SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14a INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant |_|
Filed by a Party other than the Registrant |X|
Check the appropriate box:
|X| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Under Rule 14a-12
WHITEHALL JEWELLERS, INC.
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(Name of Registrant as Specified in Its Charter)
NEWCASTLE PARTNERS, L.P.
NEWCASTLE CAPITAL MANAGEMENT, L.P.
NEWCASTLE CAPITAL GROUP, L.L.C.
MARK E. SCHWARZ
JOHN P. MURRAY
STEVEN J. PULLY
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(Name of Persons(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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|_| Fee paid previously with preliminary materials:
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|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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PRELIMINARY COPY SUBJECT TO COMPLETION
DATED NOVEMBER 29, 2005
NEWCASTLE PARTNERS, L.P.
__________, 2005
Fellow Stockholders:
The attached proxy statement and the enclosed GREEN proxy card are being
furnished to you, the stockholders of Whitehall Jewellers, Inc. ("Whitehall"),
in connection with the solicitation of proxies by Newcastle Partners, L.P.
("Newcastle Partners") for use at the special meeting of stockholders of
Whitehall, and at any adjournments or postponements thereof (the "Special
Meeting"), relating to a series of financing transactions between Whitehall and
investment funds managed by Prentice Capital Management, L.P. and Holtzman
Opportunity Fund, L.P. (the "Prentice Financing"). As a condition to the closing
of the Prentice Financing, Whitehall is required to solicit and obtain
stockholder approval for certain matters described in more detail in the
attached proxy statement. Newcastle Partners has announced its intention to
commence a tender offer to acquire, through a wholly-owned acquisition entity,
all the outstanding shares of common stock, par value $.001 per share, of
Whitehall that it does not already own for $1.20 per share in cash, subject to
certain conditions (the "Newcastle Tender Offer"). We believe the Newcastle
Tender Offer is superior to the Prentice Financing as it will provide the
equivalent level of liquidity to the Company as the Prentice Financing while
allowing stockholders to monetize their investment in the Company at a
substantial premium to market. We are therefore soliciting proxies, pursuant to
the attached proxy statement, from the stockholders of Whitehall to vote AGAINST
Whitehall's proposals in connection with the Prentice Financing.
The Special Meeting will be held on ________, __________, 200__ at ____
(local time) at ________, Chicago, Illinois _________.
We urge you to carefully consider the information contained in the
attached proxy statement and then support our efforts by signing, dating and
returning the enclosed GREEN proxy card today. The attached proxy statement and
the enclosed GREEN proxy card are first being furnished to the stockholders on
or about _______, 200__.
If you have already voted for management's proposals relating to the
Prentice Financing, you have every right to change your vote by signing, dating
and returning a later dated proxy card. If you have any questions or require any
assistance with your vote, please contact MacKenzie Partners, Inc., which is
assisting us, at their address and toll-free numbers listed on the following
page.
Thank you for your support,
Mark E. Schwarz
Newcastle Partners, L.P.
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IF YOU HAVE ANY QUESTIONS, REQUIRE ASSISTANCE IN VOTING YOUR GREEN PROXY CARD,
OR NEED ADDITIONAL COPIES OF NEWCASTLE PARTNERS' PROXY MATERIALS, PLEASE CALL
MACKENZIE PARTNERS AT THE PHONE NUMBERS LISTED BELOW.
MACKENZIE
PARTNERS, INC.
105 Madison Avenue
New York, NY 10016
proxy@mackenziepartners.com
(212) 929-5500 (Call Collect)
or
TOLL-FREE (800) 322-2885
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SPECIAL MEETING OF STOCKHOLDERS
OF
WHITEHALL JEWELLERS, INC.
-------------------------
PROXY STATEMENT
OF
NEWCASTLE PARTNERS, L.P.
-------------------------
PLEASE SIGN, DATE AND MAIL THE ENCLOSED GREEN PROXY CARD TODAY
Newcastle Partners, L.P. ("Newcastle Partners" or "we") is the second
largest stockholder of Whitehall Jewellers, Inc., a Delaware corporation
("Whitehall" or the "Company"). Newcastle Partners is writing to you in
connection with the series of financing transactions between Whitehall and
investment funds managed by Prentice Capital Management, L.P. ("Prentice") and
Holtzman Opportunity Fund, L.P. (the "Prentice Financing"). The Board of
Directors of Whitehall (the "Whitehall Board") has scheduled a special meeting
of stockholders for the purpose of approving certain matters necessary to
effectuate the Prentice Financing (the "Special Meeting"). The Special Meeting
is scheduled to be held on ________, __________, 200__ at ____ (local time) at
________, Chicago, Illinois _________. Newcastle Partners has announced its
intention to commence a tender offer to acquire, through a wholly-owned
acquisition entity, all the outstanding shares of common stock, par value $.001
per share (the "Common Stock"), of Whitehall that it does not already own for
$1.20 per share in cash, subject to certain conditions (the "Newcastle Tender
Offer"). We believe the Newcastle Tender Offer is superior to the Prentice
Financing as it will provide the equivalent level of liquidity to the Company as
the Prentice Financing while allowing stockholders to monetize their investment
in the Company at a substantial premium to market. Newcastle Partners is
therefore soliciting proxies from the stockholders of Whitehall AGAINST the
following proposals in connection with the Prentice Financing:
1. The Company's proposal to approve the issuance of shares of its
Common Stock pursuant to the terms of its secured convertible notes;
2. The Company's proposal to approve an amendment to its certificate of
incorporation to effect a 1-for-2 reverse stock split of its capital
stock; and
3. The Company's proposal to elect one (1) Class I director, three (3)
Class II directors and two (2) Class III directors.
STOCKHOLDER APPROVAL OF EACH OF THE FOREGOING PROPOSALS IS A CONDITION PRECEDENT
TO THE CONSUMMATION OF THE PRENTICE FINANCING.
Newcastle Partners, Newcastle Capital Management, L.P. ("Newcastle
Management"), Newcastle Capital Group, L.L.C. ("Newcastle Group"), Mark E.
Schwarz, John P. Murray and Steven J. Pully are members of a group (the "Group")
formed in connection with this proxy solicitation and are deemed participants in
this proxy solicitation.
See "Other Participant Information." This Proxy Statement and the GREEN proxy
card are first being furnished to Whitehall's stockholders on or about _______,
200__.
Whitehall has set the record date for determining stockholders entitled to
notice of and to vote at the Special Meeting as ________, 2005 (the "Record
Date"). Only stockholders of record as of the close of business on the Record
Date are entitled to vote the shares of Common Stock and Class B common stock,
par value $1.00 per share (the "Class B Stock" and together with the Common
Stock, the "Capital Stock"), at the Special Meeting. Each holder of outstanding
shares of Common Stock is entitled to one vote for each share of Common Stock
held in that holder's name with respect to all matters on which holders of
Common Stock are entitled to vote at the Special Meeting. Each holder of
outstanding shares of Class B Stock is entitled to 35.4208 votes for each share
of Class B Stock held in that holder's name with respect to all matters on which
holders of Class B Stock are entitled to vote at the Special Meeting. Except as
otherwise required by law, the holders of shares of Common Stock and Class B
Stock shall vote together and not as separate classes. As of the Record Date,
there were _________ shares of Common Stock and 142 shares of Class B Stock
outstanding and entitled to vote. The principal executive offices of Whitehall
are located at 155 North Wacker Drive, Suite 500, Chicago, Illinois 60606.
THIS SOLICITATION IS BEING MADE BY NEWCASTLE PARTNERS AND NOT ON BEHALF OF THE
BOARD OF DIRECTORS OR MANAGEMENT OF WHITEHALL. NEWCASTLE PARTNERS IS NOT AWARE
OF ANY OTHER MATTERS TO BE BROUGHT BEFORE THE SPECIAL MEETING. SHOULD OTHER
MATTERS, WHICH NEWCASTLE PARTNERS IS NOT AWARE OF A REASONABLE TIME BEFORE THIS
SOLICITATION, BE BROUGHT BEFORE THE SPECIAL MEETING, THE PERSONS NAMED AS
PROXIES IN THE ENCLOSED GREEN PROXY CARD WILL VOTE ON SUCH MATTERS IN THEIR
DISCRETION.
NEWCASTLE PARTNERS URGES YOU TO SIGN, DATE AND RETURN THE GREEN PROXY CARD
AGAINST THE PRENTICE FINANCING PROPOSALS.
IF YOU HAVE ALREADY RETURNED A PROXY CARD FURNISHED BY WHITEHALL MANAGEMENT, YOU
MAY REVOKE THAT PROXY AND VOTE AGAINST THE PRENTICE FINANCING PROPOSALS BY
SIGNING, DATING AND RETURNING THE ENCLOSED GREEN PROXY CARD. THE LATEST DATED
PROXY IS THE ONLY ONE THAT COUNTS. ANY PROXY MAY BE REVOKED AT ANY TIME PRIOR TO
THE SPECIAL MEETING BY DELIVERING A WRITTEN NOTICE OF REVOCATION OR A LATER
DATED PROXY FOR THE SPECIAL MEETING TO NEWCASTLE PARTNERS, C/O MACKENZIE
PARTNERS, INC. WHICH IS ASSISTING IN THIS SOLICITATION, OR TO THE SECRETARY OF
WHITEHALL, OR BY VOTING IN PERSON AT THE SPECIAL MEETING.
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IMPORTANT
YOUR VOTE IS IMPORTANT, NO MATTER HOW FEW SHARES YOU OWN. NEWCASTLE
PARTNERS URGES YOU TO SIGN, DATE, AND RETURN THE ENCLOSED GREEN PROXY CARD TODAY
TO VOTE AGAINST THE PRENTICE FINANCING PROPOSALS.
Newcastle Partners does not believe that the Prentice Financing proposals
are in the best interest of the Company's stockholders and believes that the
Newcastle Tender Offer is a superior alternative. A vote AGAINST the Prentice
Financing proposals will enable you - as the owners of Whitehall - to send a
message to the Whitehall Board that you are committed to maximizing the value of
your shares.
o If your shares are registered in your own name, please sign and date the
enclosed GREEN proxy card and return it to Newcastle Partners, c/o
MacKenzie Partners, Inc., in the enclosed envelope today.
o If any of your shares are held in the name of a brokerage firm, bank, bank
nominee or other institution on the Record Date, only it can vote such
shares and only upon receipt of your specific instructions. Accordingly,
please contact the person responsible for your account and instruct that
person to execute on your behalf the GREEN proxy card. Newcastle Partners
urges you to confirm your instructions in writing to the person
responsible for your account and to provide a copy of such instructions to
Newcastle Partners, c/o MacKenzie Partners, Inc., who is assisting in this
solicitation, at the address and telephone numbers set forth below, and on
the back cover of this Proxy Statement, so that we may be aware of all
instructions and can attempt to ensure that such instructions are
followed.
If you have any questions regarding your proxy, or need
assistance in voting your shares, please call:
MACKENZIE
PARTNERS, INC.
105 Madison Avenue
New York, New York 10016
(212) 929-5500 (Call Collect)
proxy@mackenziepartners.com
or
CALL TOLL FREE (800) 322-2885
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BACKGROUND TO SOLICITATION
We refer you to the preliminary proxy statement filed by Whitehall with
the Securities and Exchange Commission on November 14, 2005 (the "Management
Proxy Statement") for a detailed background description of the Prentice
Financing. Below is a background description of Newcastle Partners' involvement
with Whitehall, including its initial investment in the Common Stock and its
representation on the Whitehall Board, and the Prentice Financing. All
information regarding the Prentice Financing and the deliberations of the
Whitehall Board and management have been excerpted from the Management Proxy
Statement. We make no representations as to the accuracy or completeness of such
information other than the information relating to Newcastle Partners'
involvement with the Company. Assuming the accuracy and completeness of the
information excerpted from the Management Proxy Statement, we believe that the
background description below concisely and accurately state the facts necessary
for a stockholder to fairly evaluate the Prentice Financing proposals in light
of the Newcastle Tender Offer.
o On April 19, 2005, Newcastle Partners and its affiliates filed a Schedule
13D with the Securities and Exchange Commission indicating it owned
2,018,400 shares of Common Stock as of April 15, 2005, representing 14.5%
of the Company's outstanding shares. In this filing, Newcastle Partners
stated, among other things, that it intended to enter into discussions
with management on the performance of the Company and to seek
representation on the Whitehall Board.
o On June 23, 2005, Whitehall announced the election of Steven J. Pully, the
President of Newcastle Management, as a director of the Company. On or
around July 5, 2005, Mr. Pully was elected as nonexecutive Chairman of the
Board. He served as Chairman of the Board until November 10, 2005.
o On July 12, 2005, the Whitehall Board formed a special committee of the
Board of Directors consisting of Daniel H. Levy (Chairman), Richard K.
Berkowitz and Sanford Shkolnik (the "Special Committee") to consider
potential financing proposals in light of Newcastle Partners' interest in
being a potential source of financing and Mr. Pully's status as Chairman
of the Board. Mr. Pully did not participate in the consideration of the
formation of the Special Committee and subsequently questioned the role
ultimately assigned to the Special Committee. Mr. Pully felt that the role
of the Special Committee should have been to limited to determining the
fairness of any financing proposals but not the body that determines
whether the Company needs to complete a financing, which party to complete
a financing with and when a financing should be completed.
o During July 2005 and thereafter, the Whitehall Board continued to review
various issues confronting the Company, including the possibility of
raising additional funds and the advisability of selling or closing
underperforming stores. During this period, the Company discussed with the
agents for its credit facility its plans to seek additional equity or
quasi-equity financing (i.e., convertible debt) and the consideration of
potential store closings in light of the Company's weak results throughout
2005. During this period, Newcastle Partners and Reed Conner & Birdwell
LLC, another substantial
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stockholder ("RCB"), indicated that they were interested in providing
additional financing to the Company but did not present specific
proposals.
o During the period from August 10, 2005 through September 5, 2005, Company
management estimated that approximately $40-50 million of financing needed
to be raised for the Company to meet its liquidity needs.
o During this period, discussions were held with Newcastle Partners and RCB
about potential equity financings, such as the sale by the Company of
equity to them in a private transaction or a rights offering of Common
Stock in which all stockholders would be offered the opportunity to
subscribe for shares of Common Stock at a 20% discount to the average
market price of the stock over a period of time prior to the commencement
of the rights offering. It was contemplated that Newcastle Partners and
RCB would provide back-up commitments to buy shares not otherwise
purchased.
o On September 7, 2005, Mark E. Schwarz, a principal of Newcastle Partners,
sent to the Special Committee a nonbinding financing proposal dated
September 6, 2005. This proposal contemplated the issuance of $45 million
in convertible notes, bearing interest at 20%, payable quarterly partly in
kind (i.e., through the issuance of more notes) and partly in cash. These
notes would be convertible into Common Stock at a rate equal to the
average price of the Common Stock for the ten business days preceding the
first interest payment date (or, in the case of notes issued as
payment-in-kind for interest, the ten business days preceding the relevant
interest payment date). These notes would be secured by a security
interest in the Company's assets junior to that held by the banks. The
proposal contemplated that the Company would issue to Newcastle Partners
warrants to acquire 20% of the Company's fully-diluted shares in
connection with the note financing with an exercise price of $0.01 per
share. The proposal also contemplated that the interest rate on the notes
being increased to 25% per annum if stockholder approval of the share
issuances upon conversion of the notes was not procured.
o Over the next few weeks, the Company engaged in discussions with Prentice
regarding a proposed bridge loan financing to the Company that would be
refinanced with a larger convertible note transaction. At the same time,
Prentice, along with representatives of the Company, engaged in
discussions with the Company's senior lenders and key trade creditors with
the goal of reaching a comprehensive agreement regarding financing for the
Company and the resumption of key shipments of merchandise by the
Company's key suppliers.
o On September 12, 2005, Newcastle Partners submitted to the Special
Committee a nonbinding proposal for an issuance of $35 million of
convertible notes. These notes would have a maturity of three years, bear
interest at 15% (5% payable in cash and 10% payable-in-kind through the
issuance of additional notes) and be secured by a security interest in the
Company's assets junior to that securing the Company's credit facility.
Under the proposal, Newcastle Partners would be issued 10-year warrants
for 19.9% of the outstanding Common Stock, exercisable at $0.01 per share,
and $10 million of the notes would be convertible into 90% of the fully
diluted Common Stock (after dilution
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from the warrants). The proposal also provided that the interest rate on
the notes would increase to 24% per annum (5% per annum in cash and 19%
paid in kind through the issuance of new notes) if stockholder approval of
the equity issuance was not received within 120 days of closing. This
proposal expired on September 15, 2005.
o On September 14, 2005, the Company's bank lenders alleged that the Company
was in default under its credit facility and, as a result, the banks were
not obligated to make further advances. Therefore, the banks took the
position that any further advances were discretionary. The banks also
reserved their rights and remedies with respect to the alleged defaults,
including the right to accelerate the obligations of the Company under the
credit facility and to foreclose on the assets of the Company. On
September 14, 2005, representatives of the banks also indicated that the
lenders would not provide any further advances unless the Company had
entered into a letter of intent with a financing source. The banks also
indicated in several discussions that they were not interested in
providing debtor-in-possession financing to the Company if it should file
for bankruptcy protection. Based in part upon consideration of the banks'
position that they were not interested in providing debtor-in-possession
financing and considering the security interest held by the banks in
substantially all of the Company's assets, the Company concluded that
there was a significant possibility that a bankruptcy filing by the
Company could result in a liquidation, rather than a reorganization, of
the Company.
o The banks provided some additional funding but continued to express
substantial concern that the Company needed to accept a financing
proposal. They indicated that, from the banks' perspective, in light of
the Company's financial position, that unless the Company had entered into
a term sheet for additional financing, not later than September 21, 2005,
the banks would be unwilling to advance any additional funds.
o On September 18, 2005, Newcastle Partners submitted to the Special
Committee another nonbinding proposal for an issuance of $35 million of
convertible notes. The terms of this proposal were almost identical to the
terms of the September 12, 2005 proposal, except that this proposal added
a 1.5% fee to Newcastle Partners ($525,000) upon the funding of the
convertible notes and a non-refundable payment of $150,000 to Newcastle
Partners for reimbursement of its fees and expenses, plus agreement to pay
any additional fees and expenses. This proposal expired on September 19,
2005.
o Over the course of September 20 and 21, 2005, Newcastle Partners made
further written and oral modifications to its proposal. The final
September 21, 2005 proposal from Newcastle Partners contemplated the
issuance of up to $45 million of convertible notes and a $30 million
bridge loan facility. These notes would have a maturity of three years,
bear interest at 15% (5% payable in cash and 10% payable-in-kind through
the issuance of additional notes) and be secured by a security interest in
the Company's assets junior to that securing the Company's credit
facility. The first $35 million of the notes were to be issued in
connection with the refinancing of the bridge loan and an additional $10
million were issuable at the Company's option. In conjunction with these
$10 million in notes, upon the issuance thereof, the Company was to issue
to Newcastle Partners 10-year warrants exercisable at $1.50 per share for
10 million shares of Common Stock. In
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conjunction with the bridge loan, Newcastle Partners would also be issued
10-year warrants for 19.9% of the outstanding Common Stock, exercisable at
$0.01 per share. Newcastle Partners was to receive a 2.00% fee for the
bridge loan and a 1.00% fee upon funding of the convertible notes. The
bridge loan was to mature at the earlier of (i) 120 days from funding or
(ii) stockholder approval of the convertible notes. This proposal expired
on September 21, 2005.
o During the period between September 15, 2005 and September 21, 2005,
Prentice made a series of written proposals and oral modifications thereto
addressing issues of concern raised by the Whitehall Board and the Special
Committee. The final September 21, 2005 proposal from Prentice
contemplated a term sheet with Prentice (the "Prentice Term Sheet"), which
the Company signed on September 21, 2005 providing that Prentice and other
participating investors would agree to provide a bridge loan to the
Company in the aggregate amount of $30 million and, in connection
therewith, would receive warrants to purchase approximately 20% of the
Common Stock and purchase $50 million in convertible secured notes subject
to a number of conditions. The notes were to have a 3-year term, bear
interest at 15% per annum, payable quarterly, payable in cash or
additional shares of Common Stock at the Company's option. The Prentice
Term Sheet contemplated that the notes would be convertible into Common
Stock and that Prentice and the other investors would receive 7-year
warrants for Common Stock (the "Series B Warrants") with an exercise price
equal to 110% of the conversion price of the notes. The Prentice Term
Sheet provided that Prentice would have the right through the conversion
of the notes, shares issued as interest on the notes and through the
exercise of the warrants, to acquire 87% of the Common Stock. The Prentice
Term Sheet contemplated that the bridge loan be made and the warrants for
19.9% of the Common Stock be issued. Both the bridge loan and the
convertible notes were to be secured by a security interest in the
Company's assets junior to that held by the banks. The Prentice Term Sheet
was nonbinding, except that the Company was required to deal exclusively
with Prentice through September 24, 2005 (which was subsequently
extended), give Prentice access to certain information and bear Prentice's
expenses.
o On September 21, 2005, the Whitehall Board convened to discuss the
financing proposals submitted by Prentice and Newcastle Partners and voted
to authorize and direct management to execute the Prentice Term Sheet, at
the recommendation of the Special Committee, with Mr. Pully abstaining.
o During negotiations between the Company and its representatives and
Prentice and its representatives from September 24, 2005 through October
3, 2005, a number of significant changes were agreed upon by Prentice and
the Company to the contemplated transaction and related documents. These
changes included, among others, the following:
o The Company was given the right to make two one-year extensions to
the maturity of the notes if no event of default or event which,
with notice or lapse of time or both would constitute an event of
default, exists.
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o The interest rate on the notes was reduced from 15% to 12%, with
interest now being paid entirely in Common Stock during the first
three years and in cash thereafter and with all of the shares
payable as interest to be issued if the notes were to be converted
prior to the third anniversary of issuance.
o The concept of Series B Warrants was eliminated, and the exercise
price of the warrants issued in connection with the bridge loan and
the conversion price of the notes both were set at $0.75 per share.
o The representations and warranties were limited somewhat and the
material adverse effect condition was modified, so that only an
"Extremely Detrimental Effect" would be required for this closing
condition to apply.
o A provision was added providing that proceeds, if any, from
proceedings concerning the Company's former Chief Executive Officer
(net of expenses and the costs of any counterclaims) relating to her
employment agreement would be paid 20% to the Company and 80% to a
trust or other vehicle for the benefit of the Company's stockholders
immediately prior to the closing date of the purchase of the notes
and, potentially, certain creditors of the Company.
o Provisions were added requiring the Company to maintain its
indemnification arrangements with directors and officers and to
maintain directors' and officers' insurance and committing Prentice
to advance funds to the Company to purchase this insurance if
necessary.
o The exclusivity provisions were modified to allow the Company to
consider potential superior proposals, if any. Additionally, the
parties agreed to eliminate a requirement that the Company hold a
stockholders meeting to consider the transaction even if the
Whitehall Board were to determine to accept a superior proposal.
o The aggregate expense reimbursement to Prentice was capped at
$750,000.
o On September 27, 2005, Newcastle Partners submitted a revised proposal
with a stated expiration date of September 30, 2005. The revised proposal
increased the contemplated convertible note issuance from the September
21, 2005 proposal to $50 million. Reflecting the increased financing, the
ultimate percentage ownership which the investors would acquire by full
exercise of conversion and warrant rights was increased to approximately
87%. This nonbinding offer was not extended past its stated expiration
date.
o On October 3, 2005, the Prentice Financing and related matters were
approved by the Whitehall Board, at the recommendation of the Special
Committee, with all directors voting in favor, other than Mr. Pully who
voted against them. The Purchase Agreement, Bridge Loan Agreement, Notes,
Warrants, Registration Rights Agreement and Fourth
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Amendment (each as defined below) were executed and delivered by the
parties that night.
o On October 13, 2005, Prentice advised the Company that Holtzman
Opportunity Fund, L.P. ("Holtzman" and together with Prentice, the
"Investors") would participate in the financing with Prentice, as
permitted by the transaction documents.
o To provide the Company with additional liquidity through the closing date
of the Prentice Financing, on October 3, 2005, the Company entered into a
Bridge Term Loan Credit Agreement (the "Bridge Loan Agreement") with
certain of the Investors (together with any other lenders under such
agreement from time to time, the "Bridge Loan Lenders"). Under the Bridge
Loan Agreement, the Bridge Loan Lenders provided a term loan (the "Bridge
Loan") to the Company in the aggregate principal amount of $30 million,
which bears interest at a fixed rate of 18% per annum, payable monthly,
and has a stated maturity date of December 30, 2005 or, if the Purchase
Agreement (as defined below) has not been terminated on or prior to such
date and the Securities and Exchange Commission reviews the proxy
statement relating to the special meeting of the Company's stockholders as
contemplated by the Purchase Agreement, January 31, 2006.
o In connection with the Bridge Loan Agreement, the Company issued warrants
(the "Warrants") to the Bridge Loan Lenders to purchase 2,792,462 shares
of Common Stock at an exercise price of $0.75 per share. The Warrants may
be exercised for a period of seven years from the date of issuance.
o Contemporaneously with the execution of the Bridge Loan Agreement, the
Company and the Investors entered into a Securities Purchase Agreement
(the "Purchase Agreement") pursuant to which, subject to certain terms and
conditions, the Company agreed to sell, and the Investors agreed to
purchase, $50 million of the Company's Secured Convertible Notes (the
"Notes"). Proceeds from the issuance of the Notes will be used to pay off
the Bridge Loan and to provide additional liquidity for the Company's
operations. The Notes will bear interest at a rate of 12% per annum,
payable quarterly. Interest that becomes payable during the initial three
year term of the Notes will be paid in shares of Common Stock at the
conversion price (initially $0.75 per share). Interest that becomes
payable after the initial three year term of the Notes will be paid in
cash. The interest rate on the Notes will increase to 18% per annum from
and after the occurrence of an event of default until such default is
cured.
o Contemporaneously with the entry into the Bridge Loan Agreement and the
Purchase Agreement, the Company and the Investors entered into a
Registration Rights Agreement (the "Registration Rights Agreement")
pursuant to which the Company has agreed to provide certain registration
rights with respect to the shares of Common Stock that may be issued (i)
upon exercise of the Warrants, (ii) upon conversion of the Notes and (iii)
in payment of interest under the Notes.
o Contemporaneously with the execution of the Bridge Loan Agreement and the
Purchase Agreement, the Company entered into a Waiver, Consent and Fourth
Amendment (the
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"Fourth Amendment") to the Second Amended and Restated Revolving Credit
and Gold Consignment Agreement (the "Senior Credit Agreement"), dated as
of July 29, 2003, by and among the Company, LaSalle Bank National
Association, as administrative agent and collateral agent for the banks
party thereto (the "Banks"), the Banks, Bank of America, N.A., as managing
agent, and Back Bay Capital Funding LLC, as accommodation facility agent.
Under the Fourth Amendment, the Banks have agreed to increase the maximum
borrowings under the Company's credit facility, subject to and depending
on borrowing base calculations, by $15 million to $140 million and
extending the term of the facility until 2008.
o ON OCTOBER 26, 2005, NEWCASTLE PARTNERS SUBMITTED A PROPOSAL TO WHITEHALL
TO ACQUIRE ALL THE OUTSTANDING SHARES OF COMMON STOCK IT DID NOT ALREADY
OWN FOR $1.10 PER SHARE IN CASH, BY MERGER OR OTHERWISE, AND TO CASH OUT
WARRANTS AND IN-THE-MONEY OPTIONS BASED ON THAT PRICE. Under the proposal,
Newcastle Partners also would pay off the bridge loan entered into by the
Company in connection with the Prentice Financing. Newcastle Partners
indicated that it expected to obtain a commitment to either replace the
Company's senior credit facility or obtain consents from the Company's
senior lenders.
o ON OCTOBER 27, 2005, THE SPECIAL COMMITTEE RESPONDED TO THE NEWCASTLE
PARTNERS PROPOSAL BY INDICATING THAT, ON THE ADVICE OF ITS FINANCIAL
ADVISORS AND COUNSEL, THE WHITEHALL BOARD HAD DETERMINED (WITH MR. PULLY
ABSTAINING) THAT IT COULD NOT CONCLUDE, FROM THE INFORMATION PROVIDED ON
THE NEWCASTLE PARTNERS PROPOSAL, THAT SUCH PROPOSAL IS REASONABLY LIKELY
TO RESULT IN A "SUPERIOR PROPOSAL" WITHIN THE MEANING OF THE PURCHASE
AGREEMENT EXECUTED BY THE COMPANY IN CONNECTION WITH THE PRENTICE
FINANCING.
-10-
THE NEWCASTLE TENDER OFFER
On November 29, 2005, Newcastle Partners announced its intention to
commence a tender offer to purchase, through a wholly-owned acquisition entity,
all the outstanding shares of Common Stock that it does not already own
(together with the associated preferred stock purchase rights) for $1.20 per
share in cash, upon the terms and subject to the conditions to be set forth in
an Offer to Purchase, Letter of Transmittal and related documents to be filed
with the Securities and Exchange Commission (the "Tender Offer Documents").
The offer is conditioned upon, among other things, (i) a majority of
Whitehall's shares on a fully diluted basis being tendered and not withdrawn,
(ii) a termination of the Purchase Agreement, (iii) stockholder rejection of the
conditions to consummation of the Purchase Agreement, set forth herein as
Proposals 1-3, (iv) a refinancing, acceptable to Newcastle Partners, of
Whitehall's senior credit facility or a consent to the offer to purchase and the
potential merger thereafter by the lenders under Whitehall's senior credit
facility, (v) the Whitehall Board redeeming the associated preferred stock
purchase rights or Newcastle Partners being satisfied that the rights have been
invalidated or are otherwise inapplicable to the offer and the potential merger
thereafter, (vi) the Whitehall Board approving replacement financing to be
provided by Newcastle Partners of the Company's existing bridge loan financing
with financial terms no less favorable to the Company than the existing
financing, but with no warrants, conversion rights or other equity related
components, and (vii) Newcastle Partners being satisfied that Section 203 of the
Delaware General Corporation Law is inapplicable to the tender offer and the
potential merger thereafter. The tender offer will not be subject to or
conditioned upon any financing arrangement other than as provided above.
The purpose of the tender offer is to acquire control of, and the entire
equity interest in, the Company. We currently intend, as soon as practicable
after consummation of the tender offer, to seek maximum representation on the
Whitehall Board and to seek to have the Company consummate a merger or other
business combination with us (or one of our subsidiaries). Pursuant to such
merger, the outstanding shares of Common Stock not owned by us would be
converted into the right to receive cash in an amount equal to the price per
share provided pursuant to the tender offer.
The information on the Newcastle Tender Offer set forth above is only a
summary and is qualified in its entirety by reference to the Tender Offer
Documents that Newcastle Partners expects to file with the Securities and
Exchange Commission on or about December 5, 2005. You are encouraged to read the
Tender Offer Documents when they become available for a complete description of
the tender offer.
-11-
PROPOSAL NO. 1
ISSUANCE OF SHARES OF COMMON STOCK PURSUANT TO
THE SECURED CONVERTIBLE NOTES
You are being asked by Whitehall to approve the issuance of shares of
Common Stock pursuant to the Notes. Stockholder approval of this proposal is a
condition precedent to the obligation of the Investors to consummate the
Prentice Financing. In other words, the Prentice Financing cannot be consummated
without stockholder approval of such issuance. For the reasons discussed below,
we oppose the Prentice Financing. To that end, we are soliciting your proxy to
vote AGAINST Proposal No. 1.
REASONS TO VOTE AGAINST THE PRENTICE FINANCING
We believe the stockholders should vote against the Prentice Financing.
While the Prentice Financing will provide financing to Whitehall, the Prentice
Financing does not take into consideration the best interests of the
stockholders. In addition, we believe the Newcastle Tender Offer is a better
alternative for both Whitehall and its stockholders than the Prentice Financing
as it will immediately satisfy Whitehall's financing needs while giving the
stockholders an opportunity to monetize their investment in the Company at a
substantial premium to market rather than being a minority stockholder of the
Company.
IF THE PRENTICE FINANCING IS CONSUMMATED, THE INVESTORS WOULD EFFECTIVELY OBTAIN
CONTROL OF APPROXIMATELY 87% OF THE COMPANY AND THE OTHER STOCKHOLDERS WOULD BE
DILUTED TO OWNING JUST 13% OF THE COMPANY.
The Prentice Financing would have a devastating dilutive effect on the
interests of the Company's existing stockholders. As a result of the issuance of
shares of Common Stock underlying the Warrants, upon conversion of the Notes and
as payment of interest under the Notes, the Investors would receive Common Stock
equal to approximately 87% of the issued and outstanding shares of Common Stock.
We are hard pressed to understand how the Whitehall Board can justify such a
substantial dilution of the existing stockholders' interest in the Company.
IF THE PRENTICE FINANCING IS CONSUMMATED, THE INVESTORS WOULD EFFECTIVELY OBTAIN
CONTROL OF THE COMPANY WITHOUT PAYING A PREMIUM TO THE STOCKHOLDERS.
The Prentice Financing, pursuant to which the Investors will receive
Common Stock and Common Stock equivalents equal to approximately 87% of the
issued and outstanding shares of Common Stock, effectively transfers control of
the Company to the Investors. This effective transfer of control, however, does
not require the Investors to pay any control or other premium in connection with
the sale of control of the Company.
IF THE PRENTICE FINANCING IS CONSUMMATED, NO ASSURANCE CAN BE GIVEN THAT THE
COMPANY WILL EVER SUCCESSFULLY APPLY FOR LISTING OF THE COMMON STOCK ON A MAJOR
EXCHANGE.
The Common Stock was listed for trading on the New York Stock Exchange
(the "NYSE") until it was suspended from trading on the NYSE prior to the
opening of trading on Friday, October 28, 2005. The Common Stock was delisted
due to the Company's failure to comply with the NYSE continued listing standards
because its average market capitalization had been less than $25 million over a
consecutive 30 trading-day period. The Common Stock is now quoted in the Pink
Sheets, and according to the Management Proxy Statement, the Company expects
that the Common Stock will continue to be quoted on the Pink Sheets or the OTC
Bulletin Board. If the Prentice Financing is consummated and the Investors
effectively take control of the Company, we do not believe that the Company will
ever successfully apply for listing of the Common Stock on a major exchange. If
the Common Stock continues to languish
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on the Pink Sheets or the OTC Bulletin Board, there will be little liquidity in
the Common Stock and investors may find it more difficult to acquire or dispose
of the Common Stock in the secondary market.
REASONS WHY WE BELIEVE THE NEWCASTLE TENDER OFFER IS A SUPERIOR
ALTERNATIVE TO THE PRENTICE FINANCING
We believe that Newcastle Partners' all-cash offer to purchase the
outstanding Common Stock it does not already own is clearly superior to the
Prentice Financing as it will satisfy Whitehall's immediate financing needs
while providing stockholders with immediate liquidity at a premium to market and
an immediate opportunity to maximize their investment in Whitehall. Rather than
being at the mercy of the Investors who will have the option of diluting the
existing stockholders' shares upon conversion of the Notes and exercise of the
Warrants, the Newcastle Tender Offer will allow stockholders to monetize their
investment in the Company at a substantial premium to market. We are confident
that Whitehall's lenders and trade creditors would be supportive of this
proposal. Since we believe the Newcastle Tender Offer will satisfy the Company's
financing needs just as quickly and efficiently as the Prentice Financing, and
this can be done without sacrificing the interests of the existing stockholders,
we believe the Newcastle Tender Offer is a superior alternative than the
Prentice Financing.
WE ALSO QUESTION WHETHER THE PRENTICE FINANCING HAS BEEN
STRUCTURED IN ORDER TO AVOID THE REQUIREMENT FOR
SUPERMAJORITY APPROVAL OF ONE OF ITS CONDITIONS
We take issue with the structure of the Prentice Financing. As discussed
in further detail in Proposal No. 2, the Company is obligated to obtain approval
from its stockholders of an amendment to the Company's Second Restated
Certificate of Incorporation to provide for a 1-for-2 reverse split of the
Company's Capital Stock in order to consummate the Prentice Financing. This will
allow the Company to reserve for issuance the number of shares of Common Stock
issuable upon the conversion of the Notes and the exercise of the Warrants
without increasing the number of the authorized shares of Capital Stock. In
order to make available additional shares for such issuances, we believe a
corporation would normally amend its charter to increase the number of
authorized shares. Such an amendment to Whitehall's charter would require
approval from the holders of 75% of the outstanding shares of Capital Stock.
Rather than seeking the approval from the holders of 75% of the outstanding
shares of Capital Stock, an extremely difficult voting threshold to achieve, we
believe the Prentice Financing was structured to require as a condition to
closing a reverse split of the outstanding Capital Stock, as this action only
requires approval from the holders of a majority of the outstanding shares of
the Capital Stock. We question whether the Prentice Financing was intentionally
structured to require a reverse stock split rather than amending the charter to
merely increase the number of authorized shares in order to cleverly avoid the
more difficult supermajority voting threshold.
NEWCASTLE PARTNERS URGES YOU TO VOTE AGAINST WHITEHALL'S PROPOSAL TO
APPROVE THE ISSUANCE OF SHARES OF COMMON STOCK PURSUANT TO THE NOTES.
-13-
PROPOSAL NO. 2
AMENDMENT TO THE SECOND RESTATED CERTIFICATE OF INCORPORATION
TO EFFECT A 1-FOR-2 REVERSE STOCK SPLIT
As a condition to the closing of the Prentice Financing, the Company is
obligated to obtain approval from its stockholders of an amendment (the
"Amendment") to the Company's Second Restated Certificate of Incorporation (the
"Certificate of Incorporation") to provide for a 1-for-2 reverse split of the
Company's Capital Stock (the "Reverse Split"). The Amendment will allow the
Company to reserve for issuance the number of shares of Common Stock issuable
upon the conversion of the Notes and the exercise of the Warrants without
increasing the number of the authorized shares of Capital Stock.
In connection with the foregoing, the Whitehall Board has adopted a
resolution recommending that the stockholders approve the Amendment to the
Certificate of Incorporation that would effect a single reverse split of the
Capital Stock at a ratio of 1-for-2. If the Amendment is approved by the
stockholders and becomes effective, the number of issued and outstanding shares
of Capital Stock, as well as any Capital Stock held in treasury, will be reduced
at a ratio of 1-for-2. The Amendment will not reduce the number of authorized
shares of the Capital Stock.
For the reasons discussed above, we oppose the Prentice Financing. To that
end, we are soliciting your proxy to vote AGAINST Proposal No. 2. We also
believe that there are numerous risks associated with the Reverse Split which
are not necessary for the Company to take in view of the Newcastle Tender Offer.
RISKS ASSOCIATED WITH THE REVERSE SPLIT
As set forth in greater detail in the Management Proxy Statement, even the
Company acknowledges that there are certain risks associated with the Reverse
Split.
NO ASSURANCE CAN BE GIVEN THAT THE COMPANY'S TOTAL MARKET CAPITALIZATION AFTER
THE REVERSE SPLIT WILL BE EQUAL TO OR GREATER THAN THE TOTAL MARKET
CAPITALIZATION BEFORE THE REVERSE SPLIT OR THAT THE PER SHARE MARKET PRICE OF
THE COMMON STOCK FOLLOWING THE REVERSE SPLIT WILL EITHER EXCEED OR REMAIN HIGHER
THAN THE CURRENT PER SHARE MARKET PRICE OR THE PER SHARE MARKET PRICE
IMMEDIATELY BEFORE THE REVERSE SPLIT.
No assurance can be given that the market price per share of the Common
Stock after the Reverse Split will rise or remain constant in proportion to the
reduction in the number of shares of the Common Stock outstanding before the
Reverse Split. Accordingly, the Company's total market capitalization after the
Reverse Split may be lower than the Company's total market capitalization before
the Reverse Split. This has occurred in connection with reverse stock splits
that other companies have implemented. If this were to happen to the Company,
the total value of the Common Stock that you hold after the Reverse Split would
be lower than the value of your holdings immediately before the Reverse Split,
even if the price at which the stock trades is higher than it was before the
Reverse Split.
-14-
A DECLINE IN THE MARKET PRICE FOR THE COMMON STOCK AFTER THE REVERSE SPLIT MAY
RESULT IN A GREATER PERCENTAGE DECLINE THAN WOULD OCCUR IN THE ABSENCE OF THE
REVERSE SPLIT.
The market price of the Common Stock will also be based on the Company's
performance and other factors, some of which are unrelated to the number of
shares outstanding. If the Reverse Split is implemented and the market price of
the Common Stock declines, the percentage decline as an absolute number and as a
percentage of the Company's overall market capitalization may be greater than
would occur in the absence of the Reverse Split. In many cases, both the total
market capitalization of a company and the market price of a share of that
company's common stock following a reverse stock split are lower than they were
before the reverse stock split.
THE LIQUIDITY OF THE COMMON STOCK COULD BE ADVERSELY AFFECTED FOLLOWING THE
REVERSE SPLIT.
The liquidity of the Common Stock could be adversely affected by the
reduced number of shares that would be outstanding after the Reverse Split.
THE VOLATILITY OF THE COMMON STOCK COULD BE INCREASED FOLLOWING THE REVERSE
SPLIT.
The volatility of the Common Stock could be increased by the reduced
number of shares that would be outstanding after the Reverse Split.
NO ASSURANCE CAN BE GIVEN THAT THE REVERSE SPLIT WILL RESULT IN A PER SHARE
PRICE THAT WILL ATTRACT INVESTORS, BROKERS AND ANALYSTS.
No assurance can be given that the Reverse Split will result in a per
share price that will attract investors, brokers and analysts.
THE REVERSE SPLIT WOULD LIKELY INCREASE THE NUMBER OF "ODD LOT" HOLDERS.
The Reverse Split may leave certain stockholders with one or more "odd
lots" which are stock holdings in amounts of less than 100 shares. These odd
lots may be more difficult to sell than shares in even multiples of 100.
Additionally, any reduction in brokerage commissions resulting from any reverse
stock split may be offset by increased brokerage commissions required to be paid
by stockholders selling odd lots created by the reverse stock split.
NEWCASTLE PARTNERS URGES YOU TO VOTE AGAINST WHITEHALL'S PROPOSAL TO AMEND
THE CERTIFICATE OF INCORPORATION TO EFFECT THE REVERSE SPLIT.
-15-
PROPOSAL NO. 3
ELECTION OF DIRECTORS
As a condition to the closing of the Prentice Financing, the director
nominees described below must be elected to the Whitehall Board. The director
nominees have been designated by the Investors in accordance with the terms of
the Purchase Agreement. If the nominees are elected, the Investors will
effectively control the Whitehall Board.
The Whitehall Board is presently composed of five directors, divided into
three classes, two of whom are Class I directors, one of whom is a Class II
director and two of whom are Class III directors.
Whitehall is asking you to elect one Class I director to serve until the
annual meeting in the year 2006, or until such person's successor is duly
elected and qualified, three Class II directors to serve until the annual
meeting in the year 2007, or until such persons' successors are duly elected and
qualified, and two Class III directors to serve until the annual meeting in the
year 2008, or until such persons' successors are duly elected and qualified.
For the reasons discussed above, we oppose the Prentice Financing and the
election of the director nominees. To that end, we are soliciting your proxy to
vote AGAINST Proposal No. 3.
NOMINEES
The following persons, if elected at the Special Meeting, will serve as
directors until the expiration of his or her term, or until his or her successor
is elected and qualified. Biographical and other information concerning the
nominees is set forth in the Management Proxy Statement.
CLASS I DIRECTOR
o One Class I director will be named by the Company prior to
completion of the Management Proxy Statement.
CLASS II DIRECTORS
o Charles G. Phillips (age 57)
o Two additional Class II directors will be named by the Company prior
to completion of the Management Proxy Statement.
CLASS III DIRECTORS
o Jonathan Duskin (age 38)
o Seymour Holtzman (age 70)
-16-
NEWCASTLE PARTNERS URGES YOU TO VOTE AGAINST WHITEHALL'S PROPOSAL TO ELECT
THE DIRECTOR NOMINEES SET FORTH ABOVE.
-17-
VOTING AND PROXY PROCEDURES
Only stockholders of record on the Record Date will be entitled to notice
of and to vote at the Special Meeting. Each holder of outstanding shares of
Common Stock is entitled to one vote for each share of Common Stock held in that
holder's name with respect to all matters on which holders of Common Stock are
entitled to vote at the Special Meeting. Each holder of outstanding shares of
Class B Stock is entitled to 35.4208 votes for each share of Class B Stock held
in that holder's name with respect to all matters on which holders of Class B
Stock are entitled to vote at the Special Meeting. Stockholders who sell shares
of Capital Stock before the Record Date (or acquire them without voting rights
after the Record Date) may not vote such shares. Stockholders of record on the
Record Date will retain their voting rights in connection with the Special
Meeting even if they sell such shares after the Record Date. Based on publicly
available information, Newcastle Partners believes that the only outstanding
classes of securities of Whitehall entitled to vote at the Special Meeting are
the shares of Common Stock and Class B Stock.
Shares represented by properly executed GREEN proxy cards will be voted at
the Special Meeting as marked and, in the absence of specific instructions, will
be voted AGAINST the proposal to approve the issuance of shares of Common Stock
pursuant to the terms of the Notes, AGAINST the proposal to approve an amendment
to the Certificate of Incorporation to effect the Reverse Split, AGAINST the
proposal to elect one (1) Class I director, three (3) Class II directors and two
(2) Class III directors and, in the discretion of the persons named as proxies,
on all other matters as may properly come before the Special Meeting.
QUORUM
In order to conduct any business at the Special Meeting, a quorum must be
present in person or represented by valid proxies. If a majority of the voting
power with respect to the shares of Common Stock and Class B Stock combined are
represented in person or by proxy at the Special Meeting, a quorum will be
present. A quorum consists of a majority of the voting power with respect to the
shares of Common Stock and Class B Stock combined issued and outstanding on the
Record Date. All shares that are voted "FOR", "AGAINST" or "ABSTAIN" on any
matter will count for purposes of establishing a quorum and will be treated as
shares entitled to vote at the Special Meeting.
VOTES REQUIRED FOR APPROVAL
VOTE REQUIRED FOR PROPOSAL NO. 1. The approval of the proposal to issue
shares of Common Stock pursuant to the terms of the Notes requires the
affirmative vote of a majority of votes cast by the holders present in person or
represented by proxy and entitled to vote on such matter at the Special Meeting.
Accordingly, if a quorum is present at the Special Meeting, an affirmative vote
of a majority of the shares represented at the meeting in person or by proxy and
entitled to vote on this proposal will approve the issuance of shares of Common
Stock pursuant to the terms of the Notes. The Company has stated that because
the vote to approve this proposal requires a majority, abstentions and non-votes
will have the same effect as votes against approval of this proposal.
-18-
VOTE REQUIRED FOR PROPOSAL NO. 2. The approval of the proposal to amend
the Certificate of Incorporation to effect the Reverse Split requires the
affirmative vote of the holders of a majority of the outstanding shares of the
Capital Stock. The Company has stated that because the vote to approve this
proposal requires a majority, abstentions and non-votes will have the same
effect as votes against ratification of this proposal.
VOTE REQUIRED FOR PROPOSAL NO. 3. The election of the directors requires
the affirmative vote of a plurality of votes cast by the holders present in
person or represented by proxy and entitled to vote on such matter at the
Special Meeting. Accordingly, if a quorum is present at the Special Meeting, the
persons receiving the greatest number of votes by the holders will be elected to
serve as the directors.
Stockholders may cast their votes by marking the ballot at the meeting or
by specific voting instructions sent with a signed proxy to either Newcastle
Partners in care of MacKenzie Partners, Inc. at the address set forth on the
back cover of this Proxy Statement or to Whitehall at 155 North Wacker Drive,
Suite 500, Chicago, Illinois 60606 or any other address provided by Whitehall.
REVOCATION OF PROXIES
Stockholders of Whitehall may revoke their proxies at any time prior to
exercise by attending the Special Meeting and voting in person (although
attendance at the Special Meeting will not in and of itself constitute
revocation of a proxy) or by delivering a written notice of revocation. The
delivery of a subsequently dated proxy which is properly completed will
constitute a revocation of any earlier proxy. The revocation may be delivered
either to Newcastle Partners in care of MacKenzie Partners, Inc. at the address
set forth on the back cover of this Proxy Statement or to Whitehall at 155 North
Wacker Drive, Suite 500, Chicago, Illinois 60606 or any other address provided
by Whitehall. Although a revocation is effective if delivered to Whitehall,
Newcastle Partners requests that either the original or photostatic copies of
all revocations be mailed to Newcastle Partners in care of MacKenzie Partners,
Inc. at the address set forth on the back cover of this Proxy Statement so that
Newcastle Partners will be aware of all revocations and can more accurately
determine if and when proxies have been received from the holders of record on
the Record Date of a majority of the outstanding voting power. Additionally,
MacKenzie Partners, Inc. may use this information to contact stockholders who
have revoked their proxies in order to solicit later dated proxies against the
Company's proposals in connection with the Prentice Financing.
IF YOU WISH TO VOTE AGAINST THE COMPANY'S PROPOSALS IN CONNECTION WITH THE
PRENTICE FINANCING, PLEASE SIGN, DATE AND RETURN PROMPTLY THE ENCLOSED GREEN
PROXY CARD IN THE POSTAGE-PAID ENVELOPE PROVIDED.
-19-
SOLICITATION OF PROXIES
The solicitation of proxies pursuant to this Proxy Statement is being made
by Newcastle Partners. Proxies may be solicited by mail, facsimile, telephone,
telegraph, in person and by advertisements. Newcastle Partners will not solicit
proxies via the Internet.
Newcastle Partners has entered into an oral agreement with MacKenzie
Partners, Inc. for solicitation and advisory services in connection with this
solicitation, for which MacKenzie Partners, Inc. will receive a fee not to
exceed $___,000.00, together with reimbursement for its reasonable out-of-pocket
expenses. MacKenzie Partners, Inc. will solicit proxies from individuals,
brokers, banks, bank nominees and other institutional holders. Newcastle
Partners has requested banks, brokerage houses and other custodians, nominees
and fiduciaries to forward all solicitation materials to the beneficial owners
of the shares of Capital Stock they hold of record. Newcastle Partners will
reimburse these record holders for their reasonable out-of-pocket expenses in so
doing. It is anticipated that MacKenzie Partners, Inc. will employ approximately
__ persons to solicit Whitehall's stockholders for the Special Meeting.
The entire expense of soliciting proxies is being borne by Newcastle
Partners. Costs of this solicitation of proxies are currently estimated to be
approximately $___,000.00. Newcastle Partners estimates that through the date
hereof, its expenses in connection with this solicitation are approximately
$___,000.00. Newcastle Partners intends to seek reimbursement from Whitehall of
all expenses it incurs in connection with this solicitation. Newcastle Partners
does not intend to submit the question of such reimbursement to a vote of
security holders of the Company.
OTHER PARTICIPANT INFORMATION
Each member of the Group is a participant in this solicitation. Mark E.
Schwarz is the managing member of Newcastle Group, a Texas limited liability
company, which is the general partner of Newcastle Management, a Texas limited
partnership, which in turn is the general partner of Newcastle Partners, a Texas
limited partnership. The principal occupation of Mr. Schwarz is serving as the
managing member of Newcastle Group. The principal business of Newcastle Group is
acting as the general partner of Newcastle Management. The principal business of
Newcastle Management is acting as the general partner of Newcastle Partners. The
principal business of Newcastle Partners is investing in securities. The
principal occupation of John P. Murray is serving as Chief Financial Officer of
Newcastle Management. The principal occupation of Steven J. Pully is serving as
President of Newcastle Management. Mr. Pully announced his resignation as a
director of Whitehall on November 29, 2005. The principal business address of
Mr. Schwarz, Mr. Murray, Mr. Pully, Newcastle Partners, Newcastle Management and
Newcastle Group is 300 Crescent Court, Suite 1110, Dallas, Texas 75201. As of
the date hereof, Newcastle Partners is the beneficial owner of 2,018,400 shares
of Common Stock. Mark Schwarz, Newcastle Management and Newcastle Group may be
deemed to beneficially own the shares of Common Stock held by Newcastle Partners
by virtue of their affiliation with Newcastle Partners and each disclaims
beneficial ownership of such shares except to the extent of their pecuniary
interest therein. For information regarding purchases and sales of securities of
Whitehall during the past two years by Newcastle Partners, see Schedule I.
Neither Mr. Murray nor Mr. Pully beneficially owns, or has purchased or sold
during the past two years, any securities of the Company and each disclaims
beneficial ownership of the shares of Common Stock owned by Newcastle Partners.
Except as set forth in this Proxy Statement, no participant in this solicitation
has a substantial
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interest, direct or indirect, by security holdings or otherwise, in any matter
to be acted on at the Special Meeting.
Except as set forth in this Proxy Statement (including the Schedules
hereto), (i) during the past 10 years, no participant in this solicitation has
been convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors); (ii) no participant in this solicitation directly or indirectly
beneficially owns any securities of Whitehall; (iii) no participant in this
solicitation owns any securities of Whitehall which are owned of record but not
beneficially; (iv) no participant in this solicitation has purchased or sold any
securities of Whitehall during the past two years; (v) no part of the purchase
price or market value of the securities of Whitehall owned by any participant in
this solicitation is represented by funds borrowed or otherwise obtained for the
purpose of acquiring or holding such securities; (vi) no participant in this
solicitation is, or within the past year was, a party to any contract,
arrangements or understandings with any person with respect to any securities of
Whitehall, including, but not limited to, joint ventures, loan or option
arrangements, puts or calls, guarantees against loss or guarantees of profit,
division of losses or profits, or the giving or withholding of proxies; (vii) no
associate of any participant in this solicitation owns beneficially, directly or
indirectly, any securities of Whitehall; (viii) no participant in this
solicitation owns beneficially, directly or indirectly, any securities of any
parent or subsidiary of Whitehall; (ix) no participant in this solicitation or
any of his/its associates was a party to any transaction, or series of similar
transactions, since the beginning of Whitehall's last fiscal year, or is a party
to any currently proposed transaction, or series of similar transactions, to
which Whitehall or any of its subsidiaries was or is to be a party, in which the
amount involved exceeds $60,000; and (x) no participant in this solicitation or
any of his/its associates has any arrangement or understanding with any person
with respect to any future employment by Whitehall or its affiliates, or with
respect to any future transactions to which Whitehall or any of its affiliates
will or may be a party.
-21-
OTHER MATTERS AND ADDITIONAL INFORMATION
Newcastle Partners is unaware of any other matters to be considered at the
Special Meeting. However, should other matters, which Newcastle Partners is not
aware of a reasonable time before this solicitation, be brought before the
Special Meeting, the persons named as proxies on the enclosed GREEN proxy card
will vote on such matters in their discretion.
NEWCASTLE PARTNERS HAS OMITTED FROM THIS PROXY STATEMENT CERTAIN
DISCLOSURE REQUIRED BY APPLICABLE LAW THAT IS ALREADY INCLUDED IN THE MANAGEMENT
PROXY STATEMENT. THIS DISCLOSURE INCLUDES, AMONG OTHER THINGS:
o DETAILED INFORMATION RELATING TO THE BACKGROUND, REASONS FOR, TERMS
AND CONSEQUENCES OF THE PRENTICE FINANCING, INCLUDING RISK FACTORS,
FINANCIAL AND PRO FORMA INFORMATION, TAX CONSEQUENCES AND ACCOUNTING
TREATMENT;
o INFORMATION ABOUT THE COMPANY AND THE INVESTORS;
o CURRENT BIOGRAPHICAL INFORMATION ON THE COMPANY'S DIRECTOR NOMINEES,
CURRENT DIRECTORS AND EXECUTIVE OFFICERS, INFORMATION CONCERNING
EXECUTIVE COMPENSATION, AND INFORMATION ON CORPORATE GOVERNANCE
MATTERS;
o TRADING INFORMATION ON THE COMMON STOCK AND AN ANALYSIS OF
CUMULATIVE TOTAL RETURNS ON AN INVESTMENT IN THE COMMON STOCK DURING
THE PAST FIVE YEARS;
o DEADLINES AND PROCEDURES FOR SUBMITTING PROPOSALS AT THE COMPANY'S
NEXT ANNUAL MEETING OF STOCKHOLDERS UNDER RULE 14a-8 OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND OUTSIDE THE
PROCESSES OF RULE 14a-8.
STOCKHOLDERS SHOULD REFER TO THE MANAGEMENT PROXY STATEMENT TO REVIEW THIS
DISCLOSURE.
Although we do not have any knowledge indicating that any statement made
by Newcastle Partners herein is untrue, we do not take any responsibility for
the accuracy or completeness of statements taken from public documents and
records that were not prepared by or on our behalf, or for any failure by
Whitehall to disclose events that may affect the significance or accuracy of
such information. See Schedule II for information regarding persons who
beneficially own more than 5% of the shares of the securities of the Company and
the ownership of the securities of the Company by the management of the Company.
The information concerning Whitehall contained in this Proxy Statement and
the Schedules attached hereto has been taken from, or is based upon, publicly
available information.
NEWCASTLE PARTNERS, L.P.
_________, 2005
-22-
SCHEDULE I
TRANSACTIONS IN THE SECURITIES OF WHITEHALL
BY NEWCASTLE PARTNERS, L.P. DURING THE PAST TWO YEARS
CLASS QUANTITY PRICE PER DATE OF
OF SECURITY PURCHASED UNIT ($) PURCHASE
----------- --------- -------- --------
Common Stock 77,000 7.13 07/14/04
Common Stock 55,700 7.19 07/20/04
Common Stock 42,700 7.25 07/21/04
Common Stock 322,000 7.31 07/22/04
Common Stock 17,000 7.36 07/23/04
Common Stock 19,900 7.36 07/26/04
Common Stock 57,900 7.36 07/28/04
Common Stock 28,400 7.36 07/29/04
Common Stock 49,700 7.48 08/01/04
Common Stock 6,800 7.81 08/03/04
Common Stock 14,100 7.80 08/04/04
Common Stock 12,900 7.84 08/05/04
Common Stock 174,000 7.72 08/06/04
Common Stock 40,100 7.72 08/09/04
Common Stock 6,000 7.86 08/11/04
Common Stock 33,500 7.81 08/12/04
Common Stock 12,600 7.83 08/13/04
Common Stock 100 7.99 08/16/04
Common Stock 2,400 7.87 08/23/04
Common Stock 300 7.91 08/24/04
Common Stock 2,000 7.87 08/25/04
Common Stock 6,000 7.80 08/26/04
Common Stock 26,900 7.65 08/27/04
Common Stock 100 7.89 08/30/04
Common Stock 100,000 7.98 09/07/04
Common Stock 43,900 7.86 09/13/04
Common Stock 400 7.90 09/15/04
Common Stock 400 8.00 09/29/04
Common Stock 2,600 7.96 12/28/04
Common Stock 29,900 7.92 12/30/04
Common Stock 12,900 7.91 01/03/05
Common Stock 5,000 7.95 01/05/05
Common Stock 138,900 7.92 01/06/05
Common Stock 25,600 7.87 01/07/05
Common Stock 34,000 7.82 01/10/05
Common Stock 8,000 7.76 01/11/05
Common Stock 2,000 7.60 01/12/05
Common Stock 1,600 7.64 01/13/05
-23-
CLASS QUANTITY PRICE PER DATE OF
OF SECURITY PURCHASED UNIT ($) PURCHASE
----------- --------- -------- --------
Common Stock 4,000 7.67 01/18/05
Common Stock 24,000 7.55 01/19/05
Common Stock 2,000 7.53 01/20/05
Common Stock 1,000 7.54 01/21/05
Common Stock 19,500 7.40 01/24/05
Common Stock 12,700 7.29 01/25/05
Common Stock 17,000 7.13 01/26/05
Common Stock 130,600 7.04 01/27/05
Common Stock 53,500 6.97 01/28/05
Common Stock 5,000 7.45 02/02/05
Common Stock 15,100 7.39 02/03/05
Common Stock 200 7.43 02/04/05
Common Stock 10,000 7.43 02/08/05
Common Stock 2,000 7.46 02/10/05
Common Stock 4,200 7.37 02/11/05
Common Stock 9,100 7.24 02/14/05
Common Stock 4,000 7.23 02/15/05
Common Stock 10,200 7.14 02/16/05
Common Stock 2,000 7.11 02/17/05
Common Stock 4,000 7.08 02/18/05
Common Stock 10,000 6.99 02/22/05
Common Stock 600 7.03 02/24/05
Common Stock 2,600 7.06 02/28/05
Common Stock 22,700 7.08 03/01/05
Common Stock 2,100 7.06 03/02/05
Common Stock 15,100 7.05 03/03/05
Common Stock 5,000 7.05 03/04/05
Common Stock 800 7.07 03/07/05
Common Stock 8,800 7.22 03/08/05
Common Stock 2,000 7.16 03/09/05
Common Stock 4,800 7.19 03/14/05
Common Stock 4,000 7.18 03/15/05
Common Stock 500 7.18 03/16/05
Common Stock 100 7.30 03/17/05
Common Stock 4,400 7.25 03/18/05
Common Stock 2,300 7.24 03/22/05
Common Stock 8,800 7.15 03/23/05
Common Stock 6,700 7.24 03/29/05
Common Stock 29,600 7.13 03/30/05
Common Stock 20,200 7.20 03/31/05
Common Stock 11,100 7.14 04/01/05
Common Stock 2,200 7.15 04/04/05
Common Stock 6,100 7.12 04/05/05
Common Stock 6,400 7.10 04/06/05
-24-
CLASS QUANTITY PRICE PER DATE OF
OF SECURITY PURCHASED UNIT ($) PURCHASE
----------- --------- -------- --------
Common Stock 7,200 7.08 04/07/05
Common Stock 5,000 7.18 04/08/05
Common Stock 23,800 7.23 04/11/05
Common Stock 8,000 7.19 04/12/05
Common Stock 10,000 7.11 04/13/05
Common Stock 25,700 6.97 04/14/05
Common Stock 18,400 6.89 04/15/05
-25-
SCHEDULE II
THE FOLLOWING TABLE IS REPRINTED FROM THE MANAGEMENT PROXY STATEMENT.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of Whitehall's Common Stock as of October 24, 2005, by (i) each person
who is known by Whitehall to own beneficially more than 5% of the outstanding
shares of Common Stock, (ii) each director and director nominee of Whitehall,
(iii) each of the executive officers named in the Summary Compensation Table and
(iv) all directors and executive officers of Whitehall as a group.
AMOUNT OF
BENEFICIAL PERCENT OF
NAME OF BENEFICIAL OWNER(1) OWNERSHIP CLASS(2)
- ---------------------------------------------- --------- --------
5% STOCKHOLDERS
Prentice Capital Management, LP(3) 2,094,346 15.00%
623 Fifth Avenue, 32nd Floor
New York, NY 10020
Holtzman Opportunity Fund, L.P(4) 698,116 5.00%
Mr. Seymour Holtzman
c/o Jewelcor Companies
100 N. Wilkes Barre Blvd., 4th Floor
Wilkes Barre, Pennsylvania 18707
Newcastle Partners, L.P.(5) 2,018,400 14.46%
300 Crescent Court, Suite 1110
Dallas, TX 75201
FMR Corp.(6) 1,548,900 11.09%
82 Devonshire Street
Boston, MA 02109
Myron M. Kaplan(7) 1,386,600 9.93%
P.O. Box 385
Leonia, NJ 07605
Wasatch Advisors, Inc.(8) 1,331,952 9.54%
150 Social Hall Avenue
Salt Lake City, UT 84111
Dimensional Fund Advisors Inc.(9) 1,022,750 7.33%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
-26-
AMOUNT OF
BENEFICIAL PERCENT OF
NAME OF BENEFICIAL OWNER(1) OWNERSHIP CLASS(2)
- ---------------------------------------------- --------- --------
DIRECTORS AND EXECUTIVE OFFICERS
Hugh M. Patinkin(10) -- --
Matthew M. Patinkin(11) 890,936 6.21%
John R. Desjardins(12) 670,664 4.67%
Manny A. Brown(13) 127,920 *
Norman J. Patinkin(14) 90,645 *
Daniel H. Levy(15) 64,385 *
Richard K. Berkowitz(16) 61,247 *
Sanford Shkolnik(17) 29,697 *
Debbie Nicodemus-Volker(18) 20,000 *
Steven J. Pully(4),(19) -- *
Lucinda M. Baier(20) -- *
DIRECTOR NOMINEES (21)
Jonathan Duskin [ ] [ ]
Seymour Holtzman(4) 698,116 5.99
Charles G. Phillips [ ] [ ]
All executive officer and directors as a group 1,955,494 14.01%
- ----------
* Less than 1%.
(1) Except as set forth in the footnotes to this table, the persons named in
the table above have sole voting and investment power with respect to all
shares shown as beneficially owned by them.
(2) Applicable percentage of ownership is based on 13,961,216 shares of Common
Stock outstanding on October 24, 2005. Where indicated in the footnotes,
this table also includes Common Stock issuable pursuant to stock options
exercisable within 60 days of the filing of this proxy statement.
(3) Share information based solely on information contained on a Schedule 13D,
dated October 3, 2005, filed with the SEC, and as amended on October 28,
2005. The share numbers and percentages assume that the Notes (described
elsewhere in this proxy statement) have not yet been issued. This Schedule
13 D indicates that PWJ Lending LLC ("PWJ Lending") may be deemed to
beneficially own 2,094,346 shares of Common Stock issuable upon exercise
of the Warrants (described elsewhere in this proxy statement). The
Schedule 13D further indicates that PWJ Funding LLC ("PWJ Funding") may be
deemed to beneficially own 68,020,815 shares of Common Stock issuable upon
the conversion of the Notes, including interest shares (described
elsewhere in this proxy statement) if interest will paid in Common Stock
for the first three years of the Note, at a conversion price of $0.75. The
Schedule 13D also indicates that each of Prentice Capital Management, LP
and Michael Zimmerman may be deemed to beneficially own 70,115,161 shares
of Common Stock, including the 2,094,346 shares
-27-
issuable upon exercise of the Warrants and 68,020,815 shares of Common
Stock issuable upon conversion of the Notes. The Schedule 13D indicates
that Prentice Capital Management, L.P. is the managing member of PWJ
Funding and PWJ Lending. The Schedule 13D also indicates that Michael
Zimmerman is the Managing Member of (a) Prentice Management GP, LLC, the
general partner of Prentice Capital Management, LP, and (b) Prentice
Capital GP, LLC the general part of certain investment funds. The Schedule
13D states that as such, Mr. Zimmerman may be deemed to control Prentice
Capital Management, LP and certain of the investment funds and therefore
may be deemed to be the beneficial owner of the securities described
above. Each of Mr. Zimmerman and Prentice Capital Management, LP
disclaimed beneficial ownership of all of shares described above. The
Schedule 13D indicates that certain of the reporting persons to the
Schedule 13D share voting and dispositive powers over the shares
beneficially owned to the extent reported therein.
(4) Share information based solely on information contained on a Schedule 13D,
dated October 28, 2005, filed with the SEC. The share numbers and
percentages assume that the Notes (described elsewhere in this proxy
statement) have not yet been issued. This Schedule 13D indicates that
Holtzman Opportunity Fund, L.P. ("Holtzman Opportunity") beneficially owns
698,116 shares of common stock issuable upon exercise of the Warrants
(described elsewhere in this proxy statement). If the Notes are issued,
then Holtzman Opportunity at that time may be deemed to beneficially own
an aggregate of up to 22,666,667 shares of Common Stock potentially
issuable upon conversion of the Notes, including interest shares
(described elsewhere in this proxy statement); such shares, together with
shares issuable upon exercise of the Warrants, would represent an
aggregate of 23,364,783 shares of common stock, constituting approximately
21.7% of the outstanding Common Stock as of the date of this table. The
Schedule 13D further indicates that each of Holtzman Financial Advisors,
LLC ("Holtzman Advisors"), as the general partner of Holtzman Opportunity,
and SH Independence, LLC ("Independence"), as Managing Member of Holtzman
Opportunity, may each also be deemed to beneficially own 698,116 shares of
Common Stock owned by Holtzman Opportunity issuable upon exercise of the
Warrants. If the Notes are issued, then each of Holtzman Advisors and
Independence may each also be deemed to beneficially own an aggregate of
up to 22,666,667 shares of Common Stock owned by Holtzman Opportunity
potentially issuable upon conversion of the Notes, including interest
shares (described elsewhere in this proxy statement); such shares,
together with shares issuable upon exercise of the Warrants, would
represent an aggregate of 23,364,783 shares of Common Stock, constituting
approximately 21.7% of the outstanding common stock as of the date of this
proxy statement. Lastly, the Schedule 13D indicates that Seymour Holtzman,
as the sole member of Independence, may also be deemed to beneficially own
such shares. According to the Schedule 13D, each of Holtzman Opportunity,
Holtzman Advisors, Independence and Seymour Holtzman may be deemed to have
sole voting and dispositive power with respect to the reported shares.
(5) Share information based solely on information contained on a Schedule 13D,
dated October 26, 2005, filed with the SEC. This Schedule 13D indicates
that Newcastle
-28-
Partners, L.P. beneficially owns 2,018,400 shares of Common Stock and has
sole voting and investment power with respect to the reported shares.
Newcastle Capital Management, L.P., as the general partner of Newcastle
Partners, L.P., may also be deemed to beneficially own the 2,018,400
shares of Common Stock beneficially owned by Newcastle Partners, L.P.
Newcastle Capital Group, L.L.C., as the general partner of Newcastle
Capital Management, L.P., which in turn is the general partner of
Newcastle Partners, L.P., may also be deemed to beneficially own the
2,018,400 shares of Common Stock beneficially owned by Newcastle Partners,
L.P. Mark E. Schwarz, as the managing member of Newcastle Capital Group,
L.L.C., the general partner of Newcastle Capital Management, L.P., which
in turn is the general partner of Newcastle Partners, L.P., may also be
deemed to beneficially own the 2,018,400 shares of Common Stock
beneficially owned by Newcastle Partners, L.P. Steven J. Pully, as
President of Newcastle Capital Management, L.P., which is the general
partner of Newcastle Partners, L.P., may also be deemed to beneficially
own the 2,018,400 shares of Common Stock beneficially owned by Newcastle
Partners, L.P. Newcastle Capital Management, L.P., Newcastle Capital
Group, L.L.C., Mr. Schwarz and Mr. Pully disclaim beneficial ownership of
the shares of Common Stock held by Newcastle Partners, L.P., except to the
extent of their pecuniary interest therein. By virtue of his position with
Newcastle Partners, L.P., Newcastle Capital Management, L.P. and Newcastle
Capital Group, L.L.C., Mark E. Schwarz has the sole power to vote and
dispose of the shares of Common Stock owned by Newcastle Partners, L.P.
(6) Share information based solely on information contained on a Schedule 13G/
A, dated February 14, 2005, filed with the SEC. This Schedule 13G/A
indicates that Fidelity Management & Research Company, a wholly-owned
subsidiary of FMR Corp. and an investment adviser registered under section
203 of the Investment Advisers Act of 1940, has sole investment power with
respect to 1,131,900 of the reported shares. The Schedule 13G/A further
indicates that Edward C. Johnson 3d, Chairman of FMR Corp., and FMR Corp.,
through their control of Fidelity Management & Research Company, have sole
power to dispose of the 1,131,900 shares. This Schedule 13G/A also
indicates that Fidelity Management Trust Company, a wholly-owned
subsidiary of FMR Corp. and a bank as defined in Section 3(a)(6) of the
Securities Exchange Act of 1934, is the beneficial owner of 417,000 of the
reported shares as a result of its serving as investment manager of the
institutional account(s). This Schedule 13G/ A further indicates that
Edward C. Johnson 3d and FMR Corp., through their control of Fidelity
Management Trust Company, each has sole dispositive power over 417,000
shares and sole power to vote or to direct the voting of 417,000 shares of
Common Stock owned by the institutional account(s) as reported above. In
addition, the Schedule 13G/ A indicates that Fidelity Management &
Research Company carries out the voting of the shares under written
guidelines established by the Board of Directors of Trustees of the
Fidelity Funds, that members of the Edward C. Johnson 3d family own
approximately 49% of the voting power of FMR Corp., and that the Johnson
family group and all Class B stockholders of FMR Corp. have entered into a
stockholders' voting agreement under which all Class B shares will be
voted in accordance with the majority vote of Class B shares. Furthermore,
the Schedule 13G states that through their ownership of voting Common
Stock and the
-29-
execution of the stockholders' voting agreement, members of the Johnson
family may be deemed, under the Investment Company Act of 1940, to form a
controlling group with respect to FMR Corp.
(7) Share information based solely on information contained on a Form 4, dated
April 15, 2005, filed with the SEC. This Form 4 indicates that Myron M.
Kaplan has sole voting and investment power with respect to the reported
shares.
(8) Share information based solely on information contained on a Schedule 13G/
A, dated February 14, 2005, filed with the SEC. This Schedule 13G/ A
indicates that Wasatch Advisors, Inc., an investment adviser registered
under section 203 of the Investment Advisers Act of 1940, has sole voting
and investment power with respect to the reported shares.
(9) Share information based solely on information contained on a Schedule 13G,
dated February 9, 2005, filed with the SEC. This Schedule 13G indicates
that Dimensional Fund Advisors Inc., an investment adviser registered
under section 203 of the Investment Advisers Act of 1940, has sole voting
and investment power with respect to the reported shares.
(10) Mr. Hugh M. Patinkin passed away prior to the date as of which the table
speaks. Mr. Patinkin served as Chairman and Chief Executive Officer of
Whitehall until the time of his death.
(11) Includes 381,202 shares of Common Stock issuable pursuant to presently
exercisable stock options or stock options which will become exercisable
within 60 days of this proxy statement. Includes 185,208 shares solely
owned by Robin J. Patinkin, as Trustee of the Robin Patinkin UA2-2-92
Trust. Robin J. Patinkin, Matthew Patinkin's wife, has sole investment
power with respect to such shares. Includes 32,406 shares held by Matthew
M. Patinkin and Robin J. Patinkin, as Trustees of various trusts for the
benefit of their children. Includes 13,281 shares held by Robin J.
Patinkin, as Trustee of various trusts for the benefit of the children of
Matthew M. Patinkin and Robin J. Patinkin, with respect to which shares
Matthew M. Patinkin disclaims beneficial ownership because Robin J.
Patinkin has sole voting and investment power with respect to such shares.
The mailing address of Matthew M. Patinkin is c/o Whitehall Jewellers,
Inc., 155 North Wacker Drive, Suite 500, Chicago, Illinois 60606.
(12) Includes 396,159 shares of Common Stock issuable pursuant to presently
exercisable stock options or stock options which will become exercisable
within 60 days of this proxy statement. Includes 35,748 shares
beneficially owned by John R. Desjardins, which shares are held by Cheryl
Desjardins and Stephen Kendig, as Trustees of the John R. Desjardins 1995
Family Trust U/ A/ D 12/28/95. Cheryl Desjardins and Stephen Kendig have
shared investment power with respect to such shares. Shares beneficially
owned by Mr. Desjardins include shares allocated to his account in the
ESOP (12,440 shares), as to which he shares voting power with the ESOP.
The ESOP has sole investment power with respect to such shares. The
mailing address of John R. Desjardins
-30-
is c/o Whitehall Jewellers, Inc., 155 North Wacker Drive, Suite 500,
Chicago, Illinois 60606.
(13) Includes 124,632 shares of Common Stock issuable pursuant to presently
exercisable stock options or stock options which will become exercisable
within 60 days of this proxy statement. Mr. M. Brown tendered his
resignation effective December 17, 2004. Pursuant to his separation and
release agreement, Mr. M. Brown's employment with Whitehall was deemed to
have been terminated for good reason and therefore his options to purchase
shares of Whitehall's Common Stock vested in full and remain exercisable
until December 17, 2006. Includes 750 shares owned by Marcy Brown, Mr. M.
Brown's wife, in her self directed IRA account, with respect to which
shares Manny A. Brown disclaims beneficial ownership. The mailing address
of Manny A. Brown is 184 Oak Knoll Terrace, Highland Park, IL 60035.
(14) Includes 47,366 shares of Common Stock issuable pursuant to presently
exercisable stock options or stock options which will become exercisable
within 60 days of this proxy statement. Includes 1,111 shares of
restricted Common Stock granted on February 19, 2004, which restrictions
lapse in equal installments on February 19, 2006 and February 19, 2007.
Includes 1,667 shares of restricted Common Stock granted on March 3, 2005,
which restrictions lapse in equal installments on March 3, 2006, March 3,
2007 and March 3, 2008. Includes 1,402 shares of restricted Common Stock
granted on April 13, 2005, which restrictions lapse on April 13, 2006. The
mailing address of Norman J. Patinkin is c/o United Marketing Group,
L.L.C., 5724 North Pulaski, Chicago, Illinois 60647.
(15) Includes 49,444 shares of Common Stock issuable pursuant to presently
exercisable stock options or stock options which will become exercisable
within 60 days of this proxy statement. Includes 1,111 shares of
restricted Common Stock granted on February 19, 2004, which restrictions
lapse in equal installments on February 19, 2006 and February 19, 2007.
Includes 1,667 shares of restricted Common Stock granted on March 3, 2005,
which restrictions lapse in equal installments on March 3, 2006, March 3,
2007 and March 3, 2008. Includes 1,402 shares of restricted Common Stock
granted on April 13, 2005, which restrictions lapse on April 13, 2006. The
mailing address for Daniel H. Levy is c/o Whitehall Jewellers, Inc., 155
North Wacker Drive, Suite 500, Chicago, Illinois 60606.
(16) Includes 46,306 shares of Common Stock issuable pursuant to presently
exercisable stock options or stock options which will become exercisable
within 60 days of this proxy statement. Includes 1,111 shares of
restricted Common Stock granted on February 19, 2004, which restrictions
lapse in equal installments on February 19, 2006 and February 19, 2007.
Includes 1,667 shares of restricted Common Stock granted on March 3, 2005,
which restrictions lapse in equal installments on March 3, 2006, March 3,
2007 and March 3, 2008. Includes 1,402 shares of restricted Common Stock
granted on April 13, 2005, which restrictions lapse on April 13, 2006. The
mailing address for Richard K. Berkowitz is 3201 NE 183rd Street, Unit
1905, Aventure, Florida 33160.
-31-
(17) Includes 6,141 shares of Common Stock issuable pursuant to presently
exercisable stock options. Includes 1,111 shares of restricted Common
Stock granted on February 19, 2004, which restrictions lapse in equal
installments on February 19, 2006 and February 19, 2007. Includes 1,667
shares of restricted Common Stock granted on March 3, 2005, which
restrictions lapse in equal installments on March 3, 2006, March 3, 2007
and March 3, 2008. Includes 1,402 shares of restricted Common Stock
granted on April 13, 2005, which restrictions lapse on April 13, 2006. The
mailing address of Sanford Shkolnik is c/o Encore Investments, LLC, 101
West Grand Avenue, Chicago, Illinois 60610.
(18) Includes 13,333 shares of restricted Common Stock granted on June 1, 2004,
which restrictions lapse in equal installments on June 1, 2006 and June 1,
2007. The mailing address of Debbie Nicodemus-Volker is c/o Whitehall
Jewellers, Inc., 155 North Wacker Drive, Suite 500, Chicago, Illinois
60606.
(19) Mr. Pully is the President of Newcastle Management, L.P., which is the
general partner of Newcastle Partners, L.P. See footnote 4 to this table.
Mr. Pully disclaims beneficial ownership of the 2,018,400 shares owned by
Newcastle Partners, L.P. The mailing address of Mr. Pully is c/o Whitehall
Jewellers, Inc., 155 North Wacker Drive, Suite 500, Chicago, Illinois
60606.
(20) Ms. Baier tender her resignation on October 11, 2005. Pursuant to her
employment agreement, dated November 30, 2004 and as amended on August 11,
2005, Ms. Baier has forfeited all of her shares of restricted Common
Stock.
(21) One additional Class I director nominee and two additional Class II
director nominees will be named prior to the completion and distribution
of this proxy statement.
-32-
IMPORTANT
Tell your Board what you think! Your vote is important. No matter how many
shares you own, please give Newcastle Partners your proxy AGAINST the Prentice
Financing proposals by taking three steps:
o SIGNING the enclosed GREEN proxy card,
o DATING the enclosed GREEN proxy card, and
o MAILING the enclosed GREEN proxy card TODAY in the envelope provided
(no postage is required if mailed in the United States).
If any of your shares are held in the name of a brokerage firm, bank, bank
nominee or other institution, only it can vote such shares and only upon receipt
of your specific instructions. Accordingly, please contact the person
responsible for your account and instruct that person to execute the GREEN proxy
card representing your shares. Newcastle Partners urges you to confirm in
writing your instructions to Newcastle Partners in care of MacKenzie Partners,
Inc. at the address provided below so that Newcastle Partners will be aware of
all instructions given and can attempt to ensure that such instructions are
followed.
If you have any questions or require any additional information concerning
this Proxy Statement, please contact MacKenzie Partners, Inc. at the address set
forth below.
MACKENZIE
PARTNERS, INC.
105 Madison Avenue
New York, New York 10016
(212) 929-5500 (Call Collect)
proxy@mackenziepartners.com
or
CALL TOLL FREE (800) 322-2885
PRELIMINARY COPY SUBJECT TO COMPLETION
DATED NOVEMBER 29, 2005
WHITEHALL JEWELLERS, INC.
SPECIAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF
NEWCASTLE PARTNERS, L.P.
THE BOARD OF DIRECTORS OF WHITEHALL JEWELLERS, INC.
IS NOT SOLICITING THIS PROXY
P R O X Y
The undersigned appoints Mark E. Schwarz and Steven J. Pully, and each of them,
attorneys and agents with full power of substitution to vote all shares of
capital stock of Whitehall Jewellers, Inc. (the "Company") which the undersigned
would be entitled to vote if personally present at the Special Meeting of
Stockholders of the Company scheduled to be held on ________, __________, 200__
at ____ (local time) at ________, Chicago, Illinois _________, and including at
any adjournments or postponements thereof and at any meeting called in lieu
thereof (the "Special Meeting").
The undersigned hereby revokes any other proxy or proxies heretofore given to
vote or act with respect to the shares of capital stock of the Company held by
the undersigned, and hereby ratifies and confirms all action the herein named
attorneys and proxies, their substitutes, or any of them may lawfully take by
virtue hereof. If properly executed, this Proxy will be voted as directed on the
reverse and in their discretion with respect to any other matters as may
properly come before the Special Meeting that are unknown to Newcastle Partners,
L.P. a reasonable time before this solicitation.
IF NO DIRECTION IS INDICATED WITH RESPECT TO THE PROPOSALS ON THE REVERSE, THIS
PROXY WILL BE VOTED AGAINST PROPOSALS 1, 2 AND 3.
This Proxy will be valid until the sooner of one year from the date indicated on
the reverse side and the completion of the Special Meeting.
IMPORTANT: PLEASE SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY!
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
|X| PLEASE MARK VOTE AS IN THIS EXAMPLE
1. The Company's proposal to approve the issuance of shares of its common
stock pursuant to the terms of its secured convertible notes;
FOR AGAINST ABSTAIN
|_| |_| |_|
2. The Company's proposal to approve an amendment to its certificate of
incorporation to effect a 1-for-2 reverse stock split of its capital
stock.
FOR AGAINST ABSTAIN
|_| |_| |_|
3. The Company's proposal to elect one (1) Class I director, three (3) Class
II directors and two (2) Class III directors.
Nominee (1) -- Charles G. Phillips
FOR AGAINST ABSTAIN
|_| |_| |_|
Nominee (2) -- Jonathan Duskin
FOR AGAINST ABSTAIN
|_| |_| |_|
Nominee (3) -- Seymour Holtzman
FOR AGAINST ABSTAIN
|_| |_| |_|
Nominee (4) -- [____________]
FOR AGAINST ABSTAIN
|_| |_| |_|
Nominee (5) -- [____________]
FOR AGAINST ABSTAIN
|_| |_| |_|
Nominee (6) -- [____________]
FOR AGAINST ABSTAIN
|_| |_| |_|
DATED: ____________________________
- ------------------------------------
(Signature)
- ------------------------------------
(Signature, if held jointly)
- ------------------------------------
(Title)
WHEN SHARES ARE HELD JOINTLY, JOINT OWNERS SHOULD EACH SIGN. EXECUTORS,
ADMINISTRATORS, TRUSTEES, ETC., SHOULD INDICATE THE CAPACITY IN WHICH SIGNING.
PLEASE SIGN EXACTLY AS NAME APPEARS ON THIS PROXY.
Newcastle Partners L P
Filed: 29 Nov 05, 12:00am