EXHIBIT 10.1
D. E. Shaw Laminar Portfolios, L.L.C. Xerion Capital Partners LLC
120 West 45th Street 450 Park Avenue
39th Floor, Tower 45 27th Floor
New York, NY 10036 New York, NY 10022
July 11, 2006
The Board of Directors of Oneida
Oneida Ltd.
163-181 Kenwood Avenue
Oneida, NY 13421
By Email
Re: Proposal to Acquire Reorganized Oneida Ltd.
Gentlemen:
D.E. Shaw Laminar Portfolios, L.L.C. ("Laminar") and Xerion Capital Partners
LLC, on behalf of certain of its managed funds ("Xerion", together with Laminar,
"we", "us" or "our" as the context so provides), are pleased to submit the
following proposal to you, confirming our interest to acquire, through a new
entity ("Buyer") to be formed and funded by persons including us and/or our
affiliates or designees (other than direct strategic competitors of Oneida Ltd.,
a New York corporation (the "Company")) selected
in our sole and absolute discretion, 100% of the equity interests of the
Company, as reorganized ("Reorganized Oneida") under a confirmed plan of
reorganization (the "Proposed Plan") pursuant to chapter 11 of title 11 of the
United States Code (the "Bankruptcy Code") containing the terms set forth in the
Definitive Agreement (defined below). We hereby request that the Company confirm
its undertaking to pursue such a transaction substantially on the terms
described in Annex A and below (the "Proposed Transaction") by signing and
returning a copy of this letter to the senders at the address noted above by
11:59 p.m. EST on July 13, 2006. Capitalized terms used but not otherwise
defined herein (or in Annex A) shall have the meaning ascribed to such terms in
the Current Plan (defined in Annex A hereto)
Please be advised that we already have conducted due diligence on the Company's
business (the "Business") based on publicly available information and are
otherwise accordingly relatively familiar with the business, operations and
management of the Business. We believe that our follow-up due diligence could be
swiftly completed and that we can immediately commence the negotiation of the
definitive purchase or funding agreement and other related and ancillary
documents with respect to the Proposed Transaction (collectively, the
"Definitive Agreement"). We also note that we have the requisite funding to
consummate the Proposed Transaction and that our proposal is not subject to any
financing conditions.
Based upon the publicly available information concerning the Business, we
believe that the Proposed Transaction could be consummated on the terms set
forth in Annex A hereto and substantially as follows:
1. Limitations on Binding Obligations; No Prejudice. Other than as
described in Sections 1 through 11 hereof and in the Access and
Conduct of Business provisions of Annex A, this letter does not
create any binding obligations and no binding commitment of the
Company or Buyer to carry out the Proposed Transaction will be
deemed to exist until and unless the Definitive Agreement described
in Annex A has been duly executed and delivered, following which any
commitment shall thereafter be subject to all conditions of the
Definitive Agreement. For the avoidance of doubt, this proposal
remains entirely subject to "follow-up" due diligence as determined
by Buyer in its sole and absolute discretion, which due diligence
Buyer expects to conduct during the period commencing on the date
this letter is duly executed through and until the commencement of
the proposed status conference, in the administratively consolidated
chapter 11 bankruptcy cases of the Company and certain of its
domestic subsidiaries (the "Chapter 11 Cases"), with the United
States Bankruptcy Court for the Southern District of New York (the
"Bankruptcy Court"), on July 21, 2006, or as may otherwise be
extended in writing by the parties hereto (the "Due Diligence
Period").
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2. Non-Disclosure. We and the Company shall as promptly as practicable
enter into a confidentiality agreement containing customary terms
and conditions reasonably acceptable to Buyer (the "Confidentiality
Agreement").
3. Timing. We are prepared to move forward promptly and to devote the
necessary resources toward a swift completion of our necessary due
diligence and the execution of the Definitive Agreement. The Company
shall provide access for such due diligence, as described under
Access in Annex A during the Due Diligence Period.
4. Pre-Definitive Agreement Expense Reimbursement. If the Company
receives any Competing Proposal (defined below) during the Due
Diligence Period, and the Definitive Agreement is not entered into,
upon the consummation of a Competing Proposal, the Company agrees
that it shall reimburse as an administrative expense all of our
reasonable, documented fees and expenses (including the reasonable
fees and expenses of counsel) in connection with our due diligence
and negotiations incurred from and after July 11, 2006 through the
date this letter is terminated up to a maximum of $250,000 (the "Due
Diligence Expenses"). If deemed necessary, the Company shall
expeditiously seek an order of the Bankruptcy Court, in form and
substance reasonably acceptable to us and Buyer, approving this
letter, including the provisions above that such Due Diligence
Expenses will be allowed administrative expense claims in the
Chapter 11 Cases. The term "Competing Proposal" means a sale or
disposition of all or any significant part of the Business, the
Company's assets, or any equity or other securities or of any
similar interest in the Company, whether through purchase, merger,
consolidation, reorganization, rights offering, plan of
reorganization or in any other manner other than pursuant to the
Current Plan (as defined in Annex A).
5. Absolute Priority Rule. The Definitive Agreement will result in a
plan of reorganization that, to the complete satisfaction of the
Company, is confirmable under section 1129 of the Bankruptcy Code,
including under the absolute priority rule.
6. Expiration. This letter will expire at the conclusion of the Due
Diligence Period if the Definitive Agreement is not executed by
Buyer and the Company. For the avoidance of doubt, the Company will
not be deemed to be in violation of this agreement or otherwise have
acted in bad faith if, in its sole and absolute discretion, the
Company elects not to enter into the Definitive Agreement because
(i) in the good faith judgment of the Company's board of directors,
the Definitive Agreement will not result in a plan of reorganization
that is confirmable under section 1129 of the Bankruptcy Code
(including under the absolute priority rule) or (ii) the official
committee of equity security holders appointed in the Chapter
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11 Cases has not given the Company and Buyer reasonable assurance
that it will support the Proposed Plan.
7. Withdrawal of Objection to Plan Exclusivity. During the Due
Diligence Period and, if the Definitive Agreement is entered into,
during the time that such agreement is in effect, Laminar and Xerion
will withdraw, without prejudice, their objections to the Company
maintaining or extending the exclusive period during which the
Company may file a chapter 11 plan pursuant to section 1121(b) of
the Bankruptcy Code.
8. Transaction Fees and Expenses. Except as provided herein, we and the
Company will each be responsible for our respective legal and due
diligence expenses, financial advisory fees and other costs and
expenses associated with performing under this letter.
9. Entire Agreement. This letter and Annex A (including Exhibit 1
thereto) constitute the entire agreement between the parties and
supersede all prior oral or written agreements or understanding, if
any, with respect hereto.
10. Governing Law; Jurisdiction. This letter will be governed by and
construed under the laws of the State of New York, without regard to
conflict of law principles. The parties agree to submit to the
initial jurisdiction of the Bankruptcy Court concerning any disputes
arising hereunder.
11. Counterparts. This letter of intent may be executed in one or more
counterparts, each of which will be deemed an original copy and all
of which, when taken together, will be deemed to constitute one and
the same agreement.
We are very enthusiastic about this opportunity and look forward to a successful
conclusion of the Proposed Transaction. We would like to note that we recognize
and appreciate the efforts of management and the board of directors in achieving
their success with the Business to date and look forward to working with
management into the future.
[signatures on following page]
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If the foregoing appropriately sets forth our understandings, please sign and
date in the spaces provided below and return an executed copy of this letter to
us.
Very truly yours,
D. E. SHAW LAMINAR PORTFOLIOS, L.L.C.
By: /s/ Daniel Posner
Name: Daniel Posner
Title: Authorized Signatory
XERION CAPITAL PARTNERS LLC
By: /s/ Daniel J. Arbess
Name: Daniel J. Arbess
Title: Managing Member
Accepted and Agreed:
ONEIDA LTD.
By: /s/ Christopher H. Smith Date: July 13, 2006
Name: Christopher H. Smith
Title: Chairman of the Board, Chairman of the Executive Committee
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Annex A
SUMMARY OF TERMS OF THE PROPOSED TRANSACTION
Form of Proposed The Proposed Transaction will result in the issuance by the
Transaction: Company to Buyer of 100% of the equity interest of
Reorganized Oneida in consideration of the Purchase Price
(defined below). Such transaction would occur through a
plan funding agreement providing for substantially similar
treatment as outlined in the Company's current plan of
reorganization (the "Current Plan"), except that all
claims, including the Secured Tranche B Claims, will be
assumed or paid in full unless otherwise agreed to with a
particular claimholder;(1) provided, however, that holders
of the Secured PBGC Claim and the Unsecured PBGC Claims
will receive substantially similar treatment as set forth
in the Current Plan, unless otherwise agreed to or as
determined by the Bankruptcy Court.
Notwithstanding anything contained herein or in the letter
agreement to the contrary, if the parties believe that the
Proposed Transaction could be structured in manner
consistent with the recovery set forth in the preceding
paragraph, the parties will work together to structure the
Proposed Transaction as a sale pursuant to section 363 of
the Bankruptcy Code.
Consistent with the foregoing, Buyer reserves the right to
structure the Proposed Transaction in a tax-effective
manner, so as to preserve to the extent feasible the
Company's current tax net operating losses (if not
currently subject to restrictions on use due to a change of
control or otherwise) or, in lieu thereof, to achieve a
step-up in basis of the assets of the Business being
acquired.
Buyer: It is currently anticipated that during the period prior to
the closing, Laminar and its affiliates will beneficially
own more than 50% of Buyer's outstanding equity interests
and Xerion will own up to the balance of the Buyer's
outstanding equity interests.
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(1) The Secured Tranche B Claims will be paid in full, in cash.
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Purchase Price: Buyer will fund at least $222.5 million (the "Purchase
Price") or otherwise an amount sufficient to pay in full, in
cash, the Secured Tranche A Claims and the Secured Tranche B
Claims, including any accrued and unpaid interest (including
postpetition interest, fees, expenses and charges) not
included in the foregoing plus the payment or assumption by
Buyer of each of the following claims (as described and
defined in the Current Plan):
1. Secured PBGC Claims (as set forth in the Current
Plan, unless otherwise agreed or ordered by the
Bankruptcy Court),
2. Administrative Claims (including, without
limitation any fees or expenses in connection
with the Exit Facility, which Buyer may keep,
reject or replace in its sole and absolute
discretion),
3. Priority Tax Claims,
4. Professional Fees,
5. all Obligations under the DIP Credit Agreement,
6. Other Secured Claims,
7. Other Priority Claims,
8. Specified Unsecured Claims, unless each holder of
such claims agrees to a lesser or different
treatment (with respect to the Unsecured PBGC
Claims, as set forth in the Current Plan, unless
otherwise agreed, or as ordered by the Bankruptcy
Court),
9. General Unsecured Claims, and
10. amounts owed on account of the Company's
preferred Equity Interests.
The Purchase Price assumes that, unless the parties otherwise
agree, the Oneida Plan will be terminated and
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the Buffalo China Pension Plans will be retained.
Attached as Exhibit 1 hereto is the Company's estimate of the
outstanding claims against the Company as of a proposed
effective date (under the Current Plan) of July 29, 2006.
Subject to Buyer's right to protest or challenge any claim
not listed under the heading "Stipulated Amount" on Exhibit
1, Buyer shall assume or satisfy in full each claim, in its
finally determined amount (except with respect to the PBGC
Claim, which will be treated as set forth in the Current
Plan, unless otherwise agreed or ordered by the Bankruptcy
Court), including any claim that Buyer protests or otherwise
challenges but is finally judicially determined by the
Bankruptcy Court or finally judicially determined by another
court of competent jurisdiction consistent with the Current
Plan (or as may otherwise be proposed by Buyer in the
Proposed Plan to the extent the Company so agrees) to be a
valid claim, unless the holder of such claim agrees to a
different treatment or the Bankruptcy Court or other
applicable court orders otherwise.
In addition, the parties contemplate that the Proposed Plan
will include an element of consideration for the Company's
common equity holders in connection with securing their
approval of the Proposed Transaction and their withdrawal of
any objections to the Plan as modified and consummated in
accordance with this letter.
Upon signing of the Definitive Agreement, Buyer would provide
a good faith deposit in an amount to be mutually agreed;
provided such amount shall not be less than 5% of the cash
component of the Purchase Price.
Working Capital Buyer shall ensure that the Company will have reasonably
Facility sufficient working capital following consummation of the
Proposed Transaction (after assumption/satisfaction of all
claims against the Company and payment of the cash portion of
the Purchase Price).
Management Terms Buyer currently contemplates working with management to
finalize the terms of employment and the management incentive
plan, in each case mutually agreeable to the parties.
Superior
Proposals: No later than the second business day following the
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execution of the Definitive Agreement, the Company will file
with the Bankruptcy Court a motion seeking approval of the
Definitive Agreement pursuant to an order reasonably
acceptable to Buyer, which agreement and order will provide
for customary auction procedures to consider superior
proposals, including (x) customary bidding increments,
reasonable break-up fee and expense reimbursement and good
faith deposits and (y) the right to counter-bid and tender
such fees and expense reimbursements.
The Company will obtain approval of the bid procedures order
by the Bankruptcy Court as promptly as reasonably
practicable.
Confirmation/ Confirmation of the Proposed Plan or, if applicable, sale
Sale Order: order approved by the Bankruptcy Court (the "Confirmation/
Sale Order") will be in a form reasonably acceptable to the
parties to the Definitive Agreement. The Company will obtain
approval of such order as promptly as practicable following
execution of the Definitive Agreement.
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Conditions: The Proposed Transaction will be conditioned upon:
(a) the parties having negotiated, executed and delivered the
Definitive Agreement on mutually acceptable terms;
(b) the absence of any material adverse change in the
financial condition, assets, business, or properties of the
Company and its subsidiaries taken as a whole, subject to
customary carve-outs related to the announcement of the
Proposed Transaction and the pendency of the Chapter 11
Cases;
(c) customary releases and indemnification and exculpation
provisions (including those contained in the Current Plan) in
accordance with the Bankruptcy Code;
(d) approvals or waivers from governmental authorities,
including expiry of any waiting period under
Hart-Scott-Rodino and the Confirmation/Sale Order being a
final order; and
(e) other reasonable customary closing conditions, including
without limitation, the representations and warranties being
true in all material respects and pre-closing covenants
having been performed in all material respects.
Access: The Company will permit Buyer and its agents and
representatives reasonable access to its personnel, including
all senior management personnel, properties, contracts, books
and records, suppliers, customers and all other documents and
data.
All information obtained by Buyer pursuant to such access
shall be subject to the Confidentiality Agreement.
Conduct of The Company will conduct itself in a reasonable manner
Business: consistent in nature, scope and magnitude with its past
practice and will only take actions usually taken in the
ordinary course, including taking into account the Chapter 11
Cases.
Representations In the Definitive Agreement, the Company and Buyer will make
and Warranties; customary representations and warranties and will provide
Covenants: customary covenants and other protections.
Buyer does not anticipate any material issues on the
representations, warranties and covenants and would
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assume that, subject to due diligence, those contained in the
proposed exit financing under the Current Plan would serve as
a reasonable basis for those to be included in the Definitive
Agreement.
Closing: The closing and effectiveness will occur as soon as possible
after receipt of any and all consents required in connection
with the Proposed Transaction and the satisfaction of the
other reasonable customary conditions to closing contained in
the Definitive Agreement; provided, however, that the
Definitive Agreement may be terminated and the Proposed
Transaction may be abandoned if closing does not occur by the
earlier of: (i) 90 days after the entry of the
Confirmation/Sale Order; or (ii) December 31, 2006.
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EXHIBIT 1 TO ANNEX A
Claims Chart
Claim Company's Estimated Amount Stipulated Amount
- ----------------------------- -------------------------- -------------------
Secured Tranche A Claims $ 117,854,000(2) $ 117,854,000
Secured Tranche B Claims $ 107,324,000(3) $ 107,324,000
Professional Fees $ 13,400,000 -
Exit Fee $ 3,700,000 -
DIP Working Capital $ 693,000(4) -
Priority Claims $ 8,737,401 -
PBGC Claim $ 50,825,110(5)(6) $ 21,075,050(7)(8)
Italian Guarantee Claim $ 1,402,738(9) $ 1,402,738
General Unsecured Claims $ 6,738,868(10) -
Preferred Equity $ 2,200,000 $ 2,200,000
Foreign Funded Debt $ 4,609,000(11) $ 4,609,000
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Total $ 317,484,117 $ 254,464,788
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(2) Includes principal amount of $115,267,000 and accrued postpetition
interest (at the contractual non-default rate) through 7/29/06 of $2,587,000.
(3) Includes principal amount of $100,225,000, accrued prepetition interest of
$899,000 and accrued postpetition interest (at the contractual non-default rate)
through 7/29/06 of $6,200,000.
(4) Although the actual amount owed by the Debtors under the DIP Credit
Agreement is anticipated to be $43,093,000, the amounts to be applied for
repayment of the Secured Tranche A Claims ($25,300,000) and payment of the
administrative expenses accrued in the Chapter 11 Cases ($17,100,000) have been
subtracted to avoid duplication.
(5) Includes accrued postpetition interest (at the federal judgment rate of
4.76%) through 7/29/06 of $860,110.
(6) In the Current Plan, the PBGC will receive a $3 million promissory note on
account of the PBGC Claim.
(7) Includes accrued postpetition interest (at the federal judgment rate of
4.76%) through 7/29/06 of $356,650.
(8) In the Current Plan, the PBGC will receive a $3 million promissory note on
account of the PBGC Claim.
(9) Includes accrued postpetition interest (at the federal judgment rate of
4.76%) through 7/29/06 of $23,738.
(10) Not including general unsecured claims of approximately $15,278,500
disputed by the Debtors.
(11) Although the actual amount of funded indebtedness owed by Oneida's
non-debtor foreign subsidiaries is anticipated to be $5,988,000, the principal
amount of the Italian Guarantee Claim, $1,379,000 (which already is accounted
for), has been subtracted to avoid duplication.
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