fund infrastructure construction at Rancho San Pasqual,
the Company's golf/residential property in San Diego County. The Company
borrowed $1.3 million and $8.7 million during 1995 and 1996, respectively, under
this loan agreement. As required under the construction loan agreement, the
Company deposited $5 million into an escrow account in January 1995 to be used
solely for the funding of infrastructure construction costs at Rancho San
Pasqual, of which $2.5 million was included in restricted cash on December 31,
1995. The Company repaid $.2 million and $9.8 million of borrowings under the
construction loan agreement during 1995 and 1996, respectively.
The remaining borrowings outstanding as of December 31, 1996 under the
letter of credit and reimbursement agreement were principally secured by a deed
of trust on Rancho San Pasqual and a pledge and security interest in the
Company's interest in Fairbanks Highlands, LLC, a joint venture with Taylor
Woodrow Homes, Inc. formed on December 6, 1996, along with a pledge of the stock
of Signal Bolsa Corporation. Amounts outstanding under the letter of credit and
reimbursement agreement bear interest at 30 Day LIBOR plus 4%, which was 9.69%
as of December 31, 1996. The agreements initially required principal prepayments
equal to 80% of the net proceeds from any sales at Rancho San Pasqual, Fairbanks
Highlands, and principal prepayments equal to 50% of the net proceeds from
Rancho San Pasqual assessment district reimbursements. After March 12, 1996, the
agreements require principal repayments equal to 90% of the net proceeds from
any sales at Rancho San Pasqual, Fairbanks Highlands and Bolsa Chica. The
agreements contain certain restrictive covenants that limit, among other things,
(i) the incurrence of indebtedness, (ii) the making of investments and (iii) the
creation or incurrence of liens on existing and future assets of the Company.
The agreements also contain various financial covenants and events of default
customary for such agreements. In December 1996, the Company exercised its
option to extend the initial maturity date under the loans from December 20,
1996 to December 22, 1997. On February 18, 1997 the outstanding Nomura loan
balance was fully repaid with a portion of the proceeds from the sale of the
Bolsa Chica lowlands and the loan agreements were terminated.
In December 1994, the Company entered into a $6.5 million construction loan
agreement with the Bank of Boston, principally secured by resort and residential
property in New Hampshire ("Wentworth"). The Company borrowed $4.8 million under
this loan agreement and applied $4.2 million in proceeds from sales of
residential homes from Wentworth to satisfy required prepayments, resulting in
an outstanding balance of $.6 million on November 2, 1995, when the Company sold
all of its interest in the Wentworth
F-13
<PAGE>
KOLL REAL ESTATE GROUP, INC.
NOTES TO AUDITED HISTORIC FINANCIAL STATEMENTS (CONTINUED)
NOTE 6--DEBT (CONTINUED)
residential land to its development manager for $4.1 million in cash plus the
buyer's prepayment of the outstanding balance under the Bank of Boston credit
agreement, which terminated this credit facility.
PROJECT DEBT
During 1996, the Company entered into several contracts to develop and
construct commercial properties on a build-to-suit basis. Subsidiaries of the
Company have entered into three construction loan agreements aggregating $31.9
million, which have been guaranteed by the parent, to finance these projects. As
of December 31, 1996, a total of $12.5 million was drawn and $19.4 million was
available under these construction loan agreements. The loans bear interest at
prime plus .75% or 30-day LIBOR +2% and have maturity dates between June and
August 1997.
In addition, as of December 31, 1996, one development project is owned by an
unconsolidated partnership in which a subsidiary of the Company is the general
partner. The partnership has entered into a construction loan agreement for $3.5
million, which has also been guaranteed by the parent. Under this construction
loan agreement, $1.3 million was drawn and $2.2 million was available as of
December 31, 1996.
SUBORDINATED DEBENTURES
Immediately prior to the July 1992 Merger, Henley Group distributed to its
stockholders among other consideration (the "Distribution"), in respect of each
share of its outstanding common stock (the "Henley Group Common Stock"): (i)
$6.00 aggregate principal amount of the Company's 12% Senior Subordinated
Pay-In-Kind Debentures due March 15, 2002 (the "Senior Subordinated
Debentures"); and (ii) $1.50 aggregate principal amount of the 12% Subordinated
Pay-In-Kind Debentures due March 15, 2002 (the "Subordinated Debentures", and
together with the Senior Subordinated Debentures, the "Debentures").
Approximately $159.4 million aggregate principal amount of the Debentures were
distributed in the Distribution and approximately $43.8 million aggregate
principal amount of the Debentures were retained by the Company's Henley Group
subsidiary in the Merger.
The Debentures were comprised of the following as of December 31 (in
millions):
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Senior Subordinated Debentures............................................. $ 138.2 $ 155.3
Subordinated Debentures.................................................... 34.6 38.8
--------- ---------
Total face amount........................................................ 172.8 194.1
Less unamortized discount.................................................. (5.6) (5.0)
Plus accrued interest...................................................... 6.0 6.8
--------- ---------
$ 173.2 $ 195.9
--------- ---------
--------- ---------
</TABLE>
The Debentures give the Company the right to pay interest in-kind, in cash
or, subject to certain conditions, in the Company's common stock. It is
currently anticipated that interest on the Debentures will be paid in-kind. The
Debentures, which are due March 15, 2002, do not require any sinking fund
payments and may be redeemed by the Company at any time in cash only, or at
maturity in cash or stock, subject to certain conditions. The Debentures
prohibit the payment of any dividends or other distributions on the Company's
equity securities.
F-14
<PAGE>
KOLL REAL ESTATE GROUP, INC.
NOTES TO AUDITED HISTORIC FINANCIAL STATEMENTS (CONTINUED)
NOTE 6--DEBT (CONTINUED)
In November 1996, representatives of certain holders of the Debentures
indicated to the Company that they intend to support a de-leveraging of the
Company's capital structure through a voluntary exchange of the Debentures for
equity (the "Exchange Offer"). Under the proposed Exchange Offer,
Senior-Subordinated holders and Subordinated holders would, subject to the
successful completion of the Exchange Offer, receive 56 shares and 28 shares,
respectively, (after consolidation of the preferred and common stock and the
proposed reverse split discussed below) for each $1,000 of principal amount
outstanding as of March 15, 1997, after taking into account the next scheduled
"in-kind" interest payment. The solicitation of Debentureholders, as well as
stockholder approval, will not commence until the Securities and Exchange
Commission ("SEC") completes its review of a registration statement to be filed
by the Company with the SEC in February 1997, and the entire
solicitation/exchange offer process is not expected to be completed prior to
June 1997.
A 100% acceptance rate for the Exchange Offer would result in 90% of the
Company's equity, in the form of newly issued shares of common stock, being held
by the Debentureholders (approximately 80% by Senior-Subordinated and 10% by
Subordinated). The remaining 10% of the Company's equity would be owned, in the
aggregate, by current preferred and common stockholders (approximately 5.8% by
preferred stockholders and 4.2% by common stockholders). A condition to closing
the Exchange Offer will be that a minimum of 90% of the of the face amount
outstanding of the Debentures are tendered to the Company. The Company expects
to solicit the consent of its common and preferred stockholders to the Exchange
Offer and to the consolidation of the preferred and common stock into a single
class of common stock, through the issuance of 1.75 shares of Common Stock for
each outstanding share of Preferred Stock. In addition, all stockholders will be
asked to approve a one for one hundred (1:100) reverse stock split, and the
common stockholders will be asked to elect six new directors who have been
nominated by a committee of the Debentureholders and to elect four of the
Company's existing directors to be nominated by the Company.
At December 31, 1996 the estimated aggregate fair value of the Company's
Debentures was within a range of approximately $105 million to $115 million
based on quotes from certain bond traders making a market in the Debentures.
However, due to the low trading volume and illiquid market for the Debentures,
such quotes may not be meaningful indications of value. The carrying amount for
all other debt of the Company approximates market primarily as a result of
floating interest rates.
INTEREST
The Company made cash payments for interest on senior bank debt of $1.4
million, $1.4 million and $1.5 million for the years ended December 31, 1994,
1995 and 1996, respectively.
F-15
<PAGE>
KOLL REAL ESTATE GROUP, INC.
NOTES TO AUDITED HISTORIC FINANCIAL STATEMENTS (CONTINUED)
NOTE 7--OTHER LIABILITIES
Other liabilities were comprised of the following as of December 31 (in
millions):
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Net deferred tax liabilities (Note 8)........................................ $ 10.0 $ 10.0
Other tax liabilities (Note 8)............................................... 4.5 4.5
Accrued pensions and benefits................................................ 10.7 5.6
Guaranty of capital contribution notes....................................... 4.8 6.0
Accrued indemnity obligations................................................ 18.7 17.8
Majority interest and other liabilities of consolidated partnership.......... 4.2 --
--------- ---------
$ 52.9 $ 43.9
--------- ---------
--------- ---------
</TABLE>
During 1996, the Company terminated certain group annuity contracts for the
pension plan of a discontinued operation, and experienced favorable investment
returns on pension assets, resulting in a significant decrease in accrued
pensions and benefits.
NOTE 8--INCOME TAXES
The tax effects of items that gave rise to significant portions of the
deferred tax accounts are as follows for the years ended December 31 (in
millions):
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Deferred tax assets:
Real estate held for development or sale and operating properties
(due to asset revaluations and interest capitalized for tax
purposes).......................................................... $ 33.4 $ 13.8
Accruals not deductible until paid................................... 6.6 6.1
Net operating loss carryforwards..................................... 64.7 94.1
Other................................................................ 1.7 .4
Valuation allowance.................................................. (59.2) (71.3)
--------- ---------
$ 47.2 $ 43.1
--------- ---------
--------- ---------
Deferred tax liabilities:
Land held for development, (principally due to accounting for a prior
business combination, partially offset by the asset revaluation in
1995)................................................................ $ 55.0 $ 51.2
Other................................................................ 2.2 1.9
--------- ---------
$ 57.2 $ 53.1
--------- ---------
--------- ---------
</TABLE>
Net deferred tax liabilities at December 31, 1996 are comprised entirely of
state net deferred tax liabilities.
At December 31, 1996, the Company had available tax net operating loss
carryforwards of approximately $282 million which expire in the years 2004
through 2011 if not utilized. The Internal Revenue Code (the "Code") imposes an
annual limitation on the use of loss carryforwards upon the occurrence of an
"ownership change" (as defined in Section 382 of the Code). Such an ownership
change occurred in connection with the Merger in 1992. As a result,
approximately $23 million of the Company's net operating
F-16
<PAGE>
KOLL REAL ESTATE GROUP, INC.
NOTES TO AUDITED HISTORIC FINANCIAL STATEMENTS (CONTINUED)
NOTE 8--INCOME TAXES (CONTINUED)
loss carryforwards will generally be limited to the extent that Henley
Properties and its subsidiaries recognize certain gains in the five-year period
following the ownership change which ends July 16, 1997. Additionally, the use
of the Company's net operating loss carryforwards will be further limited if the
Exchange Offer is completed.
The following is a summary of the income tax provision (benefit) applicable
to losses from continuing operations for the years ended December 31 (in
millions):
<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Income Tax Provision (Benefit):
Current................................................... $ (.3) $(10.1) $ .1
Deferred.................................................. (10.0) (25.4) --
------ ------ ------
$(10.3) $(35.5) $ .1
------ ------ ------
------ ------ ------
</TABLE>
Cash payments for federal, state and local income taxes were approximately
$.6 million, $.3 million and $.2 million for the years ended December 31, 1994,
1995 and 1996, respectively. Tax refunds received for the years ended December
31, 1994, 1995 and 1996 were approximately $.8 million, $.4 million and $.2
million, respectively.
The principal items accounting for the difference in taxes on income
computed at the statutory rate and as recorded are as follows for the years
ended December 31 (in millions):
<TABLE>
<CAPTION>
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Benefit for income taxes at statutory rate........................ $ (10.2) $ (53.3) $ (10.1)
State income taxes, net........................................... (.1) .6 (.1)
Increase in valuation allowance................................... -- 28.3 12.1
Reduction in other tax liabilities................................ -- (10.0) --
All other items, net.............................................. -- (1.1) (1.8)
--------- --------- ---------
$ (10.3) $ (35.5) $ .1
--------- --------- ---------
--------- --------- ---------
</TABLE>
TAX SHARING AGREEMENTS
Henley Group and Abex, a former subsidiary of Henley Group whose stock was
distributed to stockholders of Henley Group in July 1992, entered into a tax
sharing agreement in 1992 prior to the Distribution to provide for the payment
of taxes for periods during which Henley Group and Abex were included in the
same consolidated group for federal income tax purposes, the allocation of
responsibility for the filing of tax returns, the cooperation of the parties in
realizing certain tax benefits, the conduct of tax audits and various related
matters.
1989-1992 INCOME TAXES. The Company is generally charged with
responsibility for all of its federal, state, local or foreign income taxes for
this period and, pursuant to the tax sharing agreement with Abex, all such taxes
attributable to Henley Group and their consolidated subsidiaries, including any
additional liability resulting from adjustments on audit (and any interest or
penalties payable with respect thereto), except that Abex is generally charged
with responsibility for all such taxes attributable to it and its subsidiaries
for 1990-1992. In addition, under a separate tax sharing agreement between
Henley Group and a former subsidiary of Henley Group, Fisher Scientific
International Inc. ("Fisher"), Fisher is generally charged with responsibility
for its own income tax liabilities for this period.
F-17
<PAGE>
KOLL REAL ESTATE GROUP, INC.
NOTES TO AUDITED HISTORIC FINANCIAL STATEMENTS (CONTINUED)
NOTE 8--INCOME TAXES (CONTINUED)
The Internal Revenue Service ("IRS") has completed its examinations of the
tax returns of the Company and its consolidated subsidiaries, including formerly
affiliated entities, for the years ended December 31, 1989, 1990 and 1991. With
respect to each examination, the IRS has proposed material audit adjustments.
The Company disagrees with the positions taken by the IRS and has filed a
protest with the IRS to vigorously contest the proposed adjustments. After
review of the IRS's proposed adjustments, the Company estimates that, if upheld,
the adjustments could result in Federal tax liability, before interest, of
approximately $17 million (net of amounts which may be payable by former
affiliates pursuant to tax sharing agreements). The IRS proposed adjustments, if
upheld, could also result in a disallowance of up to $147 million of available
net operating loss carryforwards, of which none are recognized, after
consideration of the valuation allowance, as of December 31, 1996. The Company
has not determined the extent of potential accompanying state tax liability
adjustments should the proposed IRS adjustments be upheld. The Company's protest
was filed in August 1995 and is still being considered by the IRS Appeals
Division. Management currently believes that the IRS's positions will not
ultimately result in any material adjustments to the Company's financial
statements. The Company is prepared to pursue all available administrative and
judicial appeal procedures with regard to this matter and the Company is advised
that its dispute with the IRS could take up to five years to resolve.
PRE-1989 INCOME TAXES. Under tax sharing agreements with WTI and Abex, the
parties are charged with sharing responsibility for paying any increase in the
federal, state or local income tax liabilities (including any interest or
penalties payable with respect thereto) for any consolidated, combined or
unitary tax group which included WTI, Henley Group or any of their subsidiaries
for tax periods ending on or before December 31, 1988. Under the agreements, the
Company was charged with the responsibility for paying $25 million, plus amounts
payable with respect to liabilities which are attributable to certain of the
Company's subsidiaries. The Company's $25 million limitation amount was accrued
in the Company's financial statements in December 1989, and following payments
made in the first quarter of 1993, $22 million remained as of December 31, 1994.
In January 1993, the IRS completed its examination of the Federal tax returns of
WTI for the periods May 1986 through December 1988 and asserted a material
deficiency relating to the tax basis of a former subsidiary of WTI. WTI, Abex
and the Company disagreed with the position taken by the IRS and WTI filed a
petition with the U.S. Tax Court. In March 1994, prior to the June 1994 trial
date, WTI and the IRS entered into a Stipulation of Settlement that resulted in
a tax payable together with interest of approximately $72 million.
In April 1994, the Company contested the alleged obligation and asserted
various defenses to making any payment under these agreements and Abex and WTI
filed suit in Delaware Chancery Court ("the Court") against the Company seeking,
among other things, declaratory relief, specific performance, and monetary
damages for the Company's alleged failure to pay approximately $21 million
claimed to be owed pursuant to tax sharing agreements entered into in 1988 and
1989, plus pre-judgment interest and attorneys' fees. The Company vigorously
defended its position with respect to the nonpayment of the alleged tax sharing
obligation, filing suit in the Supreme Court of the state of New York against
WTI and Abex. In December 1994, the Court decided against the Company, prompting
the Company to file an appeal in January 1995. In February 1995, the Company
entered into an agreement with WTI and Abex to settle both state actions in
order to avoid the ongoing cost of litigation. Under the terms of the
settlement, the Company paid an aggregate of $22 million, of which $15.5 million
was funded by borrowings under a financing agreement with a major financial
institution (Note 6) and $6.5 million was funded by the Company's restricted
cash. The Company also settled other disputes with Abex as described in Note 9.
F-18
<PAGE>
KOLL REAL ESTATE GROUP, INC.
NOTES TO AUDITED HISTORIC FINANCIAL STATEMENTS (CONTINUED)
NOTE 9--COMMITMENTS AND CONTINGENCIES
Pursuant to a 1992 transition agreement, amended in March 1993, each of Abex
and the Company provided to the other certain administrative support services
until March 31, 1994. The amendment provided for the Company to pay $.5 million
quarterly for such services and for the termination of the New Hampshire
facilities lease on March 31, 1993. Accordingly, the Company reimbursed Abex
approximately $1.8 million for the year ended December 31, 1993. Fees accrued
but not paid in the fourth quarter of 1993 and the first quarter of 1994
totaling $1.0 million were waived by Abex in connection with the February 1995
settlement with Abex described in Note 8.
LEGAL PROCEEDINGS
See Note 5 for a discussion of certain litigation relating to the Orange
County Board of Supervisors' and California Coastal Commission's approvals of
the Bolsa Chica project.
There are various other lawsuits and claims pending against the Company and
certain subsidiaries. In the opinion of the Company's management, ultimate
liability, if any, will not have a material adverse effect on the Company's
financial condition or results of operations.
CORPORATE INDEMNIFICATION MATTERS
The Company and its predecessors have, through a variety of transactions
effected since 1986, disposed of several assets and businesses, many of which
are unrelated to the Company's current operations. By operation of law or
contractual indemnity provisions, the Company has retained liabilities relating
to certain of these assets and businesses. Many of such liabilities are
supported by insurance or by indemnities from certain of the Company's
predecessor and currently or previously affiliated companies. The Company
believes its balance sheet reflects adequate reserves for these matters.
The United States Environmental Protection Agency ("EPA") has designated
Universal Oil Products ("UOP"), among others, as a Potentially Responsible Party
("PRP") with respect to an area of the Upper Peninsula of Michigan (the "Torch
Lake Site") under the Federal Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended ("CERCLA"). UOP is allegedly the successor
in interest to one of the companies that conducted mining operations in the
Torch Lake area and an affiliate of Allied Signal Inc., a predecessor of the
Company. The Company has not been named as a PRP at the site. However, Allied
Signal has, through UOP, asserted a contractual indemnification claim against
the Company for all claims that may be asserted against UOP by EPA or other
parties with respect to the site. EPA has proposed a clean-up plan which would
involve covering certain real property both contiguous and non-contiguous to
Torch Lake with soil and vegetation in order to address alleged risks posed by
copper tailings and slag at an estimated cost of $6.2 million. EPA estimates
that it has spent approximately $3.9 million to date in performing studies of
the site. Under CERCLA, EPA could assert claims against the Torch Lake PRPs,
including UOP, to recover the cost of these studies, the cost of all remedial
action required at the site, and natural resources damages. In June 1995, EPA
proposed a CERCLA settlement pursuant to which UOP pay approximately between
$2.6 and $3.3 million in exchange for a limited covenant by EPA not to sue UOP
in the future. The Company, without admission of any obligation to UOP, has
determined to vigorously defend UOP's position that the EPA's proposed cleanup
plan is unnecessary and inconsistent with the requirements of CERCLA given that
the EPA's own Site Assessment and Record of Decision found no immediate threat
to human health. In the Company's view the proposed remediation costs would be
in excess of any resulting benefits.
F-19
<PAGE>
KOLL REAL ESTATE GROUP, INC.
NOTES TO AUDITED HISTORIC FINANCIAL STATEMENTS (CONTINUED)
NOTE 10--RELATED PARTY TRANSACTIONS
CONSTRUCTION MANAGEMENT AGREEMENTS
In 1993, the Company entered into a construction management agreement with
Koll Construction, a wholly owned subsidiary of The Koll Company, for demolition
of bunkers at Bolsa Chica. In 1995, the Company also entered into a construction
management agreement with Koll Construction for infrastructure construction at
Rancho San Pasqual. In 1996, the Company entered into a general contractor
agreement with Koll Construction in conjunction with a build-to-suit project for
a third-party corporate office building in Nevada. During 1994, 1995 and 1996
the Company incurred fees aggregating approximately $100 thousand, $500 thousand
and $1.7 million, respectively, to Koll Construction in consideration for these
services and related reimbursements.
SERVICE AGREEMENTS
In September 1993, the Company entered into a Financing and Accounting
Services Agreement to provide The Koll Company with financing, accounting,
billing, collections and other related services until 30 days' prior written
notice of termination is given by one company to the other. Fees earned for the
years ended December 31, 1994, 1995 and 1996 were approximately $400 thousand,
$100 thousand and $100 thousand, respectively.
The Company also entered into a Management Information Systems and Human
Resources Services Agreement in September 1993 with Koll Management Services,
Inc., also known as Koll Real Estate Services ("KRES"), a company approximately
14% owned by a subsidiary of The Koll Company. Under this agreement, KRES
provides computer programming, data organization and retention, record keeping,
payroll and other related services until 30 days' prior written notice of
termination is given by one company to the other. Fees and related
reimbursements incurred were approximately $200 thousand for each of the years
ended December 31, 1994, 1995 and 1996.
SUBLEASE AGREEMENTS
In September 1993, the Company entered into an annual Sublease Agreement
with The Koll Company to sublease a portion of The Koll Company affiliate's
office building located in Newport Beach, California. The Company also entered
into lease agreements on a month-to-month basis, which were terminated in 1996,
for office space in Northern California and San Diego, California with KRES.
Combined lease costs on these leases were approximately $400 thousand for each
of the years ended December 31, 1994, 1995, and 1996, respectively.
DEVELOPMENT FEES
For the years ended December 31, 1994, 1995, and 1996 the Company earned
fees of approximately $3.5 million, $2.7 million, and $1.9 million respectively,
for real estate development and disposition services provided to partnerships in
which The Koll Company and certain directors and officers of the Company have an
ownership interest. In addition, the Company paid approximately $300 thousand
to, and received $100 thousand from Koll Construction for services provided to
each other in conjunction with two separate development service transactions for
the year ended December 31, 1994. The Company paid $100 thousand and $400
thousand to Koll Construction for construction services in the years ended
December 31, 1995 and 1996, respectively.
F-20
<PAGE>
KOLL REAL ESTATE GROUP, INC.
NOTES TO AUDITED HISTORIC FINANCIAL STATEMENTS (CONTINUED)
NOTE 10--RELATED PARTY TRANSACTIONS (CONTINUED)
JOINT BUSINESS OPPORTUNITY AGREEMENT
The Company and The Koll Company entered into an agreement to jointly
develop business opportunities in the Pacific Rim effective February 1, 1994.
Effective February 1, 1995 The Koll Company assigned its interests under this
agreement to KRES. Under the terms of the agreement, the Company and KRES share
on a 50%-50% basis all costs and expenses incurred in connection with
identifying and obtaining business opportunities and will share in all revenues
generated from any such opportunities on a 50%-50% basis. The Company's share of
net loss was approximately $200 thousand, $300 thousand and $100 thousand for
the years ended December 31, 1994, 1995 and 1996, respectively. Service
contracts entered into under this agreement in 1995 included construction
services from Koll Construction, for which the venture paid approximately $100
thousand to Koll Construction for services rendered for each of the years ended
December 31, 1995 and 1996. In February 1997, KRES notified the Company that it
plans to terminate the venture effective March 5, 1997, and its interest will be
adjusted accordingly.
In March 1995, the Company and The Koll Company entered into an agreement to
jointly develop commercial development business opportunities in Mexico. Under
the terms of the agreement, the Company and The Koll Company share on a 50%-50%
basis all costs and expenses incurred in connection with identifying and
obtaining business opportunities and will share in all revenues generated from
such opportunities on a 50%-50% basis. The Company's share of such net costs and
expenses was approximately $300 thousand and $100 thousand for the ten months
ended December 31, 1995, and for year ended December 31, 1996, respectively.
During the first quarter of 1996, the Company determined that, given current
economic conditions in Mexico, it could more efficiently service opportunities
in Mexico from its offices in California and Dallas and closed its Mexico City
office. The Koll Company informed the Company that effective March 1, 1996 it
would no longer fund costs and expenses related to the pursuit of commercial
development opportunities in Mexico, and The Koll's Company interest was diluted
accordingly.
Effective April 1, 1994, the Company and KRES entered into an agreement to
combine operations in the Northwest Region in order to become a full service
real estate company in that region. This agreement was terminated effective June
30, 1996. Operating profits and losses were split on a 50%-50% basis at the end
of each calendar year or portion thereof. The Company's share of profits was
approximately $500 thousand, $600 thousand and $200 thousand for the nine months
ended December 31, 1994, the year ended December 31, 1995, and the six months
ended June 30, 1996, respectively.
STOCK PLEDGE BY DIRECTOR
In December of 1995, the Company accepted pledges of all of the common stock
and warrants convertible into the common stock of the Company owned by Ms.
Kathryn G. Thompson as security against any potential construction liability
which could be asserted against the Company as a result of the 1994 acquisition
by the Company of KGTC and in exchange for the Company releasing Ms. Thompson
from a covenant to maintain insurance with respect to such potential liability.
Ms. Thompson resigned as a director of the Company and as an officer of certain
wholly-owned subsidiaries of the Company effective November 1, 1996. Ms.
Thompson received compensation of $300,000 during each of the years ended
December 31, 1995 and 1996 for her services rendered as an officer of these
subsidiaries. In connection with her resignation, Ms. Thompson received a
release from certain non-competition covenants and a release of the stock pledge
described above.
F-21
<PAGE>
KOLL REAL ESTATE GROUP, INC.
NOTES TO AUDITED HISTORIC FINANCIAL STATEMENTS (CONTINUED)
NOTE 10--RELATED PARTY TRANSACTIONS (CONTINUED)
OTHER TRANSACTIONS
See Notes 3, 8 and 9 for descriptions of other transactions and agreements
with Koll, Libra, Abex and WTI.
NOTE 11--RETIREMENT PLANS
The Company has noncontributory defined benefit retirement plans covering
substantially all employees of the Company prior to September 30, 1993 who had
completed one year of continuous employment. The benefit accrual for all
participants was terminated on December 31, 1993. In November 1996, the assets
held in trust under the Company's supplemental and executive retirement plan
were paid to participants in exchange for each participant's release of any
future benefit claims under this plan, resulting in termination of the executive
plan and the curtailment gain recorded in 1996. Net periodic pension cost for
the years ended December 31 consisted of the following (in millions):
<TABLE>
<CAPTION>
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Service cost................................................ $ -- $ -- $ --
Interest cost............................................... .5 .5 .5
Actual return on assets..................................... .1 (1.4) (.8)
Net amortization and deferral............................... (.5) 1.0 .4
Gain on curtailment......................................... -- -- (.3)
------ ------ ------
Net periodic pension cost (income).......................... $ .1 $ .1 $ (.2)
------ ------ ------
------ ------ ------
</TABLE>
The funded status and accrued pension cost at December 31, 1995 and 1996 for
defined benefit plans were as follows (in millions):
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested...................................................................... $ (6.9) $ (5.3)
Nonvested................................................................... -- --
--------- ---------
Accumulated benefit obligation................................................ $ (6.9) $ (5.3)
--------- ---------
--------- ---------
Projected benefit obligation.................................................. $ (6.9) $ (5.3)
Plan assets at fair value..................................................... 5.9 5.0
--------- ---------
Projected benefit obligation in excess of plan assets......................... (1.0) (.3)
Unrecognized net loss......................................................... 1.0 .7
Adjustment required to recognize additional minimum liability................. (1.0) (.7)
--------- ---------
Accrued pension cost.......................................................... $ (1.0) $ (.3)
--------- ---------
--------- ---------
</TABLE>
The development of the projected benefit obligation for the plans at
December 31, 1994, 1995, and 1996 is based on the following assumptions: a
discount rate of 7%, and an expected long-term rate of return on assets of 9%.
Assets of the plans are invested primarily in stocks, bonds, short-term
securities and cash equivalents.
F-22
<PAGE>
KOLL REAL ESTATE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 12--CAPITAL STOCK
COMMON STOCK
Under its restated certificate of incorporation, the Company has authority
to issue up to 750 million shares of common stock, par value $.05 per share,
subject to approval of the Board of Directors (the "Board"), of which 625
million shares of Class A Common Stock and 25 million shares of Class B Common
Stock are initially authorized for issuance and an additional 100 million shares
may be issued in one or more series, and have such voting powers or other rights
and limitations as the Board may authorize. During 1994, 1995 and 1996, 1.2
million, an additional 1.0 million, and an additional 1.4 million shares,
respectively, of Series A Preferred Stock were converted into an equal number of
shares of Class A Common Stock.
In December 1993 the Company issued 3.4 million shares of its Class A Common
Stock in exchange for all of Libra's approximately $10.6 million in aggregate
principal amount of Subordinated Debentures plus accrued interest. In connection
with the Company's sale of Lake Superior Land Company to Libra, the net cash
proceeds from the sale of 3.4 million shares of Class A Common Stock held by
Libra will be forwarded to the Company. The estimated amount of proceeds to be
received from such sale is reflected in the equity section of the balance sheet
as deferred proceeds from stock issuance.
In November 1994 the Company issued 2 million shares of its Class A Common
Stock and warrants for the purchase of an additional 2 million shares in
connection with the acquisition of the Kathryn G. Thompson Company. The warrants
have an exercise price of $.25, are exercisable over a ten year period, vest in
equal installments over five years and are subject to certain cancellation
rights of the Company.
Under the Company's Indentures for the Debentures (Note 6), the Company is
prohibited from purchasing shares of its common stock.
PREFERRED STOCK
Under its restated certificate of incorporation, the Company has authority
to issue 150 million shares of preferred stock, par value $.01 per share, in one
or more series, with such voting powers and other rights as authorized by the
Board. Effective July 16, 1992, in connection with the Merger, the Board
authorized approximately 42.5 million shares of Series A Preferred Stock, which
have a liquidation preference of $.75 per share, participate in any dividend or
distribution paid on the Class A Common Stock on a share for share basis, and
have no voting rights, except as required by law (Notes 1 and 2).
The Series A Preferred Stock is redeemable at the Company's option, on 30
days' notice given at any time after the second anniversary of issuance, at the
liquidation preference of $.75 per share, in cash or generally in shares of
Class A Common Stock. Each share of the Series A Preferred Stock is convertible
at the holder's option, at any time after the second anniversary of issuance,
generally into one share of Class A Common Stock. Since the Series A Preferred
Stock became convertible in July 1994, approximately 3.6 million shares have
been converted into an equal number of shares of Class A Common Stock.
NOTE 13--STOCK PLANS
1993 STOCK OPTION/STOCK ISSUANCE PLAN
The 1993 Stock Option/Stock Issuance Plan ("1993 Stock Option Plan") was
approved at the 1994 Annual Meeting of Stockholders as the successor equity
incentive program to the Company's 1988 Stock Plan. Outstanding options under
the 1988 Stock Plan were incorporated into the 1993 Stock Option Plan
F-23
<PAGE>
KOLL REAL ESTATE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 13--STOCK PLANS (CONTINUED)
upon its approval. Under the 1993 Stock Option Plan, 7.5 million shares each
(including 3 million shares each originally authorized under the 1988 Stock
Plan) of Series A Preferred Stock and Class A Common Stock were reserved for
issuance to officers, key employees and consultants of the Company and its
subsidiaries and the non-employee members of the Board. Options generally become
exercisable for 40% of the option shares upon completion of one year of service
and become exercisable for the balance in two equal annual installments
thereafter.
The 1993 Stock Option Plan includes an automatic option grant program,
pursuant to which each individual serving as a non-employee Board member on the
November 29, 1993 effective date of the 1993 Stock Option Plan received an
option grant for 125,000 shares each of Series A Preferred Stock and Class A
Common Stock with an exercise price of $.4063 per share, equal to the fair
market value of the underlying securities on the grant date. Each individual who
first joins the Board as a non-employee director after such effective date will
receive a similar option grant. Of the shares subject to each option, 40% will
vest upon completion of one year of Board service measured from the grant date,
and the balance will vest in two equal annual installments thereafter. Each
automatic grant will have a maximum term of 10 years, subject to earlier
termination upon the optionee's cessation of Board service.
Each non-employee Board member may also elect to apply all or any portion of
his or her annual retainer fee to the acquisition of shares of Series A
Preferred Stock or Class A Common Stock which vest incrementally over the
individual's period of Board service during the year for which the election is
in effect. During the year ended December 31, 1994, 126,856 shares were issued
under this provision. No shares were issued under this provision during 1995 or
1996.
F-24
<PAGE>
KOLL REAL ESTATE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 13--STOCK PLANS (CONTINUED)
A summary of the status of the Company's stock option plans for the three
years ended December 31, 1996, follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES PRICE PER SHARE
---------------------- ------------------------
CLASS A SERIES A CLASS A SERIES A
COMMON PREFERRED COMMON PREFERRED
OPTIONS OUTSTANDING STOCK STOCK STOCK STOCK
- ------------------------------------------ ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
December 31, 1993......................... 6,350,000 6,350,000 .23 - .41 .14 - .41
Granted................................. -- -- -- --
Exercised............................... -- -- -- --
Cancelled............................... -- -- -- --
---------- ---------- ----------- -----------
December 31, 1994......................... 6,350,000 6,350,000 .23 - .41 .14 - .41
Granted................................. -- -- -- --
Exercised............................... -- -- -- --
Cancelled............................... (75,000) (75,000) .41 .41
---------- ---------- ----------- -----------
December 31, 1995......................... 6,275,000 6,275,000 $ .23 - .41 $ .14 - .41
Granted................................. -- -- -- --
Exercised............................... -- -- -- --
Cancelled............................... -- -- -- --
---------- ---------- ----------- -----------
December 31, 1996......................... 6,275,000 6,275,000 $ .23 - 41 $ .14 - 41
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
Options exercisable at December 31,
1996.................................... 6,275,000 6,275,000 $ .23 - 41 $ .14 - 41
Options available at December 31, 1996.... 1,098,144 1,225,000
</TABLE>
In connection with the Exchange Offer, the outstanding options set forth
above will be cancelled and new options comprising 6% of the Company's fully
diluted equity will be granted based on the average trading price for 20-days
following completion of the Exchange Offer.
F-25
<PAGE>
KOLL REAL ESTATE GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 14--UNAUDITED QUARTERLY FINANCIAL INFORMATION
The following is a summary of quarterly financial information for 1995 and
1996 (in millions, except per share amounts):
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH FULL YEAR
--------- ----------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
1996
Revenues (a)................................. $ 2.7 $ 16.0 $ 6.4 $ 19.7 $ 44.8
Cost of sales (a)............................ 2.5 14.3 5.2 18.2 40.2
Loss from continuing operations.............. (7.9) (6.7) (7.6) (6.7) (28.9)
Net loss..................................... (7.9) (6.7) (7.6) (6.7) (28.9)
Loss per common share........................ (.17) (.14) (.16) (.14) (.60)
Weighted average common shares
outstanding (b)............................ 47.7 48.0 48.5 48.9 48.3
1995
Revenues (c)................................. $ 6.4 $ 5.7 $ 6.8 $ 15.1 $ 34.0
Cost of sales (c)............................ 7.3 5.2 5.9 13.5 31.9
Loss from continuing operations (d).......... (5.7) (2.6) (8.5) (100.1) (116.9)
Net loss (d)................................. (5.7) (2.6) (8.5) (100.1) (116.9)
Loss per common share........................ (.12) (.06) (.18) (2.11) (2.48)
Weighted average common shares
outstanding (b)............................ 46.6 47.0 47.3 47.5 47.1
</TABLE>
- ------------------------
(a) The Company recorded revenues and cost of sales of approximately $10.1
million from residential lot sales at Rancho San Pasqual primarily during
the second and fourth quarters. In addition, the second quarter includes the
sale of the Eagle Crest golf course at Rancho San Pasqual, and the fourth
quarter includes the sale of Fairbanks Highlands as a result of the
formation of a joint venture in which the Company has a continuing interest.
(b) The Series A Preferred Stock is not included in the calculation of weighted
average shares outstanding because the effect is antidilutive.
(c) The Company recorded revenues and cost of sales of approximately $8.0
million and $8.1 million, respectively, in the fourth quarter of 1995 from
the sale of residential land and the marina at its Wentworth By The Sea
project in New Hampshire.
(d) The Company recorded asset revaluations of $7.5 million and $116.6 million,
which were partially offset by income tax benefits of $2.6 million and $24.0
million, respectively, in the third and fourth quarters of 1995.
F-26
<PAGE>
APPENDIX A
PREPACKAGED PLAN OF REORGANIZATION
A-1
<PAGE>
UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE
<TABLE>
<S> <C>
In re
Chapter 11
KOLL REAL ESTATE
GROUP, INC. Case No. 97-
Honorable
Debtor. Bankruptcy Judge
</TABLE>
PREPACKAGED PLAN OF REORGANIZATION
OF KOLL REAL ESTATE GROUP, INC.
A-2
<PAGE>
PREPACKAGED PLAN OF REORGANIZATION
OF KOLL REAL ESTATE GROUP, INC.
ARTICLE I
DEFINITIONS
Unless the context otherwise requires, the following terms shall have the
following meanings when used in initially capitalized form in the Prepackaged
Plan. Such meanings shall be equally applicable to both the singular and plural
forms of such terms. The words "herein," "hereof" and "hereunder" and other
words of similar import refer to the Prepackaged Plan as a whole and not to any
particular section, subsection, or clause contained in the Prepackaged Plan
unless the context requires otherwise. Whenever from the context it appears
appropriate, each term stated in either the singular or the plural includes the
singular and the plural, and pronouns stated in the masculine, feminine or
neuter gender include the masculine, feminine and the neuter. Any term used in
initially capitalized form in the Prepackaged Plan that is not defined herein
but that is used in the Bankruptcy Code or the Bankruptcy Rules shall have the
meaning assigned to such term in the Bankruptcy Code or the Bankruptcy Rules.
ADMINISTRATIVE CLAIM means a Claim for payment of an administrative expense
of a kind specified in section 503(b) of the Bankruptcy Code and referred to in
section 507(a)(1) of the Bankruptcy Code, including, without limitation, the
actual, necessary costs and expenses incurred after the commencement of the
Reorganization Case of preserving the Estate and operating the business of the
Debtor, including wages, salaries or commissions for services, compensation for
legal and other services and reimbursement of expenses awarded under section
330(a) or 331 of the Bankruptcy Code, certain retiree benefits under section
1114(e)(2) of the Bankruptcy Code, and all fees and charges assessed against the
Estate under section 1930 of Chapter 123 of Title 28, United States Code.
AFFILIATE means with respect to the Debtor, any corporation, partnership or
other entity which, directly or indirectly, controls, is controlled by or is
under common control with the Debtor, excluding natural persons. With respect to
any entity other than the Debtor, a governmental unit or a natural person,
affiliate means any corporation, partnership, association or other entity which,
directly or indirectly, controls, is controlled by or is under common control
with such entity. For purposes of this definition, the term "control" means the
ownership of more than 20% of the beneficial or voting interest in the
corporation or other entity referred to herein.
ALLOWED ADMINISTRATIVE CLAIM means all or that portion of any
Administrative Claim which (a) has been allowed by a Final Order, (b) was
incurred by the Debtor in the ordinary course of business during the
Reorganization Case, or (c) relates to any payment for retiree benefits required
to be made before the Prepackaged Plan is confirmed, pursuant to section
1114(e)(2) of the Bankruptcy Code.
ALLOWED CLAIM means that portion of any Claim, other than an Administrative
Claim or a Contested Claim, (a) as to which, on or prior to the Bar Date, (i) no
proof of claim has been filed with the Court and (ii) the liquidated
non-Contingent amount of which is scheduled by the Debtor pursuant to the
Bankruptcy Code as undisputed, (b) as to which a proof of claim has been filed
in a liquidated non-Contingent amount with the Court on or prior to the Bar
Date, provided that (i) no objection to the allowance of such Claim or motion to
expunge or limit recovery of such Claim has been interposed or (ii) if such
objection or motion has been filed, such objection or motion has been overruled
by a Final Order, or such Claim has been otherwise allowed by a Final Order, and
(c) a Claim against the Debtor that is allowed (i) in any contract, instrument,
or other agreement entered into in connection with the Prepackaged Plan, or (ii)
pursuant to the terms of the Prepackaged Plan.
ALLOWED INTEREST means that portion of any Interest, other than a contested
Interest, of record held prior to the Effective Date, as to which, (a) no
objection to the allowance of such Interest or motion to expunge or limit
recovery of such Interest has been interposed or (b) if such objection or motion
has been
A-3
<PAGE>
filed, such objection or motion has been overruled by a Final Order, or such
Interest has been otherwise allowed by a Final Order.
AMENDED AND RESTATED BYLAWS means the Amended and Restated Bylaws of the
Reorganized Debtor which shall be substantially in the form set forth in Exhibit
2.
AMENDED AND RESTATED CERTIFICATE means the Amended and Restated Certificate
of Incorporation of the Reorganized Debtor which shall be substantially in the
form set forth in Exhibit 1.
BANKRUPTCY CODE means chapter 11, Title 11 of the United States Code, 11
U.S.C. Section 101 ET SEQ., as amended.
BANKRUPTCY RULES means the Federal Rules of Bankruptcy Procedure, as
amended, promulgated under 28 U.S.C. Section 2075 and the local rules of
practice and procedure of the Court, as applicable, from time to time in the
Reorganization Case.
BAR DATE means the date set by the Court as the last date for filing proofs
of Claims against and Interests in the Debtor, and with respect to Claims
arising from the rejection of executory contracts or unexpired leases, the
earlier of the date set forth in the order rejecting such executory contract or
unexpired lease or thirty (30) days after the Confirmation Date.
BUSINESS DAY means any day except Saturday, Sunday or any other day on
which commercial banks in Los Angeles, California are authorized by law to be
closed for business.
CAPITAL STOCK COMBINATION means the combination of the Class A Common
Stock, Class B Common Stock (none of which is outstanding), and Preferred Stock
into one (1) combined class and series (the "Capital Stock Combination")
designated "Common Stock" and having the same rights that the Class A Common
Stock had prior to the Capital Stock Combination.
CASH means cash and cash equivalents.
CLAIM means a claim against the Debtor, whether or not asserted, as defined
in section 101(5) of the Bankruptcy Code.
CLASS means a category of holders of Claims or Interests as classified in
Article III of the Prepackaged Plan pursuant to section 1123(a)(1) of the
Bankruptcy Code.
CLASS A COMMON STOCK means all the outstanding Class A Common Stock, par
value $0.05 per share, of the Company.
COMMON STOCK means the 11,772,691 shares of the Reorganized Debtor's new
common stock having a par value of $0.05 per share being issued pursuant to the
Prepackaged Plan.
COMPANY means Koll Real Estate Group, Inc., a Delaware corporation.
CONFIRMATION DATE means the date on which the Court enters the Confirmation
Order.
CONFIRMATION ORDER means the order confirming this Prepackaged Plan
pursuant to section 1129 of the Bankruptcy Code.
CONSUMMATION means the occurrence of the Effective Date.
CONTESTED CLAIM OR INTEREST means any Claim or Interest against which the
Debtor or the Reorganized Debtor, as the case may be, or any other party in
interest, has filed an objection to the allowance of such Claim or Interest or a
motion to expunge or limit the recovery of such Claim or Interest and which
objection or motion has not been withdrawn or overruled by a Final Order.
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CONTINGENT means a Claim is contingent as to liability if the debt is one
which the debtor may be called upon to pay only upon the occurrence or happening
of an extrinsic event which will trigger the liability of the debtor to the
alleged creditor.
COURT means the United States Bankruptcy Court for the District of
Delaware, or such other court that exercises jurisdiction over the
Reorganization Case, including the United States District Court of the District
of Delaware to the extent reference of the Reorganization Case is withdrawn.
CREDITOR means any holder of a Claim.
DEBTOR means the Company, when acting in its capacity as representative of
the Estate.
DEBENTURE HOLDERS' COMMITTEE MEANS THE GROUP OF RESTRICTED HOLDERS OF THE
OUTSTANDING DEBENTURES ORGANIZED PRIOR TO THE PETITION DATE TO NEGOTIATE WITH
THE COMPANY REGARDING THE RECAPITALIZATION.
DELAWARE GENERAL CORPORATION LAW MEANS TITLE 8 OF THE DELAWARE CODE, AS NOW
IN EFFECT OR HEREAFTER AMENDED.
DISTRIBUTION RECORD DATE means , 1997.
EFFECTIVE DATE means a date selected by the Reorganized Debtor that is no
more than ten (10) Business Days following the date on which all conditions to
consummation set forth in Section 8.2 of the Prepackaged Plan have been
satisfied or waived.
ESTATE means the bankruptcy estate of the Company created by section 541 of
the Bankruptcy Code upon the commencement of the Reorganization Case.
EXCHANGE AGENT means the entity or entities designated pursuant to Section
7.2 of the Prepackaged Plan to make distributions under the Prepackaged Plan.
EQUITY HOLDER means a holder of an Interest.
FINAL ORDER means an order or judgment entered by the Court or any other
court exercising jurisdiction over the subject matter and the parties (i) that
has not been reversed, stayed, modified or amended, (ii) as to which no appeal,
certiorari proceeding, reargument, or other review or rehearing has been
requested or is still pending, and (iii) as to which the time for filing a
notice of appeal or petition for certiorari shall have expired.
IMPAIRED means a Claim or Interest that is impaired within the meaning of
section 1124 of the Bankruptcy Code.
IMPAIRED SECURITIES means collectively the Outstanding Debentures,
Preferred Stock and Class A Common Stock.
INDENTURE TRUSTEES means the trustee under the Indenture dated July 15,
1992 governing the Senior Debentures and the Indenture dated July 15, 1992
governing the Subordinated Debentures.
INTEREST means the rights of the owners of the issued and outstanding
shares of any class of stock of the Debtor or the rights of the owners of
warrants issued by the Debtor.
LITIGATION CLAIMS means all Claims against the Company asserted under
lawsuits or complaints which are pending as of the commencement of the
Reorganization Case in state or federal court.
1993 STOCK OPTION PLAN means the Company's 1993 Stock Option/Stock Issuance
Plan.
OUTSTANDING DEBENTURES means collectively the Senior Debentures and the
Subordinated Debentures.
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OTHER CLASS 5 CLAIMS means all Allowed Claims in Class 5 other than those
relating to the Senior Debentures.
PETITION DATE means the date on which the Company files its chapter 11
bankruptcy petition.
PREPACKAGED PLAN means this Prepackaged Plan of Reorganization, together
with any exhibits or schedules attached hereto, as they may be amended, modified
or supplemented by the Debtor from time to time in accordance with the
provisions set forth herein, in the Bankruptcy Code and in the Bankruptcy Rules.
PREFERRED STOCK means all of the outstanding Series A Convertible
Redeemable Preferred Stock of the Company.
PRIORITY CLAIM means a Claim for an amount entitled to priority under
section 507(a) of the Bankruptcy Code, other than an Administrative Claim or a
Tax Claim.
PROSPECTUS means the Proxy Statement/Prospectus and Disclosure Statement of
the Company dated , 1997.
NET CLAIM means the amount owed to Affiliates, after allowing for the set
off of the respective Affiliates' Claims owed to the Debtor.
RECAPITALIZATION means the capital restructuring of the Company whereby all
Senior Debentures and Subordinated Debentures are exchanged for Common Stock of
the Reorganized Debtor.
REORGANIZATION CASE means the Debtor's case under chapter 11 of the
Bankruptcy Code.
REORGANIZED DEBTOR means the Debtor on and after the Confirmation Date, and
the entity that shall succeed to all of the rights and obligations of the Debtor
under the Prepackaged Plan.
REVERSE STOCK SPLIT means the one for one hundred (l:100) reverse stock
split of the outstanding Common Stock to be effected by the Debtor immediately
following the Capital Stock Combination.
SECURED CLAIM means any Claim of a creditor secured by a valid, perfected
and enforceable lien on any property of the Estate, but only to the extent such
Claim constitutes a secured claim under section 506 or 1111(b) of the Bankruptcy
Code.
SENIOR DEBENTURE INDENTURE means the Indenture dated July 15, 1992
governing the Senior Debentures.
SENIOR DEBENTURES means all of the outstanding 12% Senior Subordinated
Pay-In-Kind Debentures due March 15, 2002.
SENIOR DEBT means Senior Debt as defined in the Senior Debenture Indenture
and the Subordinated Debenture Indenture.
SUBCLASS means a category of holders of Claims or Interests within a Class.
SUBORDINATED DEBENTURES means all of the outstanding 12% Subordinated
Pay-In-Kind Debentures due March 15, 2002.
SUBORDINATED DEBENTURE INDENTURE means the Indenture dated July 15, 1992
governing the Subordinated Debentures.
TAX CLAIM means a Claim for an amount entitled to priority under section
507(a)(7), 507(a)(8) and 502(i) of the Bankruptcy Code, other than a Claim for a
penalty.
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UNIMPAIRED means a Claim or Interest that is not impaired within the
meaning of section 1124 of the Bankruptcy Code.
UNLIQUIDATED means if the amount of the Claim cannot be ascertained by a
mere computation, based on the terms of the obligation or on some other accepted
standard.
Unless otherwise specified herein, any reference to an entity as a holder of
a Claim or Interest includes that entity's successors, assigns, and affiliates.
ARTICLE II
TREATMENT OF UNCLASSIFIED ADMINISTRATIVE AND TAX CLAIMS
2.1 ADMINISTRATIVE CLAIMS. Unless otherwise agreed to by the parties, each
holder of an Allowed Administrative Claim shall receive cash equal to the unpaid
portion of such Allowed Administrative Claim on the later of (a) the Effective
Date, and (b) the date on which such Claim becomes an Allowed Administrative
Claim; PROVIDED, HOWEVER, that Administrative Claims that represent liabilities
incurred by the Debtor in the ordinary course of its business during the
Reorganization Case shall be paid in the ordinary course of business and in
accordance with any terms and conditions of any agreements relating thereto.
2.2 TAX CLAIMS. On the Effective Date, each holder of a Tax Claim (a)
shall be paid cash in an amount equal to the amount of its Allowed Claim, or
shall be paid on account of its Allowed Claim on such other terms as have been
or may be agreed to between such holder and the Debtor, or (b) shall receive on
account of its Allowed Claim deferred cash payments, in equal quarterly
installments over a period not exceeding six years after the date of assessment
of such Tax Claim, of a value, as of the Effective Date, equal to the amount of
such Allowed Claim. The amount of any Tax Claim that is not an Allowed Claim,
and the rights of the holder of such Claim, if any, to payment in respect
thereof shall (a) be determined in the manner in which the amount of such Claim
and the rights of the holder of such Claim would have been resolved or
adjudicated if the Reorganization Case had not been commenced, (b) survive the
Effective Date and the consummation of the Prepackaged Plan as if the
Reorganization Case had not been commenced, and (c) not be discharged pursuant
to Section 9.1 of the Prepackaged Plan and section 1141 of the Bankruptcy Code.
ARTICLE III
CLASSIFICATION OF CLAIMS AND INTERESTS
This classification of Claims and Interests is made for purposes of voting
on the Prepackaged Plan and making distribution hereunder and for ease of
administration hereof. A Claim or Interest shall be deemed classified in a
particular Class only to the extent that the Claim or Interest qualifies within
the description of that Class.
3.1 CLASS 1--PRIORITY CLAIMS. Class 1 consists of all Priority Claims, not
otherwise treated as unclassified in Article II above.
3.2 CLASS 2--SECURED CLAIMS. Class 2 consists of each Claim secured by a
security interest in or lien upon property of the Company, including, but not
limited to, Claims secured by (i) mortgages or trust deeds on real property,
(ii) mechanics' or materialmen's liens, (iii) security deposits, or (iv) liens
on miscellaneous personal property such as office furniture, telephone systems,
copiers and mailing equipment. Each Class 2 Secured Claim shall be treated for
all purposes of the Prepackaged Plan and under the Bankruptcy Code as a separate
Subclass of Class 2.
3.3 CLASS 3--UNLIQUIDATED OR CONTINGENT CLAIMS. Class 3 consists of all
Claims of holders of Unliquidated or Contingent Claims, including but not
limited to, Litigation Claims.
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3.4 CLASS 4--AFFILIATES' CLAIMS. Class 4 consists of all Net Claims of
Affiliates.
3.5 CLASS 5--GENERAL UNSECURED CLAIMS. Class 5 consists of all general
unsecured Claims of Creditors against the Company, however arising, and not
included in any other Class in the Prepackaged Plan or otherwise provided for in
the Prepackaged Plan, including (i) Senior Debentures, and (ii) Claims for
damages resulting from the rejection of leases or executory contracts.
3.6 CLASS 6--SUBORDINATED DEBENTURES. Class 6 consists of all Claims of
holders of Subordinated Debentures.
3.7 CLASS 7--PREFERRED STOCK. Class 7 consists of all Interests of holders
of Preferred Stock.
3.8 CLASS 8--CLASS A COMMON STOCK. Class 8 consists of all Interests of
holders of Class A Common Stock.
3.9 CLASS 9--WARRANTS. Class 9 consists of all Interests of holders of
outstanding warrants.
ARTICLE IV
TREATMENT OF CLASSES UNDER THE PLAN
SUMMARY
<TABLE>
<CAPTION>
CLASS STATUS
- --------------------------------------------------------------------- ------------------------------------
<S> <C>
Class 1--Priority Claims Unimpaired; deemed to have accepted
the Prepackaged Plan
Class 2--Secured Claims Unimpaired; deemed to have accepted
the Prepackaged Plan
Class 3--Unliquidated or Contingent Claims Unimpaired; deemed to have accepted
the Prepackaged Plan
Class 4--Affiliates' Claims Impaired; while such claimants
deemed to have rejected the
Prepackaged Plan, the Company
shall cause such holders to
support the Prepackaged Plan
Class 5--General Unsecured Claims Impaired; entitled to vote
Class 6--Claims of Holders of Subordinated Debentures Impaired; entitled to vote
Class 7--Interests of Holders of Preferred Stock Impaired; entitled to vote
Class 8--Interests of Holders of Class A Common Stock Impaired; entitled to vote
Class 9--Interests of Holders of Warrants Impaired; deemed to have rejected
the Prepackaged Plan
</TABLE>
4.1 PRIORITY CLAIMS. Class 1 Claims are Unimpaired. Unless otherwise
agreed to by the parties, each holder of an Allowed Claim in Class 1 shall be
paid the allowed amount of such Claim in full in cash on the later of (a) the
Effective Date, and (b) the date such Claim becomes an Allowed Claim.
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4.2 SECURED CLAIMS. Class 2 Claims are Unimpaired. Unless otherwise agreed
to by the parties, either (a) the legal, equitable and contractual rights of
each holder of an Allowed Claim in any Subclass of Class 2 shall be unaltered by
the Prepackaged Plan, or (b) at the option of the Debtor, any Allowed Claim in
any Subclass of Class 2 shall be treated in any other manner that will result in
such Allowed Claim being deemed Unimpaired under section 1124 of the Bankruptcy
Code. To the extent not previously paid, any accrued and unpaid interest due on
the Secured Claims will be paid in Cash on the Effective Date.
4.3 UNLIQUIDATED OR CONTINGENT CLAIMS. Class 3 Claims are Unimpaired. The
legal, equitable and contractual rights of the holders of Class 3 Claims shall
not be affected by the Prepackaged Plan, Class 3 Claims shall survive the
discharge provided for in Section 9.1 of the Prepackaged Plan and section 1141
of the Bankruptcy Code, and the rights of a holder of such Claim and the rights
of such holder of such Claim to payment, if any, in respect thereof shall be
determined in the manner in which the amount of such Claim and the rights of the
holder of such Claim would have been resolved or adjudicated if the
Reorganization Case had not been commenced.
4.4 AFFILIATES' CLAIMS. Class 4 Claims are Impaired. The holders of
Allowed Net Claims, if any, in Class 4 shall receive no distributions nor retain
any property under the Prepackaged Plan on account of such Allowed Net Claims.
4.5 GENERAL UNSECURED CLAIMS. Class 5 Claims are Impaired. In the event
Classes 6, 7 and 8 accept the Prepackaged Plan, on the Effective Date, without
regard to the subordination provisions in the Senior Debenture Indenture but
giving effect to the rights of Senior Debt, each holder of an Allowed Claim in
Class 5 shall receive its pro rata share of 9,359,208 shares of Common Stock so
that collectively Class 5 Claims shall hold 80% of the outstanding shares of the
Common Stock of the Reorganized Debtor on the Effective Date. If Class 6, 7, or
8 fails to accept the Prepackaged Plan, the holders of the Senior Debentures
shall enforce the subordination provisions of the Senior Debenture Indenture
with respect to such rejecting Class of Claims and/or Interests and the
Prepackaged Plan shall be deemed automatically amended pursuant to Article V.
4.6 SUBORDINATED DEBENTURES. Class 6 Claims are Impaired. Subject to
Article V, on the Effective Date, each holder of an Allowed Claim in Class 6
shall receive its pro rata share of 1,169,901 shares of Common Stock so that
collectively Class 6 Claims shall hold 10% of the outstanding shares of the
Common Stock of the Reorganized Debtor on the Effective Date.
4.7 PREFERRED STOCK. Class 7 Interests are Impaired. Subject to Article V,
on the Effective Date, after giving effect to the Capital Stock Combination and
the Reverse Stock Split, each holder of an Allowed Interest in Class 7 shall be
deemed to hold on a one and three quarter for one (1.75:1) basis Common Stock.
4.8 CLASS A COMMON STOCK. Class 8 Interests are Impaired. Subject to
Article V, on the Effective Date, after giving effect to the Capital Stock
Combination and the Reverse Stock Split, each holder of an Allowed Interest in
Class 8 shall be deemed to hold on a one for one (1:1) basis Common Stock.
4.9 WARRANTS. Class 9 Interests are Impaired. On the Effective Date, all
outstanding warrants shall be cancelled.
4.10 ACCRUAL OF INTEREST. Distributions of Common Stock to holders of
Outstanding Debentures will be based upon the principal amount of the
Outstanding Debentures as of the Petition Date plus interest accrued through the
Petition Date at the applicable non-default rate.
4.11 FRACTIONAL SHARES. (a) CAPITAL STOCK COMBINATION AND REVERSE STOCK
SPLIT. If the Capital Stock Combination or the Reverse Stock Split creates a
fraction of a share of Common Stock, holders of an Allowed Class 7 or 8
Interest, respectively, shall not receive or be deemed to hold any fractional
shares. All fractional shares which would otherwise have been created by the
Capital Stock Combination or the Reverse Stock Split shall be aggregated and
after the Effective Date, such shares shall be sold in the
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market by the Exchange Agent and the net proceeds thereof disbursed pro rata to
the holders of Allowed Class 7 and 8 Interests based upon the fraction of the
shares each holder would have been entitled to receive or would have been deemed
to hold had the Company authorized the issuance of fractional shares.
(b) DEBENTURE EXCHANGE. Whenever any distribution of a fraction of a share
of Common Stock to any holder of an Allowed Class 5 or 6 Claim would otherwise
be called for, all such fractional shares will be aggregated and after the
Effective Date, the shares will be sold in the market by the Exchange Agent and
the net proceeds thereof disbursed prorata to the holders of Allowed Class 5 and
Class 6 Claims based upon the fraction of the shares each such holder would have
been entitled to receive or deemed to hold had the Company authorized the
issuance of fractional shares.
ARTICLE V
REALLOCATION OF DISTRIBUTIONS FOR NONCONSENSUAL CONFIRMATION
5.1 HOLDERS OF SUBORDINATED DEBENTURES FAIL TO ACCEPT THE PREPACKAGED
PLAN. In the event that the holders of Allowed Claims in Class 6 shall, as a
Class, fail to accept the Prepackaged Plan as set forth in Section 6.3 of the
Prepackaged Plan, then (a) the Prepackaged Plan shall be deemed automatically
amended without further action by the Debtor such that (i) the distributions
which would otherwise have been made in accordance with Section 4.6 of the
Prepackaged Plan shall be made to holders of Allowed Claims in Class 5, (ii) the
holders of Allowed Claims in Class 6 shall receive no distributions nor retain
any property under the Prepackaged Plan on account of such Allowed Claims, (iii)
the existing Subordinated Debentures held by holders of Class 6 Allowed Claims
shall be deemed to be cancelled, and (iv) such holders shall be deemed to have
rejected the Prepackaged Plan pursuant to section 1126(g) of the Bankruptcy
Code; and (b) the Debtor shall seek to confirm the Prepackaged Plan as so
automatically amended pursuant to this Article, in accordance with section
1129(b) of the Bankruptcy Code.
5.2 HOLDERS OF PREFERRED STOCK FAIL TO ACCEPT THE PREPACKAGED PLAN. In the
event that the holders of Allowed Interests in Class 7 shall, as a Class, fail
to accept the Prepackaged Plan as set forth in Section 6.3 of the Prepackaged
Plan, then (a) the Prepackaged Plan shall be deemed automatically amended
without further action by the Debtor such that (i) the Common Stock which would
otherwise have been retained by the holders of the Preferred Stock in accordance
with Section 4.7 of the Prepackaged Plan shall be delivered by the Exchange
Agent to holders of Allowed Claims in Class 5, (ii) the holders of Allowed
Interests in Class 7 shall receive no distributions nor retain any property
under the Prepackaged Plan on account of such Allowed Interests, (iii) the
Preferred Stock held by holders of Allowed Interests in Class 7 shall be deemed
to be cancelled and, (iv) such holders shall be deemed to have rejected the
Prepackaged Plan pursuant to section 1126(g) of the Bankruptcy Code; and (b) the
Debtor shall seek to confirm the Prepackaged Plan as so automatically amended
pursuant to this Article, in accordance with section 1129(b) of the Bankruptcy
Code.
5.3 HOLDERS OF CLASS A COMMON STOCK FAIL TO ACCEPT THE PREPACKAGED
PLAN. In the event that the holders of Allowed Interests in Class 8 shall, as a
Class, fail to accept the Prepackaged Plan as set forth in Section 6.3 of the
Prepackaged Plan, then (a) the Prepackaged Plan shall be deemed automatically
amended without further action by the Debtor such that (i) the Common Stock
which would otherwise have been retained by the holders of the Class A Common
Stock in accordance with Section 4.8 of the Prepackaged Plan shall be delivered
by the Exchange Agent to holders of Allowed Claims in Class 5, (ii) the holders
of Allowed Interests in Class 8 shall receive no distributions nor retain any
property under the Prepackaged Plan on account of such Allowed Interests, (iii)
the Class A Common Stock held by holders of Allowed Interests in Class 8 shall
be deemed to be cancelled, and (iv) such holders shall be deemed to have
rejected the Prepackaged Plan pursuant to section 1126(g) of the Bankruptcy
Code; and (b) the Debtor shall seek to confirm the Prepackaged Plan as so
automatically amended pursuant to this Article, in accordance with section
1129(b) of the Bankruptcy Code.
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ARTICLE VI
ACCEPTANCE OR REJECTION OF THE PLAN
6.1 UNIMPAIRED CLASSES. The Allowed Claims in Classes 1, 2 and 3 are
Unimpaired under the Prepackaged Plan and the holders of such Allowed Claims are
conclusively presumed to have accepted the Prepackaged Plan.
6.2 IMPAIRED CLASSES TO VOTE ON PREPACKAGED PLAN. The Allowed Claims in
Classes 5 and 6 and the Allowed Interests in Classes 7 and 8 are Impaired;
consequently, the holders in such Classes are entitled to vote to accept or
reject the Prepackaged Plan. The holders of Allowed Interests in Classes 4 and 9
are conclusively presumed to have rejected the Prepackaged Plan. The Company
shall cause the holders of Class 4 Claims (which it controls) to support the
Prepackaged Plan.
6.3 ACCEPTANCE BY IMPAIRED CLASSES. An Impaired Class of Claims shall have
accepted the Prepackaged Plan if the Prepackaged Plan is accepted by the holders
(other than any holder designated under section 1126(e) of the Bankruptcy Code)
that hold at least two-thirds (2/3) in amount and more than one-half (1/2) in
number of the Allowed Claims of such Class that have voted to accept or reject
the Prepackaged Plan. An Impaired Class of Interests shall have accepted the
Prepackaged Plan if the Prepackaged Plan is accepted by the holders (other than
any holder designated under section 1126(e) of the Bankruptcy Code) that hold at
least two-thirds (2/3) in amount of the Allowed Interests of such Class that
have voted to accept or reject the Prepackaged Plan.
6.4 NONCONSENSUAL CONFIRMATION/CRAMDOWN. In the event that any Impaired
Class of Claims or Class of Interests shall fail to accept the Prepackaged Plan
in accordance with Section 1129(a)(8) of the Bankruptcy Code, the Debtor
reserves the right to (i) seek to have the Court confirm the Prepackaged Plan in
accordance with Section 1129(b) of the Bankruptcy Code, or (ii) modify the
Prepackaged Plan in accordance with Section 13.5 of the Prepackaged Plan.
ARTICLE VII
MEANS FOR IMPLEMENTATION OF THE PLAN
7.1 CONTINUED CORPORATE EXISTENCE AND VESTING OF ASSETS IN THE REORGANIZED
DEBTOR. The Debtor shall, as a Reorganized Debtor, continue to exist after the
Effective Date as a separate corporate entity, with all powers of a corporation
under the laws of the State of Delaware and without prejudice to any right to
alter or terminate such existence (whether by merger or otherwise) under such
applicable state law. Except as otherwise expressly provided in the Prepackaged
Plan on the Confirmation Date, the Reorganized Debtor shall be vested with all
of the property of the Estate free and clear of all claims, liens, encumbrances,
charges and other interests of creditors and equity security holders, and may
operate its businesses free of any restrictions imposed by the Bankruptcy Code
or by the Court, including, without limitation, any contracts or leases entered
into or assumed by the Debtor after the Petition Date; PROVIDED, HOWEVER, that
the Reorganized Debtor shall continue as a debtor in possession under the
Bankruptcy Code until the Effective Date, and, thereafter, the Reorganized
Debtor may operate its business free of any restrictions imposed by the
Bankruptcy Code or the Court.
7.2 EXCHANGE AGENT. The Debtor may designate an entity or entities to
serve as Exchange Agent to distribute all the property to be distributed under
the Prepackaged Plan, including, without limitation, the delivery of the Common
Stock in exchange for the Outstanding Debentures and as replacement for the
Preferred Stock and Class A Common Stock.
7.3 PREPACKAGED PLAN IMPLEMENTATION STEPS. On or as soon as practicable
after the Effective Date (unless otherwise expressly indicated), the following
actions shall be effectuated in the following sequential order:
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(a) AMENDMENTS TO CERTIFICATE OF INCORPORATION. The Reorganized Debtor
shall file its Amended and Restated Certificate with the office of the
Secretary of State of the State of Delaware in accordance with Section 103
of the Delaware General Corporation Law. The Amended and Restated
Certificate will, among other things, provide (to the extent necessary to
effectuate the terms of the Prepackaged Plan) for (i) the prohibition of the
issuance of non-voting equity securities, (ii) the authorization of 18
million shares of Common Stock, (iii) the Reverse Stock Split, (iv) the
Capital Stock Combination, (v) the elimination of the provisions providing
for the Company's Board of Directors to be classified into three classes
with staggered terms, (vi) the removal of all supermajority voting
provisions, and (vii) the elimination of the provisions prohibiting stock
holders from acting by written consent.
(b) AMENDMENTS TO BYLAWS. The Reorganized Debtor shall adopt and effect
the Amended and Restated Bylaws which shall provide for, among other things,
(i) the elimination of the provisions providing for the Company's Board of
Directors to be classified into three classes with staggered terms, and (ii)
the removal of all supermajority voting provisions.
(c) CAPITAL STOCK COMBINATION. To the extent necessary to effectuate the
Prepackaged Plan, the Reorganized Debtor shall effect the Capital Stock
Combination whereby the Class A Common Stock, Class B Common Stock (none of
which is outstanding), and Preferred Stock are combined into one (1) class
and series designated "Common Stock" having the same rights that the Class A
Common Stock had prior to the Capital Stock Combination. Pursuant to the
Capital Stock Combination, each share of outstanding Preferred Stock will be
reclassified to be one and three quarter (1.75) shares of Common Stock and
each outstanding share of Class A Common Stock will be reclassified to be
one share of Common Stock.
(d) REVERSE STOCK SPLIT. To the extent necessary to effectuate the
Prepackaged Plan, the Reorganized Debtor shall effect the Reverse Stock
Split.
(e) DELIVERY OF AUTHORIZED SHARES. The Reorganized Debtor shall deliver
the shares of Common Stock authorized for issuance to the Exchange Agent for
delivery to the holders of Allowed Claims and Allowed Interests in
accordance with the Prepackaged Plan.
(f) DEBENTURE EXCHANGE. The Exchange Agent shall deliver to holders of
Outstanding Debentures and Other Class 5 Claims, Common Stock in accordance
with the Prepackaged Plan.
(g) 1993 STOCK OPTION PLAN. The Reorganized Debtor shall execute an
amendment to the 1993 Stock Option Prepackaged Plan which shall be
substantially in the form attached as Exhibit 3.
7.4 EXCHANGE OF PREFERRED AND COMMON STOCK. Subject to Article V, upon
presentment of certificates evidencing Preferred Stock and Class A Common Stock,
the Exchange Agent shall deliver to holders thereof, Common Stock.
7.5 CANCELLATION OF SECURITIES AND AGREEMENTS. On the Effective Date, all
Outstanding Debentures, Class A Common Stock, Class B Common Stock (none of
which is outstanding), Preferred Stock and warrants shall be cancelled. Also, on
the Effective Date, the Senior Debenture Indenture and the Subordinated
Debenture Indenture shall be cancelled.
7.6 DIRECTORS. After giving effect to the Amended and Restated Certificate
and the Amended and Restated Bylaws, there shall be a declassification of the
Board of Directors of the Company. The Reorganized Debtor's Board of Directors
shall be comprised of ten (10) directors, four (4) of whom are present directors
of the Company and six (6) of whom shall be designated by the members of the
Debenture Holders' Committee in consultation with the Debtor. The names of the
present directors and director nominees are set forth in the Prospectus. Any
changes from that set forth in the Prospectus shall be disclosed at or prior to
the hearing to consider confirmation of the Prepackaged Plan. All such directors
shall be deemed elected, and those directors not continuing in office shall be
deemed removed therefrom,
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effective on the Effective Date, pursuant to the Confirmation Order. Such
directors' tenure and the manner of selection of new directors shall be as
provided in the Amended and Restated Certificate and the Amended and Restated
Bylaws.
7.7 OFFICERS. On the Effective Date, the existing officers of the
Reorganized Debtor shall be retained and shall remain as officers and shall
continue to serve until such time as they may resign, be removed or be replaced.
7.8 EMPLOYMENT CONTRACTS. From and after the Effective Date, the
Reorganized Debtor may enter into employment contracts with its respective
officers, agents or employees.
7.9 SECTION 1145. The shares of Common Stock issued pursuant to the
Prepackaged Plan shall be issued pursuant to the exemption from securities
registration contained in section 1145 of the Bankruptcy Code.
7.10 CORPORATE ACTION. The adoption of the Amended and Restated
Certificate, the Amended and Restated Bylaws, the selection of directors and
officers for the Reorganized Debtor, the issuance and distribution of the Common
Stock, execution and delivery of all contracts, leases, instruments, releases,
and other agreements related to any of the foregoing; and the other matters
provided for under the Prepackaged Plan involving the corporate action to be
taken by or required of the Reorganized Debtor shall be deemed to have occurred
and be effective as provided herein, and shall be authorized and approved in all
respects without any requirement of further action by stockholders or directors
of the Debtor or Reorganized Debtor.
7.11 SOURCES OF CASH FOR PREPACKAGED PLAN DISTRIBUTION. All Cash necessary
for the Reorganized Debtor to make payments pursuant to the Prepackaged Plan
shall be obtained from existing Cash balances, under existing debt agreements,
the operations of the Debtor or Reorganized Debtor, or from the sale of
fractional shares of Common Stock as described in Section 4.11(a) of the
Prepackaged Plan. The Reorganized Debtor may also make such payments using Cash
received from its subsidiaries in the ordinary course of its business, either by
way of advances or dividends.
ARTICLE VIII
CONDITIONS PRECEDENT
8.1 CONDITIONS TO CONFIRMATION. It is a condition to confirmation of the
Prepackaged Plan that the Confirmation Order include provisions:
(a) authorizing the Reorganized Debtor to adopt and file the Amended and
Restated Certificate;
(b) authorizing the Reorganized Debtor to adopt and effect the Amended
and Restated Bylaws;
(c) authorizing the Capital Stock Combination;
(d) authorizing the Reverse Stock Split;
(e) authorizing the Reorganized Debtor to issue authorized shares of
Common Stock and to deliver such shares to the Exchange Agent;
(f) authorizing and directing the Exchange Agent to deliver the Common
Stock to holders of Other Class 5 Claims, the Outstanding Debentures, the
Preferred Stock and the Class A Common Stock in accordance with the
Prepackaged Plan and to sell aggregated fractional shares and to distribute
the proceeds in accordance with Section 4.11 of the Prepackaged Plan;
(g) authorizing the Reorganized Debtor to amend and assume the 1993
Stock Option Plan;
(h) giving effect to the releases set forth in Section 9.4 of the
Prepackaged Plan;
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(i) giving effect to the injunction set forth in Section 9.5 of the
Prepackaged Plan;
(j) authorizing all of the other transactions contemplated by the
Prepackaged Plan in order to effectuate the Prepackaged Plan; and
(k) making the provisions of the Confirmation Order non-severable and
mutually dependent.
8.2 CONDITIONS TO CONSUMMATION. The Confirmation Order shall contain the
provisions set forth in Section 8.1 of the Prepackaged Plan and the Confirmation
Order shall have become a Final Order before the Prepackaged Plan will be
consummated.
8.3 WAIVER OF CONDITIONS. The Debtor may waive any condition set forth in
this Article VIII at any time, without notice, without leave of or order of the
Court, and without any formal action other than proceeding to consummate the
Prepackaged Plan.
ARTICLE IX
EFFECTS OF PLAN CONFIRMATION
9.1 DISCHARGE. Except as otherwise expressly provided in the Prepackaged
Plan, the confirmation of the Prepackaged Plan shall (i) bind all holders of
Claims and Interests, whether or not they accept the Prepackaged Plan, and (ii)
discharge and release, pursuant to section 1141(d)(1) of the Bankruptcy Code,
the Debtor effective immediately from any Claim, Interest or any "debt" (as that
term is defined in section 101(12) of the Bankruptcy Code) that arose or was
incurred before the Confirmation Date, and completely extinguish the Debtor's
and the Reorganized Debtor's liability in respect thereof, including, without
limitation, any liability of a kind specified in section 502(g) of the
Bankruptcy Code, regardless of whether: (a) a proof of the Claim or Interest was
filed, or the Interest or Claim was scheduled by the Debtor, (b) the Claim or
Interest is an Allowed Claim or Allowed Interest, as the case may be, or (c) the
holder of such Claim or Interest voted to accept or reject, or abstained from
voting on, the Prepackaged Plan. In addition, except as otherwise provided in
the Prepackaged Plan, confirmation of the Prepackaged Plan pursuant to the
Confirmation Order acts as a discharge and release, effective as of the
Confirmation Date, as to each holder of a Claim or Interest receiving or
entitled to receive any distribution under the Prepackaged Plan in respect of
any direct or indirect right, Claim or Interest such holder had or may have had
against or in the Debtor. On and after the Confirmation Date, as to every
discharged Claim and Interest, every holder of a Claim and Interest shall be
precluded from asserting against the Debtor or the Reorganized Debtor or its
assets or properties any further Claim or Interest based on any document or
instrument or act, omissions, transaction or other activity of any kind or
nature that occurred prior to the Confirmation Date.
9.2 RETENTION OF CAUSES OF ACTION/RESERVATION OF RIGHTS.
(a) Nothing contained in the Prepackaged Plan or the Confirmation Order
shall be deemed to be a waiver or relinquishment of any rights or causes of
action that the Debtor or the Reorganized Debtor may have currently or which
the Reorganized Debtor may choose to assert on behalf of the Estate under
any provision of the Bankruptcy Code or any similar applicable
non-bankruptcy law, including, without limitation, (i) the avoidance of any
transfer by or obligation of the Company or the Debtor or (ii) the turnover
of any property to the Estate, all of which are expressly reserved by the
Prepackaged Plan.
(b) Nothing contained in the Prepackaged Plan or the Confirmation Order
shall be deemed to be a waiver or relinquishment of any claim, cause of
action, right of setoff, or other legal or equitable defense which the
Company had immediately prior to the Petition Date, against or with respect
to any Claim left unaltered or Unimpaired by the Prepackaged Plan. The
Reorganized Debtor shall have, retain, reserve and be entitled to assert all
such claims, causes of action, rights of setoff and other legal or equitable
defenses which it had immediately prior to the Petition Date fully as if the
Chapter 11 Case had not been commenced; and all of the Reorganized Debtor's
legal and equitable rights respecting any Claim left unaltered or Unimpaired
by the Prepackaged Plan may be asserted after the Confirmation Date to the
same extent as if the Chapter 11 Case had not been commenced.
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9.3 POST-CONSUMMATION EFFECT OF EVIDENCES OF CLAIMS OR
INTERESTS. Outstanding Debentures, stock certificates and other evidences of
Claims against or Interests in the Debtor shall, effective upon the Effective
Date, represent only the right to participate in the distributions contemplated
by the Prepackaged Plan.
9.4 RELEASE. Except as otherwise expressly provided in the Prepackaged
Plan, on the Effective Date, in consideration for, or as part of, the treatment
accorded to the holders of Claims and Interests under the Prepackaged Plan, each
holder of a Claim or Interest against or in the Debtor shall be deemed to have
released the Debtor from any and all causes of action and claims, in law or in
equity, whether based on tort, fraud, contract or otherwise, which they
individually or collectively theretofore or thereafter possessed or may possess.
9.5 LIMITED RELEASE OF DIRECTORS, OFFICERS AND EMPLOYEES. As of the
Effective Date, the Debtor shall be deemed to have waived and released its
present and former directors, officers and employees from any and all claims of
the Debtor (including claims which the Debtor or Debtor in Possession otherwise
has legal power to assert, compromise or settle in connection with its Chapter
11 Case) arising on or prior to the Effective Date; PROVIDED HOWEVER, that this
provision shall not operate as a waiver or release of any claim (i) in respect
to any loan, advance or similar payment by the Debtor to any such person, (ii)
in respect of any contractual obligation owed by such person to the Debtor, or
(iii) or to the extent based upon or attributable to such person gaining in fact
a personal profit to which such person was not legally entitled, including,
without limitation, profits made from the purchase or sale of equity securities
of the Debtor which are recoverable by the Debtor pursuant to section 16(b) of
the Securities Exchange Act of 1934, as amended.
9.6 TERM OF INJUNCTIONS OR STAYS. Unless otherwise provided, all
injunctions or stays provided for in the Reorganization Case pursuant to section
105 or 362 of the Bankruptcy Code or otherwise in effect on the Confirmation
Date shall remain in full force and effect until the Effective Date.
9.7 EXCULPATION. Neither the Company, the Reorganized Debtor nor any of
their respective officers, directors, employees, advisors, agents or
representatives shall have or incur any liability to any holder of a Claim or
Interest for any act or omission in connection with or arising out of their
solicitation of votes on or their administration of the Prepackaged Plan or the
property to be distributed under the Prepackaged Plan except for any liabilities
which may arise under the statutes or regulations administered by the Securities
and Exchange Commission or from willful misconduct or gross negligence, and, in
all respects, shall be entitled to rely upon the advice of counsel with respect
to their duties and responsibilities under the Prepackaged Plan.
ARTICLE X
CONTESTED CLAIMS AND CONTESTED INTERESTS
10.1 OBJECTIONS TO CLAIMS AND INTERESTS. The Debtor may object to the
allowance of Claims or Interests filed with the Bankruptcy Court. From and after
the Effective Date, the Reorganized Debtor, or any entity chosen by the
Reorganized Debtor, shall have the exclusive responsibility for reviewing and
objecting to the allowance of Claims and Interests. All objections shall be
litigated to a Final Order; PROVIDED, HOWEVER, that the Debtor or the
Reorganized Debtor, as the case may be, may compromise and settle any objections
to Claims or Interests, subject to the approval of the Court, and may seek Court
estimation of Contested Claims or Contested Interests pursuant to section 502(c)
of the Bankruptcy Code.
10.2 DISTRIBUTIONS. At such time as a Contested Claim or Contested
Interest becomes an Allowed Claim or Allowed Interest, in whole or in part, the
holder of such Claim or Interest shall receive the property that would have been
distributed to such holder under the Prepackaged Plan if such Allowed Claim or
Allowed Interest was an Allowed Claim or Allowed Interest on the Effective Date.
Such distributions shall be made as soon as practicable after the date that the
order or judgment of the Court allowing such Claim or Interest becomes a Final
Order.
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ARTICLE XI
TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES
11.1 ASSUMPTION OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES. On the
Effective Date, and to the extent permitted by applicable law all executory
contracts and unexpired leases of the Debtor shall be assumed in accordance with
the provisions of section 365 and section 1123 of the Bankruptcy Code, excluding
(a) any and all executory contracts or unexpired leases which are the subject of
separate motions filed pursuant to section 365 of the Bankruptcy Code by the
Debtor prior to the commencement of the hearing on confirmation of the
Prepackaged Plan, (b) such contracts or leases as are listed on any "Schedule of
Rejected Executory Contracts and Unexpired Leases" filed by the Debtor on or
before entry of the Confirmation Order, all of which contracts or leases shall
be deemed rejected pursuant to the provisions of section 365 and section 1123 of
the Bankruptcy Code, and (c) any and all executory contracts or unexpired leases
rejected prior to entry of the Confirmation Order.
Contracts or leases entered into after the Petition Date will be performed
by the Reorganized Debtor in the ordinary course of business. Without limiting
the generality of the foregoing, the agreements set forth on Exhibit 4 attached
hereto will be deemed assumed immediately prior to the Effective Date in
accordance with the provisions and requirements of sections 365 and 1123 of the
Bankruptcy Code.
11.2 CLAIMS BASED ON REJECTION OF EXECUTORY CONTRACTS OR UNEXPIRED
LEASES. Any Claims arising out of the rejection of contracts or leases must be
filed with the Court within the time set by any Final Order rejecting an
executory contract or unexpired lease or 30 days after the Confirmation Date.
Any Claims not filed within such time will be forever barred from assertion
against the Debtor or Reorganized Debtor, its estate and property. Unless
otherwise ordered by the Bankruptcy Court or provided in this Prepackaged Plan,
all such Claims for which proofs of Claim are required to be filed will be
treated as General Unsecured Claims.
11.3 INDEMNIFICATION OBLIGATIONS. Notwithstanding any provision of the
Prepackaged Plan to the contrary, the obligations of the Company or the Debtor
to indemnify its present and former directors, controlling persons, officers,
affiliates, employees, advisors or agents against any obligations pursuant to
its Amended and Restated Certificate, Amended and Restated Bylaws, applicable
state law or specific agreement, or any combination of the foregoing, shall
survive confirmation of the Prepackaged Plan, remain unaffected thereby, and not
be discharged, irrespective of whether indemnification is owed in connection
with an event occurring before or after the Petition Date.
ARTICLE XII
RETENTION OF JURISDICTION
12.1 RETENTION OF JURISDICTION. Notwithstanding the entry of the
Confirmation Order or the Effective Date having occurred, the Court shall retain
jurisdiction to (a) determine any Contested Claims, (b) determine requests for
payment of Claims entitled to priority under section 507(a)(1) of the Bankruptcy
Code, including compensation of and reimbursement of expenses of parties
entitled thereto, (c) resolve controversies and disputes regarding
interpretation and implementation of the Prepackaged Plan, (d) enter orders in
aid of the Prepackaged Plan, including, without limitation, appropriate orders
(which may include contempt or other sanctions) to protect the Debtor and the
Reorganized Debtor, (e) modify the Prepackaged Plan pursuant to Section 13.6 of
the Prepackaged Plan, (f) determine any and all applications, adversary
proceedings and contested or litigated matters pending on the Effective Date,
(g) allow, disallow, estimate, liquidate or determine any Claim or Interest and
to enter or enforce any order requiring the filing of any such Claim before a
particular date, (h) determine any and all pending applications for the
rejection or disaffirmance of executory contracts or leases, or for the
assignment of assumed executory contracts and leases, and to hear and determine,
and if need to be liquidate, any and all Claims arising therefrom, (i) determine
any actions or controversies arising under or in connection with the Prepackaged
Plan, the Prospectus, the Confirmation Order, or any contract, instrument,
release, or other agreement created in connection with the Prepackaged Plan or
the Prospectus, (j) enter and
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<PAGE>
implement orders as are necessary or appropriate if the Confirmation Order is
for any reason modified, stayed, reversed, revoked or vacated, and (k) enter a
final decree closing the Reorganization Case.
12.2 FAILURE OF COURT TO EXERCISE JURISDICTION. If the Court abstains from
exercising or declines to exercise jurisdiction, or is otherwise without
jurisdiction over any matter arising out of the Reorganization Case, including
the matters set forth in this Article XII, this Article shall not prohibit or
limit the exercise of jurisdiction by any other court having competent
jurisdiction with respect to such matter.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
13.1 DISTRIBUTION RECORD DATE. As of the close of business on the
Distribution Record Date, the respective transfer registers for each of the
Impaired Securities in Classes 5, 6, 7 and 8 as maintained by the Debtor, the
respective Indenture Trustees, or their respective agents, shall be closed and
the transfers of Impaired Securities, or any interest therein, will be
prohibited. Moreover, the Exchange Agent shall have no obligation to recognize
the transfer of any Impaired Securities in such Classes occurring after the
Distribution Record Date, and shall be entitled for all purposes herein to
recognize and deal only with those holders of record as of the close of business
on the Distribution Record Date.
13.2 SURRENDER OF INSTRUMENTS--DEBENTURE HOLDERS. As a condition to
participation under the Prepackaged Plan, each holder of an Outstanding
Debenture evidencing a Claim that desires to receive the Common Stock to be
distributed on account of an Allowed Claim based on such debenture shall
surrender such debenture to the Reorganized Debtor, or its designee, and shall
execute and deliver such other documents as are necessary to effectuate the
Prepackaged Plan. If such debenture is not surrendered and the holder does not
provide an affidavit that such debenture was lost, and any other required
documents, all in form and substance satisfactory to the Reorganized Debtor,
within years of the Effective Date, then no distribution will be made to such
holder whose Allowed Claim is based on such debenture. Such holder shall be
deemed to forfeit all rights under the Prepackaged Plan.
13.3 UNCLAIMED DISTRIBUTIONS. If any holder of Outstanding Debentures
entitled to Common Stock directly from the Exchange Agent under the Prepackaged
Plan cannot be located on the Effective Date, such securities shall be set aside
and maintained by the Exchange Agent. If such person is located within years
of the Effective Date, such securities shall be distributed to such person. If
such person cannot be located within years of the Effective Date, any such
securities shall become the property of and shall be released to the Reorganized
Debtor; PROVIDED, HOWEVER, that nothing contained in this Prepackaged Plan shall
require the Reorganized Debtor to attempt to locate such person.
13.4 RETIREE BENEFITS. On and after the Effective Date, pursuant to
section 1129(a)(13) of the Bankruptcy Code, the Reorganized Debtor shall
continue to be obligated to pay all retiree benefits, as that term is defined in
section 1114 of the Bankruptcy Code, and shall continue to pay such retiree
benefits as they become due at the level established at any time prior to
confirmation of the Prepackaged Plan pursuant to subsection (e)(1)(B) or (g) of
section 1114, for the duration of the period the Debtor has obligated itself to
provide such benefits.
13.5 MODIFICATION OF PREPACKAGED PLAN. The Debtor reserves the right, in
accordance with the Bankruptcy Code, to amend or modify the Prepackaged Plan
prior to the entry of the Confirmation Order. After the entry of the
Confirmation Order, the Reorganized Debtor may, upon order of the Court, amend
or modify the Prepackaged Plan in accordance with section 1127(b) of the
Bankruptcy Code, or remedy any defect or omission or reconcile any inconsistency
in the Prepackaged Plan in such manner as may be necessary to carry out the
purpose and intent of the Prepackaged Plan.
13.6 WITHDRAWAL OF PREPACKAGED PLAN. The Debtor reserves the right, at any
time prior to the entry of the Conformation Order, to revoke and withdraw the
Prepackaged Plan. If the Debtor revokes or withdraws the Prepackaged Plan under
this section, or if entry of the Confirmation Order does not occur, then the
Prepackaged Plan shall be deemed null and void. In that event, nothing contained
in the Prepackaged Plan shall be deemed to constitute a waiver or release of any
Claims by or against or any
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Interests in the Debtor or to prejudice in any manner the rights of the Debtor
in any further proceedings involving the Debtor.
13.7 TAX PROVISIONS. Pursuant to section 1146(c) of the Bankruptcy Code,
the issuance, transfer or other exchange of a security, or the making or
delivery of an instrument of transfer under the Prepackaged Plan, shall not be
taxed under any state or local law imposing a stamp tax or similar tax.
13.8 PAYMENT DATES. Whenever any payment to be made under the Prepackaged
Plan is due on a day other than a Business Day, such payment will instead by
made, without interest, on the next Business Day.
13.9 HEADINGS. The headings used in this Prepackaged Plan are inserted for
convenience only and neither constitute a portion of the Prepackaged Plan nor in
any manner affect the provisions of the Prepackaged Plan.
13.10 SUCCESSORS AND ASSIGNS. The rights, benefits and obligations of any
person or entity named or referred to in the Prepackaged Plan shall be binding
upon, and shall inure to the benefit of, the heir, executor, administrator,
successor or assign of such person.
13.11 PAYMENT OF STATUTORY FEES. All fees payable pursuant to section 1930
of Title 28 of the United States Code, as determined by the Bankruptcy Court at
the hearing pursuant to section 1128 of the Bankruptcy Code, shall be paid on or
before the Effective Date.
13.12 GOVERNING LAW. Except to the extent that the Bankruptcy Code, the
Bankruptcy Rules or other federal law is applicable, the rights, duties and
obligations arising under the Prepackaged Plan shall be governed by, and
construed and enforced in accordance with, the laws of the State of Delaware.
Dated: , 1997
Newport Beach, California
KOLL REAL ESTATE GROUP, INC.
By:
--------------------------------------
Name: Raymond J. Pacini
Title: Executive Vice President and
Chief Financial Officer
Robert J. Dehney, Esq.
MORRIS, NICHOLS, ARSHT & TUNNELL
By:
--------------------------------------
Attorneys for Debtor and
Debtor-in-Possession
Brian S. Hucker, P.C., Esq.
Gregory W. Preston, Esq.
McDERMOTT, WILL & EMERY
By:
--------------------------------------
Attorneys for Debtor and
Debtor-in-Possession
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<PAGE>
EXHIBIT 1
[TO BE FILED]
A-19
<PAGE>
EXHIBIT 2
[TO BE FILED]
A-20
<PAGE>
EXHIBIT 3
[TO BE FILED]
A-21
<PAGE>
EXHIBIT 4
[TO BE FILED]
A-22
<PAGE>
Consents and Letters of Transmittal, Master Ballots, Ballots and Proxies
should be sent by the respective holders of Outstanding Debentures, Preferred
Stock, Common Stock, Impaired Claims and Impaired Interests or by the respective
broker, dealer, commercial bank, trust company or other nominee of such
entities, to the Exchange Agent at the address set forth below:
The Exchange Agent:
CHASEMELLON SHAREHOLDER SERVICES, INC.
By Hand or Overnight Courier: By Facsimile:
120 Broadway (201) 329-8936
13th Floor Telephone:
New York, New York 10271 (201) 296-4209
Attn: Reorganization Dept. (201) 296-4381
By Mail:
P.O. Box 3301
South Hackensack, NJ 07606
Attn: Reorganization Dept.
Any questions or requests for assistance with respect to the Exchange
Offers, Consent Solicitation, Annual Meeting or the Prepackaged Plan or requests
for additional copies of this Prospectus, the Consent and Letter of Transmittal,
Master Ballots, Ballots or Proxies may be directed to the Information Agent at
its address or telephone number set forth below. Holders of Outstanding
Debentures, Preferred Stock or Common Stock may also contact their broker,
dealer, commercial bank, trust company or other nominee, as applicable
concerning the Exchange Offers, Consent Solicitation, Annual Meeting or the
Prepackaged Plan.
THE INFORMATION AGENT:
Georgeson & Company, Inc.
Wall Street Plaza
88 Pine Street
30th Floor
New York, NY 10005
Call Toll Free (800) 223-2064
<PAGE>
KOLL REAL ESTATE GROUP, INC.
4343 VON KARMAN AVENUE
NEWPORT BEACH, CALIFORNIA 92660
April , 1997
Dear Securities holder:
The enclosed Proxy Statement/Prospectus and Disclosure Statement provides a
detailed description of the proposed recapitalization of Koll Real Estate Group,
Inc. (the "Company"). The Company intends to complete the recapitalization
through the Exchange Offers and is hereby soliciting its Debentureholders to
tender a minimum of 90% of the aggregate face amount of outstanding 12% Senior
Subordinated Pay-In-Kind Debentures due March 15, 2002 ("Senior Debentures") and
12% Subordinated Pay-In-Kind Debentures due March 15, 2002 ("Subordinated
Debentures"). The Exchange Offers provide that Senior Debenture holders and
Subordinated Debentureholders will receive 56 shares and 28 shares,
respectively, for each $1,000 principal amount outstanding as of March 15, 1997,
which would result in approximately 80% and 10% of the Company's newly issued
common stock being held by the Senior Debentureholders and Subordinated
Debentureholders, respectively, if 100% of the Debentures are tendered.
Concurrently, the Company is seeking the approval of its common and
preferred stockholders to ratify the Exchange Offers and related proposals,
which would result in approximately 4.2% and 5.8% of the Company's newly issued
common stock being held by current common and preferred stockholders,
respectively.
In the event that the 90% minimum tender condition is not satisfied, the
Company intends to file a Prepackaged Plan of Reorganization to complete the
recapitalization, provided that the Company has received the approval of 2/3 in
amount and greater than 50% in number of Senior Debentureholders actually voting
on the Prepackaged Plan. Therefore, the Company is also soliciting its
Debentureholders and stockholders for their acceptance of the Prepackaged Plan
described herein.
The only significant differences between completing the recapitalization
through the Exchange Offers and related transactions as compared with through
the Prepackaged Plan are (i) the Company's ability to utilize net operating loss
carryforwards ("NOLs") would be substantially restricted under the Exchange
Offers as further described in the Proxy Statement/Prospectus, and (ii) up to
10% of the Debentures may remain outstanding under the Exchange Offers, whereas
all of the Debentures would be converted to equity under the Prepackaged Plan.
However, the Company believes that the economic benefits to be derived by
preserving the NOLs and converting 100% of the Debentures under the Prepackaged
Plan would be substantially offset by the loss of business opportunities and
goodwill which may result from a Prepackaged bankruptcy.
Your Board of Directors has carefully reviewed and considered the terms and
conditions of the proposed Exchanged Offers and related transactions. The Board
believes that the Exchange Offers are fair to and in the best interest of Koll
Real Estate Group, Inc. and all of its stockholders, and unanimously recommends
that stockholders vote to ratify the Exchange Offers and approve the other
proposals described in the Proxy Statement/Prospectus.
The accompanying Proxy Statement/Prospectus provides a detailed description
of the Exchange Offers and the transactions contemplated thereby and the other
matters to be considered at the Annual Meeting. Please give this information
your careful attention.
Whether or not you are personally able to attend the Annual Meeting, please
complete, sign, date and return the enclosed proxy card and ballots as soon as
possible.
Sincerely,
[LOGO]
Donald M. Koll
Chairman and Chief Executive Officer
<PAGE>
KOLL REAL ESTATE GROUP, INC.
4343 VON KARMAN AVENUE
NEWPORT BEACH, CALIFORNIA 92660
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD , 1997
The annual meeting of stockholders (the "Annual Meeting") of Koll Real
Estate Group, Inc., a Delaware corporation (the "Company"), will be held at
, Delaware, on May , 1997, commencing at a.m., Eastern
Standard Time, to consider and act upon the following proposals relating to a
proposed recapitalization (the "Recapitalization") of the Company:
(1) A proposal (the "Exchange Offers Proposal") to ratify the terms of
the offers to exchange all outstanding 12% Senior Subordinated Pay-In-Kind
Debentures due March 15, 2002 and all outstanding 12% Subordinated
Pay-In-Kind Debentures due March 15, 2002 for shares of Common Stock, as
defined below, (collectively, the "Exchange Offers");
(2) To consider and act upon a proposal (the "Capital Stock Combination
Proposal") to amend Articles Fourth, Fifth and Sixth of the Company's
Restated Certificate of Incorporation ("Restated Certificate"), subject to
the consummation of the Recapitalization, to provide for a combination of
the Company's Class A Common Stock ("Class A Common Stock"), Class B Common
Stock and Series A Convertible Preferred Stock ("Preferred Stock") into one
class series of stock to be designated "Common Stock," whereby each
outstanding share of Preferred Stock will be reclassified to constitute one
and three quarter (1:75) shares of Common Stock and each outstanding share
of Class A Common Stock will be reclassified to be one (1) share of Common
Stock, and to provide for the elimination of the Board's authority to issue
classes or series of stock with preferences over the combined Common Stock
(the "Capital Stock Combination");
(3) To consider and act upon a proposal (the "Reverse Split Proposal")
to amend Article Fifth of the Restated Certificate to provide for a one for
one hundred (1:100) reverse stock split of each outstanding share of the
Company's capital stock (the "Reverse Stock Split");
(4) To consider and act upon a proposal to amend Article Fourth of the
Restated Certificate, subject to the consummation of the Recapitalization
and the approval and implementation of both the Capital Stock Combination
and Reverse Stock Split, to reduce the authorized capital stock to 18
million shares of the combined Common Stock (the "Authorized Capital
Proposal");
(5) To consider and act upon a proposal to amend the Restated
Certificate and the Company's Restated Bylaws (the "Bylaws"), subject to the
consummation of the Recapitalization, to delete provisions of Articles
Eighth and Thirteenth of the Restated Certificate and Articles III and XI of
the Bylaws currently providing for (i) the Board to be classified into three
classes with staggered terms,(ii) an 80% supermajority vote of the shares of
outstanding capital stock of the Company entitled to vote in elections of
directors in order to change the authorized number of directors by vote of
stockholders,(iii) a similar 80% supermajority vote in order to remove any
director for cause, and (iv) a similar 80% supermajority vote in order to
amend or repeal any of the above described provisions of the Restated
Certificate or Bylaws; and to increase the size of the Board from seven (7)
to ten (10) members, subject to the consummation of the Recapitalization
(the "Board Proposal");
(6) To consider and act upon a proposal to amend the Restated
Certificate and Bylaws, subject to the consummation of the Recapitalization,
to delete provisions of Articles Ninth and Thirteenth of the Restated
Certificate and Article XI of the Bylaws which currently provide that an 80%
supermajority vote of the shares of the outstanding capital stock of the
Company entitled to vote in elections of directors is required to amend or
repeal any provisions of Article Ninth of the Restated Certificate or
Article II, Section 3 of the Bylaws applicable to special meetings of the
stockholders of the Company and to amend Article Ninth of the Restated
Certificate and Article II, Section 3 of the Bylaws to permit stockholders
representing at least ten percent (10%) of outstanding shares of capital
stock of the Company entitled to vote in the election of directors to call a
special meeting of the Company's stockholders (the "Special Meetings
Proposal");
<PAGE>
(7) To consider and act upon a proposal to amend the Restated
Certificate, subject to the consummation of the Recapitalization, to delete
provisions of Article Tenth of the Restated Certificate which current
prohibit stockholders of the Company from acting by written consent and
which require an 80% supermajority vote of the shares of the outstanding
capital stock of the Company entitled to vote in elections of directors to
amend or repeal such provisions (the "Written Consent Proposal");
(8) To consider and act upon a proposal to elect a slate of director
nominees in the event the Recapitalization is consummated to reconstitute
the declassified Board or, if the Board is not declassified then to
reconstitute the classified Board, or in the event the Recapitalization is
not consummated, to elect incumbent directors otherwise up for election to
serve until the expiration of the terms of their respective classes and
until their respective successors are elected and qualified (the "Board
Election Proposal");
(9) To ratify the Company's selection of Deloitte & Touche LLP as the
Company's independent auditors for the fiscal year ending December 31, 1997
(the "Auditor Proposal"); and
(10) Such other business as may properly come before the meeting or any
adjournment or postponement thereof (collectively, the "Annual Meeting
Proposals").
Stockholders of record holding shares of Preferred Stock or Class A Common
Stock of the Company at the close of business on April , 1997 will be entitled
to receive notice of, and to vote at, the meeting or any adjournment or
postponement thereof.
Stockholder approval of the various proposals is required as follows: (i)
the Capital Stock Combination Proposal, Reverse Split Proposal, Authorized
Capital Proposal and the Auditor Proposal at the Annual Meeting will each
require the affirmative vote of the holders of at least a majority of the
outstanding shares of Class A Common Stock and Preferred Stock entitled to vote,
voting as separate classes, present (in person or by proxy) at the Annual
Meeting, in order to be approved; (ii) the Board Proposal, the Special Meetings
Proposal and the Written Consent Proposal at the Annual Meeting will require the
affirmative vote of the holders of at least 80% of the outstanding shares of
Class A Common Stock entitled to vote, whether or not present (in person or by
proxy) at the Annual Meeting, in order to be approved; and (iii) the Board
Election Proposal will require the affirmative vote of the holders of at least a
plurality of the outstanding shares of Class A Common Stock entitled to vote,
present (in person or by proxy) at the Annual Meeting, voted for each director
nominee in order for each such nominee to be elected. The Company is also
seeking ratification of the Exchange Offers Proposal by the holders of a
majority of the outstanding shares of Class A Common Stock and Preferred Stock.
HOWEVER, PURSUANT TO THE DELAWARE GENERAL CORPORATION LAW AND THE COMPANY'S
RESTATED CERTIFICATE AND BYLAWS, SUCH RATIFICATION IS NOT REQUIRED FOR THE
COMPANY TO CONSUMMATE THE EXCHANGE OFFERS. IF SUCH RATIFICATION IS NOT OBTAINED
AT THE ANNUAL MEETING, THE COMPANY IN ITS REASONABLE DISCRETION MAY STILL
CONSUMMATE THE EXCHANGE OFFERS.
<TABLE>
<S> <C> <C>
By Order of the Board of Directors
Raymond J. Pacini
Newport Beach, California Title: Executive Vice President, Chief
April , 1997 Financial Officer and Secretary
</TABLE>
THE BOARD OF DIRECTORS OF KOLL REAL ESTATE GROUP, INC. RECOMMENDS THAT YOU
VOTE FOR THE ANNUAL MEETING PROPOSALS.
YOUR VOTE IS IMPORTANT. PLEASE DATE, SIGN AND RETURN THE ENCLOSED PROXY
PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE. YOU MAY, IF YOU WISH, REVOKE
YOUR PROXY AT ANY TIME PRIOR TO ITS EXERCISE.
STOCKHOLDERS WITH INQUIRIES RELATED TO THE ANNUAL MEETING PROPOSALS SHOULD
CONTACT GEORGESON & COMPANY, INC. (800) 223-2064.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article FIFTEENTH(b)(1) of the Amended Certificate of Incorporation of the
Registrant requires the Registrant to indemnify directors and officers to the
fullest extent permitted by the Delaware General Corporation Law ("DGCL"). The
effect of the DGCL is summarized as follows:
(a) The DGCL permits a corporation to indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
the corporation) by reason of the fact that the person is or was a director,
or officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by the person in
connection with such action, suit or proceeding if the person acted in good
faith and in a manner the person reasonably believed to be in or not opposed
to the best interests of the corporation, and, with respect to any criminal
action or proceeding, the person had no reasonable cause to believe the
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere
or its equivalent, shall not, of itself, create a presumption that the
person did not act in good faith and in a manner the person reasonably
believed to be in or not opposed to the best interests of the corporation,
and with respect to any criminal action or proceeding, that the person had
reasonable cause to believe that the conduct was unlawful.
(b) The DGCL permits a corporation to indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by the person in connection with the defense or
settlement of such action or suit if the person acted in good faith and in a
manner the person reasonably believed to be in or not opposed to the best
interests of the corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the
extent that the Court of Chancery or the court in which such action or suit
was brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such person
is fairly and reasonably entitled to indemnity for such expenses which the
Court of Chancery or such other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in paragraphs (a) and (b) above, or
in defense of any claim, issue or matter therein, the DGCL provides that the
director, officer, employee or agent shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by that person
in connection therewith.
(d) The DGCL also provides that any indemnification under paragraphs (a)
and (b) above (unless ordered by a court) shall be made by the corporation
only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because the person has met the applicable standard of conduct
set forth in paragraphs (a) and (b) above. Such determination shall be made
(1) by a majority vote of the directors who are not parties to such action,
suit or proceeding, even though less than a quorum, or (2) if there
II-1
<PAGE>
are no such directors, or if such directors so direct, by independent legal
counsel in a written opinion, or (3) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount
if it shall ultimately be determined that that person is not entitled to be
indemnified by the corporation as authorized by the DGCL. Such expenses
(including attorneys' fees) incurred by other employees and agents may be so
paid upon such terms and conditions, if any, as the board of directors deems
appropriate.
(f) The indemnification and advancement of expenses provided by or
granted pursuant to the DGCL shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
The rights of indemnification or advancement of expenses described above are
not exclusive of any other rights of indemnification to which those seeking
indemnification may be entitled under any bylaw, agreement, vote of shareholders
or disinterested directors or otherwise.
The Registrant has directors' and officers' liability insurance coverage
which insures directors and officers of the Registrant and its subsidiaries
against certain liabilities.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
Exhibits
<TABLE>
<C> <S>
3.01 Restated Certificate of Incorporation of the Registrant, incorporated
by reference to Exhibit 3.01 to the Registrant's Annual Report on
Form 10-K for 1992.
3.02 Amended By-Laws of the Registrant, incorporated by reference to
Exhibit 3.02 to the Registrant's Annual Report on Form 10-K for 1992.
4.01 Restated Certificate of Incorporation of the Registrant (filed as
Exhibit 3.01).
4.02 Amended By-Laws of the Registrant (filed as Exhibit 3.02).
4.03 Indenture dated as of July 15, 1992 for 12% Senior Subordinated
Pay-In-Kind Debentures Due March 15, 2002 ("Senior Subordinated
Debentures"), issued by the Registrant in the aggregate principal
amount of $127,550,000, incorporated by reference to Exhibit 4.08 to
the Registrant's Annual Report on Form 10-K for 1992.
4.04 Indenture dated as of July 15, 1992 for 12% Subordinated Pay-In-Kind
Debentures Due March 15, 2002, ("Subordinated Debentures"), issued by
the Registrant in the aggregate principal amount of $75,688,000,
incorporated by reference to Exhibit 4.09 to the Registrant's Annual
Report on Form 10-K for 1992.
</TABLE>
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<PAGE>
<TABLE>
<C> <S>
4.05 Form of Senior Subordinated Debentures (included in Exhibit 4.03).
4.06 Form of Subordinated Debentures (included in Exhibit 4.04).
5.01 Legal Opinion of McDermott, Will & Emery with respect to the legality
of the securities being issued.**
8.01 Legal Opinion of McDermott, Will & Emery with respect to certain tax
matters.**
10.01 Tax Sharing Agreement dated as of December 18, 1989, between the
Registrant and The Henley Group, Inc. ("Henley Group"), incorporated
by reference to Exhibit 10.03 to the Registrant's Annual Report on
Form 10-K for 1989.
10.02 Tax Sharing Agreement dated as of December 15, 1988, between
Wheelabrator Technologies, Inc. (formerly The Wheelabrator Group,
Inc.) ("WTI") and the Registrant ("WTI Tax Sharing Agreement"),
incorporated by reference to Exhibit 10.02 to Amendment No. 3 on Form
8 to the Registrant's Registration Statement on Form 10.
10.02A Amendment No. 1 to WTI Tax Sharing Agreement dated February 14, 1994,
incorporated by reference to Exhibit 10.02A to the Registrant's
Annual Report on Form 10-K for 1993.
10.03 1993 Stock Option/Stock Issuance Plan, incorporated by reference to
Exhibit 10.03A to the Registrant's Annual Report on Form 10-K for
1993.
10.04 Deferred Compensation Plan for Non-Employee Directors of the
Registrant, incorporated by reference to Exhibit 10.14 to the
Registrant's Registration Statement on Form 10.
10.05 Retirement Plan for Non-Employee Directors of the Registrant,
incorporated by reference to Exhibit 10.15 to the Registrant's
Registration Statement on Form 10.
10.06 Retirement Plan of the Registrant, incorporated by reference to
Exhibit 10.16 to Amendment No. 3 on Form 8 to the Registrant's
Registration Statement on Form 10.
10.06A Amendment to Retirement Plan of the Registrant dated December 8,
1993, incorporated by reference to Exhibit 10.07A to the Registrant's
Annual Report on Form 10-K for 1993.
10.07 The Koll Company 401(k) Plus Plan and Trust Agreement dated July 1,
1989 under which the Registrant elected to participate as an employer
effective as of October 1, 1993, incorporated by reference to Exhibit
10.08 to the Registrant's Annual Report on Form 10-K for 1993.
10.08 Restated Environmental Matters Agreement dated as of July 28, 1989,
among a predecessor to the Registrant, Allied-Signal, New Hampshire
Oak, Fisher Scientific Group Inc. ("Fisher Group") and the
Registrant, incorporated by reference to Exhibit 10(b) to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended June
30, 1989 as amended by the Assignment, Assumption and Indemnification
Agreement dated as of December 21, 1989, among the Registrant, Henley
Group, New Hampshire Oak, Fisher Group, WTI and Allied-Signal,
incorporated by reference to Exhibit 10.21 to the Registrant's Annual
Report on Form 10-K for 1989.
10.09 Environmental Expenditures Agreement dated as of July 28, 1989, among
the Registrant, WTI, New Hampshire Oak and Fisher Group, incorporated
by reference to Exhibit 10(b) to the Registrant's quarterly report on
Form 10-Q for the quarter ended June 30, 1989 as amended by
Assignment and Assumption Agreement dated as of January 1, 1990,
among the Registrant, Henley Group, New Hampshire Oak, Fisher Group,
WTI and Henley Holdings, Inc., incorporated by reference to Exhibit
10.22 to the Registrant's Annual Report on Form 10-K for 1989.
10.10 Transition Agreement dated as of July 16, 1992 ("Transition
Agreement"), among the Registrant, Henley Group and Abex Inc.,
incorporated by reference to Exhibit 10.14 to the Registrant's Annual
Report on Form 10-K for 1992.
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
10.10A Amendment to Transition Agreement dated April 1, 1993, incorporated
by reference to Exhibit 10.12A to the Registrant's Annual Report on
Form 10-K for 1993.
10.11 Tax Sharing Agreement dated as of June 10, 1992, between Henley Group
and Abex Inc., incorporated by reference to Exhibit 10.15 to the
Registrant's Annual Report on Form 10-K for 1992.
10.12 Conditional Guarantee dated as of July 9, 1992, among the Registrant,
Abex Inc., Henley Group and Allied-Signal, incorporated by reference
to Exhibit 10.16 to the Registrant's Annual Report on Form 10-K for
1992.
10.13 Reimbursement Agreement dated as of July 16, 1992, among the
Registrant, Henley Group and Abex Inc., incorporated by reference to
Exhibit 10.17 to the Registrant's Annual Report on Form 10-K for
1992.
10.14 Pension Agreement dated as of July 16, 1992, among the Registrant,
Henley Group and Abex Inc., incorporated by reference to Exhibit
10.18 to the Registrant's Annual Report on Form 10-K for 1992.
10.15 Stock Purchase Agreement ("Stock Agreement") dated December 17, 1993
between the Registrant, certain of its subsidiaries and Libra Invest
& Trade Ltd. ("Libra") incorporated by reference to Exhibit 10.19 to
the Registrant's Annual Report on Form 10-K for 1993.
10.15A Amendment No. 1 to the Stock Agreement dated as of February 15, 1994,
incorporated by reference to Exhibit 10.19A to the Registrant's
Annual Report on Form 10-K for 1993.
10.16 Exchange Agreement dated December 17, 1993, between the Registrant
and Libra, incorporated by reference to Exhibit 10.20 to the
Registrant's Annual Report on Form 10-K for 1993.
10.17 Financing and Accounting Services Agreement dated as of September 30,
1993 between the Registrant and The Koll Company, incorporated by
reference to Exhibit 10.21 to the Registrant's Annual Report on Form
10-K for 1993.
10.18 Management Information Systems and Human Resources Services Agreement
dated as of September 30, 1993 between the Registrant and Koll
Management Services, Inc., incorporated by reference to Exhibit 10.22
to the Registrant's Annual Report on Form 10-K for 1993.
10.19 License Agreement ("License Agreement") dated September 30, 1993
between the Registrant, The Koll Company and Mr. Donald M. Koll,
incorporated by reference to Exhibit 10.3 to Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1993.
10.19A First Amendment to the License Agreement.**
10.20 Asset Purchase Agreement ("Asset Agreement") dated as of September
30, 1993 between the Registrant and The Koll Company, incorporated by
reference to Exhibit 10.2 to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1993.
10.20A Amendment No. 1 to the Asset Agreement dated as of December 29, 1993,
incorporated by reference to Exhibit 10.18A to the Registrant's
Annual Report on Form 10-K for 1993.
10.20B Amendment No. 2 to the Asset Agreement.**
10.21 Sublease Agreement dated September 30, 1993 between the Registrant
and the Koll Company, incorporated by reference to Exhibit 10.24 to
the Registrant's Annual Report on Form 10-K for 1993.
</TABLE>
II-4
<PAGE>
<TABLE>
<C> <S>
10.22 Netting Agreement dated as of October 1, 1993 between a subsidiary of
the Registrant and an executive officer of the Registrant, together
with a schedule identifying five (5) substantially identical
documents not filed therewith, incorporated by reference to Exhibit
10.1 to Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1994.
10.23 Agreement of Limited Partnership dated as of October 1, 1993 between
a subsidiary of the Registrant and an executive officer of the
Registrant, together with a schedule identifying five (5)
substantially identical documents not filed therewith, incorporated
by reference to Exhibit 10.3 to Registrant's Quarterly Report on Form
10-Q for the quarter ended September 30, 1994.
10.24 Agreement Respecting Vesting of Rights dated as of October 1, 1993
between a subsidiary of the Registrant and an executive officer of
the Registrant, together with a schedule identifying five (5)
substantially identical documents not filed therewith, incorporated
by reference to Exhibit 10.2 to Registrant's Quarterly Report on Form
10-Q for the quarter ended September 30, 1994.
10.25 Promissory Note Agreement dated April 29, 1995 between the Registrant
and AV Partnership, incorporated by reference to Exhibit 10.1 to
Registrant's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1995.
10.26 Koll Asia Pacific Development Services Amended and Restated Pacific
Rim Joint Business Opportunity Agreement, incorporated by reference
to Exhibit 10.1 to Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1996.
10.27 Bargain Purchase and Sale Agreement and Escrow Instructions between a
Subsidiary of the Registrant and the State of California, acting by
and through the State Lands Commission, incorporated by reference to
Exhibit 10.26 to the Registrant's Annual Report on Form 10-K for
1996.
10.28 Employment Agreement between the Registrant and Mr. Donald M. Koll.**
10.29 Employment Agreement between the Registrant and Mr. Richard M.
Ortwein.**
10.30 Employment Agreement between the Registrant and Mr. Raymond J.
Pacini.**
10.31 Consulting Agreement between the Registrant and Mr. Ray Wirta.**
21.01 Subsidiaries of the Registrant, incorporated by reference to Exhibit
21.01 to the Registrant's Annual Report on Form 10-K for 1996.
23.01 Consent of McDermott, Will & Emery (included in opinions filed as
Exhibits 5.01 and 8.01).**
23.02 Consent of Deloitte & Touche, LLP.*
24.01 Power of Attorney (included on page II-8 of the Registrant's
Registration Statement on Form S-4 filed on February 20, 1997).
27.01 Financial Data Schedule, incorporated by reference to Exhibit 27.01
to the Registrant's Annual Report on Form 10-K for 1996.
99.01 Form of Proxy for Class A Common Stock.*
99.02 Form of Proxy for Series A Convertible Preferred Stock.*
99.03A Form of Consent and Letter of Transmittal for exchange of the 12%
Senior Subordinated Pay-In-Kind Debentures due March 15, 2002.*
99.03B Form of Consent and Letter of Transmittal for exchange of the 12%
Subordinated Pay-In-Kind Debentures due March 15, 2002.*
</TABLE>
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<PAGE>
<TABLE>
<C> <S>
99.04A Form of Notice of Guaranteed Delivery for 12% Senior Subordinated
Pay-In-Kind Debentures due March 15, 2002.*
99.04B Form of Notice of Guaranteed Delivery for 12% Senior Subordinated
Pay-In-Kind Debentures due March 15, 2002.*
99.05A Form of Master Ballot for Class 5: General Unsecured
Creditors--Senior Debentures.*
99.05B Form of Master Ballot for Class 6: Claims of Holders of Subordinated
Debentures.*
99.05C Form of Master Ballot for Class 7: Interests of Holders of Preferred
Stock.*
99.05D Form of Master Ballot for Class 8: Interests of Holders of Class A
Common Stock.*
99.05E Form of Master Ballot for Class 5: General Unsecured Creditors--Other
than Senior Debentures.*
99.06A Form of Ballot for Class 5: General Unsecured Creditors--Senior
Debentures.*
99.06B Form of Ballot for Class 6: Claims of Holders of Subordinated
Debentures.*
99.06C Form of Ballot for Class 7: Interests of Holders of Preferred Stock.*
99.06D Form of Ballot for Class 8: Interests of Holders of Class A Common
Stock.*
99.06E Form of Ballot for Class 5: General Unsecured Creditors--Other than
Senior Debentures.*
99.07 Consents of Director Nominees.**
</TABLE>
- ------------------------
* Filed herewith.
** To be filed by amendment.
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change in such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial BONA FIDE offering thereof.
II-6
<PAGE>
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrants hereby undertake that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Company's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial BONA FIDE offering thereof.
(c) (1) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(2) The registrants undertake that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial BONA FIDE offering thereof.
(d) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
See Item 20 hereof for the Registrant's undertaking with respect to
indemnification.
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 1 to its Registration Statement to
be signed on behalf of the Registrant by the undersigned, thereto duly
authorized, in the City of Newport Beach, State of California, on April 9, 1997.
KOLL REAL ESTATE GROUP, INC.
By: /s/ RAYMOND J. PACINI
--------------------------------------
Raymond J. Pacini
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 1 to the Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ----------------------------------------------- ------------------------------------------ ----------------------
<C> <S> <C>
/s/ DONALD M. KOLL* Chairman of the Board and
------------------------------------- Chief Executive Officer April 9, 1997
(Donald M. Koll) (Principal Executive Officer)
/s/ RAYMOND J. PACINI Executive Vice President and Chief
------------------------------------- Financial Officer (Principal Financial April 9, 1997
(Raymond J. Pacini) and Accounting Officer)
/s/ RAY WIRTA*
------------------------------------- Director April 9, 1997
(Ray Wirta)
/s/ HAROLD A. ELLIS, JR.*
------------------------------------- Director April 9, 1997
(Harold A. Ellis, Jr.)
/s/ PAUL C. HEGNESS*
------------------------------------- Director April 9, 1997
(Paul C. Hegness)
/s/ J. THOMAS TALBOT*
------------------------------------- Director April 9, 1997
(J. Thomas Talbot)
/s/ MARCO F. VITULLI*
------------------------------------- Director April 9, 1997
(Marco F. Vitulli)
*By: /s/ RAYMOND J. PACINI
-------------------------------------
(Raymond J. Pacini, Attorney-in-fact)
</TABLE>
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<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 1 to Registration Statement
No. 333-22121 of Koll Real Estate Group, Inc. on Form S-4 of our report dated
February 18, 1997, appearing in the Prospectus, which is a part of such
Registration Statement, and to the reference to us under the heading
"Experts" in such Prospectus.
Deloitte & Touche LLP
Costa Mesa, California
April 9, 1997
<PAGE>
[EXHIBIT 99.01]
KOLL REAL ESTATE GROUP, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY __, 1997
The undersigned hereby authorizes and appoints Messrs. Donald M. Koll and
Raymond J. Pacini and each of them, as proxies with full power of
substitution in each, to vote all shares of Class A Common Stock, par value
$.05 per share, of Koll Real Estate Group, Inc. (the "Company") held of
record on April __, 1997 by the undersigned at the Annual Meeting of
Stockholders to be held at 10:00 a.m., Eastern Standard Time, on June __,
1997, at _____________________, Delaware, and at any adjournments or
postponements thereof, on all matters that may properly come before said
meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED (i) AS DIRECTED ON THE
REVERSE SIDE, OR, IN THE ABSENCE OF SUCH DIRECTION, THIS PROXY WILL
VOTED FOR PROPOSALS 1 THROUGH 9; AND (ii) IN ACCORDANCE WITH THE
JUDGMENT OF THE PROXIES UPON OTHER MATTERS THAT MAY PROPERLY COME
BEFORE SAID MEETING OR ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF.
PLEASE MARK THIS PROXY AND SIGN AND DATE IT ON THE REVERSE SIDE HEREOF
AND RETURN IT IN THE ENCLOSED ENVELOPE.
TRIANGLE FOLD AND DETACH TRIANGLE
The Board of Directors recommends a vote FOR all of the Proposals
set forth below.
PROPOSAL 1 - Approval and adoption of the Exchange Offer proposal which
provides for the exchange by the Company of up to all 12% Senior Subordinated
Pay-In-Kind Debentures Due March 15, 2002 ("Senior Debentures") and up to
all 12% Subordinated Pay-In-Kind Debentures Due March 15, 2002 outstanding as
of March 15, 1997 for shares of the Company's Common Stock equal to 90% of
the Company's outstanding Common Stock, on a post-Capital Stock Combination
and Reverse Stock Split basis (as described in Proposals 2 and 3).
/ / FOR / / AGAINST / / ABSTAIN
PROPOSAL 2 - Approval and adoption of the Capital Stock Combination Proposal
which provides for the amendment of Articles Fourth, Fifth and Sixth of the
Company's Restated Certificate of Incorporation (the "Restated Certificate"),
subject to the consummation of the Recapitalization, in order provide for
the combination of the Company's Class A Common Stock, Class B Common Stock
and Series A Convertible Preferred Stock ("Preferred Stock") into one class
and series of stock to be designated "Common Stock," each outstanding share
of Preferred Stock will be reclassified to be one and three quarter (1.75)
shares of Common Stock and each outstanding share of Class A Common Stock
will be reclassified to be one (1) share of Common Stock, and to provide for
the elimination of the Board's authority to issue class or series of stock
with preferences over the combined Common Stock (the "Capital Stock
Combination").
/ / FOR / / AGAINST / / ABSTAIN
<PAGE>
PROPOSAL 3 - Approval and adoption of the Reverse Split Proposal which
provides for the amendment of Article Fifth of the Restated Certificate to
provide for a one for one hundred (1:100) reverse stock split of each
outstanding share of the Company's capital stock (the "Reverse Stock Split").
/ / FOR / / AGAINST / / ABSTAIN
PROPOSAL 4 - Approve and adopt the Authorized Capital Proposal which provides
for the amendment of Article Fourth of the Restated Certificate, subject to
the consummation of the Recapitalization and the apporoval and implementation
of both the Capital Stock Combination and the Reverse Stock Split, to reduce
the authorized capital stock to 18 million shares of the combined Commmon
Stock.
/ / FOR / / AGAINST / / ABSTAIN
PROPOSAL 5 - Approval and adoption of the Board Proposal which provides for
the amendment of Articles Eighth and Thirteenth of the Company's Restated
Certificate and Articles III and XI of the Company's Bylaws to: (i) delete the
classified Board of Directors; (ii) increase the size of the Board of
Directors from seven (7) to ten (10) members; (iii) delete the 80%
supermajority vote requirement to change the number of directors by
stockholder vote; (iv) delete the 80% supermajority vote requirement to
remove any director for cause and permit directors to be removed with or
without cause; and (v) delete the 80% supermajority vote requirement to
amend any of the above described provisions contained in the Company's
Restated Certificate or Bylaws.
/ / FOR / / AGAINST / / ABSTAIN
PROPOSAL 6 - Approval and adoption of the Special Meetings Proposal which
provides for amendments to Articles Ninth and Thirteenth of the Company's
Restated Certificate and Articles II and XI of the Company's Bylaws to: (i)
delete the 80% supermajority vote requirements to amend or repeal any
provisions of Article Ninth of the Company's Restated Certificate of
Incorporation and Article II, Section 3 of the Company's Bylaws regarding the
power to call special meetings of the Company's stockholders; (ii) delete
the provisions contained in Article Ninth of the Company's Restated
Certificate of Incorporation and Article II, Section 3 of the Company's
Bylaws which provide that only the Board of Directors or the Company's Chief
Executive Officer can call such special meetings; and (iii) permit the
holders of capital stock of the Company representing at least ten percent
(10%) of the outstanding shares of capital stock of the Company entitled to
vote in the election of directors to call a special meeting of the Company's
stockholders.
/ / FOR / / AGAINST / / ABSTAIN
PROPOSAL 7 - Approval and adoption of the Written Consent Proposal which
provides for an amendment to Article Tenth of the Company's Restated
Certificate, subject to the consummation of the Recapitalization, to delete
the provisions which currently prohibit stockholders from
acting by written consent without a meeting, and which require an 80%
supermajority vote to amend or repeal such provisions.
/ / FOR / / AGAINST / / ABSTAIN
<PAGE>
PROPOSAL 8(a) -- In the event the Recapitalization is consummated, election of
each director nominee described in the Board Election Proposal with terms
expiring at the Annual Meeting in 1998:
/ / FOR each / / WITHHOLD NOMINEES: Donald M. Koll, J. Thomas Talbot,
nominee AUTHORITY Marco Vitulli, Ray Wirta, James J. Gaffney,
listed to vote for Robert J. Gagalis, Thomas W. Sabin, Jr.,
each nominee Phillip R. Burnamen II, P. John Wickser II and
listed Paul M. Zeller.
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE
FOR ANY INDIVIDUAL NOMINEE, WRITE THE NOMINEE'S
NAME ON THE SPACE PROVIDED BELOW)
______________________________________________
8(b) -- In the event the Recapitalization is consummated, but the
Board Proposal is not approved by the Stockholders, election of Mr. Burnamen
to serve until the Annual Meeting of Stockholders in 1998, Messrs. Koll,
Sabin and Wickser to serve until the Annual Meeting of Stockholders in 1999
and Messrs. Wirta, Gaffney, Burnaman and Zeller to serve until the Annual
Meeting of Stockholders in 2000.
/ / FOR each / / WITHHOLD NOMINEES: Mr. Gagalis 1998; - Messrs. Koll,
nominee AUTHORITY Sabin and Wickser - 1999; Messrs. Wirta,
listed to vote for Gaffney, Burnaman and Zeller - 2000.
each nominee
listed
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE
FOR ANY INDIVIDUAL NOMINEE, WRITE THE NOMINEE'S
NAME ON THE SPACE PROVIDED BELOW)
______________________________________________
8(c) -- In the event the Recapitalization is not cosummated,
election of Messrs. Koll and Hegness to serve until the Annual Meeting of
Stockholders in 1999 and of Messrs. Wirta and Ellis to serve until the Annual
Meeting of Stockholders in 2000.
/ / FOR each / / WITHHOLD NOMINEES: Donald M. Koll, Paul C. Hegness,
nominee AUTHORITY Ray Wirta and Harold A. Ellis.
listed to vote for
each nominee
listed
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE
FOR ANY INDIVIDUAL NOMINEE, WRITE THE NOMINEE'S
NAME ON THE SPACE PROVIDED BELOW)
______________________________________________
PROPOSAL 9 -- Approval and adoption of the Auditor Proposal which provides for
the ratification and appointment of Deloitte & Touche LLP as independent
auditors for the fiscal year ending December 31, 1997.
/ / FOR / / AGAINST / / ABSTAIN
SIGNATURE(S)_____________________________
SIGNATURE(S)_____________________________ DATED: __________________, 1997
A MAJORITY (OR IF ONLY ONE THEN THAT ONE) OF THE ABOVE PERSONS OR THEIR
SUBSTITUTES WHO SHALL BE PRESENT AND ACTING AT THE MEETING SHALL HAVE THE
POWERS CONFERRED HEREBY.
EXECUTION OF THIS PROXY BY A STOCKHOLDER WILL REVOKE ANY AND ALL PRIOR
PROXIES GIVEN BY SUCH STOCKHOLDER WITH RESPECT TO THE ANNUAL MEETING.
Signature(s) of Stockholder(s) -- please sign name exactly as imprinted (do not
print). Please indicate any change of address.
NOTE: Executors, administrators, trustees and others signing in a
representative capacity should indicate the capacity in which they sign, if
shares are held jointly, EACH should sign.
<PAGE>
[EXHIBIT 99.02]
KOLL REAL ESTATE GROUP, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY __, 1997
The undersigned hereby authorizes and appoints Messrs. Donald M. Koll and
Raymond J. Pacini and each of them, as proxies with full power of
substitution in each, to vote all shares of Series A Convertible Preferred
Stock, par value $.01 per share, of Koll Real Estate Group, Inc. (the
"Company") held of record on April __, 1997 by the undersigned at the Annual
Meeting of Stockholders to be held at 10:00 a.m., Eastern Standard Time, on
June __, 1997 at _____________________, Delaware, and at any adjournments or
postponements thereof, on any matters that may properly come before said
meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED: (i) AS DIRECTED ON THE
REVERSE SIDE, OR, IN THE ABSENCE OF SUCH DIRECTION, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1, 2, 3 and 4; AND (ii) IN ACCORDANCE WITH THE
JUDGMENT OF THE PROXIES UPON OTHER MATTERS THAT MAY PROPERLY COME
BEFORE SAID MEETING OR ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF.
PLEASE MARK THIS PROXY AND SIGN AND DATE IT ON THE REVERSE SIDE HEREOF AND
RETURN IT IN THE ENCLOSED ENVELOPE.
TRIANGLE FOLD AND DETACH HERE TRIANGLE
The Board of Directors recommends a vote FOR all of the Proposals set forth
below.
PROPOSAL 1 - Approval and adoption of the Exchange Offer proposal which
provides for the exchange by the Company of up to all 12% Senior Subordinated
Pay-In-Kind Debentures Due March 15, 2002 ("Senior Debentures") and up to
all 12% Subordinated Pay-In-Kind Debentures Due March 15, 2002 outstanding as
of March 15, 1997 for shares of the Company's Common Stock equal to 90% of
the Company's outstanding Common Stock, on a post-Capital Stock Combination
and Reverse Stock Split basis (as described in Proposals 2 and 3).
/ / FOR / / AGAINST / / ABSTAIN
PROPOSAL 2 - Approval and adoption of the Capital Stock Combination Proposal
which provides for the amendment of Articles Fourth, Fifth and Sixth of the
Company's Restated Certificate of Incorporation (the "Restated Certificate"),
subject to the consummation of the Recapitalization, in order to provide for
combination of the Company's Class A Common Stock, Class B Common Stock and
Series A Convertible Preferred Stock ("Preferred Stock") into one class and
series of stock to be designated "Common Stock," each outstanding share of
Preferred Stock will be reclassified to be one and three quarter (1.75)
shares of Common Stock and each outstanding share of Class A Common Stock
will be reclassified to be one (1) share of Common Stock, and to provide for
the elimination of the Board's authority to issue classes or series of stock
with preferences over the combined Common Stock (the "Capital Stock
Combination").
/ / FOR / / AGAINST / / ABSTAIN
<PAGE>
PROPOSAL 3 - Approval and adoption of the Reverse Split Proposal which
provides for the amendment of Article Fifth of the Restated Certificate to
provide for a one for one hundred (1:100) reverse stock split of each
outstanding share of the Company's capital stock (the "Reverse Stock Split").
/ / FOR / / AGAINST / / ABSTAIN
PROPOSAL 4 - Approve and adopt the Authorized Capital Proposal which provides
for the amendment of Article Fourth of the Restated Certificate, subject to
the consummation of the Recapitalization and the approval and implementation
of both the Capital Stock Combination and the Reverse Stock Split, to reduce
the authorized capital stock to 18 million shares of the combined Common
Stock.
/ / FOR / / AGAINST / / ABSTAIN
A MAJORITY (OR IF ONLY ONE THEN THAT ONE) OF THE ABOVE PERSONS OR THEIR
SUBSTITUTES WHO SHALL BE PRESENT AND ACTING AT THE MEETING SHALL HAVE THE
POWERS CONFERRED HEREBY.
EXECUTION OF THIS PROXY BY A STOCKHOLDER WILL REVOKE ANY AND ALL PRIOR
PROXIES GIVEN BY SUCH STOCKHOLDER WITH RESPECT TO THE ANNUAL MEETING.
SIGNATURE(S)_____________________________
SIGNATURE(S)_____________________________ DATED: __________________, 1997
Signature(s) of Stockholder(s) -- please sign name exactly as imprinted (do not
print). Please indicate any change of address.
NOTE: Executors, administrators, trustees and others signing in a
representative capacity should indicate the capacity in which they sign, if
shares are held jointly, EACH should sign.
<PAGE>
CONSENT AND LETTER OF TRANSMITTAL
TO TENDER AND TO GIVE CONSENT TO PROPOSED AMENDMENTS TO THE INDENTURE IN RESPECT
OF 12% SENIOR SUBORDINATED DEBENTURES DUE MARCH 15, 2002
(the "SENIOR DEBENTURES")
OF
KOLL REAL ESTATE GROUP, INC.
PURSUANT TO THE PROXY STATEMENT/PROSPECTUS AND DISCLOSURE STATEMENT
DATED _______________, 1997
- -------------------------------------------------------------------------------
THE OFFER TO EXCHANGE WILL EXPIRE AT 12:00 MIDNIGHT, EASTERN STANDARD
TIME, ON JUNE ___, 1997 (THE "EXPIRATION DATE"), UNLESS EXTENDED. HOLDERS OF
SENIOR DEBENTURES MUST TENDER THEIR SENIOR DEBENTURES AND PROVIDE THEIR
CONSENTS TO THE PROPOSED AMENDMENTS (AS DEFINED) ON OR PRIOR TO 12:00
MIDNIGHT EASTERN STANDARD TIME ON THE EXPIRATION DATE IN ORDER TO RECEIVE THE
EXCHANGE OFFER CONSIDERATION. TENDERED SENIOR DEBENTURES MAY BE WITHDRAWN
AND CONSENTS MAY BE REVOKED AT ANY TIME PRIOR TO 12:00 MIDNIGHT, EASTERN
STANDARD TIME, ON THE EXPIRATION DATE, BUT NOT THEREAFTER. THE EXCHANGE
OFFER IS CONDITIONED UPON THE SATISFACTION OF CERTAIN CONDITIONS, INCLUDING
AMONG OTHER THINGS, THE VALID TENDER OF AT LEAST 90% IN AGGREGATE PRINCIPAL
AMOUNT OF ALL OUTSTANDING DEBENTURES OF THE COMPANY OWNED BY PERSONS OTHER
THAN THE COMPANY, ITS SUBSIDIARIES AND CERTAIN OF THEIR AFFILIATES.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
TO EXCHANGE AGENT:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
BY MAIL: FACSIMILE TRANSMISSION: BY HAND/OVERNIGHT DELIVERY:
(FOR ELIGIBLE INSTITUTIONS ONLY)
P.O. Box 3301 (201) 329-8936 120 Broadway
South Hackensack, NJ 07606 13th Floor
Attn: Reorganization Dept. CONFIRM BY TELEPHONE: New York, New York 10271
(201) 296-4209 Attn: Reorganization Dept.
(201) 296-4381
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE
WILL NOT CONSTITUTE A VALID DELIVERY. The accompanying instructions should be
read carefully before this Consent and Letter of Transmittal is completed.
Capitalized terms used in this Consent and Letter of Transmittal not otherwise
defined herein shall have the meanings provided in the Proxy
Statement/Prospectus and Disclosure Statement dated __________, 1997 (the
"Prospectus") of Koll Real Estate Group, Inc., a Delaware corporation (the
"Company").
The undersigned acknowledges that he or she has received the Prospectus
and this Consent and Letter of Transmittal, which together constitute (i) the
Company's offer (the "Exchange Offer") to exchange an aggregate of up to
9,359,208 shares of the Company's post-Capital Stock Combination and
post-Reverse Stock Split Common Stock (the "Common Stock") for up to all of
the Company's outstanding 12% Senior Subordinated Debentures due March 15,
2002 (the "Senior Debentures"), on a 56 shares per $1000 principal amount
basis, and (ii) the Company's solicitation (the "Consent Solicitation") of
consents (the "Consents") from persons in whose names the Senior Debentures
are registered on the books of the registrar for the Senior Debentures (the
"Holders") to certain amendments (the "Proposed Amendments") to the Indenture
(the "Indenture") pursuant to which the Senior Debentures were issued. The
consideration payable by the Company for the Senior Debentures is set forth
in the Prospectus. HOLDERS WHO TENDER THEIR SENIOR DEBENTURES PURSUANT TO THE
EXCHANGE OFFER WILL BE DEEMED, BY ACCEPTANCE OF THE EXCHANGE OFFER, TO
CONSENT TO THE PROPOSED AMENDMENTS.
1.
<PAGE>
HOLDERS MAY NOT CONSENT TO THE PROPOSED AMENDMENTS WITHOUT TENDERING THEIR
SENIOR DEBENTURES. Holders who do not tender their Senior Debentures and
deliver their Consents on or prior to 12:00 midnight, Eastern Standard Time, on
the Expiration Date will not receive the Exchange Offer consideration. See
"Procedure for Tendering Outstanding Debentures and Giving Consents" in the
Prospectus. No Holder may withdraw any tendered Senior Debentures or revoke a
Consent following 12:00 midnight, Eastern Standard Time, on the Expiration Date.
The Company will issue certificates for shares of Common Stock in exchange for
tendered Senior Debentures as promptly as practicable after such Senior
Debentures are accepted for exchange pursuant to the Exchange Offer.
The Exchange Offer or Consent Solicitation may be extended, terminated or
amended, as provided in the Prospectus. During any such extension of the
Exchange Offer or Consent Solicitation, all Senior Debentures previously
tendered and Consents delivered and not withdrawn or revoked pursuant to the
Exchange Offer that have not been accepted for purchase will remain subject to
the Exchange Offer and may be accepted thereafter for purchase by the Company.
No alternative, conditional or contingent tenders will be accepted. A
tendering Holder, by execution of this Consent and Letter of Transmittal, or
facsimile thereof, waives all rights to receive notice of acceptance of such
Holder's Senior Debentures for purchase.
PLEASE READ THIS ENTIRE CONSENT AND LETTER OF TRANSMITTAL
CAREFULLY BEFORE CHECKING ANY BOX BELOW
This Consent and Letter of Transmittal is to be completed by Holders of
Senior Debentures if certificates representing such Senior Debentures are to be
forwarded herewith or if delivery of such certificates are to be made by
book-entry transfer to the account established by the Exchange Agent at The
Depository Trust Company ("DTC"), pursuant to the procedures set forth in this
Consent and Letter of Transmittal and in the Prospectus under the caption
"Procedure for Tendering Outstanding Debentures and Giving Consents," or
"Book-Entry Transfer Procedures." PURSUANT TO THE TERMS OF THE EXCHANGE OFFER
AND CONSENT SOLICITATION, THE COMPLETION, EXECUTION AND DELIVERY OF THIS CONSENT
AND LETTER OF TRANSMITTAL WILL BE DEEMED TO CONSTITUTE A CONSENT TO THE PROPOSED
AMENDMENTS.
Holders of Senior Debentures that are tendering by book-entry transfer to
the Exchange Agent's account at DTC can execute the tender through the DTC
Automated Tender Offer Program ("ATOP"), for which the transaction will be
eligible. DTC participants that are accepting the Exchange Offer must transmit
their acceptance to DTC (in accordance with DTC procedures) which will verify
the acceptance and execute a book-entry delivery to the Exchange Agent's account
at DTC. DTC will then send an agent's message ("Agent's Message") to the
Exchange Agent, which Agent's Message shall state that DTC has received an
express acceptance from each Holder tendering through ATOP that each such Holder
has received this Consent and Letter of Transmittal and has agreed to be bound
by the terms and conditions hereof. Delivery by DTC of the Agent's Message, and
receipt thereof by the Exchange Agent will satisfy the terms of the Exchange
Offer as to execution and delivery of a Consent and Letter of Transmittal by
each Holder identified in the Agent's Message.
Holders whose certificates representing the Senior Debentures are not
immediately available or who cannot deliver certificates and all other required
documents to the Exchange Agent or complete the procedure for book-entry
transfer on or prior to the Expiration Date, may nevertheless tender Senior
Debentures pursuant to the guaranteed delivery procedure set forth in the
Prospectus under the caption "Guaranteed Delivery Procedures" See Instruction 2
below.
List below the Senior Debentures that are to be tendered pursuant to this
Consent and Letter of Transmittal. If the space below is inadequate, list the
information requested below on a separate signed schedule and affix the list to
this Consent and Letter of Transmittal.
2.
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
DESCRIPTION OF SENIOR DEBENTURES TENDERED
- ---------------------------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
NAMES AND ADDRESS(ES) AGGREGATE PRINCIPAL TENDERED AND
OF HOLDER(S) AMOUNT AS TO WHICH
(PLEASE FILL IN, CERTIFICATE REPRESENTED BY CONSENTS ARE
BLANK) NUMBER(S) (1) CERTIFICATES (2) DELIVERED (2)
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
--------------------------------------------------------------
--------------------------------------------------------------
--------------------------------------------------------------
--------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
Total Principal Amount Tendered
- ---------------------------------------------------------------------------------------------------
(1) Need not be completed by Holders who tender by book-entry.
(2) Unless otherwise indicated in this column, any tendering Holder will be deemed to have
tendered, and delivered Consents with respect to, the entire principal amount represented
by the Senior Debentures indicated in this column. See Instruction 5.
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
</TABLE>
/ / CHECK HERE IF CERTIFICATES FOR TENDERED SENIOR DEBENTURES ARE ENCLOSED
HEREWITH.
/ / CHECK HERE IF TENDERED SENIOR DEBENTURES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND
COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN DTC MAY DELIVER SENIOR
DEBENTURES BY BOOK-ENTRY TRANSFER):
Name of Tendering Institution. . . . . . . . . . . . . . . . . . . . . . .
Account Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transaction Code Number. . . . . . . . . . . . . . . . . . . . . . . . . .
/ / CHECK HERE IF TENDERED SENIOR DEBENTURES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name(s) of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Window Ticket Number (if any). . . . . . . . . . . . . . . . . . . . . . .
Date of Execution of Notice of Guaranteed Delivery and Consent . . . . . .
Name of Eligible Institution that guaranteed delivery. . . . . . . . . . .
If delivery by book-entry transfer, check box here: / /
Account Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transaction Code Number. . . . . . . . . . . . . . . . . . . . . . . . . .
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
3.
<PAGE>
Only Holders are entitled to tender their Senior Debentures in the
Exchange Offer and consent to the Proposed Amendments in the Consent
Solicitation. Any financial institution that is a participant in DTC's
system and whose name appears on a security position listing as the record
owner of the Senior Debentures and who wishes to make book-entry delivery of
the Senior Debentures as described above and to consent to the Proposed
Amendments must complete, execute and deliver this Consent and Letter of
Transmittal to DTC, which will then send an Agent's message to the Exchange
Agent (as described above). Persons who are beneficial owners of Senior
Debentures but are not Holders and who seek to tender Senior Debentures and
deliver Consents to the Proposed Amendments should (i) contact the Holder of
such Senior Debentures and instruct such Holder to tender and consent on his
or her behalf, (ii) obtain and include with this Consent and Letter of
Transmittal Senior Debentures properly endorsed for transfer by the Holder or
accompanied by a properly completed bond power from the Holder, together with
a properly completed irrevocable proxy that authorizes such person to consent
to the Proposed Amendments on behalf of such Holder, with signatures on the
endorsement or bond power guaranteed by a firm that is a member of a
registered national securities exchange, a member of the National Association
of Securities Dealers, Inc. or by a commercial bank, trust company, credit
union or savings association having an office in the United States (each, an
"Eligible Institution") or (iii) effect a record transfer of such Senior
Debentures from the Holder to such beneficial owner and comply with the
requirements applicable to Holders for tendering Senior Debentures and
delivering Consents prior to 12:00 midnight, Eastern Standard Time, on the
Expiration Date, as the case may be.
A HOLDER WHO TENDERS SENIOR DEBENTURES PURSUANT TO THE EXCHANGE OFFER WILL
BE DEEMED, BY ACCEPTANCE OF THE EXCHANGE OFFER TO CONSENT TO THE PROPOSED
AMENDMENTS. HOLDERS WHO WISH TO RECEIVE COMMON STOCK PURSUANT TO THE EXCHANGE
OFFER MUST TENDER THEIR SENIOR DEBENTURES AND DELIVER CONSENTS PRIOR TO 12:00
MIDNIGHT, EASTERN STANDARD TIME, ON THE EXPIRATION DATE. SEE "PROCEDURE FOR
TENDERING OUTSTANDING DEBENTURES AND GIVING CONSENTS" IN THE PROSPECTUS.
To: Koll Real Estate Group, Inc.
Upon the terms and subject to the conditions of the Exchange Offer and
Consent Solicitation, the undersigned hereby tenders to the Company the Senior
Debentures indicated above. Subject to, and effective upon, acceptance for
exchange for the Senior Debentures tendered herewith, the undersigned hereby
sells, assigns and transfers to or upon the order of the Company all rights,
title and interest in and to all such Senior Debentures tendered hereby. The
undersigned hereby irrevocably constitutes and appoints the Exchange Agent the
true and lawful agent and attorney-in-fact of the undersigned (with full
knowledge that the Exchange Agent also acts as agent of the Company) with
respect to such Senior Debentures, with full power of substitution and
resubstitution (such power of attorney being, deemed to be an irrevocable power
coupled with an interest) to (a) deliver certificates representing such Senior
Debentures, or transfer ownership of such Senior Debentures on the account books
maintained by DTC, together, in each such case, with all accompanying evidences
of transfer and authenticity to or upon the order of the Company, (b) present
such Senior Debentures for transfer on the relevant security registrar and (c)
receive all benefits or otherwise exercise all rights of beneficial ownership on
behalf of the Company of such Senior Debentures all in accordance with the terms
of the Exchange Offer and Consent Solicitation. EXECUTION AND DELIVERY OF THIS
CONSENT AND LETTER OF TRANSMITTAL WILL ALSO BE DEEMED TO CONSTITUTE A CONSENT TO
THE PROPOSED AMENDMENTS.
THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT THE UNDERSIGNED HAS
FULL POWER AND AUTHORITY TO TENDER, SELL, ASSIGN AND TRANSFER THE SENIOR
DEBENTURES TENDERED HEREBY AND TO GIVE THE CONSENT CONTAINED HEREIN AND, THAT
WHEN THE SAME ARE ACCEPTED FOR EXCHANGE BY THE COMPANY, THE COMPANY WILL ACQUIRE
GOOD, MARKETABLE AND UNENCUMBERED TITLE THERETO, FREE AND CLEAR OF ALL SECURITY
INTERESTS, LIENS, RESTRICTIONS, CLAIMS, CHARGES, ENCUMBRANCES, CONDITIONAL SALES
AGREEMENTS OR OTHER OBLIGATIONS RELATING TO THE SALE OR TRANSFER THEREOF, AND
NOT BE SUBJECT TO ANY ADVERSE CLAIM. THE UNDERSIGNED WILL, UPON REQUEST,
EXECUTE AND DELIVER ANY ADDITIONAL DOCUMENTS DEEMED BY THE EXCHANGE AGENT OR THE
COMPANY TO BE NECESSARY OR DESIRABLE TO COMPLETE THE ASSIGNMENT, TRANSFER AND
PURCHASE OF THE SENIOR DEBENTURES TENDERED HEREBY. THE UNDERSIGNED HAS READ
4.
<PAGE>
AND AGREES TO ALL OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER AND CONSENT
SOLICITATION. DELIVERY OF THE ENCLOSED SENIOR DEBENTURES SHALL BE EFFECTED, AND
RISK OF LOSS AND TITLE TO SUCH SENIOR DEBENTURES SHALL PASS, ONLY UPON PROPER
DELIVERY THEREOF TO THE EXCHANGE AGENT IN ACCORDANCE WITH THE TERMS AND
CONDITIONS OF THE EXCHANGE OFFER.
All authority conferred or agreed to be conferred pursuant to this Consent
and Letter of Transmittal and every obligation of the undersigned hereunder
shall be binding, upon the successors, assigns, heirs, executors,
administrators, trustees in bankruptcy, and personal and legal representatives
of the undersigned and shall not be affected by, and shall survive, the death or
incapacity of the undersigned. Senior Debentures properly tendered may be
withdrawn and Consents may be revoked at any time prior to 12:00 midnight,
Eastern Standard Time, on the Expiration Date.
The Exchange Offer and Consent Solicitation are subject to a number of
conditions, each of which may be waived or modified by the Company, in whole or
in part, at any time and from time to time, as described in the Prospectus under
the caption "Conditions of the Exchange Offers." The undersigned recognizes
that as a result of such conditions the Company may not be required to accept
the Senior Debentures properly tendered hereby. In such event, the tendered
Senior Debentures not accepted for purchase and payment will be returned to the
undersigned without cost to the undersigned as soon as practicable following the
earlier to occur of the Expiration Date or the date on which the Exchange Offer
is terminated without any Senior Debentures being purchased thereunder, at the
address shown below the undersigned's signature(s) unless otherwise indicated
under "Special Payments Instructions" below.
Unless otherwise indicated below under "Special Payment Instructions" or
"Special Delivery Instructions," as applicable, please send share certificates
for Common Stock to be issued in exchange for any Senior Debentures tendered
hereby and accepted for exchange, and/or return any certificates representing
Senior Debentures not tendered or not accepted for exchange in the name(s) of
the Holder(s) and to the addressees appearing under "Description of Senior
Debentures Tendered" herein. In the event that both the Special Payment
Instructions and the Special Delivery Instructions are completed, please issue
and send the share certificates for Common Stock to be issued in exchange for
any Senior Debentures tendered hereby and/or return any certificates
representing Senior Debentures not tendered or not accepted for purchase to, the
person or persons so indicated. Unless otherwise indicated under "Special
Payment Instructions," in the case of a book-entry delivery of Senior
Debentures, please credit the account maintained at DTC with any Senior
Debentures not tendered or not accepted for exchange. The undersigned
recognizes that the Company does not have any obligation pursuant to the Special
Payment Instructions to transfer any Senior Debentures from the name of the
Holder thereof if the Company does not accept for exchange any of the Senior
Debentures so tendered.
5.
<PAGE>
- -------------------------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 6, 7 AND 8)
To be completed ONLY if Common Stock share certificates to be issued in exchange
for the Senior Debentures accepted for exchange, and/or certificates
representing Senior Debentures not accepted for exchange are to be issued in the
name of someone other than the undersigned, or if Senior Debentures delivered by
book-entry transfer not accepted for exchange are to be returned by credit to an
account maintained at DTC other than the account indicated above.
Issue: Common Stock Share
Certificate(s) to
Name: _________________________________________________________________________
(Please Print)
Address: ______________________________________________________________________
________________________________________________________________________________
(Including Zip Code)
________________________________________________________________________________
(Taxpayer Identification or Social Security Number)
Credit unpurchased Senior Debentures delivered by book-entry transfer to the DTC
account set forth below:
________________________________________________________________________________
(Account Number)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 6, 7 AND 8)
To be completed ONLY if the Common Stock share certificates to be issued in
exchange for the Senior Debentures accepted for exchange, and/or certificates
representing Senior Debentures not accepted for exchange are to be sent to
someone other than the undersigned or to the undersigned at an address other
than that shown above.
Mail: Common Stock Share
Certificate(s) to
Name: _________________________________________________________________________
(Please Print)
Address: ______________________________________________________________________
________________________________________________________________________________
(Include Zip Code)
_______________________________________________________________________________
(Taxpayer Identification or Social Security Number)
- -------------------------------------------------------------------------------
6.
<PAGE>
AFFIDAVIT OF LOSS - TO BE EXECUTED ONLY IF CERTIFICATE(S)
REPRESENTING A TOTAL OF $500 PRINCIPAL AMOUNT OR
LESS IN THE AGGREGATE HAVE BEEN LOST STOLEN OR DESTROYED
Certificate Number(s) Principal Amount
------------------------ ----------------------
------------------------ ----------------------
Certificate Number(s) Principal Amount
------------------------ ----------------------
------------------------ ----------------------
Certificate Number(s) Principal Amount
------------------------ ----------------------
------------------------ ----------------------
Certificate Number(s) Principal Amount
------------------------ ----------------------
------------------------ ----------------------
The undersigned person(s), being first duly sworn, deposes and says that: I
am the lawful owner of the above described certificate(s) shares and I have
made a diligent search for the certificate(s) and am unable to find it. The
certificate(s) has not been endorsed, cashed, negotiated, transferred,
assigned, or otherwise disposed of. I agree to completely indemnify, protect
and save harmless, and any other parties to the transaction, from and against
all loss, costs and damages, including court costs and attorney's fees, which
they may be subject to or liable for in respect of the cancellation and
replacement of the cerificate(s) represented thereby, and the distribution of
the proceeds of such fractional share interest.
------------------------------- -----------------------------------
Signature of Affiant Notary Public (Affix Seal)
------------------------------- -----------------------------------
Signature of Co-Affiant Date Commission Expires
------------------------------- NOTE: THIS AFFIDAVIT APPLIES ONLY
Date TO CERTIFICATES REPRESENTING AN
AGGREGATE PRINCIPAL AMOUNT OF $500
OR LESS
ATTENTION:
If a certificate representing an aggregate principal amount of
more than $500 has been lost, stolen or destroyed, please contact the
Information Agent for further instructions. The Exchange Agent will place a
stop on such certificate(s) and will send you the appropriate documents to be
completed in order to replace such certificate(s). You will need to purchase
a surety bond of which will cost approximately 2% of the current market value
of the Company's Common Stock that you are entitled to receive as a result of
the Exchange Offer.
7.
<PAGE>
HOLDERS OF SENIOR DEBENTURES
SIGN HERE
IMPORTANT: COMPLETE AND SIGN THE SUBSTITUTE FORM W-9 IN
THIS CONSENT AND LETTER OF TRANSMITTAL
_______________________________________________________________________________
_______________________________________________________________________________
Signature(s) of Holder(s) of Securities
Dated: , 1997 (Must be signed by the Holder(s) exactly as
name(s) appear(s) on certificates) representing the Senior Debentures or on a
security position listing or by person(s) authorized to become Holder(s) by
certificates and documents transmitted herewith. If signature is by
attorney-in-fact, executor, administrator, trustee, guardian, officer of a
corporation or other person acting in a fiduciary or representative capacity,
please provide the following information and see Instruction 6.)
Capacity (Full Title) __________________________________________________________
Name(s) ________________________________________________________________________
(Please Type or Print)
Address ________________________________________________________________________
________________________________________________________________________
(Include Zip Code)
Area Code and Telephone Number ________________________________________________
Tax Identification or Social Security No. ______________________________________
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED - SEE INSTRUCTIONS 1 AND 6)
Authorized Signature ___________________________________________________________
Name ___________________________________________________________________________
(Please Type or Print)
Address ________________________________________________________________________
________________________________________________________________________
(Include Zip Code)
Area Code and Telephone Number ________________________________________________
Dated: _____________________________
8.
<PAGE>
INSTRUCTIONS
1. GUARANTEE OF SIGNATURES. Signatures on this Consent and Letter of
Transmittal must be guaranteed by an Eligible Institution unless the
Senior Debentures tendered hereby are tendered (i) by a Holder of Senior
Debentures (or by a participant in DTC whose name appears on a security position
listing as the owner of such Senior Debentures) who has not completed either the
box entitled "Special Delivery Instructions" or "Special Payment Instructions"
above, or (ii) for the account of a member firm of an Eligible Institution. If
the Senior Debentures are registered in the name of a person other than the
signer of the Consent and Letter of Transmittal or if Senior Debentures not
accepted for payment or not tendered are to be returned to a person other than
the registered Holder, then the signatures on the Consents and Letters of
Transmittal accompanying the tendered Senior Debentures must be guaranteed by a
Medallion Signature Guarantor as described above. Persons who are beneficial
owners of Senior Debentures but are not Holders and who seek to tender Senior
Debentures and deliver Consents to the Proposed Amendments should (i) contact
the Holder of such Senior Debentures and instruct such Holder to tender and
consent on his or her behalf, (ii) obtain and include with this Consent and
Letter of Transmittal, Senior Debentures properly endorsed for transfer by the
Holder or accompanied by a properly completed bond power from the Holder,
together with a properly completed irrevocable proxy that authorizes such person
to consent to the Proposed Amendments on behalf of such Holder, with signatures
on the endorsement or bond power guaranteed by an Eligible Institution or (iii)
effect a record transfer of such Senior Debentures from the Holder to such
beneficial owner and comply with the requirements applicable to Holders for
tendering Senior Debentures and delivering Consents prior to 12:00 midnight,
Eastern Standard Time, on the Expiration Date. See Instruction 6.
2. REQUIREMENTS OF TENDER AND CONSENT. This Consent and Letter of
Transmittal is to be completed by Holders of Senior Debentures if certificates
representing such Senior Debentures are to be forwarded herewith or if delivery
is to be made by book-entry transfer to the account maintained by DTC, pursuant
to the procedures set forth in the Prospectus under the captions "Procedure for
Tendering Outstanding Debentures and Giving Consents" and "Book-Entry Transfer
Procedures." All Holders who wish to tender their Senior Debentures must, prior
to 12:00 midnight, Eastern Standard Time, on the Expiration Date: (i) complete,
sign and deliver this Consent and Letter of Transmittal, or a facsimile thereof,
to the Exchange Agent, in person or to the address set forth on page 1 hereof,
together with any signature guarantees and any other documents required in
Instructions 1-11 hereof, and (ii) tender (and not withdraw) his or her
certificates representing such Senior Debentures to the Exchange Agent, or if a
tender of a Senior Debenture is to be made by book-entry transfer to the
Exchange Agent's account at DTC, confirm such book-entry transfer and the
receipt by the Exchange Agent of the Agent's Message, in each case in accordance
with the procedures set forth in this Consent and Letter of Transmittal.
PURSUANT TO THE TERMS OF THE EXCHANGE OFFER AND CONSENT SOLICITATION, THE
COMPLETION, EXECUTION AND DELIVERY OF THIS CONSENT AND LETTER OF TRANSMITTAL OR
TENDER PURSUANT TO THE BOOK-ENTRY TRANSFER OR GUARANTEED DELIVERY PROCEDURES
WILL BE DEEMED TO CONSTITUTE A CONSENT TO THE PROPOSED AMENDMENTS WITH RESPECT
TO ANY SENIOR DEBENTURES SO TENDERED.
Notwithstanding the foregoing paragraph, Holders whose certificates
representing Senior Debentures are not immediately available or who cannot
deliver such certificates and all other required documents to the Exchange Agent
or participants in the DTC who cannot complete the procedure for book-entry
transfer on or prior to the Expiration Date may nevertheless tender Senior
Debentures by properly completing and duly executing the Notice of Guaranteed
Delivery pursuant to the guaranteed delivery procedure set forth in the
Prospectus under the caption "Guaranteed Delivery Procedures." Pursuant to such
procedures, (i) the tender must be made by or through an Eligible Institution,
(ii) a Notice of Guaranteed Delivery, substantially in the form provided
herewith, properly completed and duly executed, must be received by the Exchange
Agent on or prior to 12:00 midnight, Eastern Standard Time, on the Expiration
Date or, in the case of DTC participants, a Notice of Guaranteed Delivery is
properly completed, duly executed and delivered to DTC (in accordance with DTC
procedures) and confirmation of such delivery to DTC is received by the Exchange
Agent on or prior to 12:00 midnight, Eastern Standard Time, on the Expiration
Date and (iii) the certificates for the tendered Senior Debentures, in proper
form for transfer, together with this Consent and Letter of Transmittal,
properly
9.
<PAGE>
completed and duly executed, with any required signature guarantees and
any other documents required by this Consent and Letter of Transmittal, or a
book-entry confirmation of the transfer of such Senior Debentures into the
Exchange Agent's account at DTC and an Agent's Message stating that such
Holder has received this Consent and Letter of Transmittal and has agreed to
be bound by the terms hereof, are received by the Exchange Agent within five
(5) business days after the date of execution of the Notice of Guaranteed
Delivery.
3. CONSENTS TO PROPOSED AMENDMENTS. A valid Consent to the Proposed
Amendments may be given only by the Holder or by his or her attorney-in-fact. A
beneficial owner who is not a Holder must arrange with the Holder to execute and
deliver a Consent on his or her behalf, obtain a properly completed irrevocable
proxy that authorizes such beneficial owner to consent to the Proposed
Amendments on behalf of such Holder or become a Holder. Any financial
institution that is a participant in DTC's system and whose name appears on a
security position listing as the record owner of the Senior Debentures who
wishes to make book-entry delivery of Senior Debentures as described above and
who wishes to consent to the Proposed Amendments must complete and execute a
participant's letter (which will be distributed to participants by DTC)
instructing the DTC's nominee to complete and sign the proxy attached thereto.
4. WITHDRAWAL OF TENDERS AND REVOCATION OF CONSENTS. Tenders of Senior
Debentures may be withdrawn and the concurrent Consents may be revoked at any
time prior to 12:00 midnight, Eastern Standard Time, on the Expiration Date (but
not thereafter if the Company accepts the Senior Debentures for payment). A
valid withdrawal of tendered Senior Debentures effected prior to 12:00 midnight,
Eastern Standard Time, on the Expiration Date will constitute the concurrent
valid revocation of such Holder's related Consent. In order for a Holder to
revoke a Consent, such Holder must withdraw the related tendered Senior
Debentures. Tenders of Senior Debentures may not be withdrawn, and Consents may
not be revoked, after 12:00 midnight, Eastern Standard Time, on the Expiration
Date. In addition, tenders of Senior Debentures may be validly withdrawn if the
Exchange Offer is terminated without any Senior Debentures being purchased
thereunder. In the event of a termination of the Exchange Offer, the Senior
Debentures tendered pursuant to the Exchange Offer will be promptly returned to
the tendering Holder and any Consents given will not be effective.
For a withdrawal of a tender of Senior Debentures (and the concurrent
revocation of Consents) to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be received by the Exchange Agent prior
to 12:00 midnight, Eastern Standard Time, on the Expiration Date at its address
set forth on the back cover of this Prospectus. Any such notice of withdrawal
must (i) specify the name of the person who tendered the Senior Debentures to be
withdrawn, (ii) contain the description of the Senior Debentures to be withdrawn
and identify the certificate number or numbers shown on the particular
certificates evidencing such Senior Debentures (unless such Senior Debentures
were tendered by book-entry transfer) and the aggregate principal amount
represented by such Senior Debentures and (iii) be signed by the holder of such
Senior Debentures in the same manner as the original signature on the Consent
and Letter of Transmittal by which such Senior Debentures were tendered
(including any required signature guarantees), if any, or be accompanied by (x)
documents of transfer sufficient to have the Trustee register the transfer of
the Senior Debentures into the name of the person withdrawing such Senior
Debentures and (y) a properly completed irrevocable proxy that authorized such
person to effect such revocation on behalf of such Holder. If the Senior
Debentures to be withdrawn have been delivered or other-wise identified to the
Exchange Agent, a signed notice of withdrawal is effective immediately upon
written or facsimile notice of withdrawal even if physical release is not yet
effected.
If Senior Debentures have been tendered pursuant to the procedures for
book-entry transfer, any notice of withdrawal must specify the name and
number of the account at DTC to be credited with
the withdrawn Senior Debentures. Any such notice of withdrawal must be signed
by the registered holder of Senior Debentures in the same manner as the
original signature on this Consent and Letter of Transmittal (including any
required signature guarantees) or be accompanied by evidence satisfactory to
the Company that the person withdrawing the tender has succeeded to the
ownership of the Senior Debentures.
Any Senior Debentures properly withdrawn will be deemed to be not validly
tendered for purposes of the Exchange Offer, and will constitute the concurrent
valid revocation of such Holder's Consent. Any valid revocation of Consents
will automatically render the prior tender for the Senior Debentures to which
such Consents relate defective and the Company will have the right, which it may
waive, to reject such tender as invalid and ineffective. Any permitted
withdrawal of Senior Debentures and revocation of Consents may not be rescinded,
and any Senior Debentures properly withdrawn will thereafter be deemed not
validly tendered and any Consents revoked will be deemed not validly delivered
for purposes of the Exchange Offer; PROVIDED, HOWEVER, that withdrawn Senior
Debentures may be re-tendered and revoked Consents may be delivered by again
following one of the appropriate procedures described herein at any time on or
prior to the Expiration Date.
10.
<PAGE>
If the Company extends the Exchange Offer or is delayed in its acceptance
for exchange of Senior Debentures or is unable to exchange Senior Debentures
pursuant to the Exchange Offer for any reason, then, without prejudice to the
Company's rights hereunder, tendered Senior Debentures may be retained by the
Exchange Agent on behalf of the Company and may not be withdrawn (subject to the
prompt acceptance and delivery of shares of Common Stock in exchange for
tendered Senior Debentures or the prompt return of tendered Senior Debentures
which are not accepted after the termination or withdrawal of the Exchange
Offer), except as otherwise provided in this section.
5. PARTIAL TENDERS (NOT APPLICABLE TO HOLDERS OF SENIOR DEBENTURES WHO
TENDER BY BOOK-ENTRY TRANSFER). If less than the entire principal amount of any
Senior Debentures evidenced by a submitted certificate is tendered, the
tendering Holder should fill in the applicable principal amount of the Senior
Debentures that are to be tendered in the box entitled "Description of Senior
Debentures Tendered." The entire principal amount represented by the
certificates for all Senior Debentures delivered to the Exchange Agent will be
deemed to have been tendered unless otherwise indicated. If the entire
principal amount of all Senior Debentures is not tendered or not accepted for
payment, new certificate(s) representing the remainder of the principal amount
of the Senior Debentures that were evidenced by the old certificate(s) will be
sent to the Holder, unless otherwise provided in the boxes entitled "Special
Payment Instructions" or "Special Delivery Instructions" above, as soon as
practicable after the expiration of the Exchange Offer.
6. SIGNATURES ON THIS CONSENT AND LETTER OF TRANSMITTAL; BOND POWERS AND
ENDORSEMENTS. If this Consent and Letter of Transmittal is signed by the
Holder(s) of the Senior Debentures tendered hereby, the signature(s) must
correspond exactly with the name(s) as written on the face of the certificate(s)
without alteration, enlargement or any change whatsoever.
If any of the Senior Debentures tendered hereby are owned of record by two
or more joint owners, all such owners must sign this Consent and Letter of
Transmittal. If any tendered Senior Debentures are registered in different
names on several certificates, it will be necessary to complete, sign and submit
as many separate Consents and Letters of Transmittal as there are names in which
certificates are held.
If this Consent and Letter of Transmittal or any certificates or bond
powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and
proper evidence satisfactory to the Company of its authority so to act must be
submitted, unless waived by the Company.
If this Consent and Letter of Transmittal is signed by the Holder(s) of the
Senior Debentures listed and transmitted hereby, no endorsement of certificates
or separate bond powers are required unless payment is to be made to, or
certificates for Senior Debentures not tendered or not accepted for purchase are
to be issued to, a person other than the Holder(s). Signatures on such
certificates must be guaranteed by an Eligible Institution (unless signed by an
Eligible Institution).
If this Consent and Letter of Transmittal is signed by a person other than
the Holder(s) of the Senior Debentures listed, the certificates representing
such Senior Debentures must be properly endorsed for transfer by the Holder or
be accompanied by a properly completed bond power from the Holder, together with
a properly completed irrevocable proxy that authorizes such person to consent to
the Proposed Amendments on behalf of such Holder, with signatures on the
endorsement or bond power guaranteed by an Eligible Institution.
7. TRANSFER TAXES. The Company will pay or cause to be paid any transfer
taxes with respect to the transfer and sale of Senior Debentures to it or its
order pursuant to the Exchange Offer. If, however, certificates representing
shares of Common Stock issued in exchange for tendered Senior Debentures or
certificates representing Senior Debentures not tendered or not accepted for
payment are to be registered in the name of, any person other than the
Holder(s), or if tendered certificates re-registered in the name of any person
other than the person(s) signing this Consent and Letter of Transmittal, the
number of shares or amount of Senior Debentures will be reduced by a number
sufficient when sold by the Exchange Agent to satisfy the amount of any transfer
taxes (whether imposed on the Holder(s) or such other person) payable on account
of
11.
<PAGE>
the transfer to such person unless satisfactory evidence of the payment of such
taxes or exemption therefrom is submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 7, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES LISTED IN THIS CONSENT AND
LETTER OF TRANSMITTAL.
8. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If certificates for shares
of Common Stock exchanged for tendered Senior Debentures are to be issued in the
name of, and/or certificates representing Senior Debentures not accepted for
payment are to be returned to, a person other than the person(s) signing this
Consent and Letter of Transmittal, or are to be sent and/or are to be returned
to a person other than the person(s) signing this Consent and Letter of
Transmittal or to an address other than that shown above, the appropriate boxes
on this Consent and Letter of Transmittal should be completed. Holders of
Senior Debentures delivering Senior Debentures by book-entry transfer may
request that Senior Debentures not accepted for payment be credited to such
account maintained at DTC as such Holder(s) may designate hereon. If no such
instructions are given, such Senior Debentures not accepted for payment will be
returned by crediting the account at DTC designated above.
9. WAIVER OF CONDITIONS. To the extent permitted by applicable law, the
Company reserves the right to waive any and all conditions to the Exchange Offer
and Consent Solicitation and accept for exchange any Senior Debentures tendered.
10. TAX IDENTIFICATION NUMBER AND BACKUP WITHHOLDING. Federal income tax
law generally requires that a Holder whose tendered Senior Debentures are
accepted for exchange, or such Holder's assignee (in either case, the "Payee"),
provide the Exchange Agent (the "Payor"), with such Payee's correct Taxpayer
Identification Number ("TIN"), which, in the case of a Payee who is an
individual, is such Payee's social security number. If the Payor is not
provided with the correct TIN or an adequate basis for an exemption, such Payee
may be subject to a $50 penalty imposed by the Internal Revenue Service and
backup withholding in an amount equal to 31% of the gross proceeds received
pursuant to the Exchange Offer and Consent Solicitation. If withholding results
in an over payment of taxes, a refund may be obtained.
To prevent backup withholding, each Payee must provide such Payee's correct
TIN by completing the "Substitute Form W-9" set forth herein certifying that the
TIN provided is correct (or that such Payee is awaiting a TIN) and that (i) the
Payee is exempt from backup withholding, (ii) the Payee has not been notified by
the Internal Revenue Service that such Payee is subject to backup withholding as
a result of a failure to report all interest or dividends, or (iii) the Internal
Revenue Service has notified the Payee that such Payee is no longer subject to
backup withholding.
If the Payee does not have a TIN, such Payee should contact the Information
Agent to request a copy of the Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 (the "W-9 Guidelines") for
instructions on applying for a TIN, write "Applied For" in the space for the TIN
in Part I of the Substitute Form W-9, and sign and date the Substitute Form W-9
and the Certificate of Awaiting Taxpayer Identification Number set forth herein.
If the Payee does not provide such Payee's TIN to the Payor within 60 days,
backup withholding will begin and continue until such Payee furnishes such Payee
's TIN to the Payor. Note: Writing "Applied For" on the form means that the
Payee has already applied for a TIN or that such Payee intends to apply for one
in the near future.
If the Senior Debentures are held in more than one name or are not in the
name of the actual owner, consult the W-9 Guidelines for information on which
TIN to report.
Exempt Payees (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. To prevent possible erroneous backup withholding, an exempt Payee
should write "Exempt" in Part 2 of Substitute Form W-9. Contact the Information
Agent to obtain a copy of the W-9 Guidelines for additional instructions. In
order for a nonresident alien or foreign entity to qualify as exempt, such
person must complete the Form W-8, "Certificate of Foreign Status," signed under
12.
<PAGE>
penalty of perjury attesting to such exempt status.
11. MUTILATED, LOST, STOLEN OR DESTROYED SENIOR DEBENTURES. Holders of
an aggregate amount of $500 of less of Senior Debentures which have been
mutilated, lost stolen or destroyed should complete the Affidavit of Loss
below. Any Holder of Senior Debentures whose Senior Debentures in the aggregate
amount of more than $500 have been mutilated, lost, stolen or destroyed should
contact the Information Agent for further instructions.
12. REQUESTS FOR ASSISTANCE OF ADDITIONAL COPIES. Requests for assistance
may be directed to the Information Agent as set forth below or from the
tendering Holder's broker, dealer, commercial bank or trust company.
Additional copies of the Prospectus, this Consent and Letter of Transmittal,
and the Notice of Guaranteed Delivery may be obtained from the Information
Agent.
IMPORTANT: THIS CONSENT AND LETTER OF TRANSMITTAL, TOGETHER WITH
CERTIFICATES FOR, OR CONFIRMATION OF BOOK-ENTRY TRANSFER WITH RESPECT TO, ANY
TENDERED SENIOR DEBENTURES, WITH ANY REQUIRED SIGNATURE GUARANTEES AND ALL
OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE EXCHANGE AGENT, OR THE
NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT, ON OR
PRIOR TO 12:00 MIDNIGHT, EASTERN STANDARD TIME, ON EXPIRATION DATE.
13.
<PAGE>
PAYOR'S NAME: CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Part 1 -- PLEASE TIN ________________________
SUBSTITUTE Form W-9 PROVIDE YOUR TIN (Social Security Number or
Department of the IN THE BOX AT Employer Identification
Treasury Internal RIGHT AND CERTIFY Number)
Revenue Service BY SIGNING AND
Payor's Request for DATING BELOW
Taxpayer -----------------------------------------------------------
Identification Part 2 -- FOR PAYEES EXEMPT FROM BACKUP
Number ("TIN") and WITHHOLDING PLEASE WRITE "EXEMPT" HERE
Certification (SEE INSTRUCTIONS) ______________________________
-----------------------------------------------------------
Part 3 -- CERTIFICATION UNDER PENALTIES OF
PERJURY, I CERTIFY THAT (1) The number shown on
this form is my correct TIN (or I am waiting for
a number to be issued to me), and (2) I am not
subject to backup withholding because: (a) I am
exempt from backup withholding, or (b) I have not
been notified by the Internal Revenue Service
(the "IRS") that I am subject to backup
withholding as a result of a failure to report
all interest or dividends or (c) the IRS has
notified me that I am no longer subject to backup
withholding.
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE
YOUR CONSENT TO ANY PROVISION OF THIS DOCUMENT
OTHER THAN THE CERTIFICATIONS REQUIRED TO AVOID
BACKUP WITHHOLDING.
SIGNATURE _________________ DATE __________, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
You must cross out item (2) above if you have been notified by the IRS that you
are currently subject to backup withholding because of under reporting interest
or dividends on your tax return and you have not been notified by the IRS that
you are no longer subject to backup withholding.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU WROTE
"APPLIED FOR" IN PART 1 OF THE SUBSTITUTE FORM W-9
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and that I mailed or delivered an application to
receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration office (or I intend to mail or
deliver an application in the near future). I understand that if I do not
provide a taxpayer identification number to the payor, 31% of all reportable
payments made to me will be withheld until I provide a number.
Signature __________________________________ Date _________________, 1997
- --------------------------------------------------------------------------------
14.
<PAGE>
- --------------------------------------------------------------------------------
SUBSTITUTE FORM W-8
By checking this box / /, the perosn signing this Consent and Letter of
Transmittal hereby certifies under penalties of perjury that the Holder is an
"excempt foreign person" for purposes of the backup withholding rules under
U.S. federal income taxs laws, because the Holder:
(i) is a nonresident alien individual or a foreign corporation,
partnership, estate or trust;
(ii) If an individual, has not been and plans not to be present in the
U.S. for a total of 183 days or more during the calendar year; and:
(iii) Neither engages, nor plans to engage, in a U.S. trade or business
that has effectively connected gains from transactions with a broker
or banter exchange.
In order for a Holder who is a FOREIGN PERSON (i.e., not a United States
citizen or a resident alien, a domestic corporation, a domestic partnership,
a domestic trust or a domestic estate to qualify as exempt from 31% backup
withholding, such foreign Unitholder must certify, under penalties of perjury,
the statement in BOX C of this Letter of Transmittal attesting to that
foreign person's status by checking the box in such statemet. UNLESS THE BOX
IS CHECKED, SUCH FOREIGN PERSON WILL BE SUBJECT TO 31% WITHHOLDING OF TAX
UNDER SECTION 1445 OF THE CODE.
- --------------------------------------------------------------------------------
15.
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
THE INFORMATION AGENT IS:
GEORGESON & COMPANY, INC.
Wall Street Plaza
New York, NY 10005
Banks and Brokers Call Collect: (212) 440-9800
All Others Call Toll Free: (800) 223-2064
The Exchange Agent for the Exchange Offer and Consent Solicitation is:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
BY MAIL: FACSIMILE TRANSMISSION: BY HAND/OVERNIGHT DELIVERY:
(FOR ELIGIBLE INSTITUTIONS ONLY)
P.O. Box 798 (201) 329-8936 120 Broadway
Midtown Station 13th Floor
New York, New York 10018 CONFIRM BY TELEPHONE: New York, New York 10271
Attn: Reorganization Dept. (201) 296-4209 Attn: Reorganization Dept.
(201) 296-4381
</TABLE>
16.
<PAGE>
CONSENT AND LETTER OF TRANSMITTAL
TO TENDER AND TO GIVE CONSENT TO PROPOSED AMENDMENTS TO THE INDENTURE IN
RESPECT OF 12% SUBORDINATED PAY-IN-KIND DEBENTURES DUE MARCH 15, 2002
(THE "SUBORDINATED DEBENTURES")
OF
KOLL REAL ESTATE GROUP, INC.
PURSUANT TO THE PROXY STATEMENT/PROSPECTUS AND DISCLOSURE STATEMENT DATED
_______________, 1997
THE OFFER TO EXCHANGE WILL EXPIRE AT 12:00 MIDNIGHT, EASTERN STANDARD TIME,
ON JUNE ___, 1997 (THE "EXPIRATION DATE"), UNLESS EXTENDED. HOLDERS OF SENIOR
DEBENTURES MUST TENDER THEIR SENIOR DEBENTURES AND PROVIDE THEIR CONSENTS TO THE
PROPOSED AMENDMENTS (AS DEFINED) ON OR PRIOR TO 12:00 MIDNIGHT EASTERN STANDARD
TIME ON THE EXPIRATION DATE IN ORDER TO RECEIVE THE EXCHANGE OFFER
CONSIDERATION. TENDERED SENIOR DEBENTURES MAY BE WITHDRAWN AND CONSENTS MAY BE
REVOKED AT ANY TIME PRIOR TO 12:00 MIDNIGHT, EASTERN STANDARD TIME, ON THE
EXPIRATION DATE, BUT NOT THEREAFTER. THE EXCHANGE OFFER IS CONDITIONED UPON THE
SATISFACTION OF CERTAIN CONDITIONS, INCLUDING AMONG OTHER THINGS, THE VALID
TENDER OF AT LEAST 90% IN AGGREGATE PRINCIPAL AMOUNT OF ALL OUTSTANDING
DEBENTURES OF THE COMPANY OWNED BY PERSONS OTHER THAN THE COMPANY, ITS
SUBSIDIARIES AND CERTAIN OF THEIR AFFILIATES.
TO EXCHANGE AGENT:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
BY MAIL:
P.O. Box 798
Midtown Station
New York, New York 10018
Attn: Reorganization Dept.
FACSIMILE TRANSMISSION:
(FOR ELIGIBLE INSTITUTIONS ONLY)
(201) 329-8936
CONFIRM BY TELEPHONE:
(201) 296-4209
(201) 296-4381
BY HAND/OVERNIGHT DELIVERY:
120 Broadway
13th Floor
New York, New York 10271
Attn: Reorganization Dept.
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE
WILL NOT CONSTITUTE A VALID DELIVERY. The accompanying instructions should be
read carefully before this Consent and Letter of Transmittal is completed.
Capitalized terms used in this Consent and Letter of Transmittal not otherwise
defined herein shall have the meanings provided in the Proxy
Statement/Prospectus and Disclosure Statement dated __________, 1997 (the
"Prospectus") of Koll Real Estate Group, Inc., a Delaware corporation (the
"Company").
The undersigned acknowledges that he or she has received the Prospectus
and this Consent and Letter of Transmittal, which together constitute (i) the
Company's offer (the "Exchange Offer") to exchange an aggregate of up to
1,169,901 shares of the Company's post-Capital Stock Combination and
post-Reverse Stock Split Common Stock (the "Common Stock") for up to all of
the Company's outstanding 12% Subordinated Subordinated Debentures due March
15, 2002 (the "Subordinted Debentures"), on a 56 shares per $1000 principal
amount basis, and (ii) the Company's solicitation (the "Consent
Solicitation") of consents (the "Consents") from persons in whose names the
Subordinted Debentures are registered on the books of the registrar for the
Subordinted Debentures (the "Holders") to certain amendments (the "Proposed
Amendments") to the Indenture (the "Indenture") pursuant to which the
Subordinted Debentures were issued. The consideration payable by the Company
for the Subordinted Debentures is
1.
<PAGE>
set forth in the Prospectus. HOLDERS WHO TENDER THEIR SUBORDINTED DEBENTURES
PURSUANT TO THE EXCHANGE OFFER WILL BE DEEMED, BY ACCEPTANCE OF THE EXCHANGE
OFFER, TO CONSENT TO THE PROPOSED AMENDMENTS. HOLDERS MAY NOT CONSENT TO THE
PROPOSED AMENDMENTS WITHOUT TENDERING THEIR SUBORDINTED DEBENTURES. Holders who
do not tender their Subordinted Debentures and deliver their Consents on or
prior to 12:00 midnight, Eastern Standard Time, on the Expiration Date will not
receive the Exchange Offer consideration. See "Procedure for Tendering
Outstanding Debentures and Giving Consents" in the Prospectus. No Holder may
withdraw any tendered Subordinted Debentures or revoke a Consent following 12:00
midnight, Eastern Standard Time, on the Expiration Date. The Company will issue
certificates for shares of Common Stock in exchange for tendered Subordinted
Debentures as promptly as practicable after such Subordinted Debentures are
accepted for exchange pursuant to the Exchange Offer.
The Exchange Offer or Consent Solicitation may be extended, terminated or
amended, as provided in the Prospectus. During any such extension of the
Exchange Offer or Consent Solicitation, all Subordinted Debentures previously
tendered and Consents delivered and not withdrawn or revoked pursuant to the
Exchange Offer that have not been accepted for purchase will remain subject to
the Exchange Offer and may be accepted thereafter for purchase by the Company.
No alternative, conditional or contingent tenders will be accepted. A
tendering Holder, by execution of this Consent and Letter of Transmittal, or
facsimile thereof, waives all rights to receive notice of acceptance of such
Holder's Subordinted Debentures for purchase.
PLEASE READ THIS ENTIRE CONSENT AND LETTER OF TRANSMITTAL
CAREFULLY BEFORE CHECKING ANY BOX BELOW
This Consent and Letter of Transmittal is to be completed by Holders of
Subordinted Debentures if certificates representing such Subordinted Debentures
are to be forwarded herewith or if delivery of such certificates are to be made
by book-entry transfer to the account established by the Exchange Agent at The
Depository Trust Company ("DTC"), pursuant to the procedures set forth in this
Consent and Letter of Transmittal and in the Prospectus under the caption
"Procedure for Tendering Outstanding Debentures and Giving Consents," or
"Book-Entry Transfer Procedures." PURSUANT TO THE TERMS OF THE EXCHANGE OFFER
AND CONSENT SOLICITATION, THE COMPLETION, EXECUTION AND DELIVERY OF THIS CONSENT
AND LETTER OF TRANSMITTAL WILL BE DEEMED TO CONSTITUTE A CONSENT TO THE PROPOSED
AMENDMENTS.
Holders of Subordinted Debentures that are tendering by book-entry transfer
to the Exchange Agent's account at DTC can execute the tender through the DTC
Automated Tender Offer Program ("ATOP"), for which the transaction will be
eligible. DTC participants that are accepting the Exchange Offer must transmit
their acceptance to DTC (in accordance with DTC procedures) which will verify
the acceptance and execute a book-entry delivery to the Exchange Agent's account
at DTC. DTC will then send an agent's message ("Agent's Message") to the
Exchange Agent, which Agent's Message shall state that DTC has received an
express acceptance from each Holder tendering through ATOP that each such Holder
has received this Consent and Letter of Transmittal and has agreed to be bound
by the terms and conditions hereof. Delivery by DTC of the Agent's Message, and
receipt thereof by the Exchange Agent will satisfy the terms of the Exchange
Offer as to execution and delivery of a Consent and Letter of Transmittal by
each Holder identified in the Agent's Message.
Holders whose certificates representing the Subordinted Debentures are not
immediately available or who cannot deliver certificates and all other required
documents to the Exchange Agent or complete the procedure for book-entry
transfer on or prior to the Expiration Date, may nevertheless tender Subordinted
Debentures pursuant to the guaranteed delivery procedure set forth in the
Prospectus under the caption "Guaranteed Delivery Procedures" See Instruction 2
below. Delivery of documents to DTC does not constitute delivery to the
Exchange Agent.
List below the Subordinted Debentures that are to be tendered pursuant to
this Consent and Letter of Transmittal. If the space below is inadequate, list
the information requested below on a separate signed schedule and affix the list
to this Consent and Letter of Transmittal.
2.
<PAGE>
DESCRIPTION OF SUBORDINTED DEBENTURES TENDERED
PRINCIPAL
AMOUNT
NAMES AND ADDRESS(ES) AGGREGATE PRINCIPAL TENDERED AND
OF HOLDER(S) AMOUNT AS TO WHICH
(PLEASE FILL IN, CERTIFICATE REPRESENTED BY CONSENTS ARE
BLANK) NUMBER(S) (1) CERTIFICATES (2) DELIVERED (2)
- --------------------------------------------------------------------------------
-----------------------------------------------------------
-----------------------------------------------------------
-----------------------------------------------------------
-----------------------------------------------------------
- --------------------------------------------------------------------------------
Total Principal Amount Tendered
- --------------------------------------------------------------------------------
(1) Need not be completed by Holders who tender by book-entry.
(2) Unless otherwise indicated in this column, any tendering Holder will be
deemed to have tendered, and delivered Consents with respect to, the entire
principal amount represented by the Subordinted Debentures indicated in
this column. See Instruction 5.
/ / CHECK HERE IF CERTIFICATES FOR TENDERED Subordinted DEBENTURES ARE ENCLOSED
HEREWITH.
/ / CHECK HERE IF TENDERED Subordinted DEBENTURES ARE BEING DELIVERED BY
BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT
WITH DTC AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN DTC MAY DELIVER
Subordinted DEBENTURES BY BOOK-ENTRY TRANSFER):
Name of Tendering Institution..............................................
Account Number.............................................................
Transaction Code Number ...................................................
/ / CHECK HERE IF TENDERED Subordinted DEBENTURES ARE BEING DELIVERED PURSUANT
TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT
AND COMPLETE THE FOLLOWING:
Name(s) of Holders.........................................................
Window Ticket Number (if any)..............................................
Date of Execution of Notice of Guaranteed Delivery and Consent.............
Name of Eligible Institution that guaranteed delivery......................
If delivery by book-entry transfer, check box here: / /
Account Number.............................................................
Transaction Code Number....................................................
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
3.
<PAGE>
Only Holders are entitled to tender their Subordinted Debentures in the
Exchange Offer and consent to the Proposed Amendments in the Consent
Solicitation. Any financial institution that is a participant in DTC's
system and whose name appears on a security position listing as the record
owner of the Subordinted Debentures and who wishes to make book-entry
delivery of the Subordinted Debentures as described above and to consent to
the Proposed Amendments must complete, execute and deliver this Consent
and Letter of Transmittal to DTC, which will then send an Agent's Message to
the Exchange Agent (as described above). Persons who are beneficial owners of
Subordinted Debentures but are not Holders and who seek to tender Subordinted
Debentures and deliver Consents to the Proposed Amendments should (i) contact
the Holder of such Subordinted Debentures and instruct such Holder to tender
and consent on his or her behalf, (ii) obtain and include with this Consent
and Letter of Transmittal Subordinted Debentures properly endorsed for
transfer by the Holder or accompanied by a properly completed bond power from
the Holder, together with a properly completed irrevocable proxy that
authorizes such person to consent to the Proposed Amendments on behalf of
such Holder, with signatures on the endorsement or bond power guaranteed by a
firm that is a member of a registered national securities exchange, a member
of the National Association of Securities Dealers, Inc. or by a commercial
bank, trust company, credit union or savings association having an office in
the United States (each, an "Eligible Institution") or (iii) effect a record
transfer of such Subordinted Debentures from the Holder to such beneficial
owner and comply with the requirements applicable to Holders for tendering
Subordinted Debentures and delivering Consents prior to 12:00 midnight,
Eastern Standard Time, on the Expiration Date, as the case may be.
A HOLDER WHO TENDERS Subordinted DEBENTURES PURSUANT TO THE EXCHANGE
OFFER WILL BE DEEMED, BY ACCEPTANCE OF THE EXCHANGE OFFER TO CONSENT TO THE
PROPOSED AMENDMENTS. HOLDERS WHO WISH TO RECEIVE COMMON STOCK PURSUANT TO THE
EXCHANGE OFFER MUST TENDER THEIR Subordinted DEBENTURES AND DELIVER CONSENTS
PRIOR TO 12:00 MIDNIGHT, EASTERN STANDARD TIME, ON THE EXPIRATION DATE. SEE
"PROCEDURE FOR TENDERING OUTSTANDING DEBENTURES AND GIVING CONSENTS" IN THE
PROSPECTUS.
To: Koll Real Estate Group, Inc.
Upon the terms and subject to the conditions of the Exchange Offer and
Consent Solicitation, the undersigned hereby tenders to the Company the
Subordinted Debentures indicated above. Subject to, and effective upon,
acceptance for exchange for the Subordinted Debentures tendered herewith, the
undersigned hereby sells, assigns and transfers to or upon the order of the
Company all rights, title and interest in and to all such Subordinted Debentures
tendered hereby. The undersigned hereby irrevocably constitutes and appoints
the Exchange Agent the true and lawful agent and attorney-in-fact of the
undersigned (with full knowledge that the Exchange Agent also acts as agent of
the Company) with respect to such Subordinted Debentures, with full power of
substitution and resubstitution (such power of attorney being, deemed to be an
irrevocable power coupled with an interest) to (a) deliver certificates
representing such Subordinted Debentures, or transfer ownership of such
Subordinted Debentures on the account books maintained by DTC, together, in each
such case, with all accompanying evidences of transfer and authenticity to or
upon the order of the Company, (b) present such Subordinted Debentures for
transfer on the relevant security registrar and (c) receive all benefits or
otherwise exercise all rights of beneficial ownership on behalf of the Company
of such Subordinted Debentures all in accordance with the terms of the Exchange
Offer and Consent Solicitation. EXECUTION AND DELIVERY OF THIS CONSENT AND
LETTER OF TRANSMITTAL WILL ALSO BE DEEMED TO CONSTITUTE A CONSENT TO THE
PROPOSED AMENDMENTS.
THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT THE UNDERSIGNED HAS
FULL POWER AND AUTHORITY TO TENDER, SELL, ASSIGN AND TRANSFER THE SUBORDINTED
DEBENTURES TENDERED HEREBY AND TO GIVE THE CONSENT CONTAINED HEREIN AND, THAT
WHEN THE SAME ARE ACCEPTED FOR EXCHANGE BY THE COMPANY, THE COMPANY WILL ACQUIRE
GOOD, MARKETABLE AND UNENCUMBERED TITLE THERETO, FREE AND CLEAR OF ALL SECURITY
INTERESTS, LIENS, RESTRICTIONS, CLAIMS, CHARGES, ENCUMBRANCES, CONDITIONAL SALES
AGREEMENTS OR OTHER OBLIGATIONS RELATING TO THE SALE OR TRANSFER THEREOF, AND
NOT BE SUBJECT TO ANY ADVERSE CLAIM. THE UNDERSIGNED WILL, UPON REQUEST,
EXECUTE AND DELIVER ANY ADDITIONAL DOCUMENTS DEEMED BY THE EXCHANGE AGENT OR THE
COMPANY TO BE NECESSARY OR DESIRABLE TO COMPLETE THE ASSIGNMENT, TRANSFER AND
PURCHASE OF THE SUBORDINTED DEBENTURES TENDERED HEREBY. THE UNDERSIGNED HAS
READ AND AGREES TO ALL OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER AND
CONSENT SOLICITATION. DELIVERY OF THE ENCLOSED SUBORDINTED DEBENTURES SHALL BE
EFFECTED, AND RISK OF LOSS AND TITLE TO SUCH SUBORDINTED DEBENTURES SHALL PASS,
ONLY UPON PROPER DELIVERY THEREOF TO THE EXCHANGE AGENT IN ACCORDANCE WITH
4.
<PAGE>
THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER.
All authority conferred or agreed to be conferred pursuant to this Consent
and Letter of Transmittal and every obligation of the undersigned hereunder
shall be binding, upon the successors, assigns, heirs, executors,
administrators, trustees in bankruptcy, and personal and legal representatives
of the undersigned and shall not be affected by, and shall survive, the death or
incapacity of the undersigned. Subordinted Debentures properly tendered may be
withdrawn and Consents may be revoked at any time prior to 12:00 midnight,
Eastern Standard Time, on the Expiration Date.
The Exchange Offer and Consent Solicitation are subject to a number of
conditions, each of which may be waived or modified by the Company, in whole or
in part, at any time and from time to time, as described in the Prospectus under
the caption "Conditions of the Exchange Offers." The undersigned recognizes
that as a result of such conditions the Company may not be required to accept
the Subordinted Debentures properly tendered hereby. In such event, the
tendered Subordinted Debentures not accepted for purchase and payment will be
returned to the undersigned without cost to the undersigned as soon as
practicable following the earlier to occur of the Expiration Date or the date on
which the Exchange Offer is terminated without any Subordinted Debentures being
purchased thereunder, at the address shown below the undersigned's signature(s)
unless otherwise indicated under "Special Payments Instructions" below.
Unless otherwise indicated below under "Special Payment Instructions" or
"Special Delivery Instructions," as applicable, please send share certificates
for Common Stock to be issued in exchange for any Subordinted Debentures
tendered hereby and accepted for exchange, and/or return any certificates
representing Subordinted Debentures not tendered or not accepted for exchange in
the name(s) of the Holder(s) and to the addressees appearing under "Description
of Subordinted Debentures Tendered" herein. In the event that both the Special
Payment Instructions and the Special Delivery Instructions are completed, please
issue and send the share certificates for Common Stock to be issued in exchange
for any Subordinted Debentures tendered hereby and/or return any certificates
representing Subordinted Debentures not tendered or not accepted for purchase
to, the person or persons so indicated. Unless otherwise indicated under
"Special Payment Instructions," in the case of a book-entry delivery of
Subordinted Debentures, please credit the account maintained at DTC with any
Subordinted Debentures not tendered or not accepted for exchange. The
undersigned recognizes that the Company does not have any obligation pursuant to
the Special Payment Instructions to transfer any Subordinted Debentures from the
name of the Holder thereof if the Company does not accept for exchange any of
the Subordinted Debentures so tendered.
5.
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 6, 7 AND 8)
To be completed ONLY if Common Stock share certificates to be issued in exchange
for the Senior Debentures accepted for exchange, and/or certificates
representing Senior Debentures not accepted for exchange are to be issued in the
name of someone other than the undersigned, or if Senior Debentures delivered by
book-entry transfer not accepted for exchange are to be returned by credit to an
account maintained at DTC other than the account indicated above.
Issue: Common Stock Share
Certificate(s) to
Name:
-------------------------------------
(Please Print)
Address:
----------------------------------
- --------------------------------------------
(Include Zip Code)
- --------------------------------------------
(Taxpayer Identification or Social Security Number)
Credit unpurchased Senior Debentures delivered by book-entry transfer to the DTC
account set forth below:
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 6, 7 AND 8)
To be completed ONLY if the Common Stock share certificates to be issued in
exchange for the Senior Debentures accepted for exchange, and/or certificates
representing Senior Debentures not accepted for exchange are to be sent to
someone other than the undersigned or to the undersigned at an address other
than that shown above.
Mail: Common Stock Share
Certificate(s) to
Name:
-------------------------------------
(Please Print)
Address:
----------------------------------
- --------------------------------------------
(Include Zip Code)
- --------------------------------------------
(Taxpayer Identification or Social Security Number)
6.
<PAGE>
AFFIDAVIT OF LOSS - TO BE EXECUTED ONLY IF CERTIFICATE(S)
REPRESENTING A TOTAL OF $500 PRINCIPAL AMOUNT OR
LESS IN THE AGGREGATE HAVE BEEN LOST STOLEN OR DESTROYED
Certificate Number(s) Principal Amount
------------------------ ----------------------
------------------------ ----------------------
Certificate Number(s) Principal Amount
------------------------ ----------------------
------------------------ ----------------------
Certificate Number(s) Principal Amount
------------------------ ----------------------
------------------------ ----------------------
Certificate Number(s) Principal Amount
------------------------ ----------------------
------------------------ ----------------------
The undersigned person(s), being first duly sworn, deposes and says that: I
am the lawful owner of the above described certificate(s) shares and I have
made a diligent search for the certificate(s) and am unable to find it. The
certificate(s) has not been endorsed, cashed, negotiated, transferred,
assigned, or otherwise disposed of. I agree to completely indemnify, protect
and save harmless, and any other parties to the transaction, from and against
all loss, costs and damages, including court costs and attorney's fees, which
they may be subject to or liable for in respect of the cancellation and
replacement of the cerificate(s) represented thereby, and the distribution of
the proceeds of such fractional share interest.
------------------------------- -----------------------------------
Signature of Affiant Notary Public (Affix Seal)
------------------------------- -----------------------------------
Signature of Co-Affiant Date Commission Expires
------------------------------- NOTE: THIS AFFIDAVIT APPLIES ONLY
Date TO CERTIFICATES REPRESENTING AN
AGGREGATE PRINCIPAL AMOUNT OF $500
OR LESS
ATTENTION:
If a certificate representing an aggregate principal amount of
more than $500 has been lost, stolen or destroyed, please contact the
Information Agent for further instructions. The Exchange Agent will place a
stop on such certificate(s) and will send you the appropriate documents to be
completed in order to replace such certificate(s). You will need to purchase
a surety bond of which will cost approximately 2% of the current market value
of the Company's Common Stock that you are entitled to receive as a result of
the Exchange Offer.
7.
<PAGE>
HOLDERS OF SUBORDINTED DEBENTURES
SIGN HERE
IMPORTANT: COMPLETE AND SIGN THE SUBSTITUTE FORM W-9 IN
THIS CONSENT AND LETTER OF TRANSMITTAL
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Signature(s) of Holder(s) of Securities
Dated: , 1997 (Must be signed by the Holder(s) exactly as
name(s) appear(s) on certificates) representing the Subordinted Debentures or on
a security position listing or by person(s) authorized to become Holder(s) by
certificates and documents transmitted herewith. If signature is by
attorney-in-fact, executor, administrator, trustee, guardian, officer of a
corporation or other person acting in a fiduciary or representative capacity,
please provide the following information and see Instruction 6.)
Capacity (Full Title)
----------------------------------------------------------
Name(s)
--------------------------------------------------------------------
(Please Type or Print)
Address
------------------------------------------------------------------------
------------------------------------------------------------------------
(Include Zip Code)
Area Code and Telephone Number
------------------------------------------------
Tax Identification or Social Security No.
--------------------------------------
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED - SEE INSTRUCTIONS 1 AND 6)
Authorized Signature
-----------------------------------------------------------
Name
----------------------------------------------------------------------
(Please Type or Print)
Address
------------------------------------------------------------------------
------------------------------------------------------------------------
(Include Zip Code)
Area Code and Telephone Number
------------------------------------------------
Dated:
-------------------
8.
<PAGE>
INSTRUCTIONS
1. GUARANTEE OF SIGNATURES. Signatures on this Consent and Letter of
Transmittal must be guaranteed by an Eligible Institution, unless the
Subordinted Debentures tendered hereby are tendered (i) by a Holder of
Subordinted Debentures (or by a participant in DTC whose name appears on a
security position listing as the owner of such Subordinted Debentures) who has
not completed either the box entitled "Special Delivery Instructions" or
"Special Payment Instructions" above, or (ii) for the account of a member firm
of an Eligible Institution. If the Subordinted Debentures are registered in the
name of a person other than the signer of the Consent and Letter of Transmittal
or if Subordinted Debentures not accepted for payment or not tendered are to be
returned to a person other than the registered Holder, then the signatures on
the Consents and Letters of Transmittal accompanying the tendered Subordinted
Debentures must be guaranteed by a Medallion Signature Guarantor as described
above. Persons who are beneficial owners of Subordinted Debentures but are not
Holders and who seek to tender Subordinted Debentures and deliver Consents to
the Proposed Amendments should (i) contact the Holder of such Subordinted
Debentures and instruct such Holder to tender and consent on his or her behalf,
(ii) obtain and include with this Consent and Letter of Transmittal, Subordinted
Debentures properly endorsed for transfer by the Holder or accompanied by a
properly completed bond power from the Holder, together with a properly
completed irrevocable proxy that authorizes such person to consent to the
Proposed Amendments on behalf of such Holder, with signatures on the endorsement
or bond power guaranteed by an Eligible Institution or (iii) effect a record
transfer of such Subordinted Debentures from the Holder to such beneficial owner
and comply with the requirements applicable to Holders for tendering Subordinted
Debentures and delivering Consents prior to 12:00 midnight, Eastern Standard
Time, on the Expiration Date. See Instruction 6.
2. REQUIREMENTS OF TENDER AND CONSENT. This Consent and Letter of
Transmittal is to be completed by Holders of Subordinted Debentures if
certificates representing such Subordinted Debentures are to be forwarded
herewith or if delivery is to be made by book-entry transfer to the account
maintained by DTC, pursuant to the procedures set forth in the Prospectus under
the captions "Procedure for Tendering Outstanding Debentures and Giving
Consents" and "Book-Entry Transfer Procedures." All Holders who wish to tender
their Subordinted Debentures must, prior to 12:00 midnight, Eastern Standard
Time, on the Expiration Date: (i) complete, sign and deliver this Consent and
Letter of Transmittal, or a facsimile thereof, to the Exchange Agent, in person
or to the address set forth on page 1 hereof, together with any signature
guarantees and any other documents required in Instructions 1-11 hereof, and
(ii) tender (and not withdraw) his or her certificates representing such
Subordinted Debentures to the Exchange Agent, or if a tender of a Subordinted
Debenture is to be made by book-entry transfer to the Exchange Agent's account
at DTC, confirm such book-entry transfer and the receipt by the Exchange Agent
of the Agent's Message, in each case in accordance with the procedures set forth
in this Consent and Letter of Transmittal. PURSUANT TO THE TERMS OF THE
EXCHANGE OFFER AND CONSENT SOLICITATION, THE COMPLETION, EXECUTION AND DELIVERY
OF THIS CONSENT AND LETTER OF TRANSMITTAL OR TENDER PURSUANT TO THE BOOK-ENTRY
TRANSFER OR GUARANTEED DELIVERY PROCEDURES WILL BE DEEMED TO CONSTITUTE A
CONSENT TO THE PROPOSED AMENDMENTS WITH RESPECT TO ANY SUBORDINTED DEBENTURES SO
TENDERED.
Notwithstanding the foregoing paragraph, Holders whose certificates
representing Subordinted Debentures are not immediately available or who cannot
deliver such certificates and all other required documents to the Exchange Agent
or participants in the DTC who cannot complete the procedure for book-entry
transfer on or prior to the Expiration Date may nevertheless tender Subordinted
Debentures by properly completing and duly executing the Notice of Guaranteed
Delivery pursuant to the guaranteed delivery procedure set forth in the
Prospectus under the caption "Guaranteed Delivery Procedures." Pursuant to such
procedures, (i) the tender must be made by or through an Eligible Institution,
(ii) a Notice of Guaranteed Delivery, substantially in the form provided
herewith, properly completed and duly executed, must be received by the Exchange
Agent on or prior to 12:00 midnight, Eastern Standard Time, on the Expiration
Date or, in the case of DTC participants, a Notice of Guaranteed Delivery is
properly completed, duly executed and delivered to DTC (in accordance with DTC
procedures) and confirmation of such delivery to DTC is received by the Exchange
Agent on or prior to 12:00 midnight, Eastern Standard Time, on the Expiration
Date and (iii) the certificates for the tendered Subordinted Debentures, in
proper form for transfer, together with this Consent and Letter of Transmittal,
properly completed and duly executed, with any required signature guarantees and
any other documents required by this Consent and Letter of Transmittal; or a
book-entry
9.
<PAGE>
confirmation of the transfer of such Subordinted Debentures into the Exchange
Agent's account at DTC and an Agent's Message stating that such Holder has
received this Consent and Letter of Transmittal and has agreed to be bound by
the terms hereof are received by the Exchange Agent within five (5) business
days after the date of execution of the Notice of Guaranteed Delivery.
3. CONSENTS TO PROPOSED AMENDMENTS. A valid Consent to the Proposed
Amendments may be given only by the Holder or by his or her attorney-in-fact. A
beneficial owner who is not a Holder must arrange with the Holder to execute and
deliver a Consent on his or her behalf, obtain a properly completed irrevocable
proxy that authorizes such beneficial owner to consent to the Proposed
Amendments on behalf of such Holder or become a Holder. Any financial
institution that is a participant in DTC's system and whose name appears on a
security position listing as the record owner of the Subordinted Debentures who
wishes to make book-entry delivery of Subordinted Debentures as described above
and who wishes to consent to the Proposed Amendments must complete and execute a
participant's letter (which will be distributed to participants by DTC)
instructing the DTC's nominee to complete and sign the proxy attached thereto.
4. WITHDRAWAL OF TENDERS AND REVOCATION OF CONSENTS. Tenders of
Subordinated Debentures may be withdrawn and the concurrent Consents may be
revoked at any time prior to 12:00 midnight, Eastern Standard Time, on the
Expiration Date (but not thereafter if the Company accepts the Subordinted
Debentures for payment). A valid withdrawal of tendered Subordinted Debentures
effected prior to 12:00 midnight, Eastern Standard Time, on the Expiration Date
will constitute the concurrent valid revocation of such Holder's related
Consent. In order for a Holder to revoke a Consent, such Holder must withdraw
the related tendered Subordinted Debentures. Tenders of Subordinted Debentures
may not be withdrawn, and Consents may not be revoked, after 12:00 midnight,
Eastern Standard Time, on the Expiration Date. In addition, tenders of
Subordinted Debentures may be validly withdrawn if the Exchange Offer is
terminated without any Subordinted Debentures being purchased thereunder. In
the event of a termination of the Exchange Offer, the Subordinted Debentures
tendered pursuant to the Exchange Offer will be promptly returned to the
tendering Holder and any Consents given will not be effective.
For a withdrawal of a tender of Subordinted Debentures (and the concurrent
revocation of Consents) to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be received by the Exchange Agent prior
to 12:00 midnight, Eastern Standard Time, on the Expiration Date at its address
set forth on the back cover of this Prospectus. Any such notice of withdrawal
must (i) specify the name of the person who tendered the Subordinted Debentures
to be withdrawn, (ii) contain the description of the Subordinted Debentures to
be withdrawn and identify the certificate number or numbers shown on the
particular certificates evidencing such Subordinted Debentures (unless such
Subordinted Debentures were tendered by book-entry transfer) and the aggregate
principal amount represented by such Subordinted Debentures and (iii) be signed
by the holder of such Subordinted Debentures in the same manner as the original
signature on the Consent and Letter of Transmittal by which such Subordinted
Debentures were tendered (including any required signature guarantees), if any,
or be accompanied by (x) documents of transfer sufficient to have the Trustee
register the transfer of the Subordinted Debentures into the name of the person
withdrawing such Subordinted Debentures and (y) a properly completed irrevocable
proxy that authorized such person to effect such revocation on behalf of such
Holder. If the Subordinted Debentures to be withdrawn have been delivered or
other-wise identified to the Exchange Agent, a signed notice of withdrawal is
effective immediately upon written or facsimile notice of withdrawal even if
physical release is not yet effected.
If Subordinated Debentures have been tendered pursuant to the book-entry
transfer procedures, any notice of withdrawal must specify the name and
number of the account at DTC to be credited with the withdrawn Subordinated
Debentures. Any such notice of withdrawal must be signed by the Holder in the
same manner as the original signature on this Consent and Letter of
Transmittal (including any required signature guarantees) or be accompanied
by evidence satisfactory to the Company that the person withdrawing the
tender has succeeded to the ownership of the Subordinated Debentures.
Any Subordinted Debentures properly withdrawn will be deemed to be not
validly tendered for purposes of the Exchange Offer, and will constitute the
concurrent valid revocation of such Holder's Consent. Any valid revocation of
Consents will automatically render the prior tender for the Subordinted
Debentures to which such Consents relate defective and the Company will have the
right, which it may waive, to reject such tender as invalid and ineffective.
Any permitted withdrawal of Subordinted Debentures and revocation of Consents
may not be rescinded, and any Subordinted Debentures properly withdrawn will
thereafter be deemed not validly tendered and any Consents revoked will be
deemed not validly delivered for purposes of the Exchange Offer; PROVIDED,
HOWEVER, that withdrawn Subordinted Debentures may be re-tendered and revoked
Consents may be delivered by again following one of the appropriate procedures
described herein at any time on or prior to the Expiration Date.
If the Company extends the Exchange Offer or is delayed in its acceptance
for exchange of Subordinated
10.
<PAGE>
Debentures or is unable to exchange Subordinted Debentures pursuant to the
Exchange Offer for any reason, then, without prejudice to the Company's
rights hereunder, tendered Subordinted Debentures may be retained by the
Exchange Agent on behalf of the Company and may not be withdrawn (subject to
the prompt acceptance and delivery of shares of Common Stock in exchange for
tendered Subordinted Debentures or the prompt return of tendered Subordinted
Debentures which are not accepted after the termination or withdrawal of the
Exchange Offer), except as otherwise provided in this section.
5. PARTIAL TENDERS (NOT APPLICABLE TO HOLDERS OF SUBORDINTED DEBENTURES
WHO TENDER BY BOOK-ENTRY TRANSFER). If less than the entire principal amount of
any Subordinted Debentures evidenced by a submitted certificate is tendered, the
tendering Holder should fill in the applicable principal amount of the
Subordinted Debentures that are to be tendered in the box entitled "Description
of Subordinted Debentures Tendered." The entire principal amount represented by
the certificates for all Subordinted Debentures delivered to the Exchange Agent
will be deemed to have been tendered unless otherwise indicated. If the entire
principal amount of all Subordinted Debentures is not tendered or not accepted
for payment, new certificate(s) representing the remainder of the principal
amount of the Subordinted Debentures that were evidenced by the old
certificate(s) will be sent to the Holder, unless otherwise provided in the
boxes entitled "Special Payment Instructions" or "Special Delivery Instructions"
above, as soon as practicable after the expiration of the Exchange Offer.
6. SIGNATURES ON THIS CONSENT AND LETTER OF TRANSMITTAL; BOND POWERS AND
ENDORSEMENTS. If this Consent and Letter of Transmittal is signed by the
Holder(s) of the Subordinted Debentures tendered hereby, the signature(s) must
correspond exactly with the name(s) as written on the face of the certificate(s)
without alteration, enlargement or any change whatsoever.
If any of the Subordinted Debentures tendered hereby are owned of record by
two or more joint owners, all such owners must sign this Consent and Letter of
Transmittal. If any tendered Subordinted Debentures are registered in different
names on several certificates, it will be necessary to complete, sign and submit
as many separate Consents and Letters of Transmittal as there are names in which
certificates are held.
If this Consent and Letter of Transmittal or any certificates or bond
powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and
proper evidence satisfactory to the Company of its authority so to act must be
submitted, unless waived by the Company.
If this Consent and Letter of Transmittal is signed by the Holder(s) of the
Subordinted Debentures listed and transmitted hereby, no endorsement of
certificates or separate bond powers are required unless payment is to be made
to, or certificates for Subordinted Debentures not tendered or not accepted for
purchase are to be issued to, a person other than the Holder(s). Signatures on
such certificates must be guaranteed by an Eligible Institution (unless signed
by an Eligible Institution).
If this Consent and Letter of Transmittal is signed by a person other than
the Holder(s) of the Subordinted Debentures listed, the certificates
representing such Subordinted Debentures must be properly endorsed for transfer
by the Holder or be accompanied by a properly completed bond power from the
Holder, together with a properly completed irrevocable proxy that authorizes
such person to consent to the Proposed Amendments on behalf of such Holder, with
signatures on the endorsement or bond power guaranteed by an Eligible
Institution.
7. TRANSFER TAXES. The Company will pay or cause to be paid any transfer
taxes with respect to the transfer and sale of Subordinted Debentures to it or
its order pursuant to the Exchange Offer. If, however, certificates
representing shares of Common Stock issued in exchange for tendered Subordinted
Debentures or certificates representing Subordinted Debentures not tendered or
not accepted for payment are to be registered in the name of, any person other
than the Holder(s), or if tendered certificates re-registered in the name of any
person other than the person(s) signing this Consent and Letter of Transmittal,
the number of shares or amount of Subordinted Debentures will be reduced by a
number sufficient when sold by the Exchange Agent to satisfy the amount of any
transfer taxes (whether imposed on the Holder(s) or such other person) payable
on account of the transfer to such person unless satisfactory evidence of the
payment of such taxes or exemption therefrom is submitted.
11.
<PAGE>
EXCEPT AS PROVIDED IN THIS INSTRUCTION 7, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES LISTED IN THIS CONSENT AND
LETTER OF TRANSMITTAL.
8. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If certificates for shares
of Common Stock exchanged for tendered Subordinted Debentures are to be issued
in the name of, and/or certificates representing Subordinted Debentures not
accepted for payment are to be returned to, a person other than the person(s)
signing this Consent and Letter of Transmittal, or are to be sent and/or are to
be returned to a person other than the person(s) signing this Consent and Letter
of Transmittal or to an address other than that shown above, the appropriate
boxes on this Consent and Letter of Transmittal should be completed. Holders of
Subordinted Debentures delivering Subordinted Debentures by book-entry transfer
may request that Subordinted Debentures not accepted for payment be credited to
such account maintained at DTC as such Holder(s) may designate hereon. If no
such instructions are given, such Subordinted Debentures not accepted for
payment will be returned by crediting the account at DTC designated above.
9. WAIVER OF CONDITIONS. To the extent permitted by applicable law, the
Company reserves the right to waive any and all conditions to the Exchange Offer
and Consent Solicitation and accept for exchange any Subordinted Debentures
tendered.
10. TAX IDENTIFICATION NUMBER AND BACKUP WITHHOLDING. Federal income tax
law generally requires that a Holder whose tendered Subordinted Debentures are
accepted for exchange, or such Holder's assignee (in either case, the "Payee"),
provide the Exchange Agent (the "Payor"), with such Payee's correct Taxpayer
Identification Number ("TIN"), which, in the case of a Payee who is an
individual, is such Payee's social security number. If the Payor is not
provided with the correct TIN or an adequate basis for an exemption, such Payee
may be subject to a $50 penalty imposed by the Internal Revenue Service and
backup withholding in an amount equal to 31% of the gross proceeds received
pursuant to the Exchange Offer and Consent Solicitation. If withholding results
in an over payment of taxes, a refund may be obtained.
To prevent backup withholding, each Payee must provide such Payee's correct
TIN by completing the "Substitute Form W-9" set forth herein certifying that the
TIN provided is correct (or that such Payee is awaiting a TIN) and that (i) the
Payee is exempt from backup withholding, (ii) the Payee has not been notified by
the Internal Revenue Service that such Payee is subject to backup withholding as
a result of a failure to report all interest or dividends, or (iii) the Internal
Revenue Service has notified the Payee that such Payee is no longer subject to
backup withholding.
If the Payee does not have a TIN, such Payee should contact the Information
Agent to request a copy of the Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 (the "W-9 Guidelines") for
instructions on applying for a TIN, write "Applied For" in the space for the TIN
in Part I of the Substitute Form W-9, and sign and date the Substitute Form W-9
and the Certificate of Awaiting Taxpayer Identification Number set forth herein.
If the Payee does not provide such Payee's TIN to the Payor within 60 days,
backup withholding will begin and continue until such Payee furnishes such Payee
's TIN to the Payor. Note: Writing "Applied For" on the form means that the
Payee has already applied for a TIN or that such Payee intends to apply for one
in the near future.
If the Subordinted Debentures are held in more than one name or are not in
the name of the actual owner, consult the W-9 Guidelines for information on
which TIN to report.
Exempt Payees (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. To prevent possible erroneous backup withholding, an exempt Payee
should write "Exempt" in Part 2 of Substitute Form W-9. Contact the Information
Agent to obtain a copy of the W-9 Guidelines for additional instructions. In
order for a nonresident alien or foreign entity to qualify as exempt, such
person must complete the Form W-8, "Certificate of Foreign Status," signed under
penalty of perjury attesting to such exempt status.
11. MUTILATED, LOST, STOLEN OR DESTROYED SUBORDINTED DEBENTURES.
Holders of an aggregate amount of $500 or less of Subordinated Debentures
which have been mutilated, lost, stolen or destroyed should complete the
Affidavit of Loss below. Any Holder of Subordinted Debentures whose
Subordinted Debentures in the aggregate amount of more than $500 have been
mutilated, lost, stolen or destroyed should contact the Information Agent for
further instructions.
12.
<PAGE>
12. REQUESTS FOR ASSISTANCE OF ADDITIONAL COPIES. Requests for assistance
may be directed to the Information Agent as set forth below or from the
tendering Holder's broker, dealer, commercial bank or trust company. Additional
copies of the Prospectus, this Consent and Letter of Transmittal, and the Notice
of Guaranteed Delivery may be obtained from the Information Agent.
IMPORTANT: THIS CONSENT AND LETTER OF TRANSMITTAL, TOGETHER WITH
CERTIFICATES FOR, OR CONFIRMATION OF BOOK-ENTRY TRANSFER WITH RESPECT TO, ANY
TENDERED SUBORDINTED DEBENTURES, WITH ANY REQUIRED SIGNATURE GUARANTEES AND ALL
OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE EXCHANGE AGENT, OR THE NOTICE
OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT, ON OR PRIOR TO
THE EXPIRATION DATE.
13.
<PAGE>
PAYOR'S NAME: CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
- --------------------------------------------------------------------------------
Part 1 -- PLEASE TIN ____________________
SUBSTITUTE PROVIDE YOUR TIN IN (Social Security Number or
Form W-9 THE BOX AT RIGHT Employer Identification
Department of the AND CERTIFY BY Number)
Treasury Internal SIGNING AND DATING
Revenue Service BELOW
Payor's Request -------------------------------------------------------
for Taxpayer Part 2 -- FOR PAYEES EXEMPT FROM BACKUP WITHHOLDING
Identification PLEASE WRITE "EXEMPT" HERE (SEE INSTRUCTIONS)
Number ("TIN") ____________________________
and Certification -------------------------------------------------------
Part 3 -- CERTIFICATION UNDER PENALTIES OF PERJURY, I
CERTIFY THAT (1) The number shown on this form is my
correct TIN (or I am waiting for a number to be issued
to me), and (2) I am not subject to backup withholding
because: (a) I am exempt from backup withholding, or
(b) I have not been notified by the Internal Revenue
Service (the "IRS") that I am subject to backup
withholding as a result of a failure to report all
interest or dividends or (c) the IRS has notified me
that I am no longer subject to backup withholding.
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR
CONSENT TO ANY PROVISION OF THIS DOCUMENT OTHER THAN
THE CERTIFICATIONS REQUIRED TO AVOID BACKUP
WITHHOLDING.
SIGNATURE _________________ DATE __________, 1997
- --------------------------------------------------------------------------------
You must cross out item (2) above if you have been notified by the IRS that you
are currently subject to backup withholding because of under reporting interest
or dividends on your tax return and you have not been notified by the IRS that
you are no longer subject to backup withholding.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU WROTE
"APPLIED FOR" IN PART 1 OF THE SUBSTITUTE FORM W-9
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and that I mailed or delivered an application to
receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration office (or I intend to mail or
deliver an application in the near future). I understand that if I do not
provide a taxpayer identification number to the payor, 31% of all reportable
payments made to me will be withheld until I provide a number.
Signature __________________________________ Date _________________, 1997
- --------------------------------------------------------------------------------
14.
<PAGE>
- --------------------------------------------------------------------------------
SUBSTITUTE FORM W-8
By checking this box obssssI certify under penalties of perjury that a
taxpayer identification number has not been issued to me, and that I mailed or
delivered an application to receive a taxpayer identification number to the
appropriate Internal Revenue Service Center or Social Security Administration
office (or I intend to mail or deliver an application in the near future). I
understand that if I do not provide a taxpayer identification number to the
payor, 31% of all reportable payments made to me will be withheld until I
provide a number.
Signature __________________________________ Date _________________, 1997
- --------------------------------------------------------------------------------
15.
<PAGE>
THE INFORMATION AGENT IS:
GEORGESON & COMPANY, INC.
Wall Street Plaza
New York, NY 10005
Banks and Brokers Call Collect: (212) 440-9800
All Others Call Toll Free: (800) 223-2064
The Exchange Agent for the Exchange Offer and Consent Solicitation is:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
BY MAIL:
P.O. Box 798
Midtown Station
New York, New York 10018
Attn: Reorganization Dept.
FACSIMILE TRANSMISSION:
(FOR ELIGIBLE INSTITUTIONS ONLY)
(201) 329-8936
CONFIRM BY TELEPHONE:
(201) 296-4209
(201) 296-4381
BY HAND/OVERNIGHT DELIVERY:
120 Broadway
13th Floor
New York, New York 10271
Attn: Reorganization Dept.
16.
<PAGE>
NOTICE OF GUARANTEED DELIVERY
TO
TENDER AND CONSENT TO PROPOSED AMENDMENTS
TO THE INDENTURE IN RESPECT OF
12% SENIOR SUBORDINATED PAY-IN-KIND DEBENTURES
DUE MARCH 15, 2002 ("SENIOR DEBENTURES")
OF
KOLL REAL ESTATE GROUP, INC.
PURSUANT TO THE PROXY STATEMENT/PROSPECTUS AND DISCLOSURE STATEMENT
DATED _________________, 1997
THE OFFER TO EXCHANGE WILL EXPIRE AT 12:00 MIDNIGHT EASTERN STANDARD TIME,
ON JUNE __, 1997 (THE "EXPIRATION DATE"), UNLESS EXTENDED. HOLDERS OF SENIOR
DEBENTURES MUST TENDER THEIR SENIOR DEBENTURES AND PROVIDE THEIR CONSENTS TO THE
PROPOSED AMENDMENTS (AS DEFINED) ON OR PRIOR TO THE EXPIRATION DATE IN ORDER TO
RECEIVE THE EXCHANGE OFFER CONSIDERATION. TENDERED SENIOR DEBENTURES MAY BE
WITHDRAWN AND CONSENTS MAY BE REVOKED AT ANY TIME PRIOR TO 12:00 MIDNIGHT,
EASTERN STANDARD TIME, ON THE EXPIRATION DATE, BUT NOT THEREAFTER. THE OFFER IS
CONDITIONED UPON THE SATISFACTION OF CERTAIN CONDITIONS, INCLUDING, AMONG OTHER
THINGS, THE VALID TENDER OF AT LEAST 90% IN AGGREGATE PRINCIPAL AMOUNT OF THE
OUTSTANDING DEBENTURES OWNED BY PERSONS OTHER THAN THE PURCHASER, ITS
SUBSIDIARIES AND CERTAIN OF THEIR AFFILIATES.
As set forth in the Proxy Statement/Prospectus and Disclosure
Statement dated April __, 1997 (the "Prospectus") under the caption
"Plan Solicitation-Voting Procedures" and the accompanying Consent and Letter of
Transmittal and "Instruction 2" thereto, this Notice of Guaranteed Delivery, or
one substantially equivalent hereto, must be used to accept the Exchange Offer
and deliver a Consent if (i) certificates representing the Senior Debentures are
not immediately available, (ii) the procedure for book-entry transfer cannot be
completed on a timely basis or (iii) time will not permit a Holder's Consent and
Letter of Transmittal, certificates or other required documents to reach the
Exchange Agent on or prior to the Expiration Date. This Notice of Guaranteed
Delivery may be delivered by hand or transmitted by telegram, telex, facsimile
transmission or mail to the Exchange Agent and must include a guarantee by an
Eligible Institution unless such form is submitted on behalf of an Eligible
Institution. Capitalized terms used and not defined herein have the respective
meanings ascribed to them in the Prospectus.
The Exchange Offers and the Consent Solicitations are not being made to
(nor will the surrender of Senior Debentures be accepted from or on behalf of)
holders of Senior Debentures in any jurisdiction in which the making or
acceptance of the Exchange Offers or the Consent Solicitations would not be in
compliance with the laws of such jurisdiction.
<PAGE>
The Exchange Agent for the Offer and Consent Solicitation is:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
BY MAIL:
P.O. Box 798
Midtown Station
New York, New York 10018
Attn: Reorganization Dept.
FACSIMILE TRANSMISSION:
(FOR ELIGIBLE INSTITUTIONS ONLY)
(201) 329-8936
CONFIRM BY TELEPHONE:
(201) 296-4209
(201) 296-4381
BY HAND/OVERNIGHT DELIVERY:
120 Broadway
13th Floor
New York, New York 10271
Attn: Reorganization Dept.
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS, OR
TRANSMISSION OF THIS NOTICE OF GUARANTEED DELIVERY VIA FACSIMILE TO A NUMBER,
OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on the
Consent and Letter of Transmittal is required to be guaranteed by an "Eligible
Institution" under the instructions thereto, such signature guarantee must
appear in the applicable space provided in the signature box on the Consent and
Letter of Transmittal.
------------
Ladies and Gentlemen:
Upon the terms and subject to the conditions set forth in the Prospectus,
the undersigned hereby tender(s) to the Company, and thereby delivers to the
Company Consents with respect to, the principal amount of Senior Debentures set
forth below, pursuant to the guaranteed delivery procedures set forth in the
Prospectus under the caption "The Exchange Offers-Guaranteed Delivery
Procedures."
The undersigned understands that holders of Senior Debentures who tender
Senior Debentures are obligated to consent to the Proposed Amendments as
described in the Prospectus under the caption "Proposed Amendments to
Indentures," and, accordingly, the undersigned hereby consents to the Proposed
Amendments and acknowledges that tendering such Senior Debentures in accordance
with the Exchange Offers constitute a Consent with respect to such Senior
Debentures.
The undersigned understand(s) that Consents may be revoked, and tenders of
Senior Debentures may be withdrawn, by written notice of withdrawal received by
the Exchange Agent at any time prior to 12:00 Midnight, Eastern Standard Time,
on the Expiration Date. A valid withdrawal of tendered Senior Debentures prior
to 12:00 Midnight, Eastern Standard Time, on the Expiration Date will constitute
the concurrent valid revocation of such Holder's related Consent. In order for
a Holder to revoke a Consent, such Holder must withdraw the related tendered
Senior Debentures. In the event of a termination of the Exchange Offers, the
Senior Debentures tendered pursuant to the Exchange Offers will be returned to
the tendering Holders promptly (or, in the case of Senior Debentures tendered by
book-entry transfer, such Senior Debentures will be credited to the account
maintained at DTC from which such Senior Debentures were delivered). If the
Company makes a material change in the terms of the Exchange Offers or
Solicitation or the information concerning the Exchange Offers or Consent
Solicitations, the Company will disseminate additional Exchange Offers and
Consent Solicitations materials and extend the Offer or, if applicable, the
Solicitation, to the extent required by law. If the Solicitation is amended
prior to the Expiration Date in a manner determined by the Company to constitute
a material adverse change to the Holders, the Company promptly will disclose
such amendment and, if necessary, extend the Solicitation for a period deemed by
the Company to be adequate to permit Holders to revoke their Consents and
withdraw their Senior Debentures.
<PAGE>
Subject to and effective upon acceptance for purchase of the Senior
Debentures tendered herewith, the undersigned hereby sells, assigns and
transfers to or upon the order of the Company all right, title and interest in
and to, and any and all claims in respect of or arising or having arisen as a
result of the undersigned's status as a holder of, all Senior Debentures
tendered hereby. The undersigned authorizes the Exchange Agent to deliver this
Notice of Guaranteed Delivery to the Company and the Trustee as evidence of
the undersigned's Consent to the Proposed Amendments with respect to the Senior
Debentures tendered hereby. The undersigned understands that within five
NASDAQ trading days from the execution hereof the Exchange Agent must
receive (i) the certificates for the tendered Senior Debentures, in proper
form for transfer, together with a duly executed and properly completed
Consent and Letter of Transmittal, with any required signature guarantees and
any other documents required by the Consent and Letter of Transmittal, or
(ii) a book-entry transfer confirmation of the transfer into the Exchange
Agent's account at DTC and an Agent's message stating that the undersigned
has agreed to be bound by the terms of the Consent and Letter of Transmittal.
All authority herein conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall survive the death or incapacity of the undersigned and
every obligation of the undersigned under this Notice of Guaranteed Delivery
shall be binding upon the heirs, personal representatives, executors,
administrators, successors, assigns, trustees in bankruptcy and other legal
representatives of the undersigned.
PLEASE SIGN AND COMPLETE
Signature(s) of Registered Holder(s)
or Authorized Signatory:
- -----------------------------------
- -----------------------------------
Name(s) of Registered Holder(s):
- -----------------------------------
- -----------------------------------
Principal Amount of Senior Debentures Tendered:
- -----------------------------------
Certificate No(s). of Senior Debentures (if available):
- -----------------------------------
- -----------------------------------
Address(es):
---------------------------
- -----------------------------------------
- -----------------------------------------
- -----------------------------------------
Area Code and Telephone No.:
- -----------------------------------------
If Senior Debentures will be delivered by book-entry transfer at The Depository
Trust Company, please provide the following:
Transaction Code No.:
-------------------------
Depository Account No.:
-----------------------
HOLDERS WHO TENDER SENIOR DEBENTURES ARE OBLIGATED TO CONSENT TO THE PROPOSED
AMENDMENTS. DELIVERY OF SENIOR DEBENTURES PURSUANT TO THIS NOTICE OF GUARANTEED
DELIVERY WILL BE DEEMED TO CONSTITUTE A CONSENT TO THE PROPOSED AMENDMENTS WITH
RESPECT TO SUCH SENIOR DEBENTURES.
<PAGE>
This Notice of Guaranteed Delivery must be signed by the registered holder(s) of
Senior Debentures exactly as their name(s) appear(s) on the Senior Debentures
or, if tendered by a participant in DTC, exactly as such participant's name
appears on a security position listing as the owner of the Senior Debentures, or
by person(s) authorized to become registered holder(s) by endorsements and
documents transmitted with this Notice of Guaranteed Delivery. If signature is
by a trustee, guardian, attorney-in-fact, officer of a corporation, executor,
administrator, agent or other representative, such person must provide the
following information:
Please print name(s) and address(s)
Name(s):
-----------------------------------------------------------------
-----------------------------------------------------------------
Capacity:
-----------------------------------------------------------------
-----------------------------------------------------------------
Address(es):
-----------------------------------------------------------------
-----------------------------------------------------------------
GUARANTEE
(Not to be used for Signature Guarantee)
The undersigned, a member firm of a registered national securities exchange
or of the National Association of Securities Dealers, Inc. or a commercial bank
or trust company having an officer or a correspondent in the United States or
another "Eligible Guarantor Institution" as defined in Rule 17Ad-15 under the
Securities Exchange Act of 1934, as amended, hereby guarantees that, within
three business days from the date of this Notice of Guaranteed Delivery, a
properly completed and validly executed Consent and Letter of Transmittal (or a
facsimile thereof), together with Senior Debentures tendered hereby in proper
form for transfer (or confirmation of the book-entry transfer of such Senior
Debentures into the Depositary's account at DTC, pursuant to the procedures for
book-entry transfer set forth in the Statement) and all other required documents
will be deposited by the undersigned with the Depositary at one of its addresses
set forth above.
Name of Firm:
-------------------------------
Address:
------------------------------------
- ---------------------------------------------
Area Code and
Telephone No.:
-----------------------------
- ---------------------------------------------
Authorized Signature
Name:
----------------------------------------
Title:
---------------------------------------
Date:
----------------------------------------
DO NOT SEND SENIOR DEBENTURES WITH THIS FORM. ACTUAL SURRENDER OF SENIOR
DEBENTURES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, A PROPERLY COMPLETED
AND VALIDLY EXECUTED CONSENT AND LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED
DOCUMENTS.
<PAGE>
NOTICE OF GUARANTEED DELIVERY
TO
TENDER AND CONSENT TO CERTAIN INDENTURE AMENDMENTS
WITH RESPECT TO
12% SUBORDINATED PAY-IN-KIND DEBENTURES
DUE MARCH 15, 2002 ("SUBORDINATED DEBENTURES")
OF
KOLL REAL ESTATE GROUP, INC.
PURSUANT TO THE PROXY STATEMENT/PROSPECTUS AND DISCLOSURE STATEMENT
DATED _________________, 1997
THE OFFER TO EXCHANGE WILL EXPIRE AT 12:00 MIDNIGHT EASTERN STANDARD TIME,
ON JUNE __, 1997 (THE "EXPIRATION DATE"), UNLESS EXTENDED. HOLDERS OF SENIOR
DEBENTURES MUST TENDER THEIR SENIOR DEBENTURES AND PROVIDE THEIR CONSENTS TO THE
PROPOSED AMENDMENTS (AS DEFINED) ON OR PRIOR TO THE EXPIRATION DATE IN ORDER TO
RECEIVE THE EXCHANGE OFFER CONSIDERATION. TENDERED SENIOR DEBENTURES MAY BE
WITHDRAWN AND CONSENTS MAY BE REVOKED AT ANY TIME PRIOR TO 12:00 MIDNIGHT,
EASTERN STANDARD TIME, ON THE EXPIRATION DATE, BUT NOT THEREAFTER. THE OFFER IS
CONDITIONED UPON THE SATISFACTION OF CERTAIN CONDITIONS, INCLUDING, AMONG OTHER
THINGS, THE VALID TENDER OF AT LEAST 90% IN AGGREGATE PRINCIPAL AMOUNT OF THE
OUTSTANDING DEBENTURES OWNED BY PERSONS OTHER THAN THE PURCHASER, ITS
SUBSIDIARIES AND CERTAIN OF THEIR AFFILIATES.
As set forth in the Proxy Statement/Prospectus and Disclosure
Statement dated April __, 1997 (the "Prospectus") under the caption "Plan
Solicitation-Voting Procedures" and the accompanying Consent and Letter of
Transmittal and "Instruction 2" thereto, this Notice of Guaranteed Delivery,
or one substantially equivalent hereto, must be used to accept the Exchange
Offer and deliver a Consent if (i) certificates representing the Subordinated
Debentures are not immediately available, (ii) the procedure for book-entry
transfer cannot be completed on a timely basis or (iii) time will not permit
a Holder's Consent and Letter of Transmittal, certificates or other required
documents to reach the Exchange Agent on or prior to the Expiration Date.
This Notice of Guaranteed Delivery may be delivered by hand or transmitted by
telegram, telex, facsimile transmission or mail to the Exchange Agent and
must include a guarantee by an Eligible Institution unless such form is
submitted on behalf of an Eligible Institution. Capitalized terms used and
not defined herein have the respective meanings ascribed to them in the
Prospectus.
The Exchange Offers and the Consent Solicitations are not being made to
(nor will the surrender of Subordinated Debentures be accepted from or on behalf
of) holders of Subordinated Debentures in any jurisdiction in which the making
or acceptance of the Exchange Offers or the Consent Solicitations would not be
in compliance with the laws of such jurisdiction.
<PAGE>
The Exchange Agent for the Offer and Consent Solicitation is:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
BY MAIL:
P.O. Box 798
Midtown Station
New York, New York 10018
Attn: Reorganization Dept.
FACSIMILE TRANSMISSION:
(FOR ELIGIBLE INSTITUTIONS ONLY)
(201) 329-8936
CONFIRM BY TELEPHONE:
(201) 296-4209
(201) 296-4381
BY HAND/OVERNIGHT DELIVERY:
120 Broadway
13th Floor
New York, New York 10271
Attn: Reorganization Dept.
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS, OR
TRANSMISSION OF THIS NOTICE OF GUARANTEED DELIVERY VIA FACSIMILE TO A NUMBER,
OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on the
Consent and Letter of Transmittal is required to be guaranteed by an "Eligible
Institution" under the instructions thereto, such signature guarantee must
appear in the applicable space provided in the signature box on the Consent and
Letter of Transmittal.
------------
Ladies and Gentlemen:
Upon the terms and subject to the conditions set forth in the Prospectus,
the undersigned hereby tender(s) to the Company, and thereby delivers to the
Company Consents with respect to, the principal amount of Subordinated
Debentures set forth below, pursuant to the guaranteed delivery procedures set
forth in the Prospectus under the caption "The Exchange Offers-Guaranteed
Delivery Procedures."
The undersigned understands that holders of Subordinated Debentures who
tender Subordinated Debentures are obligated to consent to the Proposed
Amendments as described in the Prospectus under the caption "Proposed Amendments
to Indentures," and, accordingly, the undersigned hereby consents to the
Proposed Amendments and acknowledges that tendering such Subordinated Debentures
in accordance with the Exchange Offers constitute a Consent with respect to such
Subordinated Debentures.
The undersigned understand(s) that Consents may be revoked, and tenders of
Subordinated Debentures may be withdrawn, by written notice of withdrawal
received by the Exchange Agent at any time prior to 12:00 Midnight, Eastern
Daylight Time, on the Expiration Date. A valid withdrawal of tendered
Subordinated Debentures prior to 12:00 Midnight, Eastern Daylight Time, on the
Expiration Date will constitute the concurrent valid revocation of such Holder's
related Consent. In order for a Holder to revoke a Consent, such Holder must
withdraw the related tendered Subordinated Debentures. In the event of a
termination of the Exchange Offers, the Subordinated Debentures tendered
pursuant to the Exchange Offers will be returned to the tendering Holders
promptly (or, in the case of Subordinated Debentures tendered by book-entry
transfer, such Subordinated Debentures will be credited to the account
maintained at DTC from which such Subordinated Debentures were delivered). If
the Company makes a material change in the terms of the Exchange Offers or
Solicitation or the information concerning the Exchange Offers or Consent
Solicitations, the Company will disseminate additional Exchange Offers and
Consent Solicitations materials and extend the Offer or, if applicable, the
Solicitation, to the extent required by law. If the Solicitation is amended
prior to the Expiration Date in a manner determined by the Company to constitute
a material adverse change to the Holders, the Company promptly will disclose
such amendment and, if necessary, extend the Solicitation for a period deemed by
the Company to be adequate to permit Holders to revoke their Consents and
withdraw their Subordinated Debentures.
Subject to and effective upon acceptance for purchase of the Subordinated
Debentures tendered herewith, the undersigned hereby sells, assigns and
transfers to or upon the order of the Company all right, title and interest in
and
<PAGE>
to, and any and all claims in respect of or arising or having arisen as a result
of the undersigned's status as a holder of, all Subordinated Debentures tendered
hereby. The undersigned authorizes the Exchange Agent to deliver this
Notice of Guaranteed Delivery to the Company and the Trustee as evidence of
the undersigned's Consent to the Proposed Amendments with respect to the Senior
Debentures tendered hereby. The undersigned understands that within five
NASDAQ trading days from the execution hereof the Exchange Agent must
receive (i) the certificates for the tendered Senior Debentures, in proper
form for transfer, together with a duly executed and properly completed
Consent and Letter of Transmittal, with any required signature guarantees and
any other documents required by the Consent and Letter of Transmittal, or
(ii) a book-entry transfer confirmation of the transfer into the Exchange
Agent's account at DTC and an Agent's message stating that the undersigned
has agreed to be bound by the terms of the Consent and Letter of Transmittal.
All authority herein conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall survive the death or incapacity of the undersigned and
every obligation of the undersigned under this Notice of Guaranteed Delivery
shall be binding upon the heirs, personal representatives, executors,
administrators, successors, assigns, trustees in bankruptcy and other legal
representatives of the undersigned.
PLEASE SIGN AND COMPLETE
Signature(s) of Registered Holder(s)
or Authorized Signatory:
- -----------------------------------
- -----------------------------------
Name(s) of Registered Holder(s):
- -----------------------------------
- -----------------------------------
Principal Amount of Senior Debentures Tendered:
- -----------------------------------
Certificate No(s). of Senior Debentures (if available):
- -----------------------------------
- -----------------------------------
Address(es):
----------------------------
- -----------------------------------
- -----------------------------------
- -----------------------------------
Area Code and Telephone No.:
- -----------------------------------
If Senior Debentures will be delivered by book-entry transfer at The Depository
Trust Company, please provide the following:
Transaction Code No.:
-------------------------
Depository Account No.:
-----------------------
HOLDERS WHO TENDER SENIOR DEBENTURES ARE OBLIGATED TO CONSENT TO THE PROPOSED
AMENDMENTS. DELIVERY OF SENIOR DEBENTURES PURSUANT TO THIS NOTICE OF GUARANTEED
DELIVERY WILL BE DEEMED TO CONSTITUTE A CONSENT TO THE PROPOSED AMENDMENTS WITH
RESPECT TO SUCH SENIOR DEBENTURES.
<PAGE>
This Notice of Guaranteed Delivery must be signed by the registered holder(s) of
Senior Debentures exactly as their name(s) appear(s) on the Senior Debentures
or, if tendered by a participant in DTC, exactly as such participant's name
appears on a security position listing as the owner of the Senior Debentures, or
by person(s) authorized to become registered holder(s) by endorsements and
documents transmitted with this Notice of Guaranteed Delivery. If signature is
by a trustee, guardian, attorney-in-fact, officer of a corporation, executor,
administrator, agent or other representative, such person must provide the
following information:
Please print name(s) and address(s)
Name(s):
----------------------------------------
----------------------------------------
Capacity:
----------------------------------------
----------------------------------------
Address(es):
----------------------------------------
----------------------------------------
GUARANTEE
(Not to be used for Signature Guarantee)
The undersigned, a member firm of a registered national securities exchange
or of the National Association of Securities Dealers, Inc. or a commercial bank
or trust company having an officer or a correspondent in the United States or
another "Eligible Guarantor Institution" as defined in Rule 17Ad-15 under the
Securities Exchange Act of 1934, as amended, hereby guarantees that, within
three business days from the date of this Notice of Guaranteed Delivery, a
properly completed and validly executed Consent and Letter of Transmittal (or a
facsimile thereof), together with Senior Debentures tendered hereby in proper
form for transfer (or confirmation of the book-entry transfer of such Senior
Debentures into the Depositary's account at DTC, pursuant to the procedures for
book-entry transfer set forth in the Statement) and all other required documents
will be deposited by the undersigned with the Depositary at one of its addresses
set forth above.
Name of Firm:
--------------------------- ----------------------------------
Authorized Signature
Address: Name:
------------------------------- -----------------------------
Title:
- ---------------------------------------- ----------------------------
Area Code and
Telephone No.: Date:
-------------------------- ----------------------------
DO NOT SEND SENIOR DEBENTURES WITH THIS FORM. ACTUAL SURRENDER OF SENIOR
DEBENTURES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, A PROPERLY COMPLETED
AND VALIDLY EXECUTED CONSENT AND LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED
DOCUMENTS.
<PAGE>
EXHIBIT 99.05A
Important: A Bankruptcy case has not been commenced as of the date of this
document.
KOLL REAL ESTATE GROUP, INC.
MASTER BALLOT
FOR ACCEPTING OR REJECTING
THE PLAN OF REORGANIZATION OF KOLL REAL ESTATE GROUP, INC.
CLASS 5: GENERAL UNSECURED CLAIMS -- HOLDERS
OF SENIOR DEBENTURES
THE VOTING DEADLINE TO ACCEPT OR REJECT THE PLAN IS
5:00 P.M. _______, JUNE __, 1997, UNLESS EXTENDED
This Master Ballot is submitted to you to solicit and obtain the vote of
the beneficial owners of the securities described below to accept or reject
the Prepackaged Plan of Reorganization (the "Prepackaged Plan") of Koll Real
Estate Group, Inc. (the "Company") referred to in the accompanying Proxy
Statement/Prospectus and Disclosure Statement, dated ________, 1997 (the
"Prospectus"). The Prepackaged Plan could be filed in connection with a case
to be commenced in the future by the Company under chapter 11 of the
Bankruptcy Code. At this time, the Company has not commenced a chapter 11
case. If sufficient votes are received accepting the Prepackaged Plan, the
Corporation may commence a chapter 11 case and seek to have the Prepackaged
Plan confirmed by the Bankruptcy Court; however, the Company expressly
reserves the right, in its sole and absolute discretion, to not commence such
a chapter 11 case, even if it receives sufficient votes accepting the
Prepackaged Plan.
PLEASE READ THE VOTING INFORMATION AND INSTRUCTIONS ON THE REVERSE SIDE
BEFORE COMPLETING THIS MASTER BALLOT.
Item 1. Tabulation of Beneficial Owner Class 5 Voting. The
undersigned certifies that ________ beneficial owners of Senior Debentures
having an aggregate principal amount of $________ have delivered ballots to
the undersigned voting Class 5 claims to ACCEPT the Prepackaged Plan.
The undersigned certifies that ________ beneficial owners of Senior
Debentures having an aggregate principal amount of $________
have delivered ballots to the undersigned voting Class 5 claims to REJECT the
Prepackaged Plan.
Item 2. Class 5 Beneficial Owner Information. The undersigned certifies
that listed below (or attached hereto) is a true and accurate schedule of the
beneficial owners of Senior Debentures, that have delivered ballots to the
undersigned voting Class 5 claims to accept or reject the Plan.
(Please complete the following table or attach the information requested by
this Item 2 in the following format.)
Your Customer Account Number(s) Principal Amount of
for Each Beneficial Owner Senior Debentures To Accept To Reject
______________________________ ____________________ _________ _________
1.___________________________ ____________________ _________ _________
2.___________________________ ____________________ _________ _________
3.___________________________ ____________________ _________ _________
4.___________________________ ____________________ _________ _________
5.___________________________ ____________________ _________ _________
6.___________________________ ____________________ _________ _________
7.___________________________ ____________________ _________ _________
8.___________________________ ____________________ _________ _________
9.___________________________ ____________________ _________ _________
10.___________________________ ____________________ _________ _________
Item 3. The undersigned certifies that the undersigned is an agent of the
registered owner with full power and authority to execute this document in
its own name or through a position held at a securities depository of the
Senior Debentures set forth in Item 1. The undersigned further certifies
that none of the Class 5 accounts identified in Item 2 above have previously
been voted by any other Master Ballot, except to the extent provided in Item
5 of the Voting information and instructions on the reverse side hereof,
submitted by the undersigned. The undersigned also acknowledges the terms and
conditions set forth in the Prospectus.
DATED:
________________________________ _______________________________________
(Print or type name) (If by Authorized Agent, Name and Title)
________________________________ _______________________________________
(Signature) Address: (Street)
________________________________ _______________________________________
(Name of broker, bank or other nominee) Address: (City, State, Zip Code)
Return this Master Ballot before June __, 1997 to:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<CAPTION>
BY HAND DELIVERY OR OVERNIGHT COURIER: BY MAIL: FACSIMILE
TRANSMISSION:
<S> <C> <C>
ChaseMellon Shareholder Services, L.L.C. ChaseMellon Shareholder Services, L.L.C. 210/329-8936
Reorganization Department Reorganization Department To Confirm by Phone:
120 Broadway, 13th Floor P.O. Box 3301 201/296-4209
New York, NY 10271 South Hackensack, NJ 07606 201/296-4381
</TABLE>
<PAGE>
VOTING INFORMATION AND INSTRUCTIONS
FOR COMPLETING THE MASTER BALLOT
1. The Master Ballot is to be used by brokerage firms, banks or proxy
intermediaries for summarizing votes cast by beneficial owners of the
securities in Class 5 to accept or reject the Plan.
2. Master Ballots must be received by ChaseMellon Shareholder Services,
L.L.C., at the addresses and facsimile number indicated on the front of this
Master Ballot, the voting agent (the "Voting Agent"), by 5:00 p.m. Eastern
Time on June __, 1997 (the "Voting Deadline"). Master Ballots may also be
returned to the Voting Agent prior to the Voting Deadline by overnight mail
service, courier or facsimile transmission, please send the original hard
copy by overnight mail to ChaseMellon Shareholder Services. Master Ballots
not received by the Voting Deadline will not be counted.
3. The Master Ballot is not a letter of transmittal and may not be used for
any purpose other than to transmit votes to accept or reject the Prepackaged
Plan. HOLDERS SHOULD NOT SURRENDER CERTIFICATES REPRESENTING THEIR
SECURITIES AT THIS TIME, AND NEITHER THE CORPORATION NOR ITS VOTING AGENT
WILL ACCEPT DELIVERY OF ANY SUCH CERTIFICATES TRANSMITTED TOGETHER WITH A
MASTER BALLOT. Surrender of securities for exchange pursuant to the Plan
may be made only pursuant in a letter transmittal which will be furnished to
you by the Company (or its agent) after confirmation of the Prepackaged Plan
by the Bankruptcy Court.
4. With respect to any individual ballots returned to you by the beneficial
owner, you must either: (a) forward such ballots directly to the Voting Agent
indicating the appropriate authority to vote on each such ballot submitted;
or (b) complete a Master Ballot summarizing the voting with respect to such
individual ballots, return the Master Ballot to the Voting Agent, and retain
ALL such individual ballots for inspection by the Bankruptcy Court until
December 31, 1997.
5. Multiple Master Ballots may be completed and delivered to the Voting
Agent. Votes reflected by multiple Master Ballots will be counted except to
the extent that they are duplicative of other Master Ballots. If two or more
Master Ballots are inconsistent in whole or in part, the latest Master Ballot
received prior to the voting Deadline will, to the extent of such
inconsistency, supersede and revoke any prior Master Ballot. If more than
one Master Ballot is submitted and the later Master Ballot(s) supplement
rather than supersede earlier Master Ballot(s), please mark the subsequent
Master Ballot(s) with the words "Additional Vote" or such other language as
you customarily use to indicate an additional vote that is not meant to
revoke an earlier vote.
6. Item 2 of the Master Ballot requests that you provide information in
the indicated format for each individual beneficial owner on whose behalf
you are executing the Master Ballot. To identify such beneficial owners
without disclosing their names, please use the customer account number
assigned by you to each such beneficial owner. In the event that a single
customer has more than one account with the identical registration, that
customer should be listed no more than once in Item 2. In completing Item
2, the total number of shares of all accounts voted with respect to a
single customer should be listed in a single line entry, so that each
line will represent a different beneficial owner.
7. Each beneficial owner must vote its entire claim or equity interest
within a single class under the Prepackaged Plan to either accept or
reject the Prepackaged Plan. A beneficial owner may not split its vote
within a class and, accordingly, an individual ballot (or multiple
individual ballots with respect to multiple claims or equity interests
within a single class) received from a beneficial owner that partially
rejects and partially accepts the Prepackaged Plan should not be counted.
Furthermore, for purposes of computing the vote on a Master Ballot, each
voting beneficial owner should be deemed to have voted the full amount of
its holdings according to your records as of the close of business on
May __, 1997 (the "Voting Record Date").
8. No fees or commissions or other renumeration will be payable to any
broker, dealer or other person in connection with the solicitation by the
Company pursuant to the Prepackaged Plan. The Corporation will, however,
upon written request, reimburse you for customary mailing and handling
expenses incurred by you in forwarding individual ballots and
accompanying solicitation packages to your clients.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR
ANY OTHER PERSON AS THE AGENT OF THE COMPANY OR THE VOTING AGENT, OR
AUTHORIZE YOU OR ANY PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON
BEHALF OF ANY OF THEM WITH RESPECT TO THE PREPACKAGED PLAN, EXCEPT FOR THE
STATEMENTS CONTAINED IN THE DOCUMENTS ENCLOSED HEREWITH.
IF YOU HAVE ANY QUESTIONS REGARDING THIS MASTER BALLOT OR THE VOTING
PROCEDURES, OR IF YOU NEED ADDITIONAL COPIES OF THE MASTER BALLOT, INDIVIDUAL
BALLOTS OR SOLICITATION PACKAGES, INCLUDING THE PREPACKAGED PLAN AND THE
PROSPECTUS, PLEASE CALL:
THE INFORMATION AGENT
GEORGESON & COMPANY
TOLL-FREE AT (800) 223-2064
<PAGE>
EXHIBIT 99.05B
Important: A Bankruptcy case has not been commenced as of the date of this
document.
KOLL REAL ESTATE GROUP, INC.
MASTER BALLOT
FOR ACCEPTING OR REJECTING
THE PLAN OF REORGANIZATION OF KOLL REAL ESTATE GROUP, INC.
CLASS 6: HOLDERS OF SUBORDINATED DEBENTURES
THE VOTING DEADLINE TO ACCEPT OR REJECT THE PLAN IS
5:00 P.M. _______, JUNE __, 1997, UNLESS EXTENDED
This Master Ballot is submitted to you to solicit and obtain the vote of
the beneficial owners of the securities described below to accept or reject
the Prepackaged Plan of Reorganization (the "Prepackaged Plan") of Koll Real
Estate Group, Inc. (the "Company") referred to in the accompanying Proxy
Statement/Prospectus and Disclosure Statement, dated ________, 1997 (the
"Prospectus"). The Prepackaged Plan could be filed in connection with a case
to be commenced in the future by the Company under chapter 11 of the
Bankruptcy Code. At this time, the Company has not commenced a chapter 11
case. If sufficient votes are received accepting the Prepackaged Plan, the
Corporation may commence a chapter 11 case and seek to have the Prepackaged
Plan confirmed by the Bankruptcy Court; however, the Company expressly
reserves the right, in its sole and absolute discretion, to not commence such
a chapter 11 case, even if it receives sufficient votes accepting the
Prepackaged Plan.
PLEASE READ THE VOTING INFORMATION AND INSTRUCTIONS ON THE REVERSE SIDE
BEFORE COMPLETING THIS MASTER BALLOT.
Item 1. Tabulation of Beneficial Owner Class 6 Voting. The
undersigned certifies that ________ beneficial owners of Subordinated
Debentures having an aggregate principal amount of $________ have
delivered ballots to the undersigned voting Class 6 claims to ACCEPT the
Prepackaged Plan.
The undersigned certifies that ________ beneficial owners of
Subordinated Debentures having an aggregate principal amount of $________
have delivered ballots to the undersigned voting Class 6 claims to REJECT the
Prepackaged Plan.
Item 2. Class 6 Beneficial Owner Information. The undersigned certifies
that listed below (or attached hereto) is a true and accurate schedule of the
beneficial owners of Senior Debentures, that have delivered ballots to the
undersigned voting Class 6 claims to accept or reject the Plan.
(Please complete the following table or attach the information requested by
this Item 2 in the following format.)
Your Customer Account Number(s) Principal Amount of
for Each Beneficial Owner Senior Debentures To Accept To Reject
______________________________ ____________________ _________ _________
1.___________________________ ____________________ _________ _________
2.___________________________ ____________________ _________ _________
3.___________________________ ____________________ _________ _________
4.___________________________ ____________________ _________ _________
5.___________________________ ____________________ _________ _________
6.___________________________ ____________________ _________ _________
7.___________________________ ____________________ _________ _________
8.___________________________ ____________________ _________ _________
9.___________________________ ____________________ _________ _________
10.___________________________ ____________________ _________ _________
Item 3. The undersigned certifies that the undersigned is an agent of the
registered owner with full power and authority to execute this document in
its own name or through a position held at a securities depository of the
Class A Common Stock set forth in Item 1. The undersigned further certifies
that none of the Class 6 accounts identified in Item 2 above have previously
been voted by any other Master Ballot, except to the extent provided in Item
5 of the Voting information and instructions on the reverse side hereof,
submitted by the undersigned. The undersigned also acknowledges the terms and
conditions set forth in the Prospectus.
DATED:
________________________________ _______________________________________
(Print or type name) (If by Authorized Agent, Name and Title)
________________________________ _______________________________________
(Signature) Address: (Street)
________________________________ _______________________________________
(Name of broker, bank or other nominee) Address: (City, State, Zip Code)
Return this Master Ballot before June __, 1997 to:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<CAPTION>
BY HAND DELIVERY OR OVERNIGHT COURIER: BY MAIL: FACSIMILE
TRANSMISSION:
<S> <C> <C>
ChaseMellon Shareholder Services, L.L.C. ChaseMellon Shareholder Services, L.L.C. 210/329-8936
Reorganization Department Reorganization Department To Confirm by Phone:
120 Broadway, 13th Floor P.O. Box 3301 201/296-4209
New York, NY 10271 South Hackensack, NJ 07606 201/296-4381
</TABLE>
<PAGE>
VOTING INFORMATION AND INSTRUCTIONS
FOR COMPLETING THE MASTER BALLOT
1. The Master Ballot is to be used by brokerage firms, banks or proxy
intermediaries for summarizing votes cast by beneficial owners of the
securities in Class 6 to accept or reject the Plan.
2. Master Ballots must be received by ChaseMellon Shareholder Services,
L.L.C., at the addresses and facsimile number indicated on the front of this
Master Ballot, the voting agent (the "Voting Agent"), by 5:00 p.m. Eastern
Time on June __, 1997 (the "Voting Deadline"). Master Ballots may also be
returned to the Voting Agent prior to the Voting Deadline by overnight mail
service, courier or facsimile transmission, please send the original hard
copy by overnight mail to ChaseMellon Shareholder Services. Master Ballots
not received by the Voting Deadline will not be counted.
3. The Master Ballot is not a letter of transmittal and may not be used for
any purpose other than to transmit votes to accept or reject the Prepackaged
Plan. HOLDERS SHOULD NOT SURRENDER CERTIFICATES REPRESENTING THEIR
SECURITIES AT THIS TIME, AND NEITHER THE CORPORATION NOR ITS VOTING AGENT
WILL ACCEPT DELIVERY OF ANY SUCH CERTIFICATES TRANSMITTED TOGETHER WITH A
MASTER BALLOT. Surrender of securities for exchange pursuant to the Plan
may be made only pursuant in a letter transmittal which will be furnished to
you by the Company (or its agent) after confirmation of the Prepackaged Plan
by the Bankruptcy Court.
4. With respect to any individual ballots returned to you by the beneficial
owner, you must either: (a) forward such ballots directly to the Voting Agent
indicating the appropriate authority to vote on each such ballot submitted;
or (b) complete a Master Ballot summarizing the voting with respect to such
individual ballots, return the Master Ballot to the Voting Agent, and retain
ALL such individual ballots for inspection by the Bankruptcy Court until
December 31, 1997.
5. Multiple Master Ballots may be completed and delivered to the Voting
Agent. Votes reflected by multiple Master Ballots will be counted except to
the extent that they are duplicative of other Master Ballots. If two or more
Master Ballots are inconsistent in whole or in part, the latest Master Ballot
received prior to the voting Deadline will, to the extent of such
inconsistency, supersede and revoke any prior Master Ballot. If more than
one Master Ballot is submitted and the later Master Ballot(s) supplement
rather than supersede earlier Master Ballot(s), please mark the subsequent
Master Ballot(s) with the words "Additional Vote" or such other language as
you customarily use to indicate an additional vote that is not meant to
revoke an earlier vote.
6. Item 2 of the Master Ballot requests that you provide information in
the indicated format for each individual beneficial owner on whose behalf
you are executing the Master Ballot. To identify such beneficial owners
without disclosing their names, please use the customer account number
assigned by you to each such beneficial owner. In the event that a single
customer has more than one account with the identical registration, that
customer should be listed no more than once in Item 2. In completing Item
2, the total number of shares of all accounts voted with respect to a
single customer should be listed in a single line entry, so that each
line will represent a different beneficial owner.
7. Each beneficial owner must vote its entire claim or equity interest
within a single class under the Prepackaged Plan to either accept or
reject the Prepackaged Plan. A beneficial owner may not split its vote
within a class and, accordingly, an individual ballot (or multiple
individual ballots with respect to multiple claims or equity interests
within a single class) received from a beneficial owner that partially
rejects and partially accepts the Prepackaged Plan should not be counted.
Furthermore, for purposes of computing the vote on a Master Ballot, each
voting beneficial owner should be deemed to have voted the full amount of
its holdings according to your records as of the close of business on
May __, 1997 (the "Voting Record Date").
8. No fees or commissions or other renumeration will be payable to any
broker, dealer or other person in connection with the solicitation by the
Company pursuant to the Prepackaged Plan. The Corporation will, however,
upon written request, reimburse you for customary mailing and handling
expenses incurred by you in forwarding individual ballots and
accompanying solicitation packages to your clients.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR
ANY OTHER PERSON AS THE AGENT OF THE COMPANY OR THE VOTING AGENT, OR
AUTHORIZE YOU OR ANY PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON
BEHALF OF ANY OF THEM WITH RESPECT TO THE PREPACKAGED PLAN, EXCEPT FOR THE
STATEMENTS CONTAINED IN THE DOCUMENTS ENCLOSED HEREWITH.
IF YOU HAVE ANY QUESTIONS REGARDING THIS MASTER BALLOT OR THE VOTING
PROCEDURES, OR IF YOU NEED ADDITIONAL COPIES OF THE MASTER BALLOT, INDIVIDUAL
BALLOTS OR SOLICITATION PACKAGES, INCLUDING THE PREPACKAGED PLAN AND THE
PROSPECTUS, PLEASE CALL:
THE INFORMATION AGENT
GEORGESON & COMPANY
TOLL-FREE AT (800) 223-2064
<PAGE>
EXHIBIT 99.05C
Important: A Bankruptcy case has not been commenced as of the date of this
document.
KOLL REAL ESTATE GROUP, INC.
MASTER BALLOT
FOR ACCEPTING OR REJECTING
THE PLAN OF REORGANIZATION OF KOLL REAL ESTATE GROUP, INC.
CLASS 7: INTERESTS OF HOLDERS OF PREFERRED STOCK
THE VOTING DEADLINE TO ACCEPT OR REJECT THE PLAN IS
5:00 P.M. _______, JUNE __, 1997, UNLESS EXTENDED
This Master Ballot is submitted to you to solicit and obtain the vote of
the beneficial owners of the securities described below to accept or reject
the Prepackaged Plan of Reorganization (the "Prepackaged Plan") of Koll Real
Estate Group, Inc. (the "Company") referred to in the accompanying Proxy
Statement/Prospectus and Disclosure Statement, dated ________, 1997 (the
"Prospectus"). The Prepackaged Plan could be filed in connection with a case
to be commenced in the future by the Company under chapter 11 of the
Bankruptcy Code. At this time, the Company has not commenced a chapter 11
case. If sufficient votes are received accepting the Prepackaged Plan, the
Corporation may commence a chapter 11 case and seek to have the Prepackaged
Plan confirmed by the Bankruptcy Court; however, the Company expressly
reserves the right, in its sole and absolute discretion, to not commence such
a chapter 11 case, even if it receives sufficient votes accepting the
Prepackaged Plan.
PLEASE READ THE VOTING INFORMATION AND INSTRUCTIONS ON THE REVERSE SIDE
BEFORE COMPLETING THIS MASTER BALLOT.
Item 1. Tabulation of Beneficial Owner Class 7 Voting. The
undersigned certifies that ________ beneficial owners of shares of Series
A Convertible Redeemable Preferred Stock (the "Preferred Stock") have
delivered ballots to the undersigned voting Class 5 claims to ACCEPT the
Prepackaged Plan.
The undersigned certifies that ________ beneficial owners of
________ shares of Preferred Stock have delivered ballots to the
undersigned voting Class 7 claims to REJECT the
Prepackaged Plan.
Item 2. Class 7 Beneficial Owner Information. The undersigned certifies
that listed below (or attached hereto) is a true and accurate schedule of the
beneficial owners of Preferred Stock, that have delivered ballots to the
undersigned voting Class 7 claims to accept or reject the Plan.
(Please complete the following table or attach the information requested by
this Item 2 in the following format.)
Your Customer Account Number(s) Number of Shares
for Each Beneficial Owner Preferred Stock To Accept To Reject
______________________________ ____________________ _________ _________
1.___________________________ ____________________ _________ _________
2.___________________________ ____________________ _________ _________
3.___________________________ ____________________ _________ _________
4.___________________________ ____________________ _________ _________
5.___________________________ ____________________ _________ _________
6.___________________________ ____________________ _________ _________
7.___________________________ ____________________ _________ _________
8.___________________________ ____________________ _________ _________
9.___________________________ ____________________ _________ _________
10.___________________________ ____________________ _________ _________
Item 3. The undersigned certifies that the undersigned is an agent of the
registered owner with full power and authority to execute this document in
its own name or through a position held at a securities depository of the
Class A Common Stock set forth in Item 1. The undersigned further certifies
that none of the Class 7 accounts identified in Item 2 above have previously
been voted by any other Master Ballot, except to the extent provided in Item
5 of the Voting information and instructions on the reverse side hereof,
submitted by the undersigned. The undersigned also acknowledges the terms and
conditions set forth in the Prospectus.
DATED:
________________________________ _______________________________________
(Print or type name) (If by Authorized Agent, Name and Title)
________________________________ _______________________________________
(Signature) Address: (Street)
________________________________ _______________________________________
(Name of broker, bank or other nominee) Address: (City, State, Zip Code)
Return this Master Ballot before June __, 1997 to:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<CAPTION>
BY HAND DELIVERY OR OVERNIGHT COURIER: BY MAIL: FACSIMILE
TRANSMISSION:
<S> <C> <C>
ChaseMellon Shareholder Services, L.L.C. ChaseMellon Shareholder Services, L.L.C. 210/329-8936
Reorganization Department Reorganization Department To Confirm by Phone:
120 Broadway, 13th Floor P.O. Box 3301 201/296-4209
New York, NY 10271 South Hackensack, NJ 07606 201/296-4381
</TABLE>
<PAGE>
VOTING INFORMATION AND INSTRUCTIONS
FOR COMPLETING THE MASTER BALLOT
1. The Master Ballot is to be used by brokerage firms, banks or proxy
intermediaries for summarizing votes cast by beneficial owners of the
securities in Class 7 to accept or reject the Plan.
2. Master Ballots must be received by ChaseMellon Shareholder Services,
L.L.C., at the addresses and facsimile number indicated on the front of this
Master Ballot, the voting agent (the "Voting Agent"), by 5:00 p.m. Eastern
Time on June __, 1997 (the "Voting Deadline"). Master Ballots may also be
returned to the Voting Agent prior to the Voting Deadline by overnight mail
service, courier or facsimile transmission, please send the original hard
copy by overnight mail to ChaseMellon Shareholder Services. Master Ballots
not received by the Voting Deadline will not be counted.
3. The Master Ballot is not a letter of transmittal and may not be used for
any purpose other than to transmit votes to accept or reject the Prepackaged
Plan. HOLDERS SHOULD NOT SURRENDER CERTIFICATES REPRESENTING THEIR
SECURITIES AT THIS TIME, AND NEITHER THE CORPORATION NOR ITS VOTING AGENT
WILL ACCEPT DELIVERY OF ANY SUCH CERTIFICATES TRANSMITTED TOGETHER WITH A
MASTER BALLOT. Surrender of securities for exchange pursuant to the Plan
may be made only pursuant in a letter transmittal which will be furnished to
you by the Company (or its agent) after confirmation of the Prepackaged Plan
by the Bankruptcy Court.
4. With respect to any individual ballots returned to you by the beneficial
owner, you must either: (a) forward such ballots directly to the Voting Agent
indicating the appropriate authority to vote on each such ballot submitted;
or (b) complete a Master Ballot summarizing the voting with respect to such
individual ballots, return the Master Ballot to the Voting Agent, and retain
ALL such individual ballots for inspection by the Bankruptcy Court until
December 31, 1997.
5. Multiple Master Ballots may be completed and delivered to the Voting
Agent. Votes reflected by multiple Master Ballots will be counted except to
the extent that they are duplicative of other Master Ballots. If two or more
Master Ballots are inconsistent in whole or in part, the latest Master Ballot
received prior to the voting Deadline will, to the extent of such
inconsistency, supersede and revoke any prior Master Ballot. If more than
one Master Ballot is submitted and the later Master Ballot(s) supplement
rather than supersede earlier Master Ballot(s), please mark the subsequent
Master Ballot(s) with the words "Additional Vote" or such other language as
you customarily use to indicate an additional vote that is not meant to
revoke an earlier vote.
6. Item 2 of the Master Ballot requests that you provide information in
the indicated format for each individual beneficial owner on whose behalf
you are executing the Master Ballot. To identify such beneficial owners
without disclosing their names, please use the customer account number
assigned by you to each such beneficial owner. In the event that a single
customer has more than one account with the identical registration, that
customer should be listed no more than once in Item 2. In completing Item
2, the total number of shares of all accounts voted with respect to a
single customer should be listed in a single line entry, so that each
line will represent a different beneficial owner.
7. Each beneficial owner must vote its entire claim or equity interest
within a single class under the Prepackaged Plan to either accept or
reject the Prepackaged Plan. A beneficial owner may not split its vote
within a class and, accordingly, an individual ballot (or multiple
individual ballots with respect to multiple claims or equity interests
within a single class) received from a beneficial owner that partially
rejects and partially accepts the Prepackaged Plan should not be counted.
Furthermore, for purposes of computing the vote on a Master Ballot, each
voting beneficial owner should be deemed to have voted the full amount of
its holdings according to your records as of the close of business on
May __, 1997 (the "Voting Record Date").
8. No fees or commissions or other renumeration will be payable to any
broker, dealer or other person in connection with the solicitation by the
Company pursuant to the Prepackaged Plan. The Corporation will, however,
upon written request, reimburse you for customary mailing and handling
expenses incurred by you in forwarding individual ballots and
accompanying solicitation packages to your clients.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR
ANY OTHER PERSON AS THE AGENT OF THE COMPANY OR THE VOTING AGENT, OR
AUTHORIZE YOU OR ANY PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON
BEHALF OF ANY OF THEM WITH RESPECT TO THE PREPACKAGED PLAN, EXCEPT FOR THE
STATEMENTS CONTAINED IN THE DOCUMENTS ENCLOSED HEREWITH.
IF YOU HAVE ANY QUESTIONS REGARDING THIS MASTER BALLOT OR THE VOTING
PROCEDURES, OR IF YOU NEED ADDITIONAL COPIES OF THE MASTER BALLOT, INDIVIDUAL
BALLOTS OR SOLICITATION PACKAGES, INCLUDING THE PREPACKAGED PLAN AND THE
PROSPECTUS, PLEASE CALL:
THE INFORMATION AGENT
GEORGESON & COMPANY
TOLL-FREE AT (800) 223-2064
<PAGE>
EXHIBIT 99.05D
Important: A Bankruptcy case has not been commenced as of the date of this
document.
KOLL REAL ESTATE GROUP, INC.
MASTER BALLOT
FOR ACCEPTING OR REJECTING
THE PLAN OF REORGANIZATION OF KOLL REAL ESTATE GROUP, INC.
CLASS 8: CLASS A COMMON STOCK
THE VOTING DEADLINE TO ACCEPT OR REJECT THE PLAN IS
5:00 P.M. _______, JUNE __, 1997, UNLESS EXTENDED
This Master Ballot is submitted to you to solicit and obtain the vote of
the beneficial owners of the securities described below to accept or reject
the Prepackaged Plan of Reorganization (the "Prepackaged Plan") of Koll Real
Estate Group, Inc. (the "Company") referred to in the accompanying Proxy
Statement/Prospectus and Disclosure Statement, dated ________, 1997 (the
"Prospectus"). The Prepackaged Plan could be filed in connection with a case
to be commenced in the future by the Company under chapter 11 of the
Bankruptcy Code. At this time, the Company has not commenced a chapter 11
case. If sufficient votes are received accepting the Prepackaged Plan, the
Corporation may commence a chapter 11 case and seek to have the Prepackaged
Plan confirmed by the Bankruptcy Court; however, the Company expressly
reserves the right, in its sole and absolute discretion, to not commence such
a chapter 11 case, even if it receives sufficient votes accepting the
Prepackaged Plan.
PLEASE READ THE VOTING INFORMATION AND INSTRUCTIONS ON THE REVERSE SIDE
BEFORE COMPLETING THIS MASTER BALLOT.
Item 1. Tabulation of Beneficial Owner Class 8 Voting. The undersigned
certifies that ________ beneficial owners of ________ shares of Class A
Common Stock have delivered ballots to the undersigned voting Class 8 claims
to ACCEPT the Prepackaged Plan.
The undersigned certifies that ________ beneficial owners of
________ shares of Class A Common Stock have delivered ballots to the
undersigned voting Class 8 claims to REJECT the Prepackaged Plan.
Item 2. Class 8 Beneficial Owner Information. The undersigned certifies
that listed below (or attached hereto) is a true and accurate schedule of the
beneficial owners of Class A Common Stock, that have delivered ballots to the
undersigned voting Class 8 claims to accept or reject the Plan.
(Please complete the following table or attach the information requested by
this Item 2 in the following format.)
Your Customer Account Number(s) Number of Shares
for Each Beneficial Owner Class A Common Stock To Accept To Reject
______________________________ ____________________ _________ _________
1.___________________________ ____________________ _________ _________
2.___________________________ ____________________ _________ _________
3.___________________________ ____________________ _________ _________
4.___________________________ ____________________ _________ _________
5.___________________________ ____________________ _________ _________
6.___________________________ ____________________ _________ _________
7.___________________________ ____________________ _________ _________
8.___________________________ ____________________ _________ _________
9.___________________________ ____________________ _________ _________
10.___________________________ ____________________ _________ _________
Item 3. The undersigned certifies that the undersigned is an agent of the
registered owner with full power and authority to execute this document in
its own name or through a position held at a securities depository of the
Class A Common Stock set forth in Item 1. The undersigned further certifies
that none of the Class 8 accounts identified in Item 2 above have previously
been voted by any other Master Ballot, except to the extent provided in Item
5 of the Voting information and instructions on the reverse side hereof,
submitted by the undersigned. The undersigned also acknowledges the terms and
conditions set forth in the Proxy Statement.
DATED:
________________________________ _______________________________________
(Print or type name) (If by Authorized Agent, Name and Title)
________________________________ _______________________________________
(Signature) Address: (Street)
________________________________ _______________________________________
(Name of broker, bank or other nominee) Address: (City, State, Zip Code)
Return this Master Ballot before Monday, June __, 1997 to:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<CAPTION>
BY HAND DELIVERY OR OVERNIGHT COURIER: BY MAIL: FACSIMILE
TRANSMISSION:
<S> <C> <C>
ChaseMellon Shareholder Services, L.L.C. ChaseMellon Shareholder Services, L.L.C. 210/329-8936
Reorganization Department Reorganization Department To Confirm by Phone:
120 Broadway, 13th Floor P.O. Box 3301 201/296-4209
New York, NY 10271 South Hackensack, NJ 07606 201/296-4381
</TABLE>
<PAGE>
VOTING INFORMATION AND INSTRUCTIONS
FOR COMPLETING THE MASTER BALLOT
1. The Master Ballot is to be used by brokerage firms, banks or proxy
intermediaries for summarizing votes cast by beneficial owners of the
securities in Class 8 to accept or reject the Plan.
2. Master Ballots must be received by ChaseMellon Shareholder Services,
L.L.C., at the addresses and facsimile number indicated on the front of this
Master Ballot, the voting agent (the "Voting Agent"), by 5:00 p.m. Eastern
Time on June __, 1997 (the "Voting Deadline"). Master Ballots may also be
returned to the Voting Agent prior to the Voting Deadline by overnight mail
service, courier or facsimile transmission, please send the original hard
copy by overnight mail to ChaseMellon Shareholder Services. Master Ballots
not received by the Voting Deadline will not be counted.
3. The Master Ballot is not a letter of transmittal and may not be used for
any purpose other than to transmit votes to accept or reject the Prepackaged
Plan. HOLDERS SHOULD NOT SURRENDER CERTIFICATES REPRESENTING THEIR
SECURITIES AT THIS TIME, AND NEITHER THE CORPORATION NOR ITS VOTING AGENT
WILL ACCEPT DELIVERY OF ANY SUCH CERTIFICATES TRANSMITTED TOGETHER WITH A
MASTER BALLOT. Surrender of securities for exchange pursuant to the Plan
may be made only pursuant in a letter transmittal which will be furnished to
you by the Company (or its agent) after confirmation of the Prepackaged Plan
by the Bankruptcy Court.
4. With respect to any individual ballots returned to you by the beneficial
owner, you must either: (a) forward such ballots directly to the Voting Agent
indicating the appropriate authority to vote on each such ballot submitted;
or (b) complete a Master Ballot summarizing the voting with respect to such
individual ballots, return the Master Ballot to the Voting Agent, and retain
ALL such individual ballots for inspection by the Bankruptcy Court until
December 31, 1997.
5. Multiple Master Ballots may be completed and delivered to the Voting
Agent. Votes reflected by multiple Master Ballots will be counted except to
the extent that they are duplicative of other Master Ballots. If two or more
Master Ballots are inconsistent in whole or in part, the latest Master Ballot
received prior to the voting Deadline will, to the extent of such
inconsistency, supersede and revoke any prior Master Ballot. If more than
one Master Ballot is submitted and the later Master Ballot(s) supplement
rather than supersede earlier Master Ballot(s), please mark the subsequent
Master Ballot(s) with the words "Additional Vote" or such other language as
you customarily use to indicate an additional vote that is not meant to
revoke an earlier vote.
6. Item 2 of the Master Ballot requests that you provide information in
the indicated format for each individual beneficial owner on whose behalf
you are executing the Master Ballot. To identify such beneficial owners
without disclosing their names, please use the customer account number
assigned by you to each such beneficial owner. In the event that a single
customer has more than one account with the identical registration, that
customer should be listed no more than once in Item 2. In completing Item
2, the total number of shares of all accounts voted with respect to a
single customer should be listed in a single line entry, so that each
line will represent a different beneficial owner.
7. Each beneficial owner must vote its entire claim or equity interest
within a single class under the Plan to either accept or reject the Plan. A
beneficial owner may not split its vote within a class and, accordingly, an
individual ballot (or multiple individual ballots with respect to multiple
claims or equity interests within a single class) received from a beneficial
owner that partially rejects and partially accepts the Prepackaged Plan
should not be counted. Furthermore, for purposes of computing the vote on a
Master Ballot, each voting beneficial owner should be deemed to have voted
the full amount of its holdings according to your records as of the close of
business on May __, 1997 (the "Voting Record Date").
8. No fees or commissions or other renumeration will be payable to any
broker, dealer or other person in connection with the solicitation by the
Company pursuant to the Plan. The Corporation will, however, upon written
request, reimburse you for customary mailing and handling expenses incurred
by you in forwarding individual ballots and accompanying solicitation
packages to your clients.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR
ANY OTHER PERSON AS THE AGENT OF THE COMPANY OR THE VOTING AGENT, OR
AUTHORIZE YOU OR ANY PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON
BEHALF OF ANY OF THEM WITH RESPECT TO THE PREPACKAGED PLAN, EXCEPT FOR THE
STATEMENTS CONTAINED IN THE DOCUMENTS ENCLOSED HEREWITH.
IF YOU HAVE ANY QUESTIONS REGARDING THIS MASTER BALLOT OR THE VOTING
PROCEDURES, OR IF YOU NEED ADDITIONAL COPIES OF THE MASTER BALLOT, INDIVIDUAL
BALLOTS OR SOLICITATION PACKAGES, INCLUDING THE PREPACKAGED PLAN AND THE
PROSPECTUS, PLEASE CALL:
THE INFORMATION AGENT
GEORGESON & COMPANY
TOLL-FREE AT (800) 223-2064
<PAGE>
EXHIBIT 99.05E
Important: A Bankruptcy case has not been commenced as of the date of this
document.
KOLL REAL ESTATE GROUP, INC.
MASTER BALLOT
FOR ACCEPTING OR REJECTING
THE PLAN OF REORGANIZATION OF KOLL REAL ESTATE GROUP, INC.
CLASS 5: GENERAL UNSECURED CLAIMS - OTHER THAN HOLDERS
OF SENIOR DEBENTURES
THE VOTING DEADLINE TO ACCEPT OR REJECT THE PLAN IS
5:00 P.M. _______, JUNE __, 1997, UNLESS EXTENDED
This Master Ballot is submitted to you to solicit and obtain the vote of
the beneficial owners of the securities described below to accept or reject
the Prepackaged Plan of Reorganization (the "Prepackaged Plan") of Koll Real
Estate Group, Inc. (the "Company") referred to in the accompanying Proxy
Statement/Prospectus and Disclosure Statement, dated ________, 1997 (the
"Prospectus"). The Prepackaged Plan could be filed in connection with a case
to be commenced in the future by the Company under chapter 11 of the
Bankruptcy Code. At this time, the Company has not commenced a chapter 11
case. If sufficient votes are received accepting the Prepackaged Plan, the
Corporation may commence a chapter 11 case and seek to have the Prepackaged
Plan confirmed by the Bankruptcy Court; however, the Company expressly
reserves the right, in its sole and absolute discretion, to not commence such
a chapter 11 case, even if it receives sufficient votes accepting the
Prepackaged Plan.
PLEASE READ THE VOTING INFORMATION AND INSTRUCTIONS ON THE REVERSE SIDE
BEFORE COMPLETING THIS MASTER BALLOT.
Item 1. Tabulation of Beneficial Owner Class 5 Voting. The undersigned
certifies that ________ beneficial holders of General Unsecured Claims other
than Senior Debentures having an aggregate principal amount of $________
have delivered ballots to the undersigned voting Class 5 claims to ACCEPT the
Prepackaged Plan.
The undersigned certifies that ________ beneficial holders of delivered
ballots to the undersigned voting Class 5 (other than holders of Senior
Debentures) claims to REJECT the Prepackaged Plan.
Item 2. Class 5 Beneficial Owner Information. The undersigned certifies
that listed below (or attached hereto) is a true and accurate schedule of the
beneficial owners of Class A Common Stock, that have delivered ballots to the
undersigned voting Class 5 (other than holders of Senior Debentures) claims to
accept or reject the Plan.
(Please complete the following table or attach the information requested by
this Item 2 in the following format.)
Principal Amount of
Class 5 Claims
Your Customer Account Number(s) (other than Senior
for Each Beneficial Owner Debentures) To Accept To Reject
______________________________ ____________________ _________ _________
1.___________________________ ____________________ _________ _________
2.___________________________ ____________________ _________ _________
3.___________________________ ____________________ _________ _________
4.___________________________ ____________________ _________ _________
5.___________________________ ____________________ _________ _________
6.___________________________ ____________________ _________ _________
7.___________________________ ____________________ _________ _________
8.___________________________ ____________________ _________ _________
9.___________________________ ____________________ _________ _________
10.___________________________ ____________________ _________ _________
Item 3. The undersigned certifies that the undersigned is an agent of the
registered owner with full power and authority to execute this document in
its own name or through a position held at a securities depository of the
Class A Common Stock set forth in Item 1. The undersigned further certifies
that none of the Class 5 accounts identified in Item 2 above have previously
been voted by any other Master Ballot, except to the extent provided in Item
5 of the Voting information and instructions on the reverse side hereof,
submitted by the undersigned. The undersigned also acknowledges the terms and
conditions set forth in the Prospectus.
DATED:
________________________________ _______________________________________
(Print or type name) (If by Authorized Agent, Name and Title)
________________________________ _______________________________________
(Signature) Address: (Street)
________________________________ _______________________________________
(Name of broker, bank or other nominee) Address: (City, State, Zip Code)
Return this Master Ballot before June __, 1997 to:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<CAPTION>
BY HAND DELIVERY OR OVERNIGHT COURIER: BY MAIL: FACSIMILE
TRANSMISSION:
<S> <C> <C>
ChaseMellon Shareholder Services, L.L.C. ChaseMellon Shareholder Services, L.L.C. 210/329-8936
Reorganization Department Reorganization Department To Confirm by Phone:
120 Broadway, 13th Floor P.O. Box 3301 201/296-4209
New York, NY 10271 South Hackensack, NJ 07606 201/296-4381
</TABLE>
<PAGE>
VOTING INFORMATION AND INSTRUCTIONS
FOR COMPLETING THE MASTER BALLOT
1. The Master Ballot is to be used by brokerage firms, banks or proxy
intermediaries for summarizing votes cast by beneficial owners of the
securities in Class 5 (other than Senior Debentures) to accept or reject
the Plan.
2. Master Ballots must be received by ChaseMellon Shareholder Services,
L.L.C., at the addresses and facsimile number indicated on the front of this
Master Ballot, the voting agent (the "Voting Agent"), by 5:00 p.m. Eastern
Time on June __, 1997 (the "Voting Deadline"). Master Ballots may also be
returned to the Voting Agent prior to the Voting Deadline by overnight mail
service, courier or facsimile transmission, please send the original hard
copy by overnight mail to ChaseMellon Shareholder Services. Master Ballots
not received by the Voting Deadline will not be counted.
3. The Master Ballot is not a letter of transmittal and may not be used for
any purpose other than to transmit votes to accept or reject the Prepackaged
Plan. HOLDERS SHOULD NOT SURRENDER CERTIFICATES REPRESENTING THEIR
SECURITIES AT THIS TIME, AND NEITHER THE CORPORATION NOR ITS VOTING AGENT
WILL ACCEPT DELIVERY OF ANY SUCH CERTIFICATES TRANSMITTED TOGETHER WITH A
MASTER BALLOT. Surrender of securities for exchange pursuant to the Plan
may be made only pursuant in a letter transmittal which will be furnished to
you by the Company (or its agent) after confirmation of the Prepackaged Plan
by the Bankruptcy Court.
4. With respect to any individual ballots returned to you by the beneficial
owner, you must either: (a) forward such ballots directly to the Voting Agent
indicating the appropriate authority to vote on each such ballot submitted;
or (b) complete a Master Ballot summarizing the voting with respect to such
individual ballots, return the Master Ballot to the Voting Agent, and retain
ALL such individual ballots for inspection by the Bankruptcy Court until
December 31, 1997.
5. Multiple Master Ballots may be completed and delivered to the Voting
Agent. Votes reflected by multiple Master Ballots will be counted except to
the extent that they are duplicative of other Master Ballots. If two or more
Master Ballots are inconsistent in whole or in part, the latest Master Ballot
received prior to the voting Deadline will, to the extent of such
inconsistency, supersede and revoke any prior Master Ballot. If more than
one Master Ballot is submitted and the later Master Ballot(s) supplement
rather than supersede earlier Master Ballot(s), please mark the subsequent
Master Ballot(s) with the words "Additional Vote" or such other language as
you customarily use to indicate an additional vote that is not meant to
revoke an earlier vote.
6. Item 2 of the Master Ballot requests that you provide information in
the indicated format for each individual beneficial owner on whose behalf
you are executing the Master Ballot. To identify such beneficial owners
without disclosing their names, please use the customer account number
assigned by you to each such beneficial owner. In the event that a single
customer has more than one account with the identical registration, that
customer should be listed no more than once in Item 2. In completing Item
2, the total number of shares of all accounts voted with respect to a
single customer should be listed in a single line entry, so that each
line will represent a different beneficial owner.
7. Each beneficial owner must vote its entire claim or equity interest
within a single class under the Prepackaged Plan to either accept or
reject the Prepackaged Plan. A beneficial owner may not split its vote
within a class and, accordingly, an individual ballot (or multiple
individual ballots with respect to multiple claims or equity interests
within a single class) received from a beneficial owner that partially
rejects and partially accepts the Prepackaged Plan should not be counted.
Furthermore, for purposes of computing the vote on a Master Ballot, each
voting beneficial owner should be deemed to have voted the full amount of
its holdings according to your records as of the close of business on
May __, 1997 (the "Voting Record Date").
8. No fees or commissions or other renumeration will be payable to any
broker, dealer or other person in connection with the solicitation by the
Company pursuant to the Prepackaged Plan. The Corporation will, however,
upon written request, reimburse you for customary mailing and handling
expenses incurred by you in forwarding individual ballots and
accompanying solicitation packages to your clients.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR
ANY OTHER PERSON AS THE AGENT OF THE COMPANY OR THE VOTING AGENT, OR
AUTHORIZE YOU OR ANY PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON
BEHALF OF ANY OF THEM WITH RESPECT TO THE PREPACKAGED PLAN, EXCEPT FOR THE
STATEMENTS CONTAINED IN THE DOCUMENTS ENCLOSED HEREWITH.
IF YOU HAVE ANY QUESTIONS REGARDING THIS MASTER BALLOT OR THE VOTING
PROCEDURES, OR IF YOU NEED ADDITIONAL COPIES OF THE MASTER BALLOT, INDIVIDUAL
BALLOTS OR SOLICITATION PACKAGES, INCLUDING THE PREPACKAGED PLAN AND THE
PROSPECTUS, PLEASE CALL:
THE INFORMATION AGENT
GEORGESON & COMPANY
TOLL-FREE AT (800) 223-2064
<PAGE>
EXHIBIT 99.06A
KOLL REAL ESTATE GROUP, INC.
BALLOT
FOR ACCEPTING OR REJECTING
THE PREPACKAGED PLAN OF REORGANIZATION OF KOLL REAL ESTATE GROUP, INC.
Item 1: The undersigned, a Holder of a Class 5 Claim (General Unsecured Claim
- -- Senior Debentures) as defined in the Prepackaged Plan, is the beneficial
owner of the 12% Senior Subordinated Pay-In-Kind Debentures due March 15,
2002 (the "Senior Debentures") of Koll Real Estate Group, Inc. (the
"Company") having the aggregate principal amount indicated above.
Item 2: The undersigned votes all Class 5 claim(s) referenced in Item 1
(check box):
To accept To reject
the Plan the Plan
/ / / /
Item 3: By signing the Ballot, the undersigned certifies that the undersigned
is the beneficial owner of the Senior Debentures voted on this
Ballot and/or has full power and authority to vote to accept or reject
the Prepackaged Plan. The undersigned also acknowledges receipt of the
Proxy Statement/Prospectus and Disclosure Statement dated April __, 1997
(the "Prospectus") and other applicable Pregackaged Plan Solicitation
Materials as well as all terms and conditions set forth therein.
Dated:___________________________________, 1997
X______________________________________________
X______________________________________________
Signature(s) of Debentureholder(s)
Signature(s) of Debentureholder(s) -- please sign name exactly as
imprinted (do not print). Please indicate any change of address.
NOTE: Executive, administrators, trustees and others signing in a
representative capacity should indicate the capacity in which they
sign.
If shares are held jointly, EACH should sign.
TRIANGLE FOLD AND DETACH HERE TRIANGLE
VOTING INFORMATION AND INSTRUCTIONS
FOR COMPLETING THE BALLOT
1. For your vote to be counted, you must complete, sign and return the ballot
as follows:
a. IF YOUR CLASS 5: SENIOR DEBENTURES HELD THROUGH A BROKER, BANK,
OR OTHER NOMINEE: To have your vote count you must complete Items 1 and 2
and return this ballot to such broker, bank or nominee. You must return
the ballot to such entity, early enough for your vote to be processed
and forwarded to and received by the voting agent prior to 5:00 p.m.,
Eastern Standard Time on June __, 1997 to (the "Voting Expiration Date").
The broker, bank or other nominee should indicate on the ballot the
value of your account as of the close of business on April __, 1997
(the "Record Date"). If that data has not been provided, please
contact the institution(s) at which your account(s) are held and
request the same.
b. IF YOUR CLASS 5: SENIOR DEBENTURES REGISTERED IN YOUR OWN NAME:
For your vote to be counted, you must verify Item 1, complete Item 2
and return this ballot to ChaseMellon Shareholder Services, the
"Voting Agent," at the address set forth on the enclosed
pre-addressed postage pre-paid business reply envelope. You will find
your holdings, as of the close of business on the Voting Record Date,
indicated above.
If for any reason you did not receive a pre-addressed postage pre-paid
business reply envelope or if the amount of your holdings indicated on
the aforementioned label is unclear, please contact Georgeson & Company
at the toll-free number below.
BALLOTS MUST BE RECEIVED BY 5:00 P.M., EASTERN STANDARD TIME ON ______________,
JUNE ___, 1997 (THE "VOTING EXPIRATION DATE"). IF A BALLOT IS RECEIVED AFTER
THE VOTING DATE, IT WILL NOT BE COUNTED.
2. If you hold claims or equity interests in more than one class under the
Prepackaged Plan (i.e., stock and debentures), you should receive one
ballot, coded by class number and color and one set of solicitation materials
for each such class of claims or equity interests. Please complete and return
each ballot you receive. YOU MUST VOTE ALL OF YOUR CLAIMS OR EQUITY INTERESTS
WITHIN A SINGLE CLASS UNDER THE PREPACKAGED PLAN TO EITHER ACCEPT OR REJECT
THE PREPACKAGED PLAN. ACCORDINGLY, A BALLOT THAT PARTIALLY REJECTS AND
PARTIALLY ACCEPTS THE PREPACKAGED PLAN WILL NOT BE COUNTED.
3. The ballot is not a letter of transmittal and may not be used for any
other purpose other than to vote to accept or reject the Prepackaged Plan.
HOLDERS SHOULD NOT SURRENDER CERTIFICATES REPRESENTING THEIR SECURITIES AT
THIS TIME, AND NEITHER THE COMPANY NOR ITS VOTING AGENT WILL ACCEPT
DELIVERY OF ANY SUCH CERTIFICATES TRANSMITTED TOGETHER WITH A MASTER
BALLOT. Surrender of securities for exchange pursuant to the Prepackaged
Plan may be made only pursuant to a letter of transmittal which will be
furnished to you by the Company (or its agent) after confirmation of
the Prepackaged Plan by the Bankruptcy Court.
4. The ballot is for voting purposes only and does not constitute and shall
not be deemed a proof of claim or interest or an assertion of a claim or
interest.
PLEASE RETURN YOUR BALLOT PROMPTLY
IF YOU HAVE ANY QUESTIONS REGARDING
THIS BALLOT OR THE VOTING PROCEDURES
PLEASE CALL
THE INFORMATION AGENT
GEORGESON & COMPANY
TOLL-FREE AT (800) 223-2084
<PAGE>
IMPORTANT: A BANKRUPTCY CASE HAS NOT BEEN COMMENCED AS OF THE DATE OF THIS
DOCUMENT.
KOLL REAL ESTATE GROUP, INC.
BALLOT
FOR ACCEPTING OR REJECTING
THE PLAN OF REORGANIZATION OF KOLL REAL ESTATE GROUP, INC.
(CLASS 5: GENERAL UNSECURED CLAIMS -- HOLDERS OF SENIOR DEBENTURES)
THE VOTING EXPIRATION DATE TO ACCEPT OR REJECT THE PLAN IS
5:00 P.M. E.S.T. ON _________, JUNE ___, 1997, UNLESS EXTENDED
This Ballot is submitted to you to solicit your vote to accept or reject
the Prepackaged Plan of Reorganization (the "Prepackaged Plan") of KOLL REAL
ESTATE GROUP, INC. (the "Company"), referred to in the accompanying Proxy
Statement/Prospectus and Disclosure Statement, dated April__, 1997 (the
"Prospectus"). The Prepackaged Plan could be filed in connection with a case
to be commenced in the future by the Company under chapter 11 of the Bankruptcy
Code. At this time, the Company has not commenced a chapter 11 case. If
sufficient votes are received accepting the Prepackaged Plan, the Corporation
may commence a chapter 11 case and seek to have the Prepackaged Plan confirmed
by the Bankruptcy court; however, the Corporation expressly reserves the right,
in its sole and absolute discretion, to not commence such a chapter 11 case,
even if it receives sufficient votes accepting the Prepackaged Plan.
THIS BALLOT IS NOT A LETTER OF TRANSMITTAL AND MAY NOT BE USED FOR ANY
OTHER PURPOSE OTHER THAN TO VOTE TO ACCEPT OR REJECT THE PREPACKAGED PLAN.
HOLDERS SHOULD NOT SURRENDER CERTIFICATES REPRESENTING SECURITIES AT THIS
TIME, AND NEITHER THE CORPORATION NOR THE EXCHANGE AGENT WILL ACCEPT
DELIVERY OF ANY SUCH CERTIFICATES.
PLEASE READ ALL VOTING INFORMATION AND INSTRUCTIONS ON BOTH SIDES OF THIS
BALLOT BEFORE COMPLETING THIS BALLOT.
IF NEITHER THE "ACCEPTS" NOR "REJECTS" BOX IS CHECKED AND/OR THIS BALLOT
IS NOT SIGNED ON THE APPROPRIATE LINES ON THE REVERSE SIDE, THE BALLOT WILL
NOT BE VALID OR COUNTED AS HAVING BEEN CAST. PLEASE COMPLETE ITEMS 2 AND 3 ON
THE REVERSE SIDE HEREOF.
(continued and to be signed on other side)
TRIANGLE FOLD AND DETACH HERE TRIANGLE
<PAGE>
EXHIBIT 99.06B
KOLL REAL ESTATE GROUP, INC.
BALLOT
FOR ACCEPTING OR REJECTING
THE PREPACKAGED PLAN OF REORGANIZATION OF KOLL REAL ESTATE GROUP, INC.
Item 1: The undersigned, a Holder of a Class 6 Claim as defined in the
Prepackaged Plan, is the beneficial owner of 12% Subordinated Pay-In-Kind
Debentures due March 15, 2002 (the "Subordinated Debentures") Koll Real
Estate Group, Inc. (the "Company") having the aggregate principal amount
indicated above.
Item 2: The undersigned votes all Class 6 claim(s) referenced in Item 1
(check box):
To accept To reject
the Plan the Plan
/ / / /
Item 3: By signing the Ballot, the undersigned certifies that the undersigned
is the beneficial owner of the Subordinated Debentures voted on this
Ballot and/or has full power and authority to vote to accept or reject
the Prepackaged Plan. The undersigned also acknowledges receipt of the
Proxy Statement/Prospectus and Disclosure Statement dated April __, 1997
(the "Prospectus") and other applicable Pregackaged Plan Solicitation
Materials as well as all terms and conditions set forth therein.
Dated:___________________________________, 1997
X______________________________________________
X______________________________________________
Signature(s) of Debentureholder(s)
Signature(s) of Stockholder(s) -- please sign name exactly as
imprinted (do not print). Please indicate any change of address.
NOTE: Executive, administrators, trustees and others signing in a
representative capacity should indicate the capacity in which they
sign.
If shares are held jointly, EACH should sign.
TRIANGLE FOLD AND DETACH HERE TRIANGLE
VOTING INFORMATION AND INSTRUCTIONS
FOR COMPLETING THE BALLOT
1. For your vote to be counted, you must complete, sign and return the ballot
as follows:
a. IF YOUR CLASS 6: SUBORDINATED DEBENTURES ARE HELD THROUGH A BROKER, BANK,
OR OTHER NOMINEE: To have your vote count you must complete Items 1 and 2
and return this ballot to such broker, bank or nominee. You must return
the ballot to such entity, early enough for your vote to be processed
and forwarded to and received by the voting agent prior to 5:00 p.m.,
Eastern Standard Time on June __, 1997 to (the "Voting Expiration Date").
The broker, bank or other nominee should indicate on the ballot the
value of your account as of the close of business on April __, 1997
(the "Record Date"). If that data has not been provided, please
contact the institution(s) at which your account(s) are held and
request the same.
b. IF YOUR CLASS 6: SUBORDINATED DEBENTURES ARE REGISTERED IN YOUR OWN NAME:
For your vote to be counted, you must verify Item 1, complete Item 2
and return this ballot to ChaseMellon Shareholder Services, the
"Voting Agent," at the address set forth on the enclosed
pre-addressed postage pre-paid business reply envelope. You will find
your holdings, as of the close of business on the Voting Record Date,
indicated above.
If for any reason you did not receive a pre-addressed postage pre-paid
business reply envelope or if the amount of your holdings indicated on
the aforementioned label is unclear, please contact Georgeson & Company
at the toll-free number below.
BALLOTS MUST BE RECEIVED BY 5:00 P.M., EASTERN STANDARD TIME ON ______________,
JUNE ___, 1997 (THE "VOTING EXPIRATION DATE"). IF A BALLOT IS RECEIVED AFTER
THE VOTING DATE, IT WILL NOT BE COUNTED.
2. If you hold claims or equity interests in more than one class under the
Prepackaged Plan (i.e., stock and debentures), you should receive one
ballot, coded by class number and color and one set of solicitation materials
for each such class of claims or equity interests. Please complete and return
each ballot you receive. YOU MUST VOTE ALL OF YOUR CLAIMS OR EQUITY INTERESTS
WITHIN A SINGLE CLASS UNDER THE PREPACKAGED PLAN TO EITHER ACCEPT OR REJECT
THE PREPACKAGED PLAN. ACCORDINGLY, A BALLOT THAT PARTIALLY REJECTS AND
PARTIALLY ACCEPTS THE PREPACKAGED PLAN WILL NOT BE COUNTED.
3. The ballot is not a letter of transmittal and may not be used for any
other purpose other than to vote to accept or reject the Prepackaged Plan.
HOLDERS SHOULD NOT SURRENDER CERTIFICATES REPRESENTING THEIR SECURITIES AT
THIS TIME, AND NEITHER THE COMPANY NOR ITS VOTING AGENT WILL ACCEPT
DELIVERY OF ANY SUCH CERTIFICATES TRANSMITTED TOGETHER WITH A MASTER
BALLOT. Surrender of securities for exchange pursuant to the Prepackaged
Plan may be made only pursuant to a letter of transmittal which will be
furnished to you by the Company (or its agent) after confirmation of
the Prepackaged Plan by the Bankruptcy Court.
4. The ballot is for voting purposes only and does not constitute and shall
not be deemed a proof of claim or interest or an assertion of a claim or
interest.
PLEASE RETURN YOUR BALLOT PROMPTLY
IF YOU HAVE ANY QUESTIONS REGARDING
THIS BALLOT OR THE VOTING PROCEDURES
PLEASE CALL
THE INFORMATION AGENT
GEORGESON & COMPANY
TOLL-FREE AT (800) 223-2084
<PAGE>
IMPORTANT: A BANKRUPTCY CASE HAS NOT BEEN COMMENCED AS OF THE DATE OF THIS
DOCUMENT.
KOLL REAL ESTATE GROUP, INC.
BALLOT
FOR ACCEPTING OR REJECTING
THE PLAN OF REORGANIZATION OF KOLL REAL ESTATE GROUP, INC.
(CLASS 6: CLAIMS OF HOLDERS OF SUBORDINATED DEBENTURES)
THE VOTING EXPIRATION DATE TO ACCEPT OR REJECT THE PLAN IS
5:00 P.M. E.S.T. ON _________, JUNE ___, 1997, UNLESS EXTENDED
This Ballot is submitted to you to solicit your vote to accept or reject
the Prepackaged Plan of Reorganization (the "Prepackaged Plan") of KOLL REAL
ESTATE GROUP, INC. (the "Company"), referred to in the accompanying Proxy
Statement/Prospectus and Disclosure Statement, dated April__, 1997 (the
"Prospectus"). The Prepackaged Plan could be filed in connection with a case
to be commenced in the future by the Company under chapter 11 of the Bankruptcy
Code. At this time, the Company has not commenced a chapter 11 case. If
sufficient votes are received accepting the Prepackaged Plan, the Corporation
may commence a chapter 11 case and seek to have the Prepackaged Plan confirmed
by the Bankruptcy court; however, the Corporation expressly reserves the right,
in its sole and absolute discretion, to not commence such a chapter 11 case,
even if it receives sufficient votes accepting the Prepackaged Plan.
THIS BALLOT IS NOT A LETTER OF TRANSMITTAL AND MAY NOT BE USED FOR ANY
OTHER PURPOSE OTHER THAN TO VOTE TO ACCEPT OR REJECT THE PREPACKAGED PLAN.
HOLDERS SHOULD NOT SURRENDER CERTIFICATES REPRESENTING SECURITIES AT THIS
TIME, AND NEITHER THE CORPORATION NOR THE EXCHANGE AGENT WILL ACCEPT
DELIVERY OF ANY SUCH CERTIFICATES.
PLEASE READ ALL VOTING INFORMATION AND INSTRUCTIONS ON BOTH SIDES OF THIS
BALLOT BEFORE COMPLETING THIS BALLOT.
IF NEITHER THE "ACCEPTS" NOR "REJECTS" BOX IS CHECKED AND/OR THIS BALLOT
IS NOT SIGNED ON THE APPROPRIATE LINES ON THE REVERSE SIDE, THE BALLOT WILL
NOT BE VALID OR COUNTED AS HAVING BEEN CAST. PLEASE COMPLETE ITEMS 2 AND 3 ON
THE REVERSE SIDE HEREOF.
(continued and to be signed on other side)
TRIANGLE FOLD AND DETACH HERE TRIANGLE
<PAGE>
EXHIBIT 99.06C
KOLL REAL ESTATE GROUP, INC.
BALLOT
FOR ACCEPTING OR REJECTING
THE PREPACKAGED PLAN OF REORGANIZATION OF KOLL REAL ESTATE GROUP, INC.
Item 1: The undersigned, a Holder of a Class 7 Claim as defined in the
Prepackaged Plan, is the beneficial owner of the number of shares of Series A
Convertible Redeemable Preferred Stock (the "Preferred Stock") of Koll Real
Estate Group, Inc. (the "Company") as indicated above.
Item 2: The undersigned votes all Class 7 claim(s) referenced in Item 1
(check box):
To accept To reject
the Plan the Plan
/ / / /
Item 3: By signing the Ballot, the undersigned certifies that the undersigned
is the beneficial owner of the Preferred Stock voted on this
Ballot and/or has full power and authority to vote to accept or reject
the Prepackaged Plan. The undersigned also acknowledges receipt of the
Proxy Statement/Prospectus and Disclosure Statement dated April __, 1997
(the "Prospectus") and other applicable Prepackaged Plan Solicitation
Materials as well as all terms and conditions set forth therein.
Dated:___________________________________, 1997
X______________________________________________
X______________________________________________
Signature(s) of Stockholder(s)
Signature(s) of Stockholder(s) -- please sign name exactly as
imprinted (do not print). Please indicate any change of address.
NOTE: Executive, administrators, trustees and others signing in a
representative capacity should indicate the capacity in which they
sign.
If shares are held jointly, EACH should sign.
TRIANGLE FOLD AND DETACH HERE TRIANGLE
VOTING INFORMATION AND INSTRUCTIONS
FOR COMPLETING THE BALLOT
1. For your vote to be counted, you must complete, sign and return the ballot
as follows:
a. IF YOUR CLASS 7: PREFERRED STOCK IS HELD THROUGH A BROKER, BANK,
OR OTHER NOMINEE: To have your vote count you must complete Items 1 and 2
and return this ballot to such broker, bank or nominee. You must return
the ballot to such entity, early enough for your vote to be processed
and forwarded to and received by the voting agent prior to 5:00 p.m.,
Eastern Standard Time on June __, 1997 to (the "Voting Expiration Date").
The broker, bank or other nominee should indicate on the ballot the
value of your account as of the close of business on April __, 1997
(the "Record Date"). If that data has not been provided, please
contact the institution(s) at which your account(s) are held and
request the same.
b. IF YOUR CLASS 7: PREFERRED STOCK IS REGISTERED IN YOUR OWN NAME:
For your vote to be counted, you must verify Item 1, complete Item 2
and return this ballot to ChaseMellon Shareholder Services, the
"Voting Agent," at the address set forth on the enclosed
pre-addressed postage pre-paid business reply envelope. You will find
your holdings, as of the close of business on the Voting Record Date,
indicated above.
If for any reason you did not receive a pre-addressed postage pre-paid
business reply envelope or if the amount of your holdings indicated on
the aforementioned label is unclear, please contact Georgeson & Company
at the toll-free number below.
BALLOTS MUST BE RECEIVED BY 5:00 P.M., EASTERN STANDARD TIME ON ______________,
JUNE ___, 1997 (THE "VOTING EXPIRATION DATE"). IF A BALLOT IS RECEIVED AFTER
THE VOTING DATE, IT WILL NOT BE COUNTED.
2. If you hold claims or equity interests in more than one class under the
Prepackaged Plan (i.e., stock and debentures), you should receive one
ballot, coded by class number and color and one set of solicitation materials
for each such class of claims or equity interests. Please complete and return
each ballot you receive. YOU MUST VOTE ALL OF YOUR CLAIMS OR EQUITY INTERESTS
WITHIN A SINGLE CLASS UNDER THE PREPACKAGED PLAN TO EITHER ACCEPT OR REJECT
THE PREPACKAGED PLAN. ACCORDINGLY, A BALLOT THAT PARTIALLY REJECTS AND
PARTIALLY ACCEPTS THE PREPACKAGED PLAN WILL NOT BE COUNTED.
3. The ballot is not a letter of transmittal and may not be used for any
other purpose other than to vote to accept or reject the Prepackaged Plan.
HOLDERS SHOULD NOT SURRENDER CERTIFICATES REPRESENTING THEIR SECURITIES AT
THIS TIME, AND NEITHER THE COMPANY NOR ITS VOTING AGENT WILL ACCEPT
DELIVERY OF ANY SUCH CERTIFICATES TRANSMITTED TOGETHER WITH A MASTER
BALLOT. Surrender of securities for exchange pursuant to the Prepackaged
Plan may be made only pursuant to a letter of transmittal which will be
furnished to you by the Company (or its agent) after confirmation of
the Prepackaged Plan by the Bankruptcy Court.
4. The ballot is for voting purposes only and does not constitute and shall
not be deemed a proof of claim or interest or an assertion of a claim or
interest.
PLEASE RETURN YOUR BALLOT PROMPTLY
IF YOU HAVE ANY QUESTIONS REGARDING
THIS BALLOT OR THE VOTING PROCEDURES
PLEASE CALL
THE INFORMATION AGENT
GEORGESON & COMPANY
TOLL-FREE AT (800) 223-2084
<PAGE>
IMPORTANT: A BANKRUPTCY CASE HAS NOT BEEN COMMENCED AS OF THE DATE OF THIS
DOCUMENT.
KOLL REAL ESTATE GROUP, INC.
BALLOT
FOR ACCEPTING OR REJECTING
THE PLAN OF REORGANIZATION OF KOLL REAL ESTATE GROUP, INC.
(CLASS 8: CLASS A COMMON STOCK)
THE VOTING EXPIRATION DATE TO ACCEPT OR REJECT THE PLAN IS
5:00 P.M. E.S.T. ON _________, JUNE ___, 1997, UNLESS EXTENDED
This Ballot is submitted to you to solicit your vote to accept or reject
the Prepackaged Plan of Reorganization (the "Prepackaged Plan") of KOLL REAL
ESTATE GROUP, INC. (the "Company"), referred to in the accompanying Proxy
Statement/Prospectus and Disclosure Statement, dated April__, 1997 (the
"Prospectus"). The Prepackaged Plan could be filed in connection with a case
to be commenced in the future by the Company under chapter 11 of the Bankruptcy
Code. At this time, the Company has not commenced a chapter 11 case. If
sufficient votes are received accepting the Prepackaged Plan, the Corporation
may commence a chapter 11 case and seek to have the Prepackaged Plan confirmed
by the Bankruptcy court; however, the Corporation expressly reserves the right,
in its sole and absolute discretion, to not commence such a chapter 11 case,
even if it receives sufficient votes accepting the Prepackaged Plan.
THIS BALLOT IS NOT A LETTER OF TRANSMITTAL AND MAY NOT BE USED FOR ANY
OTHER PURPOSE OTHER THAN TO VOTE TO ACCEPT OR REJECT THE PREPACKAGED PLAN.
HOLDERS SHOULD NOT SURRENDER CERTIFICATES REPRESENTING SECURITIES AT THIS
TIME, AND NEITHER THE CORPORATION NOR THE EXCHANGE AGENT WILL ACCEPT
DELIVERY OF ANY SUCH CERTIFICATES.
PLEASE READ ALL VOTING INFORMATION AND INSTRUCTIONS ON BOTH SIDES OF THIS
BALLOT BEFORE COMPLETING THIS BALLOT.
IF NEITHER THE "ACCEPTS" NOR "REJECTS" BOX IS CHECKED AND/OR THIS BALLOT
IS NOT SIGNED ON THE APPROPRIATE LINES ON THE REVERSE SIDE, THE BALLOT WILL
NOT BE VALID OR COUNTED AS HAVING BEEN CAST. PLEASE COMPLETE ITEMS 2 AND 3 ON
THE REVERSE SIDE HEREOF.
(continued and to be signed on other side)
TRIANGLE FOLD AND DETACH HERE TRIANGLE
<PAGE>
EXHIBIT 99.06D
KOLL REAL ESTATE GROUP, INC.
BALLOT
FOR ACCEPTING OR REJECTING
THE PREPACKAGED PLAN OF REORGANIZATION OF KOLL REAL ESTATE GROUP, INC.
Item 1: The undersigned, a Holder of a Class 8 Claim as defined in the
Prepackaged Plan, is the beneficial owner of the number of shares of Class A
Common Stock of Koll Real Estate Group, Inc. (the "Company") as indicated
above.
Item 2: The undersigned votes all Class 8 claim(s) referenced in Item 1
(check box):
To accept To reject
the Plan the Plan
/ / / /
Item 3: By signing the Ballot, the undersigned certifies that the undersigned
is the beneficial owner of the Class A Common Stock voted on this
Ballot and/or has full power and authority to vote to accept or reject
the Prepackaged Plan. The undersigned also acknowledges receipt of the
Proxy Statement/Prospectus and Disclosure Statement dated April __, 1997
(the "Prospectus") and other applicable Pregackaged Plan Solicitation
Materials as well as all terms and conditions set forth therein.
Dated:___________________________________, 1997
X______________________________________________
X______________________________________________
Signature(s) of Stockholder(s)
Signature(s) of Stockholder(s) -- please sign name exactly as
imprinted (do not print). Please indicate any change of address.
NOTE: Executive, administrators, trustees and others signing in a
representative capacity should indicate the capacity in which they
sign.
If shares are held jointly, EACH should sign.
TRIANGLE FOLD AND DETACH HERE TRIANGLE
VOTING INFORMATION AND INSTRUCTIONS
FOR COMPLETING THE BALLOT
1. For your vote to be counted, you must complete, sign and return the ballot
as follows:
a. IF YOUR CLASS 8: CLASS A COMMON STOCK IS HELD THROUGH A BROKER, BANK,
OR OTHER NOMINEE: To have your vote count you must complete Items 1 and 2
and return this ballot to such broker, bank or nominee. You must return
the ballot to such entity, early enough for your vote to be processed
and forwarded to and received by the voting agent prior to 5:00 p.m.,
Eastern Standard Time on June __, 1997 to (the "Voting Expiration Date").
The broker, bank or other nominee should indicate on the ballot the
value of your account as of the close of business on April __, 1997
(the "Record Date"). If that data has not been provided, please
contact the institution(s) at which your account(s) are held and
request the same.
b. IF YOUR CLASS 8: CLASS A COMMON STOCK IS REGISTERED IN YOUR OWN NAME:
For your vote to be counted, you must verify Item 1, complete Item 2
and return this ballot to ChaseMellon Shareholder Services, the
"Voting Agent," at the address set forth on the enclosed
pre-addressed postage pre-paid business reply envelope. You will find
your holdings, as of the close of business on the Voting Record Date,
indicated above.
If for any reason you did not receive a pre-addressed postage pre-paid
business reply envelope or if the amount of your holdings indicated on
the aforementioned label is unclear, please contact Georgeson & Company
at the toll-free number below.
BALLOTS MUST BE RECEIVED BY 5:00 P.M., EASTERN STANDARD TIME ON ______________,
JUNE ___, 1997 (THE "VOTING EXPIRATION DATE"). IF A BALLOT IS RECEIVED AFTER
THE VOTING DATE, IT WILL NOT BE COUNTED.
2. If you hold claims or equity interests in more than one class under the
Prepackaged Plan (i.e., stock and debentures), you should receive one
ballot, coded by class number and color and one set of solicitation materials
for each such class of claims or equity interests. Please complete and return
each ballot you receive. YOU MUST VOTE ALL OF YOUR CLAIMS OR EQUITY INTERESTS
WITHIN A SINGLE CLASS UNDER THE PREPACKAGED PLAN TO EITHER ACCEPT OR REJECT
THE PREPACKAGED PLAN. ACCORDINGLY, A BALLOT THAT PARTIALLY REJECTS AND
PARTIALLY ACCEPTS THE PREPACKAGED PLAN WILL NOT BE COUNTED.
3. The ballot is not a letter of transmittal and may not be used for any
other purpose other than to vote to accept or reject the Prepackaged Plan.
HOLDERS SHOULD NOT SURRENDER CERTIFICATES REPRESENTING THEIR SECURITIES AT
THIS TIME, AND NEITHER THE COMPANY NOR ITS VOTING AGENT WILL ACCEPT
DELIVERY OF ANY SUCH CERTIFICATES TRANSMITTED TOGETHER WITH A MASTER
BALLOT. Surrender of securities for exchange pursuant to the Prepackaged
Plan may be made only pursuant to a letter of transmittal which will be
furnished to you by the Company (or its agent) after confirmation of
the Prepackaged Plan by the Bankruptcy Court.
4. The ballot is for voting purposes only and does not constitute and shall
not be deemed a proof of claim or interest or an assertion of a claim or
interest.
PLEASE RETURN YOUR BALLOT PROMPTLY
IF YOU HAVE ANY QUESTIONS REGARDING
THIS BALLOT OR THE VOTING PROCEDURES
PLEASE CALL
THE INFORMATION AGENT
GEORGESON & COMPANY
TOLL-FREE AT (800) 223-2084
<PAGE>
IMPORTANT: A BANKRUPTCY CASE HAS NOT BEEN COMMENCED AS OF THE DATE OF THIS
DOCUMENT.
KOLL REAL ESTATE GROUP, INC.
BALLOT
FOR ACCEPTING OR REJECTING
THE PLAN OF REORGANIZATION OF KOLL REAL ESTATE GROUP, INC.
(CLASS 8: CLASS A COMMON STOCK)
THE VOTING EXPIRATION DATE TO ACCEPT OR REJECT THE PLAN IS
5:00 P.M. E.S.T. ON _________, JUNE ___, 1997, UNLESS EXTENDED
This Ballot is submitted to you to solicit your vote to accept or reject
the Prepackaged Plan of Reorganization (the "Prepackaged Plan") of KOLL REAL
ESTATE GROUP, INC. (the "Company"), referred to in the accompanying Proxy
Statement/Prospectus and Disclosure Statement, dated April__, 1997 (the
"Prospectus"). The Prepackaged Plan could be filed in connection with a case
to be commenced in the future by the Company under chapter 11 of the Bankruptcy
Code. At this time, the Company has not commenced a chapter 11 case. If
sufficient votes are received accepting the Prepackaged Plan, the Corporation
may commence a chapter 11 case and seek to have the Prepackaged Plan confirmed
by the Bankruptcy court; however, the Corporation expressly reserves the right,
in its sole and absolute discretion, to not commence such a chapter 11 case,
even if it receives sufficient votes accepting the Prepackaged Plan.
THIS BALLOT IS NOT A LETTER OF TRANSMITTAL AND MAY NOT BE USED FOR ANY
OTHER PURPOSE OTHER THAN TO VOTE TO ACCEPT OR REJECT THE PREPACKAGED PLAN.
HOLDERS SHOULD NOT SURRENDER CERTIFICATES REPRESENTING SECURITIES AT THIS
TIME, AND NEITHER THE CORPORATION NOR THE EXCHANGE AGENT WILL ACCEPT
DELIVERY OF ANY SUCH CERTIFICATES.
PLEASE READ ALL VOTING INFORMATION AND INSTRUCTIONS ON BOTH SIDES OF THIS
BALLOT BEFORE COMPLETING THIS BALLOT.
IF NEITHER THE "ACCEPTS" NOR "REJECTS" BOX IS CHECKED AND/OR THIS BALLOT
IS NOT SIGNED ON THE APPROPRIATE LINES ON THE REVERSE SIDE, THE BALLOT WILL
NOT BE VALID OR COUNTED AS HAVING BEEN CAST. PLEASE COMPLETE ITEMS 1-3 ON THE
REVERSE SIDE HEREOF.
(continued and to be signed on other side)
TRIANGLE FOLD AND DETACH HERE TRIANGLE
<PAGE>
EXHIBIT 99.06E
KOLL REAL ESTATE GROUP, INC.
BALLOT
FOR ACCEPTING OR REJECTING
THE PREPACKAGED PLAN OF REORGANIZATION OF KOLL REAL ESTATE GROUP, INC.
Item 1: The undersigned, a Holder of a Class 5 Claim (General Unsecured Claim
- -- Other than Senior Debentures) as defined in the Prepackaged Plan, is the
beneficial owner of a general unsecured claim against Koll Real Estate Group,
Inc. (the "Company") in the amount indicated above.
Item 2: The undersigned votes all Class 5 claim(s) referenced in Item 1
(check box):
To accept To reject
the Plan the Plan
/ / / /
Item 3: By signing the Ballot, the undersigned certifies that the undersigned
is the beneficial owner of the Class 5 claim(s) voted on this Ballot
and/or has full power and authority to vote to accept or reject the
Prepackaged Plan. The undersigned also acknowledges receipt of the
Proxy Statement/Prospectus and Disclosure Statement dated April __, 1997
(the "Prospectus") and other applicable Pregackaged Plan Solicitation
Materials as well as all terms and conditions set forth therein.
Dated:___________________________________, 1997
X______________________________________________
X______________________________________________
Signature(s) of Claimholder(s)
Signature(s) of Claimholder(s) -- please sign name exactly as
imprinted (do not print). Please indicate any change of address.
NOTE: Executive, administrators, trustees and others signing in a
representative capacity should indicate the capacity in which they
sign.
If shares are held jointly, EACH should sign.
TRIANGLE FOLD AND DETACH HERE TRIANGLE
VOTING INFORMATION AND INSTRUCTIONS
FOR COMPLETING THE BALLOT
1. For your vote to be counted, you must complete, sign and return the ballot
as follows:
a. IF YOUR CLASS 5: GENERAL UNSECURED CLAIM -- OTHER THAN SENIOR DEBENTURES
IS HELD THROUGH A BROKER, BANK, OR OTHER NOMINEE: To have your vote count
you must complete Items 1 and 2 and return this ballot to such broker,
bank or nominee. You must return the ballot to such entity, early enough
for your vote to be processed and forwarded to and received by the voting
agent prior to 5:00 p.m., Eastern Standard Time on June __, 1997 to (the
"Voting Expiration Date").
The broker, bank or other nominee should indicate on the ballot the
value of your account as of the close of business on April __, 1997
(the "Record Date"). If that data has not been provided, please
contact the institution(s) at which your account(s) are held and
request the same.
b. IF YOUR CLASS 5: GENERAL UNSECURED CLAIM -- OTHER THAN SENIOR DEBENTURES
IS HELD IN YOUR OWN NAME: For your vote to be counted, you must verify
Item 1, complete Item 2 and return this ballot to ChaseMellon Shareholder
Services, the "Voting Agent," at the address set forth on the enclosed
pre-addressed postage pre-paid business reply envelope. You will find your
holdings, as of the close of business on the Voting Record Date, indicated
above.
If for any reason you did not receive a pre-addressed postage pre-paid
business reply envelope or if the amount of your holdings indicated on
the aforementioned label is unclear, please contact Georgeson & Company
at the toll-free number below.
BALLOTS MUST BE RECEIVED BY 5:00 P.M., EASTERN STANDARD TIME ON ______________,
JUNE ___, 1997 (THE "VOTING EXPIRATION DATE"). IF A BALLOT IS RECEIVED AFTER
THE VOTING DATE, IT WILL NOT BE COUNTED.
2. If you hold claims or equity interests in more than one class under the
Prepackaged Plan (i.e., stock and debentures), you should receive one
ballot, coded by class number and color and one set of solicitation materials
for each such class of claims or equity interests. Please complete and return
each ballot you receive. YOU MUST VOTE ALL OF YOUR CLAIMS OR EQUITY INTERESTS
WITHIN A SINGLE CLASS UNDER THE PREPACKAGED PLAN TO EITHER ACCEPT OR REJECT
THE PREPACKAGED PLAN. ACCORDINGLY, A BALLOT THAT PARTIALLY REJECTS AND
PARTIALLY ACCEPTS THE PREPACKAGED PLAN WILL NOT BE COUNTED.
3. The ballot is not a letter of transmittal and may not be used for any
other purpose other than to vote to accept or reject the Prepackaged Plan.
HOLDERS SHOULD NOT SURRENDER CERTIFICATES REPRESENTING THEIR SECURITIES AT
THIS TIME, AND NEITHER THE COMPANY NOR ITS VOTING AGENT WILL ACCEPT
DELIVERY OF ANY SUCH CERTIFICATES TRANSMITTED TOGETHER WITH A MASTER
BALLOT. Surrender of securities for exchange pursuant to the Prepackaged
Plan may be made only pursuant to a letter of transmittal which will be
furnished to you by the Company (or its agent) after confirmation of
the Prepackaged Plan by the Bankruptcy Court.
4. The ballot is for voting purposes only and does not constitute and shall
not be deemed a proof of claim or interest or an assertion of a claim or
interest.
PLEASE RETURN YOUR BALLOT PROMPTLY
IF YOU HAVE ANY QUESTIONS REGARDING
THIS BALLOT OR THE VOTING PROCEDURES
PLEASE CALL
THE INFORMATION AGENT
GEORGESON & COMPANY
TOLL-FREE AT (800) 223-2084
<PAGE>
IMPORTANT: A BANKRUPTCY CASE HAS NOT BEEN COMMENCED AS OF THE DATE OF THIS
DOCUMENT.
KOLL REAL ESTATE GROUP, INC.
BALLOT
FOR ACCEPTING OR REJECTING
THE PLAN OF REORGANIZATION OF KOLL REAL ESTATE GROUP, INC.
(CLASS 5: GENERAL UNSECURED CLAIMS -- OTHER THAN SENIOR DEBENTURES)
THE VOTING EXPIRATION DATE TO ACCEPT OR REJECT THE PLAN IS
5:00 P.M. E.S.T. ON _________, JUNE ___, 1997, UNLESS EXTENDED
This Ballot is submitted to you to solicit your vote to accept or reject
the Prepackaged Plan of Reorganization (the "Prepackaged Plan") of KOLL REAL
ESTATE GROUP, INC. (the "Company"), referred to in the accompanying Proxy
Statement/Prospectus and Disclosure Statement, dated April__, 1997 (the
"Prospectus"). The Prepackaged Plan could be filed in connection with a case
to be commenced in the future by the Company under chapter 11 of the Bankruptcy
Code. At this time, the Company has not commenced a chapter 11 case. If
sufficient votes are received accepting the Prepackaged Plan, the Corporation
may commence a chapter 11 case and seek to have the Prepackaged Plan confirmed
by the Bankruptcy court; however, the Corporation expressly reserves the right,
in its sole and absolute discretion, to not commence such a chapter 11 case,
even if it receives sufficient votes accepting the Prepackaged Plan.
THIS BALLOT IS NOT A LETTER OF TRANSMITTAL AND MAY NOT BE USED FOR ANY
OTHER PURPOSE OTHER THAN TO VOTE TO ACCEPT OR REJECT THE PREPACKAGED PLAN.
HOLDERS SHOULD NOT SURRENDER CERTIFICATES REPRESENTING SECURITIES AT THIS
TIME, AND NEITHER THE CORPORATION NOR THE EXCHANGE AGENT WILL ACCEPT
DELIVERY OF ANY SUCH CERTIFICATES.
PLEASE READ ALL VOTING INFORMATION AND INSTRUCTIONS ON BOTH SIDES OF THIS
BALLOT BEFORE COMPLETING THIS BALLOT.
IF NEITHER THE "ACCEPTS" NOR "REJECTS" BOX IS CHECKED AND/OR THIS BALLOT
IS NOT SIGNED ON THE APPROPRIATE LINES ON THE REVERSE SIDE, THE BALLOT WILL
NOT BE VALID OR COUNTED AS HAVING BEEN CAST. PLEASE COMPLETE ITEMS 2 AND 3 ON
THE REVERSE SIDE HEREOF.
(continued and to be signed on other side)
TRIANGLE FOLD AND DETACH HERE TRIANGLE
