February 17, 2006
Via U.S. Mail
Jonathan Duskin
Prentice Capital Management, LP
623 Fifth Avenue
32nd Floor
New York, New York 10022
RE: Whitehall Jewellers, Inc.
Schedule 13E-3 and Schedule TO-T filed February 8, 2006 by
Prentice Capital Management, LP, et al.
File No. 005-46037
Dear Mr. Duskin:
We have reviewed your filing and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation
as to why our comment is inapplicable or a revision is
unnecessary.
Please be as detailed as necessary in your explanation. In some
of
our comments, we may ask you to provide us with information so we
may
better understand your disclosure. After reviewing this
information,
we may raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We
look forward to working with you in these respects. We welcome
any
questions you may have about our comments or any other aspect of
our
review. Feel free to call us at the telephone numbers listed at
the
end of this letter.
Schedule 13E-3/Schedule TO-T
1. We note that the general partner of Holtzman, Holtzman
Financial
Advisors, LLC, as well as the managing member of the general
partner,
SH Independence, LLC, have not been included as filing persons on
the
Schedule 13E-3. Further, we note the description you have given
as to
Mr. Duskin`s role in meetings with Whitehall throughout the
negotiating process. Tell us whether you believe that those
entities
and Mr. Duskin are affiliates engaged in this going private
transaction. We note that all filing persons must comply with
the
requirements of Rule 13e-3 including the fairness determination
and
recommendation requirements. See Q& A No. 5 of SEC Release No.
34-
17719 (Apr. 13, 1981) and Item II.D.3 of the Division of
Corporation
Finance`s "Current Issues and Rule Making Projects" outline, dated
November 14, 2000 available on our website at www.sec.gov. In
your
supplemental response, indicate the expected continuing equity
interest each may have in the surviving entity.
2. It appears that you have not included all shares underlying
exercisable options, without regard to whether or not they are "in
the
money," in determining the appropriate filing fee. Unless you
have a
written agreement preventing option holders from exercising and
tendering into the offer, you must use the per share price rather
than
the "spread" between the exercise price and the offer price, in
calculating the fee.
Offer to Purchase
Summary Term Sheet, page 1
Conditions to Tender Offer, page 1
3. Where you discuss the Minimum Condition, please quantify what
amount of shares you will need to be tendered in order to satisfy
this
condition and indicate to what extent the condition has already
been
satisfied. Specifically, we note your disclosure elsewhere that
you
already own 4,283,795 shares or 25.55% of the outstanding equity
of
Whitehall. What does this amount represent in terms of voting
power?
Further, according to the Schedule 14D-9 filed by Whitehall the
officers and directors of Whitehall also plan on tendering into
the
Offer. Please revise to disclose the amount, both in terms of
numbers
of shares and percentage of voting power, this represents.
Position of the Purchaser Group, page 4
4. We note your indication that the Purchaser Group believes that
the
tender offer and the Merger are both "financially fair to the
unaffiliated stockholders of Whitehall." Please revise the
reference
to "financially" or advise us as to why you believe this modifier
is
necessary.
Merger Following Expiration of the Tender Offer, page 5
5. Here or in an appropriate place in this disclosure document,
revise
to discuss how you arrived at the consideration that is being paid
to
the holders of Class B Shares in the Merger.
Questions and Answers, page 7
6. Refer to your Q&A regarding "Will Whitehall`s directors and
executive offers tender their Shares in the tender offer?"
According
to the Schedule 14D-9 filed by Whitehall the officers and
directors of
Whitehall also plan on tendering into the Offer. Please revise
this
disclosure to indicate this and quantify the amount that is
expected
to be tendered.
Special Factors, page 16
1. Background of the offer; Past Contacts and Negotiations
with
Whitehall, page 16
7. See the last paragraph of this section and the first paragraph
under The Tender Offer - Certain Information Concerning Whitehall.
We
note that you do not take responsibility for the accuracy or
completeness of any information contained in the Offer to Purchase
which was based on publicly available information about the
Company or
Newcastle. While you may include appropriate language about the
limits on the reliability of the information, you may not disclaim
responsibility for its accuracy. Please revise.
8. Please revise to discuss how the Purchaser Group arrived at the
offer price of $1.60 per share.
9. Revise this discussion to address how Holtzman and its
affiliates
became an Investor. We note your indication on page 42 that you
advised Whitehall`s counsel on October 13, 2005 "that Holtzman
would
participate in the Financing Transaction with Prentice," on page
42
but you do not explain how they became involved in or what
Prentice`s
relationship is with them? In doing so, please also tell us what
consideration you and Holtzman have given to acknowledging the
existence of a group for purposes of satisfying your Section 13
reporting obligations, pursuant to Rule 13d-5(b).
3. Position of the Purchaser Group Regarding the Fairness of
the
Offer and the Merger, page 33
10. Please revise this discussion to ensure that you have provided
a
reasonably detailed discussion of each material factor forming the
basis for the Purchaser Group`s fairness determination in
accordance
with Item 1014(b) of Regulation M-A. A listing of the factors
considered, without a discussion of how that factor relates to the
determination that the transaction is fair to the unaffiliated
stockholders is inadequate. See In the Matter of Meyers Parking
Systems Inc., Securities Exchange Act Rel. No. 26069 (September
12,
1988). For example, you mention that you considered the fact that
"effective October 28, 2005, the Common Stock was suspended from
trading on the New York Stock Exchange...," however, you do not
explain how that factor relates to your fairness determination.
11. Elaborate upon the factor that refers to "the depressed market
price of the shares of Common Stock based on Whitehall`s
materially
weaker financial results of the past several years."
Specifically,
provide quantifiable information about the depressed market price
of
the shares.
12. Please elaborate upon this discussion to disclose how you
determined the transaction to be substantively fair to the
unaffiliated shareholders. The factors listed in Instruction 2 to
Item 1014 are those generally considered relevant in addressing
the
substantive fairness of a Rule 13e-3 transaction and should be
discussed. Specifically, you have not addressed the going concern
and
liquidation values of the Common Stock, pursuant to Instruction
2(iv)
and (v) of Item 1014 of Regulation M-A. To the extent that any
such
factors were not considered or deemed relevant in the context of
this
particular transaction, that fact may be important for
shareholders in
assessing the transaction and the company`s fairness
determination.
See Exchange Act Release 17719 (April 13, 1981).
13. Please also elaborate upon this discussion to address to what
extent, if any, the role of the Special Committee and the fairness
advisor, Duff & Phelps, assisted you in arriving at your
determination
of the substantive and procedural fairness of the Offer. This
comment
applies especially to the first factor you list under your
procedural
fairness determination, considering it would appear that at least
one
member of the Board, Mr. Patinkin, was faced with certain
conflicts of
interest in arriving at their fairness determination, which would
undermine this factor as being supportive of your fairness
determination.
14. Clarify the factor that refers to "the Boards of Directors
consists of Whitehall directors who, among others, are not
officers or
employees of Whitehall or the Purchaser Group and who are
independent
of Whitehall and the Purchaser Group." Specifically, clarify what
you
mean when you refer to "independent."
15. Address what consideration, if any, was given to the retention
of
your own fairness advisor to prepare a report addressing the
fairness
of the consideration you are offering to shareholders. See Item
1014(d) of Regulation M-A.
4. Purpose and Structure of the Offer and the Merger; Reasons
of
the Purchaser Group for the Offer and the Merger; Certain Effects
of
the Offer and the Merger; Alternatives to the Offer and the
Merger,
page 35
16. We refer you to your discussion regarding the "Plans for
Whitehall
After the Offer and Merger." Specifically, please revise to
clarify
the treatment of options in the Merger. Here you indicate that
you
will cancel and pay the excess, if any, on all options. On page
53,
however, it appears that you only address the treatment of options
held by non-employee directors. Please revise to clarify.
17. Also, please revise this discussion to address whether you
have
any plans to change Whitehall`s charter, bylaws or other governing
instruments, pursuant to Item 1006(c)(10) of Regulation M-A.
18. We refer you to your discussion regarding the "Reasons of the
Purchaser Group for the Offer and the Merger." We note that you
include "the cost of maintaining public-company status..." as a
reason
why you are making the Offer. This would seem to indicate that
you
plan to terminate Whitehall`s status as a reporting company, as
does
your disclosure in the last paragraph under The Tender Offer -
Certain
Effects of the Offer, where you indicate that the "Purchaser
currently
intends to seek to cause the Surviving Corporation to terminate
the
registration of the Shares under the Exchange Act upon completion
of
the Merger." Your disclosure on pages 5 and 12, however, indicate
that you have not made a determination in this regard prior to the
Merger. Please revise to reconcile or, if you mean to say that
you
will terminate Whitehall`s status as a reporting company but you
are
not sure whether it will be before or after the Merger, please
clearly
state this. If whether you will terminate Whitehall`s status as a
reporting company is dependent upon the success of the Offer,
please
also indicate this.
19. We refer you to your discussion regarding "Certain Effects of
the
Offer and the Merger." Please revise to ensure that you include a
reasonably thorough discussion of the detriments of the Offer in
accordance with Instruction 2 to Item 1013 of Regulation M-A. For
example, one of the adverse effects of the Offer will be that the
company will no longer be subject to the provisions of the
Sarbanes-
Oxley Act or the liability provisions of the Exchange Act and that
officers of the company will no longer be required to certify the
accuracy of its financial statements. Consider whether some of
the
discussion of Certain Effects of the Offer that appears on page 73
would also be appropriate here.
20. Also, please revise this discussion to reflect the effect of
the
transaction in terms of dollar amounts and percentages as it
relates
to net earnings, pursuant to Instruction 3 of Item 1013 of
Regulation
M-A.
21. We refer you to your discussion of the "Alternatives to the
Offer
and the Merger." Please revise to elaborate upon the reason why
you
"determined to abandon the issuance and sale of the notes and
entered
into the Merger Agreement."
11. The Merger Agreement, page 52
22. In your discussion of The Merger, you indicate that "[e]ach
share
of common stock of the Purchaser outstanding immediately prior to
the
Effective Time will automatically be converted at the Effective
Time
into one validly issued and outstanding share of common stock of
the
Surviving Corporation." The second paragraph in the Introduction
on
page 14 would seem to indicate that no shares will be issued in
the
Surviving Corporation as all outstanding Whitehall shares will
either
be cancelled or converted into cash. Please reconcile.
The Tender Offer, page 64
1. Terms of the Offer, page 64
23. Revise your disclosure here and in the first paragraph under
"Acceptance for Payment and Payment for Shares" to clarify that
you
will pay for all Shares so accepted "promptly," not "as soon as
legally permitted to do so under applicable law," following the
expiration of the Offer. Refer to Rule 14e-1(c). We note your
indication in the penultimate paragraph of this section that the
terms
of the Merger Agreement provide for payment "as soon as permitted
under applicable law" but this provision might not be consistent
with
your obligations under Rule 14e-1(c).
4. Withdrawal Rights, page 69
24. Please revise this discussion to acknowledge the right that
holders of Shares have to withdraw their tendered Shares in
accordance
with the provisions of Section 14(d)(5) of the Exchange Act.
Specifically, revise to disclose that Shares not yet accepted for
payment or exchange after the expiration of sixty days from the
commencement of the Offer may be withdrawn.
5. Material United States Federal Income Tax Consequences,
page
69
25. Please eliminate the statement that the discussion is included
for
general information only. We believe this statement suggests that
Whitehall`s stockholders may not rely on the description of the
material tax consequences included in your offering materials.
8. Source and Amount of Funds, page 73
26. Please tell us what, if any, documentation exists to evidence
the
transfer of funds to be provided by the Investors to Holdco and
the
Purchaser. If a loan agreement, contract, arrangement or
understanding exists with respect to the transfer of funds for
purchase of the tendered shares, such document should be filed as
an
exhibit to the Schedule TO pursuant to Item 1016 of Regulation M-
A.
11. Conditions to the Offer, page 74
27. Please elaborate upon this discussion to indicate whether any
of
the conditions to the Offer, including the Minimum Condition, are
waivable and, if so, by whom. Your discussion of The Merger
Agreement
- - Conditions to the Merger, would seem to indicate that the
Minimum
Condition is waivable by either the Purchaser or Whitehall but
your
disclosure under The Tender Offer - Terms of the Offer would seem
to
indicate that the Purchaser may not waive this condition. Please
reconcile.
Schedule I
28. You refer to "economic interests" in describing the ownership
of
Holdco by Prentice and Holtzman. Please revise to clarify what
you
mean by this.
Exhibit (a)(1)(ii) - Letter of Transmittal
29. Refer to Instruction 8. We note your statement that "the
conditions of the Offer may be waived, in whole or in part, by the
Purchaser, in its sole discretion, at any time and from time to
time
in the case of any Shares tendered..." In the event you waive a
condition, you must waive it as to all shareholders. Further,
ensure
that this language is consistent with comment above. Please
revise
accordingly.
Closing Comments
As appropriate, please amend your filing and respond to these
comments within 10 business days or tell us when you will provide
us
with a response. You may wish to provide us with marked copies of
the
amendment to expedite our review. Please furnish a cover letter
with
your amendment that keys your responses to our comments and
provides
any requested supplemental information. Detailed cover letters
greatly facilitate our review. Please understand that we may have
additional comments after reviewing your amendment and responses
to
our comments.
Please also advise us as to your intentions with respect to
re-
dissemination of the materials you revise in response to our
comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the filing persons are in possession
of
all facts relating to their disclosure, they are responsible for
the
accuracy and adequacy of the disclosures they have made.
In connection with responding to our comments, please
provide, in
writing, a statement acknowledging that:
* the filing person is responsible for the adequacy and accuracy
of
the disclosure in the filing;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the filing person may not assert staff comments as a defense in
any
proceeding initiated by the Commission or any person under the
federal
securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division
of Corporation Finance in our review of your filing or in response
to
our comments on your filing.
If you have any questions regarding our comments, please do
not
hesitate to contact me at (202) 551-3264. You may also reach me
by
facsimile at (202) 772-9203.
Sincerely,
Mara L. Ransom
Special Counsel
Office of Mergers and Acquisitions
cc via facsimile at (212) 593-5955:
Marc Weingarten, Esq.
Robert Goldstein, Esq.
Schulte Roth & Zabel LLP
Whitehall Jewellers, Inc.
February 17, 2006
Page 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-3628
DIVISION OF
CORPORATION FINANCE