SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
Of The Securities Exchange Act of 1934
Date of Report
(Date of earliest event reported): November 17, 1999
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ELECTRONIC RETAILING SYSTEMS INTERNATIONAL, INC.
------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-21456 06-1361276
- ---------------- ------------ -----------------
(State or other (Commission (I.R.S. Employer
jurisdiction of file number) Identification No.)
incorporation or
organization)
488 Main Avenue, Norwalk, Connecticut 06851
- ---------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code: 203-849-2500
------------
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Item 5. Other Events.
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On November 17, 1999, the Registrant commenced a cash
tender offer to purchase all of its outstanding 13-1/4% Senior
Discount Notes due February 1, 2004 ("Notes") for $155 per $1,000
principal amount of Notes at maturity. The offer will expire at
12:00 Midnight, New York City time, on December 15, 1999, unless
extended. At November 17, 1999, after giving effect to open
market purchases of Notes by the Company between October 29, 1999
and November 17, 1999, $102.06 million principal amount at
maturity of Notes were outstanding.
Item 7. Financial Statements and Exhibits.
----------------------------------
Exhibits.
The exhibit filed as part of this Current Report on
Form 8-K is listed in the attached Index to Exhibits.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
ELECTRONIC RETAILING SYSTEMS
INTERNATIONAL, INC.
By s/Jerry McAuliffe
--------------------------------
Jerry McAuliffe
Vice President, Chief Financial
Officer
Dated: November 30, 1999
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INDEX TO EXHIBITS
Exhibit Description
- ------- -----------
99 Registrant's Offer to Purchase for Cash Any
and All of its Outstanding 13-1/4% Senior
Discount Notes dated November 17, 1999.
EXHIBIT 99
ELECTRONIC RETAILING SYSTEMS
INTERNATIONAL, INC.
Offer to Purchase for Cash Any and
All of its Outstanding
13-1/4% Senior Discount Notes due 2004 ("Notes")
(CUSIP No. 285825AC9)
THIS OFFER WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON
WEDNESDAY, DECEMBER 15, 1999, UNLESS EXTENDED (THE "EXPIREATION
DATE"). HOLDERS OF NOTES MUST VALIDLY TENDER THEIR NOTES PRIOR TO
12:00 MIDNIGHT, NEW YORK CITY TIME, ON THE EXPIRATION DATE IN
ORDER TO RECEIVE THE TENDER OFFER CONSIDERATION (AS DEFINED).
TENDERED NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR TO 12:00
MIDNIGHT, NEW YORK CITY TIME, ON THE EXPIRATION DATE.
Electronic Retailing Systems International, Inc., a Delaware
corporation (the "Company" or "ERS"), hereby offers to purchase
for cash, upon the terms and subject to the conditions set forth
in this offer to purchase (as it may be amended from time to time,
the "Offer to Purchase") and the related letter of transmittal
(the "Letter of Transmittal"; the Letter of Transmittal and such
Offer to Purchase are referred to herein collectively as the
"Offer"), any and all of its outstanding 13-1/4% Senior Discount
Notes due 2004 (each, a "Note" and collectively, the "Notes")
issued by the Company at a cash purchase price of $155 per $1,000
principal amount at maturity of Notes (the "Tender Offer
Consideration"). At November 17, 1999, after giving effect to open
market purchases of Notes by the Company between October 29, 1999
and the date of this Offer to Purchase, $102.06 million principal
amount of Notes at maturity were outstanding.
SEE "OFFER-CERTAIN CONSIDERATIONS" AND "CERTAIN FEDERAL
INCOME TAX CONSEQUENCES" FOR DISCUSSIONS OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY INVESTORS IN EVALUATING THE OFFER.
The Company's obligation to accept for purchase and to pay
for Notes validly tendered is subject to certain conditions. See
"Offer-Conditions to the Offer".
Notes purchased pursuant to the Offer will be paid for in
same-day funds delivered to the Depositary (as defined herein) on
the first business day after the date on which the Offer expires,
or as soon as practicable thereafter, assuming that the Offer has
been accepted for payment (the "Settlement Date"). Assuming the
Offer is accepted and not extended, it is expected that the
Settlement Date will be on or about December 16, 1999.
Any questions or requests for assistance may be directed to
the Dealer Manager at the address and telephone number set forth
on the last page of this Offer to Purchase. Requests for
additional copies of this Offer to Purchase, the Letter of
Transmittal, the Notice of Guaranteed Delivery or any other
related documents may be obtained from the Dealer Manager.
Beneficial owners may also contact their broker, dealer,
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commercial bank, trust company or other nominee (a "Custodian")
for assistance concerning this Offer to Purchase.
None of the Company, the Dealer Manager, the Depositary or
the Trustee (each as defined herein) makes any recommendation as
to whether or not Holders (as defined herein) should tender their
Notes pursuant to the Offer.
The Dealer Manager for the Offer is:
Jefferies & Company, Inc.
The date of this Offer to Purchase is November 17, 1999.
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IMPORTANT INFORMATION
Any Holder of Notes ("Holder") desiring to tender Notes
should either (a) in the case of a Holder who holds Notes in book-
entry form, request such Holder's Custodian to effect the tender
of Notes for such Holder pursuant to the procedures for book-entry
delivery set forth herein, (b) tender through The Depository Trust
Company ("DTC") pursuant to DTC's Automated Tender Offer Program
("ATOP"), or (c) in the case of a Holder who holds physical
certificates evidencing such Notes, complete and sign the Letter
of Transmittal included herewith or a facsimile copy in accordance
with the instructions therein, mail or deliver it and any other
required documents to United States Trust Company of New York (the
"Depositary") and deliver the certificates for the tendered Notes
to the Depositary. Although tenders of Notes may be effected
through book-entry transfer at DTC, a properly completed and duly
executed Letter of Transmittal (or a manually signed facsimile
thereof) with any required signature guarantees or any Agent's
Message (as defined below) in connection with a book-entry
transfer, must, in any case, be transmitted to and received by the
Depositary at the address set forth on the last page of this Offer
to Purchase prior to 12:00 Midnight, New York City time, on the
Expiration Date or the Holder must comply with the guaranteed
delivery procedures described herein. See "Offer-Procedures for
Tendering Notes." A beneficial owner who has Notes registered in
the name of a Custodian must contact that Custodian if such
beneficial owner desires to tender those Notes.
Any questions or requests for assistance or for additional
copies of this Offer to Purchase, the Letter of Transmittal or
related documents may be directed to Jefferies & Company, Inc.
(the "Dealer Manager") at the telephone number set forth on the
last page of this Offer to Purchase or to each Holder's Custodian
for assistance concerning the Offer.
THIS OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH A HOLDER SHOULD READ BEFORE MAKING A
DECISION WITH RESPECT TO THE OFFER.
-------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED HEREIN OR IN
THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, ANY OF ITS AGENTS OR THE DEALER
MANAGER.
This Offer to Purchase and related documents do not
constitute an offer to buy or the solicitation of an offer to sell
Notes in any circumstances in which such offer is unlawful. In
those jurisdictions where the securities, blue sky or other laws
require the Offer to be made by a licensed broker or dealer, the
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Offer shall be deemed to be made on behalf of the Company by the
Dealer Manager or one or more registered brokers or dealers
licensed under the laws of such jurisdiction. Neither the delivery
of this Offer to Purchase and related documents nor any purchase
of Notes shall, under any circumstances, create any implication
that the information contained herein or therein is current as of
any time subsequent to the date of such information or that there
has been no change in the information set forth herein or therein
or in the affairs of the Company or any of its subsidiaries or
affiliates since the date hereof.
AVAILABLE INFORMATION
Pursuant to the terms of the Indenture (as defined herein)
and the informational requirements of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), the Company files
reports and other information with the Securities and Exchange
Commission (the "Commission"). Such reports and other information
may be inspected and copied at the Public Reference Section of the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the
Commission located at Seven World Trade Center, 13th Floor, New
York, New York 10048 and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such material may
be obtained from the Public Reference Section of the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549 at prescribed rates. The Commission maintains a Web
site that contains reports, proxy and information statements and
other materials that are filed through the Commission's Electronic
Data Gathering, Analysis, and Retrieval system. This Web site can
be accessed at http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the
Commission under the Exchange Act are incorporated herein by
reference:
(1) The Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1998, as amended by Amendment
No. 1 thereto;
(2) The Company's Quarterly Reports on Form 10-Q for the
quarters ended March 31, 1999, June 30, 1999 and
September 30, 1999; and
(3) All documents subsequently filed by the Company with the
Commission pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act and prior to the termination of the
Offer shall be deemed to be incorporated by reference
herein.
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Any statement contained in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be
modified or superseded for purposes of the Offer to Purchase to
the extent that a statement contained herein or in any
subsequently filed document or report that also is or is deemed to
be incorporated by reference herein, modifies or supersedes such
statement. Any such statement so modified or superseded shall not
be deemed, except as so modified or superseded, to constitute a
part of the Offer to Purchase.
The Company will make available to any Holder of Notes copies
of the Indenture, the information incorporated herein by reference
and the reports or other information filed with the Commission
under the Exchange Act. Any such request should be directed to
Electronic Retailing Systems International, Inc., Attention: Vice
President, Chief Financial Officer, 488 Main Avenue, Norwalk, CT
06851, telephone number (203) 849-2640.
FORWARD-LOOKING STATEMENTS
The Company cautions readers that, in addition to the
historical information included or incorporated herein by
reference, this Offer to Purchase contains certain "forward-
looking statements" that are based on management's beliefs as well
as on assumptions made by and information currently available to
management. When used herein, the words "expect," "anticipate,"
"intend," "plan," "believe," "seek," "estimate," and similar
expressions are intended to identify such forward-looking
statements. However, this Offer to Purchase also contains or
incorporates herein by reference other forward-looking statements.
Such forward-looking statements involve known and unknown risks,
including, but not limited to, the timely availability and
acceptance of new products, the rate of development of the
emerging market for electronic shelf label systems, the impact of
competitive products and pricing, the management of growth, and
other factors. Although the Company believes that its expectations
with respect to the forward-looking statements are based upon
reasonable assumptions within the bounds of its knowledge of its
business and operations, there can be no assurance that actual
results, performance or achievements of the Company will not
differ materially from any future results, performance or
achievements expressed by or implied from such forward-looking
statements. Readers are cautioned not to put undue reliance on
forward-looking statements.
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TABLE OF CONTENTS
Page
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IMPORTANT INFORMATION 2
AVAILABLE INFORMATION 3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE 3
FORWARD-LOOKING STATEMENTS 4
SUMMARY 6
THE COMPANY 7
UNAUDITED SUMMARY HISTORICAL AND PRO FORMA
STATEMENT OF OPERATIONS AND BALANCE SHEET
INFORMATION 8
CAPITALIZATION 11
BACKGROUND AND PURPOSE OF THE OFFER 11
Background 11
Purpose 12
OFFER 13
General 13
Certain Considerations 13
Procedures for Tendering Notes 16
Withdrawal of Tenders 19
Conditions to the Offer 20
Acceptance for Payment and Payment 21
Expiration, Extension, Amendment and Termination 23
CERTAIN FEDERAL INCOME TAX CONSEQUENCES 24
DEALER MANAGER AND DEPOSITARY 25
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SUMMARY
The following summary is provided solely for the convenience
of the Holders of the Notes. This summary is not intended to be
complete and is qualified in its entirety by reference to the full
text and more specific details contained or incorporated in this
Offer to Purchase and any amendments or supplements hereto.
Holders of the Notes are urged to read this Offer to Purchase in
its entirety. Each of the capitalized terms used in this Summary
and not defined herein has the meaning set forth elsewhere in this
Offer to Purchase.
The Company: Electronic Retailing Systems International,
Inc.
The Notes: 13-1/4% Senior Discount Notes due 2004 of the
Company issued pursuant to that certain
Indenture dated as of January 24, 1997 (the
"Indenture") between the Company and United
States Trust Company of New York, as trustee
(the "Trustee"). At November 17, 1999,
$102.06 million principal amount at maturity
of Notes were outstanding. At November 1,
1999, the accreted principal amount per
$1,000 principal amount at maturity of Notes
was $969.
The Offer: To purchase any and all of Company's
outstanding Notes at a cash purchase price of
$155 per $1,000 principal amount at maturity
of Notes.
Expiration: The expiration of the Offer shall be AT 12:00
Midnight, NEW YORK CITY TIME, ON DECEMBER 15,
1999, UNLESS EXTENDED BY THE COMPANY. The
term "Expiration Date" means such date, or if
the Offer is extended, the latest date to
which the Offer is extended.
Tender Offer
Consideration: $155 per $1,000 principal amount at maturity
of Notes.
Settlement Date: The Settlement Date shall be the business day
following the acceptance by the Company for
payment of tendered Notes, or as soon as
practicable thereafter.
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How to Tender
Notes: See "Procedure for Tendering Notes." For
further information, call the Dealer Manager
or the Depositary or consult your broker,
dealer, commercial bank or trust company for
assistance.
Withdrawal Rights: Tenders of Notes may be withdrawn at any time
on or prior to 12:00 Midnight, New York City
time, on the Expiration Date.
Purpose of the
Offer: The purpose of the Offer is to acquire any
and all outstanding Notes to enable the
Company to reduce its debt and increase its
strategic and financial options and assist in
addressing competitive pressures.
Effect on
Unpurchased Notes: If the Offer is consummated, the aggregate
principal amount of Notes that remain
outstanding may be significantly reduced,
which may adversely effect the liquidity of
and consequently the market price for Notes,
if any, that remain outstanding after the
consummation of the Offer. See "Offer-Certain
Considerations."
Brokerage
Commissions
and Fees: No brokerage fees, commissions or fees are
payable by tendering Holders of the Notes to
the Dealer Manager, the Company or the
Depositary.
Further
Information: Additional copies of this Offer to Purchase
and the Letter of Transmittal may be obtained
by contacting the Dealer Manager or the
Depositary.
THE COMPANY
Electronic Retailing Systems International, Inc. (the
"Company" or "ERS") develops and provides electronic shelf label
("ESL") systems designed to allow supermarket chains and other
retailers to increase productivity, reduce labor costs and improve
management information systems. The ERS ShelfNet(R) system (the
"ERS ShelfNet System") has been designed as a productivity
enhancing center store automation system, which replaces paper
price tags on retail shelves with electronic liquid crystal
display units and provides a suite of applications to enhance a
retailer's pricing, inventory, shelf management, merchandising and
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promotional activities. The ERS ShelfNet System is comprised of
proprietary hardware and software that electronically link a
store's shelves to its point-of-sale systems and central computer.
The ERS ShelfNet System functions as a local area network,
utilizing open systems networking architecture driven by the
Company's software and communications hardware, which are designed
to interface with other store and vendor applications. Each ESL is
a miniature data transceiver that is capable of storing, receiving
and returning alphanumeric messages. An ERS store-based local area
network has up to 20,000 individual ESLs connected to a central
server. The ERS ShelfNet System is designed to allow retailers to:
. Implement price changes almost instantaneously from the
store's central computer or directly from corporate or
regional headquarters;
. Ensure pricing integrity by accurately displaying and
monitoring product prices;
. Streamline stock monitoring activities to reduce lost
sales resulting from the failure to properly stock
items;
. Increase the speed and accuracy of placing product
displays and promotional material by reducing and
simplifying the tasks required of store employees; and
. Audit inventory more efficiently and improve
computerized inventory ordering systems.
ERS believes these features enable retailers to reduce labor
costs, increase productivity and pricing accuracy, and improve
inventory management, thereby raising such retailers' gross
margins and lowering their operating costs in the highly
competitive U.S. retailing market.
UNAUDITED SUMMARY HISTORICAL AND PRO FORMA STATEMENT
OF OPERATIONS AND BALANCE SHEET INFORMATION
The following data for the fiscal years ended December 31,
1997 and December 31, 1998 and at such dates has been derived from
audited financial statements including those incorporated in this
Offer to Purchase by reference on Form 10-K for the year ended
December 31, 1998. Such data at or for the nine months ended
September 30, 1998 and September 30, 1999 are derived from
unaudited financial statements. In management's opinion, the
Company's unaudited financial statements at or for the nine months
ended September 30, 1998 and September 30, 1999 include all
adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the results of operations and
financial position for the unaudited interim periods. The results
of operations for the nine months ended September 30, 1998 and
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September 30, 1999 are not necessarily indicative of the results
that may be expected for the entire year ended December 31, 1999
or any other interim period.
The unaudited pro forma balance sheet information at December
31, 1998 and September 30, 1999 is presented as if the Company had
completed each of the following transactions (collectively the
"Transactions") on December 31, 1998 and September 30, 1999
respectively: the Offer, assuming all Notes were repurchased, and
repurchases on the open market of Notes between October 29, 1999
and the date of the Offer having an aggregate principal amount at
maturity of $45.25 million for $7.01 million.
The unaudited pro forma statement of operations information
for the fiscal year ended December 31, 1998 and nine months ended
September 30, 1999 are presented (i) on an actual basis, and (ii)
as if the Company had completed the Transactions on January 1,
1998 and January 1, 1999, respectively.
The pro forma adjustments are based upon available
information and upon certain assumptions that the Company believes
are reasonable. In the opinion of management, all adjustments
necessary to fairly present the pro forma information have been
made. The unaudited pro forma financial statement information is
provided for informational purposes only and does not purport to
be indicative of the results that would have been reported had
such events actually occurred on the dates specified. The Company
cannot predict whether the consummation of the Offer will conform
to the assumptions used in preparation of the unaudited pro forma
statement of operations and balance sheet information.
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<TABLE>
ELECTRONIC RETAILING SYSTEMS INTERNATIONAL, INC.
UNAUDITED SUMMARY HISTORICAL AND PRO FORMA STATEMENT OF
OPERATIONS AND BALANCE SHEET INFORMATION
<CAPTION>
TWELVE MONTHS ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------- -------------------------------
1997 1998 1998 1998 1999 1999
PRO FORMA PRO FORMA
---- ---- --------- ---- ---- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA
Revenues $ 1,972 $ 3,764 $ 3,764 $ 2,684 $ 2,946 $ 2,946
------- ------- ------- -------- ------- --------
Cost of
goods sold 3,699 8,095 8,095 3,438 3,915 3,915
Gross loss (1,727) (4,331) (4,331) (754) (969) (969)
Operating
expenses 16,104 16,974 16,974 12,245 12,560 12,560
Loss from
operations (17,831) (21,305) (21,305) (12,999) (13,529) (13,529)
Interest
income 4,982 3,982 2,642 (a) 3,144 2,087 1,173 (d)
Interest
expense (14,024) (16,886) (375)(b) (12,486) (14,121) (228)(e)
Loss on
disposals - (104) (104) - (13) (13)
Loss before
extra-
ordinary
gain (26,873) (34,313) (19,142) (22,341) (25,576) (12,597)
Extra-
ordinary
gain on
early
retirement
of debt(c) - - 78,438 (c) - - 94,949 (f)
Net (loss)
income (26,873) (34,313) 59,296 (22,341) (25,576) 82,352
Basic earnings
(loss) per
common
share $ (1.27) $ (1.62) $ 2.79 $ (1.05) $ (1.20) $ 3.87
Weighted
average
common
shares
out-
standing $21,096 $21,233 $21,233 $21,227 $21,258 $21,258
</TABLE>
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<TABLE>
ELECTRONIC RETAILING SYSTEMS INTERNATIONAL, INC.
UNAUDITED SUMMARY HISTORICAL AND PRO FORMA
BALANCE SHEET INFORMATION
<CAPTION
DECEMBER 31, SEPTEMBER 30,
---------------------- ---------------------
1997 1998 1998 1998 1999 1999
BALANCE SHEET DATA PRO FORMA PRO FORMA
---- ---- --------- ---- ---- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Cash and cash
equivalents 82,400 63,877 39,244(g) 65,715 48,484 23,851(k)
Total assets 100,208 81,626 52,518(h) 88,695 64,344 35,716(l)
Total current
liabilities 2,482 7,211 7,211 6,475 2,077 2,077
Long-term debt 113,102 124,057 -(i) 119,898 137,470 -(m)
Accumulated deficit (72,015)(106,328)(11,379)(j) (94,356)(131,905)(23,063)(n)
Total stockholders'
equity/(deficit) (20,476) (54,742) 40,207 (42,778) (80,303) 28,539
</TABLE>
See Notes to Unaudited Summary Pro Forma Statement of Operations
and Pro Forma Balance Sheet Information.
NOTES TO UNAUDITED SUMMARY PRO FORMA STATEMENT OF OPERATIONS
AND PRO FORMA BALANCE SHEET INFORMATION
a) Interest income reflects the impact of the net decrease in
investable cash and cash equivalents on interest income earned
as a result of the Transactions, as if such Transactions had
occurred on January 1, 1998. For the twelve months ended
December 31, 1998, cash and cash equivalents decreased by a
total of $24.6 million at an average annual return of 5.44%.
This net decrease resulted from the use of $24.6 million to
purchase $108.1 million in aggregate accreted principal amount
of Notes at January 1, 1998, which includes transaction costs
of $1.8 million.
b) Interest expense reflects the impact of the decrease in
interest expense on the Notes due to the repurchase of $108.1
million aggregate accreted principal amount of Notes at
January 1, 1998, in the amounts of $16.5 million for the twelve
months ended December 31, 1998 which includes amortization
expense for the write-off of unamortized financing fees
relating to the repurchased Notes of $0.6 million.
c) Statement of operations data for the twelve months ended
December 31, 1998 reflects an extraordinary gain of $78.4
million from the repurchase of $108.1 million aggregate
accreted principal amount of Notes at January 1, 1998 for $22.8
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million cash, the incurrence of $1.8 million in transaction
costs and a charge for the write-off of unamortized financing
fees of $5.0 million relating to the repurchased Notes.
d) Interest income reflects the impact of the net decrease in
investable cash and cash equivalents on interest income earned
as a result of the Transactions, as if such Transactions had
occurred on January 1, 1999. For the nine months ended
September 30, 1999, cash and cash equivalents and short-term
investments decreased by a total of $24.6 million at an average
annual return of 4.95%. This net decrease resulted from the use
of $24.6 million to purchase $124.1 million in aggregate
accreted principal amount of Notes at January 1, 1999, which
includes transaction costs of $1.8 million.
e) Interest expense reflects the impact of the decrease in
interest expense on the Notes due to the repurchase of $124.1
million aggregate accreted principal amount of Notes at
January 1, 1999, in the amounts of $13.9 million for the nine
months ended September 30, 1999 which includes amortization
expense for the write-off of unamortized financing fees
relating to the repurchased Notes of $0.5 million.
f) Statement of operations data for the nine months ended
September 30, 1999 reflects an extraordinary gain of $94.9
million from the repurchase of $124.1 million aggregate
accreted principal amount of Notes at January 1, 1999 for $22.8
million cash, the incurrence of $1.8 million in transaction
costs and a charge for the write-off of unamortized financing
fees of $4.5 million relating to the repurchased Notes.
g) Cash and cash equivalents reflects cash repurchases of Notes
for an aggregate of $22.8 million at December 31, 1998 and
transaction costs of $1.8 million.
h) Total assets reflect the cash reductions described in (g), in
addition to $4.5 million of written-off deferred financing fees
relating to the repurchase of $124.1 million aggregate accreted
principal amount of Notes at December 31, 1998.
i) Reflects the repurchase of an aggregate of $124.1 million
aggregate accreted principal amount of Notes at December 31,
1998.
j) Reflects an extraordinary gain of $94.9 million resulting from
the repurchase of $124.1 million aggregate accreted principal
amount of Notes at December 31, 1998 for $22.8 million in cash,
the incurrence of $1.8 million in transaction costs and a
charge for the write-off of unamortized financing fees of $4.5
million relating to the repurchased Notes.
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k) Cash and cash equivalents reflects cash repurchases of Notes
for an aggregate of $22.8 million at September 30, 1999 and
transaction costs of $1.8 million.
l) Total assets reflect the cash reductions described in (k), in
addition to $4.0 million of written-off deferred financing fees
relating to the repurchase of $137.5 million aggregate accreted
principal amount of Notes at September 30, 1999.
m) Reflects the repurchase of an aggregate of $137.5 million
aggregate accreted principal amount of Notes at September 30,
1999.
n) Reflects an extraordinary gain of $108.8 million resulting from
the repurchase of $137.5 million aggregate accreted principal
amount of Notes at September 30, 1999 for $22.8 million in
cash, the incurrence of $1.8 million in transaction costs and
a charge for the write-off of unamortized financing fees of
$4.0 million relating to the repurchased Notes.
CAPITALIZATION
The following table sets forth the capitalization of the
Company as of September 30, 1999, and as adjusted to give effect to
the Transactions as if each of the Transactions had occurred on
September 30, 1999.
<TABLE>
<CAPTION>
September 30, 1999
--------------------
As
Actual Adjusted
------ --------
(In Thousands)
<S> <C> <C>
Long-term debt $137,470 $ -
Stockholders' equity:
Common Stock, par value $0.01, 35,000,000
shares authorized; 21,282,637 shares
issued and outstanding 212 212
Additional paid-in capital 51,390 51,390
Accumulated deficit (131,905) (23,063)
Total stockholders' equity/(deficit) (80,303) 28,539(a)
Total capitalization 57,167 28,539
(a) Reflects an extraordinary gain of $108.8 million resulting from the
repurchase of $137.5 million aggregate accreted principal amount of Notes at
September 30, 1999 for $22.8 million in cash, the incurrence of $1.8 million
in transaction costs and a charge for the write-off of unamortized
financing fees of $4.0 million relating to the repurchased Notes
</TABLE>
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BACKGROUND AND PURPOSE OF THE OFFER
Background
Since inception in 1990, the Company has been engaged primarily
in the development, design, market testing and, more recently, sale
of the ERS ShelfNet System. The Company has sustained net losses
and negative cash flows from operations since its inception and
management expects these conditions to continue during the year
ending December 31, 1999. Management believes that existing
resources will enable the Company to fund operations through the
year ending December 31, 2000; thereafter, the Company may need to
raise additional long-term financing to support operations and
service debt.
In order to pursue its strategy of greater market penetration
while its operations grow, the Company has incurred indebtedness
that is substantial in relation to its stockholders' deficit. As of
September 30, 1999, the Company had recorded total outstanding
indebtedness, consisting of the Notes, of approximately
$137.5 million and a total stockholders' deficit of $80.3 million.
As a result of its high degree of leverage: (i) a substantial
portion of the Company's cash flow from operations, if any, after
February 1, 2000, will be required to be dedicated to the Company's
interest expense obligations and may not be available to the
Company for its operations, working capital, capital expenditures
or other purposes, (ii) the Company's ability to obtain financing
that may be needed may be limited, (iii) the Company's flexibility
to adjust to changing market conditions and ability to withstand
competitive pressures as compared to less highly-leveraged
competitors could be limited (including by reason of the covenants
contained in the Company's debt instruments), and (iv) the Company
may be more vulnerable to downturns in general economic conditions
or in its business or be unable to undertake capital expenditures
that are important for its growth strategy, any of which could have
a material adverse effect on the Company and its ability to make
payments of principal of, and interest on, its indebtedness.
Commencing August 1, 2000, cash interest on the Notes will be
payable semi-annually at the rate of 13-1/4% per annum. The full
accreted principal amount at maturity of the Senior Discount Notes
will become due on February 1, 2004. The Company's ability to meet
its continuing debt service and other obligations will depend
largely on the extent to which the Company can implement
successfully its business strategy of achieving large-scale
commercialization of the ERS ShelfNet System, and there can be no
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assurance that the Company will be able to implement fully its
strategy, that the anticipated results of its strategy will be
realized, or that the Company will be able to generate sufficient
cash flow or otherwise obtain funds in the future to cover interest
and principal payments associated with the Notes and any other debt
of the Company.
On October 29, 1999 and on November 8, 1999, the Company
repurchased $31.25 million aggregate principal amount at maturity
and $14 million aggregate principal amount at maturity,
respectively, of Notes. These repurchases occurred in open market
transactions with persons who were not affiliates of the Company
for purchase prices of $4.84 million and $2.17 million,
respectively. These repurchases of Notes were made at a purchase
price of $155 per $1,000 principal amount at maturity of Notes.
At November 1, 1999, the accreted principal amount per $1,000
principal amount at maturity of Notes was $969.
Purpose
The purpose of the Offer is to enable the Company to eliminate
the amount of debt that becomes due on February 1, 2004 from the
$102.06 million principal amount at maturity currently outstanding,
and to reduce the Company's interest expense therefrom otherwise
commencing in August 2000. The Company believes that the
consummation of the Offer on these terms will provide significant
benefits to the Company by increasing its strategic and financial
options, and assist the Company in addressing competitive
pressures.
If all outstanding Notes are purchased for $155 per $1,000
principal amount at maturity, the aggregate Tender Offer
consideration will be $15.82 million. The Company expects to pay
the Tender Offer Consideration out of cash on hand and
cash-equivalents of the Company.
The Offer also gives Holders who are considering the sale of
all or some of their Notes the opportunity to sell their Notes
without the usual transaction costs associated with market sales.
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Under the terms of the Offer, Notes acquired by the Company
will be purchased by the Company at a substantial discount to their
stated principal amount. Accordingly, if the Company acquires all
of the Notes pursuant to the Offer, the Company will recognize an
extraordinary gain of approximately $116 million for financial
accounting purposes as a result of the Offer and its open market
purchases of Notes during the fourth quarter 1999, after giving
effect to unamortized debt issuance costs and transaction expenses.
The Company believes that any resulting cancellation of
indebtedness income for federal income tax purposes will be offset
by accumulated net operating loss carryforwards. Accordingly, the
Company does not expect to incur any current federal income tax
liability, with the possible exception of alternative minimum tax,
with respect to such income. Transaction costs with respect to the
Offer are expected to be approximately $1.8 million, and the
Company expects to use cash on hand or cash-equivalents to purchase
the Notes in the Offer and to pay such expenses. Any Notes
purchased pursuant to the Offer will be retired by the Company.
OFFER
General
The Company hereby offers to purchase for cash, upon the terms
and subject to the conditions set forth in this Offer to Purchase
and the Letter of Transmittal, any and all of its outstanding Notes
at a purchase price of $155 per $1,000 principal amount at maturity
of Notes. Payments for Notes validly tendered (and not withdrawn)
and accepted for payment will be made on the Settlement Date.
The Offer will expire at 12:00 Midnight, New York City time,
on December 15, 1999, unless extended ("Expiration Time"). See-
"Expiration, Extension, Amendment and Termination." Holders who
desire to tender Notes pursuant to the Offer and receive $155 per
$1,000 principal amount at maturity of Notes must tender such Notes
prior to the Expiration Time.
Notes purchased pursuant to the Offer will be paid for in same-
day funds on the Settlement Date for the Offer, which will be one
business day after the date on which the Offer expires, or as soon
as practicable thereafter. See "-Acceptance for Payment and
Payment."
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Certain Considerations
In deciding whether to participate in the Offer, each Holder
should consider carefully, in addition to the other information
contained or incorporated by reference in this Offer to Purchase,
the following:
Limited Trading Market. To the extent that Notes are traded,
prices for the Notes may fluctuate greatly depending on the trading
volume and other factors. In addition, quotations for securities
that are not widely traded, such as the Notes, may differ from
actual trading prices and should be viewed as approximations. To
the extent that Notes are purchased pursuant to the Offer, the
trading markets for the Notes that remain outstanding will become
more limited. A debt security with a smaller outstanding principal
amount available for trading (a smaller "float") may command a
lower price than would a comparable debt security with a greater
float. Therefore, the market price for Notes not purchased may be
affected adversely to the extent the amount of Notes purchased
pursuant to the Offer reduces the float of the Notes. The reduced
float may also tend to make the trading price of the Notes more
volatile. The extent of the public market for the Notes following
consummation of the Offer would depend upon the number of Holders
that remain at such time, the interest in maintaining markets in
the Notes on the part of securities firms and other factors. There
can be no assurance that any trading market will exist for the
Notes following the Offer.
Other Purchases of the Notes. Whether or not the Offer is
consummated, the Company or its affiliates may from time to time
acquire Notes otherwise than pursuant to the Offer, through open
market purchases, privately negotiated transactions, tender offers,
exchange offers or otherwise (or may defease the Notes), upon such
terms and at such prices as they may determine which may be more or
less than the prices to be paid pursuant to the Offer, and could be
for cash or other consideration.
Certain Bankruptcy Considerations. Any payments made to Holders
in consideration for their Notes may be subject to challenge as
avoidable preferences under Section 547 of the U.S. Bankruptcy Code
(the "Bankruptcy Code") if such payments: (a) are made on or
within 90 days before the date the filing of a bankruptcy petition
by or against the Company (or within one year in the case of
Holders who are determined to be insiders of the Company); (b) are
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made when the Company is insolvent; and (c) enable the Holders to
receive more than they otherwise might receive in a liquidation if
the Company is under Chapter 7 of the Bankruptcy Code. If such
payments were deemed to be avoidable preferences, the Company's
bankruptcy trustee (or the Company as a "debtor in possession")
could recover the full amount of payments, and the Holders would be
entitled to assert prepetition unsecured claims in respect of the
Notes against the Company in its bankruptcy case. For these
purposes, "insolvency" generally means a financial condition such
that the sum of the Company's debts is greater than all of the
Company's property at a fair valuation. At September 30, 1999, the
Company had a stockholders' deficiency, calculated in accordance
with generally accepted accounting principles (which may not
reflect market value or realizable value), of $80.3 million, and
has not commissioned any recent valuation of its property. In any
event, under Section 547 of the Bankruptcy Code, there would be a
rebuttable presumption that the Company would be insolvent for the
90 days immediately preceding the date of the filing of the
Company's bankruptcy case.
History of Losses; Repayment of Notes that Remain Outstanding
After the Offer is Uncertain. The Company has sustained net losses
and negative cash flows from operations to date. Through September
30, 1999, the Company has generated cumulative revenues of
$21.2 million, and has incurred a cumulative net loss of
approximately $152.5 million. On a pro forma basis at September 30,
1999, assuming the Company had completed the repurchase of all
Notes pursuant to the Offer and repurchases on the open market of
Notes between October 29, 1999 and the date of the Offer having an
aggregate principal amount at maturity of $147.31 million for
$24.6 million, the Company would have had $23.9 million cash on
hand and cash-equivalents. See "Unaudited Summary Historical and
Pro Forma Statement of Operations and Balance Sheet Information."
The Company's ability to meet its continuing debt service and other
obligations will depend, among other factors, on the acceptance of
the Company's system in its intended market and the Company's
success in implementing its business strategy and achieving large
scale commercialization of the ERS ShelfNet System. Accordingly,
there can be no assurance that the Company will achieve
profitability and have sufficient cash on hand or other sources of
funding at a level sufficient to pay interest on the Notes
outstanding after the Offer prior to maturity, or principal and
accrued interest on such Notes at maturity. In the event the
Company is unable to meet its obligations with respect to its
existing indebtedness, it may be required to reduce or delay
capital expenditures, refinance or restructure all or a portion of
its indebtedness, sell material assets or operations or seek to
raise additional debt or equity capital. There can be no assurance
that the Company will be able to effect any such refinancing or
restructuring or sell assets or obtain any such additional capital
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on satisfactory terms or at all, or that the Company's cash flow
and capital resources will be sufficient for payment of interest on
and principal of its indebtedness in the future.
Risk of Regulation under the Investment Company Act of 1940.
The Investment Company Act of 1940, as amended (the "1940 Act"),
requires the registration of, and imposes various substantive
restrictions on, certain companies ("investment companies") that
are, or hold themselves out as being engaged primarily, or propose
to engage primarily, in the business of investing, reinvesting or
trading in securities, or that fail certain statistical tests
regarding composition of assets and sources of income and are not
primarily engaged in businesses other than investing, reinvesting,
owning, holding or trading securities.
Because of the composition of the Company's assets, there is
a risk that the Company could be characterized as an investment
company under the 1940 Act. If the Commission or its staff were to
take the position, or if it were otherwise asserted, that the
Company is an investment company under the 1940 Act, the Company
could be required either to (i) liquidate its financial assets and
change the manner in which it conducts its operations to avoid
being required to register as an investment company or (ii)
register as an investment company under the 1940 Act. If the
Company were required to register as an investment company, it
would become subject to substantial regulation with respect to its
capital structure, management, operations, transactions with
affiliated persons (as defined in the 1940 Act) and other matters.
Application of the 1940 Act to the Company would have a material
adverse effect on the Company. If the Company were found to be an
investment company but was not registered under the 1940 Act, the
Company would be prohibited from offering for sale, selling,
purchasing, redeeming, retiring or otherwise acquiring or
attempting to acquire any security or any interest in any security
or engaging in any business in interstate commerce. Any contract
made in violation of these restrictions, or whose performance
involves such a violation, would be unenforceable by either party
unless a court finds that under the circumstances enforcement would
produce a more equitable result than non-enforcement and would not
be inconsistent with the purposes of the 1940 Act.
The Company does not believe that it is an investment company
under the 1940 Act. In the event it is determined that the Company
is an investment company under the 1940 Act, the Company would take
such action as may be prudent to seek to avoid becoming subject to
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regulation under the 1940 Act. However, there is no assurance that
under such circumstances such regulation could be avoided.
Procedures for Tendering Notes
Any beneficial owner whose Notes are registered in the name of
a Custodian and who wishes to tender Notes should contact such
Custodian promptly and instruct such Custodian to tender Notes on
such beneficial owner's behalf. Tenders of Notes pursuant to the
Offer will be accepted only in principal amounts at maturity of
$1,000 or integral multiples thereof.
Book-Entry Delivery of the Notes. Within two business days
after the date of this Offer to Purchase, the Depositary will
establish an account with respect to the Notes at DTC for purposes
of the Offer. Any financial institution that is a participant in
the DTC system and whose name appears on a security position
listing as the owner of the Notes may make book-entry delivery of
Notes by causing DTC to transfer such Notes into the Depositary's
account in accordance with DTC's procedure for such transfer.
Although delivery of Notes may be effected through book-entry at
DTC, the Letter of Transmittal (or facsimile thereof), with any
required signature guarantees, or (in the case of a book-entry
transfer) an Agent's Message (as defined below) in lieu of the
Letter of Transmittal pursuant to ATOP procedures for transfer, and
any other required documents, must be transmitted to and received
by the Depositary prior to the Expiration Time at one of its
addresses set forth on the last page of this Offer to Purchase.
Delivery of such documents to DTC does not constitute delivery to
the Depositary. As used herein, the term "Agent's Message" means,
with respect to any tendered Notes, a message transmitted by DTC to
and received by the Depositary and forming a part of a book-entry
confirmation, stating that DTC has received an express
acknowledgment from the tendering participant to the effect that,
with respect to such Notes, such participant has received and
agrees to be bound by the Letter of Transmittal and that the
Company may enforce the Letter of Transmittal against such
participant.
Guaranteed Delivery. If a Holder desires to tender Notes
pursuant to the Offer and such Holder's certificates are not lost
but not immediately available or time will not permit all required
documents to reach the Depositary prior to 12:00 Midnight, New York
City time, on the Expiration Date, or such Holder cannot complete
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the procedures for book-entry transfer on a timely basis, such
Notes may nevertheless be tendered provided that all of the
following conditions are satisfied:
(a) The tender is made by or through an Eligible Institution
(as defined below);
(b) Prior to 12:00 Midnight, New York City time, on the
Expiration Date, the Depositary receives from such Eligible
Institution at one of the addresses for the Depositary set forth on
the last page of this Offer to Purchase, a properly completed and
duly executed Notice of Guaranteed Delivery (by mail, hand delivery
or facsimile). Such Notice of Guaranteed Delivery shall (i) be
substantially in the form made available by the Company, (ii) set
forth the name and address of the Holder, (iii) describe the Notes
and the principal amount at maturity of the Notes tendered, (iv)
state that the tender is being made thereby and (v) guarantee that,
within three New York Stock Exchange trading days after the date of
execution of such Notice of Guaranteed Delivery, a properly
completed and duly executed Letter of Transmittal (or a manually
signed facsimile thereof) or an Agent's Message together with the
certificates representing such Notes (or appropriate confirmation
of book-entry transfer) and any other documents required by the
Letter of Transmittal and the instructions thereto will be
deposited by the Eligible Institution with the Depositary; and
(c) The certificates for the tendered Notes in proper form for
transfer (or confirmation of book-entry transfer into the
Depositary's account at DTC), together with a properly completed
and duly executed Letter of Transmittal (or a manually signed
facsimile thereof), or confirmation of a book-entry transfer of
such Notes into the Depositary's account with DTC as described
above, including an Agent's Message in connection therewith, and
all other documents required by the Letter of Transmittal and the
instructions thereto, are received by the Depositary within three
New York Stock Exchange trading days after the execution of such
Notice of Guaranteed Delivery.
In all cases, payment for Notes tendered and accepted for
payment pursuant to the Offer will be made only after timely
receipt by the Depositary of certificates for such Notes or
confirmation of book-entry transfer into the Depositary's account
at DTC, a properly completed and duly executed Letter of
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Transmittal (or manually signed facsimile thereof) or Agent's
Message and any other documents required by the Letter of
Transmittal.
Need for Guarantee of Signature. Signatures on a Letter of
Transmittal must be guaranteed by a recognized participant in the
Securities Transfer Agents Medallion Program or the Stock Exchange
Medallion program (a "Medallion Signature Guarantor") (generally,
a member of a registered national securities exchange or the
National Association of Securities Dealers, Inc. or a commercial
bank or trust company having an office in the United States (each,
an "Eligible Institution")), unless the Notes tendered thereby are
tendered (a) by the registered Holder of such Notes and that Holder
has not completed either of the boxes entitled "Special
Issuance/Delivery Instructions" on the Letter of Transmittal, or
(b) such Notes are tendered for the account of an Eligible
Institution.
Notes held in Physical Form. For a Holder to validly tender
Notes held in physical form pursuant to the Offer, such Holder must
deliver a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), with any required signature
guarantee, and any other required documents, to the Depositary at
one of its addresses set forth on the last page of this Offer to
Purchase prior to the Expiration Time. In addition, prior to the
Expiration Time, the Depositary must receive certificates for
tendered Notes at one of its addresses. If the Notes are held of
record in the name of a person other than the signer of the Letter
of Transmittal, or if certificates for unpurchased Notes are to be
issued to a person other than the registered Holder, the
certificates must be endorsed or accompanied by appropriate bond
powers, in either case signed exactly as the name of the registered
Holder appears on the certificates, with the signature on the
certificates or bond powers guaranteed as described below. The
Letter of Transmittal and Notes should be sent only to the
Depositary, and not to the Company, the Dealer Manager, or DTC.
Withholding Tax. Under federal tax laws, the Depositary may be
required to withhold 31% of the amount of any payments made to
certain Holders pursuant to the Offer. See "Certain Federal Income
Tax Consequences" below.
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General. Notwithstanding any other provision hereof, payment
for Notes accepted for payment pursuant to the Offer will in all
cases be made only after timely receipt by the Depositary of (i)
certificates for (or a timely book-entry confirmation with respect
to) such Notes, (ii) a Letter of Transmittal (or a manually signed
facsimile thereof), properly completed and duly executed, with any
required signature guarantees, or, in the case of a book-entry
transfer, an Agent's Message and (iii) any other documents required
by the Letter of Transmittal.
The tender of Notes pursuant to the Offer by one of the
procedures set forth above will constitute a binding agreement
between the tendering Holder and the Company in accordance with the
terms and subject to the conditions of the Offer. By executing a
Letter of Transmittal as set forth above, and subject to and
effective upon acceptance for purchase of, and payment for, the
Notes tendered therewith, a tendering Holder irrevocably sells,
assigns and transfers to, or upon the order of the Company, all
right, title and interest in and to all the Notes tendered thereby,
waives any and all other rights with respect to the Notes
(including, without limitation, the tendering Holder's rights with
respect to any existing or past defaults and their consequences in
respect of the Notes and the Indenture) and releases and discharges
the Company and its affiliates from any and all claims such Holder
may have now or may have in the future arising out of, or related
to, the Notes, including, without limitation, any claims that such
Holder is entitled to receive additional principal or interest
payments with respect to the Notes or to participate in any
redemption or defeasance of the Notes.
The method of delivery of the Letter of Transmittal, Notice of
Guaranteed Delivery, certificates for Notes and all other required
documents is at the election and risk of the tendering Holder. If
a Holder chooses to deliver by mail, the recommended method is by
registered mail with return receipt requested, properly insured. In
all cases, sufficient time should be allowed to ensure timely
delivery.
All questions as to the form of documents and validity,
eligibility (including time of receipt), acceptance for payment,
and withdrawal of tendered Notes will be determined by the Company
in its sole discretion, and its determination will be final and
binding. The Company reserves the absolute right to reject any or
all tenders of Notes that it determines are not in proper form or
the acceptance for payment of or payment for which may, in the
opinion of its counsel, be unlawful. The Company also reserves the
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absolute right in its sole discretion to waive any of the
conditions to the Offer or any defect or irregularity in the tender
of Notes of any particular Holder, whether or not it elects to
waive similar conditions, defects or irregularities in the case of
the other Holders. The Company's interpretation of the terms and
conditions of the Offer (including the instructions in the Letter
of Transmittal) will be final and binding. Any defect or
irregularity in connection with tenders of Notes must be cured
within such time as the Company determines, unless waived by the
Company. Tenders of Notes shall not be deemed to have been made
until all defects and irregularities have been waived by the
Company or cured. None of the Company, the Depositary, the Dealer
Manager, the Trustee or any other person will be under any duty to
give notification of any defects or irregularities in tenders or
any notices of withdrawal or will incur any liability for failure
to give any such notification.
Withdrawal of Tenders
Notes tendered pursuant to the Offer may be withdrawn at any
time prior to the Expiration Time. If the Offer is terminated
without any Notes being purchased thereunder, the Notes tendered
pursuant to the Offer will be promptly returned to the tendering
Holder. For a withdrawal of Notes to be effective, a written or
facsimile transmission notice of withdrawal must be timely received
by the Depositary at one of its addresses set forth on the last
page of this Offer to Purchase. The notice must (i) specify the
name of the person who tendered the Notes to be withdrawn; (ii)
contain a description of the Notes to be withdrawn, the certificate
numbers shown on the particular certificates evidencing such Notes
(unless such Notes were tendered by book-entry transfer) and the
aggregate principal amount at maturity represented by such Notes;
and (iii) be signed by the Holder of such Notes in the same manner
as the original signature on the 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 beneficial ownership of the Notes. In
addition, the notice of withdrawal must specify, in the case of
Notes tendered by delivery of certificates for such Notes, the name
of the registered Holder (if different from that of the tendering
Holder) or, in the case of Notes tendered by book-entry transfer,
the name and number of the account at DTC to be credited with the
withdrawn Notes. The signature on the notice of withdrawal must be
guaranteed by an Eligible Institution unless such Notes have been
tendered for the account of an Eligible Institution. If
certificates for the Notes to be withdrawn have been delivered or
otherwise identified to the Depositary, a signed notice of
withdrawal will be effective immediately upon receipt by the
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Depositary of written or facsimile transmission notice of
withdrawal even if physical release is not yet effected.
Withdrawal of tenders of Notes may not be rescinded, and any
Notes properly withdrawn will thereafter be deemed not validly
tendered for purposes of the Offer. Properly withdrawn Notes may,
however, be retendered by again following one of the procedures
described in "-Procedures for Tendering Notes" above at any time
prior to the Expiration Time.
Withdrawals of Notes can only be accomplished in accordance
with the foregoing procedures. See "-Procedures for Tendering
Notes" with respect to the Company's discretion as to the
withdrawal of Notes.
If the Company is delayed in its acceptance for purchase of,
or payment for, any Notes or is unable to accept for purchase or
pay for Notes pursuant to the Offer for any reason, then, without
prejudice to the Company's rights hereunder, tendered Notes may be
retained by the Depositary on behalf of the Company and may not be
withdrawn (subject to Rule 14e-1 under the Exchange Act, which
requires that the Company pay the consideration offered or return
the Notes deposited by or on behalf of the Holders promptly after
the termination or withdrawal of the Offer).
The Notes are debt obligations of the Company and are governed
by the Indenture. There are no appraisal or other similar statutory
rights available to the Holders in connection with the Offer.
Conditions to the Offer
Notwithstanding any other provisions of the Offer, the Company
will not be required to accept for purchase, or to pay for, Notes
tendered pursuant to the Offer and may terminate, extend or amend
the Offer and may (subject to Rule 14e-1 under the Exchange Act,
which requires that an offeror pay the consideration offered or
return the securities deposited by or on behalf of the holder
thereof promptly after the termination or withdrawal of a tender
offer) postpone the acceptance for purchase of, and payment for,
Notes so tendered if, in the sole discretion of the Company, any of
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the following conditions shall occur on or after the date of this
Offer to Purchase and be continuing at the Expiration Time:
(a) in the sole judgment of the Company, there exists any
actual or threatened legal impediment (including a default
under an agreement, indenture or other instrument or
obligation to which the Company or any of its affiliates
is party or by which it is bound) to the purchase of Notes
pursuant to the Offer;
(b) there shall have been instituted, threatened or be pending
any claim, action or proceeding before or by any court,
governmental, regulatory or administrative agency or
instrumentality, or by any other person, in connection with
the Offer, that (i) challenges, delays, restricts or makes
illegal the acceptance for purchase of, or payment for, the
Notes pursuant to the Offer, (ii) may prohibit, prevent,
restrict or delay the closing of the Offer, or (iii) is,
or is reasonably likely to be, in the sole judgment of the
Company, materially adverse to the business, operations,
properties, results of operations, condition (financial or
otherwise), assets, liabilities or prospects of the Company
or any of its affiliates or which would or might, in the
sole judgment of the Company, prohibit, prevent, restrict
or delay consummation of the Offer;
(c) there shall have occurred any development which would or
might, in the sole judgment of the Company, materially
adversely affect the business of the Company or any of its
subsidiaries;
(d) an order, statute, rule, regulation, executive order, stay,
decree, judgment or injunction shall have been proposed,
enacted, entered, issued, promulgated, enforced or deemed
applicable by any court or governmental, regulatory or
administrative agency or instrumentality that, in the sole
judgment of the Company, would or might prohibit, prevent,
restrict or delay consummation of the Offer, or have any
of the other consequences referred to in clause (b) above;
(e) there shall have occurred or be likely to occur any event
affecting the business or financial affairs of the Company
or any of its subsidiaries that, in the sole judgment of
the Company, would or might directly or indirectly
prohibit, prevent, restrict or delay consummation of the
Offer or is likely to materially impair the contemplated
benefits of the Offer to the Company or otherwise results
in the Offer not being or likely not being in the best
interests of the Company;
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(f) the Trustee under the Indenture shall have objected in any
respect to or taken any action that could, in the sole
judgment of the Company, adversely affect the consummation
of the Offer or in the making of the Offer or the
acceptance of, or payment for, the Notes; or
(g) there shall have occurred (i) any general suspension of,
or limitation of trading in, or limitation on prices for,
securities on any national securities exchange or in the
over-the-counter market, (ii) any significant change in the
price of the Notes which is adverse to the Company or any
of its affiliates, (iii) a material impairment in the
trading market for debt securities, (iv) a declaration of
a banking moratorium or any suspension of payments in
respect of banks in the United States or abroad, (v) any
limitation (whether or not mandatory) by any government or
governmental, administrative or regulatory authority or
agency, domestic or foreign, or other event that, in the
reasonable judgment of the Company, might affect the
extension of credit by banks or other lending institutions,
(vi) a commencement or escalation of a war or armed
hostilities or other national or international calamity
directly or indirectly involving the United States or (vii)
in the case of any of the foregoing existing on the date
hereof, a material acceleration or worsening thereof.
The foregoing conditions are for the sole benefit of the
Company and its affiliates, and may be asserted by the Company
regardless of the circumstances (including any action or inaction
on their part) giving rise to such condition or may be waived by
the Company in whole or in part at any time and from time to time
in its sole discretion. If any condition to the Offer is not
satisfied or waived by the Company prior to the Expiration Time,
the Company reserves the right (but shall not be obligated),
subject to applicable law, (i) to terminate the Offer and return
the tendered Notes to the tendering Holders, (ii) to waive all
unsatisfied conditions and accept for payment and purchase all
Notes that are validly tendered (and not validly withdrawn), (iii)
to extend the Offer and retain the Notes that have been tendered
during the period for which the Offer is extended, or (iv) to amend
the Offer. Any determination by the Company concerning any of the
foregoing events shall be final and binding upon all persons.
Although the Company has no present plans or arrangements to
do so, the Company reserves the right to amend, at any time, the
terms of the Offer. The Company will give such notice as is
required by applicable law.
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Acceptance for Payment and Payment
Upon the terms and subject to the conditions of the Offer, the
Company will accept for payment and pay for all Notes that are
validly tendered pursuant to the Offer and not validly withdrawn.
Such acceptance will occur promptly after the later of (i) the
Expiration Time or (ii) the satisfaction or waiver of the
conditions to the Offer set forth under "-Conditions to the Offer."
For purposes of the Offer, the Company will be deemed to have
accepted for payment tendered Notes if, as and when the Company
gives oral or written notice to the Depositary of its acceptance
for payment of such Notes (the date of such acceptance, the
"Acceptance Date"). Payment for Notes accepted for payment pursuant
to the Offer will be made by prompt deposit of funds with the
Depositary, which will act as agent for the tendering Holders for
the purpose of receiving payments from the Company and transmitting
such payments to the tendering Holders. Notes purchased pursuant to
the Offer will be paid for in same-day funds on the Settlement
Date.
The Company expressly reserves the right, in its sole
discretion, to delay acceptance for purchase of Notes tendered
under the Offer or the payment for Notes accepted for purchase
(subject to Rule 14e-1 under the Exchange Act, which requires that
an offeror pay the consideration offered or return the securities
deposited by or on behalf of the holders thereof promptly after the
termination or withdrawal of the tender offer), or to terminate the
Offer and not accept for purchase any Notes not theretofore
accepted for purchase, if any of the conditions set forth under
"-Conditions to the Offer" shall not have been satisfied or waived
by the Company or in order to comply in whole or in part with any
applicable law. In all cases, payment for Notes accepted for
purchase pursuant to the Offer will be made only after timely
receipt by the Depositary of certificates representing Notes (or
confirmation of book-entry transfer thereof), a properly completed
and duly executed Letter of Transmittal (or a manually signed
facsimile thereof or satisfaction of DTC's ATOP procedures) and any
other documents required thereby.
If, for any reason, acceptance for purchase of, or payment for,
validly tendered Notes pursuant to the Offer is delayed or the
Company is unable to accept for purchase, or to pay for, validly
tendered Notes pursuant to the Offer, then the Depositary may,
nevertheless, on behalf of the Company, retain tendered Notes,
without prejudice to the rights of the Company described under
"-Expiration, Extension, Amendment and Termination," "-Conditions
to the Offer" and "-Withdrawal of Tenders" (subject to Rule 14e-1
under the Exchange Act, which requires that an offeror pay the
consideration offered or return the securities deposited by or on
behalf of the holders thereof promptly after the termination or
withdrawal of a tender offer). If any tendered Notes are not
accepted for payment for any reason pursuant to the terms and
conditions of the Offer, or if certificates are submitted
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evidencing more Notes than those which are tendered, certificates
evidencing unpurchased Notes will be returned, without expense, to
the tendering Holder (or, in the case of Notes tendered by book-
entry transfer into the Depositary's account at DTC pursuant to the
Procedures set forth under the caption "-Procedures for Tendering
Notes-Book-Entry Delivery of the Notes," such Notes will be
credited to the account maintained at DTC from which such Notes
were delivered), unless otherwise requested by such Holder in the
box entitled "Special Issuance/Delivery Instructions" in the Letter
of Transmittal, promptly following the Acceptance Date or the
termination of the Offer.
The Company reserves the right to transfer or assign, in whole
or from time to time in part, to one or more of its affiliates, the
right to purchase all or any portion of the Notes tendered pursuant
to the Offer, but any such transfer or assignment will not relieve
the Company of its obligations under the Offer and will in no way
prejudice the rights of tendering Holders to receive the full
payment contemplated by the Offer (free and clear of any
withholding or similar tax, except as described herein) for Notes
validly tendered and not validly withdrawn and accepted for payment
pursuant to the Offer.
Assuming the Company makes full payment for the purchase of
Notes to the Depositary on the Settlement Date, under no
circumstances will any additional interest or accretion be payable
because of any delay in the transmission of funds from the
Depositary to the Holders of the purchased Notes.
Tendering Holders of Notes purchased in the Offer will not be
obligated to pay brokerage commissions, fees or transfer taxes with
respect to the purchase of their Notes unless the box titled
"Special Issuance/Delivery Instructions" on the Letter of
Transmittal has been completed, as described in the instructions
thereto. The Company or an affiliate will pay all other charges and
expenses in connection with the Offer. See "Dealer Manager and
Depositary".
Expiration, Extension, Amendment and Termination
The Offer will expire at 12:00 Midnight, New York City time,
on December 15, 1999, unless extended by the Company.
The Company expressly reserves the right, in its sole
discretion at any time or from time to time, regardless of whether
or not the conditions set forth in "-Conditions to the Offer" shall
have been satisfied, subject to applicable law, (i) to extend the
Expiration Time for the Offer on a daily basis or for such period
or periods as it may determine in its sole discretion, (ii) to
amend the Offer in any respect, (iii) to waive any condition of the
Offer, or (iv) to terminate the Offer prior to the Expiration Time
therefor and return the Notes tendered pursuant thereto, in each
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case by giving written notice of such extension, amendment or
termination to the Depositary.
During any extension of the Offer, all Notes previously
tendered and not accepted for purchase will remain subject to the
Offer and, subject to the terms and conditions of the Offer, may be
accepted for purchase by the Company. If the Company makes a
material change in the terms of the Offer, or in the information
concerning the Offer, the Company will disseminate additional Offer
materials and extend the Offer, to the extent required by law. For
purposes of the Offer, the term "business day" means any day other
than a Saturday, Sunday or federal holiday and consists of the time
period from 12:01 A.M. through 12:00 midnight, New York City time.
There can be no assurance that the Company will exercise its
right to extend the Expiration Time for the Offer. Any extension,
amendment or termination will be followed as promptly as
practicable by public announcement thereof, with the announcement
in the case of an extension to be issued no later than 9:00 A.M.,
New York City time, on the first business day after the previously
scheduled Expiration Time, as the case may be. Without limiting the
manner in which the Company may choose to make any public
announcement, the Company shall have no obligation to publish,
advertise or otherwise communicate any such public announcement
other than by issuing a release to the Dow Jones News Service.
In the event the Company shall terminate the Offer, it shall
as soon as practicable give notice thereof to the Depositary, and
all Notes theretofore tendered and not accepted for payment shall
be returned promptly to the tendering and delivering Holders
thereof. In that event, the Tender Offer Consideration will not be
paid or become payable. See "-Withdrawal of Tenders" and "-
Conditions to the Offer" above.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary is a general discussion of certain United
States federal income tax consequences applicable to the sale of
Notes pursuant to the Offer. This discussion is a general summary
only and does not address all tax aspects of these transactions
that may be relevant to a Holder's particular circumstances. This
discussion addresses only a sale of Notes by a "U.S. Holder" which,
for purposes of this Offer means a beneficial owner of Notes that
is (a) a citizen or resident of the United States, (b) a
corporation or other entity created or organized under the laws of
the United States or any political subdivision of the United
States, (c) an estate taxed by the United States on its income
without regard to the source of its income, or (d) a trust if a
United States court can exercise primary jurisdiction over its
administration and one or more United States persons has the
authority to control all of the substantial decisions of the trust.
The discussion does not deal with special classes of Holders, such
as dealers in securities or currencies, traders in securities that
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are subject to the mark to market rules, banks, financial
institutions, insurance companies, tax-exempt organizations,
persons with a functional currency other than the U.S. dollar,
investors in pass-through entities such as partnerships or persons
holding Notes as part of a straddle, hedging transaction,
conversion transaction, synthetic security, or other integrated
transaction. This discussion (i) does not describe any tax
consequences arising out of the laws of any state or local or
foreign jurisdiction; (ii) assumes that the Notes are held as
"capital assets" within the meaning of Section 1221 of the Internal
Revenue Code of 1986, as amended (the "Code"); and (iii) is based
upon the Code and the regulations, rulings, and judicial decisions
thereunder as of the date hereof, any of which may be repealed or
modified in a manner resulting in federal income tax consequences
that differ from those described below. The Company has not sought
any ruling from the Internal Revenue Service (the "IRS") with
respect to the statements made and the conclusions reached in this
discussion, and there can be no assurance that the IRS will agree
with such statements and conclusions.
Sales of Notes by U.S. Holders pursuant to the Offer will be
taxable transactions for United States federal income tax purposes.
The Company believes that it is more likely than not that the Notes
are indebtedness of the Company for United States federal income
tax purposes. If the Notes are instead treated as equity, the cash
received by a U.S. Holder could be treated as a dividend unless the
U.S. Holder completely terminates his, her or its actual and
constructive interest in the Company or the sale is treated as a
redemption not essentially equivalent to a dividend. The remainder
of this discussion assumes that the Notes constitute indebtedness
for United States federal income tax purposes. Holders should
consult their own tax advisor concerning the treatment of sales of
Notes pursuant to the Offer if the Notes are treated as equity.
The Notes were issued with original issue discount, and U.S.
Holders will be required to include original issue discount accrued
through the date of sale as ordinary income. Except as described
below in connection with application of the market discount rules,
a U.S. Holder selling Notes pursuant to the Offer will recognize
capital gain or loss in an amount equal to the difference between
(i) the amount of cash received and (ii) the U.S. Holder's adjusted
tax basis in the Notes sold at the time of sale. A U.S. Holder's
adjusted tax basis in Notes generally will equal the cost of the
Notes to such U.S. Holder, increased by the amount of original
issue discount and any market discount previously taken into income
by the U.S. Holder, and reduced by the amount of any bond premium
previously amortized by the U.S. Holder with respect to the Notes.
Capital gain of a non-corporate U.S. Holder is generally subject to
a maximum tax rate of 20% if the Notes have been held for more than
one year. In general, a corporation may deduct capital losses only
to the extent of its capital gains, and a taxpayer other than a
corporation may deduct capital losses only to the extent of its
capital gains plus $3,000.
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A U.S. Holder of a Note who did not acquire the Note at its
original issue, and who acquired such Note at a market discount
(that is, at a price that was less than the revised issue price of
the Note at its maturity), may be required, subject to a statutory
de minimis exception, to treat gain on the sale of the Note as
ordinary income to the extent of any "accrued market discount",
unless the U.S. Holder has elected to include market discount in
income currently as it accrues.
Sales of Notes pursuant to the Offer by U.S. Holders generally
will be subject to information reporting requirements. In addition,
certain U.S. Holders who fail to complete the Substitute Form W-9
included in the Letter of Transmittal may be subject to backup
withholding at a rate of 31% with respect to payments received
pursuant to the Offer. Backup withholding is not an additional
federal income tax. Rather, the federal income tax liability of
persons subject to backup withholding will be offset by the amount
of tax withheld. If backup withholding results in an overpayment of
federal income taxes, a refund may be obtained from the IRS
provided the required information is furnished. Certain U.S.
Holders (including, among others, corporations) are not subject to
these backup withholding and reporting requirements.
ALL HOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO
DETERMINE THE TAX CONSEQUENCES OF THE OFFER IN THEIR PARTICULAR
CIRCUMSTANCES, INCLUDING THE APPLICATION OF FEDERAL, STATE, LOCAL
AND FOREIGN TAX LAWS.
DEALER MANAGER AND DEPOSITARY
Pursuant to a Dealer Manager Agreement dated November 17, 1999,
the Company has retained Jefferies & Company, Inc. to act as the
Dealer Manager for the Offer. Pursuant to a Depository Agreement
dated November 17, 1999, United States Trust Company of New York
has been retained to act as Depositary in connection with the
Offer. The Dealer Manager may contact Holders regarding the Offer
and may request Custodians to forward this Offer to Purchase and
related materials to beneficial owners of Notes.
The Company has agreed to pay the Dealer Manager and the
Depositary their customary fees for their services in connection
with the Offer. The Company has also agreed to reimburse the Dealer
Manager and the Depositary for their out-of-pocket expenses
(including the fees and disbursements of counsel) and to indemnify
them against certain liabilities, including liabilities under
federal securities laws. The Depositary is the Trustee under the
Indenture and has received customary fees for such services.
In accordance with a letter agreement, the Company has engaged
the Dealer Manager and another financial advisor to advise the
Company in connection with the development or consideration of
proposals relating to the Notes. Under the letter agreement, the
Company will pay a fee in the event the Company makes a tender
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offer such as the Offer and an additional fee upon consummation of
specified transactions involving the Notes. The Dealer Manager and
the other financial advisor and some of their affiliates may
perform in the future other financial advisory and investment
banking services for the Company. The Company may in the future pay
such parties compensation for their services.
All deliveries and correspondence sent to the Depositary should
be directed to one of the addresses set forth on the last page of
this Offer to Purchase. Requests for additional copies of
documentation may be directed to the Dealer Manager at the address
and telephone number set forth on the last page of this Offer to
Purchase.
In connection with the Offer, directors and officers of the
Company and its affiliates may solicit tenders by use of the mails,
personally or by telephone, facsimile, telegram or other similar
methods. The Company or its affiliates will also pay brokerage
houses and other custodians, nominees and fiduciaries the
reasonable out-of-pocket expenses incurred by them in forwarding
Offer materials to Holder.
Neither the Dealer Manager or the Depositary assume any
responsibility for the accuracy or completeness of the information
concerning the Company or any of its affiliates contained in this
Offer to Purchase or for any failure by the Company to disclose
events that may have occurred and may affect the significance or
accuracy of such information.
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The Depository for the Offer is:
UNITED STATES TRUST COMPANY OF NEW YORK
(By Mail): (By Overnight Courier:)
United States Trust Company United States Trust Company
of New York of New York
P.O. Box 844 770 Broadway - 13th Floor
Cooper Station Corporate Trust Operations Department
New York, NY 10276-0844 New York, New York 10003
(registered or certified mail
recommended)
(By Hand): (By Facsimile):
United States Trust Company (212) 420-6211
of New York (for Eligible Institutions Only)
111 Broadway - Lower Level Confirm by telephone:
New York, NY 10003 (800) 548-6565
Attention: Corporate Trust Services
The Dealer Manager for the Offer is:
Jefferies & Company, Inc.
520 Madison Avenue
New York, New York 10022
Attention: Victor Polizzotto
Call Toll Free: (800) 421-0160 x7160
Call Collect: (212) 336-7160
