CONSENT SOLICITATION STATEMENT DATED MARCH 30, 1998
BURKE INDUSTRIES, INC.
SOLICITATION OF CONSENTS TO INDENTURE AMENDMENTS
--------------------------
10% SENIOR NOTES DUE 2007
($110,000,000 PRINCIPAL AMOUNT OUTSTANDING)
UNCONDITIONALLY GUARANTEED BY
BURKE FLOORING PRODUCTS, INC., BURKE RUBBER COMPANY, INC.
AND BURKE CUSTOM PROCESSING, INC.
CONSENT PAYMENTS: $3.75 PER $1,000.00 PRINCIPAL AMOUNT OF EXISTING NOTES
Burke Industries, Inc., a California corporation (the "Company" or
"Burke"), is soliciting (the "Solicitation") the consents (the "Consents") of
holders of record (the "Record Holders") as of March 26, 1998 (the "Record
Date") of the outstanding $110.0 million aggregate principal amount of its 10%
Senior Notes due 2007 (the "Existing Notes"), to certain amendments (the
"Proposed Amendments") to the indenture governing the Existing Notes (the
"Original Indenture"), including an amendment allowing the Company to issue and
sell up to $30.0 million principal amount of Floating Interest Rate Senior Notes
due 2007 of the Company (the "New Notes") to provide a portion of the financing
for the acquisition by the Company (the "Mercer Acquisition") of Mercer Products
Company, Inc. ("Mercer").
The Solicitation is being made upon the terms and is subject to the
conditions set forth in this Consent Solicitation Statement and in the
accompanying Consent. Adoption of the Proposed Amendments requires the consent
of Record Holders of a majority in principal amount of the outstanding Existing
Notes (the "Requisite Consents"). The Company will make consent payments (the
"Consent Payments") of $3.75 cash per each $1,000.00 principal amount of
Existing Notes to Holders (as defined herein) who have properly furnished, and
not revoked, their Consents on or prior to the Expiration Date (as defined
herein), provided that (i) the Requisite Consents are received, (ii) the
Offering (as defined below) is consummated, (iii) the Mercer Acquisition is
consummated and (iv) the First Supplemental Indenture (as defined below) is
executed and delivered. Upon satisfaction of the conditions set forth in
clauses (i), (ii) and (iii) above, it is anticipated that the Company and United
States Trust Company of New York, the trustee under the Original Indenture (the
"Trustee"), will execute a supplemental indenture implementing the Proposed
Amendments (the "First Supplemental Indenture").
Simultaneously with the Solicitation, the Company is offering (the
"Offering") for sale without registration under the Securities Act of 1933, as
amended (the "Securities Act"), $30.0 million principal amount of New Notes
which will be issued pursuant to a new indenture (the "New Indenture") providing
for the issuance of the New Notes. Consummation of the Offering is conditioned
upon closing of the Mercer Acquisition, the receipt of the Requisite Consents
and the execution and delivery of the First Supplemental Indenture. A copy of
the Company's preliminary Offering Memorandum dated March 30, 1998 (the
"Offering Memorandum") relating to the Offering is enclosed herewith. The
closing of the Mercer Acquisition is not conditioned on successful consummation
of the Consent Solicitation as the Company has received a commitment for
alternative financing from NationsBank, N.A. that provides adequate funds to
enable the Company to consummate the Mercer Acquisition. See "Alternative
Financing."
The Solicitation Agent for the Consent Solicitation is:
NATIONSBANC MONTGOMERY SECURITIES LLC
THE SOLICITATION WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON APRIL 10,
1998, UNLESS EXTENDED BY THE COMPANY (SUCH DATE AND TIME AS IT MAY BE EXTENDED
BY THE COMPANY, SHALL BE REFERRED TO AS THE "EXPIRATION DATE"). IF THE
REQUISITE CONSENTS HAVE NOT BEEN RECEIVED BY 5:00 P.M., NEW YORK CITY TIME, ON
OR PRIOR TO THE ORIGINAL EXPIRATION DATE, THE COMPANY MAY, IN ITS SOLE
DISCRETION, TERMINATE THE SOLICITATION OR EXTEND THE SOLICITATION FOR A
SPECIFIED PERIOD OR ON A DAILY BASIS UNTIL THE REQUISITE CONSENTS HAVE BEEN
RECEIVED.
Consents may be revoked by Holders at any time on or prior to the
Expiration Date and will automatically expire if the Requisite Consents are not
obtained on or prior to the Expiration Date. If the Proposed Amendments become
effective, each present and future holder of the Existing Notes will be bound by
the Proposed Amendments, whether or not such holder delivered a Consent.
The Solicitation Agent for the Consent Solicitation is:
NATIONSBANC MONTGOMERY SECURITIES LLC
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports and other information with the Securities and Exchange
Commission (the "Commission"). Such reports and other information filed with
the Commission are available for inspection and copying at the public reference
facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, at the Commission's Regional Offices
located at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and at Seven World Trade Center, New York, New York 10048.
Copies of such documents may also be obtained from the Public Reference Section
of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. In addition, copies of such documents may be
obtained through the Commission's Internet address at http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed with the Commission by the Company
and are hereby incorporated by reference in this Consent Solicitation Statement:
1. The Company's Registration Statement on Form S-4 and related
Prospectus relating to the Exchange Offer (as defined herein) dated
December 5, 1997.
2. All other reports filed with the Commission prior to the
Expiration Date.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Consent Solicitation Statement to the extent that a
statement contained herein or in the enclosed Offering Memorandum or in any
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Consent Solicitation Statement.
Copies of all documents which are incorporated herein by reference (not
including the exhibits to such documents, unless such exhibits are specifically
incorporated by reference in such documents) will be provided without charge to
each person, including any beneficial Holder of Existing Notes, to whom this
Consent Solicitation Statement and the Offering Memorandum is delivered, upon
request. Copies of this Consent Solicitation Statement, as amended or
supplemented from time to time, and any other documents (or parts of documents)
that constitute part of this Consent Solicitation Statement will also be
provided without charge to each such person, upon request. Requests should be
directed to the Company's Information Agent (the "Information Agent"), D.F. King
& Co., Inc.
3
This Consent Solicitation Statement and the Offering Memorandum contain
certain forward-looking statements and information relating to the Company and
Mercer that are based on the beliefs of management as well as assumptions made
by and information currently available to management. Such forward-looking
statements are principally contained in the Offering Memorandum in the sections
"Offering Memorandum Summary," "Risk Factors," "Unaudited Pro Forma Combined
Financial Statements," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business" and include, without
limitation, the Company's expectation and estimates as to the Company's business
operations following the Offering and the acquisition of Mercer, including the
introduction of new products, future financial performance, including growth in
net sales and earnings, cash flows from operations and the synergies resulting
from the Mercer Acquisition. In addition, in those and other portions of the
Offering Memorandum and this Consent Solicitation Statement, the words
"anticipates," believes," "estimates," "expects," "plans," "intends" and similar
expressions, as they relate to the Company or its management, are intended to
identify forward-looking statements. Such statements reflect the current views
of the Company, with respect to future events and are subject to certain risks,
uncertainties and assumptions, including the risk factors described in the
Offering Memorandum. In addition to factors that may be described elsewhere in
the Offering Memorandum, the Company specifically wishes to advise readers that
the factors listed under the caption "Risk Factors" could cause actual results
to differ materially from those expressed in any forward-looking statement.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect (including the assumptions used in
connection with the preparation of the Summary Unaudited Pro Forma Combined
Financial Data), actual results may vary materially from those described herein
as anticipated, believed, estimated or expected. The Company does not intend to
update these forward-looking statements.
No person has been authorized to give any information or make any
representations other than those contained 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 Solicitation Agent,
the Information Agent or the Tabulation Agent. The Consent Solicitation is not
being made to, and no Consents are being solicited from the Holders of Notes in
any jurisdiction in which it is unlawful to make such solicitation or grant such
Consents. The delivery of this Consent Solicitation Statement at any time does
not imply that the information herein is correct as of any subsequent date.
The information provided in this Consent Solicitation Statement is based
upon information provided solely by the Company. The Solicitation Agent has not
independently verified and does not make any representation or warranty, express
or implied, or assume any responsibility, as to the accuracy or adequacy of the
information contained herein.
4
SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND THE SUMMARY FINANCIAL AND STATISTICAL DATA AND FINANCIAL
STATEMENTS APPEARING ELSEWHERE IN OR INCORPORATED BY REFERENCE INTO THIS CONSENT
SOLICITATION STATEMENT. CAPITALIZED TERMS USED HEREIN AND NOT DEFINED HEREIN
HAVE THE MEANINGS ASSIGNED TO SUCH TERMS IN THE OFFERING MEMORANDUM.
THE COMPANY
OVERVIEW
Burke, headquartered in San Jose, California, is a leading, diversified
manufacturer of highly engineered rubber, silicone and vinyl-based (herein
"elastomer") products. Through its vertically integrated operations and
reputation for quality elastomer-based products, Burke has become (i) the
largest domestic producer of precision silicone seals for commercial and
military aircraft ("Aerospace Products"), (ii) a leading nationwide producer of
both rubber and vinyl cove base and floor covering accessories for commercial
and industrial applications ("Flooring Products") and (iii) a value-added
producer of high-performance silicone hose, roofing and membrane products for
the heavy-duty truck, commercial building and fluid containment industries,
respectively ("Commercial Products").
The Company has grown through new product development and the successful
integration of acquired product lines and production assets. As a result, net
sales increased from $36.4 million in 1993 to $90.2 million in 1997 and EBITDA
increased from $3.8 million to $16.9 million (adjusted to exclude certain
expenses and other items relating to the Prior Recapitalization as described
herein) over the same period.
On March 5, 1998, the Company entered into a Stock Purchase Agreement with
Sovereign Specialty Chemicals, Inc. ("Sovereign") and Mercer pursuant to which
the Company will acquire from Sovereign all of the outstanding capital stock of
Mercer. Mercer is a leading manufacturer of extruded plastic and vinyl flooring
products such as vinyl cove base, transitional and finish mouldings, corners,
stair treads and other accessories. On a pro forma basis, after giving effect to
the Mercer Acquisition as if it had occurred on January 4, 1997, Burke would
have generated $115.1 million and $22.4 million in revenues and EBITDA,
respectively, in 1997. See "Acquisition of Mercer" and "Unaudited Pro Forma
Combined Financial Statements."
Mercer represents the fifth acquisition completed by Burke's current
management team over the last five years. Burke's integration of these
acquisitions has led to a dominant position in the aerospace seals market,
opened new markets for its Flooring Products, improved operating efficiencies,
consolidated overhead and strengthened technical capabilities. Management
intends to continue to evaluate potential acquisitions as a way to augment
Burke's internal growth, expand and strengthen existing product lines and
enhance the Company's distribution and technological capabilities.
5
AEROSPACE PRODUCTS
Burke is the largest domestic producer of precision silicone seals used at
airframe and internal component junctures in commercial and military aircraft.
Burke's seals are specified on virtually all major domestically produced
commercial aircraft, including every aircraft series manufactured by The Boeing
Company's Commercial Airplane Group ("Boeing") and on substantially all United
States military aircraft including cargo, fighter and bomber series airplanes
and several helicopter models. As a result, Burke's products have been designed
into some of the most successful commercial and military aircraft in the world,
including the Boeing 717, 737, 747, 757, 767 and 777, the McDonnell Douglas DC
and MD series, the Northrop Grumman F-14 and the Lockheed Martin L1011. Burke
bases its belief that it is the largest domestic producer of certain components
used in commercial and military aircraft upon internal analysis and informal
feedback from customers and competitors.
Products are engineered to customer specifications for selected aircraft
body and engine models and are generally made from custom tooling maintained and
controlled by Burke for use over the life of the specific aircraft program.
Burke benefits from a lengthy product-demand cycle, which can remain active for
as long as 30 years, driven by new aircraft assembly and retrofit and
maintenance projects. Retrofit and maintenance projects accounted for
approximately one-third of the Company's 1997 Aerospace Products sales.
The Aerospace Products business also manufactures low-observable,
radar-absorbing seals and exterior tapes and coatings for stealth military
aircraft and other military applications. These products are currently in use on
the B-2 bomber and will also be used in the F-22 Advanced Tactical Fighter
("F-22"), which is being developed to replace the F-15 as the premier fighter in
the United States military arsenal.
Aerospace Products sales increased from $3.6 million in 1993, the year that
Burke first entered the aerospace market with its purchase of assets of Purosil,
Inc. ("Purosil"), to $31.2 million in 1997, accounting for approximately 34.6%
of the Company's total net sales in 1997. Management believes the Aerospace
Products business is well positioned to benefit from the commercial aircraft
build rates which increased in 1997 and are continuing to increase in 1998,
along with the associated retrofit, refurbishment, replacement and upgrade
projects that are required over the life of the aircraft.
FLOORING PRODUCTS
Through its Flooring Products business, Burke is a leading nationwide
producer of floor covering accessories for commercial and industrial
applications. Burke has historically been the dominant supplier of rubber cove
base (floor border that joins flooring or carpet to a wall), manufactured under
the name BurkeBase-Registered Trademark-, and other rubber-based flooring
accessories for commercial and industrial applications in the western United
States. The acquisition of Mercer significantly expands Burke's product
offerings and distribution capabilities given Mercer's historically strong
presence as a manufacturer of vinyl cove base and other vinyl-based flooring
accessories in the eastern United States.
6
Both Burke's and Mercer's principal product offerings include vinyl cove
base and rubber cove base, tile, stair treads, corners, shapes and other
flooring accessories. Demand for cove base is driven by new commercial
construction, remodeling, redecorating and general maintenance. During periods
of slower growth in new commercial construction, remodeling and redecorating
activities tend to increase, providing stable overall demand for the Company's
products. Flooring Products sales were $23.5 million in 1997, comprising 26.0%
of the Company's total net sales in 1997. Mercer's sales were $24.9 million in
1997.
Management believes that the acquisition of Mercer, which is already well
established as a leading supplier of vinyl cove base and mouldings in the
eastern United States, will enable it to increase revenues through the increased
penetration of existing markets and the expansion of its product line to markets
where vinyl cove base is traditionally more popular than rubber cove base, such
as the midwestern and eastern United States. The Mercer Acquisition also
presents the opportunity for cost savings through economies of scale and shared
resources.
COMMERCIAL PRODUCTS
Burke's expertise in the mixing, blending and formulation of silicone and
organic rubber compounds has established its Commercial Products business as a
growing, value-added supplier of elastomer products for use in both intermediate
and end products. The Commercial Products business is comprised of three primary
product lines: (i) high-performance silicone truck hoses for heavy-duty trucks
and buses marketed under the Purosil brand name, (ii) membranes for commercial
roofing and fluid containment systems marketed under the Burkeline trade name
and manufactured from DuPont's patented Hypalon polymer material and (iii)
precision-formulated custom products and sheet goods that utilize Burke's
extensive formulation and production capabilities for use in end-product
elastomer applications. Commercial Products net sales increased from $14.8
million in 1993 to $35.5 million in 1997, and represented 39.4% of the Company's
total net sales in 1997. Management believes that the Commercial Products
business has significant growth potential primarily through the expansion of the
Purosil line of high-end hoses to new customers and channels of distribution and
the development of new applications for the silicone custom product line.
COMPETITIVE STRENGTHS
Burke has secured a strong competitive position in each of its specialized
market segments. Burke is the largest provider of aerospace seals to the
domestic commercial and military aerospace industries, one of the nation's
largest producers of floor covering accessories and maintains strong positions
in its roofing and membrane, truck hose and custom product lines. These
competitive positions are sustained through the following strengths:
ESTABLISHED CUSTOMER RELATIONSHIPS. The Company enjoys long-term
relationships with many of its customers in each of its markets. These
relationships, whether built by Burke over its long history or assumed in recent
acquisitions, provide the Company with a stable base from which to pursue future
expansion and give Burke a significant advantage over potential competitors
seeking to enter the Company's markets. Several of the Burke trademarks and
trade names (BurkeBase, Burkeline, SFS, Haskon and Purosil) are widely
recognized by end users and
7
distributors and are generally associated with superior levels of quality and
customer service in their respective markets. Pursuant to the Mercer
Acquisition, the Company will also be acquiring Mercer's strong relationships
with distributors in the eastern United States and Mercer's trade name
Uni-Color-Registered Trademark- color matching system, which is a widely
recognized brand name in the flooring business.
DIVERSE REVENUE BASE. The Company's products are used in a wide variety of
industries and applications, and a significant share of the Company's revenue is
derived from the repair and replacement market for its products, including
aerospace seals and tape, cove base, truck hoses and fluid containment membrane.
Replacement demand is typically less affected by slower economic periods.
Management believes that this diversity has and will continue to mitigate the
effect of economic fluctuations.
TECHNOLOGICAL LEADERSHIP IN ELASTOMER-BASED PRODUCTS. Burke is widely
recognized as a technological leader in elastomer-based products due to its
strong engineering, design and research capabilities. Burke has 25 specialists
in its engineering, design and laboratory departments devoted to new product
development and product cost reduction. Management believes that its aerospace
technical staff is significantly larger than those of its direct competitors,
providing the Company with a competitive advantage in pursuing and maintaining
relationships in the technologically advanced defense and commercial aerospace
industries.
VERTICALLY INTEGRATED PRODUCTION CAPABILITIES. Burke has vertically
integrated production capabilities that enable it to transform raw organic
rubber and silicone gum into a diverse array of finished products. This
capability allows management more direct control over the Company's product
development, cost structure and quality requirements, providing a competitive
edge in its targeted market segments and enables Burke's Commercial Products
business to selectively participate in market segments as a value-added,
intermediate supplier to other elastomer product producers and users.
EXPERIENCED MANAGEMENT TEAM. The management team has extensive experience
both with the Company and within the industry and encompasses a balance of both
senior leadership and a strong group of young managers. This management team has
successfully managed the Company's continuing vertical integration efforts and
acquired five independent operations since 1993.
BUSINESS STRATEGY.
Burke intends to capitalize on its aforementioned
competitive strengths in a variety of ways in each of its major market
segments. Key components of this strategy for each of the Company's
businesses include:
8
AEROSPACE PRODUCTS
- PENETRATE INTERNATIONAL MARKET FOR AEROSPACE SEALS. Management
believes that the Company is the largest domestic aerospace seal
manufacturer and has the production capacity to market beyond the
United States. The Company's recent acquisitions dramatically
increased production capacity and, as a result, the Company recently
sought and was successful in being designated as a qualified parts
manufacturer for a large subcontractor of Airbus Industries
("Airbus").
- FOCUS ON VALUE-ADDED MANUFACTURING. Management intends to further
increase its participation in the trend towards integrating higher
levels of processing and finishing to products before shipping to
original equipment manufacturers ("OEMs").
- MAINTAIN STRONG RELATIONSHIPS WITH LEADING PRIME CONTRACTORS.
Management believes that its existing relationships with leading prime
military contractors have positioned the Company to continue to
participate in "next generation" stealth military programs, including
the Joint Strike Fighter currently being developed for NATO, through
the sale of low-observable seals and tape.
FLOORING PRODUCTS
- BROADEN DOMESTIC DISTRIBUTION OF FLOORING PRODUCTS. Although the
Company is the dominant producer of rubber cove base in the western
United States, the Company believes it can successfully expand this
product line into other geographic regions by offering the full
complement of its rubber and newly acquired vinyl flooring products
and by capitalizing on the strong East Coast presence in vinyl
flooring products that Mercer has already established.
- LEVERAGE BRAND NAME RECOGNITION AND EXISTING DISTRIBUTION CHANNELS.
The Company intends to continue to capitalize on the BurkeBase
trademark by expanding and upgrading its existing product line. In
addition, the Company intends to capitalize on the strong brand name
established by Mercer in the flooring business with Mercer's unique
Uni-Color-Registered Trademark- color matching system. The Company
also believes that it can leverage its strong distribution network for
its flooring products through the introduction of flooring
accessories. For example, the Company's new BurkeEmerge product line
of photoluminescent emergency lighting is an alternative to strip
lighting at a 70% lower cost. Emergency lighting is increasingly being
utilized due to heightened public awareness of the dangers that can
result from unlit corridors and confusing exit signs.
COMMERCIAL PRODUCTS
- INCREASE PENETRATION OF PUROSIL SILICONE HOSES. The Company believes
it has yet to fully capitalize on the growth opportunities for its
Purosil silicone hoses, particularly in the heavy-duty truck and bus
aftermarket. New initiatives include
9
increasing customer share at a major private-label customer,
initiating production of silicone hoses for a major new OEM customer
and expanding into new product areas.
- PROMOTE ADDITIONAL HYPALON APPLICATIONS. Management is continuing to
work with DuPont to promote Hypalon as a durable and environmentally
sound liner product suitable for new water-containment applications.
In addition to these internal growth strategies, the Company intends to
seek selective acquisitions, such as the Mercer Acquisition, where it can expand
and strengthen existing product lines and enhance distribution and technological
capabilities. The Company believes that certain market niches in which it
competes are highly fragmented, with a number of manufacturers that would make
attractive acquisition candidates.
The Company's principal executive offices are located at 2250 South Tenth
Street, San Jose, California 95112; telephone: (408) 297-3500.
SIGNIFICANT RECENT DEVELOPMENTS
ACQUISITION OF MERCER
On March 5, 1998, the Company entered into a Stock Purchase Agreement with
Sovereign and Mercer pursuant to which the Company will acquire from Sovereign
all of the outstanding capital stock of Mercer for an aggregate of $35,750,000,
subject to working capital and other adjustments.
Founded in 1958, and headquartered in Eustis, Florida, Mercer is a leading
manufacturer of extruded plastic and vinyl products such as vinyl and rubber
cove base, transitional and finish mouldings, corners, stair treads and other
accessories. Mercer also sells a range of related adhesive products. Mercer's
product and distribution lines strongly complement the Company's Flooring
Products business. While the Company is the dominant producer of rubber cove
base and floor covering accessories in the western United States, Mercer is a
leading supplier to the vinyl cove base and moulding products markets and has a
particularly strong presence in the eastern United States.
Management believes the acquisition of Mercer will significantly enhance
the Company's already strong flooring product offerings, distribution channels
and product development capabilities. The Mercer Acquisition also presents the
opportunity for cost savings through economies of scale and shared resources.
Mercer has experienced consistently profitable historical financial
results, with steady growth in sales and significant increases in EBITDA since
1995. Net sales increased 7.2% and 1.4%, respectively, in 1996 and 1997, while
EBITDA increased 8.8% and 49.5%, respectively, over the same period.
10
Under the Stock Purchase Agreement, the consummation of the Mercer
Acquisition is subject to customary conditions, including the expiration of any
applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976. The Stock Purchase Agreement also contains customary
representations and warranties from Sovereign to the Company. Certain of these
representations and warranties, and related indemnification rights, will
terminate after a limited time following the effectiveness of the Mercer
Acquisition.
THE CLOSING OF THE MERCER ACQUISITION IS NOT CONDITIONED ON SUCCESSFUL
CONSUMMATION OF THE CONSENT SOLICITATION AS THE COMPANY HAS RECEIVED A
COMMITMENT FOR ALTERNATIVE FINANCING FROM NATIONSBANK, N.A. THAT PROVIDES
ADEQUATE FUNDS TO ENABLE THE COMPANY TO CONSUMMATE THE MERCER ACQUISITION. SEE
"ALTERNATIVE FINANCING."
CONSUMMATION OF EXCHANGE OFFER
On January 28, 1998, the Company successfully consummated its offer to
exchange each of the Existing Notes that were issued on August 20, 1997 (the
Closing Date of the recapitalization of Burke) that were not registered under
the Securities Act, for the Exchange Notes which are registered under the
Securities Act and are freely tradeable.
11
THE PROPOSED AMENDMENTS
The Proposed Amendments to the Original Indenture would, among other
things, (i) permit the Company to issue and sell up to $30.0 million of New
Notes in the Offering, (ii) increase certain of the permitted indebtedness and
permitted investment baskets contained in the indebtedness and restricted
payment covenants in the Original Indenture to reflect the increased size of the
Company after the closing of the Mercer Acquisition, (iii) modify the Lien
covenant to enhance the Company's ability to use assets as collateral for new
financing and (iv) make certain other amendments of a non-substantive nature to
the Original Indenture. See Mark-Up of Original Indenture Provisions attached
hereto as Schedule A.
The Company believes that the Proposed Amendments will benefit the Holders
by, among other things, (i) providing the Company with necessary capital to
finance the Mercer Acquisition, thereby growing the Company and adding
significant depth to its already strong product and distribution lines and
product development capabilities and (ii) providing the Company with greater
operating flexibility to permit it to continue to pursue new acquisitions. On a
pro forma basis based on Mercer's actual 1997 financial results, Mercer would
have contributed an additional $24.9 million and $4.8 million (excluding
synergies and other adjustments) in additional revenues and EBITDA, respectively
in Fiscal Year 1997. In addition, giving effect to consummation of the Offering
and the Mercer Acquisition, on a pro forma basis for Fiscal Year 1997, interest
coverage (EBITDA to cash interest expense) would increase from 1.6x (actual for
the year ended December 31, 1997) to 1.7x (pro forma for the same period),
assuming a 9.5% pro forma interest rate, and leverage (total debt to EBITDA)
would decrease from 6.53x (actual at December 31, 1997) to 6.26x (pro forma at
the same date). With the addition of Mercer, the Company is expected to achieve
a critical mass that enhances debt protection for investors, although there can
be no assurance on this point.
Management believes that the purchase price of approximately $35.8 million
for the Mercer Acquisition, before transaction costs (or 6.48x 1997 EBITDA
before synergies but pro forma for adjustments outlined in the Offering
Memorandum) is attractive to the Company and the Mercer Acquisition will expand
significantly the Company's east coast presence in the vinyl flooring segment,
utilizing Mercer's established brand names and product recognition.
THE OFFERING
For a description of the Offering and the proposed use of the net proceeds
thereof, see the Offering Memorandum. Consummation of the Offering is
conditioned upon closing of the Mercer Acquisition, the receipt of the Requisite
Consents and the execution and delivery of the First Supplemental Indenture.
There can be no assurance that the Offering will be consummated.
RISK FACTORS
In making a determination as to whether to Consent to the Proposed
Amendments, each Holder should carefully consider all of the matters described
herein and in the Offering Memorandum. There can be no assurance that any of
the anticipated benefits to the Holders or
12
the Company will be realized. Holders should also consider those matters set
forth under the section of the Offering Memorandum entitled "Risk Factors"
beginning on page 14 thereof.
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THE SOLICITATION
The Solicitation . . . . . . . . . The Company is soliciting Consents of Holders to the Proposed Amendments to
the Original Indenture.
The Consent Payments . . . . . . . Cash payments of $3.75 for each $1,000.00 principal amount of the Existing
Notes for which a Consent has been properly furnished, and not revoked, on or
prior to the Expiration Date, provided that (i) the Requisite Consents have
been received by the Company on or before such date, (ii) the Offering is
consummated, (iii) the Mercer Acquisition is consummated and (iv) the First
Supplemental Indenture is executed and delivered. Consent Payments will be
made by check payable to the person designated in the Consent. Interest will
not accrue on or be payable with respect to any Consent Payments.
Expiration Date . . . . . . . . . 5:00 p.m., New York City time, on April 10, 1998, unless the Solicitation is
extended by the Company, in which case the term "Expiration Date" means the
latest date and time to which the Solicitation is extended. The Company may
terminate the Solicitation or may extend the Solicitation for a specified
period or on a daily basis.
How to Consent . . . . . . . . . . A Holder desiring to consent to the Proposed Amendments should either (i)
complete and sign the Consent, or a facsimile thereof, have the signature
thereon (and on any proxy delivered therewith) guaranteed if required by the
Consent and mail, fax or otherwise deliver the Consent, or such facsimile,
together with a duly executed proxy if the Holder was not a Record Holder, and
any other required documents to the Tabulation Agent at its address set forth
on the back cover hereof or (ii) request the Holder's broker, dealer,
commercial bank, trust company or other nominee to effect the Consent on its
behalf.
Consents must be delivered to the Tabulation Agent prior to the Expiration
Date. The Company anticipates that the Depository Trust Company ("DTC"), as
nominee Holder of the Existing Notes, will execute an omnibus proxy in favor
of its respective participants ("DTC Participants") which will authorize each
DTC
14
Participant to vote the Existing Notes owned by it and held in DTC's name.
Only registered owners of Existing 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 Amendments and
receive the Consent Fee. See "The Solicitation -- How To Consent."
Special Procedures for
Beneficial Holders . . . . . . . . Any beneficial holder whose Existing Notes are held through a broker, dealer,
commercial bank, trust company or other nominee and who wishes to consent
should contact such holder promptly and instruct such holder to consent on its
behalf. If such beneficial holder wishes to consent on its own behalf, such
beneficial holder must obtain a proxy from the Record Holder authorizing the
beneficial holder to vote Existing Notes on behalf of such Record Holder. See
"The Solicitation--How to Consent."
Conditions . . . . . . . . . . . It is anticipated that the Company, the Subsidiary Guarantors and the Trustee
will execute the First Supplemental Indenture promptly following receipt of
the Requisite Consents.
Consequences to Non-Consenting
Holders . . . . . . . . . . . . . If the Requisite Consents are obtained, and the Consent Fee is paid, non-
consenting Holders will be bound by the Proposed Amendments but will not
receive the Consent Fee.
Holders . . . . . . . . . . . . . The term "Holder" means (i) any Person in whose name Existing Notes are
registered on the books of the Company at the close of business on the Record
Date (a "Record Holder") or (ii) any other person who has obtained a proxy
substantially in the form attached to the Consent which authorizes such other
person (or person claiming title by or through such other person) to vote
Existing Notes on behalf of such Record Holder.
Withdrawal Rights and Revocation . Consents with respect to the Existing Notes may be revoked by the Holders at
any time prior to the Expiration Date, but may not be revoked thereafter.
15
Any Holder who revokes a Consent will not receive Consent Payments, unless such
Consent is redelivered and received by the Tabulation Agent and accepted by
the Company on or prior to the Expiration Date. See "The
Solicitation--Revocation of Consents."
Certain Tax Considerations . . . . For a discussion of certain U.S. federal income tax consequences of the
Consent Solicitation to beneficial owners of Notes, see "Certain United States
Federal Income Tax Consequences."
Solicitation Agent . . . . . . . . The Company has retained NationsBanc Montgomery Securities LLC ("NationsBanc
Montgomery") as its Solicitation Agent in connection with the Solicitation
(the "Solicitation Agent").
Information Agent . . . . . . . . The Company has retained D.F. King & Co., Inc. as its Information Agent in
connection with the Solicitation.
Tabulation Agent . . . . . . . . . The Company has retained United States Trust Company of New York as its
Tabulation Agent in connection with the Solicitation (the "Tabulation Agent").
16
PURPOSES AND EFFECTS
SET FORTH BELOW IS A SUMMARY OF THE PROPOSED AMENDMENTS TO THE ORIGINAL
INDENTURE FOR WHICH CONSENTS ARE BEING SOUGHT PURSUANT TO THIS SOLICITATION.
THE DISCUSSION BELOW IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL AND
COMPLETE TERMS OF THE ORIGINAL INDENTURE AND OF SUCH PROPOSED AMENDMENTS AS SET
FORTH IN THE MARK-UP OF THE PROVISIONS OF THE ORIGINAL INDENTURE ATTACHED HERETO
AS SCHEDULE A (THE "MARK-UP OF ORIGINAL INDENTURE PROVISIONS"), WHICH IS
INCORPORATED HEREIN BY THIS REFERENCE. CONSUMMATION OF THE OFFERING IS
CONDITIONED UPON CLOSING OF THE MERCER ACQUISITION, THE RECEIPT OF THE REQUISITE
CONSENTS AND THE EXECUTION AND DELIVERY OF THE FIRST SUPPLEMENTAL INDENTURE.
THERE CAN BE NO ASSURANCE THAT THE OFFERING WILL BE CONSUMMATED. EACH
CAPITALIZED TERM APPEARING BELOW THAT IS NOT DEFINED HEREIN HAS THE MEANING
CURRENTLY ASSIGNED TO SUCH TERM IN THE ORIGINAL INDENTURE.
1. AMENDMENT RELATING TO THE ISSUANCE AND SALE OF THE NEW NOTES
As part of the financing for the Mercer Acquisition, the Company proposes
to issue and sell up to $30.0 million of New Notes without registration under
the Securities Act through NationsBanc Montgomery, as initial purchaser (the
"Initial Purchaser"). The terms of the New Notes will be substantially
identical to the terms of the Existing Notes, as amended by the Proposed
Amendments, except for the interest and redemption provisions.
The Original Indenture generally does not permit the Company or any
Restricted Subsidiary to incur Indebtedness unless, on the date of such
incurrence and after giving effect thereto on a pro forma basis, the Fixed
Charge Coverage Ratio would have been equal to at least 2.0 to 1.0. Such
covenant in its existing form would not permit the Company to offer and sell the
New Notes in the aggregate amount proposed. To allow the Company to offer and
sell the New Notes, the Company proposes to amend the Original Indenture to
modify the Limitation on Indebtedness covenant to expressly permit Indebtedness
evidenced by the New Notes and related guaranties. See Section 1010 in the
Mark-Up of Original Indenture Provisions. The closing of the Mercer Acquisition
is not conditioned on successful consummation of the Consent Solicitation. See
"Alternative Financing."
Management believes that the purchase price of approximately $35.8 million
for the Mercer Acquisition, before transaction costs (or 6.48x 1997 EBITDA
before synergies but pro forma for adjustments outlined in the Offering
Memorandum) is attractive to the Company and the Mercer Acquisition will expand
significantly the Company's east coast presence in the vinyl flooring segment,
utilizing Mercer's established brand names and product recognition.
2. AMENDMENTS TO DEFINITION OF PERMITTED INDEBTEDNESS IN COVENANT
REGARDING LIMITATION ON INDEBTEDNESS
The Original Indenture generally does not permit the Company or any
Restricted Subsidiary to incur Indebtedness unless, on the date of such
incurrence and after giving effect thereto, the Fixed Charge Coverage Ratio
would have been equal to at least 2.0 to 1.0.
17
Notwithstanding this general restriction, the Original Indenture permits the
Company and its Restricted Subsidiaries to incur Permitted Indebtedness of
various types.
The Company believes that the increase of the three baskets described below
in the amounts so proposed is appropriate given the increase in pro forma 1997
EBITDA to the Company after consummation of the Mercer Acquisition. On a pro
forma basis based on Mercer's actual 1997 financial results, Mercer would have
contributed an additional $24.9 million and $4.8 million (excluding synergies
and other adjustments) in additional revenues and EBITDA, respectively in Fiscal
Year 1997. In addition, giving effect to consummation of the Offering and the
Mercer Acquisition, on a pro forma basis for Fiscal Year 1997, interest coverage
(EBITDA to cash interest expense) would increase from 1.6x (actual for the year
ended December 31, 1997) to 1.7x (pro forma for the same period), assuming a
9.5% pro forma interest rate, and leverage (total debt to EBITDA) would decrease
from 6.53x (actual at December 31, 1997) to 6.26x (pro forma at the same date).
With the addition of Mercer, the Company is expected to achieve a critical mass
that enhances debt protection for investors, although there can be no assurance
on this point.
A. INCREASE OF PERMITTED INDEBTEDNESS UNDER THE BANK CREDIT
AGREEMENT OR CREDIT FACILITIES BASKET.
CLAUSE (i) OF THE THIRD PARAGRAPH OF THE LIMITATION ON
INDEBTEDNESS COVENANT (SECTION 1010) OF THE ORIGINAL INDENTURE (THE "CREDIT
AGREEMENT BASKET") PERMITS THE COMPANY AND ANY RESTRICTED SUBSIDIARY TO
INCUR INDEBTEDNESS UNDER THE BANK CREDIT AGREEMENT OR ONE OR MORE OTHER
CREDIT FACILITIES (AND THE INCURRENCE BY ANY RESTRICTED SUBSIDIARY OF
GUARANTEES THEREOF) IN AN AGGREGATE PRINCIPAL AMOUNT AT ANY ONE TIME
OUTSTANDING NOT TO EXCEED THE GREATER OF (x) $15.0 MILLION OR (y) THE
AMOUNT OF THE BORROWING BASE, LESS ANY AMOUNTS APPLIED TO THE PERMANENT
REDUCTION OF SUCH CREDIT FACILITIES PURSUANT TO SECTION 1016.
Under the Proposed Amendments, the amount in clause (x) of the Credit
Agreement Basket would be increased from $15.0 million to $25.0 million. See
Section 1010 in the Mark-Up of Original Indenture Provisions.
B. INCREASE OF PERMITTED INDEBTEDNESS UNDER ACQUISITION DEBT BASKET
Clause (vii) of the third paragraph of the Limitation on Indebtedness
covenant (Section 1010) of the Original Indenture (the "Acquisition Debt
Basket") permits the Company and any Restricted Subsidiary to incur Indebtedness
consisting of either (A) Capitalized Lease Obligations or (B) Indebtedness under
purchase money mortgages or secured by purchase money security interests, in
each case incurred for the purpose of financing or refinancing all or any part
of the purchase price or cost of construction or improvement of any property
(real or personal) or other assets that are used or useful in the business of
the Company or such Restricted Subsidiary (whether through the direct purchase
of assets or the Capital Stock of any Person owning such assets and whether such
Indebtedness is owed to the seller or Person carrying out such construction or
improvement or to any third party), so long as (x) such Indebtedness is not
secured by any property or assets of the Company or any Restricted Subsidiary
other than the
18
property and assets so acquired, constructed or improved and (y) such
Indebtedness is created within 90 days of the acquisition or completion of
construction or improvement of the related property; provided that the aggregate
amount of Indebtedness under clauses (A) and (B) does not exceed $7.5 million at
any one time outstanding.
Under the Proposed Amendments, the amount of the Acquisition Debt
Basket would be increased from $7.5 million to $10.0 million. See Section 1010
in the Mark-Up of Original Indenture Provisions.
C. INCREASE OF PERMITTED INDEBTEDNESS UNDER PERMITTED DEBT BASKET.
Clause (viii) of the third paragraph of the Limitation on Indebtedness
covenant (Section 1010) of the Original Indenture (the "Permitted Debt Basket")
permits the Company and any Restricted Subsidiary to incur Indebtedness of the
Company or any Restricted Subsidiary not permitted by any other clause of this
definition, in an aggregate principal amount not to exceed $10 million at any
one time outstanding.
Under the Proposed Amendments, the amount of the Permitted Debt Basket
would be increased from $10.0 million to $15.0 million. See Section 1010 in the
Mark-Up of Original Indenture Provisions.
3. AMENDMENT TO COVENANT REGARDING LIMITATION ON LIENS
The Original Indenture generally prohibits all Liens on property or assets
of the Company or any Restricted Subsidiary other than Permitted Liens. Clause
(ii) of the definition of Permitted Liens permits Liens on property or assets of
the Company or any Restricted Subsidiary securing Indebtedness under the Bank
Credit Agreement or one or more other credit facilities in a principal amount
not to exceed the principal amount of the outstanding Indebtedness permitted by
the Credit Agreement Basket.
The Proposed Amendments would amend clause (ii) of the definition of
Permitted Liens to permit the Company to incur Liens securing the Bank Credit
Agreement or one or more other credit facilities not only under the Credit
Agreement Basket but also under the Permitted Debt Basket. As a result, the
Company will have the ability to incur up to an additional $15.0 million of
other Indebtedness under the Bank Credit Agreement or one or more other credit
facilities which is secured by the assets of the Company or its Restricted
Subsidiaries, thereby affording the Company additional financing options as it
continues to grow and pursue attractive acquisition opportunities. See Section
1014 in the attached Mark-Up of the Original Indenture Provisions.
4. AMENDMENT TO DEFINITION OF PERMITTED INVESTMENTS
The Original Indenture generally prohibits the Company and any Restricted
Subsidiary from making any Investment in any person other than a Permitted
Investment. Clause (j) of the definition of Permitted Investments in the
Original Indenture expressly permits other Investments
19
that do not exceed $4.0 million in the aggregate at any time outstanding (the
"Permitted Investments Basket").
Under the Proposed Amendments, the amount of the Permitted Investments
Basket would be increased from $4.0 million to $7.5 million. Currently, the
Permitted Investments Basket permits the Company to make minority investments.
However, as part of the Proposed Amendments, the entire Permitted Investments
Basket would be restricted to majority-owned investments. As explained more
fully in Section 2 above, the Company believes that the increase in the
Permitted Investments Basket is appropriate given the increased size of the
Company upon consummation of the Mercer Acquisition and will facilitate the
Company's ability to quickly seize potentially fruitful acquisition
opportunities. See definition of Permitted Investments in the attached Mark-Up
of the Original Indenture Provisions.
5. OTHER PROPOSED AMENDMENTS OF A NON-SUBSTANTIVE NATURE
For a complete description of the other Proposed Amendments to the Original
Indenture, please refer to the Mark-Up of Original Indenture Provisions.
ALTERNATIVE FINANCING
On March 13, 1998, the Company entered into a Commitment Letter with
NationsBank, N.A., as agent (the "Agent") and NationsBanc Montgomery Securities
LLC, as Arranger and Syndication Agent, pursuant to which the Agent has
committed to lend up to $26.0 million to Mercer under a senior secured credit
facility (the "Mercer Credit Facility"), secured by the stock, assets and
properties of Mercer. If entered into, the obligations under the Mercer Credit
Facility would be non-recourse to the Company and Mercer would be designated as
an Unrestricted Subsidiary under the Original Indenture in order to comply with
the terms of the Original Indenture. Thus, in the event that the Offering is
not consummated, given (i) the amount of available working capital currently in
Burke, (ii) additional equity to be provided by J.F. Lehman Equity Investors I,
L.P. and Burke's other shareholders and (iii) potential available borrowings
under the Mercer Credit Facility, the Company will have adequate funds available
to consummate the Mercer Acquisition without delay.
20
THE SOLICITATION
GENERAL
Pursuant to Section 902 of the Original Indenture, in order to adopt the
Proposed Amendments the Company must receive the Requisite Consents (valid and
unrevoked Consents of Holders of not less than a majority in aggregate principal
amount of the outstanding Existing Notes). As of the Record Date, $110.0
million aggregate principal amount of Existing Notes were issued and
outstanding. The Proposed Amendments will become effective only upon (i)
receipt of the Requisite Consents, (ii) consummation of the Offering, (iii)
closing of the Mercer Acquisition and (iv) execution and delivery of the First
Supplemental Indenture. There can be no assurance that the Offering will be
consummated and the Proposed Amendments will become effective. If the Proposed
Amendments become effective, they will be binding on all holders of Existing
Notes and their successors and transferees, whether or not such holders
consented to the Proposed Amendments.
The term "Holder" shall mean (i) any Record Holder or (ii) any other person
who has obtained a proxy substantially in the form attached to the Consent which
authorizes such other person (or any person claiming title by or through such
other person) to vote Existing Notes on behalf of such Record Holder. The
Company anticipates that DTC, as nominee Holder of the Existing Notes, will
execute an omnibus proxy in favor of the DTC Participants which will authorize
each DTC Participant to vote the Existing Notes owned by it and held in DTC's
name.
The delivery of a Consent to the Proposed Amendments will not affect a
Holder's right to sell or transfer the Existing Notes. Failure to deliver a
Consent will have the same effect as if a Holder had voted "No" to the Proposed
Amendments.
CONSENT PAYMENTS
If the Requisite Consents have been received on the Expiration Date and the
Proposed Amendments become effective, the Company will pay, promptly to Holders
of the Existing Notes whose Consents have not been properly revoked and had been
received by the Tabulation Agent on or prior to the Expiration Date, Consent
Payments in the amount of $3.75 for each $1,000.00 principal amount of the
Existing Notes as to which such a Consent has been delivered and not revoked.
Consents will expire if the Proposed Amendments have not been approved by the
Requisite Consents by the Expiration Date. Interest will not accrue on or be
payable with respect to any Consent Payments.
RECORD DATE
This Consent Solicitation Statement, form of Consent and Offering
Memorandum (the "Solicitation Materials") are being sent to all persons who were
Holders of record of the Existing Notes at the close of business on the Record
Date (March 26, 1998). Such date has been fixed by the Company as the date for
the determination of Holders entitled to give Consents pursuant to the
Solicitation. The Company reserves the right to establish, from time to time,
any new date as
21
such Record Date and, thereupon, any such new date will be deemed to be the
"Record Date" for purposes of the Solicitation.
HOW TO CONSENT
All Consents that are properly completed, signed and delivered to the
Tabulation Agent prior to the Expiration Date and not revoked prior to such
date, will be given effect in accordance with the specifications thereof. The
Solicitation Materials are being mailed to all Record Holders and as many
beneficial holders of the Existing Notes as the Company is reasonably able to
identify. Holders who desire to consent to the Proposed Amendments should so
indicate by marking the appropriate box on, and signing and dating, the Consent
included herewith and mailing, faxing or otherwise delivering it to the
Tabulation Agent at the address listed on the back cover page hereof, in
accordance with the instructions contained therein. However, if neither of the
boxes on the Consent is checked, but the consent is otherwise properly completed
and signed, the Holder will be deemed to have consented to the Proposed
Amendments. Holders must consent to all of the Proposed Amendments or none of
them.
Only Holders (i.e. persons in whose name a Note is registered or their duly
designated proxies) may execute and deliver a Consent. DTC is expected to grant
an omnibus proxy authorizing DTC Participants to deliver a Consent.
Accordingly, for the purposes of this Consent Solicitation, the term "Holder"
shall be deemed to mean DTC Participants who held Notes through DTC as of the
Record Date. In order to cause a Consent to be given with respect to Notes held
through DTC, such DTC Participants must complete and sign the 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.
Consents by the Record Holder(s) must be executed in exactly the same
manner as the name(s) appear(s) on the Existing Notes. If Existing Notes to
which a Consent relates are held by two or more joint Holders, all such Holders
must sign the Consent. If a signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer of a corporation or other Holder acting in a
fiduciary or representative capacity, such person should so indicate when
signing and must submit proper evidence satisfactory to the Company of such
person's authority so to act. If Existing Notes are held in different names,
separate Consents must be executed covering each name. If a Consent is executed
by a person other than the Record Holder(s) on the Record Date, it must be
accompanied by a proxy in substantially the form included herewith, duly
executed by such Record Holder(s), with signature guaranteed by a firm which is
a participant in an authorized signature guarantee program (an "Eligible
Institution"), confirming the right of the signatory to execute the Consent on
behalf of such Record Holder(s).
22
If a Consent relates to fewer than all of the Existing Notes held of record
as of the Record Date by the Record Holder providing such Consent, such Record
Holder must indicate on the Consent the aggregate dollar amount (in integral
multiples of $1,000.00) of such Existing Notes to which the Consent relates.
Otherwise, the Consent will be deemed to relate to all such Existing Notes held
by such Holder. A Consent Payment will be paid only for such portion of the
Existing Notes to which a Consent relates.
HOLDERS WHO WISH TO CONSENT SHOULD HAND DELIVER, SEND BY OVERNIGHT COURIER,
OR FACSIMILE (FOLLOWED BY DELIVERY BY HAND OR OVERNIGHT COURIER) THEIR PROPERLY
COMPLETED, EXECUTED AND DATED CONSENT FORMS TO THE TABULATION AGENT IN
ACCORDANCE WITH THE INSTRUCTIONS SET FORTH HEREIN AND IN THE CONSENT.
REVOCATIONS OF CONSENTS SHOULD BE SENT TO THE TABULATION AGENT. CONSENT
PAYMENTS WILL ONLY BE PAID TO HOLDERS WHOSE CONSENTS ARE RECEIVED BY THE
TABULATION AGENT ON OR PRIOR TO THE EXPIRATION DATE (AND IN THE CASE OF
FACSIMILE TRANSMISSIONS, WHOSE ORIGINAL CONSENTS ARE RECEIVED BY THE TABULATION
AGENT ON THE THIRD BUSINESS DAY AFTER THE EXPIRATION DATE). NEITHER CONSENTS
NOR REVOCATIONS OF CONSENTS SHOULD BE SENT TO THE COMPANY, THE SOLICITATION
AGENT OR THE INFORMATION AGENT. THE METHOD OF DELIVERY OF ALL DOCUMENTS,
INCLUDING CONSENTS, PROXIES AND REVOCATIONS, IS AT THE ELECTION AND RISK OF THE
HOLDER. IN NO EVENT SHOULD A HOLDER TENDER OR DELIVER CERTIFICATES EVIDENCING
SUCH HOLDER'S EXISTING NOTES.
THE COMPANY RESERVES THE RIGHT TO RECEIVE CONSENTS BY ANY OTHER REASONABLE
MEANS OR IN ANY FORM THAT REASONABLY EVIDENCES THE GIVING OF A CONSENT. RECEIPT
OF THE REQUISITE CONSENTS BY THE TABULATION AGENT WILL NOT OBLIGATE THE COMPANY
TO CONSUMMATE THE OFFERING.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance and revocation of the Consents will be resolved by the
Company, in its sole discretion, which resolution shall be final and binding.
The Company reserves the right to reject any and all Consents not validly given
or any Consents the Company's acceptance of which could, in the opinion of the
Company or its counsel, be unlawful. The Company also reserves the right to
waive any defects or irregularities or conditions of the Solicitation. The
interpretation of the terms and conditions of the Solicitation (including the
Consents and the instructions thereto) by the Company shall be final and binding
on all parties. Unless waived, any defects or irregularities in connection with
deliveries of Consents must be cured within such time as the Company shall
determine. None of the Company, the Solicitation Agent, the Tabulation Agent,
the Information Agent or any other person shall be under any duty to give
notification of defects or irregularities with respect to deliveries of
Consents, nor shall any of them incur any liability for failure to give such
notification.
23
EXPIRATION DATE; EXTENSIONS; AMENDMENT
The term "Expiration Date" means 5:00 p.m. New York City time, on April 10,
1998, unless the Company, in its sole discretion, extends the period during
which the Solicitation is open, in which event the Expiration Date shall be the
last date for which an extension is effective. In order to extend the
Expiration Date, the Company will notify the Tabulation Agent of any extension
by oral or written notice and will make a public announcement thereof, each
prior to 5:00 p.m., New York City time, on the next business day after the
previously scheduled Expiration Date. Such announcements may state that the
Company is extending the Solicitation for a specified period of time or on a
daily basis. Failure of any Holder or beneficial owner of Existing Notes to be
so notified will not affect the extension of the Solicitation.
The Company reserves the right to (i) extend the Solicitation or to
terminate the Solicitation, and to accept Consents not previously accepted by
giving oral or written notice of such extension, termination or acceptance to
the Tabulation Agent, or (ii) amend the terms of the Solicitation in any manner.
If the Solicitation is amended in any material manner, the Company will
promptly disclose such amendment in a public announcement and the Company will
extend the Solicitation for a period deemed by the Company to be adequate to
permit Holders to deliver or revoke their Consents.
Without limiting the manner in which the Company may choose to make a
public announcement of any extension, amendment or termination of the
Solicitation, the Company shall have no obligation to publish, advertise, or
otherwise communicate any such public announcement, other than by making a
timely press release and complying with any applicable notice provisions of the
Original Indenture.
REVOCATION OF CONSENTS
Consents may be revoked by Holders at any time prior to the Expiration
Date. All properly completed and executed Consents received by the Tabulation
Agent will be counted, notwithstanding any transfer of Existing Notes to which
such Consents relate or any beneficial interest therein, unless the Tabulation
Agent receives from a Holder at any time prior to the Expiration Date, a
properly completed and duly executed notice of revocation or a changed Consent
bearing a date later than the date of the prior Consent. Until the Expiration
Date, a Consent to such Proposed Amendments by a Holder of Existing Notes shall
bind the Holder and every subsequent Holder of such Existing Notes or portion of
such Existing Notes that evidences the same debt as the consenting Holder's
Existing Notes, even if a notation of the Consent is not made on any such
Existing Notes. However, as stated above, any such Holder (or a subsequent
Holder which has received a proxy) may revoke the Consent as to an Existing Note
or portion of an Existing Note if the Tabulation Agent receives notice of
revocation before the Expiration Date. Therefore, a transfer of Existing Notes
after the Record Date must be accompanied by a duly executed proxy if the
subsequent transferee is to have revocation rights.
24
EFFECTIVE DATE OF THE PROPOSED AMENDMENTS
The Company anticipates that the Company and the Trustee will execute the
First Supplemental Indenture upon consummation of the Offering. Holders will
not receive Consent Payments if the Proposed Amendments do not become operative.
CONDITIONS
The consummation of the Consent Solicitation (including the payment of
Consent Payments in respect thereof) is conditioned on (i) there being received
by the Tabulation Agent (and not revoked), prior to the Expiration Date, the
Requisite Consents, (ii) the execution and delivery of the First Supplemental
Indenture, (iii) the consummation of the Offering, (iv) the closing of the
Mercer Acquisition and (v) 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 Amendments, the entering into of the
First Supplemental Indenture or the payment of any Consent Payments or question
the legality or validity of any thereof.
SOLICITATION AGENT, INFORMATION AGENT AND TABULATION AGENT
The Company has retained NationsBanc Montgomery to serve as its
Solicitation Agent, D.F. King & Co., Inc. to serve as its Information Agent and
United States Trust Company of New York to serve as its Tabulation Agent in
connection with the Solicitation. NationsBanc Montgomery has not been retained
to render an opinion as to the fairness of the Solicitation. The Company has
agreed to reimburse NationsBanc Montgomery for its out-of-pocket expenses,
including the fees and expenses of its counsel, and will indemnify NationsBanc
Montgomery against certain liabilities and expenses. At any time, the
Solicitation Agent may trade the Existing Notes and the New Notes for its own
account or for the accounts or for the accounts of customers and, accordingly,
may have a long or short position in the Existing Notes and the New Notes. The
Solicitation Agent and its affiliates have provided in the past, and are
currently providing, other investment banking and/or financial advisory services
to the Company. NationsBanc Montgomery is also the Initial Purchaser of the New
Notes. See "Alternative Financing." Each of the Solicitation Agent, Tabulation
Agent and Information Agent will receive a fee from the Company for serving in
such capacities.
THE COMPANY HAS NOT AUTHORIZED ANY PERSON (INCLUDING THE INFORMATION AGENT)
TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
SOLICITATION OF CONSENTS OTHER THAN AS SET FORTH HEREIN AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY.
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 Information
25
Agent at its address and telephone number set forth on the back cover of this
Consent Solicitation Statement.
FEES AND EXPENSES
The Company will bear the costs of the Solicitation, including the fees and
expenses of the Solicitation Agent, the Tabulation Agent and the Information
Agent. The Company will pay the Trustee under the Original Indenture reasonable
and customary compensation for its services in connection with the Solicitation,
plus reimbursement for expenses.
Brokers, dealers, commercial banks, trust companies and other nominees will
be reimbursed by the Tabulation Agent, by application of funds provided by the
Company, for customary mailing and handling expenses incurred by them in
forwarding material to their customers. All other fees and expenses
attributable to the Solicitation, other than expenses incurred by Holders of
Existing Notes, will be paid by the Company.
26
CERTAIN UNITED STATES
FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following discussion summarizes certain United States Federal income
tax consequences to Holders resulting from the Solicitation. This summary is
based on the Internal Revenue Code of 1986, as amended (the "Code"), existing
and proposed Treasury regulations, administrative pronouncements and judicial
decisions currently in effect, all of which are subject to change, possibly on a
retroactive basis. The discussion below does not purport to deal with all
aspects of United States Federal income taxation that may be relevant to
particular investors in light of their personal investment circumstances, nor
does it discuss the application of the United States Federal income tax laws to
persons or entities subject to special treatment under the Code (for example,
dealers in securities, banks, insurance companies, regulated investment
companies, S corporations, nonresident aliens, foreign corporations and
tax-exempt entities), nor does it address any aspect of gift, estate, state,
local or foreign taxation. Holders should consult their own tax advisers
regarding the tax consequences of the Solicitation.
TREATMENT OF HOLDERS
GENERALLY
Regulations promulgated pursuant to Section 1001 of the Code provide rules
for determining whether modifications to a debt instrument are significant and
will result in a deemed exchange of the original debt instrument for a "new"
debt instrument. Pursuant to the regulations, a consent payment generally is
treated as increasing the yield of the debt instrument and an increase in yield
is generally treated as causing a deemed exchange of the debt instrument unless
the increase in yield falls within a prescribed "safe harbor" amount. The
Consent Payments will satisfy the safe harbor in the regulations, and
accordingly, the payment of the Consent Payment will not result in a deemed
exchange of the Existing Notes held by consenting Holders for federal income tax
purposes.
Accordingly, a Holder will not recognize gain or loss as a result of the
implementation of the Proposed Amendments, regardless of whether or not such
Holder receives a Consent Payment, but consenting Holders receiving Consent
Payments will recognize ordinary income upon receipt of such payment as
discussed below.
THE CONSENT PAYMENT
There is no authority directly on point concerning the United States
federal income tax consequences of receipt of the Consent Payment. In the
absence of an administrative or judicial decision to the contrary with respect
to such payments, the Company intends to treat Consent Payments paid to
consenting Holders as a separate fee for consenting to the Proposed Amendments
which constitutes ordinary income to such Holder for United States Federal
income tax purposes.
27
PROPOSED AMENDMENTS
The federal income tax consequences of the adoption of the Proposed
Amendments depend upon whether the Proposed Amendments result in a deemed
exchange of the Notes for new Notes under Section 1001 of the Code. The
Treasury Regulations provide that a modification that adds, deletes or alters
customary accounting or financial covenants is not a significant modification
and therefore does not result in a deemed exchange. The Company believes that
the adoption of the Proposed Amendments merely alters the financial covenants
contained in the Notes and therefore should not result in a deemed exchange for
federal income tax purposes. Accordingly, holders should not recognize any gain
or loss as a result of the proposed amendments becoming effective. However,
receipt of the consent payments will result in taxable income to the holders as
described above.
BACKUP WITHHOLDING
Under United States Federal income tax law, in certain circumstances, a
consenting Holder may be subject to backup withholding at the rate of 31% with
respect to the Consent Payment received by such Holder, unless such consenting
Holder (i) is a corporation or is otherwise exempt and, when required,
demonstrates this fact, or (ii) provides a correct taxpayer identification
number, certifies as to no loss of backup withholding and otherwise complies
with the applicable requirements of the backup withholding rules.
28
SCHEDULE A
MARK-UP OF ORIGINAL INDENTURE PROVISIONS
[Note: Additions to Original Indenture are bold underscored;
deletions are marked by strike-through notation]
SECTION 101. DEFINITIONS.
<#>"Additional New Notes" means up to $20.0 million in aggregate principal
amount of New Notes having identical terms to the New Notes that, subject to
compliance with Article 10 of the New Indenture, may be issued after the New
Closing Date pursuant to the New Indenture.
"Mercer Acquisition" means the acquisition by the Company of all of the
outstanding capital stock of Mercer Products Company, Inc. pursuant to a Stock
Purchase Agreement dated March 5, 1998 among the Company, Mercer and Sovereign
Specialty Chemicals, Inc.
"New Closing Date" means the date on which the New Notes are originally
issued under the New Indenture.
"New Indenture" means the indenture entered into on the New Closing Date
pursuant to which the New Notes are issued, as it may be supplemented or amended
from time to time.
"New Notes" means Floating Interest Rate Senior Notes due August 15, 2007
to be issued in connection with the Mercer Acquisition and shall include (i) any
notes having substantially identical terms issued in exchange for such New Notes
or any Additional New Notes pursuant to a registration rights agreement and (ii)
any Additional New Notes that may be issued pursuant to the New Indenture.
"New Notes Guarantee" means any guarantee of the New Notes issued by a
Restricted Subsidiary of the Company pursuant to the New Indenture.</#>
"Permitted Investments" means any of the following:
(a) Investments in (i) securities with a maturity at the time of
acquisition of one year or less issued or directly and fully guaranteed or
insured by the United States or any agency or instrumentality thereof
(provided that the full faith and credit of the United States is pledged in
support thereof); (ii) certificates of deposit, Eurodollar deposits or
bankers' acceptances with a maturity at the time of acquisition of one year
or less of any financial institution that is a member of the Federal
Reserve System having combined capital and surplus of not less than
$500,000,000; (iii) any shares of money market
A-1
mutual or similar funds having assets in excess of $500,000,000; and (iv)
commercial paper with a maturity at the time of acquisition of one year or
less issued by a corporation that is not an Affiliate of the Company and is
organized under the laws of any state of the United States or the District
of Columbia and having a rating (A) from Moody's Investors Service, Inc. of
at least P-1 or (B) from Standard & Poor's Ratings Services of at least
A-1;
(b) Investments by the Company or any Restricted Subsidiary in
another person, if as a result of such Investment (i) such other person
becomes a Wholly Owned Restricted Subsidiary that is a Subsidiary Guarantor
or (ii) such other person is merged or consolidated with or into, or
transfers or conveys all or substantially all of its assets to, the Company
or a Restricted Subsidiary;
(c) Investments by the Company or a Restricted Subsidiary in the
Company or a Restricted Subsidiary that is a Subsidiary Guarantor;
(d) Investments in existence on the Closing Date;
(e) promissory notes received as a result of Asset Sales permitted
under Section 1016;
(f) any acquisition of assets solely in exchange for the issuance of
Qualified Equity Interests of the Company;
(g) stock, obligations or securities received in satisfaction of
judgments, in bankruptcy proceedings or in settlement of debts;
(h) Hedging Obligations otherwise permitted under the Indenture;
(i) loans or advances to officers or employees of the Company or any
of its Restricted Subsidiaries in the ordinary course of business not to
exceed $250,000 in the aggregate at any one time outstanding; and
(j) other Investments <*>that do not exceed $4</*> <#>in any Person,
a majority of the equity ownership and Voting Stock of which is owned,
directly or indirectly, by the Company and/or one or more of the
Subsidiaries of the Company, that do not exceed $7.5</#> million in the
aggregate at any time outstanding.
"Series A Preferred Stock" means, <#>collectively,</#> the Series A
Cumulative Redeemable Preferred Stock of the Company, <*>par value $0.01 per
share.</*> <#>no par value and the Series B Cumulative Redeemable Preferred
Stock of the Company, no par value, in each case issued on the Closing Date.</#>
A-2
<#>"Series C Preferred Stock" means the Convertible Preferred Stock of the
Company issued on the New Closing Date.</#>
SECTION 1010. LIMITATION ON INDEBTEDNESS OR ISSUANCE OF DISQUALIFIED STOCK.
The Company shall not, and shall not permit any Restricted Subsidiary to,
create, issue, assume, guarantee or in any manner become directly or indirectly
liable for the payment of, or otherwise incur (collectively, "incur"), any
Indebtedness (including Acquired Indebtedness and the issuance of Disqualified
Stock), except that the Company or any Subsidiary Guarantor may incur
Indebtedness if, at the time of such event, the Fixed Charge Coverage Ratio for
the immediately preceding four full fiscal quarters for which internal financial
statements are available, taken as one accounting period, would have been equal
to at least 2.00 to 1.0.
In making the foregoing calculation for any four-quarter period that
includes the Closing Date, pro forma effect shall be given to the Offering and
the Recapitalization, as if such transactions had occurred at the beginning of
such four-quarter period. In addition (but without duplication), in making the
foregoing calculation, pro forma effect shall be given to: (i) the incurrence
of such Indebtedness and (if applicable) the application of the net proceeds
therefrom, including to refinance other Indebtedness, as if such Indebtedness
was incurred and the application of such proceeds occurred at the beginning of
such four-quarter period, (ii) the incurrence, repayment or retirement of any
other Indebtedness by the Company or its Restricted Subsidiaries since the first
day of such four-quarter period as if such Indebtedness was incurred, repaid or
retired at the beginning of such four-quarter period and (iii) the acquisition
(whether by purchase, merger or otherwise) or disposition (whether by sale,
merger or otherwise) of any company, entity or business acquired or disposed of
by the Company or its Restricted Subsidiaries, as the case may be, since the
first day of such four-quarter period, in each case as if such acquisition or
disposition (and the reduction or increase of any associated Fixed Charge
obligations and the change in Consolidated EBITDA resulting therefrom) had
occurred at the beginning of such four-quarter period. If since the beginning
of such period any Person (that subsequently became a Restricted Subsidiary or
was merged with or into the Company or any Restricted Subsidiary since the
beginning of such period) shall have made any acquisition (whether by purchase,
merger or otherwise) or disposition that would have required adjustment pursuant
to this definition, then the Fixed Charge Coverage Ratio shall be calculated
giving PRO FORMA effect thereto as if such acquisition or disposition had
occurred at the beginning of the applicable four-quarter period. In making a
computation under the foregoing clause (i) or (ii), (A) the amount of
Indebtedness under a revolving credit facility shall be computed based on the
average daily balance of such Indebtedness during such four-quarter period, (B)
if such Indebtedness bears, at the option of the Company, a fixed or floating
rate of interest, interest thereon shall be computed by applying, at the option
of the Company, either the fixed or floating rate and (C) the amount of any
Indebtedness that bears interest at a floating rate will be calculated as if the
rate in effect on the date of determination had been the applicable rate for the
entire period (taking into account any Hedging Obligations applicable to such
Indebtedness if such Hedging Obligations have a remaining term at the date of
determination in excess of 12 months). For purposes of this definition,
whenever PRO FORMA effect is to be given to a
A-3
transaction, the PRO FORMA calculations shall be made in good faith by the chief
financial officer of the Company.
Notwithstanding the foregoing, the Company may, and may permit its
Restricted Subsidiaries to, incur the following Indebtedness ("Permitted
Indebtedness"):
(i) Indebtedness of the Company or any Restricted Subsidiary under
the Bank Credit Agreement or one or more other credit facilities (and the
incurrence by any Restricted Subsidiary of guarantees thereof) in an
aggregate principal amount at any one time outstanding not to exceed the
greater of (x) <*>$15</*> <#>$25.0</#> million or (y) the amount of the
Borrowing Base, less any amounts applied to the permanent reduction of such
credit facilities pursuant to Section 1016;
(ii) Indebtedness of the Company or any Restricted Subsidiary
outstanding on the Closing Date and listed on a schedule to the
Indenture (other than Indebtedness described under clause (i) above);
(iii) Indebtedness owed by the Company to any Wholly Owned
Restricted Subsidiary or owed by any Restricted Subsidiary to the
Company or a Wholly Owned Restricted Subsidiary (provided that such
Indebtedness is held by the Company or such Restricted Subsidiary);
PROVIDED, HOWEVER, that any Indebtedness of the Company owing to any
such Restricted Subsidiary is unsecured and subordinated in right of
payment from and after such time as the Notes shall become due and
payable (whether at Stated Maturity, acceleration, or otherwise) to
the payment and performance of the Company's obligations under the
Notes;
(iv) Indebtedness represented by <#>(i)</#> the Notes (other than the
Additional Notes) <*>and</*><#>, (ii)</#> the Note Guarantees (including
any Note Guarantees issued pursuant to Section 1021<*>);</*> <#>of this
Indenture), (iii) the New Notes (other than any Additional New Notes) and
(iv) the New Notes Guarantees (including any New Notes Guarantees issued
pursuant to Section 1021 of the New Indenture);</#>
(v) Indebtedness of the Company or any Restricted Subsidiary
under Hedging Obligations incurred in the ordinary course of business;
(vi) Indebtedness of the Company or any Restricted Subsidiary
consisting of guarantees, indemnities or obligations in respect of
purchase price adjustments in connection with the acquisition or
disposition of assets, including, without limitation, shares of
Capital Stock;
(vii) either (A) Capitalized Lease Obligations of the Company or any
Restricted Subsidiary or (B) Indebtedness under purchase money mortgages or
secured by purchase money security interests, in each case incurred for the
purpose of financing or refinancing all or any part of the purchase price
or cost of construction or improvement of any
A-4
property (real or personal) or other assets that are used or useful in the
business of the Company or such Restricted Subsidiary (whether through the
direct purchase of assets or the Capital Stock of any Person owning such
assets and whether such Indebtedness is owed to the seller or Person
carrying out such construction or improvement or to any third party), so
long as (x) such Indebtedness is not secured by any property or assets of
the Company or any Restricted Subsidiary other than the property and assets
so acquired, constructed or improved and (y) such Indebtedness is created
within 90 days of the acquisition or completion of construction or
improvement of the related property; provided that the aggregate amount of
Indebtedness under clauses (A) and (B) does not exceed <*>$7,500,000</*>
<#>$10.0</#> million at any one time outstanding;
(viii) Indebtedness of the Company or any Restricted Subsidiary not
permitted by any other clause of this definition, in an aggregate principal
amount not to exceed <*>$10</*> <#>$15.0</#> million at any one time
outstanding;
(ix) Indebtedness under (or constituting reimbursement
obligations with respect) to letters of credit issued in the ordinary
course of business, including without limitation letters of credit in
respect of workers' compensation claims or self-insurance, or other
Indebtedness with respect to reimbursement type obligations regarding
workers' compensation claims; PROVIDED, HOWEVER, that upon the drawing
of such letters of credit or other obligations, such obligations are
reimbursed within five days following such drawing; and
(x) any renewals, extensions, substitutions, refinancings or
replacements (each, for purposes of this clause, a "refinancing") of
any outstanding Indebtedness, other than Indebtedness incurred
pursuant to clause (i), (iii), (v), (vi), (vii), (viii) or (ix) of
this definition, including any successive refinancings thereof, so
long as (A) any such new Indebtedness is in a principal amount that
does not exceed the principal amount so refinanced, plus the amount of
any premium required to be paid in connection with such refinancing
pursuant to the terms of the Indebtedness refinanced or the amount of
any premium reasonably determined by the Company as necessary to
accomplish such refinancing, plus the amount of the expenses of the
Company incurred in connection with such refinancing, (B) in the case
of any refinancing of Subordinated Indebtedness, such new Indebtedness
is made subordinate to the Notes at least to the same extent as the
Indebtedness being refinanced and (C) such refinancing Indebtedness
does not have an Average Life less than the Average Life of the
Indebtedness being refinanced and does not have a final scheduled
maturity earlier than the final scheduled maturity, or permit
redemption at the option of the holder earlier than the earliest date
of redemption at the option of the holder, of the Indebtedness being
refinanced.
SECTION 1011. LIMITATION ON RESTRICTED PAYMENTS.
A-5
The Company shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, take any of the following actions:
(a) declare or pay any dividend or make any other payment or
distribution on account of the Company's or any of its Restricted
Subsidiaries' Capital Stock (including, without limitation any payment in
connection with any merger or consolidation involving the Company) or to
the direct or indirect holders of the Company's or any of its Restricted
Subsidiaries' Capital Stock in their capacity as such, other than (i)
dividends, payments or distributions payable solely in Qualified Equity
Interests, (ii) dividends, payments or distributions by a Restricted
Subsidiary payments payable to the Company or another Restricted Subsidiary
or (iii) pro rata dividends, payments or distributions on common stock of
Restricted Subsidiaries held by minority stockholders, provided that such
dividends, payments or distributions do not in the aggregate exceed the
minority stockholders' pro rata share of such Restricted Subsidiaries' net
income from the first day of the Company's fiscal quarter during which the
Closing Date occurs;
(b) purchase, redeem or otherwise acquire or retire for value,
directly or indirectly, any shares of Capital Stock, or any options,
warrants or other rights to acquire such shares of Capital Stock of (i) the
Company or (ii) any Restricted Subsidiary held by any Affiliate of the
Company (other than, in either case, any such Capital Stock owned by the
Company or any of its Restricted Subsidiaries);
(c) make any principal payment on, or repurchase, redeem, defease or
otherwise acquire or retire for value, prior to any scheduled principal
payment, sinking fund payment or maturity, any Subordinated Indebtedness;
and
(d) make any Investment (other than a Permitted Investment) in any
person (such payments or other actions described in (but not excluded from)
clauses (a) through (d) being referred to as "Restricted Payments"), unless
at the time of, and immediately after giving effect to, the proposed
Restricted Payment:
(i) no Default or Event of Default has occurred and is continuing,
(ii) the Company could incur at least $1.00 of additional Indebtedness
pursuant to the first paragraph of Section 1010 and
(iii) the aggregate amount of all Restricted Payments made after the
Closing Date does not exceed the sum of:
(A) 50% of the aggregate Consolidated Adjusted Net Income of the
Company during the period (taken as one accounting period) from the
first day of the Company's first fiscal quarter commencing after the
Closing Date to the last day of the Company's most recently ended
fiscal quarter for which internal financial statements are available
at the time of such proposed Restricted Payment (or, if such aggregate
cumulative Consolidated Adjusted Net Income is a loss, minus 100% of
such amount), plus
A-6
(B) 100% of the aggregate net cash proceeds received by the
Company after the Closing Date from (x) the issuance or sale (other
than to a Restricted Subsidiary) of either (1) Qualified Equity
Interests of the Company or (2) Indebtedness (other than the Series A
Preferred Stock and any refinancings thereof) or Disqualified Stock
that has been converted into or exchanged for Qualified Equity
Interests of the Company, together with the aggregate net cash
proceeds received by the Company at the time of such conversion or
exchange or (y) cash capital contributions received by the Company
after the Closing Date with respect to Qualified Equity Interests,
plus
(C) $3 million.
<#>For purposes of this "Limitation on Restricted Payments" covenant,
the accrual of dividends on the Series C Preferred Stock shall not be treated as
a Restricted Payment.</#> Notwithstanding the foregoing, the Company and its
Restricted Subsidiaries may take the following actions, so long as (other than
with respect to the action described in clause (a) below) no Default or Event of
Default has occurred and is continuing or would occur:
(a) the payment of any dividend within 60 days after the date of
declaration thereof, if at the declaration date such payment would not have
been prohibited by the foregoing provisions;
(b) the repurchase, redemption or other acquisition or retirement for
value of any shares of Capital Stock of the Company, in exchange for, or
out of the net cash proceeds of a substantially concurrent issuance and
sale (other than to a Subsidiary) of, Qualified Equity Interests of the
Company;
(c) the purchase, redemption, defeasance or other acquisition or
retirement for value of any Subordinated Indebtedness in exchange for, or
out of the net cash proceeds of a substantially concurrent issuance and
sale (other than to a Subsidiary) of, shares of Qualified Equity Interests
of the Company;
(d) the purchase, redemption, defeasance or other acquisition or
retirement for value of Subordinated Indebtedness in exchange for, or out
of the net cash proceeds of a substantially concurrent issuance or sale
(other than to a Restricted Subsidiary) of, Subordinated Indebtedness, so
long as the Company or a Restricted Subsidiary would be permitted to
refinance such original Subordinated Indebtedness with such new
Subordinated Indebtedness pursuant to clause (x) of the definition of
Permitted Indebtedness;
(e) the purchase, redemption, acquisition, cancellation or other
retirement for value of shares of Capital Stock of the Company, options or
warrants to acquire any such shares or related stock appreciation rights
held by officers, directors or employees of the Company or its Subsidiaries
or former officers, directors or employees (or their respective estates or
beneficiaries under their estates) of the Company or its Subsidiaries or by
any plan for their benefit, in each case, upon death, disability,
retirement or
A-7
termination of employment or pursuant to the terms of any benefit plan or
any other agreement under which such shares of stock or options, warrants
or rights were issued; provided that the aggregate cash consideration paid
for such purchase, redemption, acquisition, cancellation or other
retirement of such shares of Capital Stock or options, warrants or rights
after the Closing Date does not exceed in any fiscal year the sum of (i)
$500,000, (ii) the cash proceeds received by the Company after the Closing
Date from the sale of Qualified Equity Interests to employees, directors or
officers of the Company and its Subsidiaries that occurs in such fiscal
year and (iii) amounts referred to in clauses (i) through (ii) that remain
unused from the immediately preceding fiscal year; and
(f) (i) the payment of any regular quarterly dividends in respect of
the Series A Preferred Stock in the form of additional shares of Series A
Preferred Stock having the terms and conditions set forth in the
Certificate of Determination for the Series A Preferred Stock as in effect
on the Closing Date; and (ii) commencing October 15, 2000, the payment of
regular quarterly cash dividends (in the amount no greater than that
provided for in the Certificate of Determination for the Series A Preferred
Stock as in effect on the Closing Date), out of funds legally available
therefor, on any of the shares of Series A Preferred Stock issued and
outstanding on the Closing Date and on any shares of Series A Preferred
Stock issued in payment of dividends made or subsequently issued in payment
of dividends thereon in respect of such shares of Series A Preferred Stock
outstanding on the Closing Date, PROVIDED that, at the time of and
immediately after giving effect to the payment of such cash dividend, the
Fixed Charge Coverage Ratio, giving pro forma effect to the payment of such
dividend as if it had occurred at the beginning of the four full fiscal
quarters immediately preceding the date on which the dividend is to be
paid, would have been equal to at least 2.25 to 1.0.
The actions described in clauses (b), (c), (e) and (f)(ii) of this paragraph
shall be Restricted Payments that will be permitted to be taken in accordance
with this paragraph but will be considered Restricted Payments for purposes of
clause (iii) of the first paragraph of this Section 1011 and the actions
described in clauses (a), (d) and (f)(i) of this paragraph shall be Restricted
Payments that shall be permitted to be taken in accordance with this paragraph
but will not be considered Restricted Payments for purposes of clause (iii) of
the first paragraph of this Section 1011.
For the purpose of making any calculations under the Indenture (i) if
a Restricted Subsidiary is designated an Unrestricted Subsidiary, the Company
shall be deemed to have made an Investment in an amount equal to the fair market
value of the net assets of such Restricted Subsidiary at the time of such
designation as determined by the Board of Directors of the Company, whose good
faith determination shall be conclusive, (ii) any property transferred to or
from an Unrestricted Subsidiary shall be valued at fair market value at the time
of such transfer, as determined by the Board of Directors of the Company, whose
good faith determination shall be conclusive and (iii) subject to the foregoing,
the amount of any Restricted Payment, if other than cash, shall be determined by
the Board of Directors of the Company, whose good faith determination shall be
conclusive.
A-8
If the aggregate amount of all Restricted Payments calculated under
the foregoing provision includes an Investment (other than a Permitted
Investment) in an Unrestricted Subsidiary or other person that thereafter
becomes a Restricted Subsidiary, the aggregate amount of all Restricted Payments
calculated under the foregoing provision shall be reduced by the lesser of (x)
the net asset value of such Subsidiary at the time it becomes a Restricted
Subsidiary and (y) the initial amount of such Restricted Payment.
If an Investment resulted in the making of a Restricted Payment, the
aggregate amount of all Restricted Payments calculated under the foregoing
provision shall be reduced by the amount of any net reduction in such Investment
(resulting from the payment of interest or dividends, loan repayment, transfer
of assets or otherwise), to the extent such net reduction is not included in the
Company's Consolidated Adjusted Net Income; provided that the total amount by
which the aggregate amount of all Restricted Payments may be reduced may not
exceed the lesser of (x) the cash proceeds received by the Company and its
Restricted Subsidiaries in connection with such net reduction and (y) the
initial amount of such Restricted Payment.
In computing the Consolidated Adjusted Net Income of the Company for
purposes of the foregoing clause (iii)(A), (i) the Company may use audited
financial statements for the portions of the relevant period for which audited
financial statements are available on the date of determination and unaudited
financial statements and other current financial data based on the books and
records of the Company for the remaining portion of such period and (ii) the
Company shall be permitted to rely in good faith on the financial statements and
other financial data derived from its books and records that are available on
the date of determination. If the Company makes a Restricted Payment that, at
the time of the making of such Restricted Payment, would in the good faith
determination of the Company be permitted under the requirements of the
Indenture, such Restricted Payment shall be deemed to have been made in
compliance with the Indenture notwithstanding any subsequent adjustments made in
good faith to the Company's financial statements affecting Consolidated Adjusted
Net Income of the Company for any period.
SECTION 1013. LIMITATION ON TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, enter into or suffer to exist any transaction with, or
for the benefit of, any Affiliate of the Company or any beneficial owner of 10%
or more of any class of the Capital Stock of the Company at any time outstanding
("Interested Persons"), unless (a) such transaction is on terms that are no less
favorable to the Company or such Restricted Subsidiary, as the case may be, than
those that could have been obtained in an arm's length transaction with third
parties who are not Interested Persons and (b) the Company delivers to the
Trustee (i) with respect to any transaction or series of related transactions
entered into after the Closing Date involving aggregate payments in excess of
$1.0 million, a resolution of the Board of Directors of the Company set forth in
an officers' certificate certifying that such transaction or transactions
complies with clause (a) above and that such transaction or transactions have
been approved by the Board of Directors (including a majority of the
Disinterested Directors) of the Company and (ii) with respect to a transaction
or series of related transactions involving aggregate payments equal to or
greater than
A-9
$5 million, a written opinion as to the fairness to the Company or such
Restricted Subsidiary of such transaction or series of transactions from a
financial point of view issued by an independent investment banking, accounting
or valuation firm of national standing.
The foregoing covenant shall not restrict
(A) transactions among the Company and/or its Restricted
Subsidiaries;
(B) transactions (including Permitted Investments) permitted by
Section 1011;
(C) employment agreements on customary terms and the payment of
regular and customary compensation to employees, officers or directors in
the ordinary course of business;
(D) the payment to the Principals or their Related Parties and
Affiliates, of annual management and advisory fees and related expenses,
PROVIDED that the amount of any such fees and expenses shall not exceed
$500,000 per fiscal year, PROVIDED FURTHER that any such fees shall only
commence accruing on October 1, 1998 and shall be payable in arrears on a
quarterly basis commencing on January 1, 1999;
(E) loans or advances to officers or employees of the Company or any
of its Restricted Subsidiaries in the ordinary course of business not to
exceed $250,000 in the aggregate at any one time outstanding;
(F) the payment of all fees and expenses related to the
Recapitalization<#>, the offering of the New Notes and the Mercer
Acquisition</#>; and
(G) any agreement to which the Company or any Restricted Subsidiary
is a party as in effect as of the date of the Indenture as set forth in
Schedule A hereto or any amendment thereto (as long as any such amendment
is not disadvantageous to the Holders in any material respect) or any
transaction contemplated thereby.
SECTION 1014. LIMITATION ON LIENS.
The Company shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, create, incur, assume or suffer to exist any Lien of any
kind on or with respect to any of its property or assets, including any shares
of stock or debt of any Restricted Subsidiary, whether owned at the Closing Date
or thereafter acquired, or any income, profits or proceeds therefrom, or assign
or otherwise convey any right to receive income thereon, unless (a) in the case
of any Lien securing Subordinated Indebtedness, the Notes are secured by a Lien
on such property, assets or proceeds that is senior in priority to such Lien and
(b) in the case of any other Lien, the Notes are equally and ratably secured
with the obligation or liability secured by such Lien.
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Notwithstanding the foregoing, the Company may, and may permit any
Subsidiary to, incur the following Liens ("Permitted Liens"):
(i) Liens (other than Liens securing Indebtedness under the Bank
Credit Agreement) existing as of the Closing Date;
(ii) Liens on property or assets of the Company or any Restricted
Subsidiary securing Indebtedness under the Bank Credit Agreement or one or
more other credit facilities in a principal amount not to exceed the
<#>aggregate</#> principal amount of the outstanding Indebtedness permitted
by <*>clause</*> <#>clauses</#> (i) <#>and (viii)</#> of the definition of
"Permitted Indebtedness";
(iii) Liens on any property or assets of a Restricted Subsidiary
granted in favor of the Company or any Wholly Owned Restricted Subsidiary;
(iv) Liens securing <#>(a)</#> the Notes or any Note Guarantee
<#>or (b) any New Notes or any New Notes Guarantees, provided that both the
Notes or any related Note Guarantee and the New Notes or any related New
Notes Guarantee are secured equally and ratably with the obligation or
liability secured by such Lien</#>;
(v) any interest or title of a lessor under any Capitalized Lease
Obligation or Sale and Leaseback Transaction that was not entered into in
violation of Section 1010;
(vi) Liens securing Acquired Indebtedness created prior to (and
not in connection with or in contemplation of) the incurrence of such
Indebtedness by the Company or any Restricted Subsidiary; provided that
such Lien does not extend to any property or assets of the Company or any
Restricted Subsidiary other than the property and assets acquired in
connection with the incurrence of such Acquired Indebtedness;
(vii) Liens securing Hedging Obligations permitted to be incurred
pursuant to clause (v) of the definition of "Permitted Indebtedness";
(viii) Liens securing Indebtedness permitted to be incurred under
paragraph (vii) of the definition of "Permitted Indebtedness" in Section
1010;
(ix) statutory Liens or landlords', carriers', warehouseman's,
mechanics', suppliers', materialmen's, repairmen's or other like Liens
arising in the ordinary course of business and with respect to amounts not
yet delinquent or being contested in good faith by appropriate proceedings
and, if required by GAAP, a reserve or other appropriate provision has been
made therefor;
(x) Liens for taxes, assessments, government charges or claims
that are not yet delinquent or being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted and,
if required by GAAP, a reserve or other appropriate provision has been made
therefor;
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(xi) Liens incurred or deposits made to secure the performance of
tenders, bids, leases, statutory obligations, surety and appeal bonds,
government contracts, performance bonds and other obligations of a like
nature incurred in the ordinary course of business (other than contracts
for the payment of money);
(xii) easements, rights-of-way, restrictions and other similar
charges or encumbrances not interfering in any material respect with the
business of the Company or any Restricted Subsidiary incurred in the
ordinary course of business;
(xiii) Liens arising by reason of any judgment, decree or order of
any court, so long as such Lien is adequately bonded and any appropriate
legal proceedings that may have been duly initiated for the review of such
judgment, decree or order have not been finally terminated or the period
within which such proceedings may be initiated has not expired;
(xiv) Liens securing reimbursement obligations with respect to
letters of credit that encumber documents and other property relating to
such letters of credit and the products and proceeds thereof;
(xv) Liens upon specific items of inventory or other goods and
proceeds of the Company or any Restricted Subsidiary securing its
obligations in respect of bankers' acceptances issued or created for the
account of any person to facilitate the purchase, shipment or storage of
such inventory or other goods;
(xvi) 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;
(xvii) Liens incurred in the ordinary course of business of the
Company or any Restricted Subsidiary of the Company with respect to
obligations that do not exceed $500,000 at any one time outstanding and
that (a) are not incurred in connection with the borrowing of money or the
obtaining of advances or credit (other than trade credit in the ordinary
course of business) and (b) do not in the aggregate materially detract
from the value of the property or materially impair the use thereof in the
operation of the businesses of the Company or such Restricted Subsidiary;
(xviii) leases or subleases to third parties;
(xix) Liens in connection with workers' compensation obligations of
the Company and its Restricted Subsidiaries incurred in the ordinary
course; and
(xx) any extension, renewal or replacement, in whole or in part, of
any Lien described in the foregoing clauses (i) through (xix); provided
that any such extension, renewal or replacement is no more restrictive in
any material respect than the Lien so extended, renewed or replaced and
does not extend to any additional property or assets.
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SECTION 1016. LIMITATION ON CERTAIN ASSET SALES.
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, engage in any Asset Sale unless (i) the consideration received by
the Company or such Restricted Subsidiary for such Asset Sale is not less than
the fair market value of the assets sold (as determined by the Board of
Directors of the Company, whose good faith determination shall be conclusive)
and (ii) the consideration received by the Company or the relevant Restricted
Subsidiary in respect of such Asset Sale consists of at least 75% cash or cash
equivalents (including, for purposes of this clause (ii), the principal amount
of any Indebtedness for money borrowed (as reflected on the Company's
consolidated balance sheet) of the Company or any Restricted Subsidiary that (x)
is assumed by any transferee of any such assets or other property in such Asset
Sale or (y) with respect to the sale or other disposition of all of the Capital
Stock of any Restricted Subsidiary, remains the liability of such Subsidiary
subsequent to such sale or other disposition, but only to the extent that such
assumption, sale or other disposition, as the case may be, is effected on a
basis under which there is no further recourse to the Company or any of its
Restricted Subsidiaries with respect to such liability).
(b) If the Company or any Restricted Subsidiary engages in an Asset
Sale, the Company may, at its option, within 12 months after such Asset Sale,
(i) apply all or a portion of the Net Cash Proceeds to the reduction of amounts
outstanding under the Bank Credit Agreement or to the permanent repayment of
other senior Indebtedness of the Company or a Restricted Subsidiary, or (ii)
invest (or enter into a legally binding agreement to invest) all or a portion of
such Net Cash Proceeds in the making of capital expenditures, the acquisition of
a controlling interest in a Permitted Business or acquisition of other long-term
assets, in each case, that shall be used or useful in the Permitted Businesses
of the Company or its Restricted Subsidiaries, as the case may be. Pending the
final application of any such Net Cash Proceeds, the Company may temporarily
reduce revolving credit Indebtedness to the extent not prohibited by the
Indenture. If any such legally binding agreement to invest such Net Cash
Proceeds is terminated, the Company may, within 90 days of such termination or
within 12 months of such Asset Sale, whichever is later, invest such Net Cash
Proceeds as provided in clause (i) or (ii) (without regard to the parenthetical
contained in such clause (ii)) above. The amount of such Net Cash Proceeds not
so used as set forth above in this paragraph (b) constitutes "Excess Proceeds".
(c) When the aggregate amount of Excess Proceeds exceeds $5 million,
the Company shall, within 30 days thereafter, make an offer (an "Excess Proceeds
Offer") to purchase from all holders of Notes and <*>Additional Notes, on a pro
rata basis</*> <#>New Notes, PRO RATA in proportion to the respective principal
amounts outstanding of the Notes and New Notes</#>, the maximum principal amount
(expressed as a multiple of $1,000) of Notes and <*>Additional</*> <#>New</#>
Notes that may be purchased <*>with</*> <#>out of</#> the Excess Proceeds, at a
purchase price in cash equal to 100% of the principal amount thereof, plus
accrued interest, if any, and Liquidated Damages, if any, to the date such offer
to purchase is consummated. To the extent that the aggregate principal amount
of Notes and <*>Additional</*> <#>New</#> Notes tendered pursuant to such offer
to purchase is less than the Excess Proceeds, the Company or its Restricted
Subsidiaries may use such deficiency for general corporate purposes. If the
aggregate principal amount of Notes and <*>Additional</*> <#>New</#> Notes
validly tendered and not withdrawn by holders thereof exceeds the Excess
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Proceeds, the Notes and <*>Additional</*> <#>New</#> Notes to be purchased shall
be selected on a PRO RATA basis. Upon completion of such offer to purchase, the
amount of Excess Proceeds shall be reset to zero.
(d) The Company shall commence an Excess Proceeds Offer by mailing a
notice to the Trustee and each Holder as of such record date as the Company
shall establish (and delivering such notice to the Trustee at least five days
prior thereto) stating:
(i) that the Excess Proceeds Offer is being made pursuant to this
Section 1016 and that all Notes validly tendered will be accepted for
payment on a PRO RATA basis;
(ii) the purchase price and the date of purchase (which shall be a
Business Day no earlier than 30 days nor later than 60 days from the date
such notice is mailed) (the "Excess Proceeds Payment Date");
(iii) that any Note not tendered will continue to accrue interest;
(iv) that, unless the Company defaults in the payment of the Excess
Proceeds Payment, any Note accepted for payment pursuant to the Excess
Proceeds Offer shall cease to accrue interest on and after the Excess
Proceeds Payment Date;
(v) that Holders electing to have any Note purchased pursuant to the
Excess Proceeds Offer will be required to surrender such Note, together
with the form entitled "Option of the Holder to Elect Purchase" on the
reverse side of the Note completed, to the Paying Agent at the address
specified in the notice prior to the close of business on the Business Day
immediately preceding the Excess Proceeds Payment Date;
(vi) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the close of business on the third
Business Day immediately preceding the Excess Proceeds Payment Date, a
telegram, telex, facsimile transmission or letter setting forth the name of
such Holder, the principal amount of Notes delivered for purchase and a
statement that such Holder is withdrawing his election to have such Notes
purchased; and
(vii) that Holders whose Notes are being purchased only in part will be
issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered; PROVIDED that each Note purchased and each new Note
issued shall be in a principal amount of $1,000 or integral multiples
thereof.
At least five days prior to the date notice is mailed to each Holder,
the Company shall furnish the Trustee with an Officers' Certificate stating the
amount of the Excess Proceeds Payment.
(e) On the Excess Proceeds Payment Date, the Company shall:
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(i) accept for payment on a pro rata basis Notes or portions thereof
tendered pursuant to the Excess Proceeds Offer;
(ii) deposit one day prior to the Excess Proceeds Payment Date with
the Paying Agent money sufficient to pay the purchase price of all Notes or
portions thereof so accepted; and
(iii) deliver; or cause to be delivered, to the Trustee, all Notes or
portions thereof so accepted, together with an Officers' Certificate
specifying the Notes or portions thereof accepted for payment by the
Company.
The Paying Agent shall promptly mail to the Holders of Notes so
accepted payment in an amount equal to the purchase price, and the Trustee shall
promptly authenticate and mail to such Holders a new Note equal in principal
amount to any unpurchased portion of the Note surrendered; PROVIDED that each
Note purchased and each new Note issued shall be in a principal amount of $1,000
or integral multiples thereof.
The Company will publicly announce the results of the Excess Proceeds
Offer as soon as practicable after the Excess Proceeds Payment Date. For
purposes of this Section 1016, the Trustee shall act as the Paying Agent. All
Notes or portions thereof purchased pursuant to this Section 1016 will be
cancelled by the Trustee.
(f) The Company shall comply with the applicable tender offer rules
including Rule-14e under the Exchange Act, and any other applicable securities
laws and regulations in connection with an offer made pursuant to clause (c)
above. To the extent that provisions of any applicable securities laws or
regulations conflict with provisions of this Section 1016, the Company shall
comply with such securities laws and regulations and shall not be deemed to have
breached its obligations under this Section 1016 by virtue thereof.
A-15
BURKE INDUSTRIES, INC.
SOLICITATION OF CONSENTS TO INDENTURE AMENDMENTS
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 document, 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 Information Agent at one of its
telephone numbers set forth below. A Holder may also contact the Solicitation
Agent at its telephone number set forth below or such Holder's broker, dealer,
commercial bank, trust company or other nominee for assistance concerning the
Consent Solicitation.
The Tabulation Agent for the Solicitation is:
UNITED STATES TRUST COMPANY OF NEW YORK
By Overnight Courier: By Hand: By Registered or Certified Mail:
United States Trust Company United States Trust Company United States Trust Company
of New York of New York of New York
770 Broadway, 13th Floor 111 Broadway, Lower Level P.O. Box 844, Cooper Station
New York, New York 10003 New York, New York 10006 New York, New York 10276-0844
Attn: Corporate Trust Services Attn: Corporate Trust Services Attn: Corporate Trust Services
By Facsimile Transmission
(212) 420-6152
Confirm by Telephone
(800) 548-6565
The Information Agent for the Solicitation is:
D.F. KING & CO., INC.
77 Water Street, 20th Floor
New York, New York 10005
Banks and Brokers Call Collect
(212) 269-5550
All Others Call Toll-Free
(800) 859-8508
The Solicitation Agent for the Solicitation is:
NATIONSBANC MONTGOMERY SECURITIES LLC
100 North Tryon Street, 7th Floor
Charlotte, North Carolina 28255
Attn: Liability Management Group
(704) 388-4807
or Toll-Free
(888) 292-0070