Exhibit 99.2
CONSENT SOLICITATION STATEMENT
PHIBRO ANIMAL HEALTH CORPORATION
(FORMERLY PHILIPP BROTHERS CHEMICALS, INC.)
SOLICITATION OF CONSENTS
RELATING TO
9-7/8% SENIOR SUBORDINATED NOTES DUE 2008
CUSIP NO. 718209AC3
Phibro Animal Health Corporation, a New York corporation (the "Company"),
hereby solicits (the "Solicitation") consents (the "Consents") of the registered
holders of its 9-7/8% Senior Subordinated Notes due 2008 (the "Notes"), upon the
terms and subject to the conditions set forth in this Consent Solicitation
Statement (as the same may be amended or supplemented from time to time, the
"Consent Solicitation Statement") and in the accompanying DTC Participants'
Consent Letter (the "Consent Letter" and, together with the Consent Solicitation
Statement and the other documents relating to the Consent Solicitation delivered
herewith, the "Solicitation Documents"), to the adoption of the Proposed
Amendments (as defined below) to the Indenture, dated as of June 11, 1998 (the
"Indenture"), between the Company, as issuer, the guarantors named therein, and
JPMorgan Chase Bank (formerly The Chase Manhattan Bank), as trustee, under which
the Notes were issued. The purpose of the Proposed Amendments is to permit the
Company and its restricted subsidiaries to incur up to $105 million aggregate
principal amount of senior secured notes due 2007 and to permit the other
transactions described herein.
The Consent Solicitation is being made to all persons in whose name a Note
was registered at 5:00 p.m., New York City time, on September 24, 2003 (the
"Record Date") and their duly designated proxies. As of September 24, 2003, all
of the Notes were held through The Depository Trust Company ("DTC") by
participants in DTC ("DTC Participants") (such DTC Participants and other
registered holders as of the Record Date are referred to herein as "Holders").
Holders must deliver (and not revoke) valid Consents in respect of a majority in
aggregate principal amount of all outstanding Notes (the "Requisite Consent") to
approve the Proposed Amendments. A beneficial owner of an interest in Notes
("Beneficial Owner") held through a DTC Participant must complete and sign the
Letter of Instructions and deliver it to such DTC Participant in order to cause
a Consent to be given by such DTC Participant with respect to such Notes.
Promptly after receipt of the Requisite Consent, the Company will execute a
supplemental indenture (the "Supplemental Indenture") that will give effect to
the Proposed Amendment (subject to certain conditions). There will be no payment
for the Consents.
THE CONSENT SOLICITATION WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON
WEDNESDAY, OCTOBER 1, 2003 (THE "EXPIRATION DATE"). SUBJECT TO THE TERMS AND
CONDITIONS SET FORTH IN THIS CONSENT SOLICITATION STATEMENT, THE COMPANY WILL
ACCEPT ALL PROPERLY COMPLETED, EXECUTED AND DATED CONSENTS RECEIVED BY THE
TABULATION AGENT (AND NOT SUBSEQUENTLY REVOKED) PRIOR TO THE EXPIRATION DATE.
THE COMPANY RESERVES THE RIGHT TO TERMINATE OR EXTEND THE CONSENT SOLICITATION
IN ITS SOLE DISCRETION. THE TERM "EXPIRATION DATE" SHALL MEAN THE TIME AND DATE
ON OR TO WHICH THE CONSENT SOLICITATION IS SO TERMINATED OR EXTENDED. IN NO
EVENT SHOULD A HOLDER TENDER OR DELIVER NOTES.
THE DATE OF THIS CONSENT SOLICITATION STATEMENT IS SEPTEMBER 24, 2003.
Holders residing outside the United States who wish to deliver a Consent
must satisfy themselves as to their full observance of the laws of the relevant
jurisdiction in connection therewith. If the Company becomes aware of any state
or foreign jurisdiction where the making of the Consent Solicitation is
prohibited, the Company will make a good faith effort to comply with the
requirements of any such state or foreign jurisdiction. If, after such effort,
the Company cannot comply with the requirements of any such state or foreign
jurisdiction, the Consent Solicitation will not be made to (and Consents will
not be accepted from or on behalf of) Holders in such state or foreign
jurisdiction.
No person has been authorized to give any information or make any
representations other than those contained or incorporated by reference in this
Consent Solicitation Statement and, if given or made, such information or
representations must not be relied upon as having been authorized by the
Company. The delivery of this Consent Solicitation Statement at any time does
not imply that the information herein is correct as of any time subsequent to
its date.
AVAILABLE INFORMATION
The Company, formerly Philipp Brothers Chemicals, Inc., is not subject to
the information and reporting requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), but has voluntarily filed certain
periodic reports and other information with the Securities and Exchange
Commission (the "Commission"). Those reports and other information so filed with
the Commission may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549. Copies of those materials can be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. The Commission also maintains a site
on the World Wide Web at http://www.sec.gov, which contains reports and other
information regarding registrants that file electronically with or furnished to
the Commission.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended June 30, 2002,
Quarterly Reports on Form 10-Q for the periods ending September 30, 2002,
December 31, 2002 and March 31, 2003 and Current Reports on Form 8-K filed with
the Commission on March 4, 2003 and September 12, 2003 are incorporated by
reference in this Consent Solicitation Statement. All documents filed or
furnished by the Company under Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act on or after the date of this Consent Solicitation Statement and
prior to the Expiration Date shall be deemed to be incorporated by reference in
this Consent Solicitation Statement and to be a part of this Consent
Solicitation Statement from the date of filing or furnishing of those documents.
Any statement contained in this Consent Solicitation Statement or in a
previously filed or furnished document incorporated or deemed to be incorporated
by reference in this Consent Solicitation Statement shall be deemed to be
modified or superseded for purposes of this Consent Solicitation Statement to
the extent that a statement contained in this Consent Solicitation Statement or
in any other subsequently filed or furnished document that also is or was deemed
to be incorporated by reference in this Consent Solicitation Statement modifies
or supersedes that statement. Any statement so modified or superseded shall not
be deemed, except as so modified or superseded, to constitute a part of this
Consent Solicitation Statement.
In addition, the Indenture (although not incorporated in this Consent
Solicitation Statement and not deemed a part of this Consent Solicitation
Statement) is available from the Company upon request.
The information relating to the Company contained in this Consent
Solicitation Statement should be read together with the information in the
documents incorporated by reference.
THIS CONSENT SOLICITATION STATEMENT INCORPORATES BY REFERENCE DOCUMENTS
THAT ARE NOT PRESENTED IN THIS CONSENT SOLICITATION STATEMENT OR DELIVERED WITH
THIS CONSENT SOLICITATION STATEMENT. THOSE DOCUMENTS (OTHER THAN EXHIBITS TO
THOSE DOCUMENTS UNLESS THOSE EXHIBITS ARE SPECIFICALLY INCORPORATED BY
REFERENCE) ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON, INCLUDING ANY BENEFICIAL
OWNER, TO WHOM THIS CONSENT SOLICITATION STATEMENT IS DELIVERED, UPON WRITTEN OR
ORAL REQUEST TO THE COMPANY. REQUESTS FOR SUCH DOCUMENTS SHOULD BE DIRECTED TO
OUR CHIEF FINANCIAL OFFICER AT OUR PRINCIPAL EXECUTIVE OFFICES, WHICH ARE
LOCATED AT 1 PARKER PLAZA, 400 KELBY STREET, FORT LEE, NJ 07024, TELEPHONE
NUMBER (201) 944-6020. SUCH DOCUMENTS ARE ALSO
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ELECTRONICALLY FILED WITH OR FURNISHED TO THE COMMISSION AND MAY BE LOCATED ON
THE WORLD WIDE WEB AT HTTP://WWW.SEC.GOV.
FORWARD-LOOKING STATEMENTS
This Consent Solicitation Statement (including the documents incorporated
by reference) contains forward-looking statements within the meaning of the
federal securities laws. Statements that are not historical facts, including
statements about the Company's beliefs and expectations, are forward-looking
statements. Forward-looking statements include statements preceded by, followed
by or that include the words "may," "could," "would," "should," "believe,"
"expect," "anticipate," "plan," "estimate," "target," "project," "intend," or
similar expressions. These statements include, among others, statements
regarding the Company's expected business outlook, anticipated financial and
operating results, the Company's business strategy and means to implement the
strategy, the Company's objectives, the amount and timing of capital
expenditures, the likelihood of the Company's success in expanding its business,
financing plans, budgets, working capital needs and sources of liquidity.
Forward-looking statements are only predictions and are not guarantees of
performance. These statements are based on the Company's management's beliefs
and assumptions, which in turn are based on currently available information.
Important assumptions relating to the forward-looking statements include, among
others, assumptions regarding demand for the Company's products, the expansion
of product offerings geographically or through new applications, the timing and
cost of planned capital expenditures, competitive conditions and general
economic conditions. These assumptions could prove inaccurate. Forward-looking
statements also involve risks and uncertainties, which could cause actual
results that differ materially from those contained in any forward-looking
statement. Many of these factors are beyond the Company's ability to control or
predict. Such factors include, but are not limited to, the following:
- the Company's substantial leverage and potential inability to
service our debt
- the Company's dependence on distributions from our subsidiaries
- risks associated with the Company's international operations and
significant foreign assets
- the Company's dependence on its Israeli operations
- competition in each of the Company's markets
- potential environmental liability
- potential legislation affecting the use of medicated feed additives
- extensive regulation by numerous government authorities in the
United States and other countries
- the Company's reliance on the continued operation and sufficiency of
its manufacturing facilities
- the Company's reliance upon unpatented trade secrets
- the risks of legal proceedings and general litigation expenses
- potential operating hazards and uninsured risks
- the risk of work stoppages
- the Company's dependence on key personnel
and others that are described in more detail in the Company's periodic
filings with the Commission. The Company disclaims any intent or obligation to
update forward looking statements, and otherwise claims the safe harbor
protection for forward looking statements afforded under the Private Securities
Litigation Reform Act of 1995.
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SUMMARY
THIS CONSENT SOLICITATION STATEMENT AND THE RELATED CONSENT AND LETTER OF
TRANSMITTAL CONTAIN IMPORTANT INFORMATION THAT SHOULD BE READ CAREFULLY BEFORE
ANY DECISION IS MADE WITH RESPECT TO THE SOLICITATION.
The following summary is provided solely for the convenience of the
Holders of the Notes. This summary is not intended to be complete and is
qualified in its entirety by reference to, and should be read in conjunction
with, the information appearing elsewhere in this Consent Solicitation Statement
and the more detailed information contained in the documents incorporated by
reference in this Consent Solicitation Statement.
CONSENT FEE: No payment will be made for the Consents.
RECORD DATE: September 24, 2003.
EXPIRATION DATE: The Expiration Date for the Consent
Solicitation will be 5:00 P.M., New York City
time, on October 1, 2003, unless extended by
the Company. See "The Consent Solicitation -
Expiration Date; Extensions."
THE CONSENT SOLICITATION: The Company is seeking Consents from Holders of
the Notes to certain Proposed Amendments to the
Indenture. When the Requisite Consents have
been obtained, the Company and the Trustee will
execute the Supplemental Indenture. If the
Proposed Amendments are adopted, then each
Holder of Notes will be bound by the Proposed
Amendments even though that Holder did not
consent to the Proposed Amendments.
REQUISITE CONSENT: Holders must grant (and not revoke) valid
Consents in respect of a majority in aggregate
principal amount of all outstanding Notes to
approve the Proposed Amendment.
As of the date of this Consent Solicitation
Statement, the aggregate outstanding principal
amount of the Notes was $100.0 million.
PROCEDURES FOR DELIVERY
OF CONSENTS: Consents must be delivered to the Tabulation
Agent on or before the Expiration Date. DTC
is expected to grant an omnibus proxy
authorizing the DTC Participants to deliver a
Consent. Only registered owners of Notes as
of the Record Date or their duly designated
proxies, including, for the purposes of this
Consent Solicitation, DTC Participants, are
eligible to consent to the Proposed
Amendment. Therefore, a beneficial owner of
an interest in Notes held in an account of a
DTC Participant who wishes a Consent to be
delivered must properly instruct such DTC
Participant to cause a Consent to be given in
respect of such Notes. See "The Consent
Solicitation - Consent Procedures."
REVOCATION OF CONSENTS: Revocation of Consents may be made at any time
prior to 5:00 p.m., New York City Time on the
first business day on which the Company
receives the Requisite Consent and certifies to
the Trustee that the Requisite Consent has been
obtained (the "Effective Date"), but only by
the Holder that previously granted such Consent
(or a duly designated proxy of such Holder).
Consents may not be revoked at any time after
the Effective Date, even if the Consent
Solicitation is
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extended beyond the Expiration Date. See "The
Consent Solicitation -- Revocation of Consents."
TABULATION AGENT: JPMorgan Chase Bank is serving as Tabulation Agent
(the "Tabulation Agent") in connection with the
Solicitation. The Tabulation Agent's contact
information is listed on the back cover of this
Consent Solicitation Statement.
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THE TRANSACTIONS
The Company intends to enter into the following transactions (the
"Transactions"):
Issuance of new Senior Secured Notes. The Company intends to issue new Units
consisting of $85 million aggregate principal amount of Senior Secured Notes due
2007 (the "US Notes") of the Company and $20 million aggregate principal amount
of Senior Secured Notes due 2007 (the "Dutch Notes") of Philipp Brothers
Netherlands III BV (the "Dutch Issuer"), a wholly-owned subsidiary of the
Company. The US Notes will be guaranteed by the domestic restricted subsidiaries
of the Company and the Dutch Notes will be guaranteed by the restricted
subsidiaries of the Dutch Issuer, the Company and the domestic restricted
subsidiaries of the Company.
The US Notes and related guarantees will be secured by substantially all of the
Company's assets and the assets of the Company's domestic restricted
subsidiaries, other than real property and interests therein. In addition, the
US Notes will be secured by 65% of the voting stock and 100% of the non-voting
stock of foreign subsidiaries owned by the Company and its domestic restricted
subsidiaries. The Dutch Notes and related guarantees will be secured by a pledge
of all of the accounts receivable, a security interest or floating charge on
inventory to the extent permitted by applicable law and by a mortgage on
substantially all of the real property of the Dutch Issuer and each of its
restricted subsidiaries, 100% of the stock of each direct subsidiary of the
Dutch Issuer and its restricted subsidiaries and substantially all of the assets
of the Company and its domestic restricted subsidiaries, other than real
property and interests therein.
The proceeds from the sale of the Units will be used to :
- fund the purchase by the Company of approximately $52 million
aggregate principal amount of the Notes, at a price equal to 60% of
the principal amount thereof, plus accrued and unpaid interest,
pursuant to privately negotiated transactions;
- repay the Company's existing credit facility;
- make a payment to Pfizer Inc. of approximately $28.5 million, plus
accrued interest on its existing promissory note due 2004 to satisfy
(i) approximately $20.1 million aggregate principal amount of such
promissory note; (ii) approximately $12.8 million of accounts
payable; (iii) approximately $9.2 million of accrued expenses; and
(iv) the Company's future contingent obligations under the Pfizer
agreements; and
- pay related fees and expenses.
The Company also intends to enter into a new domestic working capital facility
providing for a working capital line of $15 million plus a letter of credit
facility.
Sale of PMC. The Company intends to sell The Prince Manufacturing Company
("PMC") to Palladium Equity Partners II, LP and certain of its affiliates (the
"Palladium Investors"). Such sale, as currently contemplated, would include the
following elements: (i) the transfer of ownership to the Palladium Investors of
PMC (which would be valued at approximately $21 million); (ii) the reduction of
the preferred stock of the Palladium Investors from $68.9 million (as of June
30, 2003) to $15.2 million (as of September 30, 2003); (iii) the termination of
any obligation of the Company or any Restricted Subsidiary of the Company in
respect of the $2.25 million annual management advisory fee; (iv) a separate
cash payment to the Palladium Investors of $10 million (from the recent sale of
Mineral Resource Technologies, Inc.); (v) payments by PMC to the Company for
central support services for the next three years of $1 million, $0.5 million
and $0.2 million, respectively; and (vi) supply arrangements between the Company
and PMC with respect to manganous oxide and red iron oxide. The foregoing
transactions are subject to definitive documentation that is expected to include
customary representations, warranties and indemnities by the Company, and
provisions for closing working capital balance adjustments, settlement of
intercompany accounts owed to PMC, a closing fee payable to Palladium and the
agreement of the Company to pay or reimburse the Palladium Investors for their
reasonable out-of-pocket expenses. The economic terms set forth above are
subject to the terms upon which intercompany accounts would be settled, the
amount of minimum working capital of PMC to be agreed upon
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and the amount of the closing fee payable to the Palladium Investors. The
Company also expects that it will establish a $1 million escrow or other credit
support for two years to secure its net working capital and foregoing
indemnification obligations, and indemnify the Palladium Investors, payable
after the maturity of the Notes, for a portion, at the rate of $0.65 for every
dollar, of the amount they receive in respect of the disposition of PMC less
than $21 million, up to a maximum payment by the Company of $4 million.
Effective immediately prior to the consummation of the offering or, if earlier,
September 30, 2003, (i) the Management and Advisory Service Agreement is
expected to become the obligation of PMC, and the obligations of and annual fee
payable by the Company thereunder to be terminated, and (ii) PMC will become
bound by such agreement or enter into a new management agreement substantially
the same as the Management and Advisory Services Agreement, without recourse to
the Company or any other subsidiaries thereof. The new management agreement of
PMC with Palladium is expected to provide that if the Palladium transaction is
not consummated on or before December 31, 2003 such new management agreement
will become the direct obligation of the Company. In the event that the
transaction is structured as an asset sale, upon consummation of the Palladium
transaction such new management agreement will become the direct obligation of
the buyer, without any recourse to PMC or the Company or any other subsidiaries
thereof.
RECENT DEVELOPMENTS
Mineral Resource Technologies, Inc. On August 28, 2003, the Company sold its
subsidiary, Mineral Resource Technologies, Inc., to Cemex, Inc. for a net
value after payment of transaction expenses of approximately $14 million in
cash, subject to certain escrow arrangements and post-closing adjustments.
INFORMATION ABOUT THE COMPANY
The Company is a leading diversified global manufacturer and marketer of a
broad range of animal health and nutrition products, specifically medicated feed
additives (MFAs) and nutritional feed additives (NFAs), which are sold
throughout the world predominantly to the poultry, swine and cattle markets. The
Company is also a specialty chemicals manufacturer and marketer, serving
numerous markets. Its principal offices are located at 1 Parker Plaza, 400 Kelby
Street, Fort Lee, New Jersey 07024.
THE CONSENT SOLICITATION
GENERAL
The Company is soliciting Consents from Holders, upon the terms and
subject to the conditions set forth in the Solicitation Documents, to the
Proposed Amendment to the Indenture. See "The Proposed Amendment." THE COMPANY
RECOMMENDS THAT HOLDERS OF NOTES CONSENT TO THE PROPOSED AMENDMENT.
Consents may not be revoked at any time after the Effective Date, even if
the Consent Solicitation is extended beyond the Expiration Date. If the
Requisite Consent is received (and not revoked) on or before the Expiration
Date, the Proposed Amendment will be effected by execution of the Supplemental
Indenture by the Company, the Guarantors and the Trustee on or promptly after
the Effective Date. No payment will be made for the Consents.
The Company will be deemed to have accepted the Consents if, as and when
it executes the Supplemental Indenture. Thereafter, all Holders, including
non-consenting Holders, and all subsequent holders of Notes will be bound by the
Proposed Amendment. Whether or not the Requisite Consent is received, if the
Consent Solicitation is terminated for any reason before the Expiration Date, or
the conditions thereto are neither satisfied nor waived, the Consents will be
voided.
In addition to the use of the mail, Consents may be solicited by officers
and other employees of the Company, without any additional remuneration, in
person, or by telephone, telegraph, or facsimile transmission. The Company has
retained the Tabulation Agent to aid in the solicitation of Consents.
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Before, during or after the Consent Solicitation, the Company and the
Guarantors and any of their affiliates may purchase Notes in the open market, in
privately negotiated transactions, through tender or exchange offers or
otherwise. Any future purchases will depend on various factors at that time.
REQUISITE CONSENT
Holders must deliver (and not revoke) valid Consents in respect of a
majority in aggregate principal amount of all outstanding Notes to approve the
Proposed Amendment. As of the date hereof, the aggregate outstanding principal
amount of the Notes was $100.0 million.
The failure of a Holder to deliver a Consent (including any failure
resulting from broker non-votes) will have the same effect as if such Holder had
voted "Against" the Proposed Amendment.
EXPIRATION DATE; EXTENSIONS
The Consent Solicitation will expire at 5:00 p.m., New York City Time, on
Wednesday, October 1, 2003, unless terminated or extended by the Company in its
sole discretion. The time and date of expiration of the Consent Solicitation is
herein referred to as the "Expiration Date." Consents may be revoked at any time
prior to the date on which the Company receives the Requisite Consents and
certifies to the Trustee that such Requisite Consents have been obtained, but
may not be revoked thereafter. See "Revocation of Consents."
The Company reserves the right to extend the Consent Solicitation at any
time and from time to time, whether or not the Requisite Consent has been
received, by giving oral or written notice to the Tabulation Agent no later than
9:00 a.m., New York City time, on the next business day after the previously
announced Expiration Date. Any such extension will be followed as promptly as
practicable by notice thereof by press release or other public announcement (or
by written notice to the Holders). Such announcement or notice may state that
the Company are extending the Consent Solicitation for a specified period of
time or on a daily basis.
The Company expressly reserves the right for any reason (i) to abandon,
terminate or amend the Consent Solicitation at any time prior to the Expiration
Date by giving oral or written notice thereof to the Tabulation Agent, and (ii)
not to extend the Consent Solicitation beyond the last previously announced
Expiration Date. Any such action by the Company will be followed as promptly as
practicable by notice thereof by press release or by other public announcement
(or by written notice to the Holders).
CONDITIONS OF THE CONSENT SOLICITATION
The consummation of the Consent Solicitation is conditioned on (i) there
being received by the Tabulation Agent (and not revoked), on or before the
Expiration Date, the Requisite Consent, (ii) the execution of the Supplemental
Indenture by the Company, the Guarantors and the Trustee, and (iii) the absence
of any existing or proposed law or regulation which would, and the absence of
any injunction or action or other proceeding (pending or threatened) which (in
the case of any action or proceeding, if adversely determined) would, make
unlawful or invalid or enjoin or delay the implementation of the Proposed
Amendment, the entering into of the Supplemental Indenture or question the
legality or validity of any thereof.
FAILURE TO OBTAIN THE REQUISITE CONSENT
In the event the Requisite Consent is not obtained and the Consent
Solicitation is terminated, the Supplemental Indenture will not be executed and
the Proposed Amendment will not become operative.
CONSENT PROCEDURES
Only Holders (i.e., persons in whose name a Note is registered or their
duly designated proxies) may execute and deliver a Consent Letter. DTC is
expected to grant an omnibus proxy authorizing DTC Participants to deliver a
Consent Letter. Accordingly, for the purposes of this Consent Solicitation, the
term "Holder" shall be deemed to mean record holders and DTC Participants who
held Notes through DTC as of the Record Date. In order
8
to cause a Consent to be given with respect to Notes held through DTC, such DTC
Participant must complete and sign the appropriate form of Consent Letter, and
mail or deliver it to the Tabulation Agent at its address or facsimile set forth
on the back cover page of this Consent Solicitation Statement pursuant to the
procedures set forth herein and therein.
A beneficial owner of an interest in Notes ("Beneficial Owner") held
through a DTC Participant must complete and sign the Letter of Instructions and
deliver it to such DTC Participant in order to cause a Consent to be given by
such DTC Participant with respect to such Notes.
Giving a Consent will not affect a Holder's right to sell or transfer the
Notes. All Consents received by the Tabulation Agent (and not revoked) on or
before the Expiration Date will be effective notwithstanding a record transfer
of such Notes subsequent to the Record Date, unless the Holder revokes such
Consent prior to the Expiration Date by following the procedures set forth under
"Revocation of Consents" below.
HOLDERS WHO WISH TO CONSENT SHOULD MAIL, HAND DELIVER, SEND BY OVERNIGHT
COURIER OR FACSIMILE (CONFIRMED BY PHYSICAL DELIVERY) THEIR PROPERLY COMPLETED
AND DULY EXECUTED CONSENT LETTERS TO THE TABULATION AGENT AT THE ADDRESS OR
FACSIMILE NUMBER SET FORTH ON THE BACK COVER PAGE HEREOF AND ON THE CONSENT
LETTER IN ACCORDANCE WITH THE INSTRUCTIONS SET FORTH HEREIN AND THEREIN.
CONSENTS SHOULD BE DELIVERED TO THE TABULATION AGENT, NOT TO THE
COMPANY. HOWEVER, THE COMPANY RESERVES THE RIGHT TO ACCEPT ANY CONSENT
RECEIVED BY THE COMPANY.
HOLDERS SHOULD NOT TENDER OR DELIVER NOTES AT ANY TIME.
All Consents that are properly completed, signed and delivered to the
Tabulation Agent, and not revoked, on or before the Expiration Date will be
given effect in accordance with the specifications thereof. Holders who desire
to consent to the Proposed Amendment should complete, sign and date, the
appropriate form of Consent Letter included herewith and mail, deliver, send by
overnight courier or facsimile (confirmed by physical delivery) the signed
Consent Letter to the Tabulation Agent at the address or facsimile number listed
on the back cover page of this Consent Solicitation Statement and on the Consent
Letter, all in accordance with the instructions contained herein and therein.
Consents by record Holders must be executed in exactly the same manner as
such Holder(`s)(s') name(s) are so registered. Consents by Holder(s) who are DTC
Participants must be executed in exactly the same manner as such Holder(s)
name(s) are registered with DTC. If a Consent is signed by a trustee, partner,
executor, administrator, guardian, attorney-in-fact, officer of a corporation or
other person acting in a fiduciary or representative capacity, such person must
so indicate when signing and must submit with the Consent form appropriate
evidence of authority to execute the Consent. In addition, if a Consent relates
to less than the total principal amount of Notes which such Holder holds
directly or through DTC, the Holder must list the principal amount of Notes
which such Holder holds to which the Consent relates. If no aggregate principal
amount of the Notes as to which a Consent is delivered is specified, or if
neither the "For" or "Against" box is marked with respect to such Notes, but the
Consent Letter is otherwise properly completed and signed, the Holder will be
deemed to have consented to the Proposed Amendment with respect to the entire
aggregate principal amount of Notes which such Holder holds directly or through
DTC.
The registered ownership of a Note as of the Record Date shall be proved
by the Trustee, as registrar of the Notes. The ownership of Notes held through
DTC by DTC Participants shall be established by a DTC security position listing
provided by DTC as of the Record Date. All questions as to the validity, form
and eligibility (including time of receipt) regarding the Consent procedures
will be determined by the Company in its sole discretion, which determination
will be conclusive and binding subject only to such final review as may be
prescribed by the Trustee concerning proof of execution and ownership. The
Company reserves the right to reject any or all Consents that are not in proper
form or the acceptance of which could, in the opinion of the Company, or its
counsel, be unlawful. The Company also reserves the right, subject to such final
review as the Trustee prescribes for the proof of execution and ownership, to
waive any defects or irregularities in connection with deliveries of
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particular Consents. Unless waived, any defects or irregularities in connection
with deliveries of Consents must be cured within such time as the Company
determines. None of the Guarantors or the Company or any of their affiliates,
the Tabulation Agent, the Trustee or any other person shall be under any duty to
give any notification of any such defects or irregularities or waiver, nor shall
any of them incur any liability for failure to give such notification.
Deliveries of Consents will not be deemed to have been made until any
irregularities or defects therein have been cured or waived. The Company's
interpretations of the terms and conditions of the Consent Solicitation shall be
conclusive and binding.
REVOCATION OF CONSENTS
Each Holder who delivers a Consent pursuant to the Consent Solicitation
will agree in the Consent Letter that it will not revoke its Consent after the
Effective Date and that until such time it will not revoke its Consent except in
accordance with the conditions and procedures for revocation of Consents
provided below. Each properly completed and executed consent will be counted,
notwithstanding any transfer of the Notes to which such Consent relates, unless
the procedure for revocation of Consents has been followed. The Company will
make prompt public disclosure by press release of the occurrence of the
Expiration Date.
Prior to the Effective Date, any Holder may revoke any Consent given as to
its Notes or any portion of such Notes (in integral multiples of $1,000). A
Holder desiring to revoke a Consent must deliver to the Tabulation Agent at the
address set forth on the back cover of this Consent Solicitation Statement and
on the Consent Letter a written revocation of such Consent in the form of a
subsequent Consent marked "Against" the Proposed Amendment, including the
principal amount of Notes to which such revocation relates and the signature of
such Holder. A revocation of a Consent may only be rescinded by the execution
and delivery of a new Consent, in accordance with the procedures herein
described by the Holder who delivered such revocation.
The revocation must be executed by such Holder in the same manner as the
Holder's name appears on the Consent to which the revocation relates. If a
revocation is signed by a trustee, partner, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a fiduciary
or representative capacity, such person must so indicate when signing and must
submit with the revocation appropriate evidence of authority to execute the
revocation. A Holder may revoke a Consent only if such revocation complies with
the provisions of this Consent Solicitation Statement. A beneficial owner of
Notes who is not the Holder as of the Record Date of such Notes must instruct
the Holder of such Notes to revoke any Consent already given with respect to
such Notes.
The Company reserves the right to contest the validity of any revocation
and all questions as to the validity (including time of receipt) of any
revocation will be determined by the Company in its sole discretion, which
determination will be conclusive and binding subject only to such final review
as may be prescribed by the Trustee concerning proof of execution and ownership.
None of the Guarantors, the Company, any of their affiliates, the Tabulation
Agent, the Trustee or any other person will be under any duty to give
notification of any defects or irregularities with respect to any revocation nor
shall any of them incur any liability for failure to given such notification.
TABULATION AGENT
The Company has retained JPMorgan Chase Bank as Tabulation Agent in
connection with the Consent Solicitation. As Tabulation Agent, JPMorgan Chase
Bank will be responsible for collecting Consents. JPMorgan Chase Bank will
receive a customary fee for such services and reimbursement of its reasonable
out-of-pocket expenses.
Requests for assistance in filling out and delivering Consents or for
additional copies of this Consent Solicitation Statement or the Consent Letter
may be directed to the Tabulation Agent at its address and telephone numbers set
forth on the back cover of this Consent Solicitation Statement.
10
PROPOSED AMENDMENTS TO THE INDENTURE
PURPOSES AND EFFECTS
The primary purpose of the Proposed Amendments is to permit the Company
and its restricted subsidiaries to incur up to $105 million aggregate principal
amount of the US Notes and the Dutch Notes and to permit the other transactions
described herein. In addition, the Proposed Amendments would exclude Restricted
Investments made pursuant to Section 4.10(c) in calculating Restricted Payments
made after the Issue Date for purposes of Section 4.10(a)(iii). The Supplemental
Indenture will be executed by the Company and the Trustee promptly after the
Effective Date and will become operative upon such execution.
PROPOSED AMENDMENTS
Set out below is a summary description of the proposed modifications to
the Indenture for which the Consents of the Holders are being solicited by this
Consent Solicitation Statement. This description does not purport to be
comprehensive or definitive and is qualified by reference to the full provisions
of the existing Indenture and the provisions of the proposed Supplemental
Indenture, copies of which may be obtained from the Company. The capitalized
terms used in this Consent Solicitation Statement and not otherwise defined have
the meanings given to them in the Indenture.
The Proposed Amendments will become effective upon execution of the
Supplemental Indenture.
SECTION 1.01 DEFINITIONS
PROPOSED PROVISION. The following definitions would be amended as
indicated:
"Asset Sale" means (i) any sale, lease, conveyance or other
disposition by the Company or any Restricted Subsidiary of any assets
(including by way of a sale and leaseback) other than in the ordinary
course of business or (ii) the issuance or sale of Capital Stock of any
Restricted Subsidiary, in the case of each of (i) and (ii), whether in a
single transaction or a series of related transactions, to any Person
(other than to the Company or a Restricted Subsidiary and other than
directors' qualifying shares) for Net Proceeds in excess of $250,000. The
(i) disposition of property of the Company or any of its Restricted
Subsidiaries that, in the reasonable judgment of the Company, is no longer
useful in the conduct of the business of the Company and its Restricted
Subsidiaries, or (ii) a Permitted Investment in a Permitted Joint Venture
of the Company, (iii) the MRT Sale and (iv) the PMC Sale Transactions
shall not constitute an Asset Sale.
"Designated Senior Debt" means (i) the Indebtedness under the Credit
Facility, (ii) the US Notes, the Dutch Notes and the related Guarantees,
and (iii) any other Senior Debt permitted to be incurred under this
Indenture the principal amount of which is $15.0 million or more
(including to a syndicate of lenders or an agent thereof) at the time of
the designation of such Senior Debt as "Designated Senior Debt" by the
Company in a written instrument delivered to the Trustee.
"Permitted Liens" means (i) Liens on assets or property of the
Company that secure Senior Debt and Liens on assets or property of a
Guarantor that secure Senior Debt; (ii) Liens securing Indebtedness of a
Person existing at the time that such Person is merged into or
consolidated with the Company or a Restricted Subsidiary; provided,
however, that such Liens were in existence prior to the contemplation of
such merger or consolidation and do not extend to any assets other than
those of such Person; (iii) Liens on property acquired by the Company or a
Restricted Subsidiary; provided, however, that such Liens were in
existence prior to the contemplation of such acquisition and do not extend
to any property other than that of the Person merged into or consolidated
with the Company or such Restricted Subsidiary; (iv) Liens in respect of
Interest Rate Agreement Obligations and Currency Agreement Obligations
permitted under this Indenture;(v) Liens in favor of the Company or any
Restricted Subsidiary; (vi) Liens existing or created on
11
the Issue Date; (vii) Liens securing the Notes or the Guarantees; (viii)
Liens to secure Attributable Debt that is permitted to be incurred
pursuant to Section 4.23; (ix) leases or subleases granted to others that
do not materially interfere with the ordinary course of business of the
Company and its Restricted Subsidiaries; (x) Liens arising from filing
Uniform Commercial Code financing statements regarding leases; (xi) Liens
in favor of customs and revenue authorities arising as a matter of law to
secure payment of customs duties in connection with the importation of
goods; (xii) Liens to secure obligations arising from statutory,
regulatory, contractual or warranty requirements of the Company or any of
its Restricted Subsidiaries, including the performance of statutory
obligations, surety or appeal bonds or performance bonds, or landlords',
carriers', warehousemen's, mechanics', suppliers', materialmen's or other
like Liens, in any case incurred in the ordinary course of business and
rights to offset and set off; (xiii) Liens for taxes, assessments or
governmental charges or claims that are not yet delinquent or that are
being contested in good faith by appropriate proceedings promptly
instituted and diligently concluded; provided that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall
have been made therefor; (xiv) Liens securing Indebtedness incurred to
amend, modify, renew, refund, replace or refinance Indebtedness that has
been secured by a Lien permitted under this Indenture, provided that (a)
any such Lien not extend to or cover any assets or property not securing
the Indebtedness so refinanced and (b)the Refinancing Indebtedness secured
by such Lien shall have been permitted to be incurred under this
Indenture; (xv) Liens on assets of Foreign Subsidiaries securing
Indebtedness permitted by this Indenture and (xvi) Liens arising in
connection with the placement by the Company or any Restricted Subsidiary
of the Company, as the case may be, of a reasonable amount of cash (as
determined in good faith by such Person's board of directors) in escrow
against any obligations permitted by Section 4.12(b)(xvi).
The following definitions would be added to the definitions contained in
Section 1.01 of the Indenture in the corresponding alphabetical order:
"Dutch Notes" means Senior Secured Notes due 2007 of Philipp
Brothers Netherlands III BV (the "Dutch Issuer").
"MRT Sale" means the sale of MRT to Cemex, Inc. for a net value
after payment of transaction expenses of approximately $14 million in
cash, subject to certain escrow arrangements and post-closing adjustments.
"Palladium Preferred Stock" means the Series B Redeemable
Participating Preferred Stock and the Series C Redeemable Participating
Preferred Stock of the Company owned by Palladium Equity Partners II, LP
and certain of its affiliates.
"PMC Sale Transactions" the following transactions and payments,
including payments required pursuant to the documents evidencing such
transactions: (i) the transfer of ownership to the Palladium Investors of
The Prince Manufacturing Company ("PMC") (which would be valued at
approximately $21 million); (ii) the reduction of the preferred stock of
the Palladium Investors to $15.2 million (as of September 30, 2003); (iii)
the termination of any obligation of the Company or any Restricted
Subsidiary of the Company in respect of the $2.25 million annual
management advisory fee (subject to reinstatement if these transactions
are not consummated on or before December 31, 2003); (iv) a separate cash
payment to the Palladium Investors of $10 million; (v) payments by PMC to
the Company for central support services for the next three years of $1
million, $0.5 million and $0.2 million, respectively; (vi) supply
arrangements between the Company and PMC with respect to manganous oxide
and red iron oxide; (vii) customary representations, warranties and
indemnities by the Company, and provisions for closing working capital
balance adjustments, settlement of intercompany accounts owed to PMC, a
closing fee payable to Palladium and the agreement of the Company to pay
or reimburse the Palladium Investors for their reasonable out-of-pocket
expenses; and (viii) the establishment by the Company of a $1 million
escrow or other credit support for two years to secure its net working
capital and foregoing indemnification obligations, and indemnification of
the Palladium Investors, payable after the maturity of the Notes, for a
portion, at the rate of $0.65 for every dollar, of the amount they receive
in respect of the disposition of PMC less than $21 million, up to a
maximum payment by the Company of $4 million. The economic terms set forth
above are subject to the terms upon which intercompany accounts would be
settled, the amount of
12
minimum working capital of PMC to be agreed upon and the amount of the
closing fee payable to the Palladium Investors.
"US Notes" means Senior Secured Notes due 2007 of the Company.
SECTION 4.10. LIMITATION ON RESTRICTED PAYMENTS
PROPOSED PROVISIONS. The following provisions would be inserted as an
additional provision in Section 4.10(b):
"(ix) the PMC Sale Transactions; and
(x) the designation of MRT Holdings, LLC, MRT, Prince MFG, LLC and
PMC as Unrestricted Subsidiaries."
Section 4.10(c) would be amended as indicated:
For purposes of Section 4.10(a)(iii), the Permitted Payments
referred to in clauses (i), and (v) above shall be included in the
aggregate amount of Restricted Payments made since the Issue Date, and any
other Permitted Payments described above shall be excluded.
SECTION 4.11. LIMITATION ON TRANSACTIONS WITH AFFILIATES
PROPOSED PROVISION. The following provisions would be inserted as an
additional provision in Section 4.11(b):
"and (vi) the PMC Sale Transactions"
SECTION 4.12. LIMITATION ON INCURRENCE OF INDEBTEDNESS
PROPOSED PROVISION. Section 4.12(b)(xiv) would be amended as indicated:
"(xiv) Indebtedness of the Company or any Restricted Subsidiary in
addition to that described in clauses (i) through (xiii) above and clauses
(xv) and (xvi) below, and any amendments, modifications, renewals,
refundings, replacements or refinancings of such Indebtedness, so long as
the aggregate principal amount of all such Indebtedness incurred pursuant
to this clause (xiv) does not exceed $5.0 million at any one time
outstanding."
The following provisions would be inserted as additional provisions in
Section 4.12(b):
" (xv) $105 million aggregate principal amount of the US Notes
and Dutch Notes and the related Guarantees; and
"(xvi) Indebtedness arising from agreements of the Company or a
Restricted Subsidiary providing for the guarantee, indemnification,
adjustment of purchase or sales price or similar obligations, in each
case, incurred in connection with the disposition or exchange of any
business, assets or Subsidiary or consideration therefor, other than
guarantees of Indebtedness incurred by any Person acquiring all or any
portion of such business, assets or Subsidiary for the purpose of
financing such acquisition; provided that the maximum aggregate liability
in respect of such Indebtedness shall at no time exceed the gross proceeds
actually received by the Company and its Restricted Subsidiaries in
connection with such disposition."
SECTION 4.13. LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING
RESTRICTED SUBSIDIARIES
PROPOSED PROVISION. The following provisions would be inserted as an
additional provision in Section 4.13:
13
" (j) the US Notes and Dutch Notes, the indenture governing such US
Notes and Dutch Notes, the related Guarantees and security and collateral
agreements."
SECTION 4.14. LIMITATION ON DESIGNATION OF UNRESTRICTED SUBSIDIARIES
PROPOSED PROVISION. The following provisions would be inserted as an
additional provision in Section 4.14:
"Notwithstanding the foregoing, the designation of MRT Holdings,
LLC, Prince MFG, LLC and PMC as Unrestricted Subsidiaries shall be
permitted without complying with Section 4.14(a); provided, that MRT
Holdings, LLC, Prince MFG, LLC and PMC shall be deemed to be redesignated
as Restricted Subsidiaries on January 1, 2004 if the PMC Sale Transactions
shall not have been consummated on or prior to such date."
SECTION 4.20. LIMITATION ON GUARANTEES OF INDEBTEDNESS BY SUBSIDIARIES
PROPOSED PROVISION. The following provisions would be inserted as an
additional provision in Section 4.20:
"Notwithstanding the foregoing, Restricted Subsidiaries of the
Company may guarantee the US Notes and the Dutch Notes without complying
with this Section 4.20."
SECTION 12.04. RELEASE OF A GUARANTOR
PROPOSED PROVISION. Section 12.04(a) would be amended as indicated:
(a) So long as no Event of Default shall have occurred and be
continuing upon (I) the sale or disposition (whether by merger, stock
purchase, asset sale or otherwise) of a Guarantor (or all or substantially
all of the assets of any such Guarantor or 50% or more of the Capital
Stock of any such Guarantor) to an entity which is not a Subsidiary of the
Company, which transaction is otherwise in compliance with this Indenture
or (ii) the designation of any Guarantor as an Unrestricted Subsidiary in
compliance with this Indenture, such Guarantor shall be deemed released
from all its obligations under its Guarantee of the Notes and under this
Indenture; provided, however, that any such termination shall occur only
to the extent that all obligations of such Guarantor under all its
Guarantees of, and under all of its pledges of assets or other security
interests which secure, any Indebtedness of the Company shall also
terminate upon such release, sale or transfer. Upon the release of any
Guarantor from its Guarantee pursuant to the provisions of the Indenture,
each other Guarantor not so released shall remain liable for the full
amount of principal of, and interest on, the Notes as and to the extent
provided in this Indenture.
OMNIBUS CONSENT AND WAIVER
In addition to the amendments described above, the Company is requesting
that the holders of the Notes consent to such additional amendments and waivers
to the Indenture not inconsistent with the foregoing that may be required to
consummate the transactions described in this Consent Solicitation, including
but not limited to certain conforming and related changes to the Indenture as
appropriate in light of those amendments.
The Company is seeking Consents to all the Proposed Amendments as a single
proposal. Accordingly, a Consent purporting to consent to only some of the
Proposed Amendments will not be valid.
14
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes certain material U.S. federal income
tax consequences resulting from the Solicitation. This summary deals only with
the Notes held as capital assets within the meaning of Section 1221 of the Code
(as defined below) by United States Holders (as defined below).
This discussion does not describe all of the tax consequences that may be
relevant to a Holder in light of the Holder's particular circumstances or to
Holders subject to special rules, such as:
- certain financial institutions;
- insurance companies;
- dealers in securities or foreign currencies;
- persons holding Notes as part of a "straddle," "hedge" or
"conversion" transaction;
- United States Holders (as defined below) whose functional currency
is not the U.S. dollar;
- U.S. expatriates;
- partnerships or other entities classified as partnerships for U.S.
federal income tax purposes;
- persons subject to the alternative minimum tax;
- subchapter S corporations; and
- tax exempt entities.
In addition, this discussion does not consider the effect of any
applicable foreign, state, local or other tax laws.
This summary is based on the Internal Revenue Code of 1986, as amended
(the "Code"), administrative pronouncements, judicial decisions and final,
temporary and proposed Treasury Regulations, in each case as of the date of this
Statement, changes to any of which subsequent to the date of this Statement may
affect the tax consequences described in this Statement.
PERSONS CONSIDERING THE CONSENT SOLICITATION ARE URGED TO CONSULT THEIR
OWN TAX ADVISERS CONCERNING THE U.S. FEDERAL INCOME TAX CONSEQUENCES IN LIGHT OF
THEIR PARTICULAR SITUATIONS, AS WELL AS ANY CONSEQUENCES ARISING UNDER THE LAWS
OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTIONS.
UNITED STATES HOLDERS
As used in this Statement, the term "United States Holder" means a
beneficial owner of a Note that is for U.S. federal income tax purposes:
- a citizen or resident of the United States;
- a corporation, or other entity taxable as a corporation for U.S.
federal income tax purposes, created or organized in or under the
laws of the United States, any State thereof or the District of
Columbia;
15
- an estate the income of which is subject to U.S. federal income
taxation regardless of its source; or
- a trust if (i) a court within the United States is able to exercise
primary supervision over the administration of the trust and one or
more U.S. persons have the authority to control all substantial
decisions of the trust or (ii) the trust has in effect a valid
election to be treated as a domestic trust for United States federal
income tax purposes.
TAX CONSEQUENCES TO UNITED STATES HOLDERS
The statements regarding U.S. federal income tax considerations set out
below assume that the Notes were issued, and transfers of the Notes and payments
on the Notes have been and will continue to be made, in accordance with the
Indenture.
The U.S. federal income tax consequences to a United States Holder of
Notes as a result of the adoption of the Proposed Amendments will depend on
whether, under applicable Treasury regulations, the adoption of the Proposed
Amendments results in a "significant modification" of the Notes and, if so,
whether such adoption results in a recapitalization within the meaning of
Section 368(a)(1)(E) of the Code.
Under applicable Treasury regulations, the modification of a debt
instrument, such as the Notes, is a significant modification resulting in a
deemed exchange of the Notes for new Notes (the "New Notes," and that exchange,
a "Deemed Exchange") if, based on all the facts and circumstances, and taking
into account all modifications of the relevant Notes collectively, the legal
rights and obligations under the Notes are altered in a manner that is
"economically significant." A modification that adds, deletes or alters
customary accounting or financial covenants is not considered a significant
modification under these regulations. Nevertheless, because the issue is not
free from doubt, there exists some risk that under the applicable Treasury
regulations the adoption of the Proposed Amendments would cause the Notes
(referred to in this section as the "Old Notes") to be treated as having been
exchanged for new debt instruments.
If the Proposed Amendments are adopted, and such adoption does not result
in a Deemed Exchange, United States Holders of Notes would not recognize any
income, gain or loss for U.S. federal income tax purposes as a result of such
adoption, and such Holders would recognize income in respect of the Old Notes at
the same times and in the same amounts as such Holders would have recognized had
the Proposed Amendments not been adopted. The Company intends to take a position
that the adoption of the Proposed Amendments will not result in a Deemed
Exchange.
Although not free from doubt, both the Old Notes and the New Notes should
be treated as "securities" for purposes of Section 368(a)(1)(E) of the Code.
Thus, if the adoption of the Proposed Amendments were considered to result in a
Deemed Exchange, the exchange should be treated as a recapitalization (and
therefore, a tax-free reorganization), and United States Holders of the Old
Notes should not recognize any gain or loss on the Deemed Exchange, except that
such Holders may recognize ordinary income to the extent that the New Notes are
treated as received in satisfaction of accrued but untaxed interest on the Old
Notes. Holders should obtain a tax basis in the New Notes equal to their tax
basis in the Old Notes deemed to be surrendered therefor and should have a
holding period for the New Notes that includes the holding period for the Old
Notes; provided that the tax basis of any New Note (or portion thereof) treated
as received in satisfaction of accrued interest should equal the amount of such
accrued interest, and the holding period for such New Note (or portion thereof)
should not include the holding period of the Old Notes.
If the Deemed Exchange were to not qualify for treatment as a tax-free
recapitalization, a United States Holder of the Old Notes would recognize gain
or loss for U.S. federal income tax purposes upon the Deemed Exchange in an
amount equal to the difference between (i) the Holder's adjusted tax basis in
the Old Notes on the date of the Deemed Exchange and (ii) the issue price of the
New Notes deemed to be received in exchange therefor. Generally, a United States
Holder's "adjusted tax basis" for a Note will be equal to the cost of the Note
to the Holder, increased, if applicable, by any market discount (described
below) previously included in income by the Holder under an election to include
market discount in gross income currently as it accrues (including any market
discount included in the taxable year of the sale prior to the date of sale),
and reduced (but not below zero) by the
16
accrual of any amortizable bond premium which the United States Holder has
previously elected to offset against interest payments on the Note. Although the
matter is not free from doubt, the Company believes, and intends to take the
position that, the Old Notes were not, and the New Notes will not be, traded on
an established securities market and, as a result, the issue price of the New
Notes should be their principal amount. Subject to the treatment of a portion of
any gain as ordinary income to the extent of any market discount accrued on the
Old Notes (and not previously included in income by the Holder) to, and accrued
and untaxed interest as of, the date of the Deemed Exchange, such gain or loss
would be long-term capital gain or loss if the Holder held the Old Notes for
more than one year on the date of the Deemed Exchange. UNITED STATES HOLDERS ARE
URGED TO CONSULT THEIR TAX ADVISERS WITH RESPECT TO APPLICABLE RATES, HOLDING
PERIODS AND NETTING RULES FOR CAPITAL GAINS AND LOSSES.
If adoption of the Proposed Amendments resulted in a Deemed Exchange that
did not qualify for treatment as a tax-free recapitalization and the Internal
Revenue Service were to assert successfully that the Notes are publicly traded,
a Holder would recognize taxable gain or loss equal to the difference (if any)
between the fair market value of the New Note at the time of the Deemed Exchange
(except for the portion of the issue price deemed attributable to accrued
interest) and the Holder's adjusted tax basis in the Old Note. Any resulting
gain would be treated as provided above, while any resulting loss may be
capitalized into basis of the New Notes under Section 1091 of the Code. Subject
to a statutory de minimis exception, if the fair market value of the New Note
immediately after the adoption of the Proposed Amendments were less than its
principal amount, the New Note would have original issue discount for U.S.
federal income tax purposes, which would be included in the United States
Holder's gross income on a constant yield basis in advance of receipt of cash
attributable to that discount over the remaining term of the Notes.
An exception to the capital gain treatment described above may apply to a
United States Holder who purchased a Note with "market discount." Subject to a
statutory de minimis exception, market discount is the excess of the principal
amount of the Note over the United States Holder's tax basis in the Note
immediately after its acquisition by the Holder. In general, unless the United
States Holder has elected to include market discount in income currently as it
accrues, any gain realized by a United States Holder on the sale of a Note
having market discount will be treated as ordinary income to the extent of the
market discount that has accrued (on a straight line basis or, at the election
of the United States Holder, on a constant yield basis) while the Note was held
by the United States Holder.
HOLDERS OF NOTES ARE URGED TO CONSULT THEIR OWN TAX ADVISERS AS TO THE
CONSEQUENCES OF THE ADOPTION OF THE PROPOSED AMENDMENTS.
PHIBRO ANIMAL HEALTH CORPORATION
September 24, 2003
17
In order to give a Consent, a Holder should mail, hand deliver, send by
overnight courier or facsimile (confirmed by physical delivery) a properly
completed and duly executed Consent Letter, and any other required documents, to
the Tabulation Agent at its address set forth below. Any questions or requests
for assistance or for additional copies of this Consent Solicitation Statement
or related documents may be directed to the Tabulation Agent at one of its
telephone numbers set forth below.
THE TABULATION AGENT FOR THE SOLICITATION IS:
JPMORGAN CHASE BANK
--------------------------
First Class/Registered/Certified
Mail:
JPMorgan Chase Bank
Institutional Trust Svc. window
P.O. Box 2320
Dallas, Texas 75221-2320
Attn: Frank Ivins
Express Delivery only:
JPMorgan Chase Bank
Institutional Trust Svc.
2001 Bryant St. 9th Fl.
Dallas, Texas 75221-2320
Attn: Frank Ivins
By Hand only:
JPMorgan Chase Bank
Institutional Trust Svc.
4 New York Plaza - 1st Fl.
New York, NY 10004
Facsimile Transmission: 214-468-6496
Requests for assistance or additional copies of this Consent Solicitation
Statement, the Consent Letter and other related documents should be directed to
the Company. You may also contact your broker, dealer, commercial bank, trust
company or nominee for assistance concerning the Solicitation.