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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. _________)*
Silicon Graphics, Inc.
--------------------------------------------------------------------------------
(Name of Issuer)
Common Stock, par value $0.01 per share
--------------------------------------------------------------------------------
(Title of Class of Securities)
827056409
--------------------------------------------------------------------------------
(CUSIP Number)
Erin C. Ross
Watershed Asset Management, L.L.C.
One Maritime Plaza, Suite 1525
San Francisco, California 94111
(415) 391-8900
--------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
October 17, 2006
--------------------------------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of Sections 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check
the following box [ ].
Note: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Section 240.13d-7 for other
parties to whom copies are to be sent.
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter the
disclosures provided in a prior cover page.
The information required in the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
(Continued on following pages)
Page 1 of 22 Pages
Exhibit Index Found on Page 21
13D
===================
CUSIP No. 827056409
===================
------------====================================================================
NAMES OF REPORTING PERSONS
1 I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Watershed Capital Partners, L.P.
------------====================================================================
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions)
(a) [ ]
(b) [ X ]**
2
** The reporting persons making this filing hold an
aggregate of 1,505,858 Shares, which is 13.5% of the
class of securities. The reporting person on this
cover page, however, is a beneficial owner only of
the securities reported by it on this cover page.
------------====================================================================
3 SEC USE ONLY
------------====================================================================
SOURCE OF FUNDS (See Instructions)
4
WC
------------====================================================================
CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
5 TO ITEMS 2(d) OR 2(e)
[ ]
------------====================================================================
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Delaware
------------====================================================================
SOLE VOTING POWER
7
NUMBER OF -0-
------------===========================================
SHARES SHARED VOTING POWER
BENEFICIALLY 8
OWNED BY 259,591
------------===========================================
EACH SOLE DISPOSITIVE POWER
9
REPORTING -0-
PERSON WITH ------------===========================================
SHARED DISPOSITIVE POWER
10
259,591
------------====================================================================
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
259,591
------------====================================================================
CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
12 CERTAIN SHARES (See Instructions)
[ ]
------------====================================================================
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
2.3%
------------====================================================================
TYPE OF REPORTING PERSON (See Instructions)
14
PN
------------====================================================================
Page 2 of 22 Pages
13D
===================
CUSIP No. 827056409
===================
------------====================================================================
NAMES OF REPORTING PERSONS
1 I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Watershed Capital Institutional Partners, L.P.
------------====================================================================
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions)
(a) [ ]
(b) [ X ]**
2
** The reporting persons making this filing hold an
aggregate of 1,505,858 Shares, which is 13.5% of the
class of securities. The reporting person on this
cover page, however, is a beneficial owner only of
the securities reported by it on this cover page.
------------====================================================================
3 SEC USE ONLY
------------====================================================================
SOURCE OF FUNDS (See Instructions)
4
WC
------------====================================================================
CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
5 TO ITEMS 2(d) OR 2(e)
[ ]
------------====================================================================
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Delaware
------------====================================================================
SOLE VOTING POWER
7
NUMBER OF -0-
------------===========================================
SHARES SHARED VOTING POWER
BENEFICIALLY 8
OWNED BY 869,129
------------===========================================
EACH SOLE DISPOSITIVE POWER
9
REPORTING -0-
PERSON WITH ------------===========================================
SHARED DISPOSITIVE POWER
10
869,129
------------====================================================================
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
869,129
------------====================================================================
CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
12 CERTAIN SHARES (See Instructions)
[ ]
------------====================================================================
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
7.8%
------------====================================================================
TYPE OF REPORTING PERSON (See Instructions)
14
PN
------------====================================================================
Page 3 of 22 Pages
13D
===================
CUSIP No. 827056409
===================
------------====================================================================
NAMES OF REPORTING PERSONS
1 I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Watershed Asset Management, L.L.C.
------------====================================================================
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions)
(a) [ ]
(b) [ X ]**
2
** The reporting persons making this filing hold an
aggregate of 1,505,858 Shares, which is 13.5% of the
class of securities. The reporting person on this
cover page, however, may be deemed a beneficial owner
only of the securities reported by it on this cover
page.
------------====================================================================
3 SEC USE ONLY
------------====================================================================
SOURCE OF FUNDS (See Instructions)
4
AF
------------====================================================================
CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
5 TO ITEMS 2(d) OR 2(e)
[ ]
------------====================================================================
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Delaware
------------====================================================================
SOLE VOTING POWER
7
NUMBER OF -0-
------------===========================================
SHARES SHARED VOTING POWER
BENEFICIALLY 8
OWNED BY 1,505,858
------------===========================================
EACH SOLE DISPOSITIVE POWER
9
REPORTING -0-
PERSON WITH ------------===========================================
SHARED DISPOSITIVE POWER
10
1,505,858
------------====================================================================
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
1,505,858
------------====================================================================
CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
12 CERTAIN SHARES (See Instructions)
[ ]
------------====================================================================
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
13.5%
------------====================================================================
TYPE OF REPORTING PERSON (See Instructions)
14
OO
------------====================================================================
Page 4 of 22 Pages
13D
===================
CUSIP No. 827056409
===================
------------====================================================================
NAMES OF REPORTING PERSONS
1 I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
WS Partners, L.L.C.
------------====================================================================
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions)
(a) [ ]
(b) [ X ]**
2
** The reporting persons making this filing hold an
aggregate of 1,505,858 Shares, which is 13.5% of the
class of securities. The reporting person on this
cover page, however, may be deemed a beneficial owner
only of the securities reported by it on this cover
page.
------------====================================================================
3 SEC USE ONLY
------------====================================================================
SOURCE OF FUNDS (See Instructions)
4
AF
------------====================================================================
CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
5 TO ITEMS 2(d) OR 2(e)
[ ]
------------====================================================================
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Delaware
------------====================================================================
SOLE VOTING POWER
7
NUMBER OF -0-
------------===========================================
SHARES SHARED VOTING POWER
BENEFICIALLY 8
OWNED BY 1,128,720
------------===========================================
EACH SOLE DISPOSITIVE POWER
9
REPORTING -0-
PERSON WITH ------------===========================================
SHARED DISPOSITIVE POWER
10
1,128,720
------------====================================================================
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
1,128,720
------------====================================================================
CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
12 CERTAIN SHARES (See Instructions)
[ ]
------------====================================================================
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
10.1%
------------====================================================================
TYPE OF REPORTING PERSON (See Instructions)
14
OO
------------====================================================================
Page 5 of 22 Pages
13D
===================
CUSIP No. 827056409
===================
------------====================================================================
NAMES OF REPORTING PERSONS
1 I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Meridee A. Moore
------------====================================================================
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions)
(a) [ ]
(b) [ X ]**
2
** The reporting persons making this filing hold an
aggregate of 1,505,858 Shares, which is 13.5% of the
class of securities. The reporting person on this
cover page, however, may be deemed a beneficial owner
only of the securities reported by it on this cover
page.
------------====================================================================
3 SEC USE ONLY
------------====================================================================
SOURCE OF FUNDS (See Instructions)
4
AF
------------====================================================================
CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
5 TO ITEMS 2(d) OR 2(e)
[ ]
------------====================================================================
CITIZENSHIP OR PLACE OF ORGANIZATION
6
United States
------------====================================================================
SOLE VOTING POWER
7
NUMBER OF -0-
------------===========================================
SHARES SHARED VOTING POWER
BENEFICIALLY 8
OWNED BY 1,505,858
------------===========================================
EACH SOLE DISPOSITIVE POWER
9
REPORTING -0-
PERSON WITH ------------===========================================
SHARED DISPOSITIVE POWER
10
1,505,858
------------====================================================================
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
1,505,858
------------====================================================================
CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
12 CERTAIN SHARES (See Instructions)
[ ]
------------====================================================================
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
13.5%
------------====================================================================
TYPE OF REPORTING PERSON (See Instructions)
14
IN
------------====================================================================
Page 6 of 22 Pages
Item 1. Security And Issuer
------ -------------------
This statement relates to shares of Common Stock, par value $0.01 per
share (the "Shares"), of Silicon Graphics, Inc. (the "Company"). The Company's
principal offices are located at 1200 Crittendon Lane, Mountain View, California
94043.
Item 2. Identity And Background
------ -----------------------
(a) This statement is filed by the entities and persons listed
below, all of whom together are referred to herein as the "Reporting Persons."
The Funds
----------
(i) Watershed Capital Partners, L.P., a Delaware limited
partnership ("WCP"), with respect to the Shares held
by it; and
(ii) Watershed Capital Institutional Partners, L.P., a
Delaware limited partnership ("WCIP"), with respect
to the Shares held by it.
WCP and WCIP are together referred to herein as the "Funds."
The Management Company
----------------------
(iii) Watershed Asset Management, L.L.C., a Delaware
limited liability company (the "Management Company"),
with respect to the Shares held by Watershed Capital
Partners (Offshore), Ltd. ("Watershed Offshore"), an
entity managed by the Management Company, and with
respect to the Shares held by the Funds, for which
the Management Company serves as an investment
adviser.
The General Partner
-------------------
(iv) WS Partners, L.L.C., a Delaware limited liability
company which is the general partner of each of the
Funds (the "General Partner"), with respect to the
Shares held by each of the Funds.
The Managing Member
-------------------
(v) Meridee A. Moore, a United States citizen who is the
Senior Managing Member of both the General Partner
and the Management Company, with respect to the
Shares held by the Funds and Watershed Offshore.
Meridee A. Moore is referred to herein as the "Individual Reporting
Person."
Page 7 of 22 Pages
(b) The address of the principal business office of the Funds, the
General Partner, the Management Company and the Individual Reporting Person is
c/o Watershed Asset Management, L.L.C., One Maritime Plaza, Suite 1525, San
Francisco, California 94111.
(c) The principal business of each of the Funds is that of a
private investment fund engaging in the purchase and sale of investments for its
own account. The principal business of the General Partner is to act as the
general partner of the Funds. The principal business of the Management Company
is to act as the investment adviser to the Funds and Watershed Offshore. The
principal business of the Individual Reporting Person is serving as the senior
managing member of both the Management Company and the General Partner.
(d) None of the Funds, the Management Company, the General Partner
or the Individual Reporting Person has, during the last five years, been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors).
(e) None of the Funds, the Management Company, the General Partner
or the Individual Reporting Person has, during the last five years, been party
to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting or
mandating activities subject to, federal or state securities laws or finding any
violation with respect to such laws.
(f) The citizenship of each of the Funds, the General Partner, the
Management Company and the Individual Reporting Person is set forth above.
Item 3. Source And Amount Of Funds And Other Consideration
------ --------------------------------------------------
In total, 1,505,858 Shares are reported herein. The Funds and Watershed
Offshore acquired (i) 260,225 of such Shares (the "Claim Distribution Shares")
as part of the reorganization of the Company (the "Reorganization") under
Chapter 11 of the U.S. Bankruptcy Code (the "Bankruptcy
Page 8 of 22 Pages
Code") pursuant to the First Amended Joint Plan of Reorganization Under Chapter
11 of the Bankruptcy Code, dated July 27, 2006 as modified (the "First Amended
Plan"), and the agreements entered into in connection with the First Amended
Plan (together with the First Amended Plan, the "Plan"), (ii) 707,812 of such
Shares (the "Subscription Shares") by participating in the Company's rights
offering (the "Rights Offering") pursuant to the Plan, and (iii) 74,586 of such
Shares (the "Backstop Shares") and 463,235 of such Shares (the "Overallotment
Shares") pursuant to the Backstop Commitment Agreement (the "Backstop Commitment
Agreement") entered into with the Company in connection with the Rights Offering
pursuant to the Plan. For more information regarding the Plan, the Rights
Offering or the Backstop Commitment Agreement, see the copy of the Plan attached
as an exhibit to the Form 8-K filed by the Company with the Securities and
Exchange Commission on September 19, 2006. Any description of the Plan, and the
related Rights Offering and Backstop Commitment Agreement, is qualified in its
entirety by the actual terms and conditions of the Plan and of each agreement,
as applicable.
As of April 12, 2006, the Funds and Watershed Offshore owned in
aggregate approximately $19,883,000 principal amount of Senior Secured
Convertible Notes (the "Notes") issued pursuant to the Indenture, dated December
24, 2003 (the "Indenture"), between the Company and U.S. Bank National
Association, as indenture trustee, as amended from time to time. The Funds and
Watershed Offshore entered into a confidentiality agreement with the Company as
of such date and after such date did not acquire or dispose of any Notes. The
$19,883,000 principal amount of Notes were convertible pursuant to the terms of
the Indenture into approximately 15,906,400 shares of common stock, par value
$0.001 per share (the "Cancelled Shares"), of the Company, which shares were
cancelled on October 17, 2006 in connection with the restructuring of the
Company as described in the Plan. The Funds and Watershed Offshore received as
distributions pursuant to the Plan in respect of their Notes an aggregate of
260,225 Shares.
Page 9 of 22 Pages
The investment cost (including commissions) for the Subscription
Shares, the Backstop Shares and the Overallotment Shares held by each of the
Funds and Watershed Offshore is set forth below (based on the $6.67 per Share
subscription price specified in the Plan):
Subscription Shares,
Backstop Shares and Approximate Net
Entity Overallotment Shares Held Investment Cost
------ ------------------------- ---------------
WCP 209,172 $1,395,177.24
WCIP 729,516 $4,865,871.72
Watershed Offshore 306,945 $2,047,323.15
Each of WCP, WCIP and Watershed Offshore obtained the consideration for
its acquisition of the Subscription Shares, the Backstop Shares and the
Overallotment Shares from its working capital.
Item 4. Purpose Of The Transactions
------ ---------------------------
The purpose of the acquisition of the Shares is for investment, and the
acquisitions of the Shares by each of the Funds and Watershed Offshore were made
in the ordinary course of business. In connection with the Reorganization and
pursuant to Section 10.3 of the Plan, the Funds, Watershed Offshore and the
other members of the Ad Hoc Committee selected in consultation with the Company
the six current members of the Board of Directors of the Company, including
Kevin D. Katari, a managing member of the General Partner and the Management
Company. Mr. Katari was subsequently elected Chairman of the Company's Board of
Directors.
As described in Item 3 and Item 6, each of the Funds and Watershed
Offshore acquired, in aggregate, beneficial ownership of the 1,505,858 Shares
reported herein as part of the Reorganization of the Company pursuant to the
Plan, including 260,225 Shares acquired as distributions in respect of Notes
held by the Funds and Watershed Offshore prior to the Reorganization.
Page 10 of 22 Pages
Although no Reporting Person has any specific plan or proposal to
acquire or dispose of Shares, consistent with its investment purpose and subject
to applicable law, each Reporting Person at any time and from time to time may
acquire additional Shares or dispose of any or all of its Shares depending upon
an ongoing evaluation of the investment in the Shares, prevailing market
conditions, other investment opportunities, liquidity requirements of the
Reporting Person and/or other investment considerations. No Reporting Person has
made a determination regarding a maximum or minimum number of Shares which it
may hold at any point in time.
Also, consistent with their investment intent, the Reporting Persons
may engage in communications with one or more shareholders of the Company, one
or more officers of the Company, one or more members of the board of directors
of the Company and/or potential investors in the Company regarding the Company,
including but not limited to its operations, its capital structure and potential
strategies to enhance shareholder value. During the course of such
communications, the Reporting Persons may advocate or oppose one or more courses
of action. As noted previously, Kevin D. Katari, a managing member of the
General Partner and the Management Company, is a member and Chairman of the
Company's Board of Directors.
Except to the extent the foregoing may be deemed a plan or proposal,
none of the Reporting Persons has any plans or proposals which relate to, or
could result in, any of the matters referred to in paragraphs (a) through (j),
inclusive, of the instructions to Item 4 of Schedule 13D. The Reporting Persons
may, at any time and from time to time, review or reconsider their position
and/or change their purpose and/or formulate plans or proposals with respect
thereto.
Item 5. Interest In Securities Of The Issuer
------ ------------------------------------
(a) The Funds
(a),(b) The information set forth in Rows 7 through 13 of the
cover page hereto for each Fund is incorporated
herein by reference for each such Fund. The
percentage amount set forth in Row 13 for all cover
pages filed herewith is
Page 11 of 22 Pages
calculated based upon the 11,125,000 Shares
outstanding as of October 17, 2006 as reported by the
Company.
(c) The transaction dates, number of Shares purchased, or
sold or otherwise acquired and the price per Share
(including commissions) for all purchases, sales or
acquisitions of the Shares by the Funds in the past
60 days are set forth on Schedules A-B hereto and are
incorporated herein by reference. All of such
transactions were effected as part of the
Reorganization of the Company pursuant to the Plan,
as described in Item 3 above.
(d) The General Partner has the power to direct the
receipt of dividends relating to, or the disposition
of the proceeds of the sale of, all of the Shares
held by the Funds as reported herein. The Management
Company, as an investment adviser, has the power to
direct the receipt of dividends relating to, or the
disposition of the proceeds of the sale of, all of
the Shares held by the Funds as reported herein. The
Individual Reporting Person is the Senior Managing
Member of the General Partner and the Management
Company.
(e) Not applicable.
(b) The Management Company
(a),(b) The information set forth in Rows 7 through 13 of the
cover page hereto for the Management Company is
incorporated herein by reference.
(c) The transaction dates, number of Shares purchased or
sold and the price per Share (including commissions)
for all purchases and sales of the Shares by the
Management Company on behalf of Watershed Offshore in
the past 60 days are set forth on Schedule C hereto
and are incorporated herein by reference. All of such
transactions were effected as part of the
Reorganization of the Company pursuant to the Plan,
as described in Item 3 above.
For information regarding transactions by the
Management Company on behalf of the Funds, see Item
5(a) above.
(d) The Management Company, as an investment adviser, has
the power to direct the receipt of dividends relating
to, or the disposition of the proceeds of the sale
of, all of the Shares held by Watershed Offshore and
the Funds as reported herein. The Individual
Reporting Person is the Senior Managing Member of the
Management Company.
(e) Not applicable.
(c) The General Partner
Page 12 of 22 Pages
(a),(b) The information set forth in Rows 7 through 13 of the
cover page hereto for the General Partner is
incorporated herein by reference.
(c) None.
(d) The General Partner has the power to direct the
receipt of dividends relating to, or the disposition
of the proceeds of the sale of, all of the Shares
held by the Funds as reported herein. The Management
Company, as an investment adviser, has the power to
direct the receipt of dividends relating to, or the
disposition of the proceeds of the sale of, all of
the Shares held by the Funds as reported herein. The
Individual Reporting Person is the Senior Managing
Member of the General Partner and the Management
Company.
(e) Not applicable.
(d) The Individual Reporting Person
(a),(b) The information set forth in Rows 7 through 13 of the
cover page hereto for the Individual Reporting Person
is incorporated herein by reference for the
Individual Reporting Person.
(c) None.
(d) The General Partner has the power to direct the
receipt of dividends relating to, or the disposition
of the proceeds of the sale of, all of the Shares
held by the Funds as reported herein. The Management
Company, as an investment adviser, has the power to
direct the receipt of dividends relating to, or the
disposition of the proceeds of the sale of, all the
Shares held by Watershed Offshore and the Funds as
reported herein. The Individual Reporting Person is
the Senior Managing Member of the General Partner and
the Management Company.
(e) Not applicable.
The Shares reported hereby for the Funds are owned directly by the
Funds and those reported by the Management Company on behalf of Watershed
Offshore are owned directly by Watershed Offshore. The General Partner, as
general partner to the Funds, may be deemed to be the beneficial owner of all
such Shares owned by the Funds. The Management Company, as investment adviser to
Watershed Offshore and the Funds, may be deemed to be the beneficial owner of
all such Shares owned by Watershed Offshore and the Funds, respectively. The
Individual Reporting Person, as the Senior Managing Member of both the General
Partner and the
Page 13 of 22 Pages
Management Company, may be deemed to be the beneficial owner of all such Shares
owned by the Funds and Watershed Offshore. Each of the Management Company, the
General Partner and the Individual Reporting Person hereby disclaims any
beneficial ownership of any such Shares.
Item 6. Contracts, Arrangements, Understandings Or
------ -------------------------------------------
Relationships With Respect To Securities Of The Issuer
------------------------------------------------------
As previously reported by the Company in a Form 8-K filed with the
Securities and Exchange Commission on May 9, 2006 (the "May 9 Form 8-K), on May
7, 2006, subsequent to acquiring the Notes, each of the Funds and Watershed
Offshore entered into Restructuring Agreements with the Company (the
"Restructuring Agreements") in connection with the Company's filing of a
voluntary petition for reorganization under Chapter 11 of the Bankruptcy Code.
Pursuant to the Restructuring Agreements, the Funds and Watershed Offshore had
agreed to vote in favor of a financial restructuring of the Company to be
effected through a Chapter 11 reorganization on certain terms and conditions
contained therein. This description of the Restructuring Agreements is qualified
in its entirety by the full terms and conditions thereof. A form of the
Restructuring Agreement entered into by each of the Funds and Watershed
Offshore, which is incorporated herein by reference, was attached as an exhibit
to the May 9 Form 8-K filed by the Company.
Certain of the Reporting Persons are also party to a Registration
Rights Agreement with the Company. Under the Registration Rights Agreement,
dated as of October 17, 2006 (the "Registration Rights Agreement"), among the
Company, the Funds, and Watershed Offshore and certain other investors named
therein (together with the Funds and Watershed Offshore, the "Investors"), the
Company has granted to the Investors certain demand and piggyback registration
rights with respect to the Shares now held, or hereinafter acquired, by the
Investors (the "Registrable Common Stock"). The Funds and Watershed Offshore
collectively qualify as a Key Holder under the Registration Rights Agreement.
Under the Registration Rights Agreement, a Key
Page 14 of 22 Pages
Holder has the right to require the Company to effect the registration of such
shares of Registrable Common Stock in certain circumstances and subject to
certain limitations set forth therein. Each Key Holder may request a maximum of
two demand registrations. In addition, the Company has agreed that, no later
than ten days after the Company becomes eligible to file a Registration
Statement on Form S-3, it will prepare and file a Registration Statement on Form
S-3 relating to the offering on a continuous or delayed basis pursuant to Rule
415 under the Securities Act of 1933, as amended (the "Securities Act"), of the
Registrable Common Stock, subject to certain conditions and limitations
described in the Registration Rights Agreement. In the event that the Company
proposes to register Shares for its own account, it shall, upon written request,
effect the registration of such requesting Key Holder's shares of Registrable
Common Stock, subject to certain limitations set forth therein. The Registration
Rights Agreement, a copy of which was attached as an exhibit to the Form 8-K
filed by the Company with the Securities and Exchange Commission on October 20,
2006, is incorporated by reference herein. Any description of the Registration
Rights Agreement is qualified in its entirety by the full terms and conditions
thereof.
The Funds and Watershed Offshore are lenders under the Senior Secured
Credit Agreement dated as of October 17, 2006 (the "Loan Agreement"), by and
among the Company, the guarantors named therein and the lenders parties thereto
from time to time. For more information regarding the Loan Agreement, please see
a copy of the Loan Agreement attached as an exhibit to the Form 8-K filed by the
Company with the Securities and Exchange Commission on October 20, 2006. Any
description of the Loan Agreement is qualified in its entirety by the full terms
and conditions thereof.
As part of the Reorganization, the Company entered into the Liquidating
Trust Agreement, dated as of October 17, 2006 (the "Liquidating Trust
Agreement"), with a trustee to establish a
Page 15 of 22 Pages
liquidating trust (the "Liquidating Trust") with respect to certain assets,
including litigation claims, transferred to the Liquidating Trust from the
Debtor's Chapter 11 estate. Pursuant to the Liquidating Trust Agreement, the
trustee shall make distributions to the beneficial holders of the Liquidating
Trust of all cash on hand, except as otherwise provided by the Liquidating Trust
Agreement. The Funds and Watershed Offshore are beneficial holders of the
Liquidating Trust and Mr. Katari is a member of the Trust Advisory Board. For
more information regarding the Liquidating Trust Agreement, see the copy of the
Plan attached as an exhibit to the Form 8-K filed by the Company with the
Securities and Exchange Commission on September 19, 2006. Any description of the
Liquidating Trust Agreement is qualified in its entirety by the full terms and
conditions thereof.
Except as described in Item 3, Item 4 and this Item 6, there are no
contracts, arrangements, understandings or relationships (legal or otherwise)
among the Reporting Persons or between such persons and any other person with
respect to any securities of the Company, including but not limited to the
transfer or voting of any securities of the Company, finder's fees, joint
ventures, loan or option arrangements, puts or calls, guarantees of profits,
divisions of profits or loss, or the giving or withholding of proxies.
Item 7. Materials To Be Filed As Exhibits
------ ---------------------------------
There is filed herewith as Exhibit 1 a written agreement relating to
the filing of joint acquisition statements as required by Section 240.13d-1(k)
under the Securities Exchange Act of 1934, as amended.
Page 16 of 22 Pages
SIGNATURES
----------
After reasonable inquiry and to the best of our knowledge and belief,
the undersigned certify that the information set forth in this statement is
true, complete and correct.
Dated: October 27, 2006
/s/ Meridee A. Moore
----------------------------------------
WS PARTNERS, L.L.C.,
On its own behalf and
as the General Partner of
WATERSHED CAPITAL PARTNERS, L.P. and
WATERSHED CAPITAL INSTITUTIONAL PARTNERS, L.P.,
By Meridee A. Moore,
Senior Managing Member
/s/ Meridee A. Moore
----------------------------------------
WATERSHED ASSET MANAGEMENT, L.L.C.
By Meridee A. Moore,
Senior Managing Member
/s/ Meridee A. Moore
----------------------------------------
Meridee A. Moore
Page 17 of 22 Pages
SCHEDULE A
WATERSHED CAPITAL PARTNERS, L.P.
NO. OF SHARES PRICE
TRANSACTION DATE ACQUIRED PER SHARE ($)
---------------- ------------ -------------
10/17/2006 50,419 -- (1)
10/17/2006 137,141 6.67(2)
10/17/2006 9,989 6.67(3)
10/17/2006 62,042 6.67(4)
-------------------
(1) Represents Claim Distribution Shares received as distributions in respect of
$3,852,400 principal amount of Notes.
(2) Represents Subscription Shares.
(3) Represents Backstop Shares.
(4) Represents Overallotment Shares.
Page 18 of 22 Pages
SCHEDULE B
WATERSHED CAPITAL INSTITUTIONAL PARTNERS, L.P.
NO. OF SHARES PRICE
TRANSACTION DATE ACQUIRED PER SHARE ($)
---------------- ------------ -------------
10/17/2006 139,613 -- (1)
10/17/2006 379,747 6.67(2)
10/17/2006 48,507 6.67(3)
10/17/2006 301,262 6.67(4)
------------------------
(1) Represents Claim Distribution Shares received as distributions in respect of
$10,667,400 principal amount of Notes.
(2) Represents Subscription Shares.
(3) Represents Backstop Shares.
(4) Represents Overallotment Shares.
Page 19 of 22 Pages
SCHEDULE C
WATERSHED ASSET MANAGEMENT, L.L.C.
The transactions listed below were effected solely on behalf of
Watershed Offshore. For transactions on behalf of WCP and WCIP, see Schedules A
and B, respectively.
NO. OF SHARES PRICE
TRANSACTION DATE ACQUIRED PER SHARE ($)
---------------- ------------ -------------
10/17/2006 70,193 -- (1)
10/17/2006 190,924 6.67(2)
10/17/2006 16,090 6.67(3)
10/17/2006 99,931 6.67(4)
-----------------------
(1) Represents Claim Distribution Shares received as distributions in respect of
$5,363,200 principal amount of Notes.
(2) Represents Subscription Shares.
(3) Represents Backstop Shares.
(4) Represents Overallotment Shares.
Page 20 of 22 Pages
EXHIBIT INDEX
EXHIBIT 1 Joint Acquisition Statement Pursuant to Section
240.13d-1(k)
Page 21 of 22 Pages
EXHIBIT 1
to
SCHEDULE 13D
JOINT ACQUISITION STATEMENT
PURSUANT TO SECTION 240.13d-1(k)
The undersigned acknowledge and agree that the foregoing statement on
Schedule 13D is filed on behalf of each of the undersigned and that all
subsequent amendments to this statement on Schedule 13D shall be filed on behalf
of each of the undersigned without the necessity of filing additional joint
acquisition statements. The undersigned acknowledge that each shall be
responsible for the timely filing of such amendments, and for the completeness
and accuracy of the information concerning him, her or it contained therein, but
shall not be responsible for the completeness and accuracy of the information
concerning the other entities or persons, except to the extent that he, she or
it knows or has reason to believe that such information is inaccurate.
Dated: October 27, 2006
/s/ Meridee A. Moore
----------------------------------------
WS PARTNERS, L.L.C.,
On its own behalf and
as the General Partner of
WATERSHED CAPITAL PARTNERS, L.P. and
WATERSHED CAPITAL INSTITUTIONAL PARTNERS, L.P.,
By Meridee A. Moore,
Senior Managing Member
/s/ Meridee A. Moore
----------------------------------------
WATERSHED ASSET MANAGEMENT, L.L.C.
By Meridee A. Moore,
Senior Managing Member
/s/ Meridee A. Moore
----------------------------------------
Meridee A. Moore
Page 22 of 22 Pages