Offer to Purchase for Cash
All Outstanding Shares of Common Stock
(Including the Associated Preferred Stock Purchase Rights)
of
WHITEHALL JEWELLERS, INC.
at
$1.20 Net Per Share
by
JWL ACQUISITION CORP.
A Wholly Owned Subsidiary of
NEWCASTLE PARTNERS, L.P.
THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON WEDNESDAY, JANUARY 4, 2006, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN BEFORE THE EXPIRATION OF THE OFFER A NUMBER OF
SHARES OF COMMON STOCK, PAR VALUE $0.001 PER SHARE, WITH THE ASSOCIATED
PREFERRED STOCK PURCHASE RIGHTS (TOGETHER, THE "SHARES"), OF WHITEHALL
JEWELLERS, INC. (THE "COMPANY"), WHICH, TOGETHER WITH THE SHARES THEN OWNED BY
NEWCASTLE PARTNERS, L.P. ("PARENT") AND ITS SUBSIDIARIES (INCLUDING JWL
ACQUISITION CORP. (THE "PURCHASER")), REPRESENTS AT LEAST A MAJORITY OF THE
TOTAL NUMBER OF SHARES OUTSTANDING ON A FULLY DILUTED BASIS, (II) THE
TERMINATION OF THE SECURITIES PURCHASE AGREEMENT, DATED AS OF OCTOBER 3, 2005,
BETWEEN THE COMPANY, PWJ FUNDING LLC, PWJ LENDING LLC AND HOLTZMAN OPPORTUNITY
FUND, L.P. PURSUANT TO WHICH THE COMPANY WOULD SELL UP TO $50 MILLION IN
CONVERTIBLE NOTES (THE "SECURITIES PURCHASE AGREEMENT"), (III) STOCKHOLDER
REJECTION OF THE CONDITIONS TO CONSUMMATION OF THE SECURITIES PURCHASE
AGREEMENT, INCLUDING THE ISSUANCE OF SHARES OF COMMON STOCK FOR THE CONVERSION
OF THE NOTES SOLD UNDER THE SECURITIES PURCHASE AGREEMENT, THE 1-FOR-2
REVERSE STOCK SPLIT, AND THE ELECTION OF THE DIRECTORS NOMINATED BY THE
PURCHASERS UNDER THE SECURITIES PURCHASE AGREEMENT, (IV) A REFINANCING,
ACCEPTABLE TO PARENT, OF THE COMPANY'S SENIOR CREDIT FACILITY OR A CONSENT
TO THIS OFFER TO PURCHASE AND THE POTENTIAL MERGER THEREAFTER, AS DESCRIBED
HEREIN, BY THE LENDERS UNDER THE COMPANY'S SENIOR CREDIT FACILITY, (V) THE
COMPANY'S BOARD OF DIRECTORS REDEEMING THE ASSOCIATED PREFERRED STOCK PURCHASE
RIGHTS OR THE PURCHASER BEING SATISFIED THAT THE RIGHTS HAVE BEEN INVALIDATED OR
ARE OTHERWISE INAPPLICABLE TO THE OFFER AND THE POTENTIAL MERGER THEREAFTER,
(VI) THE COMPANY'S BOARD OF DIRECTORS APPROVING REPLACEMENT FINANCING TO BE
PROVIDED BY PARENT 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) THE PURCHASER BEING SATISFIED THAT SECTION 203 OF THE DELAWARE GENERAL
CORPORATION LAW IS INAPPLICABLE TO THE OFFER TO PURCHASE AND THE POTENTIAL
MERGER THEREAFTER.
PARENT AND THE PURCHASER ARE SEEKING TO NEGOTIATE A BUSINESS COMBINATION WITH
THE COMPANY. SUBJECT TO APPLICABLE LAW, THE PURCHASER RESERVES THE RIGHT TO
AMEND THE OFFER (INCLUDING AMENDING THE NUMBER OF SHARES TO BE PURCHASED, THE
OFFER PRICE AND THE CONSIDERATION TO BE OFFERED IN THE PROPOSED MERGER) UPON
ENTERING INTO A MERGER AGREEMENT WITH THE COMPANY, OR TO NEGOTIATE A MERGER
AGREEMENT WITH THE COMPANY NOT INVOLVING A TENDER OFFER PURSUANT TO WHICH THE
PURCHASER WOULD TERMINATE THE OFFER AND THE SHARES WOULD, UPON CONSUMMATION OF
SUCH MERGER, BE CONVERTED INTO THE CONSIDERATION NEGOTIATED BY PARENT, THE
PURCHASER AND THE COMPANY.
IMPORTANT
Any stockholder of the Company desiring to tender Shares in the Offer
should either (i) complete and sign the Letter of Transmittal or a facsimile
thereof in accordance with the instructions in the Letter of Transmittal, and
mail or deliver the Letter of Transmittal together with the certificates
representing tendered Shares and all other required documents to American Stock
Transfer & Trust Company, the Depositary for the Offer, or tender such Shares
pursuant to the procedure for book-entry transfer set forth in "The
Offer--Section 3--Book-Entry Delivery" or (ii) request such stockholder's
broker, dealer, commercial bank, trust company or other nominee to effect the
transaction for such stockholder. Stockholders whose Shares are registered in
the name of a broker, dealer, commercial bank, trust company or other nominee
must contact such person if they desire to tender their Shares. The associated
preferred stock purchase rights are currently evidenced by the certificates
representing the Shares, and by tendering Shares, a stockholder will also tender
the associated preferred stock purchase rights. If the Distribution Date (as
defined in "The Offer--Section 9--Preferred Stock Purchase Rights") occurs,
stockholders will be required to tender one associated preferred stock purchase
right for each Share tendered in order to effect a valid tender of such Share.
Any stockholder who desires to tender Shares and whose certificates
representing such Shares (or, if applicable, associated preferred stock purchase
rights) are not immediately available, or who cannot comply with the procedures
for book-entry transfer on a timely basis, may tender such Shares pursuant to
the guaranteed delivery procedure set forth in "The Offer--Section 3--Guaranteed
Delivery".
Questions and requests for assistance may be directed to the Information
Agent at its address and telephone number set forth on the back cover of this
Offer to Purchase. Additional copies of this Offer to Purchase, the Letter of
Transmittal, the Notice of Guaranteed Delivery and other related materials may
be obtained from the Information Agent or from brokers, dealers, commercial
banks and trust companies.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION, AND YOU SHOULD CAREFULLY READ BOTH IN THEIR ENTIRETY
BEFORE MAKING A DECISION WITH RESPECT TO THE OFFER.
December 5, 2005
ii
TABLE OF CONTENTS
Page
----
Summary Term Sheet.......................................................... 1
Introduction................................................................ 5
The Offer................................................................... 6
1. Terms of the Offer.............................................. 6
2. Acceptance for Payment and Payment.............................. 7
3. Procedure for Tendering Shares.................................. 8
4. Withdrawal Rights............................................... 10
5. Certain Tax Considerations...................................... 11
6. Price Range of Shares; Dividends................................ 11
7. Possible Effects of the Offer on the Market for the Shares;
Stock Exchange Listing; Registration under the Exchange Act..... 12
8. Certain Information Concerning the Company...................... 12
9. Certain Information Concerning the Purchaser and Parent......... 14
10. Source and Amount of Funds...................................... 15
11. Background of the Offer......................................... 16
12. Purpose of the Offer; Plans for the Company; Statutory
Requirements; Approval of the Merger; Appraisal Rights.......... 20
13. Dividends and Distributions..................................... 22
14. Conditions of the Offer......................................... 23
15. Certain Legal Matters; Regulatory Approvals..................... 26
16. Fees and Expenses............................................... 27
17. Miscellaneous................................................... 27
Schedule I.................................................................. S-1
SUMMARY TERM SHEET
JWL Acquisition Corp., a wholly owned subsidiary of Newcastle Partners,
L.P., is offering to purchase all outstanding shares of common stock, par value
$0.001 per share, of Whitehall Jewellers, Inc. (together with the associated
preferred stock purchase rights) for $1.20 net per share in cash, upon the terms
and subject to the conditions set forth in this Offer to Purchase and the
related Letter of Transmittal. The following are some of the questions you, as a
Whitehall Jewellers, Inc. stockholder, may have and answers to those questions.
You should carefully read this Offer to Purchase and the accompanying Letter of
Transmittal in their entirety because the information in this summary term sheet
is not complete and additional important information is contained in the
remainder of this Offer to Purchase and the Letter of Transmittal.
WHO IS OFFERING TO BUY MY SECURITIES?
Our name is JWL Acquisition Corp. We are a Delaware corporation formed to
serve as an acquisition vehicle with no current operations other than those
incident to the commencement of the offer. We are a wholly owned subsidiary of
Newcastle Partners, L.P., a Texas limited partnership. See "The Offer--Section
9".
WHAT SECURITIES ARE YOU OFFERING TO PURCHASE?
We are offering to purchase all of the outstanding common stock, par value
$0.001 per share, and the associated preferred stock purchase rights, of
Whitehall Jewellers, Inc. We refer to one share of Whitehall Jewellers, Inc.
common stock, together with the associated stock purchase right, as a "share" or
"Share". See "Introduction".
HOW MUCH ARE YOU OFFERING TO PAY FOR MY SECURITIES AND WHAT IS THE FORM OF
PAYMENT?
We are offering to pay you $1.20 per share in cash without brokerage fees,
commissions or, except in certain circumstances, transfer taxes. See
"Introduction".
DO YOU HAVE THE FINANCIAL RESOURCES TO PAY FOR THE SHARES?
Yes. We will need approximately $14.5 million to purchase all Shares
pursuant to the offer and to pay related fees and expenses. We will also need
approximately $30 million to replace Whitehall Jewellers, Inc.'s current $30
million bridge loan facility on comparable terms. As of December 2, 2005,
Newcastle Partners, L.P. had cash and cash equivalents and short-term
investments substantially in excess of the approximately $44.5 million required
to acquire the Shares and replace the bridge loan facility. Accordingly, the
offer is not conditioned upon any financing arrangements. See "The
Offer--Section 10".
IS YOUR FINANCIAL CONDITION RELEVANT TO MY DECISION TO TENDER IN THE OFFER?
Because (i) the form of payment for your Shares consists solely of cash,
(ii) we intend to use cash to replace the Company's existing bridge loan
facility, and (iii) neither the purchase of the Shares nor the replacement of
the bridge loan facility are conditioned upon any financing arrangements, we do
not think our financial condition is material to your decision whether to tender
in the offer.
WHAT DOES THE BOARD OF DIRECTORS OF WHITEHALL JEWELLERS, INC. THINK OF THE OFFER?
Whitehall Jewellers, Inc.'s Board of Directors has not approved this offer
or otherwise commented on it as of the date of this Offer to Purchase. Within 10
business days after the date of this Offer to Purchase, Whitehall Jewellers,
Inc. is required by law to publish, send or give to you (and file with the
Securities and Exchange Commission) a statement as to whether it recommends
acceptance or rejection of the offer, that it has no opinion with respect to the
offer or that it is unable to take a position with respect to the offer.
1
HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER IN THE OFFER?
You have until the expiration date of the offer to tender. The offer
currently is scheduled to expire at 12:00 Midnight, New York City time, on
Wednesday, January 4, 2006. We currently expect that the offer will be extended
until the principal conditions to the offer, which are described below, are
satisfied. If the offer is extended, we will issue a press release announcing
the extension at or before 9:00 A.M. New York City time on the next business day
after the date the offer was scheduled to expire. See "The Offer--Section 1".
We may elect to provide a "subsequent offering period" for the offer. A
subsequent offering period, if one is included, will be an additional period of
time beginning after we have purchased shares tendered during the offer, during
which stockholders may tender, but not withdraw, their shares and receive the
offer consideration. We do not currently intend to include a subsequent offering
period, although we reserve the right to do so. See "The Offer--Section 1".
WHAT ARE THE MOST SIGNIFICANT CONDITIONS TO THE OFFER?
The offer is conditioned upon, among other things, (i) there being validly
tendered and not withdrawn before the expiration of the offer a number of
shares, which, together with the shares then owned by Newcastle Partners, L.P.
and its subsidiaries (including us), represents at least a majority of the total
number of shares outstanding on a fully diluted basis, (ii) the termination of
the Securities Purchase Agreement, dated as of October 3, 2005, between
Whitehall Jewellers, Inc., PWJ Funding LLC, PWJ Lending LLC and Holtzman
Opportunity Fund, L.P. pursuant to which Whitehall Jewellers, Inc. would sell up
to $50 million in convertible notes, (iii) stockholder rejection of the
conditions to consummation of such Securities Purchase Agreement, including the
issuance of shares for the conversion of the notes sold under the Securities
Purchase Agreement, the 1-for-2 reverse stock split, and the election of the
directors nominated by the purchasers under the Securities Purchase Agreement,
(iv) a refinancing, acceptable to Newcastle Partners, L.P., of Whitehall
Jewellers, Inc.'s senior credit facility or a consent to the offer and the
potential merger thereafter, as described herein, by the lenders under Whitehall
Jewellers, Inc.'s senior credit facility, (v) Whitehall Jewellers, Inc.'s Board
of Directors redeeming the associated preferred stock purchase rights or our
being satisfied that the rights have been invalidated or are otherwise
inapplicable to the offer and the potential merger thereafter, (vi) the
Company's Board of Directors approving replacement financing to be provided by
Parent 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, L.P. being satisfied that Section 203 of the Delaware General
Corporation Law is inapplicable to the offer and the potential merger
thereafter. See "The Offer--Section 14".
HOW WILL I BE NOTIFIED IF THE OFFER IS EXTENDED?
If we decide to extend the offer, we will inform American Stock Transfer &
Trust Company, the depositary for the offer, of that fact and will make a public
announcement of the extension, no later than 9:00 A.M., New York City time, on
the next business day after the date the offer was scheduled to expire. See "The
Offer--Section 1".
HOW DO I TENDER MY SHARES?
To tender shares, you must deliver the certificates representing your
shares, together with a completed Letter of Transmittal and any other required
documents, to American Stock Transfer & Trust Company, the depositary for the
offer, not later than the time the offer expires. If your shares are held in
street name by your broker, dealer, bank, trust company or other nominee, such
nominee can tender your shares through The Depository Trust Company. If you
cannot deliver everything required to make a valid tender to the depositary
before the expiration of the offer, you may have a limited amount of additional
time by having a financial institution (including most banks, savings and loan
associations and brokerage houses) that is a member of a recognized Medallion
Program approved by The Securities Transfer Association Inc., including the
Securities Transfer Agents Medallion Program (STAMP), the Stock Exchange
Medallion Program (SEMP) and the New York Stock Exchange, Inc. Medallion
Signature Program (MSP), guarantee, pursuant to a Notice of Guaranteed Delivery,
that the missing items will be received by the depositary within three business
days. However, the depositary must receive the missing items within that three
business day period. See "The Offer--Section 3".
2
UNTIL WHAT TIME CAN I WITHDRAW TENDERED SHARES?
You can withdraw tendered shares at any time until the offer has expired,
and, if we have not by February 3, 2006, agreed to accept your shares for
payment, you can withdraw them at any time after such time until we accept
shares for payment. You may not, however, withdraw shares tendered during a
subsequent offering period, if one is included. See "The Offer--Section 4".
HOW DO I WITHDRAW TENDERED SHARES?
To withdraw shares, you must deliver a written notice of withdrawal, or a
facsimile of one, with the required information to American Stock Transfer &
Trust Company while you have the right to withdraw the shares. See "The
Offer--Section 4".
WHEN AND HOW WILL I BE PAID FOR MY TENDERED SHARES?
Subject to the terms and conditions of the offer, we will pay for all
validly tendered and not withdrawn shares promptly after the later of the date
of expiration of the offer and the satisfaction or waiver of the conditions to
the offer set forth in "The Offer--Section 14" that are dependent upon the
receipt of government approvals. We do, however, reserve the right, in our
reasonable discretion and subject to applicable law, to delay payment for shares
until satisfaction of all conditions to the offer that are dependent upon the
receipt of government approvals. See "The Offer--Section 2".
We will pay for your validly tendered and not withdrawn shares by
depositing the purchase price with American Stock Transfer & Trust Company,
which will act as your agent for the purpose of receiving payments from us and
transmitting such payments to you. In all cases, payment for tendered shares
will be made only after timely receipt by American Stock Transfer & Trust
Company of certificates for such shares (or of a confirmation of a book-entry
transfer of such shares as described in "The Offer--Section 3--Book-Entry
Delivery"), a properly completed and duly executed Letter of Transmittal (or
facsimile thereof) and any other required documents for such shares. See "The
Offer--Section 2".
WILL THE OFFER BE FOLLOWED BY A MERGER IF ALL THE WHITEHALL JEWELLERS, INC.
SHARES ARE NOT TENDERED IN THE OFFER?
If we accept for payment and pay for at least a majority of the
outstanding shares on a fully diluted basis, JWL Acquisition Corp. expects to be
merged with and into Whitehall Jewellers, Inc. If that merger takes place,
Newcastle Partners, L.P. will own all of the shares and all remaining
stockholders (other than us, Newcastle Partners, L.P. and stockholders properly
exercising their appraisal rights) will receive the price per share paid in the
offer. See "The Offer--Section 12--Purpose of the Offer; Plans for the Company".
IF A MAJORITY OF THE SHARES ARE TENDERED AND ACCEPTED FOR PAYMENT, WILL
WHITEHALL JEWELLERS, INC. CONTINUE AS A PUBLIC COMPANY?
If the merger takes place, Whitehall Jewellers, Inc. will no longer be
publicly owned. Even if the merger does not take place, if we purchase all the
tendered shares, there may be so few remaining stockholders and publicly held
shares that the shares will no longer be eligible to be traded on a securities
exchange, there may not be a public trading market for the shares, and Whitehall
Jewellers, Inc. may cease making filings with the Securities and Exchange
Commission or otherwise cease being required to comply with the Securities and
Exchange Commission's rules relating to publicly held companies. See "The
Offer--Section 7".
IF I DECIDE NOT TO TENDER, HOW WILL THE OFFER AFFECT MY SHARES?
If the offer is successful, JWL Acquisition Corp. expects to conclude a
merger transaction in which all shares of Whitehall Jewellers, Inc. will be
exchanged for an amount in cash per share equal to the price per share paid in
the offer. If the proposed second-step merger takes place, stockholders who do
not tender in the offer (other than those properly exercising their appraisal
rights) will receive the same amount of cash per share that they would have
received had they tendered their shares in the offer. Therefore, if such merger
takes place, the only difference between tendering and not tendering shares in
3
the offer is that tendering stockholders will be paid earlier. If, however, the
merger does not take place and the offer is consummated, the number of
stockholders and of shares that are still in the hands of the public may be so
small that there will no longer be an active or liquid public trading market
(or, possibly, any public trading market) for shares held by stockholders other
than JWL Acquisition Corp., which may affect prices at which shares trade. Also,
as described above, Whitehall Jewellers, Inc. may cease making filings with the
Securities and Exchange Commission or being required to comply with the
Securities and Exchange Commission's rules relating to publicly held companies.
See "The Offer--Section 7".
WHAT IS THE MARKET VALUE OF MY SHARES AS OF A RECENT DATE?
On November 28, 2005, the last full business day before the announcement
of our intention to commence the offer, the last reported sales price of
Whitehall Jewellers, Inc. common stock reported on the Pink Sheets electronic
quotation system was $0.88 per share. Please obtain a recent quotation for your
shares prior to deciding whether or not to tender.
WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF PARTICIPATING IN THE OFFER?
In general, your sale of shares pursuant to the offer will be a taxable
transaction for U.S. federal income tax purposes and may also be a taxable
transaction under applicable state, local or foreign income or other tax laws.
You should consult your tax advisor about the tax consequences to you of
participating in the offer in light of your particular circumstances. See "The
Offer--Section 5".
WHO CAN I TALK TO IF I HAVE QUESTIONS ABOUT THE OFFER?
You can call MacKenzie Partners, Inc., the information agent for the
offer, at (212) 929-5500 (collect) or (800) 322-2885 (toll-free). See the back
cover of this Offer to Purchase.
4
To the Stockholders of Whitehall Jewellers, Inc.:
INTRODUCTION
We, JWL Acquisition Corp. (the "Purchaser"), a Delaware corporation and
wholly owned subsidiary of Newcastle Partners, L.P., a Texas limited partnership
("Parent"), are offering to purchase all outstanding shares of common stock (the
"Common Stock"), par value $0.001 per share, of Whitehall Jewellers, Inc., a
Delaware corporation (the "Company"), and the associated stock purchase rights
(the "Rights" and, together with the Common Stock, the "Shares") issued pursuant
to the Amended and Restated Stockholders Rights Plan, dated as of April 28,
1999, between the Company and LaSalle Bank National Association, as the rights
agent (the "Rights Agreement"), for $1.20 per Share, net to the seller in cash,
upon the terms and subject to the conditions set forth in this Offer to Purchase
and the related Letter of Transmittal (which, together with any amendments or
supplements thereto, collectively constitute the "Offer"). Stockholders who have
Shares registered in their own names and tender directly to American Stock
Transfer & Trust Company, the depositary for the Offer (the "Depositary"),
will not have to pay brokerage fees or commissions. Stockholders with Shares
held in street name by a broker, dealer, bank, trust company or other nominee
should consult with their nominee to determine if they charge any transaction
fees. Except as set forth in Instruction 6 of the Letter of Transmittal,
stockholders will not have to pay transfer taxes on the sale of Shares pursuant
to the Offer. We will pay all charges and expenses of the Depositary and
MacKenzie Partners, Inc. (the "Information Agent") incurred in connection with
the Offer. See "The Offer--Section 16".
The Offer is conditioned upon, among other things, (i) there being validly
tendered and not withdrawn before the Expiration Date (as defined below) a
number of Shares, which, together with the Shares then owned by Parent and its
subsidiaries (including us), represents at least a majority of the total number
of Shares outstanding on a fully diluted basis (the "Minimum Tender Condition"),
(ii) the termination of the Securities Purchase Agreement, dated as of October
3, 2005, between the Company, PWJ Funding LLC, PWJ Lending LLC and Holtzman
Opportunity Fund, L.P. pursuant to which the Company would sell up to $50
million in convertible notes (the "Termination Condition"), (iii) stockholder
rejection of the conditions to consummation of such Securities Purchase
Agreement, including the issuance of shares for the conversion of the notes sold
under the Securities Purchase Agreement, the 1-for-2 reverse stock split, and
the election of the directors nominated by the purchasers under the Securities
Purchase Agreement (the "Stockholder Rejection Condition"), (iv) a refinancing,
acceptable to Parent, of the Company's senior credit facility or a consent to
the Offer and the potential merger thereafter, as described herein, by the
lenders under the Company's senior credit facility (the "Credit Facility
Condition"), (v) the Company's Board of Directors redeeming the Rights or our
being satisfied that the Rights have been invalidated or are otherwise
inapplicable to the Offer and the potential merger thereafter (the "Rights
Condition"), (vi) the Company's Board of Directors approving replacement
financing to be provided by Parent 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
components (the "Bridge Refinancing Approval Condition") and (vii) our being
satisfied that Section 203 of the Delaware General Corporation Law (the
"Delaware Law") is inapplicable to the Offer and the potential merger thereafter
(the "Section 203 Condition").
According to the Company's Quarterly Report on Form 10-Q filed on November
1, 2005 with the Securities and Exchange Commission (the "SEC"), as of October
24, 2005, there were outstanding 13,961,216 Shares. Parent and the Purchaser
beneficially own 2,018,400 Shares, representing approximately 14.46% of the
outstanding Shares.
The purpose of the 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 Offer, to seek maximum representation on the Company's Board
of Directors (the "Company Board") and to seek to have the Company consummate a
merger or other similar business combination with us (or one of our
subsidiaries). Under the Delaware Law, if we acquire, pursuant to the Offer or
otherwise, at least 90% of the outstanding Shares, we believe we would be able
to approve a merger or other business combination without a vote of the Company
Board or other stockholders. If we do not acquire at least 90% of the
outstanding Shares, we will have to seek approval of a merger or other business
combination by the Company's stockholders. Approval of a merger or other
business combination requires the affirmative vote of holders of a majority of
the outstanding Shares. Pursuant to such merger or business combination,
outstanding Shares not owned by Parent or its subsidiaries (including us) would
be converted into the right to receive cash in an amount equal to the price per
Share provided pursuant to the Offer.
5
Parent and the Purchaser are seeking to negotiate a business combination
with the Company. Subject to applicable law, the Purchaser reserves the right to
amend the Offer (including amending the number of Shares to be purchased, the
offer price and the consideration to be offered in the proposed merger) upon
entering into a merger agreement with the Company, or to negotiate a merger
agreement with the Company not involving a tender offer pursuant to which the
Purchaser would terminate the Offer and the Shares would, upon consummation of
such merger, be converted into the consideration negotiated by Parent, the
Purchaser and the Company.
According to the Company's Annual Report on Form 10-K for the year ended
January 31, 2005 (the "Company 10-K"), the Company did not declare any dividends
in fiscal 2004 and 2003 and does not anticipate paying any cash dividends in the
foreseeable future. If we acquire control of the Company, we currently intend
that no dividends will be declared on the Shares prior to the acquisition of the
entire equity interest in the Company.
This Offer to Purchase and the related Letter of Transmittal contain
important information, and you should carefully read both in their entirety
before you make a decision with respect to the Offer.
THE OFFER
1. TERMS OF THE OFFER. Upon the terms and subject to the conditions set
forth in the Offer, we will accept for payment and pay for all Shares that are
validly tendered before the Expiration Date and not withdrawn. "Expiration Date"
means 12:00 Midnight, New York City time, on Wednesday, January 4, 2006, unless
extended, in which event "Expiration Date" means the latest time and date at
which the Offer, as so extended, shall expire.
The Offer is subject to the conditions set forth in "The Offer--Section
14", which include, among other things, satisfaction of the Minimum Tender
Condition, the Termination Condition, the Stockholder Rejection Condition, the
Credit Facility Condition, the Rights Condition, the Bridge Refinancing Approval
Condition and the Section 203 Condition. If any such condition is not satisfied,
we may (i) terminate the Offer and return all tendered Shares to tendering
stockholders, (ii) extend the Offer and, subject to withdrawal rights as set
forth in "The Offer--Section 4", retain all such Shares until the expiration of
the Offer as so extended, (iii) waive such condition and, subject to any
requirement to extend the period of time during which the Offer is open,
purchase all Shares validly tendered prior to the Expiration Date and not
withdrawn or (iv) delay acceptance for payment or payment for Shares, subject to
applicable law, until satisfaction or waiver of the conditions to the Offer.
Subject to any applicable rules and regulations of the SEC, the Purchaser
expressly reserves the right (but will not be obligated), in its reasonable
discretion, at any time and from time to time, to extend the period during which
the Offer is open for any reason by giving oral or written notice of the
extension to the Depositary and by making a public announcement of the
extension. During any extension, all Shares previously tendered and not
withdrawn will remain subject to the Offer and subject to the right of a
tendering stockholder to withdraw Shares.
Subject to any applicable rules and regulations of the SEC, including Rule
14e-1(c) under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), the Purchaser expressly reserves the right to (i) terminate or amend the
Offer if any of the conditions set forth in "The Offer--Section 14" has not been
satisfied or (ii) waive any condition or otherwise amend the Offer in any
respect, in each case, by giving oral or written notice of such termination,
waiver or amendment to the Depositary and by making a public announcement
thereof, as described below. Rule 14e-1(c) under the Exchange Act requires the
Purchaser to pay the consideration offered or return the Shares tendered
promptly after the termination or withdrawal of the Offer.
As of the date of this Offer to Purchase, the Rights do not trade
separately. Accordingly, by tendering Common Stock you are automatically
tendering a similar number of Rights. If, however, the Rights detach and
separate certificates evidencing the Rights are issued, tendering stockholders
will be required to deliver Rights certificates with the Common Stock.
If we decrease the percentage of Shares being sought or increase or
decrease the consideration to be paid for Shares pursuant to the Offer and the
Offer is scheduled to expire at any time before the expiration of a period of 10
business days from, and including, the date that notice of such increase or
decrease is first published, sent or given in the manner specified below, the
Offer shall be extended until the expiration of such period of 10 business days.
6
If we make any other material change in the terms of or information concerning
the Offer or waive a material condition of the Offer, we will extend the Offer,
if required by applicable law, for a period sufficient to allow you to consider
the amended terms of the Offer. In a published release, the SEC has stated that
in its view an offer must remain open for a minimum period of time following a
material change in the terms of such offer and that the waiver of a condition
such as the Minimum Tender Condition is a material change in the terms of an
offer. The release states that an offer should remain open for a minimum of five
business days from the date the material change is first published, sent or
given to stockholders, and that if material changes are made with respect to
information that approaches the significance of price and share levels, a
minimum of 10 business days may be required to allow adequate dissemination and
investor response. "Business day" means any day other than Saturday, Sunday or a
U.S. federal holiday and consists of the time period from 12:01 A.M. through
12:00 Midnight, New York City time.
If we extend the Offer, are delayed in accepting for payment or paying for
Shares or are unable to accept for payment or pay for Shares pursuant to the
Offer for any reason, then, without prejudice to our rights under the Offer, the
Depositary may, on our behalf, retain all Shares tendered, and such Shares may
not be withdrawn except as provided in "The Offer--Section 4". Our reservation
of the right to delay acceptance for payment of or payment for Shares is subject
to applicable law, which requires that we pay the consideration offered or
return the Shares deposited by or on behalf of stockholders promptly after the
termination or withdrawal of the Offer.
Any extension, delay, termination, waiver or amendment of the Offer will
be followed as promptly as practicable by a public announcement thereof. Without
limiting the manner in which we may choose to make any public announcement, we
will have no obligation (except as otherwise required by applicable law) to
publish, advertise or otherwise communicate any such public announcement other
than by making a release to the Dow Jones News Service. In the case of an
extension of the Offer, we will make a public announcement of such extension no
later than 9:00 A.M., New York City time, on the next business day after the
previously scheduled Expiration Date.
After the expiration of the Offer, we may, but are not obligated to,
include a subsequent offering period of between three and 20 business days to
permit additional tenders of Shares (a "Subsequent Offering Period"). Pursuant
to Rule 14d-11 under the Exchange Act, we may include a Subsequent Offering
Period so long as, among other things, (i) the Offer remains open for a minimum
of 20 business days and has expired, (ii) all conditions to the Offer are
satisfied or waived by us on or before the Expiration Date, (iii) we accept and
promptly pay for all securities validly tendered during the Offer, (iv) we
announce the results of the Offer, including the approximate number and
percentage of Shares deposited in the Offer, no later than 9:00 A.M., New York
City time, on the next business day after the Expiration Date and immediately
begin the Subsequent Offering Period and (v) we immediately accept and promptly
pay for Shares as they are tendered during the Subsequent Offering Period. In
addition, we may extend any initial Subsequent Offering Period by any period or
periods, provided that the aggregate of the Subsequent Offering Period
(including extensions thereof) is no more than 20 business days. No withdrawal
rights apply to Shares tendered in a Subsequent Offering Period, and no
withdrawal rights apply during a Subsequent Offering Period with respect to
Shares previously tendered in the Offer and accepted for payment. The same price
paid in the Offer will be paid to stockholders tendering Shares in the Offer or
in a Subsequent Offering Period, if one is included.
We do not currently intend to include a Subsequent Offering Period,
although we reserve the right to do so. If we elect to include or extend a
Subsequent Offering Period, we will make a public announcement of such inclusion
or extension no later than 9:00 A.M., New York City time, on the next business
day after the Expiration Date or date of termination of any prior Subsequent
Offering Period.
We have made a request to the Company for its stockholder list and
security position listings for the purpose of disseminating the Offer to holders
of Shares. We will send this Offer to Purchase, the related Letter of
Transmittal and other related documents to record holders of Shares and to
brokers, dealers, banks, trust companies and other nominees whose names appear
on the stockholder list or, if applicable, who are listed as participants in a
clearing agency's security position listing for subsequent transmittal to
beneficial owners of Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT. Upon the terms and subject to
the conditions of the Offer, we will accept for payment and pay for all Shares
validly tendered before the Expiration Date and not withdrawn promptly after the
later of the Expiration Date and the satisfaction or waiver of all conditions
set forth in "The Offer--Section 14" that are dependent upon the receipt of
government approvals. Subject to any applicable rules and regulations of the
SEC, including
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Rule 14e-1(c) under the Exchange Act, we reserve the right, in our reasonable
discretion and subject to applicable law, to delay the acceptance for payment or
payment for Shares until satisfaction of all conditions to the Offer that are
dependent upon the receipt of government approvals. For a description of our
right to terminate the Offer and not accept for payment or pay for Shares or to
delay acceptance for payment or payment for Shares, see "The Offer--Section 14".
If we increase the consideration to be paid for Shares pursuant to the Offer, we
will pay such increased consideration for all Shares purchased pursuant to the
Offer.
We will pay for Shares accepted for payment pursuant to the Offer by
depositing the purchase price with the Depositary, which will act as your agent
for the purpose of receiving payments from us and transmitting such payments to
you. In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of (i) certificates for
such Shares (or a confirmation of a book-entry transfer of such Shares into the
Depositary's account at the Book-Entry Transfer Facility (as defined in "The
Offer--Section 3")) and, if the Distribution Date (as defined below) occurs,
certificates for Rights (or a confirmation of book-entry transfer, if available,
of such Rights into the Depositary's account at the Book-Entry Transfer
Facility), (ii) a properly completed and duly executed Letter of Transmittal (or
facsimile thereof) and (iii) any other required documents. For a description of
the procedure for tendering Shares pursuant to the Offer, see "The
Offer--Section 3". Accordingly, payment may be made to tendering stockholders at
different times if delivery of the Shares and other required documents occurs at
different times. Under no circumstances will we pay interest on the
consideration paid for Shares pursuant to the Offer, regardless of any delay in
making such payment.
For purposes of the Offer, we shall be deemed to have accepted for payment
tendered Shares when, as and if we give oral or written notice of our acceptance
to the Depositary.
We reserve the right to transfer or assign, in whole or from time to time
in part, to one or more of our affiliates the right to purchase Shares tendered
pursuant to the Offer, but any such transfer or assignment will not relieve us
of our obligations under the Offer or prejudice your rights to receive payment
for Shares validly tendered and accepted for payment.
If any tendered Shares are not purchased pursuant to the Offer for any
reason, or if certificates are submitted for more Shares than are tendered,
certificates for such unpurchased or untendered Shares will be returned (or, in
the case of Shares tendered by book-entry transfer, such Shares will be credited
to an account maintained at the Book-Entry Transfer Facility), without expense
to you, promptly following the expiration or termination of the Offer.
3. PROCEDURE FOR TENDERING SHARES.
VALID TENDER OF SHARES. To tender Shares pursuant to the Offer, either (i)
the Depositary must receive at one of its addresses set forth on the back cover
of this Offer to Purchase (a) a properly completed and duly executed Letter of
Transmittal (or facsimile thereof) and any other documents required by the
Letter of Transmittal and (b) certificates for the Shares (including, if the
Distribution Date occurs, certificates for the Rights) to be tendered or
delivery of such Shares pursuant to the procedures for book-entry transfer
described below (and a confirmation of such delivery including an Agent's
Message (as defined below) if the tendering stockholder has not delivered a
Letter of Transmittal), in each case by the Expiration Date, or (ii) the
guaranteed delivery procedure described below must be complied with.
THE METHOD OF DELIVERY OF SHARES AND ALL OTHER REQUIRED DOCUMENTS,
INCLUDING THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT YOUR OPTION AND RISK,
AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY.
IF CERTIFICATES FOR SHARES ARE SENT BY MAIL, WE RECOMMEND REGISTERED MAIL WITH
RETURN RECEIPT REQUESTED, PROPERLY INSURED, IN TIME TO BE RECEIVED ON OR PRIOR
TO THE EXPIRATION DATE.
The tender of Shares pursuant to any one of the procedures described above
will constitute your acceptance of the Offer, as well as your representation and
warranty that (i) you own the Shares being tendered within the meaning of Rule
14e-4 under the Exchange Act, (ii) the tender of such Shares complies with Rule
14e-4 under the Exchange Act and (iii) you have the full power and authority to
tender, sell, assign and transfer the Shares tendered, as specified in the
Letter of Transmittal. Our acceptance for payment of Shares tendered by you
pursuant to the Offer will constitute a binding agreement between us with
8
respect to such Shares, upon the terms and subject to the conditions of the
Offer.
BOOK-ENTRY DELIVERY. The Depositary will establish an account with respect
to the Shares for purposes of the Offer at The Depository Trust Company (the
"Book-Entry Transfer Facility") within two business days after the date of this
Offer to Purchase. Any financial institution that is a participant in the system
of the Book-Entry Transfer Facility may deliver Shares by causing the Book-Entry
Transfer Facility to transfer such Shares into the Depositary's account in
accordance with the procedures of the Book-Entry Transfer Facility. However,
although delivery of Shares may be effected through book-entry transfer, the
Letter of Transmittal (or facsimile thereof) properly completed and duly
executed together with any required signature guarantees or an Agent's Message
and any other required documents must, in any case, be received by the
Depositary at one of its addresses set forth on the back cover of this Offer to
Purchase by the Expiration Date, or the guaranteed delivery procedure described
below must be complied with. Delivery of the Letter of Transmittal and any other
required documents to the Book-Entry Transfer Facility does not constitute
delivery to the Depositary. "Agent's Message" means a message, transmitted by
the Book-Entry Transfer Facility to, and received by, the Depositary and forming
a part of a book-entry confirmation stating that the Book-Entry Transfer
Facility has received an express acknowledgment from the participant in the
Book-Entry Transfer Facility tendering the Shares that are the subject of such
book-entry confirmation that such participant has received, and agrees to be
bound by, the terms of the Letter of Transmittal and that the Company may
enforce such agreement against such participant.
SIGNATURE GUARANTEES. All signatures on a Letter of Transmittal must be
guaranteed by a financial institution (including most banks, savings and loan
associations and brokerage houses) that is a member of a recognized Medallion
Program approved by The Securities Transfer Association Inc., including the
Securities Transfer Agents Medallion Program (STAMP), the Stock Exchange
Medallion Program (SEMP) and the New York Stock Exchange, Inc. Medallion
Signature Program (MSP) or any other "eligible guarantor institution" (as such
term is defined in Rule 17Ad-15 under the Exchange Act) (each an "Eligible
Institution"), unless (i) the Letter of Transmittal is signed by the registered
holder of the Shares tendered therewith and such holder has not completed the
box entitled "Special Payment Instructions" on the Letter of Transmittal or (ii)
such Shares are tendered for the account of an Eligible Institution. See
Instructions 1 and 5 of the Letter of Transmittal.
GUARANTEED DELIVERY. If you wish to tender Shares pursuant to the Offer
and cannot deliver such Shares and all other required documents to the
Depositary by the Expiration Date or cannot complete the procedure for delivery
by book-entry transfer on a timely basis, you may nevertheless tender such
Shares if all of the following conditions are met:
o such tender is made by or through an Eligible Institution;
o a properly completed and duly executed Notice of Guaranteed Delivery
in the form provided by the Purchaser is received by the Depositary
(as provided below) by the Expiration Date; and
o the certificates for such Shares (or a confirmation of a book-entry
transfer of such Shares into the Depositary's account at the
Book-Entry Transfer Facility), together with a properly completed
and duly executed Letter of Transmittal (or facsimile thereof)
together with any required signature guarantee or an Agent's Message
and any other required documents, are received by the Depositary
within three business days after the date of execution of the Notice
of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by telegram, telex, facsimile transmission or mail to the Depositary and must
include a guarantee by an Eligible Institution in the form set forth in such
Notice.
BACKUP WITHHOLDING. Under the U.S. federal income tax laws, backup
withholding will apply to any payments made pursuant to the Offer unless you
provide the Depositary with your correct taxpayer identification number and
certify that you are not subject to such backup withholding by completing the
Substitute Form W-9 included in the Letter of Transmittal. If you are a
non-resident alien or foreign entity not subject to backup withholding, you must
9
give the Depositary a completed Form W-8BEN Certificate of Foreign Status before
receipt of any payment.
APPOINTMENT OF PROXY. By executing a Letter of Transmittal, you
irrevocably appoint our designees as your proxies in the manner set forth in the
Letter of Transmittal to the full extent of your rights with respect to the
Shares tendered and accepted for payment by us (and any and all other Shares or
other securities issued or issuable in respect of such Shares on or after
December 5, 2005). All such proxies are irrevocable and coupled with an interest
in the tendered Shares. Such appointment is effective only upon our acceptance
for payment of such Shares. Upon such acceptance for payment, all prior proxies
and consents granted by you with respect to such Shares and other securities
will, without further action, be revoked, and no subsequent proxies may be given
(and, if previously given, will cease to be effective). Our designees will be
empowered to exercise all your voting and other rights as they, in their
reasonable discretion, may deem proper at any annual, special or adjourned
meeting of the Company's stockholders. We reserve the right to require that, in
order for Shares to be deemed validly tendered, immediately upon our acceptance
for payment of such Shares, we or our designee must be able to exercise full
voting rights with respect to such Shares and other securities (including voting
at any meeting of stockholders).
The foregoing proxies are effective only upon acceptance for payment of
Shares pursuant to the Offer. The Offer does not constitute a solicitation of
proxies, absent a purchase of Shares, for any meeting of the Company's
stockholders.
DETERMINATION OF VALIDITY. We will determine, in our reasonable
discretion, all questions as to the form of documents and the validity,
eligibility (including time of receipt) and acceptance for payment of any tender
of Shares, and our determination shall be final and binding. We reserve the
absolute right to reject any or all tenders of Shares that we determine not to
be in proper form or the acceptance for payment of or payment for which may, in
the opinion of our counsel, be unlawful. We also reserve the absolute right to
waive any defect or irregularity in any tender of Shares. None of the Purchaser,
the Depositary, the Information Agent or any other person will be under any duty
to give notification of any defect or irregularity in tenders or waiver of any
such defect or irregularity or incur any liability for failure to give any such
notification.
4. WITHDRAWAL RIGHTS. You may withdraw tenders of Shares made pursuant
to the Offer at any time before the Expiration Date. Thereafter, such tenders
are irrevocable, except that they may be withdrawn after February 3, 2006,
unless such Shares have been accepted for payment as provided in this Offer to
Purchase. If we extend the period of time during which the Offer is open, are
delayed in accepting for payment or paying for Shares or are unable to accept
for payment or pay for Shares pursuant to the Offer for any reason, then,
without prejudice to our rights under the Offer, the Depositary may, on our
behalf, retain all Shares tendered, and such Shares may not be withdrawn except
as otherwise provided in this Section 4.
For your withdrawal to be effective, a written, telegraphic, telex or
facsimile transmission notice of withdrawal with respect to the Shares must be
timely received by the Depositary at one of its addresses set forth on the back
cover of this Offer to Purchase, and the notice of withdrawal must specify the
name of the person who tendered the Shares to be withdrawn, the number of Shares
to be withdrawn and the name of the registered holder of Shares, if different
from that of the person who tendered such Shares. If the Shares to be withdrawn
have been delivered to the Depositary, a signed notice of withdrawal with
(except in the case of Shares tendered by an Eligible Institution) signatures
guaranteed by an Eligible Institution must be submitted before the release of
such Shares. In addition, such notice must specify, in the case of Shares
tendered by delivery of certificates, the name of the registered holder (if
different from that of the tendering stockholder) and the serial numbers shown
on the particular certificates evidencing the Shares to be withdrawn or, in the
case of Shares tendered by book-entry transfer, the name and number of the
account at the Book-Entry Transfer Facility to be credited with the withdrawn
Shares. Withdrawals may not be rescinded, and Shares withdrawn will thereafter
be deemed not validly tendered. However, withdrawn Shares may be retendered by
again following one of the procedures described in "The Offer--Section 3" at any
time before the Expiration Date.
If we include a Subsequent Offering Period (as described in more detail in
"The Offer--Section 1") following the Offer, no withdrawal rights will apply to
Shares tendered in such Subsequent Offering Period and no withdrawal rights
apply during such Subsequent Offering Period with respect to Shares previously
tendered in the Offer and accepted for payment.
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We will determine, in our reasonable discretion, all questions as to the
form and validity (including time of receipt) of any notice of withdrawal, and
our determination shall be final and binding. None of the Purchaser, the
Depositary, the Information Agent or any other person will be under any duty to
give notification of any defect or irregularity in any notice of withdrawal or
waiver of any such defect or irregularity or incur any liability for failure to
give any such notification.
5. CERTAIN TAX CONSIDERATIONS. THE U.S. FEDERAL INCOME TAX DISCUSSION
SET FORTH BELOW IS INCLUDED FOR GENERAL INFORMATION ONLY AND IS BASED UPON
PRESENT LAW. DUE TO THE INDIVIDUAL NATURE OF TAX CONSEQUENCES, YOU ARE URGED TO
CONSULT YOUR TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO YOU OF THE
OFFER, INCLUDING THE EFFECTS OF APPLICABLE STATE, LOCAL AND OTHER TAX LAWS. The
following discussion may not apply to certain stockholders. For example, the
following discussion may not apply to you if you acquired your Shares pursuant
to the exercise of stock options or other compensation arrangements with the
Company, you are not a citizen or resident of the United States or you are
otherwise subject to special tax treatment under the Internal Revenue Code of
1986, as amended.
Your sale of Shares pursuant to the Offer will be a taxable transaction
for U.S. federal income tax purposes and may also be a taxable transaction under
applicable state, local and other tax laws. In general, if you tender Shares
pursuant to the Offer, you will recognize gain or loss equal to the difference
between the tax basis of your Shares and the amount of cash received in exchange
therefor. Such gain or loss will be capital gain or loss if you hold the Shares
as capital assets and will be long-term gain or loss if your holding period for
the Shares is more than one year as of the date of the sale of such Shares.
A stockholder whose shares are purchased in the Offer may be subject to
backup withholding unless certain information is provided to the Depositary or
an exemption applies. See "The Offer--Section 3--Backup Withholding".
6. PRICE RANGE OF SHARES; DIVIDENDS. According to the preliminary proxy
statement filed by the Company with the SEC on November 14, 2005, until October
28, 2005, the Shares were listed for trading on the New York Stock Exchange
under the symbol JWL, at which time the Shares were suspended from trading on
the New York Stock Exchange due to the Company having an average market
capitalization of less than $25 million for 30 consecutive business days. The
Shares are now listed and principally traded on the Pink Sheets electronic
quotation system under the symbol JWLR.PK. The following table sets forth for
the periods indicated the high and low sales prices per Share on the New York
Stock Exchange and the Pink Sheets electronic quotation system as reported in
published financial sources:
Fiscal Year Ended January 31,
2004 High Low
---- ---
First Quarter $10.23 $7.90
Second Quarter 12.20 8.88
Third Quarter 12.60 10.23
Fourth Quarter 13.25 8.66
2005
First Quarter 9.98 8.65
Second Quarter 9.10 7.05
Third Quarter 8.63 7.42
Fourth Quarter 8.95 6.88
2006
First Quarter 7.85 6.83
Second Quarter 7.30 6.27
Third Quarter 7.00 0.75
Fourth Quarter (though December 1, 2005) 1.09 0.77
According to the Company 10-K, the Company did not declare any dividends
in fiscal 2004 and 2003 and does not anticipate paying any cash dividends in the
foreseeable future. If we acquire control of the Company, we currently intend
that no dividends will be declared on the Shares prior to the acquisition of the
entire equity interest in the Company.
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On November 28, 2005, the last full business day before the announcement
of our intention to commence the Offer, the last reported sales price of the
Common Stock reported on the Pink Sheets electronic quotation system was $0.88
per share. Please obtain a recent quotation for your shares prior to deciding
whether or not to tender.
7. POSSIBLE EFFECTS OF THE OFFER ON THE MARKET FOR THE SHARES; STOCK
EXCHANGE LISTING; REGISTRATION UNDER THE EXCHANGE ACT.
POSSIBLE EFFECTS OF THE OFFER ON THE MARKET FOR THE SHARES. If the merger
of the Company and us (or one of our subsidiaries) is consummated, stockholders
not tendering their Shares in the Offer (other than those properly exercising
their appraisal rights) will receive cash in an amount equal to the price per
Share paid in the Offer. Therefore, if such merger takes place, the only
difference between tendering and not tendering Shares in the Offer is that
tendering stockholders will be paid earlier. If, however, the merger does not
take place and the Offer is consummated, the number of stockholders and of
Shares that are still in the hands of the public may be so small that there will
no longer be an active or liquid public trading market (or possibly any public
trading market) for Shares held by stockholders other than the Purchaser. We
cannot predict whether the reduction in the number of Shares that might
otherwise trade publicly would have an adverse or beneficial effect on the
market price for, or marketability of, the Shares or whether such reduction
would cause future market prices to be greater or less than the price paid in
the Offer.
STOCK EXCHANGE LISTING. As stated above, the Company's Shares are
presently listed on the Pink Sheets electronic quotation system. Depending upon
the number of Shares purchased pursuant to the Offer, the purchase of the Shares
by the Purchaser pursuant to the Offer will reduce the number of Shares that
might otherwise trade publicly and will reduce the number of holders of Shares,
which could adversely affect the liquidity and market value of the remaining
Shares held by the public. The extent of the public market for the Shares and
the availability of quotations reported on Pink Sheets electronic quotation
system depends upon the number of stockholders holding the Shares, the aggregate
market value of the Shares remaining at such time, the interest of maintaining a
market in the Shares on the part of any securities firms, and other factors.
REGISTRATION UNDER THE EXCHANGE ACT. The Shares are currently registered
under the Exchange Act. Such registration may be terminated upon application of
the Company to the SEC if the Shares are neither listed on a national securities
exchange nor held by 300 or more holders of record. Termination of the
registration of the Shares under the Exchange Act would substantially reduce the
information required to be furnished by the Company to holders of Shares and to
the SEC and would make certain of the provisions of the Exchange Act, such as
the short-swing profit recovery provisions of Section 16(b), the requirement to
furnish a proxy statement pursuant to Section 14(a) in connection with a
stockholder's meeting and the related requirement to furnish an annual report to
stockholders and the requirements of Rule 13e-3 under the Exchange Act with
respect to "going private" transactions, no longer applicable to the Shares.
Furthermore, "affiliates" of the Company and persons holding "restricted
securities" of the Company may be deprived of the ability to dispose of such
securities pursuant to Rule 144 promulgated under the Securities Act of 1933
(the "Securities Act"). We intend to seek to cause the Company to terminate
registration of the Shares under the Exchange Act as soon after consummation of
the Offer as the requirements for termination of registration of the Shares are
met.
8. CERTAIN INFORMATION CONCERNING THE COMPANY. The information
concerning the Company contained in this Offer to Purchase has been taken from
or based upon publicly available documents and records on file with the SEC and
other public sources and is qualified in its entirety by reference thereto. None
of Parent, the Purchaser, the Information Agent or the Depositary can take
responsibility for the accuracy or completeness of the information contained in
such documents and records or for any failure by the Company to disclose events
which may have occurred or may affect the significance or accuracy of any such
information but which are unknown to Parent, the Purchaser, the Information
Agent or the Depositary.
According to the Company 10-K, the Company is incorporated in the State of
Delaware and was founded in 1895. The principal executive offices of the Company
are located at 155 North Wacker Drive, Suite 500, Chicago, Illinois 60606 and
its telephone number is (312) 782-6800. According to the Company 10-K, the
Company is a national specialty retailer of fine jewelry offering a selection of
merchandise in the following categories: diamond, gold, precious and
semi-precious jewelry and watches. As of April 1, 2005, the Company operated 384
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mall-based stores in 38 states under the established brand names of Whitehall
Co. Jewellers (327 stores), Lundstrom Jewelers (55 stores) and Marks Bros.
Jewelers (2 stores).
PREFERRED STOCK PURCHASE RIGHTS. The following description of the Rights
is based upon publicly available documents. This description does not purport to
be complete and is qualified in its entirety by reference to the Rights
Agreement which is filed as Exhibit 3 to the Company's registration statement on
Form 8-A12B filed with the SEC on January 12, 2000.
On April 1, 1996, the Company Board authorized the issuance of one Right
for each outstanding share of Common Stock. Each Right entitles the registered
holder to purchase from the Company one one-hundredth of a share of Series A
Junior Participating Preferred Stock, par value $0.001 per share, of the Company
(the "Preferred Shares") at a price of $52.00 per one one-hundredth of a
Preferred Share (the "Purchase Price"), subject to adjustment.
The Rights will be evidenced by share certificates and not by separate
certificates until the earlier to occur of (a) the tenth day after a person or
group other than certain exempt persons (an "Acquiring Person"), together with
persons affiliated or associated with that Acquiring Person, has acquired, or
obtained the right to acquire, beneficial ownership of 15% or more of the
outstanding Shares (a "Triggering Event") and (b) the tenth business day
(subject to delay by action of the Company Board in certain cases) after the
commencement or public disclosure of an intention to commence a tender offer or
exchange offer by a person other than an exempt person if, upon consummation of
the offer, such person could acquire beneficial ownership of 15% or more of the
outstanding Shares (the earlier of such dates being called the "Distribution
Date"). Parent believes that the Company Board is obligated by its fiduciary
duties to delay the Distribution Date in respect of the Offer and make public
disclosure thereof.
Until the Distribution Date (or earlier redemption, exchange or expiration
of the Rights), the Rights will be transferred with and only with the shares of
Common Stock. As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights will be mailed to holders of record of Common
Stock as of the close of business on the Distribution Date, and those separate
right certificates alone will evidence the Rights.
The Rights will first become exercisable after the Distribution Date
(unless sooner redeemed or exchanged). Until a Right is exercised, the holder of
that right, as such, will have no rights as a stockholder of the Company,
including, without limitation, the right to vote or to receive dividends. The
Rights will expire at the close of business on May 2, 2006, unless earlier
redeemed or exchanged by the Company as described below.
In the event that a person becomes an Acquiring Person, each Right (other
than Rights that are or were beneficially owned by the Acquiring Person and
certain related persons and transferees, which will thereafter be void) shall,
thereafter, be exercisable not for Preferred Shares, but for a number of shares
of Common Stock having a market value of two times the exercise price of the
Right. In the event that, at the time or after a person becomes an Acquiring
Person, the Company is involved in a merger or other business combination in
which (a) the Company is not the surviving corporation, (b) Shares are changed
or exchanged, or (c) 50% or more of the Company's consolidated assets or earning
power are sold (each such event in this paragraph constitutes a "Flip-Over
Event"), then each Right (other than Rights that are or were owned by the
Acquiring Person and certain related persons and transferees, which will
thereafter be void) shall thereafter be exercisable for a number of shares of
common stock of the acquiring company having a market value of two times the
exercise price of the Right.
In addition, at any time after a person has become an Acquiring Person,
but before a person has acquired beneficial ownership of 50% or more of the
outstanding Shares, the Company may elect to exchange all or part of the Rights
(excluding void rights held by an Acquiring Person and certain related persons
and transferees) for shares of Common Stock on a one-for-one basis.
The Purchase Price payable, and the number and kind of securities, cash or
other property issuable, upon exercise of the Rights are subject to adjustment
from time to time to prevent dilution (a) in the event of a stock dividend or
distribution on, or a subdivision or combination of, the Shares, (b) upon the
grant to holders of the Shares of rights, options or warrants to subscribe for
Shares or securities convertible into Shares at less than the current market
price, (c) upon the distribution to holders of the Shares of securities, cash,
evidences of indebtedness or assets (excluding regular periodic cash dividends
out of earnings or retained earnings) and (d) in connection with
recapitalizations of the Company or reclassifications of the Shares.
13
No fractional Preferred Shares will be issued (other than fractions that
are integral multiples of one one-hundredth of a Preferred Share, which may, at
the election of the Company, be evidenced by depositary receipts) and, in lieu
of those fractional Preferred Shares, the Company will make an adjustment in
cash based on the market price of the Preferred Shares on the last trading date
prior to the date of exercise.
At any time prior to the earlier of (a) the tenth day after the public
announcement that a person has become an Acquiring Person, (b) the occurrence of
a Flip-Over Event or (c) May 2, 2006, the Company Board may redeem the Rights in
whole, but not in part, at a price of $0.01 per Right (the "Redemption Price").
The Redemption Price will be payable in cash, Common Stock (including fractional
shares) or any other form of consideration deemed appropriate by the Company
Board. Immediately upon action of the Company Board ordering redemption of the
Rights, the ability of holders to exercise the Rights will terminate and the
only rights of such holders will be to receive the Redemption Price.
At any time prior to the public announcement that a person has become an
Acquiring Person, the Company Board may amend or supplement the Rights Agreement
without the approval of the Rights agent or any holder of the Rights.
Thereafter, the Rights Agreement may not be amended or changed in any manner
that would adversely affect the interests of the holders of the Rights (other
than an Acquiring Person or an affiliate or associate of that Acquiring Person).
The Offer is conditioned upon, among other things, the Company Board
redeeming the Rights or our being satisfied, in our reasonable discretion, that
the Rights have been invalidated or are otherwise inapplicable to the Offer and
the merger of the Company and the Purchaser (or one of our subsidiaries) as
described herein.
Unless the Rights Condition is satisfied, Company stockholders will be
required to tender one Right for each share of Common Stock tendered in order to
effect a valid tender of Shares in accordance with the procedures set forth in
Section 3. Unless the Distribution Date occurs, a tender of Common Stock will
also constitute a tender of the Rights.
Because of the nature of the dividend, liquidation and voting rights of
the Preferred Shares, the value of the one one-hundredth interest in a Preferred
Share purchasable upon exercise of each Right should approximate the value of
one share of Common Stock, adjusted to give effect to any dilution event.
The Purchaser and Parent believe that, under the circumstances of the
Offer and under applicable law, the Company Board has a fiduciary obligation to
redeem the Rights (or amend the Rights Agreement to make the Rights inapplicable
to the Offer and the Merger), and the Purchaser is hereby requesting that the
Company Board do so. However, there can be no assurance that the Company Board
will redeem the Rights (or amend the Rights Agreement).
ADDITIONAL INFORMATION. The Company is subject to the informational
requirements of the Exchange Act and in accordance therewith files periodic
reports, proxy statements and other information with the SEC relating to its
business, financial condition and other matters. The Company is required to
disclose in such proxy statements certain information, as of particular dates,
concerning the Company's directors and officers, their remuneration, stock
options granted to them, the principal holders of the Company's securities and
any material interest of such persons in transactions with the Company. Such
reports, proxy statements and other information may be inspected at the public
reference room maintained by the SEC at 100 F Street, N.E., Washington, D.C.
20549. Copies of such material can also be obtained at prescribed rates from the
public reference room of the SEC at 100 F Street, N.E., Washington, D.C. 20549,
or free of charge at the Web site maintained by the SEC at http://www.sec.gov.
Please call the SEC at 1-800-SEC-0330 for further information on the operation
of the public reference room.
9. CERTAIN INFORMATION CONCERNING THE PURCHASER AND PARENT. We are a
Delaware corporation incorporated on May 28, 2004, with principal executive
offices at 300 Crescent Court, Suite 1110, Dallas, Texas 75201. The telephone
number of our principal executive offices is (214) 661-7474. We were formed to
serve as an acquisition vehicle for Parent, with no current operations other
than those incident to the commencement of the Offer. The Purchaser is a wholly
owned subsidiary of Parent.
Parent is a private investment partnership that has been in business for
over twelve years. Parent specializes in identifying, researching, analyzing and
investing in under-valued securities. Parent's investment approach employs the
solid, proven principles of a disciplined, value-based strategy focused
primarily on smaller capitalization companies. As part of its investment
strategy, Parent has a demonstrated expertise in making active and control
investments.
Parent beneficially owns 2,018,400 Shares of the Company, representing
approximately 14.5% of the Company's outstanding Shares. As the general partner
of Parent, Newcastle Capital Management, L.P. ("Newcastle Capital") may be
deemed to beneficially own the 2,018,400 Shares, or approximately 14.5% of the
Company's outstanding Shares, beneficially owned by Parent. The principal
14
business of Newcastle Capital is acting as the general partner of Parent. As the
general partner of Newcastle Capital, Newcastle Capital Group, L.L.C.
("Newcastle Capital Group") may be deemed to beneficially own the 2,018,400
Shares, or approximately 14.5% of the Company's outstanding Shares, beneficially
owned by Parent. The principal business of Newcastle Capital Group is acting as
the general partner of Newcastle Capital. Mark E. Schwarz, as the managing
member of Newcastle Capital Group, the general partner of Newcastle Capital,
which in turn is the general partner of Parent, may also be deemed to
beneficially own the 2,018,400 Shares, or approximately 14.5% of the Company's
outstanding Shares, beneficially owned by Parent. Collectively, Parent,
Newcastle Capital and Newcastle Capital Group are referred to herein as the
"Newcastle Entities." Each of the Newcastle Entities are organized under the
laws of the State of Texas. The business address for each of the Newcastle
Entities is 300 Crescent Court, Suite 1110, Dallas, Texas 75201. The business
telephone number for each of the Newcastle Entities is (214) 661-7474.
The name, business address, principal occupation or employment, five year
employment history and citizenship of each director and executive officer of the
Newcastle Entities and the Purchaser and certain other information are set forth
on Schedule I hereto.
Except as set forth elsewhere in this Offer to Purchase or Schedule I to
this Offer to Purchase: (i) none of the Newcastle Entities, the Purchaser and,
to the Newcastle Entities' and the Purchaser's knowledge, the persons listed in
Schedule I hereto or any associate or majority owned subsidiary of the Newcastle
Entities, the Purchaser or of any of the persons so listed, beneficially owns or
has a right to acquire any Shares or any other equity securities of the Company;
(ii) none of the Newcastle Entities, the Purchaser and, to the Newcastle
Entities' and the Purchaser's knowledge, the persons or entities referred to in
clause (i) above has effected any transaction in the Shares or any other equity
securities of the Company during the past 60 days; (iii) none of the Newcastle
Entities, the Purchaser and, to the Newcastle Entities' and the Purchaser's
knowledge, the persons listed in Schedule I to this Offer to Purchase, has any
contract, arrangement, understanding or relationship with any other person with
respect to any securities of the Company (including, but not limited to, any
contract, arrangement, understanding or relationship concerning the transfer or
the voting of any such securities, joint ventures, loan or option arrangements,
puts or calls, guaranties of loans, guaranties against loss or the giving or
withholding of proxies, consents or authorizations); (iv) during the two years
before the date of this Offer to Purchase, there have been no transactions
between the Newcastle Entities, the Purchaser, their subsidiaries or, to the
Newcastle Entities' and the Purchaser's knowledge, any of the persons listed in
Schedule I to this Offer to Purchase, on the one hand, and the Company or any of
its executive officers, directors or affiliates, on the other hand, that would
require reporting under SEC rules and regulations; and (v) during the two years
before the date of this Offer to Purchase, there have been no contracts,
negotiations or transactions between the Newcastle Entities, the Purchaser,
their subsidiaries or, to the Newcastle Entities' and the Purchaser's knowledge,
any of the persons listed in Schedule I to this Offer to Purchase, on the one
hand, and the Company or any of its subsidiaries or affiliates, on the other
hand, concerning a merger, consolidation or acquisition, a tender offer or other
acquisition of securities, an election of directors or a sale or other transfer
of a material amount of assets.
On August 15, 2005, Vesta Insurance Group, Inc. ("Vesta") commenced an
action against Parent alleging that Parent violated a Florida insurance statute
requiring an acquirer of more than 5% of the outstanding voting stock of a
domestic stock insurer to file an application with the Florida Office of
Insurance Regulation (the "FOIR"). On October 17, 2005, the court granted
Vesta's Motion for Preliminary Injunction enjoining Parent, pending approval of
its share ownership by the FOIR, from (a) soliciting proxies from shareholders
of Vesta, (b) voting its shares of Vesta allegedly acquired in violation of a
Florida insurance statute, and (c) making any material changes in the management
and operation of Vesta. On November 1, 2005, the FOIR issued a Written Report
and Recommended Order in which it recommended that a Final Order be entered into
by the FOIR finding that Parent's application for acquisition of up to 9.99% of
Vesta's outstanding voting stock be approved, subject to certain conditions. On
November 17, 2005, Parent and Vesta entered into a Settlement and Standstill
Agreement which, among other things, provided for the filing of a Notice of
Settlement and Joint Stipulation for Dismissal with Prejudice of the action
commenced by Vesta and the entry of a final order by the FOIR approving Parent's
share ownership. The FOIR final order found that Parent's delay in filing an
application to acquire more than 5% of Vesta's outstanding voting stock was
inadvertent and in good faith.
10. SOURCE AND AMOUNT OF FUNDS. We will need approximately $14.5 million
to purchase all of the outstanding Shares pursuant to the Offer and to pay
related fees and expenses. We will also need approximately $30 million to
replace the Company's current $30 million bridge loan facility on comparable
terms. As of December 2, 2005, Parent had cash and cash equivalents and
short-term investments substantially in excess of the approximately $44.5
million required to acquire the Shares and replace the bridge loan facility. The
Purchaser intends to obtain all funds needed for the Offer and to replace the
bridge loan facility through a capital contribution or a loan from Parent.
15
Parent plans to provide the funds for such capital contribution or loan from its
available cash and working capital. The Offer is not subject to any financing
condition.
11. BACKGROUND OF THE OFFER. We refer you to the preliminary proxy
statement filed by the Company with the SEC on November 14, 2005 (the
"Management Proxy Statement") for a detailed background description of the
series of proposed financing transactions between the Company and certain
investment funds managed by Prentice Capital Management, L.P. ("Prentice") and
Holtzman Opportunity Fund, L.P. (the "Prentice Financing"). Below is a
background description of Parent's involvement with the Company, including its
initial investment in the Shares and its representation on the Company Board,
and the Prentice Financing. All information regarding the Prentice Financing and
the deliberations of the Company 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 Parent's
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 states the facts necessary
for a stockholder to fairly evaluate the Offer.
On April 19, 2005, Parent and its affiliates filed a Schedule 13D with the
SEC indicating it owned 2,018,400 Shares as of April 15, 2005, representing
14.5% of the Company's outstanding Shares. In this filing, Parent 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 Company Board.
On June 23, 2005, the Company announced the election of Steven J. Pully,
the President of Parent's general partner, 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 and then as a
director until his resignation on November 29, 2005.
On July 12, 2005, the Company Board formed a special committee of the
Company Board consisting of Daniel H. Levy (Chairman), Richard K. Berkowitz and
Sanford Shkolnik (the "Special Committee") to consider potential financing
proposals in light of Parent's 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 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.
During July 2005 and thereafter, the Company 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, Parent and Reed
Conner & Birdwell LLC, another substantial stockholder ("RCB"), indicated that
they were interested in providing additional financing to the Company but did
not present specific proposals.
During the period from August 10, 2005 through September 5, 2005, the
Company estimated that approximately $40-50 million of financing needed to be
raised for the Company to meet its liquidity needs.
During this period, discussions were held with Parent 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 Shares in which all
stockholders would be offered the opportunity to subscribe for Shares 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 Parent and RCB
would provide back-up commitments to buy Shares not otherwise purchased.
On September 7, 2005, Mark E. Schwarz, a principal of Parent, 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 Shares at
a rate equal to the average price of the Shares 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
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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 Parent 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.
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.
On September 12, 2005, Parent 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, Parent would be issued
10-year warrants for 19.9% of the outstanding Shares, exercisable at $0.01 per
Share, and $10 million of the notes would be convertible into 90% of the fully
diluted Shares (after dilution 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.
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.
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.
On September 18, 2005, Parent 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 Parent ($525,000)
upon the funding of the convertible notes and a non-refundable payment of
$150,000 to Parent for reimbursement of its fees and expenses, plus an agreement
to pay any additional fees and expenses. This proposal expired on September 19,
2005.
Over the course of September 20 and 21, 2005, Parent made further written
and oral modifications to its proposal. The final September 21, 2005 proposal
from Parent 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 Parent 10-year warrants
exercisable at $1.50 per share for 10 million Shares. In conjunction with the
bridge loan, Parent would also be issued 10-year warrants for 19.9% of the
17
outstanding Shares, exercisable at $0.01 per share. Parent 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.
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 Company 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 Shares 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 at the Company's option. The Prentice Term Sheet contemplated that the
notes would be convertible into Shares and that Prentice and the other investors
would receive 7-year warrants for Shares (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 Shares. The Prentice Term Sheet contemplated
that the bridge loan be made and the warrants for 19.9% of the Shares 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.
On September 21, 2005, the Company Board convened to discuss the financing
proposals submitted by Prentice and Parent and voted to authorize and direct
management to execute the Prentice Term Sheet, at the recommendation of the
Special Committee, with Mr. Pully abstaining.
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.
o The interest rate on the notes was reduced from 15% to 12%, with
interest now being paid entirely in Shares 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.
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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 Company
Board were to determine to accept a superior proposal.
o The aggregate expense reimbursement to Prentice was capped at
$750,000.
On September 27, 2005, Parent 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.
On October 3, 2005, the Prentice Financing and related matters were
approved by the Company 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 Amendment (each as defined below) were executed and
delivered by the parties that night.
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.
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 SEC reviews the proxy statement
relating to the special meeting of the Company's stockholders as contemplated by
the Purchase Agreement, January 31, 2006.
In connection with the Bridge Loan Agreement, the Company issued warrants
(the "Warrants") to the Bridge Loan Lenders to purchase 2,792,462 Shares 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.
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
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.
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 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.
Contemporaneously with the execution of the Bridge Loan Agreement and the
Purchase Agreement, the Company entered into a Waiver, Consent and Fourth
Amendment (the "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
19
"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.
On October 26, 2005, Parent submitted a proposal to the Company to acquire
all the outstanding Shares 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, Parent also would pay off the bridge loan
entered into by the Company in connection with the Prentice Financing. Parent
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.
On October 27, 2005, the Special Committee responded to Parent's proposal
by indicating that, on the advice of its financial advisors and counsel, the
Company Board had determined (with Mr. Pully abstaining) that it could not
conclude, from the information provided on Parent's 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.
12. PURPOSE OF THE OFFER; PLANS FOR THE COMPANY; STATUTORY REQUIREMENTS;
APPROVAL OF THE MERGER; APPRAISAL RIGHTS.
PURPOSE OF THE OFFER; PLANS FOR THE COMPANY. The purpose of the 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 Offer, to
seek maximum representation on the Company 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 not owned by
Parent or its subsidiaries (including us) would be converted into the right to
receive cash in an amount equal to the price per Share provided pursuant to the
Offer.
If we acquire Shares pursuant to the Offer and depending upon the number
of Shares so acquired and other factors relevant to our equity ownership in the
Company, we may, subsequent to the consummation of the Offer, seek to acquire
additional Shares through open market purchases, privately negotiated
transactions, a tender or exchange offer or other transactions or a combination
of the foregoing on such terms and at such prices as we shall determine, which
may be different from the price paid in the Offer. We also reserve the right to
dispose of Shares that we have acquired or may acquire.
Whether or not we propose a merger or other similar business combination
with the Company, we currently intend, as soon as practicable after consummation
of the Offer, to seek maximum representation on the Company Board. We intend,
promptly after the consummation of the Offer, to request that some or all of the
current members of the Company Board resign and that our designees be elected to
fill the vacancies so created. Should such request be refused, we intend to take
such action as may be necessary and lawful to secure control of the Company
Board.
In connection with this Offer, Parent has reviewed and will continue to
review various possible business strategies that it might consider in the event
that Purchaser acquires control of the Company, whether pursuant to the Offer or
otherwise. Following a review of additional information regarding the Company,
such changes could include, among other things, changes in the Company's
business, operations, personnel, employee benefit plans, corporate structure,
capitalization and management.
Except as described above or elsewhere in this Offer to Purchase, the
Purchaser has no present plans or proposals that would relate to or result in an
extraordinary corporate transaction involving the Company or any of its
subsidiaries (such as a merger, reorganization, liquidation, relocation of any
operations or sale or other transfer of a material amount of assets), any change
in the Company Board or management, any material change in the Company's
capitalization or dividend policy or any other material change in the Company's
corporate structure or business.
STATUTORY REQUIREMENTS; APPROVAL OF THE MERGER. Under the Delaware Law and
the Company's Certificate of Incorporation, if the Section 203 Condition is
satisfied, a merger of the Company would require the approval of the Company
20
Board and the holders of a majority of the outstanding Shares. If we acquire,
pursuant to the Offer or otherwise, at least a majority of the outstanding
Shares we would have sufficient voting power to approve a merger of the Company
without the affirmative vote of any other stockholder of the Company. In
addition, under the Delaware Law, if we acquire, pursuant to the Offer or
otherwise, at least 90% of the outstanding Shares, we believe we would be able
to approve the merger of the Company without a vote of the Company Board or
other stockholders. If we acquire control of the Company, we currently intend
that, prior to the acquisition of the entire equity interest in the Company, no
dividends will be declared on the Shares.
Section 203 could significantly delay our ability to acquire the entire
equity interest in the Company. In general, Section 203 prevents an "interested
stockholder" (generally, a stockholder owning 15% or more of a corporation's
outstanding voting stock or an affiliate or associate thereof) from engaging in
a "business combination" (defined to include a merger or consolidation and
certain other transactions) with a Delaware corporation for a period of three
years following the time on which such stockholder became an interested
stockholder unless (i) prior to such time the corporation's board of directors
approved either the business combination or the transaction which resulted in
such stockholder becoming an interested stockholder, (ii) upon consummation of
the transaction which resulted in such stockholder becoming an interested
stockholder, the interested stockholder owned at least 85% of the corporation's
voting stock outstanding at the time the transaction commenced (excluding shares
owned by certain employee stock plans and persons who are directors and also
officers of the corporation) or (iii) at or subsequent to such time the business
combination is approved by the corporation's board of directors and authorized
at an annual or special meeting of stockholders, and not by written consent, by
the affirmative vote of at least 66 2/3% of the outstanding voting stock not
owned by the interested stockholder.
The provisions of Section 203 do not apply to a Delaware corporation if,
among other things, (i) such corporation amends its certificate of incorporation
or bylaws to elect not to be governed by Section 203 by (in addition to any
other required vote) the affirmative vote of a majority of the shares entitled
to vote; provided that such amendment would not be effective until 12 months
after its adoption and would not apply to any business combination between such
corporation and any person who became an interested stockholder on or prior to
its adoption, (ii) such corporation does not have a class of voting stock that
is listed on a national securities exchange, authorized for quotation on Nasdaq
or held of record by more than 2,000 stockholders, unless any of the foregoing
results from action taken, directly or indirectly, by an interested stockholder
or from a transaction in which a person becomes an interested stockholder, or
(iii) the business combination is proposed by an interested stockholder prior to
the consummation or abandonment of, and subsequent to the earlier of the public
announcement or the notice required under Section 203 of, any one of certain
proposed transactions which is with or by a person who was not an interested
stockholder during the previous three years or who became an interested
stockholder with the approval of the corporation's board of directors and is
approved or not opposed by a majority of the board of directors then in office
who were directors prior to any person becoming an interested stockholder during
the previous three years or were recommended for election to succeed such
directors by a majority of such directors.
The Offer is subject to satisfaction of the Section 203 Condition, which
will be satisfied if, among other things, (i) prior to the acceptance for
payment of Shares pursuant to the Offer, the Company Board approves the Offer or
the proposed merger or (ii) there are validly tendered prior to the Expiration
Date and not withdrawn a number of Shares which, together with the Shares then
owned by us, would represent at least 85% of the Shares outstanding on the date
hereof (excluding Shares owned by certain employee stock plans and persons who
are directors and also officers of the Company).
We reserve the right to waive the Section 203 Condition, although there
can be no assurance that we will do so, and we have not determined whether we
would be willing to do so under any circumstances. If we waive such condition
and purchase Shares pursuant to the Offer or otherwise and Section 203 is
applicable, we may nevertheless seek to consummate a merger or other business
combination with the Company. We believe we would be able to cause the
consummation of such a merger or other business combination if we own a majority
of the outstanding Shares and (i) such merger or other business combination is
approved by the Company Board and authorized at an annual or special meeting of
stockholders of the Company, and not by written consent, by the affirmative vote
of at least 66 2/3% of the outstanding Shares not owned by us or our affiliates
and associates; or (ii) such merger or other business combination occurs after
the expiration of three years following the date we became an interested
stockholder.
21
On the other hand, if we waive the Section 203 Condition and purchase
Shares pursuant to the Offer or otherwise and are prevented by Section 203 from
consummating a merger or other business combination with the Company, we may (i)
determine not to seek to consummate such a merger or other business combination,
(ii) seek to acquire additional Shares in the open market, pursuant to privately
negotiated transactions or otherwise, at prices that may be higher, lower or the
same as the price paid in the Offer or (iii) seek to effect one or more
alternative transactions with or by the Company. We have not determined whether
we would take any of the actions described above under such circumstances.
Parent believes, among other things, that the Company Board should approve
the Offer and take any other action necessary to render Section 203 inapplicable
to a merger or other business combination with the Company. There can be no
assurance that the Company Board will grant such approval or take such other
action.
The exact timing and details of any merger or other similar business
combination involving the Company will necessarily depend upon a variety of
factors, including the number of Shares we acquire pursuant to the Offer.
Although we currently intend to propose a merger or similar business combination
generally on the terms described above, it is possible that, as a result of
substantial delays in our ability to effect such a transaction, actions the
Company may take in response to the Offer, information we obtain hereafter,
changes in general economic or market conditions or in the business of the
Company or other currently unforeseen factors, such a transaction may not be so
proposed, may be delayed or abandoned or may be proposed on different terms. We
reserve the right not to propose a merger or other similar business combination
with the Company or to propose such a transaction on terms other than those
described above. Specifically, we reserve the right (i) to propose consideration
in a merger or other similar business combination consisting of securities or a
combination of cash and securities and (ii) to propose consideration in such a
transaction having a value more or less than the amount referred to above.
APPRAISAL RIGHTS. You do not have appraisal rights as a result of the
Offer. However, if a merger involving the Company is consummated, stockholders
of the Company who have neither voted in favor of the merger nor consented
thereto in writing, and who otherwise under the Delaware Law comply with the
applicable statutory procedures will be entitled to receive a judicial
determination of the fair value of their Shares (exclusive of any element of
value arising from the accomplishment or expectation of such merger) and to
receive payment of such fair value in cash, together with a fair rate of
interest, if any (all such Shares collectively, the "Dissenting Shares"). Any
such judicial determination of the fair value of the Dissenting Shares could be
based upon considerations other than or in addition to the price paid in the
Offer and the market value of the Shares. Stockholders should recognize that the
value so determined could be higher or lower than the price per Share paid
pursuant to the Offer or the consideration paid in such a merger. Moreover, we
may argue in an appraisal proceeding that, for purposes of such a proceeding,
the fair value of the Dissenting Shares is less than the price paid in the
Offer.
If any holder of Shares who demands appraisal under Section 262 of the
Delaware Law fails to perfect, or effectively withdraws or loses his rights to
appraisal as provided in the Delaware Law, the Shares of such stockholder will
be converted into the right to receive the price per Share paid in the Offer. A
stockholder may withdraw his demand for appraisal by delivering to us a written
withdrawal of his demand for appraisal and acceptance of the merger.
Failure to follow the steps required by Section 262 of the Delaware Law
for perfecting appraisal rights may result in the loss of such rights.
The foregoing discussion is not a complete statement of the Delaware Law
or U.S. federal law and is qualified in its entirety by reference to the
Delaware Law and applicable U.S. federal law.
13. DIVIDENDS AND DISTRIBUTIONS. If, on or after December 5, 2005, the
Company should split, combine or otherwise change the Shares or its
capitalization, acquire or otherwise cause a reduction in the number of
outstanding Shares or issue or sell any additional Shares (other than Shares
issued pursuant to and in accordance with the terms in effect on December 2,
2005, of employee stock options outstanding prior to such date), shares of any
other class or series of capital stock, other voting securities or any
securities convertible into, or options, rights, or warrants, conditional or
otherwise, to acquire, any of the foregoing, then, without prejudice to our
rights under "The Offer--Section 14", we may, in our reasonable discretion, make
such adjustments in the purchase price and other terms of the Offer as we deem
appropriate including the number or type of securities to be purchased.
22
If, on or after December 5, 2005, the Company should declare or pay any
dividend on the Shares or any distribution with respect to the Shares (including
the issuance of additional Shares or other securities or rights to purchase of
any securities) that is payable or distributable to stockholders of record on a
date prior to the transfer to the name of the Purchaser or its nominee or
transferee on the Company's stock transfer records of the Shares purchased
pursuant to the Offer, then, without prejudice to our rights under "The
Offer--Section 14", (i) the purchase price per Share payable by us pursuant to
the Offer will be reduced to the extent of any such cash dividend or
distribution and (ii) the whole of any such non-cash dividend or distribution to
be received by the tendering stockholders will (a) be received and held by the
tendering stockholders for our account and will be required to be promptly
remitted and transferred by each tendering stockholder to the Depositary for our
account, accompanied by appropriate documentation of transfer or (b) be
exercised for our benefit at our direction, in which case the proceeds of such
exercise will promptly be remitted to us. Pending such remittance and subject to
applicable law, we will be entitled to all rights and privileges as owner of any
such non-cash dividend or distribution or proceeds thereof and may withhold the
entire purchase price or deduct from the purchase price the amount or value
thereof, as we determine in our reasonable discretion.
14. CONDITIONS OF THE OFFER. Notwithstanding any other provision of the
Offer, we are not required to accept for payment or, subject to any applicable
rules and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act
(relating to the Purchaser's obligation to pay for or return tendered Shares
promptly after termination or expiration of the Offer), pay for any Shares, and
may terminate or amend the Offer, if before the Expiration Date the Minimum
Tender Condition, the Termination Condition, the Stockholder Rejection
Condition, the Credit Facility Condition, the Rights Condition, the Bridge
Refinancing Approval Condition or the Section 203 Condition shall not have been
satisfied, or if, at any time on or after December 5, 2005, and before the
expiration of the Offer (or thereafter in relation to any condition dependent
upon the receipt of goverment approvals), any of the following conditions exist:
(i) there is threatened, instituted or pending any action or proceeding by
any government, governmental authority or agency or any other person, domestic,
foreign, or supranational, before any court or governmental authority or agency,
domestic, foreign or supranational, (a) challenging or seeking to make illegal,
to delay or otherwise, directly or indirectly, to restrain or prohibit the
making of the Offer, the acceptance for payment of or payment for some or all of
the Shares by us or any of our subsidiaries or affiliates or the consummation by
us or any of our subsidiaries or affiliates of a merger or other similar
business combination involving the Company, (b) seeking to obtain material
damages or otherwise directly or indirectly relating to the transactions
contemplated by the Offer or any such merger or other similar business
combination, (c) seeking to restrain or prohibit the exercise of our full rights
of ownership or operation by us or any of our subsidiaries or affiliates of all
or any portion of our business or assets or that of the Company or any of our
and the Company's respective subsidiaries or affiliates or to compel us or any
of our subsidiaries or affiliates to dispose of or hold separate all or any
portion of our business or assets or that of the Company or any of our or the
Company's respective subsidiaries or affiliates, (d) seeking to impose or
confirm limitations on our ability or that of any of our subsidiaries or
affiliates effectively to exercise full rights of ownership of the Shares,
including, without limitation, the right to vote any Shares acquired or owned by
us or any of our subsidiaries or affiliates on all matters properly presented to
the Company's stockholders, (e) seeking to require divestiture by us or any of
our subsidiaries or affiliates of any Shares, (f) seeking any material
diminution in the benefits expected to be derived by us or any of our
subsidiaries or affiliates as a result of the transactions contemplated by the
Offer or any merger or other business combination involving the Company, (g)
adversely affecting the financing of the Offer or any merger or other business
combination involving the Company or (h) that otherwise, in our reasonable
judgment, has or may have material adverse significance with respect to either
the value of the Company or any of its subsidiaries or affiliates or the value
of the Shares to us or any of our subsidiaries or affiliates; or
(ii) any action is taken, or any statute, rule, regulation, injunction,
order or decree is proposed, enacted, enforced, promulgated, issued or deemed
applicable to the Offer, the acceptance for payment of or payment for Shares, or
any merger or other business combination involving the Company, by any court,
government or governmental authority or agency, domestic, foreign or
supranational, or of any applicable foreign statutes or regulations (as in
effect as of December 2, 2005), to the Offer or to any such merger or other
business combination that, in our reasonable judgment, might, directly or
indirectly, result in any of the consequences referred to in clauses (a) through
(h) of paragraph (i) above; or
23
(iii) any change occurs or is threatened (or any development occurs or is
threatened involving a prospective change) in the business, assets, liabilities,
financial condition, capitalization, operations, results of operations or
prospects of the Company or any of its affiliates that, in our reasonable
judgment, is or may be materially adverse to the Company or any of its
affiliates, or we become aware of any facts that, in our reasonable judgment,
have or may have material adverse significance with respect to either the value
of the Company or any of its affiliates or the value of the Shares to us or any
of our affiliates; or
(iv) there occurs (a) any general suspension of trading in, or limitation
on prices for, securities on any national securities exchange or in the
over-the-counter market, (b) any decline in either the Dow Jones Industrial
Average, the Standard and Poor's Index of 500 Industrial Companies or the
NASDAQ-100 Index by an amount in excess of 15%, measured from the business day
immediately preceding the commencement date of the Offer or any change in the
general political, market, economic or financial conditions in the United States
or abroad that, in our reasonable judgment, could have a material adverse effect
on the business, financial condition or results of operations or prospects of
the Company and its subsidiaries, taken as a whole, (c) the declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States, (d) any material adverse change (or development or threatened
development involving a prospective material adverse change) in U.S. or any
other currency exchange rates or a suspension of, or a limitation on, the
markets therefor, (e) any material adverse change in the market price of the
Shares or in the U.S. securities or financial markets, (f) the commencement of a
war, armed hostilities or other international or national calamity directly or
indirectly involving the United States or any attack on, outbreak or act of
terrorism involving the United States, (g) any limitation (whether or not
mandatory) by any governmental authority or agency on, or any other event that,
in our reasonable judgment, may adversely affect, the extension of credit by
banks or other financial institutions or (h) in the case of any of the foregoing
existing at the time of the commencement of the Offer, a material acceleration
or worsening thereof; or
(v) (a) a tender or exchange offer for some or all of the Shares has been
publicly proposed to be made or has been made by another person (including the
Company or any of its subsidiaries or affiliates), or has been publicly
disclosed, or we otherwise learn that any person or "group" (as defined in
Section 13(d)(3) of the Exchange Act) has acquired or proposes to acquire
beneficial ownership of more than 5% of any class or series of capital stock of
the Company (including the Shares), through the acquisition of stock, the
formation of a group or otherwise, or is granted any option, right or warrant,
conditional or otherwise, to acquire beneficial ownership of more than 5% of any
class or series of capital stock of the Company (including the Shares) other
than acquisitions for bona fide arbitrage purposes only and other than as
disclosed in a Schedule 13D or 13G on file with the SEC on December 2, 2005, (b)
any such person or group which, prior to December 5, 2005, had filed such a
Schedule with the SEC has acquired or proposes to acquire beneficial ownership
of additional shares of any class or series of capital stock of the Company,
through the acquisition of stock, the formation of a group or otherwise,
constituting 1% or more of any such class or series, or is granted any option,
right or warrant, conditional or otherwise, to acquire beneficial ownership of
additional shares of any class or series of capital stock of the Company
constituting 1% or more of any such class or series, (c) any person or group has
entered into a definitive agreement or an agreement in principle or made a
proposal with respect to a tender or exchange offer or a merger, consolidation
or other business combination with or involving the Company or (d) any person
has filed a Notification and Report Form under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 or made a public announcement reflecting an intent to
acquire the Company or any assets or securities of the Company; or
(vi) the Company or any of its subsidiaries has (a) split, combined or
otherwise changed, or authorized or proposed the split, combination or other
change of, the Shares or its capitalization, (b) acquired or otherwise caused a
reduction in the number of, or authorized or proposed the acquisition or other
reduction in the number of, outstanding Shares or other securities, (c) issued
or sold, or authorized or proposed the issuance or sale of, any additional
Shares, shares of any other class or series of capital stock, other voting
securities or any securities convertible into, or options, rights or warrants,
conditional or otherwise, to acquire, any of the foregoing (other than the
issuance of Shares pursuant to and in accordance with the terms in effect on
December 2, 2005, of employee stock options outstanding prior to such date), or
any other securities or rights in respect of, in lieu of, or in substitution or
exchange for any shares of its capital stock, (d) permitted the issuance or sale
of any shares of any class of capital stock or other securities of any
subsidiary of the Company, (e) declared, paid or proposed to declare or pay any
dividend or other distribution on any shares of capital stock of the Company
(other than a distribution of the Rights certificates or a redemption of the
Rights in accordance with the Rights Agreement as publicly disclosed to be in
effect prior to December 5, 2005), (f) altered or proposed to alter any material
term of any outstanding security, issued or sold, or authorized or proposed the
24
issuance or sale of, any debt securities or otherwise incurred or authorized or
proposed the incurrence of any debt other than in the ordinary course of
business (other than to amend the Rights Agreement to make the Rights
inapplicable to the Offer and the proposed second-step merger described herein),
(g) authorized, recommended, proposed, announced its intent to enter into or
entered into an agreement with respect to or effected any merger, consolidation,
liquidation, dissolution, business combination, acquisition of assets,
disposition of assets or relinquishment of any material contract or other right
of the Company or any of its subsidiaries or any comparable event not in the
ordinary course of business, (h) authorized, recommended, proposed, announced
its intent to enter into or entered into any agreement or arrangement with any
person or group that, in our reasonable judgment, has or may have material
adverse significance with respect to either the value of the Company or any of
its subsidiaries or affiliates or the value of the Shares to us or any of our
subsidiaries or affiliates, (i) entered into or amended any employment,
severance or similar agreement, arrangement or plan with any of its employees
other than in the ordinary course of business or entered into or amended any
such agreements, arrangements or plans so as to provide for increased benefits
to employees as a result of or in connection with the making of the Offer, the
acceptance for payment of or payment for some of or all the Shares by us or our
consummation of any merger or other similar business combination involving the
Company, (j) except as may be required by law, taken any action to terminate or
amend any employee benefit plan (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974) of the Company or any of its
subsidiaries, or we shall have become aware of any such action which was not
previously announced or (k) amended, or authorized or proposed any amendment to,
its certificate of incorporation or bylaws (or other similar constituent
documents) or we become aware that the Company or any of its subsidiaries shall
have amended, or authorized or proposed any amendment to, its certificate of
incorporation or bylaws (or other similar constituent documents) which has not
been previously disclosed (in each case, other than to amend the Rights
Agreement to make the Rights inapplicable to the Offer and the proposed
second-step merger described herein); or
(vii) we become aware (a) that any material contractual right of the
Company or any of its subsidiaries has been impaired or otherwise adversely
affected or that any material amount of indebtedness of the Company or any of
its subsidiaries has been accelerated or has otherwise become due or become
subject to acceleration prior to its stated due date, in each case with or
without notice or the lapse of time or both, as a result of or in connection
with the Offer or the consummation by us or any of our subsidiaries or
affiliates of a merger or other similar business combination involving the
Company or (b) of any covenant, term or condition in any instrument or agreement
of the Company or any of its subsidiaries that, in our reasonable judgment, has
or may have material adverse significance with respect to either the value of
the Company or any of its affiliates or the value of the Shares to us or any of
our affiliates (including, without limitation, any event of default that may
ensue as a result of or in connection with the Offer, the acceptance for payment
of or payment for some or all of the Shares by us or our consummation of a
merger or other similar business combination involving the Company); or
(viii) we or any of our affiliates enters into a definitive agreement or
announces an agreement in principle with the Company providing for a merger or
other similar business combination with the Company or any of its subsidiaries
or the purchase of securities or assets of the Company or any of its
subsidiaries, or we and the Company reach any other agreement or understanding
pursuant to which it is agreed that the Offer will be terminated; or
(ix) the Company or any of its subsidiaries shall have (a) granted to any
person proposing a merger or other business combination with or involving the
Company or any of its subsidiaries or the purchase of securities or assets of
the Company or any of its subsidiaries any type of option, warrant or right
which, in our reasonable judgment, constitutes a "lock-up" device (including,
without limitation, a right to acquire or receive any Shares or other
securities, assets or business of the Company or any of its subsidiaries) or (b)
paid or agreed to pay any cash or other consideration to any party in connection
with or in any way related to any such business combination or purchase; which,
in Parent's or the Purchaser's reasonable judgment, in any such case, and
regardless of the circumstances (including any action or omission by Parent or
the Purchaser) giving rise to any such condition, makes it inadvisable to
proceed with such acceptance for payment or payment.
The foregoing conditions are for the sole benefit of Parent, the Purchaser
and their affiliates and may be asserted by us or Parent in our reasonable
discretion regardless of the circumstances (including any action or omission by
Parent or us) giving rise to any such conditions or may be waived by us in our
reasonable discretion in whole or in part at any time or from time to time
before the Expiration Date (provided that all conditions to the Offer other than
those dependent upon the receipt of government approvals must be satisfied or
waived prior to expiration of the Offer). We expressly reserve the right to
waive any of the conditions to the
25
Offer and to make any change in the terms of or conditions to the Offer. Our
failure at any time to exercise our rights under any of the foregoing conditions
shall not be deemed a waiver of any such right. The waiver of any such right
with respect to particular facts and circumstances shall not be deemed a waiver
with respect to any other facts and circumstances. Each such right shall be
deemed an ongoing right which may be asserted at any time or from time to time.
Any determination made by us concerning the events described in this Section 14
shall be final and binding upon all parties.
15. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS.
GENERAL. Based on our examination of publicly available information filed
by the Company with the SEC and other publicly available information concerning
the Company, we are not aware of any governmental license or regulatory permit
that appears to be material to the Company's business that might be adversely
affected by our acquisition of Shares pursuant to the Offer or, except as set
forth below, of any approval or other action by any government or governmental
administrative or regulatory authority or agency, domestic or foreign, that
would be required for our acquisition or ownership of Shares pursuant to the
Offer. Should any such approval or other action be required or desirable, we
currently contemplate that, except as described below under "State Takeover
Statutes", such approval or other action will be sought. There is, however, no
current intent to delay the purchase of Shares tendered pursuant to the Offer
pending the outcome of any such matter. There can be no assurance that any such
approval or other action, if needed, would be obtained (with or without
substantial conditions) or that if such approvals were not obtained or such
other actions were not taken adverse consequences might not result to the
Company's business or certain parts of the Company's business might not have to
be disposed of, any of which could cause us to elect to terminate the Offer
without the purchase of Shares thereunder. Our obligation under the Offer to
accept for payment and pay for Shares is subject to the conditions set forth in
"The Offer--Section 14".
STATE TAKEOVER STATUTES. A number of states have adopted laws which
purport, to varying degrees, to apply to attempts to acquire corporations that
are incorporated in, or which have substantial assets, stockholders, principal
executive offices or principal places of business or whose business operations
otherwise have substantial economic effects in, such states. The Company,
directly or through subsidiaries, conducts business in a number of states
throughout the United States, some of which have enacted such laws. Except as
described herein, we do not know whether any of these laws will, by their terms,
apply to the Offer or any merger or other business combination between us or any
of our affiliates and the Company, and we have not complied with any such laws.
To the extent that certain provisions of these laws purport to apply to the
Offer or any such merger or other business combination, we believe that there
are reasonable bases for contesting such laws.
In 1982, in Edgar v. MITE Corp., the Supreme Court of the United States
invalidated on constitutional grounds the Illinois Business Takeover Statute
which, as a matter of state securities law, made takeovers of corporations
meeting certain requirements more difficult. However, in 1987 in CTS Corp. v.
Dynamics Corp. of America, the Supreme Court held that the State of Indiana
could, as a matter of corporate law, constitutionally disqualify a potential
acquiror from voting shares of a target corporation without the prior approval
of the remaining stockholders where, among other things, the corporation is
incorporated, and has a substantial number of stockholders, in the state.
Subsequently, in TLX Acquisition Corp. v. Telex Corp., a U.S. federal district
court in Oklahoma ruled that the Oklahoma statutes were unconstitutional as
applied to corporations incorporated outside Oklahoma in that they would subject
such corporations to inconsistent regulations. Similarly, in Tyson Foods, Inc.
v. McReynolds, a U.S. federal district court in Tennessee ruled that four
Tennessee takeover statutes were unconstitutional as applied to corporations
incorporated outside Tennessee. This decision was affirmed by the United States
Court of Appeals for the Sixth Circuit. In December 1988, a U.S. federal
district court in Florida held in Grand Metropolitan PLC v. Butterworth that the
provisions of the Florida Affiliated Transactions Act and the Florida Control
Share Acquisition Act were unconstitutional as applied to corporations
incorporated outside of Florida.
If any government official or third party seeks to apply any state
takeover law to the Offer or any merger or other business combination between us
or any of our affiliates and the Company, we will take such action as then
appears desirable, which action may include challenging the applicability or
validity of such statute in appropriate court proceedings. If it is asserted
that one or more state takeover statutes is applicable to the Offer or any such
merger or other business combination and an appropriate court does not determine
that it is inapplicable or invalid as applied to the Offer or any such merger or
other business combination, we might be required to file certain information
26
with, or to receive approvals from, the relevant state authorities or holders of
Shares, and we may be unable to accept for payment or pay for Shares tendered
pursuant to the Offer, or be delayed in continuing or consummating the Offer or
any such merger or other business combination. In such case, we may not be
obligated to accept for payment or pay for any tendered Shares. See "The
Offer--Section 14".
OTHER. Any merger or other similar business combination that we propose
would also have to comply with any applicable U.S. federal law. In particular,
unless the Shares were deregistered under the Exchange Act prior to such
transaction, if such merger or other business combination were consummated more
than one year after termination of the Offer or did not provide for stockholders
to receive cash for their Shares in an amount at least equal to the price paid
in the Offer, we may be required to comply with Rule 13e-3 under the Exchange
Act. If applicable, Rule 13e-3 would require, among other things, that certain
financial information concerning the Company and certain information relating to
the fairness of the proposed transaction and the consideration offered to
minority stockholders in such a transaction be filed with the SEC and
distributed to such stockholders prior to consummation of the transaction.
16. FEES AND EXPENSES. We have retained MacKenzie Partners, Inc. to act
as the information agent and American Stock Transfer & Trust Company to act as
the depositary in connection with the Offer. The Information Agent may contact
holders of Shares by mail, telephone, telex, telegraph and personal interviews
and may request brokers, dealers, banks, trust companies and other nominees to
forward materials relating to the Offer to beneficial owners. The Information
Agent and the Depositary each will receive reasonable and customary compensation
for their respective services, will be reimbursed for certain reasonable
out-of-pocket expenses and will be indemnified against certain liabilities in
connection therewith, including certain liabilities under the U.S. federal
securities laws.
We will not pay any fees or commissions to any broker or dealer or any
other person (other than the Information Agent and the Depositary) for
soliciting tenders of Shares pursuant to the Offer. Brokers, dealers, banks,
trust companies and other nominees will, upon request, be reimbursed by us for
reasonable and necessary costs and expenses incurred by them in forwarding
materials to their customers.
17. MISCELLANEOUS. The Offer is not being made to, nor will tenders be
accepted from or on behalf of, holders of Shares in any jurisdiction in which
the making of the Offer or acceptance thereof would not be in compliance with
the laws of such jurisdiction. However, we may, in our reasonable discretion,
take such action as we may deem necessary to make the Offer in any such
jurisdiction and extend the Offer to holders of Shares in such jurisdiction.
No person has been authorized to give any information or make any
representation on behalf of Parent or the Purchaser not contained in this Offer
to Purchase or in the Letter of Transmittal and, if given or made, such
information or representation must not be relied upon as having been authorized.
We have filed with the SEC a Tender Offer Statement on Schedule TO,
together with exhibits, pursuant to Rule 14d-3 under the Exchange Act,
furnishing certain additional information with respect to the Offer. The
Schedule TO and any amendments thereto, including exhibits, may be examined and
copies may be obtained from the offices of the SEC in the manner described in
"The Offer--Section 9" of this Offer to Purchase.
JWL ACQUISITION CORP.
December 5, 2005
27
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF THE NEWCASTLE ENTITIES AND PURCHASER
Mark E. Schwarz, Steven J. Pully and John P. Murray are the sole officers
of the Newcastle Entities which currently have no directors. Mr. Schwarz is also
Chairman of the Board of Purchaser and its sole director and Mr. Murray is
Purchaser's President and Secretary.
The name, current principal occupation or employment and material
occupations, positions, offices or employment for the past five years of each
director and executive officer of the Newcastle Entities and Purchaser are set
forth below. The business address of each director and officer is care of
Newcastle Partners, L.P., 300 Crescent Court, Suite 1110, Dallas, Texas 75201.
Except as provided in the Offer to Purchase, none of the directors and officers
listed below has, during the past five years, (i) been convicted in a criminal
proceeding or (ii) been a party to any judicial or administrative proceeding
that resulted in a judgment, decree or final order enjoining the person from
future violations of, or prohibiting activities subject to, U.S. federal or
state securities laws, or a finding of any violation of U.S. federal or state
securities laws. All directors and officers listed below are citizens of the
United States.
Current Principal Occupation or
Name Age Employment and Five-year Employment History
- ---- --- -------------------------------------------
Mark E. Schwarz 44 Mark E. Schwarz is the Chairman, Chief Executive
Officer and Portfolio Manager of Newcastle
Capital Management, L.P., a private investment
management firm he founded in 1993 that is the
general partner of Parent. Mr. Schwarz is
Chairman of the Board and Chief Executive Officer
of Hallmark Financial Services, Inc., a property
and casualty insurance company, Chairman of the
Board of Bell Industries, Inc., a computer
systems integrator, Pizza Inn, Inc., a franchisor
and food and supply distributor, and New Century
Equity Holdings Corp., an asset management
company, and a director of Nashua Corporation, a
specialty paper, label and printing supplies
manufacturer, SL Industries, Inc., a power and
data quality products manufacturer, WebFinancial
Corporation, a specialty bank and finance
company, and Vesta Insurance Group, Inc., a
holding company for a group of insurance
companies.
Steven J. Pully 45 Mr. Pully is the President of Newcastle Capital
Management, L.P., the general partner of Parent.
Mr. Pully is also Chief Executive Officer and a
director of New Century Equity Holdings Corp., an
asset management company, a director of Pizza
Inn, Inc., a franchisor and food and supply
distributor and was Chief Executive Officer of
Pinnacle Frames and Accents, Inc. from January
2003 through June 2004, a private company engaged
in mass production of picture frame products. Mr.
Pully was a director of the Company from June 23,
2005 until his resignation on November 29, 2005.
He was nonexecutive Chairman of the Board of the
Company from July 5, 2005 through November 10,
2005. Prior to joining Newcastle Capital
Management, L.P. in late 2001, from May 2000 to
December 2001, he was a managing director in the
mergers and acquisitions department of Banc of
America Securities, Inc. and from January 1997 to
May 2000 he was a member of the investment
banking department of Bear Stearns where he
became a senior managing director in 1999. Prior
to becoming an investment banker, Mr. Pully
practiced securities and corporate law at the law
firm of Baker & Botts. Mr. Pully is a CPA, a CFA
and a member of the Texas Bar.
S-1
Current Principal Occupation or
Name Age Employment and Five-year Employment History
- ---- --- -------------------------------------------
John P. Murray 35 Mr. Murray is the Chief Financial Officer of
Newcastle Capital Management, L.P., the general
partner of Parent. Prior to joining Newcastle
Capital Management, L.P. in January 2002, Mr.
Murray was a partner with Speer & Murray, Ltd.,
an accounting firm specializing in tax planning
and compliance, estate planning, asset protection
and investment management. Mr. Murray was also
previously employed by Ernst & Young, LLP as a
member of the audit staff.
S-2
Facsimile copies of the Letter of Transmittal will be accepted. The Letter
of Transmittal and certificates for Shares and any other required documents
should be sent to the Depositary at one of the addresses set forth below:
The Depositary for the Offer is
AMERICAN STOCK TRANSFER & TRUST COMPANY
BY MAIL OR OVERNIGHT COURIER: BY HAND:
American Stock Transfer & Trust Company American Stock Transfer & Trust Company
Operations Center Attn: Reorganization Department
Attn: Reorganization Department 59 Maiden Lane
6201 15th Avenue Concourse Level
Brooklyn, NY 11219 New York, NY 10038
By Facsimile
(718) 234-5001
Confirm Facsimile Transmission
(By Telephone Only)
Toll Free (877) 248-6417
If you have questions or need additional copies of this Offer to Purchase
and the Letter of Transmittal, you can call the Information Agent at its address
and telephone numbers set forth below. You may also contact your broker, dealer,
bank, trust company or other nominee for assistance concerning the Offer.
The Information Agent for the Offer is:
MACKENZIE PARTNERS, INC.
105 Madison Avenue
New York, New York
(212) 929-5500 (call collect)
or
Call Toll-Free (800) 322-2885
Newcastle Partners L P
Filed: 5 Dec 05, 12:00am