Exhibit 10.21
FIFTH SUPPLEMENTAL INDENTURE
AND WAIVER OF COVENANTS
FIFTH SUPPLEMENTAL INDENTURE AND WAIVER OF COVENANTS, dated as of
March 16, 2000 (the "Fifth Supplemental Indenture") to the Indenture, dated as
of May 1, 1993, between Chatwins Group, Inc., a Delaware corporation (the
"Company"), Reunion Industries, Inc., a Delaware corporation ("Reunion"), and
State Street Bank and Trust Company, a Massachusetts trust company, as successor
trustee to The First National Bank of Boston (the "Trustee"), as amended by the
First Supplemental Indenture and Waiver of Covenants, dated as of June 20, 1995
between the Company and the Trustee, the Second Supplemental Indenture, dated as
of June 20, 1995, between the Company and the Trustee, the Third Supplemental
Indenture, dated as of May 28, 1999, between the Company and the Trustee, and
the Fourth Supplemental Indenture, dated as of March 8, 2000, between the
Company and the Trustee (as amended, the "Indenture"). Capitalized terms used
herein but not otherwise defined shall have the respective meanings set forth in
the Indenture or in the Amended Consent Solicitation and Notice of Offer to
Purchase Senior Notes of the Company, dated February 1, 2000, attached hereto as
Schedule I (the "Consent Solicitation").
The Company and the Trustee, pursuant to Sections 9.02 and 5.01 of the
Indenture, agree as follows for the benefit of the other party and for the equal
and ratable benefit of the holders of the Company's Securities:
1. Assumption of Indenture Obligations. The Company has entered into an
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Amended and Restated Merger Agreement with Reunion, dated as of July 28, 1999
(the "Amended and Restated Merger Agreement"), pursuant to which the Company is
merging with and into Reunion (the "Merger"), with Reunion being the surviving
corporation ("New Reunion"). In connection with the Merger, New Reunion does
hereby assume, succeed to and agree to be bound by all of the obligations of the
Company under the Indenture, the Purchase Agreement, the Exchange and
Registration Rights Agreement and the Securities Pledge Agreement.
2. Amendment of Indenture. Section 4.09(iii) of the Indenture is hereby
----------------------
amended by deleting the phrase "2.5 to 1.0 thereafter" and inserting in its
place the phrase "2.0 to 1.0 thereafter."
3. Waiver of Outstanding Defaults. The Investment Default and the Pledge
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Default under the Indenture, and the consequences thereof, are waived as to all
Securities and all Securityholders as may be necessary to permit Chatwins and
Reunion to proceed with the Merger and for all other purposes under the
Indenture.
4. Waivers of Indenture Covenants. In connection with the transactions
------------------------------
set forth in the Consent Solicitation, the following Indenture provisions, and
the consequences thereof, are waived as to all Securities and all
Securityholders:
(a) the provisions of Section 5.01(4)(B) (Debt Test Covenant of
"When Company May Merge") as may be necessary to permit Chatwins and Reunion to
consummate the Merger;
(b) the provisions of Section 4.12 of the Indenture ("Limitation on
Liens") as may be necessary to permit New Reunion to enter into and consummate
the New Credit Facility;
(c) Section 4.09 of the Indenture ("Limitation on Incurrence of
Indebtedness") as may be necessary to enter into and consummate the Term Loan
Facility on the effective date of Merger and to make additional term loan
borrowings thereunder from time to time thereafter, but limited always to a
maximum aggregate principal amount of $33 million outstanding at any time under
the Term Loan Facility; and
(d) the provisions of Section 4.09 of the Indenture ("Limitation on
Incurrence of Indebtedness") as may be necessary to permit New Reunion to
consummate the Kingway Acquisition.
5. No Defaults. In connection with the outstanding Default and covenant
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waivers set forth in Sections 3 and 4 above, the parties hereby acknowledge that
any Defaults have ceased to exist, and any Event of Default arising therefrom
shall be deemed to have been cured for every purpose of the Indenture; but no
such waiver shall extend to any subsequent or other Default or impair any right
consequent to such other or subsequent Default, except, however, such subsequent
Defaults as would otherwise arise upon subsequent reborrowings under the Term
Loan Facility so long as the aggregate principal amount outstanding thereunder
at any time does not exceed $33 million, all of which subsequent Defaults, if
any, are hereby waived.
6. Waiver of June Purchase Offer. The Holders of $47,450,000 principal
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amount of outstanding Securities set forth in Column B of Schedule 2 hereto (the
"Consenting Securities") have waived their right to receive, accept and elect to
participate in and tender Securities pursuant to the Purchase Offer due to be
made by the Company on June 1, 2000 (the "June Purchase Offer") pursuant to
Section 3.09 of the Indenture (the "June Purchase Offer Waiver").
7. Effect of June Purchase Offer Waiver. Pursuant to Section 9.04(c) of
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the Indenture, the June Purchase Offer Waiver shall bind each Securityholder of
a Consenting Security and every subsequent Securityholder of a Consenting
Security or a portion thereof if notice of the June Purchase Offer Waiver is
reflected on a Security that evidences the same debt or a portion thereof as the
consenting Securityholder's Security. To ensure that the June Purchase Offer
Waiver under Section 3.09 of the Indenture binds every subsequent Securityholder
of the Consenting Securities or a portion thereof, the Company has taken the
steps necessary to make a notation of the June Purchase Offer Waiver on the
Consenting Securities.
8. No Defaults. In connection with the covenant waiver set forth in
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Section 6 above, the parties hereby acknowledge that any Default or any Event of
Default which might otherwise arise as a result of the failure to extend the
June Purchase Offer to
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the holders of Consenting Securities or portions thereof shall be deemed to have
been cured for every purpose of the Indenture; but no such waiver shall extend
to any subsequent or other Default or impair any right consequent to such other
or subsequent Default.
9. Effect of Fifth Supplemental Indenture. This Fifth Supplemental
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Indenture shall be an integrated part of the Indenture (as amended and modified
by the First Supplemental Indenture and Wavier of Covenants, the Second
Supplemental Indenture, the Third Supplemental Indenture and the Fourth
Supplemental Indenture). Except as amended by this Fifth Supplemental Indenture,
the Indenture (as so amended) shall remain in full force and effect.
10. Counterparts. This Fifth Supplemental Indenture may be executed in
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any number of counterparts, each which when so executed and delivered shall be
deemed an original, but all of which counterparts together shall constitute but
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Fifth Supplemental
Indenture to be duly executed, all as of the date first written above.
CHATWINS GROUP, INC.
/s/Xxxxxx X. Lawyer
--------------------
Name: Xxxxxx X. Lawyer
Title: President
REUNION INDUSTRIES, INC.
/s/Xxxxxxxx X. Xxxxx
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Name: Xxxxxxx X. Xxxxx
Title: Executive Vice President, Chief
Financial Officer and Secretary
STATE STREET BANK AND
TRUST COMPANY, as successor Trustee
By: /s/Xxxxxxxxxx Xxxxxxxx
----------------------
Name: Xxxxxxxxxx Xxxxxxxx
Title: Assistant Vice President
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SCHEDULE I
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M E M O R A N D U M
-------------------
TO: HOLDERS OF SENIOR NOTES
FROM: Chatwins Group, Inc.
DATE: February 1, 2000
RE: Amended Consent Solicitation and Notice of Offer To Purchase
Senior Notes (the "Amended Consent Solicitation and Purchase
Offer"), and Termination and Rescission of November 19 and 24,
1999 Consent Solicitation and Purchase Offer (the "Original
Consent Solicitation and Purchase Offer")
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ISSUER: Chatwins Group, Inc. ("Chatwins")
SECURITIES: 13% Senior Notes of Chatwins due 2003 (the "Securities") issued
under the Indenture, dated as of May 1, 1993, between Chatwins
and State Street Bank and Trust Company, as successor Trustee
to First National Bank of Boston, as amended (the "Indenture").
SUMMARY:/1/ . The Original Consent Solicitation and Purchase Offer is
rescinded due to inability to complete the New Credit Facility
as defined therein
. Chatwins hereby makes an Amended Consent Solicitation and
Purchase Offer to:
. Obtain the same amendments and waivers of the Indenture
covenants and defaults solicited in November, 1999
. Obtain a new waiver of Chatwins' obligation to make a
Purchase Offer as to $25 million principal amount of
Securities on June 1, 2000
. Offer to purchase at par from Securityholders consenting to
all such amendments and waivers up to $25 million principal
amount of Securities (the "Amended Purchase Offer")
------------------
/1/ This summary is qualified by the other more specific provisions of this
document.
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. To consent to such amendments and waivers and to accept the
Amended Purchase Offer:
. Complete the form attached as Exhibit A and fax it to
Chatwins by 5:00 p.m. Eastern Standard Time on February
10, 2000.
. Ensure that you have tendered your Securities to DTC by
February 10, 2000 in the principal amount of Securities as
to which you validly accept the Amended Purchase Offer.
BACKGROUND: By notices dated November 19 and 24, 1999, Chatwins made an
offer to purchase $25 million principal amount of Securities at
one hundred percent (100%) of par (the "Original Purchase
Offer") from those Securityholders of record on November 19,
1999 who consented and agreed to certain amendments and waivers
under the Indenture (the "Original Consent Solicitation and
Purchase Offer"). A copy of the Original Consent Solicitation
and Purchase Offer is attached as Exhibit B. Capitalized terms
used but not defined herein shall have the meanings ascribed to
them in Exhibit B.
Chatwins solicited these amendments and waivers under the
Indenture to allow Chatwins and Reunion Industries, Inc.
("Reunion") to proceed with (i) a proposed merger, whereby
Chatwins will merge with and into Reunion ("New Reunion") and
New Reunion will succeed to Chatwins' obligations under the
Indenture and (ii) certain related transactions. Only those
Securityholders who consented and agreed to all the requested
---
amendments and waivers were to be entitled to have their
Securities purchased in the Original Purchase Offer.
The Original Consent Solicitation and Purchase Offer was
conditioned upon (i) Chatwins receiving all the requested
---
amendments and waivers from a majority of the outstanding
principal amount of Securities, (ii) the Original Purchase
Offer being accepted as to at least $25 million principal
amount of the Securities, and (iii) New Reunion consummating
the financing necessary to consummate the Original Purchase
Offer. If more than $25 million of Securities were tendered in
the Original Purchase Offer, the tendered Securities were to be
purchased pro rata.
As of December 3, 1999, Chatwins received consents to all
requested amendments and waivers from $49,335,000 principal
amount of Securities. That same principal amount of Securities
held by consenting Securityholders properly accepted the
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Original Purchase Offer.
REASON FOR TERMINATION The Original Consent Solicitation and Purchase Offer
AND RESCISSION OF contemplated that New Reunion would enter into a new credit
ORIGINAL CONSENT facility (the "New Credit Facility") with certain lenders. $25
SOLICITATION AND million of the proceeds of the New Credit Facility was to be
PURCHASE OFFER: used to consummate the Original Repurchase Offer. The lenders
negotiating the New Credit Facility have now indicated that
they will not consummate the New Credit Facility unless
Securityholders waive the obligation of New Reunion (as
Chatwins' successor following the Merger) under Section 3.09 of
the Indenture to make a Purchase Offer to purchase $25 million
principal amount of the Securities on June 1, 2000.
TERMINATION AND The third condition of the Original Purchase Offer (New Reunion
RESCISSION OF ORIGINAL being able to consummate the New Credit Facility) having
CONSENT SOLICITATION failed, the Original Purchase Offer is terminated and
AND PURCHASE OFFER: rescinded, the agreements and waivers received by Chatwins from
Securityholders in connection therewith are void and
ineffective, all as contemplated by the terms of the Original
Consent Solicitation and Purchase Offer and the Trustee has
cancelled the tender of your Securities in connection therewith.
AMENDED CONSENT Chatwins hereby makes a new offer to purchase $25 million
SOLICITATION AND principal amount of its Securities at one hundred percent
PURCHASE OFFER: (100%) of par (the "Amended Purchase Offer"). In connection
with the Amended Purchase Offer, Chatwins is soliciting
consents to certain amendments and waivers under its Indenture.
The Amended Purchase Offer is being made to only those
Securityholders of record on November 19, 1999 who agree and
consent to all the amendments and waivers of the Indenture
---
covenants and Defaults solicited hereby and is conditioned upon
(i) Chatwins receiving consents to the amendments and waivers
solicited hereby from Securityholders in respect of the
outstanding principal amount of Securities that will be
sufficient to permit it to consummate the Merger, the New
Credit Facility and the related transactions without violating
any provisions of the Indenture, (ii) the Amended Purchase
Offer being accepted as to at least $25 million principal
amount of the Securities, and (iii) New Reunion consummating
the New Credit Facility (the New Credit Facility subject to an
acceptable waiver of the June 1, 2000 purchase offer being
hereinafter referred to as the "Revised New Credit Facility")
which is required to provide the funds needed to consummate the
Amended Purchase Offer. If more than $25 million of Securities
are tendered in the Amended Purchase
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Offer, the tendered Securities are to be purchased pro rata. If
the Amended Purchase Offer is not consummated, then none of the
amendments and waivers solicited hereby shall become effective.
November 19, 1999 (at 5:00 p.m. Eastern Standard Time) has been
fixed by Chatwins as the record date for determining the
Securityholders entitled to participate in the Amended Purchase
Offer and to agree and consent to the amendments and waivers
requested herein. The Securities are represented by a Global
Security deposited with The Depository Trust Company ("DTC")
and registered in the name of DTC's nominee, Cede & Co. In
accordance with DTC's usual procedures, an Omnibus Consent is
being delivered to Chatwins under which Cede & Co.'s rights to
consent in respect of the Securities have been assigned to the
DTC Participants who are the holders on the record date of the
Securities through their accounts at DTC or their assignees
(the "Participants").
DESCRIPTION OF Pursuant to Section 3.08 of the Indenture Chatwins is obligated
NEW WAIVER: to make a mandatory redemption of $12.5 million principal
amount of Securities on May 1, 2000.
Pursuant to Section 3.09 of the Indenture Chatwins is obligated
to offer to purchase $25 million principal amount of the
Securities on June 1, 2000.
If the Merger and the Revised New Credit Facility and the
Amended Purchase Offer are consummated, New Reunion will credit
against these obligations as permitted by Section 3.10 of the
Indenture the $25 million principal amount of Securities it
will acquire in the Amended Purchase Offer as follows:
. $12.5 million against the Section 3.08 May 1, 2000
mandatory redemption obligation, and
. $12.5 million against the Section 3.09 June 1, 2000
purchase offer obligation.
Accordingly, New Reunion will remain obligated to offer to
purchase $12.5 million principal amount of Securities on June
1, 2000 pursuant to Section 3.09 of the Indenture.
As noted above, New Reunion's prospective lenders will not
consummate the Revised New Credit Facility unless
Securityholders waive this remaining $12.5 million repurchase
offer obligation under Section 3.09 of the Indenture. Thus, in
7
order to proceed with the Amended Purchase Offer and consummate
the Merger and other transactions described above, Chatwins is
requesting that the Securityholders waive their rights to
require Chatwins to make the balance of the Section 3.09 June
1, 2000 purchase offer remaining after crediting $12.5 million
of the $25 million principal amount of Securities it acquires
pursuant to the Amended Purchase Offer as noted above.
INDENTURE Section 6.06(6) of the Indenture provides that if Chatwins
REQUIREMENTS fails to fulfill its repurchase obligations arising under
FOR NEW WAIVER: Section 3.09, such failure shall constitute a Default by reason
of the failure by the Company to pay principal and,
notwithstanding any other provision of the Indenture, the right
of any Securityholder to receive payment of such principal may
not be impaired or affected without the consent of such
Securityholder.
Similarly, although Section 9.02 of the Indenture provides that
the Indenture may be amended and any existing Default or Event
of Default or compliance with any provision or consequences of
the foregoing may be waived with the written consent of
Securityholders holding a majority of the aggregate principal
amount of the Securities then outstanding, no such amendment,
supplement or waiver may be made without the consent of the
Securityholder if it would alter the redemption or repurchase
provisions of such Security.
EFFECT OF Pursuant to Section 9.04(c) of the Indenture, after the waiver
NEW WAIVER: of compliance with the Section 3.09 June 1, 2000 repurchase
obligation becomes effective it will bind every Securityholder
of a Security who has consented to it and it shall also bind
every subsequent Securityholder of such Security (or of a
portion of a Security that evidences the same debt as the
consenting Securityholder's Security) if notice of such waiver
is reflected on the Securities that evidence the same debt as
the consenting Securityholder's Security.
ACTION REQUESTED: If you wish to accept the Amended Purchase Offer by consenting
and agreeing to all the amendments and waivers of the Indenture
covenants and defaults solicited hereby, please (i) indicate
your acceptance, consent and agreement in the space provided on
the form attached hereto as Exhibit A; (ii) return the properly
executed form to Chatwins via facsimile at (000) 000-0000
(Attention: Xxxxxxx X. Xxxxxxx), (iii) send the executed
original form to Chatwins via overnight courier addressed as
follows: Chatwins Group, Inc., 000 Xxxxxx Xxxxx, Xxxxx 000,
Xxxxxxxxxx, XX, 00000, Attention: Xxxxxxx X.
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Carolus; and (iv) tender your Securities to be acquired under
the Amended Purchase Offer through the DTC ATOP System.
To ensure that you will be entitled to have your Securities
purchased pursuant to the Amended Purchase Offer, your properly
executed acceptance must be received by Chatwins no later than
February 10, 2000 at 5:00 p.m. Eastern Standard Time and you
must have tendered your Securities through the DTC ATOP System
no later than February 10, 2000.
If you do not have independent authority to consent and agree
in respect of the Securities you hold as a Participant at DTC
you should distribute a copy of this document to your customers
or affiliates and obtain from them whatever authorization you
require in respect of such consent and agreement.
WITHDRAWAL Securityholders will have the right to withdraw their tender of
RIGHTS: Securities pursuant to the Amended Purchase Offer only until
the amount of Securities tendered pursuant to the Amended
Purchase Offer equals $25 million. Chatwins will notify
Securityholders when their withdrawal rights have terminated.
ADDITIONAL INFORMATION: See the Original Consent Solicitation and Purchase Offer
(attached as Exhibit B). Copies of the other materials
previously distributed therewith will be recirculated upon
request - Contact: Xxxxxxx Xxxxxxx, Chatwins Group, Inc., 000
Xxxxxx Xxxxx, Xxxxx 000, Xxxxxxxxxx, Xxxxxxxxxxxx 00000,
Telephone: (000) 000-0000; Facsimile: (000) 000-0000.
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Exhibit A
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AMENDED CONSENT SOLICITATION AND PURCHASE OFFER FORM
11. The undersigned does hereby represent that it is a Participant with
DTC -- namely, that it maintains an account with The Depository Trust Company,
New York, NY ("DTC").
12. The undersigned does hereby represent that it had $_________ principal
amount of Securities credited to its account with DTC on November 19, 1999.
13. The undersigned does hereby represent that as of November 19, 1999 it
had the full right to consent and agree, or has received all necessary
authorizations to consent and agree, on behalf of $__________ principal amount
of Securities in respect of the amendments and waivers of the Indenture
covenants and Defaults as more fully described herein.
14. On behalf of $_________ principal amount (the "Consenting
Securities") of the total $_________ principal amount of Securities credited to
its account with DTC on November 19, 1999, and on behalf of all subsequent
holders of the Consenting Securities, the undersigned does hereby:
(a) Agree and consent to all the amendments and waivers of the
---
Indenture covenants and defaults solicited in the Original Consent
Solicitation and Purchase Offer as set forth in Exhibit B hereto;
and
(b) Waive its right to receive, accept and elect to participate in and
tender Consenting Securities pursuant to the Purchase Offer due to
be made by Chatwins on June 1, 2000 pursuant to Section 3.09 of
the Indenture.
15. The undersigned does hereby accept the Amended Purchase Offer on
behalf of $______________ principal amount of the $______________ principal
amount of Consenting Securities for which it has consented to all the amendments
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and waivers as stated herein and which were credited to its account with DTC on
November 19, 1999.
16. THE UNDERSIGNED ACKNOWLEDGES THAT (I) THIS AMENDED CONSENT
SOLICITATION AND PURCHASE OFFER SUPERCEDES THE ORIGINAL CONSENT SOLICITATION AND
PURCHASE OFFER, (II) ONLY SECURITYHOLDERS THAT TIMELY CONSENT TO ALL THE
AMENDMENTS AND WAIVERS REQUESTED BY THIS NOTICE WILL BE PERMITTED TO PARTICIPATE
IN THE AMENDED PURCHASE OFFER AND TO SELL SECURITIES TO CHATWINS PURSUANT
THERETO AND (III) THIS AMENDED PURCHASE OFFER WILL ONLY BE CONSUMMATED IF NEW
REUNION CONSUMMATES THE REVISED NEW CREDIT FACILITY.
Signature
Date:
---------------------------------
Print Name:
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Taxpayer ID Number:
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Exhibit B-1
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TO: HOLDERS OF SENIOR NOTES
FROM: Chatwins Group, Inc.
DATE: November 19, 1999
RE: Chatwins Group Inc. - Notice of Offer to
Purchase Senior Notes and Consent Solicitation
----------------------------------------------
I. SUMMARY
Capitalized terms used herein but not otherwise defined herein shall
have the respective meanings ascribed to them in the Indenture, dated as of May
1, 1993, between Chatwins Group, Inc. ("Chatwins") and State Street Bank and
Trust Company, as successor Trustee to The First National Bank of Boston (the
"Trustee"), as amended (the "Indenture").
Chatwins hereby offers to purchase $25 million principal amount of its
13% Senior Notes due 2003 (the "Securities") at ninety-eight percent (98%) of
par (the "Purchase Offer"). In connection with the Purchase Offer, Chatwins is
soliciting consents to certain amendments and waivers under its Indenture. The
Purchase Offer is being made to only those Securityholders of record on November
19, 1999 who agree and consent to all amendments and waivers of the Indenture
---
covenants and Defaults solicited hereby and is conditioned upon (i) Chatwins
receiving consents to all the amendments and waivers solicited hereby from
---
Securityholders in respect of a majority of the outstanding principal amount of
Securities which will be sufficient for the amendments and waivers to become
effective under the Indenture), (ii) the Purchase Offer being accepted as to at
least $25 million principal amount of the Securities, and (iii) New Reunion (as
defined below) consummating the New Credit Facility (as defined in Section II(5)
below) which is required to consummate the Purchase Offer. If the Purchase
Offer is not consummated, then none of the amendments and waivers solicited
hereby shall become effective.
November 19, 1999 (at 5:00 p.m. Eastern Standard Time) has been fixed
by Chatwins as the record date for determining the Securityholders entitled to
participate in the Purchase Offer and to agree and consent to the amendments and
waivers requested herein. The Securities are represented by a Global Security
deposited with The Depository Trust Company ("DTC") and registered in the name
of DTC's nominee, Cede & Co. In accordance with DTC's usual procedures, an
Omnibus Consent is being delivered to Chatwins under which Cede & Co.'s rights
to consent in respect of the Securities have been assigned to the DTC
Participants who are the holders on the record date of the Securities through
their accounts at DTC or their assignees (the "Participants").
To ensure that you will be entitled to have your Securities purchased
pursuant to the Purchase Offer in consideration of your consent to all the
---
amendments and waivers of the Indenture covenants and Defaults solicited hereby,
your properly executed acceptance must be received by Chatwins no later than
December 3, 1999 at 5:00 p.m. Eastern Standard Time.
Chatwins has entered into an Amended and Restated Merger Agreement
with Reunion Industries, Inc., a Delaware corporation ("Reunion"), dated as of
July 28, 1999 (the "Amended and Restated Merger Agreement"), pursuant to which
Chatwins will merge with and into Reunion (the "Merger"), with Reunion being the
surviving corporation ("New Reunion").
In connection with the Merger, New Reunion intends to enter into the
following transactions:
(i) Upon the Merger, New Reunion will succeed to and agree to be
bound by the Indenture;
(ii) New Reunion will enter into the New Credit Facility (as defined
in Section II(5) below) the proceeds of which will be used,
among other things, to finance the Purchase Offer and the
Kingway Acquisition (as defined below) and to refinance certain
of the debt of Chatwins and Reunion. The New Credit Facility
will be secured by a first priority lien on substantially all of
New Reunion's assets which will include substantially all of
Chatwins' assets;
(iii) New Reunion will acquire Kingway Material Handling Company
("Kingway"), which is currently owned by certain officers and
directors of Chatwins and Reunion (the "Kingway Acquisition");
and
(iv) New Reunion will assume certain indebtedness of Kingway in
connection with the Kingway Acquisition.
In order to proceed with the Purchase Offer, and consummate the Merger
and the other transactions described above, Chatwins is requesting that the
Securityholders consent to the following:
(i) A waiver of the Debt Test (as defined below) condition of the
"When Company May Merge" covenant (Section 5.01(4)(B) of the
Indenture);
(ii) A waiver of two existing Defaults under the Indenture (as more
fully described below) which is required for the Merger;
(iii) A waiver of the "Limitation on Liens" covenant (Section 4.12 of
the Indenture) and a waiver of the "Limitation on Incurrence of
Indebtedness" covenant (Section 4.09 of the Indenture) which are
required for the New Credit Facility;
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(iv) A waiver of the "Limitation on Incurrence of Indebtedness"
covenant (Section 4.09 of the Indenture) which is required to
assume the Assumed Affiliate Indebtedness (as defined in Section
II(6) below) in the Kingway Acquisition; and
(v) The amendment of the "Limitation on Incurrence of Indebtedness"
covenant (Section 4.09 of the Indenture) to reduce the
Consolidated Interest Coverage Ratio, which under the Indenture
is calculated on a pro forma basis for the debt to be incurred
for the preceding four full quarters (the "Debt Test"), from 2.5
to 1.0 to 2.0 to 1.0.
II. DISCUSSION
1. PURCHASE OFFER
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The Purchase Offer is hereby made by Chatwins to Securityholders of
record on November 19, 1999 that consent to all the amendments and waivers
---
described herein subject to the following three conditions:
(i) Chatwins must receive consents to all the amendments and
---
waivers of the Indenture covenants and Defaults described herein
from a majority of the outstanding principal amount of
Securities which is required for the amendments and waivers to
become effective;
(ii) the Purchase Offer must be accepted as to at least $25 million
in principal amount of the Securities; and
(iii) New Reunion must have consummated the New Credit Facility which
is required to consummate the Purchase Offer.
If these conditions are met and more than $25 million principal amount
of Securities consent to the amendments and waivers and accept the Purchase
Offer, Chatwins will purchase the tendered Securities pro rata.
The Purchase Offer will begin on the date hereof and will terminate on
the latest of (i) December 3, 1999, (ii) the date Chatwins receives consents
from a majority of the outstanding principal amount of Securities to all the
amendments and waivers of the Indenture covenants and Defaults described herein
and (iii) the date on which Chatwins notifies Securityholders that the Purchase
Offer is terminated because New Reunion will not be able to consummate the New
Credit Facility. Please see the instructions beginning on page 10 below on how
to accept the Purchase Offer and indicate your consent to the amendments and
waivers described herein.
If Chatwins obtains the requisite consents to the amendments and
waivers described herein and New Reunion is unable to consummate the New Credit
Facility necessary to consummate the Purchase Offer, the consents received by
Chatwins will become void and the amendments and waivers will not become
effective under the Indenture.
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If the conditions to the Merger are satisfied or waived and the Merger
is consummated, upon the Merger New Reunion will assume the obligations of the
Indenture as contemplated by Section 5.01 of the Indenture.
2. INDENTURE PROVISIONS REGARDING WAIVERS UNDER THE INDENTURE
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Pursuant to Section 9.02 of the Indenture, the Indenture may be
amended and any existing Default or Event of Default or compliance with any
provision or consequences of the foregoing may be waived with the written
consent of Securityholders holding a majority of aggregate principal amount of
the Securities then outstanding. Pursuant to Section 9.04(a) of the Indenture,
an amendment or waiver becomes effective upon receipt by the Trustee of (i) an
Officer's Certificate from Chatwins certifying that Securityholders have
consented to such amendment or waiver in respect of the requisite principal
amount and (ii) evidence that the amendment or waiver has been approved by
Securityholders in respect of the requisite principal amount of Securities.
Pursuant to Section 9.04(c) of the Indenture, after an amendment or waiver
becomes effective it will bind every Securityholder and shall also bind every
subsequent Securityholder if notice of such amendment or waiver is reflected on
the Securities that evidence the same debt as the consenting Securityholder's
Securities.
In addition, pursuant to Section 6.04 of the Indenture,
Securityholders holding at least a majority in aggregate principal amount of the
Securities then outstanding may, by providing notice to the Trustee, waive as to
all Securityholders any past or existing Default except for a continuing Default
in the payment of principal and certain other continuing payment Defaults
enumerated in Section 6.04 of the Indenture. Upon any such waiver, the Defaults
shall cease to exist, and any Event of Default arising therefrom shall be deemed
to have been cured for every purpose of the Indenture.
3. MERGER WITH REUNION
-------------------
Pursuant to the Amended and Restated Merger Agreement, from and after
the Merger New Reunion will possess all of the assets, rights, privileges,
powers and franchises of Chatwins and be subject to all of the liabilities,
restrictions, disabilities and duties of Chatwins including those arising under
the Indenture.
The Merger will be consummated on the earliest practicable date after
all of the conditions thereto have been waived or satisfied, including the
approval of the Amended and Restated Merger Agreement by Reunion's stockholders.
The Amended and Restated Merger Agreement has been approved by the requisite
vote of Chatwins' Board of Directors and shareholders and by Reunion's Board of
Directors. Chatwins and Reunion anticipate that the Closing Date for the Merger
will be December 17, 1999, although there can be no assurances that the Merger
will be consummated by that time or at all. The Merger will become effective
immediately upon the filing of a Certificate of Merger in accordance with the
Delaware General Corporation Law (the "Effective Time").
At the Effective Time, the shares of common stock of Chatwins issued
and outstanding and held by the stockholders of Chatwins on the Closing Date
will be automatically converted into the right to receive shares of common stock
of Reunion
4
("Reunion Common Stock"), plus cash in lieu of any fractional share interests.
The aggregate number of shares of Reunion Common Stock that will be issued to
Chatwins' stockholders in connection with the Merger will be 9,500,000 shares
plus up to an additional 500,000 shares if certain Chatwins business units
achieve specified performance goals in 2000. Said 9,500,000 shares will
represent 79.2% of the voting power of New Reunion.
A copy of the Reunion Proxy Statement/Prospectus in respect of the
Merger is enclosed herein for your reference. The Reunion Proxy
Statement/Prospectus contains extensive disclosures about Chatwins and Reunion
and the transactions described herein and Chatwins urges Securityholders to read
the Reunion Proxy Statement/Prospectus carefully to obtain a more complete
description of the terms of the Merger and the other transactions described
herein.
Pursuant to Section 5.01 of the Indenture, Chatwins may merge with or
into any Person if, at the time and giving effect thereto:
(1) the Person surviving such merger is a corporation organized and
existing under the laws of the United States;
(2) the Person surviving such merger assumes by supplemental
indenture, subject to approval by the Trustee, all the obligations
of Chatwins under the Securities and the Indenture and assumes the
obligations of Chatwins under the Purchase Agreement, the Exchange
and Registration Rights Agreement and the Securities Pledge
Agreement;
(3) immediately prior to and after giving effect to such merger, no
Default or Event of Default under the Indenture shall have
occurred and be continuing; and
(4) the Person surviving such merger (A) shall have a Consolidated Net
Worth immediately after the merger, but prior to any purchase
accounting adjustments resulting from the merger, not less than
the Consolidated Net Worth of Chatwins immediately prior to the
merger; and (B) shall satisfy the Debt Test under Section 4.09 of
the Indenture.
New Reunion will satisfy the requirements of paragraphs (1), (2) and
(4)(A) of Section 5.01 of the Indenture.
Chatwins and New Reunion are unable to satisfy the requirements of
paragraph (3) of Section 5.01 of the Indenture because of the continuing
Defaults under the Indenture, more fully described below. Upon the consent of a
majority of outstanding principal amount of Securities to waive these two
Defaults as requested herein, no Default or Event of Default will be continuing
immediately prior to or after giving effect to the Merger and Chatwins and
Reunion will be entitled to proceed with the Merger under Section 5.01 of the
Indenture.
5
Chatwins and New Reunion are unable to satisfy the requirements of
paragraph (4)(B) of Section 5.01 of the Indenture because New Reunion will not
be able to satisfy the Debt Test upon consummation of the Merger. Therefore,
Section 5.01(4)(B) must be waived before Chatwins and Reunion can proceed with
the Merger.
4. EXISTING DEFAULTS
-----------------
Chatwins previously notified the Trustee and the Securityholders on
June 5, 1998 of two continuing Defaults under the Indenture. In May of 1998,
Chatwins executed a joint venture agreement pursuant to which it contributed
$100,000 to Suzhou Grating Co., Ltd., a fiberglass reinforced plastic grating
manufacturer located in China (the "Investment"). The Investment is not one of
the Investments specifically permitted by Section 4.16(vii) of the Indenture
and, therefore, it constitutes a Default pursuant to Section 6.01(4) of the
Indenture (the "Investment Default").
Also in May of 0000, Xxxxxxx X. Xxxxxxx, Xx., the Chairman of the
Board of Directors of Chatwins, transferred all of his shares of the common
stock of Chatwins (the "Xxxxxxx Shares") to the Xxxxxxx X. Xxxxxxx Family
Limited Partnership (the "FLP"), of which Xx. Xxxxxxx is the general partner.
The FLP executed a Counterpart of the Securities Pledge Agreement, dated as of
May 1, 1993, as amended (the "Pledge Agreement"), made by Xx. Xxxxxxx, Xxxx X.
Xxxxx and Chatwins, in favor of the Trustee, as Collateral Agent for and
representative of the Securityholders. The FLP retains title to the Xxxxxxx
Shares but has granted voting control of the Xxxxxxx Shares to Stanwich
Partners, Inc., a Delaware corporation, which in turn has granted voting control
over the Xxxxxxx Shares to Xxxx X. Xxxxx. Upon the Merger, the voting control
of the Xxxxxxx Shares will become vested in Xxxxxxx Xxxxxxx, the son of Xxxxxxx
X. Xxxxxxx Xx. Xxxxxxx Xxxxxxx is Senior Vice President of Chatwins and will
become Executive Vice President of Operations of New Reunion following the
Merger. Because Xxxxxxx X. Xxxxxxx Xx. no longer has sole voting power over the
Shares, a breach of Section 7(a) of the Pledge Agreement occurred, is continuing
and will continue after the Merger. A breach of the Pledge Agreement
constitutes a Default under Section 6.01(4) of the Indenture (the "Pledge
Default").
A Default under Section 6.01(4) of the Indenture will become an "Event
of Default" only if the Trustee or Securityholders holding at least 25% of the
principal amount of the Securities then outstanding notify Chatwins and the
Trustee of the Default and Chatwins does not cure the Default within 30 days of
such notice. As of the date hereof, Chatwins has not received such notice from
the Trustee or the Securityholders regarding either the Investment Default or
the Pledge Default.
Because the Merger would be prohibited under Section 5.01(3) of the
Indenture if there were a continuing Default or Event of Default immediately
prior to or after giving effect to the Merger, the Investment Default and the
Pledge Default must be waived before Chatwins and Reunion can proceed with the
Merger.
6
5. THE NEW CREDIT FACILITY
-----------------------
As stated above, upon the Merger, New Reunion will assume the
obligations of the Indenture as required by Section 5.01 thereof. In order to
consummate the Purchase Offer and the Kingway Acquisition and to refinance
certain indebtedness of Chatwins, Reunion and Kingway, Bank of America,
Chatwins' lender under its existing $40 million Revolving Credit Facility
secured by Chatwins' accounts receivable and inventory, has agreed to enter into
a new credit facility (the "New Credit Facility") with New Reunion. The New
Credit Facility will have two components: (i) a $42 million revolving credit
facility that upon the Merger will become the Revolving Credit Facility as
defined in the Indenture; and (ii) a term loan facility consisting of one or
more term loans of up to a maximum aggregate principal amount of $33 million at
any time outstanding (including Hedging Obligations with respect thereto in a
notional amount not exceeding $20 million) that may be borrowed at various times
during the life of the New Credit Facility (the "Term Loan Facility"). A
condition of the New Credit Facility is that the entire New Credit Facility be
secured by a first priority lien on substantially all of the existing and
subsequently acquired assets of New Reunion including the fixed assets of
Reunion, Chatwins and Kingway (the "Blanket Lien").
The Blanket Lien is prohibited by Section 4.12 of the Indenture which
states that Chatwins (and New Reunion) will not create any Lien (other than
Permitted Liens) upon any of its assets unless the Securities are equally and
ratably secured by such assets. Because (i) the Blanket Lien is not a Permitted
Lien to the extent it extends to assets other than accounts receivable and
inventory and (ii) the Securities will not be equally and ratably secured by the
Blanket Lien, Section 4.12 of the Indenture must be waived before New Reunion
can proceed with the New Credit Facility.
In addition, the Term Loan Facility is prohibited by Section 4.09 of
the Indenture which states that Chatwins (and New Reunion) may not incur any
Indebtedness (other than Permitted Indebtedness) unless it satisfies the Debt
Test. Because the Term Loan Facility is not Permitted Indebtedness and New
Reunion will not be able to satisfy the Debt Test when the first borrowings are
made under the Term Loan Facility upon the effective date of the Merger, Section
4.09 must be waived before New Reunion can proceed with the New Credit Facility.
Because New Reunion will require the liquidity to be provided by subsequent
borrowings under the Term Loan Facility and it is not certain that New Reunion
will satisfy the Debt Test when such borrowings are required, Section 4.09 must
also be waived for all such subsequent borrowings but limited always to a
maximum aggregate principal amount of $33 million outstanding under the Term
Loan Facility at any time.
6. KINGWAY ACQUISITION
-------------------
New Reunion proposes to acquire Kingway. Kingway is currently owned
by certain officers and directors of Chatwins and Reunion. In the Kingway
Acquisition, New Reunion proposes to: (i) issue shares of New Reunion's
preferred stock in exchange for shares of Kingway preferred stock which were
issued by Kingway to Stanwich Financial Services Corp. ("Stanwich Financial")
when Kingway was initially capitalized by
7
the current owners of Kingway upon their original acquisition of Kingway; (ii)
assume approximately $4.0 million of Kingway indebtedness owing to Stanwich
Financial which was incurred or replaced indebtedness that was incurred in
connection with the original acquisition of Kingway by the current owners of
Kingway (the "Assumed Affiliate Indebtedness"); and (iii) use the proceeds of
the New Credit Facility to either buy the assets of Kingway for up to $7.0
million or buy the common stock of Kingway for $100,000, repay $6.2 million of
Kingway indebtedness owing to third parties and repay $700,000 of Kingway
indebtedness owing to Stanwich Financial.
According to Section 1.01 of the Indenture, the current owners of
Kingway and Stanwich Financial may be deemed to be "Affiliates" of New Reunion.
Pursuant to Section 4.11 of the Indenture, New Reunion would be prohibited from
entering into a transaction with Affiliates of New Reunion unless (a) the
transaction is fair to New Reunion and on terms that are no less favorable to
New Reunion than would be available in a comparable transaction with an
unrelated third party; and (b) (i) if the transaction involves aggregate
payments in excess of $300,000, the Board of Directors of New Reunion adopts a
unanimous resolution certifying that such transaction complies with clause (a)
above, and (ii) if the transaction involves aggregate payments equal to or
greater than $3 million, New Reunion receives a written opinion of a nationally
recognized investment bank that such transaction is fair to New Reunion from a
financial point of view.
Management of Chatwins and Reunion believe that the terms of the
Kingway Acquisition are not less favorable to Chatwins and New Reunion than
terms that would likely be negotiated with an unaffiliated third party in a
similar transaction. Because the Kingway Acquisition involves aggregate
payments exceeding $300,000, before consummating the Kingway Acquisition New
Reunion will obtain a unanimous resolution from the Board of Directors of New
Reunion certifying that the terms of the Kingway Acquisition are not less
favorable to New Reunion than terms it would likely negotiate with an
unaffiliated third party in a similar transaction. Because the Kingway
Acquisition involves aggregate payments exceeding $3 million, before
consummating the Kingway Acquisition, New Reunion will obtain an opinion from a
qualifying investment bank that the transaction is fair to New Reunion from a
financial point of view.
In addition, New Reunion cannot assume the Assumed Affiliate
Indebtedness in the Kingway Acquisition unless it satisfies the Debt Test
pursuant to Section 4.09 of the Indenture. New Reunion will not satisfy the
Debt Test upon assumption of the Assumed Affiliate Indebtedness. Therefore,
Section 4.09 of the Indenture must be waived before New Reunion can proceed with
the Kingway Acquisition.
7. AMENDMENT OF DEBT TEST
----------------------
As noted above, pursuant to Section 4.09 of the Indenture, Chatwins
cannot create, incur, assume, guarantee or otherwise become directly or
indirectly liable for payment of any Indebtedness, other than Permitted
Indebtedness, unless it satisfies the Debt Test. Pursuant to the Indenture, the
Debt Test (i.e., the Consolidated Interest Coverage Ratio) has increased over
time as follows: (i) the Consolidated Interest Coverage
8
Ratio was originally 2.0 to 1.0 for the period from the date of original
issuance of the Securities through April 30, 1996, (ii) the Consolidated
Interest Coverage Ratio increased to 2.25 to 1.0 for the period May 1, 1996
through April 30, 1999 and (iii) the Consolidated Interest Coverage Ratio
increased to 2.50 to 1.0 thereafter. Chatwins desires to reduce the Consolidated
Interest Coverage Ratio to the original ratio of 2.0 to 1.0.
Therefore, Chatwins is requesting that Section 4.09 of the Indenture
be amended so that the Consolidated Interest Coverage Ratio is permanently
reduced to 2.0 to 1.0.
ACTION REQUESTED
----------------
If you wish to accept the Purchase Offer by consenting and agreeing to
the amendments and waivers of the Indenture covenants and Defaults as more fully
described above, please indicate your acceptance, consent and agreement in the
space provided on one of the separately enclosed pink copies of pages 11-12
hereof. Then return the pink page to Chatwins via facsimile at (000) 000-0000
(Attention: Xxxxxxx X. Xxxxxxx) and send the executed original to Chatwins via
overnight courier addressed as follows: Chatwins Group, Inc., 000 Xxxxxx Xxxxx,
Xxxxx 000, Xxxxxxxxxx, XX, 00000, Attention: Xxxxxxx X. Xxxxxxx.
If you do not have independent authority to consent and agree in
respect of the Securities you hold as a Participant at DTC you should distribute
a copy of this document to your customers or affiliates and obtain from them
whatever authorization you require in respect of such consent and agreement.
If all the conditions precedent to the Purchase Offer as described
above are satisfied or waived, Chatwins will coordinate with the Trustee on
behalf of Securityholders that have timely consented to all the requested
---
amendments and waivers regarding the procedures to consummate the Purchase
Offer.
ONLY SECURITYHOLDERS THAT CONSENT TO ALL THE AMENDMENTS AND WAIVERS
---
REQUESTED HEREBY BY DECEMBER 3, 1999 AT 5:00 P.M. EASTERN STANDARD TIME WILL
ENSURE THAT THEY ARE ENTITLED TO PARTICIPATE IN THE PURCHASE OFFER AND TO SELL
SECURITIES TO CHATWINS PURSUANT THERETO.
FURTHER INFORMATION
-------------------
If you have any questions regarding this Notice, please contact
Xxxxxxx X. Xxxxxxx, Vice President of Chatwins or Xxxx X. Xxxxxxxxx, Chief
Financial Officer of Chatwins at (000) 000-0000.
# # #
This Notice contains certain forward-looking statements made pursuant to the
U.S. Private Securities Litigation Reform Act of 1995. In particular,
statements with regard to Chatwins', Reunion's and New Reunion's intentions with
respect to consummation of the Purchase Offer, the New Credit Facility, the
Kingway Acquisition and the Merger are forward looking in nature. By their
nature forward looking statements involve risks and
9
uncertainties that could cause actual results to differ materially from those
expressed or implied by the forward looking statements. Information and factors
that could cause actual results to differ materially in addition to those
discussed in this Notice and Reunion's Proxy Statement/Prospectus enclosed
herewith are included in the periodic reports of Chatwins and Reunion on file
with the U.S. Securities and Exchange Commission. The forward looking statements
included in this Notice represent Chatwins' best judgment as of the date hereof
based in part on preliminary information and discussions with third parties and
certain assumptions which management believes to be reasonable. Chatwins
disclaims any obligation to update these forward-looking statements.
# # #
10
Exhibit B-2
-----------
TO: HOLDERS OF SENIOR NOTES
FROM: Chatwins Group, Inc.
DATE: November 24, 1999
RE: Amendment of November 19, 1999 Consent Solicitation and
Offer To Purchase Senior Notes
------------------------------
ISSUER: Chatwins Group, Inc. ("Chatwins")
SECURITIES: 13% Senior Notes of Chatwins due 2003 (the "Securities") issued
under the Indenture, dated as of May 1, 1993, between Chatwins and
State Street Bank and Trust Company, as successor Trustee to First
National Bank of Boston, as amended (the "Indenture").
AMENDMENT
OF PURCHASE
OFFER: By notice dated November 19, 1999 Chatwins announced its
conditional offer to purchase $25 million principal amount of
Securities at ninety-eight percent (98%) of par (the "Purchase
Offer") from those Securityholders of record on November 19, 1999
who consent and agree to the amendments and waivers under the
Indenture that were described in and solicited pursuant to the
November 19, 1999 notice. CHATWINS HEREBY AMENDS THE PURCHASE
OFFER TO BE AN OFFER TO PURCHASE AT PAR. All other terms and
provisions of the Purchase Offer and the consent solicitation as
stated in the November 19, 1999 notice remain in effect without
change and all references therein to the "Purchase Offer" shall
mean the Purchase Offer as amended hereby.
Accordingly, as was previously the case, only those
Securityholders who consent and agree to all the requested
---
amendments and waivers will be entitled to have their Securities
purchased in the Purchase Offer.
The Purchase Offer remains conditioned upon (i) Chatwins receiving
all the requested amendments and waivers from a majority of the
---
outstanding principal amount of Securities, (ii) the Purchase
Offer being accepted as to at least $25 million principal amount
of the Securities, and (iii) New Reunion (as defined in the
November 19 notice) consummating the financing necessary to
consummate the Purchase Offer. If more than $25 million of
Securities are tendered in the Purchase Offer, the tendered
Securities will be purchased pro rata.
ACTION
REQUESTED: As stated in the November 19, 1999 notice, the Purchase Offer
can be closed by Chatwins as early as December 3, 1999. To ensure
that you
11
will be entitled to have your Securities purchased pursuant to
the Purchase Offer in consideration of your consent to all the
---
amendments and waivers of the Indenture covenants and defaults
solicited by the November 19, 1999 notice, your properly executed
consent and agreement to the requested amendments and waivers and
acceptance of the Purchase Offer (attached as pages 10-11 of the
November 19 notice) must be received by Chatwins no later than
December 3, 1999 at 5:00 p.m. Eastern Standard Time.
ADDITIONAL
INFORMATION: See the November 19, 1999 Notice of Offer To Purchase Senior Notes
and Consent Solicitation previously distributed.
12
