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Item 1.01.
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Entry into a Material Definitive Agreement; Item 1.03. Bankruptcy or Receivership.
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On March 30, 2008, Ampex Corporation and its U.S. subsidiaries (collectively, “Ampex” or the “Company”), filed voluntary
petitions for relief under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”), in the United States Bankruptcy Court for the Southern District of New York (the “Court”) (
In re Ampex Corporation
, Case
No. 08-11094) (the “Case”). The Company has requested that the Case be jointly administered
.
The Company will continue to operate its business as a “debtor-in-possession” under the jurisdiction of the Court and in
accordance with the provisions of the Bankruptcy Code. The Company has sought Court approval of motions that will permit the Company to continue to pay its employees’ salaries and benefits and certain vendor obligations and honor its customer
warranties and other programs in the ordinary course of business.
Prior to filing its petitions, the Company negotiated with and obtained
the support of the majority of its secured creditors and its largest unsecured creditor for the terms of a pre-negotiated plan of reorganization (the “Plan”), as evidenced by a Plan Support Agreement dated as of March 30, 2008 (the
“PSA”), by and among the Company, Hillside Capital Incorporated (“Hillside”), Credit Suisse Asset Management LLC and GMAM Investment Funds Trust II (on behalf of which DDJ Capital Management LLC acts as investment manager), which
was filed contemporaneously with the Company’s voluntary petitions for relief under the Bankruptcy Code. The parties to the PSA have agreed to support the Plan and not to support, directly or indirectly, any other plan, in exchange for the
Company’s agreement to implement all steps necessary to solicit the requisite acceptances of the Plan and obtain from the Court an order confirming the Plan in accordance with the terms of the PSA. The PSA may be terminated in the event that
the Plan and related disclosure statement (the “Disclosure Statement”) are not approved by certain deadlines, the Plan is not consummated within a certain period of time after its confirmation, a party materially breaches the PSA, a
trustee or examiner is appointed in the Case or the Case is converted to cases under chapter 7 of the Bankruptcy Code. The Plan and the Disclosure Statement are subject to approval by the Court. The Company has filed a motion to schedule a hearing
to obtain Court approval of the Disclosure Statement in May 2008.
Under the terms of the Plan, holders of approximately $6.9 million of
the Company’s 12% Senior Notes (as of March 30, 2008) will receive approximately $3.45 million in cash and approximately $3.45 million of new secured notes of Reorganized Ampex (as defined below), payable over a one-year period after the
Company’s emergence from chapter 11, in exchange for the cancellation of their outstanding notes, which were originally scheduled to mature on August 15, 2008.
The Plan also provides that Hillside, which holds approximately $11.0 million of the Company’s secured notes and approximately $41.7 million of the Company’s unsecured indebtedness (including interest), will
provide additional financing to the Company, comprised of a $1 million short term secured loan and a $4 million senior secured five-year term loan. These loans will bear interest at 10%, and will be used for working capital purposes and to fund the
cash payment in respect of the 12% Senior Notes, as indicated above. In exchange for cancellation of Hillside’s secured notes, Reorganized Ampex (as defined below) will incur $10.5 million of debt, which debt will bear interest at 10%, under a
new credit facility. In exchange for cancellation of its unsecured debt, Hillside will receive equity in newly reorganized Ampex Corporation (“Reorganized Ampex”) after its emergence from chapter 11. The Company’s existing debt to
Hillside was incurred in connection with advances made by Hillside to the Company in order to fund the Company’s ongoing pension obligations. Upon emergence from chapter 11, pursuant to an Amended and Restated Ampex-Hillside/Sherborne
Agreement, Hillside will continue to fund future pension obligations in the event that Ampex does not have sufficient liquidity to make such payments, despite its having used commercially reasonable efforts to obtain such liquidity. Such advances
will be in the form of new loans that will be extended to Reorganized Ampex by Hillside. After the total amount of the Company’s post-emergence debt owed to Hillside equals $25 million, Hillside will receive shares of a new series of 16%
preferred stock in Reorganized Ampex for any subsequent advances that it makes to Reorganized Ampex.
Under the Plan, unsecured trade
creditors will be paid 100% of their claims in cash in the ordinary course. Other unsecured creditors, which include, but are not limited to, Hillside with respect to its unsecured claims, participants in the Company’s Supplemental Retirement
Programs and holders of claims arising from the Company’s environmental remediation obligations, will receive new common stock in Reorganized Ampex (“New Common Stock”). Shares of New Common Stock are not expected to be registered or
traded on any public exchange.
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Upon consummation of the Plan, the Company expects that shares of its outstanding Class A Common
Stock, which are currently listed on Nasdaq, will be canceled. Although holders of Class A Common Stock will not receive any distributions under the Plan on account of their interests, holders of such stock who do not object to the Plan will
receive certain consideration if intellectual property that is currently not royalty bearing yields net revenues in excess of certain thresholds in the future. Under the terms of the Plan, on the date that the Plan becomes effective, the current
members of the Board of Directors of the Company will be replaced by those individuals set forth on Exhibit I to the Plan.
Because of
uncertainties inherent in the reorganization process, including those relating to the identification and impact of all potentially relevant facts and circumstances, it is not possible at this time to predict the outcome of the Case, the terms and
provisions of the final plan of reorganization to be approved by the Court, or the effect of the chapter 11 reorganization process on the claims and interests of the Company’s creditors, equity holders and other stakeholders with any degree of
certainty.
The foregoing descriptions of the Plan, the PSA and the Disclosure Statement are qualified in their entirety by reference to
those documents, which are attached hereto as Exhibits 10.1, 10.2 and 10.3, respectively, and incorporated herein by reference. On March 31, 2008, Ampex issued a press release announcing the commencement of the Case, a copy of which is attached
as Exhibit 99.1 hereto. Additional information about the Case is available on the Internet at www.ampex.com. The information set forth on the Company’s website shall not be deemed to be a part of or incorporated by reference into this Form 8-K.
