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ALL STAR GAS CORPORATION
(formerly known as Empire Gas Corporation)
Offer to Exchange
11% Senior Secured Notes due 2003
for All of its Outstanding
12 7/8% Senior Secured Notes due 2000
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THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON DECEMBER 1, 2000, UNLESS EXTENDED (THE "EXPIRATION DATE").
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All Star Gas Corporation ("All Star" or the "Company"), a Missouri
corporation, hereby offers, upon the terms and subject to the conditions set
forth in this Offering Circular (the "Offering Circular") and in the
accompanying Letter of Transmittal (the "Letter of Transmittal" which, together
with the Offering Circular, constitutes the "Exchange Offer"), to exchange an
aggregate principal amount of $50,880,000 of its 11% Senior Secured Notes due
2003 (the "New Notes" or the "Offer Consideration") for a like principal amount
of its issued and outstanding 12 7/8% Senior Secured Notes due 2000 (the "Old
Notes" or the "Notes") from the registered holders (individually, a "Holder"
and collectively, the "Holders") thereof. The terms of the New Notes are
discussed in "Offering Circular Summary-Comparison of Old Notes and New Notes"
and "Description of New Notes." The New Notes will evidence the same class of
debt as the Old Notes and will be issued pursuant to, and entitled to the
benefits of, an Indenture (the "New Indenture"), which the Company and State
Street Bank and Trust Company, as trustee (the "New Trustee") intend to execute
on or before the issuance of the New Notes. The Old Notes were issued pursuant
to, and are entitled to the benefits of, an Indenture, as amended (the "Old
Indenture"), dated as of June 29, 1994, between the Company and State Street
Bank and Trust Company (formerly known as Shawmut Bank Connecticut, National
Association, a National Banking Association) as trustee (the "Old Trustee"; the
Old Trustee and the New Trustee, sometimes referred to as the "Trustee").
The Company's obligation to accept for exchange Old Notes validly tendered
pursuant to the Exchange Offer is subject to certain conditions, including,
without limitation, (i) the tender of 100% of the aggregate principal amount of
the Old Notes outstanding and not owned by All Star and its affiliates (the
"Minimum Tender Condition") and (ii) satisfaction of the General Conditions (as
defined below). See "The Exchange Offer-Conditions to the Exchange Offer."
The Company will accept for exchange all Old Notes validly tendered and
not withdrawn prior to the Expiration Date. See "The Exchange Offer-Procedures
for Tendering Old Notes."
The New Notes will constitute senior secured obligations of the Company
and rank pari passu with any existing and permitted future secured and senior
indebtedness of the Company.
See "Risk Factors" for a discussion of certain factors that should be
considered in evaluating the Exchange Offer.
THE OFFER OF THE SECURITIES CONTEMPLATED IN THE EXCHANGE OFFER IS MADE
PURSUANT TO THE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SECTION 5 OF
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), PROVIDED BY
SECTION 3(a) (9) THEREOF AND, ACCORDINGLY, THE OFFER OF SUCH SECURITIES HAS NOT
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION.
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS OFFERING CIRCULAR. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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The Company has suffered recurring losses from operations and has net
working capital and stockholders' equity deficiencies. On May 31, 2000,
pursuant to an Offer to Purchase and Consent Solicitation described herein
under "The Company," the Company purchased and retired a portion of the Old
Notes at a discounted price of $786 per $1,000 principal amount. The purchase
price of this portion of Old Notes was funded from proceeds of the sale of
approximately 39% of the Company's total assets. On July 31, 2000 the entire
outstanding principal amount of $50,880,000 of the Old Notes became due. All
Star did not have the available funds or other sources of financing to enable
it to pay such amount on July 31, 2000 and is in default with respect to the
outstanding principal amount of the Old Notes and accrued and unpaid interest
from January 1, 2000. All Star has also outstanding, $9,729,000 principal
amount of its 9% Subordinated Debentures due 2007 (the "Subordinated
Indebtedness"). As a consequence of the default under the Old Notes and
pursuant to the terms of the Indenture to which the Subordinated Indebtedness
is subject, All Star was prohibited from making the interest payment on July
31, 2000 for interest due on June 30, 2000 (after utilizing the permitted grace
period). Accordingly, All Star is also in default under its Subordinated
Indebtedness. All Star currently has outstanding an offer to exchange the
Subordinated Indebtedness for a new issue of 9% Accruing Subordinated
Debentures due 2007.
The New Notes will bear interest at the rate of 11% per annum beginning
August 1, 2000 and payable semiannually as of each June 30 and December 30.
Holders exchanging Old Notes for New Notes will not receive a cash interest
payment for the interest accrued through July 31, 2000 in respect of the Old
Notes exchanged.
The purpose of the Exchange Offer is to increase the Company's short term
flexibility by relieving it of its immediate requirement to pay the outstanding
principal amount of the Old Notes and by reducing the Company's annual cash
interest payment requirements. The Company believes that the terms of the New
Notes will be more beneficial to it over the short term.
Based on an interpretation by the staff of the Division of Corporation
Finance of the Securities and Exchange Commission (the "Commission"), the
Company believes that the New Notes issued pursuant to the Exchange Offer may
be offered for resale, resold and otherwise transferred by any Holder thereof
without compliance with the registration requirements of the Securities Act.
The Company has not entered into any arrangement or understanding with any
person to distribute the New Notes to be received in the Exchange Offer and, to
the best of the Company's information and belief, each person participating in
the Exchange Offer is acquiring the New Notes in the ordinary course of
business and has no arrangement or understanding with any person to participate
in the distribution of the New Notes.
The Company has made no arrangements for and has no understanding with any
dealer, salesman or other person regarding the solicitation of tenders
hereunder, and no person has been authorized by the Company to give any
information or to make any representations in connection with the Exchange
Offer other than those contained or incorporated by reference in this Offering
Circular and, if given or made, such other information or representation must
not be relied upon as having been authorized. Neither the delivery of this
Offering Circular nor the exchange of New Notes for Old Notes shall, under any
circumstances, create any implication that the information contained herein is
correct as of any time subsequent to the date hereof.
The Company will not receive any proceeds from the Exchange Offer. The
Company has agreed to bear the expenses of the Exchange Offer.
The Exchange Agent (as defined herein) and The Depository Trust Company
("DTC") have confirmed that the Exchange Offer is eligible for the DTC
Automated Tender Offer Program ("ATOP"). Accordingly, DTC participants may
electronically transmit their acceptance of the Exchange Offer by causing DTC
to transfer Old Notes to the Exchange Agent in accordance with DTC's ATOP
procedures for such a transfer. DTC will then send an Agent's Message (as
defined herein) to the Exchange Agent.
NONE OF THE COMPANY, THE BOARD OF DIRECTORS OF THE COMPANY, EXECUTIVE
OFFICERS OF THE COMPANY, OR THE EXCHANGE AGENT MAKES ANY RECOMMENDATION TO
HOLDERS OF THE OLD NOTES AS TO WHETHER TO EXCHANGE OR REFRAIN FROM EXCHANGING
THEIR OLD NOTES. IN ADDITION, NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH
RECOMMENDATION. HOLDERS OF OLD NOTES MUST MAKE THEIR OWN DECISION WHETHER TO
EXCHANGE OLD NOTES PURSUANT TO THE EXCHANGE OFFER AND, IF SO, THE AGGREGATE
PRINCIPAL AMOUNT OF OLD NOTES TO EXCHANGE.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
TENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH
THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH
THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
The date of this Offering Circular is November 2, 2000.
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AVAILABLE INFORMATION
The Company is subject to the informational reporting requirements of the
Exchange Act, and, in accordance therewith, files reports, statements and other
information with the Commission. Such reports, statements and other information
filed by the Company can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and at its Regional Offices located
at 7 World Trade Center, Suite 1300, New York, New York 10048 and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511.
Copies of such material can be obtained from the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The Commission also maintains a site on the World Wide Web at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission.
The Company has instructed the Exchange Agent not to solicit exchanges in
connection with the Exchange Offer or to make any recommendation with respect
to acceptance or rejection of the Exchange Offer. Solicitations will be made
solely by employees of the Company. The Exchange Agent will answer any
questions from Holders of the Old Notes with respect to the Exchange Offer
solely by reference to the terms of this Offering Circular, and Holders may
contact the Exchange Agent at the addresses and telephone numbers listed below.
Holders of the Old Notes who have any questions regarding the mechanics of the
Exchange Offer should contact the Exchange Agent. In addition, all questions
with respect to the Exchange Offer may be directed to the Company (Attn:
Valeria Schall, telephone number (417) 532-3103).
Exchange Agent:
State Street Bank and Trust Company
By Hand, Registered Mail or Overnight Carrier:
State Street Bank and Trust Company
Corporate Trust Department
2 Avenue de Lafayette, 5th Floor
Boston, MA 02111
Attention: Meaghan Haight
Confirm by Telephone:
(860) 244-1849
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed by the Company with the Commission
(Commission File No. 033-53343) pursuant to the Exchange Act and are
incorporated herein by reference and made a part hereof: (1) the Company's
Annual Report on Form 10-K for the fiscal year ended June 30, 2000; (2) the
Company's Quarterly Report on Form 10-Q for the quarters ended September 30,
1999, December 31, 1999 and March 31, 2000; and (3) the Company's Current
Reports on Form 8-K dated July 15, 1999, January 14, 2000, February 25, 2000,
March 3, 2000, March 23, 2000, April 14, 2000, April 20, 2000, May 5, 2000, May
12, 2000, May 23, 2000, May 30, 2000, June 30, 2000, July 31, 2000, August 31,
2000, September 29, 2000 and October 30, 2000.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act on and subsequent to the date of this Offering
Circular and prior to the Expiration Date are deemed to be incorporated by
reference herein and shall be a part hereof from their respective filing dates.
Information contained in this Offering Circular modifies or supersedes similar
information contained in the documents incorporated by reference above.
Further, information contained in any subsequently filed document, which is
deemed to be incorporated by reference in this Offering Circular, will modify
and supersede similar information contained in this Offering Circular or any of
the documents incorporated by reference above.
The Company will provide, without charge, to each person to whom a copy of
this Offering Circular is delivered, upon written or oral request, a copy of
any and all of the documents incorporated by reference in this Offering
Circular, other than exhibits to such documents unless such exhibits are
specifically incorporated by reference into the documents that this Offering
Circular incorporates. Requests for copies of such documents should be directed
to All Star Gas Corporation, 119 West Commercial Street, P.O. Box 303, Lebanon,
MO 65536, telephone number (417) 532-3103.
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OFFERING CIRCULAR SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere, or incorporated by reference in this Offering
Circular. See "Risk Factors" for a discussion of certain factors that should be
considered in connection with the Exchange Offer and the New Notes offered
hereby.
The Company
The Company was founded in 1963 and through its subsidiaries has been in
operation for over 36 years. The Company is engaged primarily in (a) the retail
marketing of propane to residential, agricultural, and commercial customers,
(b) the retail marketing of propane-related appliances, supplies, and
equipment, and (c) the renting of consumer propane storage tanks to residential
and commercial customers under various brand names, including All Star and the
names of numerous predecessors.
The principal executive offices of the Company are located at 119 West
Commercial Street, P.O. Box 303, Lebanon, MO 65536. Its telephone number is
(417) 532-3103.
The Exchange Offer and Consent Solicitation
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The Exchange Offer: Pursuant to the Exchange Offer, the Company is offering to any Holder to
exchange, for all of its Old Notes, an equal principal amount of newly
issued New Notes.
General: The New Notes will be secured obligations of the Company, will mature on
June 30, 2003, and will bear interest from August 1, 2000 at the rate of
eleven percent per year, payable semiannualy. Principal, interest and
premium, if any, will be payable at the office of the Trustee in the City of
New York, State of New York, and the New Notes may be presented for
registration of transfer or exchange at such office as provided in the New
Indenture. The New Notes will be issued only in fully registered form in
denominations of $1,000 and integral multiples thereof. The New Notes
will not be convertible.
Seniority of Notes: The payment of the principal of, premium, if any, and interest on the New
Notes is senior in right of payment, to the extent set forth in the New
Indenture, to the prior payment in full of all existing and future
Subordinated Indebtedness of the Company, as that term is defined in the
New Indenture. Upon any distribution of the assets of the Company or
upon any dissolution, winding up, liquidation, or reorganization of the
Company, the holders of the New Notes will be entitled to receive payment
in full before holders of the Subordinated Indebtedness are entitled to
receive any payment. See "Description of New Notes" for the definition of
Subordinated Indebtedness.
Optional Redemption: The New Notes will be redeemable, at the Company's option, in whole or
in part, on not less than 30 days' nor more than 60 days' prior notice given
by first-class mail as provided in the New Indenture, on any date prior to
maturity, at specified redemption prices plus accrued interest thereon to
the redemption date. See "Description of New Notes -- Optional
Redemption" for a discussion of redemption prices.
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Modification of Indenture: Without the consent of the holders of the New Notes, the Company, the
Subsidiary Guarantors and the Trustee may amend or supplement the
New Indenture, the Security Documents or the New Notes: (a) to cure any
ambiguity, omission, defect or inconsistency; (b) to comply with Article IV
of the New Indenture relating to a Consolidation, Merger or Sale of the
Company; (c) to provide for uncertificated New Notes in addition to the
certificated New Notes; (d) to add additional guarantees with respect to
the New Notes or to secure the New Notes; (e) to add to the covenants of
the Company for the benefit of the holders of the New Notes or to
surrender any right or power herein conferred upon the Company; (f) to
comply with the requirements of the Commission in connection with
qualifications of the New Indenture under the Trust Indenture Act of 1939,
as amended; (g) to make any change that does not adversely affect the
rights of any holder of the New Notes; (h) to provide for certain
amendments to the Security Documents expressly called for therein and to
add Collateral thereto, as defined therein; (i) to increase the aggregate
principal amount at maturity of New Notes that may be issued by the
Company pursuant to the New Indenture.
Otherwise, the Company, the Subsidiary Guarantors and the Trustee may
amend or supplement the New Indenture, the Security Documents or the
New Notes with the written consent of the holders of a majority in principal
amount of the New Notes. However, without the consent of each holder of
the New Notes affected, an amendment or supplement may not (i) reduce
the principal amount of New Notes the holders of which must consent to
an amendment or supplement; (ii) reduce the rate of or change the time
for payment of interest on any New Note; (iii) reduce the principal of or
change the Stated Maturity, as defined in the New Notes; (iv) reduce the
premium payable upon the redemption of any of the New Notes or change
the time at which any of the New Notes may or shall be redeemed in
accordance with the New Indenture; (v) make any of the New Notes
payable in currency or consideration other than that stated in the New
Notes; (vi) make any change in Section 5.4, 5.7 or 8.2 (second sentence)
of the New Indenture; (vii) directly or indirectly release liens on all or
substantially all of the Collateral, as defined in the New Indenture; or (viii)
modify or affect in any manner adverse to the holders of the New Notes
the terms and conditions of the obligation of any Guarantor, as defined
therein, for the due and punctual payment of the principal or, premium, if
any, or interest on the New Notes.
Default and Certain An "Event of Default" will be defined in the New Indenture as a default in
Rights on Default: payment of principal at maturity, upon redemption, by declaration or
otherwise; a default for 30 days in payment of any interest that is due and
payable; a default for 30 days after notice of performance in any material
respect of any other covenant in the New Indenture or New Notes; or
certain other events and events of bankruptcy, insolvency, receivership or
reorganization.
The New Indenture will provide that, if an Event of Default shall have
happened and be continuing, either the Trustee or the holders of 25
percent in principal amount of the New Notes then outstanding may
declare the principal of all the New Notes to be due and payable
immediately, but upon certain conditions such declaration may be annulled
and past defaults (except, unless theretofore cured, a default in payment
of principal, interest or premium, if any, on the New Notes and except a
default in respect of a covenant or provisions of the New Indenture which
may not be amended without the consent of the holder of each then
outstanding New Note affected) may be waived by the holders of a
majority in principal amount of the New Notes then outstanding.
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Concerning the Trustee: State Street Bank and Trust Company will be the Trustee under the New
Indenture and is the Trustee under the Old Indenture.
Interest Payable The New Notes will bear interest at the rate of 11% per annum payable
semiannually on each June 30 and December 30 from August 1, 2000.
Holders exchanging Old Notes for New Notes will not receive a cash
interest payment for the interest accrued through July 31, 2000 in respect
of the Old Notes exchanged.
Old Notes Outstanding: As of the date hereof, $50,880,000 aggregate principal amount of Old
Notes are outstanding.
CUSIP Number: The CUSIP Number of the Old Notes is 291714AC7.
Conditions to the Consummation of the Exchange Offer is conditioned upon certain
Exchange Offer: conditions described herein. The Company may, in its sole discretion,
waive any condition with respect to the Exchange Offer and accept for
exchange any Old Notes tendered. See "The Exchange Offer--Conditions
to the Exchange Offer."
Expiration and Extensions: The Exchange Offer will expire at 5:00 p.m., New York City time, on
December 1, 2000, or at such later time and date to which the Exchange
Offer may be extended by the Company in accordance with the
procedures described herein. See "The Exchange Offer--Expiration Date;
Extensions; Termination; Amendments."
Certain U.S. Federal The exchange of Old Notes pursuant to the Exchange Offer will constitute
Income Tax Consequences: a taxable exchange for U.S. federal income tax purposes. Whether a
Holder of Old Notes that receives New Notes pursuant to the Exchange
Offer will recognize gain or loss upon the exchange of Old Notes for New
Notes will depend upon whether the amount realized on the exchange is
greater or less than the Holder's adjusted basis in the Old Notes. In
addition to the 11% stated interest, which will be includible in a Holder's
taxable income in accordance with the Holder's method of accounting, the
New Notes will bear original issue discount, which will be includible in a
Holder's taxable income as accrued regardless of the Holder's method of
accounting. See "Certain U.S. Federal Income Tax Consequences."
Certain Consequences of In deciding whether to participate in the Exchange Offer, each Holder
the Exchange Offer: should consider carefully, in addition to the other information contained in
this Offering Circular, the information set forth under the captions
"Description of New Notes" and "Risk Factors."
Tender of Old Notes: To tender Old Notes, Holders must deliver their Old Notes together with a
properly completed and duly executed Letter of Transmittal to the
Exchange Agent or follow the procedures for book-entry transfer. If Old
Notes are held by a broker, dealer, commercial bank, trust company or
other nominee (individually, a "Custodian" and collectively, the
"Custodians"), the beneficial owner thereof should instruct such Custodian
to tender such Old Notes on their behalf. All tenders must be made on or
prior to the Expiration Date. See "The Exchange Offer--Procedures for
Tendering Old Notes."
New Notes will be delivered either in book-entry form through DTC or by
Holders who elect to take physical delivery of their certificates instead.
See "The Exchange Offer--Proper Execution and Delivery of Letter of
Transmittal."
Guaranteed Delivery: Holders of Old Notes who wish to tender their Old Notes and who cannot
deliver their Old Notes or the Letter of Transmittal to the Exchange Agent,
prior to the Expiration Date, or cannot complete procedures for book-entry
transfer on a timely basis, must tender their Old Notes according to the
guaranteed delivery procedures set forth in "The Exchange Offer--
Guaranteed Delivery Procedures."
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Acceptance of Old Notes Subject to satisfaction or waiver of the conditions to the Exchange Offer,
and Delivery of New Notes: the Company will exchange all Old Notes that are properly tendered and
not withdrawn prior to the Expiration Date. New Notes will be delivered as
soon as practicable following the Expiration Date (the "Exchange Date").
See "The Exchange Offer--Acceptance of Old Notes Tendered for
Exchange; Delivery of New Notes."
Withdrawal Rights: Tenders of Old Notes may be withdrawn at any time prior to the Expiration
Date. Withdrawal of tendered Old Notes will be deemed a rejection of the
Exchange Offer. See "The Exchange Offer--Withdrawal Rights."
Registration of New Notes: The New Notes will be registered under the Exchange Act. However, the
Company does not intend to list the New Notes on any Stock Exchange.
As a result there may be a very limited or no trading market for the New
Notes.
The New Notes
Issuer: All Star Gas Corporation.
Indenture: The New Notes will be issued under the New Indenture.
Maturity: June 30, 2003
Interest: The New Notes will bear interest each June 30 and December 30,
commencing August 1, 2000.
Ranking: The New Notes will be secured obligations of the Company and will rank
pari passu with any existing and permitted future secured and senior
indebtedness of the Company.
Form: The New Notes will be available in book-entry form through DTC or in
registered certificated form for those Holders who elect to take physical
delivery. See "Exchange Offer--Acceptance of Old Notes Tendered for
Exchange; Delivery of Old Notes"; and "Certificated Notes."
Optional Redemption: The Company, at its option, may redeem the New Notes at any time, in
whole or from time to time in part, until maturity, upon not less than 30 nor
more than 60 days' notice, at the followng redemption prices (expressed
as percentages of the principal amount of the New Notes being
redeemed) plus accrued and unpaid interest thereon to the redemption
date:
On or prior to Redemption Percentage
-------------- ---------------------
February 28, 2001 83.97%
June 30, 2001 87.18%
December 31, 2001 90.38%
June 30, 2002 93.59%
December 31, 2002 96.79%
June 30, 2003 100.00%
Use of Proceeds: The New Notes will be issued only in exchange for the Old Notes. The
Company will not receive any cash proceeds from the issuance of the
New Notes.
Listing or Registration: The New Notes will be registered under the Exchange Act. However, the
Company does not intend to list the New Notes on any Stock Exchange.
As a result there may be a very limited or no trading market for the New
Notes.
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Comparison of Old Notes and New Notes
The following is a brief comparison of the principal features of the Old
Notes and the New Notes. The following descriptions are brief summaries, do not
purport to be complete and are qualified in their entirety by reference, with
respect to the Old Notes, to the Old Notes and the Old Indenture and, with
respect to the New Notes, to the New Notes and the New Indenture. For further
information regarding the New Notes and for definitions of capitalized terms
used with respect to the New Notes but not otherwise defined herein, see
"Description of New Notes."
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OLD NOTES NEW NOTES
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<S> <C> <C>
Obligor: All Star Gas Corporation All Star Gas Corporation
Trustee: State Street Bank and Trust State Street Bank and Trust
Company Company
Aggregate Principal $50,880,000 $50,880,000
Amount:
Maturity: July 31, 2000 June 30, 2003
Interest Rate: 12 7/8% per annum 11% per annum
Interest Payment/Accrual payments June 30 and payments June 30 and
Dates: December 31 annually December 30 annually
Ranking: The Old Notes are secured Except for certain purchase
obligations of the Company, money secured equipment
and rank pari passu with all financing and lease obligations
existing and future secured and of the Company incurred in the
senior indebtedness of the ordinary course of its business,
Company. the New Notes will be secured
obligations of the Company,
and rank pari passu with all
existing and future secured and
senior indebtedness of the
Company.
Optional Redemption: The Company was permitted The Company, may, at its
pursuant to the terms of the Old option, redeem the New Notes
Notes and the Old Indenture to at any time, in whole or from to
redeem the remaining principal time in part, until maturity, upon
amount of the Old Notes not less than 30 nor more than
outstanding at $786 per $1,000 60 days' notice, at a
principal without any accrual of redemption price equal to a
interest by July 31, 2000. percentage of the principal
amount of the New Notes being
redeemed (the "Redemption
Percentage") plus accrued and
unpaid interest thereon to the
redemption date. For a more
detailed description of the
Redemption Percentage, see
"Offering Circular Summary --
The New Notes."
Sinking Fund: None. None.
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OLD NOTES NEW NOTES
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Security: The Old Notes are secured by The New Notes will be secured
a pledge of the outstanding by a pledge of certain
shares of stock of certain outstanding shares of stock of
subsidiaries of the Company the Company and all of the
and a lien on certain tangible outstanding shares of stock of
and intangible assets of All Star certain subsidiaries of the
Gas Inc. of Colorado. Company. The New Notes will
also be secured by a lien on
certain tangible and intangible
assets of All Star Gas Inc. of
Colorado and the right to obtain
a lien on certain of the
remaining current and future
assets of the Company and its
subsidiaries.
Change of Control: In the event of a Change of In the event of a Change of
Control, as defined in the Old Control, as defined in the New
Indenture, the Company shall Indenture, the Company shall
make an offer to purchase the make an offer to purchase the
Old Notes then outstanding at a New Notes then outstanding at
purchase price equal to a a purchase price equal to the
percentage of the principal Redemption Percentage plus
amount of the Old Notes then accrued and unpaid interest
outstanding plus accrued and thereon to the purchase date.
unpaid interest thereon to the For a more detailed description
purchase date. of the Redemption Percentage,
see "Offering Circular Summary
-- The New Notes."
Registration: The Old Notes are registered The New Notes will be
under the Exchange Act. registered under the Exchange
Act.
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RISK FACTORS
In deciding whether to participate in the Exchange Offer, each Holder
should consider carefully, in addition to the other information contained in
the Offering Circular, the factors listed below.
History of Losses; Repayment of New Notes Uncertain
The Company has suffered losses from operations in various periods since
its inception and has a net working capital deficiency of $80,513,000 and a
stockholders' equity deficiency of $45,919,000 as of June 30, 2000. Ignoring
gains on sales of assets the Company expects to operate at a net loss at least
through fiscal year 2001 and possibly in subsequent years. The Company can give
no assurance that it will achieve profitability in 2001 or in any subsequent
year or that it will have sufficient cash on hand or available from liquidation
of assets, or that other sources of funding will be available, to pay interest
on the New Notes on the interest payment dates or principal on the New Notes at
maturity.
Tax Liability for Fiscal Year Ending June 30, 2000; Payment of Interest
Uncertain
Pursuant to the Offer to Purchase and Consent Solicitation Statement dated
March 22, 2000, as amended, supplemented and modified, the Company purchased,
for a purchase price of $60,000,000, sixty percent or $76,320,000 principal
amount of the Old Notes outstanding on May 30, 2000. The purchase price of
$60,000,000 was funded through the sale of certain of the Company's assets.
Accordingly, in connection with such sales the Company incurred a federal tax
liability estimated to be approximately $9.7 million for the fiscal year ending
June 30, 2000. The Company will not have cash or alternative financing
available to pay such tax liability which may impede the Company's ability to
make the interest payment on the New Notes due December 30, 2000 and all
subsequent interest payments.
The Company's federal income tax return was filed on September 15, 2000,
and the return reported a tax due of approximately $9.7 million all of which
was unpaid. The Company is engaged in negotiations with the Internal Revenue
Service to pay such liability over a period of four to five years. There can be
no assurance that the Internal Revenue Service will agree to such payment
terms. The Internal Revenue Service may file a federal tax lien to protect its
position, and such a filing may impair the ability of the Company to borrow
money with which to finance its operations. The Internal Revenue Service can
resort to levying upon property of the Company. Although the Company is
endeavoring to negotiate viable payment terms with the Internal Revenue
Service, there can be no assurance that the Internal Revenue Service would
restrain itself from filing a federal tax lien or other collection measures.
Collection measures by the Internal Revenue Service may impede the Company's
ability to make interest payments on the New Notes due December 30, 2000 and
all subsequent interest payments.
Interest Payable and Remedies Under Subordinated Indebtedness
The Company currently has outstanding $9,729,000 principal amount of its
9% Subordinated Debentures due 2007 (the "Subordinated Indebtedness"). Pursuant
to the terms of the Subordinated Indebtedness, a semiannual interest payment
due June 30, 2000 was not paid following the 30 day grace period permitted by
the indenture related to the Subordinated Indebtedness. According to the Offer
to Exchange and the Consent Solicitation dated June 30, 2000, as supplemented
on July 31, 2000, the Company is offering to exchange its new 9% Accruing
Subordinated Debentures due 2007 (the "Accruing Subordinated Indebtedness") for
up to all of the outstanding principal amount of Subordinated Indebtedness.
Interest on the Accruing Subordinated Indebtedness would accrue semiannually,
payable at maturity; accordingly, such exchange would relieve the Company of
the obligation to pay interest on the Subordinated Indebtedness semiannually.
If the exchange offer for the Subordinated Indebtedness is not accepted by all
of the holders of Subordinated Indebtedness, the Company will be required to
continue to pay interest to such non-tendering holders semiannually and to pay
all accrued interest payable as of July 31, 2000 with respect to such
non-tendering holders. In the event that the Company fails to make any interest
payment otherwise payable pursuant to the Subordinated Indebtedness, the
trustee and the holders of such Subordinated Indebtedness may choose to pursue
any and all remedies contained in the indenture or at law relating to such
Subordinated Indebtedness.
11
<PAGE>
Failure to Tender of 100% Principal Amount of the Old Notes; Holder Remedies
As a condition to the consummation of the Exchange Offer, the Holders must
tender 100% of the aggregate principal amount of the Old Notes outstanding.
There can be no assurances that the Holders will tender 100% of the aggregate
principal amount of the outstanding Old Notes. If the Exchange Offer is not
consummated, the terms of the Old Notes and the Old Indenture will continue to
apply. If the Holders of the Old Notes accelerate the Company's obligations
under the Old Notes, such events would have a material adverse effect on the
Company's liquidity and financial position. Under such circumstances, the
Company's financial position would necessitate the development of an
alternative financial structure. Considering the limited financial resources
and the existence of certain defaults, there can be no assurance that the
Company would succeed in formulating and consummating an acceptable alternative
financial structure. In addition, in light of the Company's current financial
condition and the existence of certain defaults, the Company may need to seek
protection under the federal bankruptcy laws.
Acceptance of Exchange Offer; Release of Any and All Claims Against All Star
By tendering Old Notes in the Exchange Offer, a Holder will be deemed to
have released and waived any and all claims it, its successors and its assigns
have or may have had against All Star, its subsidiaries, its affiliates and its
stockholders, and/or the directors, officers, employees, attorneys,
accountants, advisors, agents and representatives, in each case whether current
or former, of All Star, its subsidiaries, its affiliates and its stockholders,
arising from, related to, or in connection with, a Holder's acquisition or
ownership of the Old Notes, whether those claims arise under federal or state
securities laws or otherwise. Since it is not possible to estimate the
likelihood of success in pursuing these legal claims or the magnitude of any
recovery to which a Holder ultimately might be entitled, it is possible that
the consideration a Holder receives in the Exchange Offer will have a value
less than the value of the legal claims the Holder is relinquishing. Moreover,
former Holders who have already sold their Old Notes will continue to have the
right to prosecute their claims against All Star. These claims, if successful,
may result in one or more material judgments against All Star, the payment of
which could impair its ability to meet its obligations under the New Notes.
Security Interests
The Old Notes are secured with a pledge of the outstanding shares of stock
of certain subsidiaries of the Company and certain tangible and intangible
assets of All Star Gas Inc. of Colorado. By contrast, the New Notes will be
secured with the same security as the Old Notes and, in addition, the pledge of
certain outstanding shares of stock of the Company and at the request of the
Holders, all of the current and future assets of the Company and its
subsidiaries. This means that, although the Old Notes are secured obligations
of the Company and, except for certain purchase money secured equipment
financing and lease obligations of the Company incurred in the ordinary course
of its business, rank pari passu with all existing and future secured and
senior indebtedness of the Company, the dollar value of assets securing the Old
Notes may be less than the dollar value of assets intended to secure the New
Notes. Notwithstanding the increased value of assets securing the New Notes,
there can be no assurances that the assets of the Company would be sufficient
upon liquidation to repay senior secured lenders, if any, or the holders of the
New Notes.
No Public Trading Market
No active trading market currently exists for the New Notes, and none may
develop. The New Notes will not be listed on any securities exchange. The
trading price of the New Notes may depend upon prevailing interest rates, the
market for similar securities and other factors, including general economic
conditions and the Company's financial condition, performance and prospects. If
an active trading market does not develop, you may not be able to resell your
New Notes at their fair market value or at all.
Preference Provisions Of Federal Or State Insolvency Laws
If the Company or one of its subsidiaries that guarantees the New Notes
were to file a petition, or become a debtor in an involuntary proceeding, under
the United States Bankruptcy Code within 90
12
<PAGE>
days after the consummation of the Exchange Offer, then the granting of liens
on the assets of the entity that filed the bankruptcy petition to secure the
New Notes could be challenged as a voidable preference under the Bankruptcy
Code. In addition, if any of the exchanging noteholders were determined to be
an "insider", as that term is defined in the Bankruptcy Code, on the date the
Exchange Offer is consummated, then the applicable period in which the filing
of a bankruptcy petition could lead to the assertion of a preference claim with
respect to the exchange offer would be one year rather than 90 days. "Insider"
is defined under the Bankruptcy Code to include, in the case of a corporation,
o officers,
o directors,
o partnerships in which the debtor is a general partner,
o general partners of the debtor,
o relatives of officers, directors or general partners or persons in
control of the debtor
o persons in control of the corporation and
o an affiliate, or insider of an affiliate, as if the affiliate were the
debtor.
The liens that the bankrupt entity had granted could be voided if
o The liens were granted within the applicable reachback period to secure
preexisting debt,
o the liens were granted to or for the benefit of a creditor,
o the bankrupt entity was insolvent at the time it granted the liens,
o the liens would enable the exchanging noteholders to receive more in a
liquidation of the bankrupt entity than they would have received in the
absence of the transaction and
o no defense applies.
The Bankruptcy Codes creates a rebuttable presumption that a bankrupt
entity was insolvent during the 90 days preceding its bankruptcy filing.
Applicable defenses include the exchange of "new value" for the granting of the
liens. The Bankruptcy Code defines "new value" to include the extension of new
credit, but it does not include an obligation substituted for an existing
obligation. If a bankrupt entity's granting of liens were found to be a
voidable preference, the liens that entity granted would be set aside and the
obligations of that entity under the indenture governing the new notes would
become unsecured obligations of that entity. Voiding of the liens the bankrupt
entity granted would not affect the liens that any other entity had granted.
Interest Accrual In The Event Of A Bankruptcy Proceeding Involving The Company
In the event of a bankruptcy proceeding involving the Company, interest on
debts owed by the Company will continue to accrue subsequent to the date of the
bankruptcy filing to the extent that such debts are fully secured (i.e. to the
extent the value of collateral exceeds the allowed claims secured thereby).
Since the New Notes may be secured with substantially all of the current and
future assets of the Company (which should be valued higher than collateral
securing the Old Notes), it is more likely, if so secured, that interest could
continue to accrue on the New Notes after the date of a bankruptcy filing than
with respect to the Old Notes.
Fraudulent Conveyance Considerations
The transfer of assets, the incurrence of indebtedness, or the grant of
security interests by the Company and the incurrence of the indebtedness in the
Exchange Offer could be subject to review under relevant federal and state
fraudulent conveyance statutes ("Fraudulent Conveyance Statutes") in a
bankruptcy case or lawsuit brought by or on behalf of the unpaid creditors of
the Company. Under such Fraudulent Conveyance Statutes, a transaction (i.e. the
indebtedness as well as liens granted)
13
<PAGE>
may be challenged (up to one year after the closing under Section 548 of the
Bankruptcy Code and up to 4 years if the transaction is challenged under the
Uniform Fraudulent Transfer Act), if it was effected for the purpose of
delaying, hindering or defrauding creditors or the Company received less than
reasonably equivalent value at a time when the debtor was, or as a result of
which the debtor became, insolvent, inadequately capitalized, or expected to be
unable to pay its debts when due. A court reaching such a conclusion with
respect to the Company's issuance of New Notes in the Exchange Offer could void
the issuance transaction (and any liens granted in connection therewith) or
subordinate the New Notes to preexisting and future indebtedness of the Company
(in addition to any senior indebtedness to which such securities are or will be
expressly subordinated) or take other action detrimental to the holders of such
securities.
Demand for Propane
The Company's ability to make the interest payment on the New Notes due
December 30, 2000, is highly dependent upon the demand for propane, which
demand has decreased over the past few years as a result of warm winters in the
northeastern United States. The Company believes that the occurrence of a cold
winter in late 2000 and early 2001 will improve the Company's results of
operations and thereby enhance the Company's ability to generate cash flows
necessary to make interest payments required under the New Notes. There can be
no assurances that the upcoming winter in late 2000 and early 2001 will be any
colder than such winters in recent past, and that the Company will be able to
pay interest on the New Notes on December 30, 2000, or on any subsequent
interest payment date or principal on the New Notes at maturity.
THE COMPANY
The Company was founded in 1963 and through its subsidiaries has been in
operation for over 36 years. The Company is engaged primarily in (a) the retail
marketing of propane to residential, agricultural, and commercial customers,
(b) the retail marketing of propane-related appliances, supplies, and
equipment, and (c) the renting of consumer propane storage tanks to residential
and commercial customers under various brand names, including All Star and the
names of numerous predecessors. During the fiscal year which ended June 30,
2000, the Company supplied propane to approximately 112,000 customers in 19
states. The Company experienced significant downsizing during fiscal year 2000
and by June 30, 2000, the Company was servicing 56,000 customers in 8 states
from 56 retail service centers. These 56,000 customers accounted for 41 million
of the total 74 million gallons sold during fiscal year 2000.
In March 2000, pursuant to an Offer to Purchase and Consent Solicitation,
the Company offered to purchase all $127.2 million of its Old Notes and
solicited consents for amendments of the Old Indenture. The offered aggregate
consideration for the purchase was $100 million, or $786 per $1,000 principal
amount of the Old Notes, without any further accrual of interest. In April
2000, the Company amended and extended its offer until May 5, 2000. In May
2000, the Company amended and extended its offer to May 26, 2000. The amendment
included the purchase and retirement, on a pro rata basis, of 60% of all Old
Notes outstanding. The offered aggregate consideration for the purchase and
consent was $60 million, or $786 per $1,000 principal amount of the Old Notes,
without any accrual of interest.
In order to obtain a portion of the funds necessary to consummate the
partial tender offer, from March 2000 through May 26, 2000, the Company sold 53
of its retail service centers located throughout the United States. The Company
received approximately $82 million in cash for the service center dispositions.
The retail service centers disposed of accounted for approximately 49.1% and
53.7% of the Company's sales volume for the year ended June 30, 2000 and 1999,
respectively. At June 30, 1999, the carrying value of the retail centers
disposed of was approximately 39% of the Company's total assets.
On May 30, 2000 the Company successfully completed the partial tender
offer to purchase and retire 60% of the Old Notes and received consents from
100% of the holders of the outstanding Old Notes not owned by the Company for
the amendments. Under terms of the amendments, the Company was permitted to
redeem the remaining principal amount of the Old Notes outstanding at $786 per
14
<PAGE>
$1,000 principal without any accrual of interest, or $40 million, by July 31,
2000 and the maturity date of the Old Notes was accelerated to July 31, 2000.
In order to obtain a portion of the funds necessary to pay the $40 million
redemption amount, the Company intended to sell additional service centers.
On July 31, 2000, the Company did not enter into a definitive agreement
for the sale of certain of its assets, the proceeds of which were to be used in
part to redeem the Old Notes. Therefore, as of such date, the Company is in
default with respect to its Old Notes. All Star has also outstanding $9,729,000
principal amount of its Subordinated Indebtedness. As a consequence of the
default under the Old Notes and pursuant to the terms of the indenture to which
the Subordinated Indebtedness is subject, All Star was prohibited from making
the interest payment on July 31, 2000 for interest due on June 30, 2000 (after
utilizing the permitted grace period). Accordingly, All Star is also in default
under its Subordinated Indebtedness. All Star currently has outstanding an
offer to exchange the Subordinated Indebtedness for a new issue of 9% Accuring
Subordinated Debentures due 2007.
On June 30, 2000, the Company offered, to the holders of the Subordinated
Indebtedness, to exchange an aggregate principal amount of up to $9,729,000 of
its new 9% Accruing Subordinated Debentures due 2007 ("Accruing Subordinated
Indebtedness") for a like principal amount of its issued and outstanding
Subordinated Indebtedness. The Accruing Subordinated Indebtedness will be
unsecured obligations of the Company, maturing on December 31, 2007, and will
bear interest accruing semiannually from January 1, 2000 at the rate of 9% per
year, payable on maturity. The payment of the principal of, premium, if any,
and interest on the Accruing Subordinated Indebtedness will be subordinated in
right of payment to the prior payment in full of all existing and future senior
indebtedness of the Company.
By exchanging a bi-annual cash interest payment obligation under the
Subordinated Indebtedness for the accruing and compounding interest obligation
under the Accruing Subordinated Indebtedness, although beneficial from a cash
flow perspective in the short term, the Company will significantly increase its
aggregate interest obligations upon maturity of the Accruing Subordinated
Indebtedness. Furthermore, if the exchange offer for the Subordinated
Indebtedness is not accepted by all of the holders of Subordinated
Indebtedness, the Company will be required to continue to pay interest to such
non-tendering holders semiannually in addition to being required to pay all
accrued interest payable as of June 30, 2000 to such non-tendering holders.
In the event that the Company fails to make any interest payment otherwise
payable pursuant to the Subordinated Indebtedness or the Accruing Subordinated
Indebtedness, the trustee and the holders of such indebtedness may choose to
pursue any and all remedies contained in the indenture or at law relating to
such indebtedness.
15
<PAGE>
SELECTED FINANCIAL DATA
The following table sets forth certain selected historical financial
information of the Company for, and as of the end of, each of the periods
presented. The selected historical financial information should be read in
conjunction with the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 2000. The selected historical financial information provided
below is not necessarily indicative of future results of operations or
financial performance for the Company.
<TABLE>
<CAPTION>
Year Ended June 30,
------------------------------
2000 1999
-------------- --------------
(restated)
<S> <C> <C>
(Dollars in thousands, except per share
amounts)
OPERATING REVENUE ............................................... $ 80,617 $ 83,563
COST OF PRODUCT SOLD ............................................ $ 46,425 $ 37,971
---------- ----------
GROSS PROFIT .................................................... $ 34,192 $ 45,592
---------- ----------
OPERATING COSTS AND EXPENSES
Provision for doubtful accounts ................................ $ 464 $ 227
General and administrative ..................................... $ 33,082 $ 32,377
Depreciation and amortization .................................. $ 8,169 $ 9,776
(Gain) loss on sale of assets .................................. $ (44,940) $ (547)
---------- ----------
$ (3,225) $ 41,833
---------- ----------
OPERATING INCOME ................................................ $ 37,417 $ 3,759
---------- ----------
OTHER INCOME (EXPENSE)
Interest expense ............................................... $ (18,062) $ (11,965)
Amortization of debt discount .................................. $ (2,042) $ (7,762)
Gain on SYN/Myers Transaction .................................. -- --
Restructuring proposal costs ................................... -- --
Write off of carrying value of underground storage facility and
closing costs .................................................
---------- ----------
$ (20,104) $ (19,727)
---------- ----------
INCOME (LOSS) BEFORE EQUITY IN NET INCOME OF
AFFILIATES ..................................................... $ 17,313 $ (15,968)
EQUITY IN NET INCOME OF AFFILIATES .............................. -- --
---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES ............................... $ 17,313 $ (15,968)
PROVISION (CREDIT) FOR INCOME TAXES ............................. $ 7,862 $ (5,197)
---------- ----------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM ......................... $ 9,421 $ (10,771)
EXTRAORDINARY ITEM .............................................. $ 7,969 --
Gain on Extinguishment of Debt, net of income taxes of $4,630 ..
---------- ----------
NET INCOME (LOSS) ............................................... $ 17,390 $ (10,771)
========== ==========
BASIC AND DILUTED INCOME (LOSS) PER COMMON SHARE
BEFORE EXTRAORDINARY ITEM ...................................... $ 5.94 $ (6.79)
BASIC AND DILUTED INCOME PER COMMON SHARE ON
EXTRAORDINARY ITEM ............................................. $ 5.02 --
---------- ----------
BASIC AND DILUTED INCOME (LOSS) PER COMMON SHARE ................ $ 10.96 $ (6.79)
========== ==========
</TABLE>
<PAGE>
[RESTUBBED TABLE]
<TABLE>
<CAPTION>
Year Ended June 30,
----------------------------------------------
1998 1997 1996
-------------- -------------- --------------
(restated)
<S> <C> <C> <C>
(Dollars in thousands, except per share
amounts)
OPERATING REVENUE ............................................... $ 90,963 $ 94,543 $ 82,702
COST OF PRODUCT SOLD ............................................ $ 43,839 $ 53,075 $ 43,318
---------- ---------- ----------
GROSS PROFIT .................................................... $ 47,124 $ 41,468 $ 39,384
---------- ---------- ----------
OPERATING COSTS AND EXPENSES
Provision for doubtful accounts ................................ $ 342 $ 483 $ 889
General and administrative ..................................... $ 33,338 $ 27,638 $ 27,493
Depreciation and amortization .................................. $ 9,723 $ 6,867 $ 6,770
(Gain) loss on sale of assets .................................. $ (340) $ 732 $ (395)
---------- ---------- ----------
$ 43,063 $ 35,720 $ 34,757
---------- ---------- ----------
OPERATING INCOME ................................................ $ 4,061 $ 5,748 $ 4,627
---------- ---------- ----------
OTHER INCOME (EXPENSE)
Interest expense ............................................... $ (11,577) $ (10,605) $ (10,657)
Amortization of debt discount .................................. $ (6,796) $ (6,140) $ (5,476)
Gain on SYN/Myers Transaction .................................. -- $ 16,922 --
Restructuring proposal costs ................................... $ (910) $ (1,903) --
Write off of carrying value of underground storage facility and
closing costs ................................................. $ (200)
---------- ---------- ----------
$ (19,283) $ (1,726) $ (16,333)
---------- ---------- ----------
INCOME (LOSS) BEFORE EQUITY IN NET INCOME OF
AFFILIATES ..................................................... $ (15,222) $ 4,022 $ (11,706)
EQUITY IN NET INCOME OF AFFILIATES .............................. -- -- $ 59
---------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES ............................... $ (15,222) $ 4,022 $ (11,647)
PROVISION (CREDIT) FOR INCOME TAXES ............................. $ (4,130) $ 1,800 $ (3,750)
---------- ---------- ----------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM ......................... $ (11,092) $ 2,222 $ (7,897)
EXTRAORDINARY ITEM .............................................. -- -- --
Gain on Extinguishment of Debt, net of income taxes of $4,630 ..
---------- ---------- ----------
NET INCOME (LOSS) ............................................... $ (11,092) $ 2,222 $ (7,897)
========== ========== ==========
BASIC AND DILUTED INCOME (LOSS) PER COMMON SHARE
BEFORE EXTRAORDINARY ITEM ...................................... $ (6.99) $ 1.41 $ (5.00)
BASIC AND DILUTED INCOME PER COMMON SHARE ON
EXTRAORDINARY ITEM ............................................. -- -- --
---------- ---------- ----------
BASIC AND DILUTED INCOME (LOSS) PER COMMON SHARE ................ $ (6.99) $ 1.41 $ (5.00)
========== ========== ==========
</TABLE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of June 30, 2000. This table should be read in conjunction with the
Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2000.
Since June 30, 2000, there has been no material change in the consolidated
capitalization of the Company.
<TABLE>
<CAPTION>
As of June 30, 2000
(in thousands)
--------------------
<S> <C>
Short-term debt .................................. $ 57,897
=========
Long-term debt ................................... $ 3,177
=========
Shareholders' equity (deficit):
Common stock .................................. $ 14
Common stock purchase warrants ................ 1,227
Additional paid-in capital .................... 28,574
Retained Earnings ............................. 12,180
Treasury stock, at cost ....................... (87,914)
---------
Total shareholders' equity (deficit) .......... $ (45,919)
=========
Total short-term debt and capitalization ......... $ (11,978)
=========
</TABLE>
16
<PAGE>
THE EXCHANGE OFFER
Purpose of the Exchange Offer
The Company has suffered recurring losses from operations and has net
working capital and stockholders' equity deficiencies. On May 31, 2000,
pursuant to an Offer to Purchase and Consent Solicitation described herein
under "The Company," the Company purchased and retired a portion of the Old
Notes at a discounted price of $786 per $1,000 principal amount. The purchase
price of this portion of Old Notes was funded from proceeds of the sale of
approximately 39% of the Company's total assets. On July 31, 2000 the entire
outstanding principal amount of $50,880,000 of the Old Notes became due. All
Star did not have the available funds or other sources of financing to enable
it to pay such amount on July 31, 2000 and is in default with respect to the
outstanding principal amount of the Old Notes and accrued and unpaid interest
from January 1, 2000.
The purpose of the Exchange Offer is to increase the Company's short term
flexibility by relieving it of its immediate requirement to pay the outstanding
principal amount of the Old Notes and by reducing the Company's annual cash
interest payment requirements. The Company believes that the terms of the New
Notes will be more beneficial to it over the short term.
Terms of the Exchange Offer and Consent Solicitation
Upon the terms and subject to the conditions set forth in this Offering
Circular and the accompanying Letter of Transmittal, the Company is making the
Exchange Offer, pursuant to which it is offering to exchange $1,000 principal
amount of the Company's New Notes for each $1,000 principal amount of the
Company's Old Notes. The Company's obligation to accept for exchange Old Notes
validly tendered pursuant to the Exchange Offer is subject to certain
conditions, including, without limitation, satisfaction of (i) the Minimum
Tender Condition and (ii) the General Conditions (as defined below).
Concerning the Trustee
The State Street Bank and Trust Company is the Trustee under the Old
Indenture, will be the Trustee under the New Indenture and has been engaged by
the Company to serve as the Exchange Agent.
Interest Payable
The New Notes will bear interest at the rate of 11% per annum beginning
August 1, 2000 and payable semiannually as of each June 30 and December 30.
Accordingly, Holders exchanging Old Notes for New Notes will not receive a cash
interest payment for the interest accrued through July 31, 2000 in respect of
the Old Notes exchanged.
Expiration Date; Extensions; Termination; Amendments
The Exchange Offer will expire at 5:00 p.m. New York City time, on the
Expiration Date, unless extended by the Company as provided herein. In the
event that the Exchange Offer is extended, the term "Expiration Date" with
respect to such extended Exchange Offer shall mean the time and date on which
the Exchange Offer, as so extended, shall expire.
The Company expressly reserves the right, in its sole discretion, subject
to applicable law, to (i) extend or terminate the Exchange Offer and not accept
for exchange any tendered Old Notes if any of the conditions specified in
"--Conditions to the Exchange Offer" are not satisfied or waived, (ii) waive
any condition to the Exchange Offer and accept Old Notes tendered pursuant to
the Exchange Offer, (iii) extend the Exchange Offer and retain all the Old
Notes tendered pursuant to the Exchange Offer until the expiration of the
Exchange offer, subject, however, to the withdrawal of rights of Holders as
provided in "--Withdrawal Rights", (iv) amend the terms of the Exchange Offer
and (v) modify the form of the consideration to be paid pursuant to the
Exchange Offer.
Any extension, termination or amendment will be followed as promptly as
practicable by a public announcement and notification to the Exchange Agent. In
the case of any extension, a public announcement will be issued prior to 9:00
a.m. New York City time, on the next business day after the previously
scheduled Expiration Date of the Exchange Offer. 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 filing with
17
<PAGE>
the Commisson a release or otherwise as required by law. In the event of any
extension of the Exchange Offer, all Old Notes tendered pursuant to the
Exchange Offer and not subsequently withdrawn, will remain subject to, and
Holders will continue to have withdrawal rights until the expiration of, the
Exchange Offer.
Effect of Tender
A tendering Holder of Old Notes that are exchanged in the Exchange Offer
will not be obligated to pay transfer taxes or any fees or commissions with
respect to the acquisition of their Old Notes by the Company pursuant to the
Exchange Offer. See "--Transfer Taxes." However, if the beneficial owner
tenders through a Custodian, such beneficial owner may be required to pay fees
or commissions to such institution.
Acceptance of Old Notes Tendered for Exchange; Delivery of Old Notes
Upon the terms and subject to the conditions of the Exchange Offer, the
Company will exchange Old Notes by accepting such Old Notes for exchange and in
consideration will issue a like principal amount of New Notes. New Notes will
be delivered on the Exchange Date. The Exchange Agent will act as agent for the
tendering Holders for the purpose of receiving Old Notes and delivering New
Notes to such Holders. In all cases, Old Notes will be accepted for exchange
pursuant to the Exchange Offer only after timely receipt by the Exchange Agent
of certificates representing Old Notes (or confirmation of a book-entry
transfer), 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.
Except as set forth in the next paragraph, the New Notes will be evidenced
initially by one or more global notes (the "Global Note") which will be
deposited with, or on behalf of, DTC and registered in the name of Cede & Co.,
as DTC's nominee. Except as set forth below, record ownership of the Global
Note may be transferred, in whole or in part, only to another nominee of DTC or
to a successor of DTC or its nominee.
New Notes held by holders who elect to take physical delivery of their
certificates instead of holding their interests through the Global Note (and
which are thus ineligible to trade through DTC) (collectively referred to
herein as the "Non-Global Holders") will be issued in registered certificated
form ("Certificated Notes"). Upon transfer, such Certificated Note will, unless
the transferee requests otherwise or the Global Note has previously been
exchanged in whole for Certificated Notes as described below, be exchanged for
an interest in the Global Note.
Owners of beneficial interests in the Global Note may hold their interest
in the Global Note directly through DTC if such person is a participant in DTC
or indirectly through organizations that are participants in DTC (the
"Participants"). Persons who are not Participants may beneficially own
interests in the Global Note held by DTC only through Participants or certain
banks, brokers, dealers, trust companies and other parties that clear through
or maintain a custodial relationship with a Participant, either directly or
indirectly ("Indirect Participants"). So long as Cede & Co., as the nominee of
DTC, is the registered owner of the Global Note, Cede & Co. for all purposes
will be considered the sole holder of the Global Note. Owners of beneficial
interests in the Global Note will be entitled to have certificates registered
in their names and to receive physical delivery of Certificated Notes.
The Company has been informed by DTC that, with respect to any payment of
principal of, or premium or interest on the Global Note, DTC's practice is to
credit Participants' accounts on the applicable payment date, with payments in
amounts proportionate to their respective beneficial interests in the new notes
represented by the Global Note as shown on the records of DTC, unless DTC has
reason to believe that it will not receive payment on such payment date.
Payments by Participants to owners of beneficial interests in the new notes
represented by the Global Note held through such Participants will be the
responsibility of such Participants, as is now the case with securities held
for the accounts of customers registered in "street name."
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Transfers between Participants will be effected in the ordinary way in
accordance with DTC's rules and will be settled in immediately available funds.
The laws of some states require that certain persons take physical delivery of
securities in definitive form. Consequently, the ability to transfer beneficial
interests in the Global Note to such persons may be limited. Because DTC can
only act on behalf of Participants, who in turn act on behalf of Indirect
Participants and certain banks and other parties, the ability of a person
having a beneficial interest in the New Notes represented by the Global Note to
pledge such interest to persons or entities that do not participate in the DTC
system, or otherwise take actions in respect of such interest, may be affected
by the lack of a physical certificate evidencing such interest.
Neither the Company nor the Exchange Agent will have responsibility for
the performance of DTC or its Participants or Indirect Participants of their
respective obligations under the rules and procedures governing their
operations. DTC has advised the Company that it will take any action permitted
to be taken by a Holder of New Notes (including, without limitation, the
presentation of New Notes for exchange as described below) only at the
direction of one or more Participants to whose account with DTC interests in
the Global Note are credited, and only in respect of the New Notes represented
by the Global Note as to which such Participant or Participants has or have
given such direction.
DTC has also advised the Company that DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its Participants and to facilitate the clearance and settlement
of securities transactions between Participants through electronic book-entry
changes to accounts of its Participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations. Certain of such
Participants (or their representatives), together with other entities, own DTC.
Indirect access to the DTC system is available to others such as banks,
brokers, dealers and trust companies that clear through, or maintain a
custodial relationship with, a Participant, either directly or indirectly.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Note among Participants, it is under no
obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. If DTC is at any time unwilling or
unable to continue as depositary and a successor depositary is not appointed by
the Company within 90 days, the Company will cause Certificated Notes to be
issued in exchange for the Global Notes.
Certificated Notes
Investors in the New Notes may request that Certificated Notes be issued
in exchange for New Notes represented by the Global Note.
The Company will be deemed to have accepted for exchange tendered Old
Notes as, if and when the Company gives oral or written notice to the Exchange
Agent of the Company's acceptance of such Old Notes for exchange. Old Notes
accepted for exchange by the Company will be canceled.
The entire principal amount that is represented by Old Notes delivered to
the Exchange Agent will be deemed to have been tendered unless otherwise
indicated in the Letter of Transmittal. The Company will not accept partial
tenders of Old Notes. If any tendered Old Notes are not accepted for exchange
because of an invalid tender, the occurrence of certain other events set forth
herein or otherwise, such Old Notes will be returned, at the Company's expense,
to the tendering holder thereof, as promptly as practicable following the
expiration or termination of the Exchange Offer.
Procedures for Tendering Old Notes
Tender of Old Notes Held in Physical Form. To tender Old Notes held in
physical form, a Holder must (i) complete (including the required information
regarding delivery of New Notes through DTC)
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and sign the Letter of Transmittal in accordance with the instructions set
forth therein and (ii) deliver the properly completed and executed Letter of
Transmittal, together with any other documents required by the Letter of
Transmittal, and the Old Notes in physical form to the Exchange Agent at the
address set forth hereof prior to the Expiration Date.
Tender of Old Notes Held Through a Custodian
To tender Old Notes held by a Custodian, the beneficial owner of the Old
Notes must contact the Custodian and direct the Custodian to tender such Old
Notes in accordance with the procedures set forth herein and in the Letter of
Transmittal.
The Exchange Agent and DTC have confirmed that the Exchange Offer is
eligible for ATOP. Accordingly, DTC participants may electronically transmit
their acceptance of the Exchange Offer by causing DTC to transfer Old Notes to
the Exchange Agent in accordance with DTC's ATOP procedures for such a
transfer. DTC will then send an Agent's Message to the Exchange Agent.
The term "Agent's Message" means a message transmitted by DTC received by
the Exchange Agent and forming part of a Book-Entry Confirmation (as defined
herein), which states that DTC has received an express acknowledgment from the
DTC participant tendering Old Notes which are the subject of such Book-Entry
Confirmation, that such DTC participant has received and agrees to be bound by
the terms of the Letter of Transmittal and that the Company may enforce such
agreement against such DTC participant. In the case of an Agent's Message
relating to a guaranteed delivery, the term means a message transmitted by DTC
and received by the Exchange Agent, which states that DTC has received an
express acknowledgment from the DTC participant tendering Old Notes that such
DTC participant has received and agrees to be bound by the Notice of Guaranteed
Delivery (as described below). Holders desiring to tender Old Notes on the
Expiration Date should note that such Holders must allow sufficient time for
completion of the ATOP procedures during the normal business hours of DTC on
that date.
If the Custodian holds such Old Notes in physical form, the custodian must
follow the procedure set forth above under "Procedures for Tendering Old Notes
-- Tender of Old Notes Held in Physical Form."
If the Custodian holds such Old Notes in book-entry form through DTC (the
"Book-Entry Transfer Facility"), to tender such Old Notes the Custodian must
effect a book-entry transfer (a "Book-Entry Confirmation") of all Old Notes to
be tendered to the Exchange Agent's account at such Book-Entry Transfer
Facility prior to the Expiration Date.
Book-Entry Delivery Procedures
The Exchange Agent will establish promptly an account with respect to the
Old Notes at the Book- Entry Transfer Facility for the purposes of the Exchange
Offer. Any financial institution that is a participant in the Book-Entry
Transfer Facility may make a book-entry delivery of Old Notes by causing the
Book-Entry Transfer Facility to transfer Old Notes to the Exchange Agent's
account. Delivery of a Letter of Transmittal to a Book-Entry Transfer Facility
will not constitute valid delivery to the Exchange Agent.
Signature Guarantees
Signatures on all Letters of Transmittal, if necessary, must be guaranteed
by a recognized participant in the Securities Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Signature Program or the Stock
Exchange Medallion Program (a "Medallion Signature Guarantor"), unless the
Notes tendered thereby are tendered (i) by a registered Holder of Notes (or by
a participant in DTC whose name appears on a security position listing as the
owner of such Notes) who has not
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completed the box entitled "Special Issuance/Delivery Instructions" on the
Letter of Transmittal or (ii) for the account of a member firm of a registered
national securities exchange, a member of the National Association of
Securities Dealers, Inc. ("NASD") or a commercial bank or trust company having
an office or correspondent in the United States (each of the foregoing being
referred to as an "Eligible Institution"). See Instruction 1 of the Letter of
Transmittal. If the Notes are registered in the name of a person other than the
signer of the Letter of Transmittal or if Notes not accepted for payment or not
tendered are to be returned to a person other than the registered Holder, then
the signatures on the Letters of Transmittal accompanying the tendered Notes
must be guaranteed by a Medallion Signature Guarantor as described above. See
Instructions 1 and 5 of the Letter of Transmittal.
Letters of Transmittal and Old Notes must be sent only to the Exchange Agent.
Do not send Letters of Transmittal or Old Notes to the Company.
Any Holder whose Old Notes have been mutilated, lost, stolen or destroyed
will be responsible for obtaining replacement securities or for arranging for
indemnification with the State Street Bank and Trust Company, as trustee for
the Old Notes. Holders may contact the Trustee for assistance with such
matters.
In order for a tendering Holder to be assured of participating in the
Exchange Offer, such Holder must tender Old Notes in accordance with the
procedures set forth herein and in the Letter of Transmittal prior to the
Expiration Date. The method of delivery of Old Notes and all other required
documents is at the option and risk of the Holder. If delivery is by mail,
registered mail with return receipt requested, properly insured, is recommended
and enough time should be allowed to ensure timely delivery.
Guaranteed Delivery Procedures
If a Holder of Old Notes wishes to tender such Old Notes and time will not
permit such Holder of the Old Notes or other required documents to reach the
Exchange Agent prior to the Expiration Date, or the procedure for book-entry
transfer cannot be completed on a timely basis, a tender may be effected if (i)
the tender is made through an Eligible Institution (as such term is defined in
the Letter of Transmittal), (ii) on or prior to 5:00 p.m., New York City time,
on the Expiration Date, the Exchange Agent received from such Eligible
Institution a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Company (by mail or hand
delivery), setting forth the name and address of the holder of Old Notes and
the amount of Old Notes tendered, stating that the tender is being made thereby
and guaranteeing that within three New York Stock Exchange ("NYSE") trading
days after the date of execution of the Notice of Guaranteed Delivery, the
certificates for all physically tendered Old Notes, in proper form for transfer
or a Book-Entry Confirmation, as the case may be, together with a properly
completed and duly executed Letter of Transmittal with any required signature
guarantees and any other documents required by the Letter of Transmittal will
be deposited by the Eligible Institution with the Exchange Agent, and (iii) the
certificates for all physically tendered Old Notes, in proper form for
transfer, or a Book-Entry Confirmation, as the case may be, together with a
properly completed and duly executed Letter of Transmittal with any required
signature guarantees, and any other documents required by the Letter of
Transmittal are deposited by the Eligible Institution within three NYSE trading
days after the date of execution of the Notice of Guaranteed Delivery.
Proper Execution and Delivery of Letter of Transmittal
In general, all signatures on a Letter of Transmittal or a notice of
withdrawal must be guaranteed by an Eligible Institution; however, such
signatures need not be guaranteed if (a) the Letter of Transmittal is signed by
the Holder of the Old Notes tendered thereby or by a participant in a
Book-Entry Transfer Facility whose name appears on a security position listing
as the Holder of the Old Notes tendered thereby and such Holder has not
completed the portion entitled "Special Delivery Instructions" on the Letter of
Transmittal, or (b) such Old Notes tendered are for the account of an Eligible
Institution.
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If the Letter of Transmittal is signed by the Holder of the Old Notes
tendered thereby or a participant in a Book-Entry Transfer Facility whose name
appears on a security position listing with respect to the Old Notes tendered
thereby, the signature must correspond with the name as written on the face of
the Old Notes or on the security position listing, respectively, without any
change whatsoever. If any of the Old Notes tendered thereby are held by two or
more holders, all such Holders must sign the Letter of Transmittal. If any of
the Old Notes tendered thereby are registered in different names on different
Old Notes, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations.
If the Letter of Transmittal is signed by a person other than the Holder
of the Old Notes tendered thereby or a participant in a Book-Entry Transfer
Facility whose name appears on a security position listing with respect to the
Old Notes tendered thereby, the Old Notes must be endorsed or accompanied by
appropriate instruments of transfer, in either case, signed exactly as the name
of the Holder appears on the face of the Old Notes or on the security position
listing with respect thereto. If the Letter of Transmittal or any Old Notes
proxy or instrument of transfer is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity, such person must so
indicate when signing, and proper evidence satisfactory to the Exchange Agent
of the authority of such person so to act must be submitted.
No alternative, conditional, irregular or contingent tenders will be
accepted. By executing the Letter of Transmittal, the Holder of Old Notes
waives any right to receive any notice of the acceptance for exchange of such
Holder's Old Notes, except as otherwise provided herein.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of tendered Old Notes will be determined by the
Company, whose determination shall be conclusive and binding. The Company
reserves the absolute right to reject any or all tenders that are not in proper
form or the acceptance of which may be, in the opinion of counsel for the
Company, unlawful. The Company also reserves the absolute right to waive any
condition of the Exchange Offer as set forth under "--Conditions to the
Exchange Offer" and any irregularities or conditions of tender as to particular
Old Notes. The Company's interpretation of the terms and conditions of the
Exchange Offer (including the instructions in the Letter of Transmittal) shall
be conclusive and binding.
Unless waived, any irregularities in connection with tenders must be cured
within such time as the Company may determine. The Company and the Exchange
Agent shall not be under any duty to give notification of defects in such
tenders and shall not incur liability for any failure to give such
notification. Tenders of Old Notes will not be deemed to have been made until
such irregularities have been cured or waived. Any Old Notes received by the
Exchange Agent that are not properly tendered and as to which the
irregularities have not been cured or waived will be returned by the Exchange
Agent to the Holder, unless otherwise provided in the Letter of Transmittal, as
soon as practicable following the Expiration Date.
Conditions to the Exchange Offer
Notwithstanding any other provisions of the Exchange Offer or any
extension of the Exchange Offer, the Company will not be required to issue New
Notes and may terminate the Exchange Offer by oral or written notice to the
Exchange Agent or, at its option, modify or otherwise amend the Exchange Offer
with respect to such Old Notes if any of the following conditions has not been
satisfied, on or prior to the Expiration Date:
(a) there shall not have been any action taken or threatened, or any
statute, rule, regulation, judgment, order, stay, decree or injunction
promulgated, enacted, entered, enforced or deemed applicable to the
Exchange Offer or the exchange of Old Notes pursuant to the Exchange Offer
(the "Exchange"), by or before any court or governmental regulatory or
administrative agency or authority or tribunal, domestic or foreign, which
(i) challenges the making of the Exchange Offer or the Exchange, or might,
directly or indirectly, prohibit, prevent, restrict or delay consummation
of the Exchange Offer or the Exchange, or might otherwise adversely affect
in any material manner
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the Exchange Offer or the Exchange or (ii) in the sole judgment of the
Company, could materially adversely affect the business, condition
(financial or otherwise), income, operations, properties, assets,
liabilities or prospects of the Company and its subsidiaries, taken as a
whole, or materially impair the contemplated benefits of the Exchange Offer
or the Exchange to the Company or might be material to Holders of Old Notes
in deciding whether to accept such Exchange Offer;
(b) there shall not have occurred or be likely to occur any event
affecting the business or financial affairs of the Company that, in the
sole judgment of the Company, would or might prohibit, prevent, restrict
or delay consummation of the Exchange Offer or the Exchange or that will,
or is reasonably likely to, materially impair the contemplated benefits of
the Exchange Offer or the Exchange to the Company or might be material to
Holders of Old Notes in deciding whether to accept such Exchange Offer;
(c) there shall not have occurred (i) a material impairment in the
general trading market for debt securities, (ii) a declaration of a
banking moratorium or any suspension of payments in respect of banks by
federal or state authorities in the United States (whether or not
mandatory), (iii) a commencement or escalation of a war, armed hostilities
or other national or international crisis directly or indirectly relating
to the United States, (iv) any limitation (whether or not mandatory) by
any governmental authority on, or other event having a reasonable
likelihood of affecting, the extension of credit by banks or other lending
institutions in the United States, (v) any material adverse change in
United States securities or financial markets generally, or in the case of
any of the foregoing existing at the time of the commencement of the
Exchange Offer, a material acceleration or worsening thereof or (vi) any
general suspension of or limitation on trading in securities on the NYSE
or on the over-the-counter market (whether or not mandatory);
(d) the Trustee shall not 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 Exchange Offer or the Exchange nor shall the Trustee
have taken any action that challenges the validity or effectiveness of the
procedures used by the Company or in making the Exchange Offer or the
Exchange; and
(e) there shall not have occurred the satisfaction of the Minimum Tender
Condition.
If any of the foregoing conditions are not satisfied, the Company may (i)
terminate the Exchange Offer and return such Old Notes to the Holders who
tendered them, (ii) extend the Exchange Offer and retain all tendered Old Notes
until the expiration of the Exchange Offer, as extended, subject, however, to
the withdrawal rights of Holders: see "--Withdrawal Rights" and "--Expiration
Date; Extensions; Termination; Amendment", or (iii) waive any of the conditions
with respect to such Exchange Offer and accept all Old Notes tendered therein.
The foregoing conditions are for the sole benefit of the Company and may
be waived by the Company, in whole or in part in its sole discretion. Any
determination made by the Company concerning an event, development or
circumstance described or referred to above shall be conclusive and binding.
Withdrawal Rights
Tendered Old Notes may be withdrawn by the Holder prior to the Expiration
Date.
A Holder of Old Notes who tendered Old Notes in physical form may withdraw
the Old Notes tendered by providing a written notice of withdrawal (or
facsimile thereof) to the Exchange Agent, at its address set forth herein,
prior to the Expiration Date, which notice must contain: (i) the name of the
person who tendered the Old Notes; (ii) a description of the Old Notes to be
withdrawn; (iii) the certificate number or numbers shown on the particular
certificate or certificates evidencing such Old Notes; (iv) the aggregate
principal amount represented by such Old Notes; (v) the signature of the Holder
of such Old Notes executed in the same manner as the original signature on the
Letter of Transmittal (including a signature guarantee, if such original
signature was guaranteed); and (vi) if such Old Notes are owned by a new
beneficial owner, evidence satisfactory to the Company that the person
withdrawing the tender has succeeded to the beneficial ownership of the Old
Notes.
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If a beneficial owner of Old Notes who tendered through a Custodian wishes
to withdraw the Old Notes tendered, the beneficial owner must contact the
Custodian and direct the Custodian to withdraw the Old Notes in accordance with
the following procedures. In order to withdraw such Old Notes, the Custodian
must provide a written notice of withdrawal (or facsimile thereof) to the
Exchange Agent, at its address set forth herein, prior to the Expiration Date,
which notice must contain: (i) the name of the person who tendered the Old
Notes; (ii) a description of the Old Notes to be withdrawn; (iii) the
certificate number or numbers shown on the particular certificate or
certificates evidencing such Old Notes (if Old Notes were tendered in physical
form); (iv) the aggregate principal amount represented by such Old Notes; and
(v) if such Old Notes are owned by a new beneficial owner, evidence
satisfactory to the Company that the person withdrawing the tender has
succeeded to the beneficial ownership of the Old Notes. If the Old Notes were
tendered by book entry transfer, the Custodian also must debit the Exchange
Agent's account at the Book-Entry Transfer Facility through which the tender
was made of all Old Notes to be withdrawn.
A purported notice of withdrawal which lacks any of the required
information will not be an effective withdrawal of a tender previously made.
Tenders may not be withdrawn after the Expiration Date.
Holders who have tendered in the Exchange Offer will continue to have
withdrawal rights following any extension of the Expiration Date. Any permitted
withdrawals of tenders of Old Notes may not be rescinded, and any Old Notes so
withdrawn will thereafter be deemed not validly tendered for purposes of the
Exchange Offer and the Holder thereof will be deemed to have rejected the
Exchange Offer. However, withdrawn Old Notes may be re-tendered prior to the
Expiration Date by following the procedures for tendering described above.
All questions as to the validity (including time of receipt) of notices of
withdrawal will be determined by the Company, whose determination will be
conclusive and binding. None of the Company, the Exchange Agent or any other
person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure
to give any such notification.
Transfer Taxes
The Company will pay all transfer taxes, if any, applicable to the
transfer and sale of Old Notes pursuant to the Exchange Offer. If, however,
substitute Old Notes for amounts not tendered or not exchanged are to be
delivered to, or are to be registered in the name of any person other than the
Holder of Old Notes tendered, or if tendered Old Notes are registered in the
name of any person other than the person signing the Letter of Transmittal, or
if a transfer tax is imposed for any reason other than the transfer or sale of
Old Notes to the Company pursuant to the Exchange Offer, the amount of any such
transfer taxes (whether imposed on the Holder or any other persons) shall be
payable by the Holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted with the appropriate Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
Holder and/or withheld from any payments due with respect to the Old Notes
tendered by such Holder.
Exchange Agent
The State Street Bank and Trust Company, which is serving as the Old
Trustee and will serve as the New Trustee, has been appointed Exchange Agent
for the Exchange Offer. The Company will pay the Exchange Agent reasonable and
customary fees for its services and will reimburse it for its reasonable
out-of-pocket expenses in connection therewith. Letters of Transmittal and all
correspondence in connection with the Exchange Offer must be sent or delivered
to the Exchange Agent at its address set forth herein.
Any questions concerning the tender procedures or requests for assistance
or additional copies of this Offering Circular or the Letters of Transmittal
may be directed to the Exchange Agent. Holders of Old Notes may also contact
their broker, dealer, commercial bank, trust company or other nominee for
assistance concerning the Exchange Offer.
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DESCRIPTION OF NEW NOTES
The following summaries of certain provisions of the New Notes and the New
Indenture do not purport to be complete and are subject, and are qualified in
their entirety by reference, to all the provisions of the New Notes and the New
Indenture, including the definitions therein of certain terms.
General
The New Notes will be secured obligations of the Company, will mature on
June 30, 2003, and will bear interest on an aggregate principal amount not to
exceed $50,880,000 at the rate of eleven percent per year payable semiannually
beginning August 1, 2000. Principal, interest and any premium will be payable
at the office of the Trustee in the City of New York, State of New York, and
the New Notes may be presented for registration of transfer or exchange at such
office as provided in the New Indenture. The New Notes will be issued only in
fully registered form in denominations of $1,000 and integral multiples
thereof. The New Notes will not be convertible.
Seniority of New Notes
The payment of the principal of, premium, if any, and interest on the New
Notes is senior in right of payment, to the extent set forth in the New
Indenture, to the prior payment in full of all existing and future Subordinated
Indebtedness of the Company, as that term is defined in the New Indenture. Upon
any distribution of the assets of the Company or upon any dissolution, winding
up, liquidation, or reorganization of the Company, the holders of the New Notes
will be entitled to receive payment in full before holders of the Subordinated
Indebtedness are entitled to receive any payment.
"Subordinated Indebtedness" will be defined in the New Indenture as any
indebtedness of the Company which is contractually subordinated or junior in
right of payment to the New Notes or any other indebtedness of the Company.
Optional Redemption
The New Notes will be redeemable, at the Company's option, in whole or in
part, on not less than 30 days' nor more than 60 days' prior notice given by
first-class mail as provided in the New Indenture, on any date prior to
maturity plus accrued interest thereon to the redemption date at the following
redemption prices (expressed as percentages of the principal amount of the New
Notes being redeemed):
on or prior to percentage
-------------- ----------
February 28, 2001 83.97%
June 30, 2001 87.18%
December 31, 2001 90.38%
June 30, 2002 93.59%
December 31, 2002 96.70%
June 30, 2003 100.00%
Modification of New Indenture
Without the consent of the holders of the New Notes, the Company, the
Subsidiary Guarantors and the Trustee may amend or supplement the New
Indenture, the Security Documents or the New Notes: (a) to cure any ambiguity,
omission, defect or inconsistency; (b) to comply with Article IV of the New
Indenture relating to a Consolidation, Merger or Sale of the Company; (c) to
provide for uncertificated New Notes in addition to the certificated New Notes;
(d) to add additional guarantees with respect to the New Notes or to secure the
New Notes; (e) to add to the covenants of the Company for the benefit of the
holders of the New Notes or to surrender any right or power herein conferred
upon the Company; (f) to comply with the requirements of the Commission in
connection with qualifications of the New Indenture under the Trust Indenture
Act of 1939, as amended; (g) to make any change that does
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not adversely affect the rights of any holder of the New Notes; (h) to provide
for certain amendments to the Security Documents expressly called for therein
and to add Collateral thereto, as defined therein; (i) to increase the
aggregate principal amount at maturity of New Notes that may be issued by the
Company pursuant to the New Indenture.
Default and Certain Rights on Default
An "Event of Default" will be defined in the New Indenture as a default in
payment of principal at maturity, upon redemption, by declaration or otherwise;
a default for 30 days in payment of any interest that is due and payable; a
default for 30 days after notice in performance in any material respect of any
other covenant in the New Indenture or New Notes; or certain other events and
events of bankruptcy, insolvency, receivership or reorganization.
The Indenture will provide that, if an Event of Default shall have
happened and be continuing, either the Trustee or the holders of 25 percent in
principal amount of the New Notes then outstanding may declare the principal of
all the New Notes to be due and payable immediately, but upon certain
conditions such declaration may be annulled and past defaults (except, unless
theretofore cured, a default in payment of principal, interest or premium, if
any, on the New Notes and except a default in respect of a covenant or
provisions of the New Indenture which may not be amended without the consent of
the holder of each then outstanding New Notes affected) may be waived by the
holders of a majority in principal amount of the New Notes then outstanding.
The New Indenture will require the Company to file annually with the
Trustee a statement as to the Company's compliance with the terms of the New
Indenture, including a statement whether the Company has fulfilled all its
obligations under the New Indenture, and whether there has been a default. The
Company must also, upon becoming aware of any default, deliver to the Trustee a
certificate specifying any such default. The New Indenture will provide that
the Trustee shall, within 90 days after the occurrence of a default, give to
the holders of the New Notes notice of all uncured defaults known to it;
provided, however, that, in the case of default in the payment of principal, or
interest on any of the New Notes, the Trustee shall be protected in withholding
such notice if the Trustee in good faith determines that the withholding of
such notice is in the interest of the holders of the New Notes. The term
"default" for the purpose of this provision only shall mean the happening of
any of the Events of Default specified above, excluding any grace periods.
The New Indenture will contain a provision entitling the Trustee, subject
to the duty of the Trustee during default to act with the required standard of
care, to be indemnified by the Company.
Consolidation, Merger and Sale of Property
The Company may, without the consent of any Holders of outstanding New
Notes, consolidate or merge with or into, or sell or convey its property to,
any person, provided that (i) the person formed by such consolidation or into
which the Company is merged, or the Person, which acquires the property of the
Company assumes the Company's obligations on the New Notes and under the New
Indenture, (ii) after giving effect to the transaction, no Event of Default,
and no event related to such transaction which would become an Event of
Default, shall have happened and be continuing and (iii) certain other
conditions are met.
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a summary of certain federal income tax
consequences to Holders of the exchange of Old Notes for New Notes and of the
ownership of New Notes acquired pursuant to the Exchange Offer. This summary is
based on the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
Regulations, Internal Revenue Service ("IRS") rulings, official pronouncements
and judicial decisions, all as in effect on the date hereof and all of which
are subject to change, possibly with retroactive effect, or different
interpretations. This summary does not discuss all the federal income
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tax consequences that may be relevant to a Holder in light of the Holder's
particular circumstances. In particular, this summary does not address any
special rules that may be applicable to insurance companies, tax-exempt
persons, financial institutions, regulated investment companies, dealers in
securities or currencies, pass-through entities, foreign corporations, persons
who are not citizens or residents of the United States, or persons whose
functional currency is other than the United States dollar. In addition, this
summary does not address any state or local tax considerations that may be
relevant to a Holder's decision to exchange Old Notes for New Notes pursuant to
the Exchange Offer.
THE FOLLOWING IS NOT TAX ADVICE TO ANY HOLDER OF OLD NOTES. ALL HOLDERS OF
OLD NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE UNITED STATES
FEDERAL, STATE AND LOCAL TAX CONSEQUENCES OF THE EXCHANGE OF OLD NOTES FOR NEW
NOTES AND OF THE OWNERSHIP AND DISPOSITION OF NEW NOTES RECEIVED IN THE
EXCHANGE OFFER IN LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES.
For federal income tax purposes, the receipt of a New Note in exchange for
an Old Note will be a taxable disposition of the Old Note, and the Holder of
the Old Note will be required to determine and recognize the gain or loss, if
any, on the exchange. Gain will be recognized by the Holder to the extent the
amount realized from the receipt of the New Note exceeds the Holder's adjusted
basis in the Old Note. Loss will be recognized by the Holder to the extent the
Holder's adjusted basis in the Old Note exceeds the amount realized from the
receipt of the New Note. The amount realized from the receipt of the New Note
will equal the issue price of the New Note. As described below, the issue price
of each $1,000 face amount New Note should be equal to $839.70.
The Company will have the option to redeem each $1,000 face amount New
Note for $839.70 plus accrued and unpaid interest at any time on or before
February 28, 2001, and will have additional redemption options at increasing
redemption prices at various times until the final maturity date of the New
Notes. Since exercise of the redemption option at the $839.70 redemption price
would minimize the economic yield to maturity of the New Notes, for federal
income tax purposes each $1,000 face amount New Note initially will be treated
as having a stated redemption price at maturity equal to the $839.70 optional
redemption price. The New Notes will bear stated interest at a rate of 11% per
annum, payable twice yearly. The stated interest rate is in excess of the
applicable Federal rate determined under the Internal Revenue Code. Therefore,
the issue price of each New Note will be equal to the $839.70 stated redemption
price at maturity.
If the Company does not exercise its option to redeem the New Notes on or
before February 28, 2001 at the $839.70 redemption price described above, then
for federal income purposes the New Notes will be treated as retired and
reissued on the expiration of the first redemption period. The increases in the
redemption price for each subsequent redemption date are such that the yield to
maturity on the New Notes will continue to increase between each redemption
date. Therefore, a Holder of a New Note will be treated as having disposed of
the New Note on each redemption date for an amount realized equal to the
redemption price on the immediately following redemption date, and will
recognize gain or loss accordingly. In addition, each Holder of a New Note will
be required to include in taxable income the stated interest on the New Note in
accordance with the Holder's method of accounting.
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PLAN OF DISTRIBUTION
The Company will exchange New Notes for Old Notes. Accordingly, the
Company will not receive any proceeds from the exchange of New Notes for Old
Notes.
Based on an interpretation by the staff of the Division of Corporation
Finance of the Commission, the Company believes that the New Notes issued
pursuant to the Exchange Offer may be offered for resale, resold and otherwise
transferred by any Holder thereof without compliance with the registration
requirements of the Securities Act.
The Company has not entered into any arrangement or understanding with any
person to distribute the New Notes to be received in the Exchange Offer and, to
the best of the Company's information and belief, each person participating in
the Exchange Offer is acquiring the New Notes in the ordinary course of
business and has no arrangement or understanding with any person to participate
in the distribution of the New Notes.
The Company has agreed to pay all expenses incident to the Exchange Offer
(other than commissions or concessions of any brokers or dealers).
INDEPENDENT ACCOUNTANTS
The consolidated financial statements as of June 30, 2000 and 1999 and for
each of the three years in the period ended June 30, 2000, incorporated by
reference in this Offering Circular from the Company's Annual Report on Form
10-K for the year ended June 30, 2000 have been audited by Baird, Kurtz &
Dobson, independent accountants, as stated in their report incorporated by
reference herein.
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