0000950134-01-507027.txt : 20011010
0000950134-01-507027.hdr.sgml : 20011010
ACCESSION NUMBER: 0000950134-01-507027
CONFORMED SUBMISSION TYPE: SC TO-T/A
PUBLIC DOCUMENT COUNT: 2
FILED AS OF DATE: 20011004
GROUP MEMBERS: TEMPLE-INLAND ACQUISITION CORPORATION
SUBJECT COMPANY:
COMPANY DATA:
COMPANY CONFORMED NAME: GAYLORD CONTAINER CORP /DE/
CENTRAL INDEX KEY: 0000812700
STANDARD INDUSTRIAL CLASSIFICATION: PAPERBOARD CONTAINERS & BOXES [2650]
IRS NUMBER: 363472452
STATE OF INCORPORATION: DE
FISCAL YEAR END: 0930
FILING VALUES:
FORM TYPE: SC TO-T/A
SEC ACT: 1934 Act
SEC FILE NUMBER: 005-39843
FILM NUMBER: 1752274
BUSINESS ADDRESS:
STREET 1: 500 LAKE COOK RD STE 400
CITY: DEERFIELD
STATE: IL
ZIP: 60015
BUSINESS PHONE: 7084055500
MAIL ADDRESS:
STREET 1: 500 LAKE COOK ROADE
STREET 2: SUITE 400
CITY: DEERFIELD
STATE: IL
ZIP: 60015
FILED BY:
COMPANY DATA:
COMPANY CONFORMED NAME: TEMPLE INLAND INC
CENTRAL INDEX KEY: 0000731939
STANDARD INDUSTRIAL CLASSIFICATION: PAPERBOARD MILLS [2631]
IRS NUMBER: 751903917
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1230
FILING VALUES:
FORM TYPE: SC TO-T/A
BUSINESS ADDRESS:
STREET 1: 303 S TEMPLE DR
STREET 2: P.O. DRAWER N
CITY: DIBOLL
STATE: TX
ZIP: 75941
BUSINESS PHONE: 9368295511
MAIL ADDRESS:
STREET 1: 303 SOUTH TEMPLE DR
CITY: DIBOLL
STATE: TX
ZIP: 75941
SC TO-T/A
1
d90566ascto-ta.txt
AMENDMENT NO. 1 TO SC TO-T
1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
SCHEDULE TO
(RULE 14D-100)
TENDER OFFER STATEMENT UNDER SECTION 14(d)(1) OR 13(e)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 1)
---------------------
GAYLORD CONTAINER CORPORATION
(Name of Subject Company (Issuer))
TEMPLE-INLAND ACQUISITION CORPORATION
an indirect, wholly-owned subsidiary of
TEMPLE-INLAND INC.
(Names of Filing Persons (Offerors))
CLASS A COMMON STOCK, PAR VALUE $.0001 PER SHARE
(INCLUDING THE ASSOCIATED RIGHTS TO PURCHASE PREFERRED STOCK)
(Title of Class of Securities)
368145108
(CUSIP Number of Class of Securities)
M. RICHARD WARNER, ESQ.
TEMPLE-INLAND INC.
303 SOUTH TEMPLE DRIVE
DIBOLL, TX 75941
(936) 829-5511
(Name, Address and Telephone Number of Person Authorized
To Receive Notices and Communications on Behalf of the Filing Persons)
Copy to:
STEPHEN W. HAMILTON, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
1440 NEW YORK AVENUE, N.W.
WASHINGTON, D.C. 20005
(202) 371-7000
[ ] Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
Check the appropriate boxes below to designate any transactions to which the
statement relates:
[X] third-party tender offer subject to Rule 14d-1.
[ ] issuer tender offer subject to Rule 13e-4.
[ ] going-private transaction subject to Rule 13e-3.
[ ] amendment to Schedule 13D under Rule 13d-2.
Check the following box if the filing is a final amendment reporting the results
of the tender offer: [ ]
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This Amendment No. 1 (this "Amendment") amends and supplements the
Tender Offer Statement on Schedule TO filed with the Securities and Exchange
Commission on September 28, 2001 (as amended, the "Schedule TO") by
Temple-Inland Acquisition Corporation, a Delaware corporation (the "Purchaser"),
and Temple-Inland Inc. a Delaware corporation (the "Parent"), relating to the
offer to purchase all outstanding shares of Class A Common Stock, par value
$.0001 per share (the "Common Stock"), of Gaylord Container Corporation, a
Delaware corporation (the "Company"), including the associated rights to
purchase preferred stock issued pursuant to the Rights Agreement (as defined in
the Offer to Purchase) (the "Rights" and, together with the Common Stock, the
"Shares"), at a price of $1.80 per Share, net to the seller in cash, without
interest, upon the terms and subject to the conditions set forth in the Offer to
Purchase, dated September 28, 2001 (the "Offer to Purchase"), and in the related
Letter of Transmittal (which, together with the Offer to Purchase, as either may
be amended or supplemented from time to time, collectively constitute the
"Offer"), copies of which are attached to and filed with the Schedule TO as
Exhibits (a)(1) and (a)(2), respectively. The Offer is made pursuant to an
Agreement and Plan of Merger, dated as of September 27, 2001, among the Parent,
the Purchaser and the Company, which contemplates the merger of the Purchaser
with and into the Company. Any capitalized term used and not otherwise defined
herein shall have the meaning ascribed to such term in the Offer to Purchase.
ITEM 11. ADDITIONAL INFORMATION.
Item 11 of the Schedule TO is hereby amended and supplemented by adding
the following thereto:
On October 1, 2001, a lawsuit entitled Absolute Recovery Hedge Fund,
L.P., Absolute Recovery Hedge Fund, Ltd. v. Gaylord Container Corp.,
Temple-Inland Acquisition Corp., Temple-Inland Inc., State Street Bank and Trust
Company and Fleet National Bank, was filed in the United States District Court
for the Southern District of New York by plaintiffs seeking to assert claims on
behalf of a class of all holders (the "Noteholders") of the Company's 9-3/4%
Senior Notes due 2007 and 9-3/8% Senior Notes due 2007 (collectively, the
"Senior Notes"). The complaint names as defendants the Company, the Purchaser,
Parent and State Street Bank and Trust Company and Fleet National Bank. The
plaintiffs allege that the Company has assumed fiduciary responsibilities to its
creditors and that it has breached these duties along with provisions of the
indentures related to the Senior Notes, and breached implied covenants of fair
dealing in the indentures related to the Senior Notes by permitting,
facilitating and/or favoring the proposed transaction. The plaintiffs allege
that State Street Bank and Trust Company and Fleet National Bank, as trustees
under the indentures related to the Senior Notes (collectively, the "Trustees")
breached their fiduciary duties to the Noteholders. The plaintiffs allege that
Parent aided and abetted the Company's and the Trustees' alleged breaches. The
plaintiffs seek, among other requested items of relief, injunctive relief
enjoining the defendants from completing the transaction or if consummated,
rescission of the transaction, the imposition of a constructive trust on the
Company's assets for the benefit of its creditors and damages and fees and
expenses.
The above description of the lawsuit is qualified in its entirety by
the complaint, a copy of which is attached hereto as Exhibit (a)(9) and
incorporated herein by reference.
Item 12. EXHIBITS.
Item 12 of the Schedule TO is hereby amended and supplemented to add
the following exhibit:
(a)(9) Complaint filed by Absolute Recovery Hedge Fund, L.P. and
Absolute Recovery Hedge Fund, Ltd. in the United States District Court for the
Southern District of New York, on October 1, 2001.
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SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
TEMPLE-INLAND INC.
By: /s/ M. RICHARD WARNER
-----------------------------------
Name: M. Richard Warner
Title: Vice President and Chief
Administrative Officer
TEMPLE-INLAND ACQUISITION CORPORATION
By: /s/ M. RICHARD WARNER
-----------------------------------
Name: M. Richard Warner
Title: Vice President
Date: October 4, 2001
4
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------- -----------
(a)(9) Complaint filed by Absolute Recovery Hedge Fund, L.P. and
Absolute Recovery Hedge Fund, Ltd. in the United States
District Court for the Southern District of New York, on
October 1, 2001.
EX-99.(A)(9)
3
d90566aex99-a9.txt
COMPLAINT FILED BY ABSOLUTE RECOVERY HEDGE FUND
1
EXHIBIT (a)(9)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
-----------------------------------------|
|
ABSOLUTE RECOVERY HEDGE FUND, L.P., |
ABSOLUTE RECOVERY HEDGE FUND, LTD., | Civ. No. 01-CV-8811
on behalf of themselves and all others |
similarly situated, |
|
Plaintiffs,|
|
v. | CLASS ACTION COMPLAINT
|
GAYLORD CONTAINER CORP., |
TEMPLE-INLAND ACQUISITION CORP., |
TEMPLE-INLAND INC., |
STATE STREET BANK AND TRUST COMPANY |
and FLEET NATIONAL BANK, |
| JURY TRIAL DEMANDED
Defendants.|
|
-----------------------------------------|
Plaintiffs, by their attorneys, allege upon information and belief,
except for those allegations which pertain to themselves, which allegations are
based upon personal knowledge:
1. Plaintiffs bring this action on behalf of themselves and all other
holders (the "noteholders") of the following publicly traded notes issued by
Gaylord Container Corporation: 9-3/4% Senior Notes Due 2007 ("9-3/4% Notes");
and 9-3/8% Senior Notes Due 2007 ("9-3/8% Notes") (collectively, the "Notes").
Plaintiffs allege breaches of the terms of the relevant indentures (the
"Indentures"), breaches of fiduciary duties and disclosure violations under
applicable state laws and common law.
JURISDICTION AND VENUE
2. This action is brought pursuant to: The Trust Indenture Act of 1939,
15 U.S.C. Section 77aaa, et seq.; principles of state and common law; and the
Declaratory Judgments Act, 28 U.S.C. Section 2201.
3. The Court has jurisdiction of the subject matter of this action
pursuant to 28 U.S.C. Section 1331, 1337 and 1367(a). The acts and transactions
alleged herein arise in connection with interstate commerce and involve use of
the mails and other instrumentalities of interstate commerce.
4. Venue is proper in this District pursuant to 28 U.S.C. Section
1391(b)-(c).
THE PARTIES
5. (a) Plaintiff Absolute Recovery Hedge Fund, L.P., a Delaware limited
partnership, is the holder of $235,000 in principal amount of 9-3/4% Notes.
(b) Plaintiff Absolute Recovery Hedge Fund, Ltd., a Bermuda
corporation, is the holder of $265,000 in principal amount of 9-3/4% Notes.
6. Defendant Gaylord Container Corporation ("Gaylord" or the "Company")
is a Delaware corporation, whose headquarters are located at 500 Lake Cook Road,
Suite 400, Deerfield, Illinois 60015. Gaylord is a manufacturer of paper and
paper packaging products.
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7. Defendant Temple-Inland Acquisition Corporation ("Acquisition") or
the "Purchaser") is a Delaware corporation and an indirect wholly-owned
subsidiary of defendant Temple-Inland Inc. ("Parent") (Parent and Acquisition
are collectively referred to herein as "Temple-Inland"). Temple-Inland Inc. is a
manufacturer of corrugated packaging and building products, whose principal
executive offices are located at 1300 McPac Expressway South, Austin, Texas
78746.
8. Defendant State Street Bank and Trust Company ("State Street") is a
Massachusetts Chartered Trust Company, whose principal executive offices are
located at 225 Asylum Street, 23rd Floor, Hartford, Connecticut, 16103. State
Street is the Trustee for the 9-3/8% Notes.
9. Defendant Fleet National Bank ("Fleet"), is a National Banking
Association, whose principal executive offices are located at 777 Main Street,
Hartford, Connecticut, 06115. Fleet is the Trustee for the 9-3/4% Notes. State
Street and Fleet are sometimes collectively referred to herein as the
"Trustees."
CLASS ACTION ALLEGATIONS
10. Plaintiffs bring this action on their own behalf and as a class
action pursuant to Rule 23 of the Federal Rules of Civil Procedures on behalf of
all holders of the Notes (collectively, the "Noteholders") (except defendants
and any person, firm trust, corporation, or other entity related to or
affiliated with any defendant) and their transferees and successors in interest.
11. This action is properly maintainable as a class action for the
following reasons:
(a) The Class is so numerous that joinder of all members is
impracticable. There are $425 million in face amounts of the Notes outstanding
and in public hands. The Notes are actively and publicly traded. It is estimated
that there are hundreds, if not thousands, of members of the Class.
(b) There are questions of law and fact that are common to the
Class and that predominate over questions affecting any individual class member.
12. Plaintiffs are committed to prosecuting this action and have
retained competent counsel experienced in litigation of this nature. Plaintiffs,
holders of a class of Senior Notes, are similarly situated with all other class
members. Their claims are typical of the claims of the other members of the
Class and plaintiffs have the same interests in this case as the other members
of the Class. Plaintiffs are adequate representatives of the Class and will
fairly and adequately protect the interests of the Class. Plaintiffs anticipate
that there will be no difficulty in the management of this litigation as a class
action.
13. For the reasons stated herein, a class action is superior to other
available methods for the fair and efficient adjudication of this action and the
claims asserted herein. The likelihood that individual members of the Class will
prosecute separate individual actions is remote due to the burden and expense of
prosecuting litigation of this nature and magnitude. Absent a class action, the
class members will continue to suffer damage, and defendants' violations of law
will proceed without remedy. Defendants are acting in a manner which affects all
shareholders in the same or similar
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fashion and would be subjected to potentially differing legal requirements or
standards of conduct if this litigation were not certified to proceed as a class
action on behalf of all Noteholders.
SUBSTANTIVE ALLEGATIONS
A. THE NOTES AND THEIR INDENTURES
14. In fiscal 1998, the Company issued $200 million principal amount of
9-3/8% Notes. In fiscal 1997, the Company issued $225 million of 9-3/4 Notes.
State Street and Fleet are the Indenture Trustees for the 9-3/8% Notes and the
9-3/4% Notes, respectively and, as such, owe fiduciary duties to the holders of
each of their series of Notes.
15. Section 4.15 of the Indenture governing the 9-3/8% Notes states, in
pertinent part, that: "(a) In the event of a Change of Control, each Holder will
have the right to require that the Company repurchase all or a portion of such
Holders' Notes pursuant to the offer described in paragraph (b) below (the
"Change of Control Offer") at a purchase price equal to 101% of the principal
amount thereof plus accrued and unpaid interest, if any, to the date of
repurchase." Section 4.15(b) continues: "(b) Within 30 days following the date
upon which the Change of Control occurred (the "Change of Control Date")
requiring the Company to make a Change of Control Offer pursuant to this Section
4.15 the Company shall send ... a notice to each Holder, with a copy to the
Trustee, which notice shall govern the terms of the Change of Control Offer."
Section 4.15 thereafter further delineates procedures for a Change of Control
Offer, including specific responsibilities of the Trustee.
16. Section 1.01 of the Indenture governing the 9-3/8% Notes states
that: "Change of Control" means if at any time any Person or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) acquires, in one or
more transactions (i) beneficial ownership (within the meaning of Rule 13(d)(3)
under the Exchange Act) of 50% or more of the voting power represented by all
voting securities of the Company...."
17. Section 5.01 of the Indenture governing the 9-3/8% Notes, entitled
"When Company May Merge, Etc.," states in pertinent part:
(a) The Company shall not, in a single transaction or through
a series of related transactions, consolidate with or merge
with or into ... another Person ..., unless:
(1) either the Company shall be the survivor of such merger or
consolidation or the surviving Person ... shall expressly
assume, by an indenture supplemental hereto, executed and
delivered to the Trustee on or prior to the consummation of
such transaction, in a form satisfactory to the Trustee, all
the obligations of the Company under the Notes and this
Indenture;
(2) ...;
(3) ...; and
(4) The Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, transfer or adoption and such
supplemental indenture comply with this Article Five, that the
surviving Person (if other than the Company) agrees to be
bound hereby, and that all conditions precedent herein
provided relating to such transaction have been satisfied.
18. Sections 1.01, 4.15 and 5.01 of the Indenture governing the 9-3/4%
Notes contains substantially the same provisions regarding a Change of Control
Offer.
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19. The Indentures and the Notes issued thereunder are expressly
governed by New York law (excluding its conflict of law principles).
B. THE PROPOSED TRANSACTION
20. On September 27, 2001, Temple-Inland and Gaylord announced the
signing of a definitive merger agreement (the "Merger Agreement") by which
Temple-Inland will acquire Gaylord. Pursuant to the terms of the agreement,
Temple-Inland will begin cross-conditional tender offers for all of Gaylord's
outstanding shares and outstanding 9-3/8% Notes, 9-3/4% Notes and 9-7/8% Senior
Subordinated Notes due 2008 (the "9-7/8% Senior Subordinated Notes"). Certain
outstanding bank debt and other senior secured debt obligations of Gaylord will
be paid or otherwise satisfied. Assuming that all shares and all notes are
tendered, the total consideration for the transaction is approximately $786
million, consisting of $1.80 per share, or approximately $100 million, to
purchase the outstanding shares of Gaylord, and approximately $686 million to
acquire all the notes and to satisfy the bank debt and other senior secured debt
obligations.
21. The transaction is contingent upon, among other things: (a) at
least two-thirds of the outstanding shares of Gaylord being validly tendered and
(b) at least 90% of the aggregate principal amount of the outstanding notes of
each series being validly tendered.
22. The transaction is purportedly not conditioned upon financing.
Temple-Inland has reportedly received a financing commitment from Citibank,
N.A., to fund its offer for all outstanding shares of Gaylord, to acquire all
the notes, to satisfy the bank debt and other senior secured bank obligations,
and to pay costs and expenses associated with the transaction. The tender offers
for the outstanding stock and notes are both set to expire on October 26, 2001.
23. In accordance with the terms of the Merger Agreement, Temple-Inland
will commence a tender offer to purchase all of the outstanding shares of
Gaylord at a price of $1.80 per share in cash. Gaylord's Board of Directors has
unanimously recommended that its shareholders accept the offer and tender their
shares. In that regard, Gaylord's Board of Directors has received fairness
opinions from Deutsche Banc Alex. Brown Inc. and Rothschild Inc., its
financial advisors, stating that the consideration to be received by Gaylord's
shareholders is fair from a financial point of view to such shareholders. No
such financial opinion has been provided stating that the tender offer
consideration is fair to the holders of the notes.
24. Temple-Inland will also commence a tender offer and consent
solicitation for each series of notes. Specifically, Temple-Inland intends to
commence a tender offer to purchase 100% of the outstanding principal amount of
the 9-3/8% Notes at a price of $735 per $1000 principal amount, 100% of the
outstanding principal amount of the 9-3/4% Notes at a price of $735 per $1000
principal amount and 100% of the 9-7/8% Senior Subordinated Notes at a price of
$240 per $1000 principal amount. In addition, a consent payment of $20 per $1000
principal amount will be paid for each note tendered prior to the consent
payment deadline and will be in consideration for a tendering noteholder's
waiver of that person's rights under the respective indentures and notes. Among
other things, no provision is made for the payment of accrued interest, and the
Change of Control provisions in the indentures are not being honored.
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25. In the event that Gaylord terminates or abandons the transaction,
including to accept a superior proposal, Gaylord shall pay to Temple-Inland an
amount equal to $20 million, plus Temple-Inland's expenses up to $2.5 million.
The Company cannot afford to pay those fees and expenses (in addition to the
extraordinary fees and expenses of the transaction that it has already incurred,
including fees to its lawyers and advisors).
26. Gaylord has in place a "poison pill" shareholders' rights plan
which precludes any unsolicited takeover not approved by the Board. As a
condition of the proposed transaction, Gaylord has waived the protections of the
poison pill to allow the Temple-Inland offer to proceed. Therefore, Gaylord's
directors have utilized the Company's preclusive anti-takeover defenses solely
to foster an unfair and inadequate transaction which serves their own interests
to the detriment of the superior claims held by Noteholders.
27. According to Standard & Poor's, "because Temple-Inland's balance
sheet is already stretched ... this acquisition could lead to the deterioration
of th[at] company's financial profile." In Standard & Poor's view,
Temple-Inland's completion of the tender offers for Gaylord's notes "will be
tantamount to a default" on its own debt. In addition, if the acquisition is
completed as currently structured, with a minimum 90% tender requirement for the
notes, Gaylord's senior unsecured and senior subordinated debt ratings on its
remaining outstanding notes will be lowered to "D," and then all ratings would
be withdrawn.
28. According to Gaylord's most recent SEC filing, the Company's
directors and executive officers own 13.1% of the Company's common stock, with
Gaylord's Chairman and Chief Executive Officer, Marvin Pomerantz, owning 8.3% of
Gaylord's shares. It is believed that these individuals do not own any of
Gaylord's notes. In addition, Mr. Pomerantz will receive $8 million in
accelerated employee benefits in connection with the transaction.
29. Notably, while the tender offer price for the stock reflects
greater than a 100% premium over the unaffected market price for the shares, the
notes are being repurchased at little or no premium and at a deep discount to
their par value.
30. The consent payment of $20 per $1000 principal amount will likely
include amendment of the indentures which, as provided therein, may be modified
in principal part based on the consent of the majority of the outstanding
principal amount of such notes. The $20 consent payment was arbitrarily selected
and is grossly inadequate in relation to the rights being surrendered.
C. GAYLORD'S INSOLVENT CONDITION
31. Gaylord is insolvent by any measure. According to its 10-K filing
with the SEC for the fiscal year ending September 30, 2000, Gaylord's total
stockholders' equity (deficit) was a negative $86.8 million. As for the 2000
fiscal year, Gaylord's net cash decreased by $9.7 million, leaving the Company
with cash and cash equivalents at year end which totaled only $700,000. As of
September 30, 2000, Gaylord's long-term debt totaled $911.2 million.
32. For the nine months ended June 30, 2001, Gaylord lost another $14.7
million, and its total stockholders' deficit increased to $100.3 million.
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33. Moreover, according to a September 21, 2001, analyst's report
issued by Deutsche Banc Alex. Brown, Gaylord will be unlikely to satisfy the
financial covenants in its indentures for the December 2001 quarter "absent a
dramatic improvement in the company, industry and/or economy." Notably, Deutsche
Banc was, at the same time, serving as one of the Company's financial advisors
in connection with the proposed transaction and rendered a financial opinion to
the Gaylord Board attesting to the fairness of the transaction from the
shareholders' point of view.
34. The purchase prices reflected in the currently proposed transaction
confirm Gaylord's insolvent status. Giving effect to Gaylord's $278 million in
total bank debt, which will be paid in full, and other senior debt which will
also be paid in full, and further taking into account that $200 million of
9-3/8% Notes will be purchased for $151 million (representing a $49 million
discount from face), that $225 million of 9-3/4% Notes will be purchased for
$169.9 million (representing a $55.1 million discount from face) and that $250
million of 9-7/8% Senior Subordinated Notes will be purchased for $65 million
(representing a $185 million discount from face), debt repurchases will total
$686 million. In addition, Gaylord's unaffected stock price immediately prior to
announcement of the proposed transaction was approximately $44.8 million (56
million shares x $0.80 per share). Thus, Gaylord's enterprise value (the market
value of its debt plus its equity), based on the actual purchase prices for the
debt, is approximately $740.8 million. However, Gaylord's total outstanding debt
obligations amounted to $966.1 million as per its June 30, 2001 10-Q. As a
result, the value of Gaylord's assets demonstrably falls short of its
liabilities and the Company is therefore unquestionably insolvent.
35. In that regard, a September 28, 2001, research report issued by
Barclays uses three additional, different methodologies to value Gaylord on a
going-concern basis, none of which exceed the outstanding debt obligations of
the Company.
36. Given Gaylord's clearly insolvent status, the Company, by and
through its directors, has assumed fiduciary responsibilities to its creditors
which take precedence over any fiduciary duties that would otherwise be owed to
Gaylord's shareholders. The assets of Gaylord are, therefore, impressed with a
constructive trust for the benefit of its creditors which Gaylord, through the
acts of its directors, several of whom own significant amounts of shares, is
impairing and improperly diverting to the holders of the common stock. In
seeking to sell the Company or otherwise to dispose of its assets, Gaylord's
directors were required to obtain 100% payment for the holders of the senior
notes treating them the same as the holders of bank debt and other secured debt,
whether or not this would result in the shareholders receiving little or nothing
at all. In a bankruptcy or receivership, that would certainly be the result and
Gaylord should not be permitted to achieve indirectly that which could not have
been achieved directly by use of more conventional methods of financial
reorganization.
37. Temple-Inland has knowingly aided and abetted and substantially
assisted in the breaches of fiduciary duties and other wrongs committed by
Gaylord and the Trustees. The Trustees, for their part, have primarily
participated in, and aided and abetted, the breaches and wrongdoing alleged
herein by their overt and tacit cooperation, assistance and acquiescence. In
that regard, none of the documentation specified by Sections 4.15 and 5.01 of
the Indenture governing the 9-3/8% Notes (or their equivalents), concerning a
Change of Control, have been demanded or obtained, and the Trustees have
knowingly permitted Temple-Inland to attempt to obtain the extinguishment of the
Noteholders' rights for the trivial sum of $20 per $1000 principal amount.
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FIRST CLAIM FOR RELIEF
(FOR VIOLATION OF THE TRUST INDENTURE ACT OF 1939)
38. Plaintiffs repeat and reallege the allegations set forth above.
39. Fleet and State Street, as Trustees for the respective Indentures
for the 9-3/8% Notes and the 9-3/4% Notes, owe fiduciary duties to the
Noteholders, and a private right of action exists under the Trust Indenture Act
of 1939 to enforce those duties.
40. The Trustees are, or will be, violating their fiduciary duties by,
among other things:
(a) permitting and/or facilitating the plan by which the
Change of Control provisions in the Indentures will be end-run and subverted;
(b) permitting and/or facilitating the scheme by which $100
million of the $786 million in total acquisition costs will be diverted to
Gaylord's stockholders, representing a 100% premium over the stock's unaffected
market price when, due to the Company's insolvency, no amount should be
allocated to the stockholders until the Noteholders are paid in full; and
(c) failing to act diligently and aggressively to protect the
Noteholders against the actions of a conflicted Gaylord Board dominated by, and
solely devoted to, the interest of shareholders.
41. Defendants Gaylord and Temple-Inland are participating in and
knowingly aiding and abetting and substantially assisting in the commission of
such wrongs.
42. As a result of the foregoing, plaintiffs and other members of the
Class are suffering irreparable injury for which there is no adequate remedy at
law.
SECOND CLAIM FOR RELIEF
(FOR BREACHES OF FIDUCIARY DUTY AND UNFAIR DEALING)
43. Plaintiffs repeat and reallege the allegations set forth above.
44. By reason of the foregoing, the Company, by and through its
directors, and the Trustees have each violated their fiduciary duties to the
Noteholders and breached implied covenants of fair dealing in the Indentures by
permitting, facilitating and/or favoring the proposed transaction. Defendants
have acted in bad faith and disloyally to the Noteholders in order to promote
their own interests and that of other shareholders without regard to their
fiduciary duties to protect and enhance the interests of the Noteholders given
Gaylord's insolvent and precarious financial status.
45. Defendants' fiduciary breaches are exacerbated by the coercive
nature of the tender offers for the Notes. As structured, the tender offers will
force all Noteholders to tender irrespective of their displeasure with the
economic terms of the tender offers. That is because the noteholders, many of
whom are institutional investors and are themselves fiduciaries, cannot afford
to hold the securities and risk their being relegated to the status of holders
of notes which are illiquid, unrated and stripped, by virtue of the consent
solicitation, of all their protective features. In short, the securities which
the noteholders would retain if they did not tender would, in material respects,
not be the same securities and would, in reality, be inferior.
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46. Additionally, Gaylord and the Trustees have engaged in acts of
unfair dealing by failing to provide independent noteholder representation in
negotiating and considering the proposed transaction and failing to secure
financial advisory services and a fairness opinion from the point of view of the
noteholders.
47. In connection with the tender offers, noteholders are not being
advised of these deficiencies in the process by which the transaction has been
structured and proposed. Further, noteholders are not being advised that
consummation of the tender offers is likely to cause a default under
Temple-Inland's loan covenants, raising substantial risk that Temple-Inland will
be unable to close the transaction.
48. Moreover, Gaylord's outlays for the fees of financial advisors and
counsel in pursuing the proposed transaction and its potential costs for
break-up fees and expense reimbursement are, or will be, fraudulent conveyances
in light of the Company's insolvent and precarious financial condition.
49. Each defendant has rendered substantial assistance in the
accomplishment of the fiduciary breaches and other wrongs complained of herein.
In taking the actions, as particularized herein, to aid and abet and
substantially assist in the wrongs complained of, all defendants acted with an
awareness of the primary wrongdoing, realized that their conduct substantially
assisted the accomplishment of that wrongdoing, and overall contributed to the
course of wrongful conduct.
50. As a result of the foregoing, plaintiffs and other members of the
Class are suffering irreparable injury for which there is no adequate remedy at
law.
THIRD CLAIM FOR RELIEF
(FOR DECLARATORY RELIEF)
51. Plaintiffs repeat and reallege the allegations set forth above.
52. Plaintiffs seek declaratory relief pursuant to the Declaratory
Judgments Act, 28 U.S.C. Section 2201.
53. Declaratory relief is sought, inter alia, as to the following
matters:
(a) Gaylord's fiduciary duties owed to noteholders;
(b) Gaylord's insolvent status;
(c) the impact of the contractual provisions in the
Indentures, particularly with reference to Change of Control;
(d) the consent payment, and
(e) the existence of a constructive trust over all Gaylord's
assets for the benefit of Gaylord's creditors and defendants' invasion of that
trust.
54. Plaintiffs and other members of the Class are suffering irreparable
injury as to which they seek declaratory relief and for which there is no
adequate remedy at law.
WHEREFORE, plaintiffs demand judgment in favor of themselves and the
other members of the Class, as follows:
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(a) declaring this action to be properly maintainable as a
class action and certifying plaintiffs as the class representatives;
(b) granting declaratory relief as set forth in the Third
Claim For Relief;
(c) enjoining defendants from proceeding with the challenged
transactions;
(d) if the transactions are consummated, rescinding and
setting them aside;
(e) imposing a constructive trust on Gaylord's assets for the
benefit of its creditors;
(f) alternatively, directing defendants, jointly and
severally, to account to the Class for the damages sustained by Class members
and all profits unlawfully obtained by defendants as a result of the wrongs
complained of;
(g) awarding plaintiffs the costs and expenses of this action,
including reasonable counsel and expert fees; and
(h) awarding such other and further relief as may be just,
necessary and appropriate under the circumstances.
Dated: October 1, 2001.
MILBERG WEISS BERSHAD
HYNES & LERACH LLP
By: /s/ Steven G. Schulman
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Steven G. Schulman (SS-2561)
U. Seth Ottensoser (UO-9703)
One Pennsylvania Plaza
New York, NY 10119
(212) 594-5300
Attorneys For Plaintiffs
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