<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
SCHEDULE 14D-1
Tender Offer Statement Pursuant To
Section 14(d)(1) Of The Securities Exchange Act Of 1934
----------------
SYNTHETIC INDUSTRIES, INC.
(Name of Subject Company)
SIND ACQUISITION, INC.
SIND HOLDINGS, INC.
INVESTCORP S.A.
(Bidders)
Common Stock, $1.00 par value per share
(Title of Class of Securities)
871914107
(CUSIP Number of Class of Securities)
E. Michael Greaney, Esq.
Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, New York 10166
(212) 351-4000
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications on Behalf of Bidder)
CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
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Transaction Valuation Amount of Filing Fee
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<S> <C>
$314,512,011 $62,903
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</TABLE>
* Estimated for purposes of calculating the amount of the filing fee only.
The filing fee calculation assumes the purchase of all outstanding shares
of common stock, $1.00 par value per share (collectively, the "Shares"), of
Synthetic Industries, Inc. at a price of $33.00 per Share in cash, without
interest. The filing fee calculation is based on 8,664,819 Shares
outstanding as of November 1, 1999 and assumes the issuance prior to the
consummation of the Offer (as defined herein) of 865,848 Shares upon the
exercise of outstanding stock options. The amount of the filing fee
calculated in accordance with Regulation 240.0-11 of the Securities
Exchange Act of 1934, as amended, equals 1/50th of one percent of the value
of the transaction.
[_] Check box if any part of the fee is offset as provided by Rules 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form
or schedule and the date of its filing.
Amount previously paid: None Filing party:Not applicable.
Form or registration no.: Not applicable Date filed: Not applicable
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<PAGE>
SCHEDULE 14D-1
CUSIP No. 871914107 Page 2 of 10 Pages
1. Names of Reporting Persons I.R.S. Identification Nos.
of Above Persons (Entities Only)
SIND Acquisition, Inc.
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2. Check the Appropriate Box if a Member of a Group* (a) [_]
(b) [_]
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3. SEC Use Only
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4. Sources of Funds
AF, BK
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5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(e) or 2(f)
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6. Citizenship or Place of Organization
Delaware
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7. Aggregate Amount Beneficially Owned by Each Reporting Person
5,699,194 (1)
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8. Check Box if the Aggregate Amount in Row (7) Excludes Certain Shares [_]
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9. Percent of Class Represented by Amount in Row (7)
65.8%
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10. Type of Reporting Person
CO
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(1) SIND Acquisition, Inc. disclaims beneficial ownership of the 5,699,194
shares and this statement shall not be construed as an admission that SIND
Acquisition, Inc. is the beneficial owner of any such shares.
<PAGE>
SCHEDULE 14D-1
CUSIP No. 871914107 Page 3 of 10 Pages
1. Names of Reporting Persons
I.R.S. Identification Nos.
of Above Persons (Entities Only)
SIND Holdings, Inc.
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2. Check the Appropriate Box if a Member of a Group* (a) [_]
(b) [_]
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3. SEC Use Only
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4. Sources of Funds
AF, BK
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5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(e) or 2(f)
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6. Citizenship or Place of Organization
Delaware
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7. Aggregate Amount Beneficially Owned by Each Reporting Person
5,699,194 (2)
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8. Check Box if the Aggregate Amount in Row (7) Excludes Certain Shares [_]
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9. Percent of Class Represented by Amount in Row (7)
65.8%
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10. Type of Reporting Person
CO
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(2) SIND Holdings, Inc. disclaims beneficial ownership of the 5,699,194 shares
and this statement shall not be construed as an admission that SIND
Holdings, Inc. is the beneficial owner of any such shares.
<PAGE>
SCHEDULE 14D-1
CUSIP No. 871914107 Page 4 of 10 Pages
1. Names of Reporting Persons I.R.S. Identification Nos.
of Above Persons (Entities Only)
Investcorp S.A.
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2. Check the Appropriate Box if a Member of a Group* (a) [_]
(b) [_]
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3. SEC Use Only
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4. Sources of Funds AF, BK
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5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(e) or 2(f)
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6. Citizenship or Place of Organization
Luxembourg
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7. Aggregate Amount Beneficially Owned by Each Reporting Person
5,699,194 (3)
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8. Check Box if the Aggregate Amount in Row (7) Excludes Certain Shares [_]
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9. Percent of Class Represented by Amount in Row (7)
65.8%
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10. Type of Reporting Person
CO
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(3) Investcorp S.A. disclaims beneficial ownership of the 5,699,194 shares and
this statement shall not be construed as an admission that Investcorp S.A.
is the beneficial owner of any such shares.
<PAGE>
INTRODUCTION
This Tender Offer Statement on Schedule 14D-1 (this "Statement") relates to
the offer by SIND Acquisition, Inc., a Delaware corporation ("Purchaser") and
wholly owned subsidiary of SIND Holdings, Inc., a Delaware corporation
("Parent") formed at the direction of Investcorp S.A., a Luxembourg
corporation ("Investcorp"), to purchase all outstanding shares of common
stock, $1.00 par value per share (collectively, the "Shares"), of Synthetic
Industries, Inc., a Delaware corporation (the "Company"), at a price of $33.00
per Share, net to the seller in cash, without interest thereon, upon the terms
and subject to the conditions set forth in the Offer to Purchase, dated
November 12, 1999 (the "Offer to Purchase"), and the related Letter of
Transmittal (which, together with any amendments or supplements thereto,
collectively constitute the "Offer"), copies of which are attached hereto as
Exhibits (a)(1) and (a)(2), respectively. The Offer is being made pursuant to
an Agreement and Plan of Merger, dated as of November 5, 1999 (the "Merger
Agreement"), by and among Parent, Purchaser and the Company, a copy of which
is attached hereto as Exhibit (c)(1), and which provides, among other things,
that on the second business day following or as soon as practicable after the
satisfaction or waiver of the conditions set forth therein (including the
purchase of Shares pursuant to the Offer), Purchaser will be merged with and
into the Company (the "Merger"), with the Company continuing as the surviving
corporation and wholly owned subsidiary of Parent. Upon consummation of the
Merger, each issued Share that is outstanding immediately prior to the Merger
(other than any Shares held by Parent, Purchaser or the Company, or any
subsidiary of Parent or the Company, and other than Shares held by the
Company's stockholders who have properly exercised appraisal rights under
Delaware law), will be converted automatically into the right to receive the
amount paid per Share in the Offer, in cash, without interest thereon, upon
surrender of the certificate representing the Share.
The information contained in this Statement concerning the Company,
including information concerning the deliberations, approvals and
recommendations of the Board of Directors of the Company in connection with
the transaction, the opinion of the financial advisor to such Board of
Directors, and the Company's capital structure and financial information, was
supplied by the Company. None of Investcorp, Parent or Purchaser takes any
responsibility for the accuracy of such information.
Item 1. Issuer and Class of Security Subject to the Transaction
(a) The name of the subject company is Synthetic Industries, Inc., a
Delaware corporation, which has its principal executive offices at 309
LaFayette Road, Chickamauga, Georgia 30707.
(b) The class of equity securities being sought is the common stock, par
value $1.00 per share, of the Company. The information set forth in the Offer
to Purchase under the caption "INTRODUCTION" is incorporated herein by
reference.
(c) The information concerning the principal market in which the Shares are
traded and certain high and low sales prices for the Shares in such principal
market set forth in the Offer to Purchase under the caption "THE TENDER
OFFER--6. Price Range of the Shares; Dividends" is incorporated herein by
reference.
Item 2. Identity and Background
(a)-(d),(g) This Statement is being filed by Investcorp, Parent and
Purchaser. The information concerning the name, state or other place of
organization, principal business and address of the principal office of each
of Investcorp, Parent and Purchaser, and the name, business address, present
principal occupation or employment (including the name, principal business and
address of any corporation or other organization in which such employment or
occupation is conducted), material occupations, positions, offices or
employment during the last five years and citizenship of each of the executive
officers and directors of Investcorp, Parent and Purchaser is set forth in the
Offer to Purchase under the captions "INTRODUCTION" and "THE TENDER OFFER--9.
Certain Information Concerning Investcorp, Parent and Purchaser" and in
Schedule I to the Offer to Purchase, and is incorporated herein by reference.
Sipco Limited, a Cayman Islands corporation ("Sipco"), is a passive
5
<PAGE>
holding company which has no operations and no employees. Sipco may be deemed
to control Investcorp through its ownership of a majority of the stock of a
company which indirectly owns a majority of Investcorp's outstanding stock.
Sipco's principal office is located at West Wind Building, P.O. Box 1111,
Harbour Drive, Grand Cayman, Cayman Islands, B.W.I. The information concerning
the name, business address, present principal occupation or employment
(including the name, age, principal business and address of any corporation or
other organization in which such employment or occupation is conducted),
material occupations, positions, offices or employment during the last five
years and citizenship of each of the executive officers and directors of Sipco
is set forth in Schedule 1 to this Statement.
(e) and (f) During the last five years, none of Sipco, Investcorp, Parent,
Purchaser, or to the best of Investcorp, Parent's and Purchaser's knowledge,
any person listed in Schedule I to the Offer to Purchase or Schedule 1 to this
Statement has been (i) convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or (ii) a 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 activities subject to, federal
or state securities laws or finding any violations of such laws.
Item 3. Past Contacts, Transactions or Negotiations
(a) The information set forth in the Offer to Purchase under the captions
"INTRODUCTION," "THE TENDER OFFER--9. Certain Information Concerning
Investcorp, Parent, Purchaser" and "THE TENDER OFFER--11. Purpose of the Offer
and the Merger; Plans for the Company; the Merger Agreement; Appraisal Rights
in the Merger; the Stockholder Agreement; Other Matters" is incorporated
herein by reference. Since October 1, 1996, none of Sipco, or to the best of
Investcorp's, Parent's and Purchaser's knowledge, any of the persons listed in
Schedule 1 to this Statement, has had any transaction with the Company or any
of its executive officers, directors or affiliates that is required to be
reported under the rules and regulations of the Commission applicable to the
Offer.
(b) The information set forth in the Offer to Purchase under the captions
"INTRODUCTION," "THE TENDER OFFER--9. Certain Information Concerning
Investcorp, Parent and Purchaser," "THE TENDER OFFER--10. Background of the
Offer and the Merger; Contacts with the Company" and "THE TENDER OFFER--11.
Purpose of the Offer and the Merger; Plans for the Company; the Merger
Agreement; Appraisal Rights in the Merger; the Stockholder Agreement; Other
Matters" is incorporated herein by reference. Since October 1, 1996, there
have been no contacts, negotiations or transactions between Sipco, or to the
best of Investcorp's, Parent's and Purchaser's knowledge, any of the persons
listed in Schedule 1 to this Statement on the one hand, and the Company or its
affiliates on the other hand, concerning a merger, consolidation or
acquisition, a tender offer for or other acquisition of securities of any
class of the Company, an election of directors of the Company, or a sale or
other transfer of a material amount of assets of the Company or any of its
subsidiaries.
Item 4. Source and Amount of Funds or Other Consideration
(a) and (b) The information set forth in the Offer to Purchase under the
caption "THE TENDER OFFER--12. Source and Amount of Funds" is incorporated
herein by reference.
(c) Not applicable.
Item 5. Purpose of the Tender Offer and Plans or Proposals of the Bidder
(a)-(e) The information set forth in the Offer to Purchase under the
captions "INTRODUCTION," "THE TENDER OFFER--11. Purpose of the Offer and the
Merger; Plans for the Company; the Merger Agreement; Appraisal Rights in the
Merger; the Stockholder Agreement; Other Matters" and "THE TENDER OFFER--12.
Source and Amount of Funds" is incorporated herein by reference. Except as
incorporated herein by the previous sentence, none of Sipco, or to the best of
Investcorp's, Parent's and Purchaser's knowledge, any of the persons listed in
Schedule 1 to this Statement, has any current plans or proposals that would
result in an extraordinary corporate transaction, such as a merger,
reorganization or liquidation of the Company or any of its subsidiaries
6
<PAGE>
with or into any third entity, the sale or transfer of a material amount of
the Company's or any of its subsidiaries' assets to a third party, a material
change in the Company's capitalization or dividend structure or any other
material change in the Company's corporate structure or business.
(f) and (g) The information set forth in the Offer to Purchase under the
caption "THE TENDER OFFER --7. Possible Effects of the Offer on the Market for
Shares; Nasdaq National Market Quotation; Exchange Act Registration; Margin
Regulations" is incorporated herein by reference. None of Sipco, or to the
best of Investcorp's, Parent's and Purchaser's knowledge, any of the persons
listed in Schedule 1 to this Statement, has any current plans or proposals
that would result in a class of securities of the Company to be delisted from
a national securities exchange or to cease to be authorized to be quoted in an
inter-dealer quotation system of a registered national securities association,
or a class of equity securities of the Company becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the Securities
Exchange Act of 1934, as amended.
Item 6. Interest in Securities of the Subject Company
(a) and (b) The information set forth in the Offer to Purchase under the
caption "THE TENDER OFFER--11. Purpose of the Offer and the Merger; Plans for
the Company; the Merger Agreement; Appraisal Rights in the Merger; the
Stockholder Agreement; Other Matters" is incorporated herein by reference. As
a result of Parent and Purchaser obtaining an irrevocable proxy pursuant to a
Stockholder Agreement which Parent and Purchaser entered into with Synthetic
Industries, L.P. (the "Stockholder") on November 5, 1999, each of Parent and
Purchaser may be deemed to beneficially own the 5,699,194 Shares which are
owned by the Stockholder and which represent 65.8% of the Shares outstanding
as of November 1, 1999. Certain entities (the "Managed Entities") each own a
non-controlling interest in Parent and are each indirectly managed by an
affiliate(s) of Investcorp through a revocable management services or similar
agreement between the Managed Entity or its shareholders or principals and the
affiliate(s) (collectively, the "Management Agreements"). Each Managed Entity,
pursuant to its respective Management Agreement, has indirectly granted to an
Investcorp affiliate(s) the authority to direct the voting and disposition of
its equity interest in Parent for so long as the Management Agreement is in
effect. As a result, Investcorp may be deemed to beneficially own the
5,699,194 Shares. As stated above, Sipco may be deemed to control Investcorp
through its ownership of a majority of the stock of a company which indirectly
owns a majority of Investcorp's outstanding stock, and may thus be deemed to
beneficially own the 5,699,194 Shares. To the best of Investcorp's, Parent's
and Purchaser's knowledge, none of the persons listed in Schedule 1 to this
Statement, nor any associate or subsidiary of such persons, beneficially owns
or has any right to acquire directly or indirectly any Shares. None of Sipco,
or to the best of Investcorp's, Parent's and Purchaser's knowledge, any of the
persons listed in Schedule 1 to this Statement, or any associate or subsidiary
of any of the foregoing, or any of the respective directors, executive
officers or subsidiaries of any of the foregoing, has effected any transaction
in the Shares during the past 60 days.
Item 7. Contracts, Arrangements, Understandings or Relationships With Respect
to the Subject Company's Securities
The information set forth in the Offer to Purchase under the captions "THE
TENDER OFFER--11. Purpose of the Offer and the Merger; Plans for the Company;
the Merger Agreement; Appraisal Rights in the Merger; the Stockholder
Agreement; Other Matters" and "THE TENDER OFFER--12. Source and Amount of
Funds" is incorporated herein by reference. None of Sipco, or to the best of
Investcorp's, Parent's and Purchaser's knowledge, any of the persons listed in
Schedule 1 to this Statement, has any contract, arrangement, understanding or
relationship with any other person with respect to any Shares, including, but
not limited to, any contract, arrangement, understanding or relationship
concerning the transfer or the voting of any Shares, joint ventures, loan or
option arrangements, puts or calls, guaranties of loans, guaranties against
loss, or the giving or withholding of proxies.
Item 8. Persons Retained, Employed or to Be Compensated
The information set forth in the Offer to Purchase under the caption "THE
TENDER OFFER--16. Fees and Expenses" is incorporated herein by reference.
7
<PAGE>
Item 9. Financial Statements of Certain Bidders
Not applicable.
Item 10. Additional Information
(a) Except as disclosed in Items 3 and 7 above, there are no present or
proposed material contracts, arrangements, understandings or relationships
between Sipco, Investcorp, Parent or Purchaser, or to the best of Investcorp's,
Parent's and Purchaser's knowledge, any of the persons listed in Schedule I to
the Offer to Purchase or Schedule 1 to this Statement, and the Company or any
of the Company's executive officers, directors, controlling persons or
subsidiaries.
(b) and (c) The information set forth in the Offer to Purchase under the
caption "THE TENDER OFFER-- 15. Certain Legal Matters; Regulatory Approvals" is
incorporated herein by reference.
(d) The information set forth in the Offer to Purchase under the caption "THE
TENDER OFFER--7. Possible Effects of the Offer on the Market for Shares; Nasdaq
National Market Quotation; Exchange Act Registration; Margin Regulations" is
incorporated herein by reference.
(e) None.
(f) The information set forth in the Offer to Purchase and the Letter of
Transmittal, to the extent not otherwise incorporated by reference, is
incorporated herein by reference.
Item 11. Material to be Filed as Exhibits
(a)(l) Offer to Purchase, dated November 12, 1999
(a)(2) Letter of Transmittal
(a)(3) Notice of Guaranteed Delivery
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees
(a)(5) Letter to Clients for Use by Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees
(a)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9
(a)(7) Form of Summary Advertisement, dated November 12, 1999
(a)(8) Press Release, dated November 5, 1999, issued by Investcorp and the
Company
(b)(1) Senior Subordinated Credit Facility Commitment Letter, dated
November 2, 1999, among Bear Stearns Corporate Lending Inc., Bear,
Stearns & Co. Inc., The Chase Manhattan Bank, Chase Securities Inc.
and Investcorp Investment Equity Limited
(b)(2) Engagement Letter, dated November 2, 1999, among Bear, Stearns & Co.
Inc., Chase Securities Inc. and Investcorp Investment Equity Limited
(b)(3) Revolving Credit Facility Commitment Letter, dated November 2, 1999,
between Bear Stearns Corporate Lending Inc., Bear, Stearns & Co.
Inc., The Chase Manhattan Bank, Chase Securities Inc. and Investcorp
Investment Equity Limited*
(c)(1) Agreement and Plan of Merger, dated as of November 5, 1999, by and
among Parent, Purchaser and the Company
(c)(2) Stockholder Agreement, dated as of November 5, 1999, among Parent,
Purchaser and Synthetic Industries, L.P.
8
<PAGE>
(c)(3) Confidentiality Agreement, dated as of June 7 1999, between the
Company and Investcorp International Inc.
(c)(4) Employment Letter of Intent, dated November 5, 1999, between Parent
and Leonard Chill
(c)(5) Employment Letter of Intent, dated November 5, 1999, between Parent
and Joseph Dana
(c)(6) Employment Letter of Intent, dated November 5, 1999, between Parent
and Joseph Sinicropi
(c)(7) Employment Letter of Intent, dated November 5, 1999, between Parent
and Charles T. Koerner
(c)(8) Employment Letter of Intent, dated November 5, 1999, between Parent
and John Michael Long
(c)(9) Employment Letter of Intent, dated November 5, 1999, between Parent
and Proctor Allen
(c)(10) Employment Letter of Intent, dated November 5, 1999, between Parent
and Louis Ziebold
(d) None
(e) Not applicable
(f) None
* To be filed by amendment.
9
<PAGE>
SIGNATURES
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.
SIND ACQUISITION, INC.
/s/ Christopher J. O'Brien
By: _________________________________
Name: Christopher J. O'Brien
Title: President
Dated: November 12, 1999
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.
SIND HOLDINGS, INC.
/s/ Christopher J. O'Brien
By: _________________________________
Name: Christopher J. O'Brien
Title: President
Dated: November 12, 1999
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.
INVESTCORP S.A.
/s/ Lawrence B. Kessler
By: _________________________________
Name: Lawrence B. Kessler
Title: Authorized Representative
Dated: November 12, 1999
10
<PAGE>
SCHEDULE 1
The following table sets forth the name, citizenship, business address,
present principal occupation and other material positions held during the last
five years, if any, of each director of Sipco. Sipco has no executive
officers. Paget-Brown & Company serves as the Secretary of Sipco. Paget-Brown
& Company's address is West Wind Building, P.O. Box 1111, Harbour Drive,
George Town, Grand Cayman, Cayman Islands, B.W.I., and its principal business
is providing corporate management services. Each person listed below has been
a director of Sipco for the past five years.
<TABLE>
<CAPTION>
Name, Citizenship Other Material Positions
and Business Address Present Principal Occupation Held During the Past Five Years
-------------------- ---------------------------- -------------------------------
<S> <C> <C>
Abdul-Rahman Salim Chairman, Bahrain Middle East None.
Al-Ateeqi Kuwait Bank.
P.O. BOX 848
Safat 13009
Kuwait
Hussain Ibrahim Chairman, Alfardan Group of Vice Chairman, Gulf Publishing
Al-Fardan Qatar Companies (Holdings) WLL, a & Printing Organization WLL.
P.O. Box 63 group comprised of jewelry, Managing Director, The
Doha trading, automobile, real Commercial Bank of Qatar Ltd.
Qatar estate and investment and QSC.
trading services companies.
Mohammed Yousef Jalal Chairman, Mohammed Jalal & Sons Chairman, Bahrain Tourism Co.
Bahrain Group of Companies, a trading and Al-Ahli Commercial Bank
P.O. BOX 113 and contracting group with BSC. Vice Chairman of Bahrain
Manama worldwide interests. International Golf Course Co.
Bahrain BSC and National Import &
Export Co. Director, Bahrain
Airport Services Co.
Nemir Amin Kirdar President and Chief Executive None.
Bahrain Officer, Investcorp Bank E.C.
P.O. BOX 5340
Manama
Bahrain
Abdul Aziz Jassim Kanoo Deputy Chairman and Deputy Director of the following
Saudi Arabia Chief Executive Officer, Yusuf entities: Eastern Province
P.O. Box 37 Bin Ahmed Kanoo Group, Saudi Cement Co.; Saudi Public
Dammam 31411 Arabia, a group active in Transport Co.; Gulf Union
Kingdom Of Saudi Arabia shipping, trading, property, Insurance & Reinsurance Co.,
travel, machinery sales and Bahrain; United Arab Shipping
services, oil field supplies Agencies Co. (SA) Ltd.
and services, chemicals,
procurement services, insurance
and domestic and overseas
investments. Chairman of the
following entities: Saudi
Arabian Industrial & Trading
Est.; Baroid (Saudi Arabia)
Ltd.; Saudi Arabian Lube
Additives Co. Ltd.; Key
Communications Development Ltd.
Lawrence B. Kessler Chief Administrative Officer, None.
Investcorp S.A.
Gary S. Long Chief Financial Officer, None.
Investcorp S.A.
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Sequentially
Number Exhibit Index Numbered Page
------- ------------- -------------
<C> <S> <C>
(a)(l) Offer to Purchase, dated November 12, 1999
(a)(2) Letter of Transmittal
(a)(3) Notice of Guaranteed Delivery
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees
(a)(5) Letter to Clients for Use by Brokers, Dealers,
Commercial Banks, Trust Companies and Other Nominees
(a)(6) Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9
(a)(7) Form of Summary Advertisement, dated November 12, 1999
(a)(8) Press Release, dated November 5, 1999, issued by
Investcorp and the Company
(b)(1) Senior Subordinated Credit Facility Commitment Letter,
dated November 2, 1999, among Bear Stearns Corporate
Lending Inc., Bear, Stearns & Co. Inc., The Chase
Manhattan Bank, Chase Securities Inc. and Investcorp
Investment Equity Limited
(b)(2) Engagement Letter, dated November 2, 1999, among Bear,
Stearns & Co. Inc., Chase Securities Inc. and
Investcorp Investment Equity Limited
(b)(3) Revolving Credit Facility Commitment Letter, dated
November 2, 1999, between Bear Stearns Corporate
Lending Inc., Bear, Stearns & Co. Inc., The Chase
Manhattan Bank, Chase Securities Inc. and Investcorp
Investment Equity Limited*
(c)(1) Agreement and Plan of Merger, dated as of November 5,
1999, by and among Parent, Purchaser and the Company
(c)(2) Stockholder Agreement, dated as of November 5, 1999,
among Parent, Purchaser and Synthetic Industries, L.P.
(c)(3) Confidentiality Agreement, dated as of June 7 1999,
between the Company and Investcorp International Inc.
(c)(4) Employment Letter of Intent, dated November 5, 1999,
between Parent and Leonard Chill
(c)(5) Employment Letter of Intent, dated November 5, 1999,
between Parent and Joseph Dana
(c)(6) Employment Letter of Intent, dated November 5, 1999,
between Parent and Joseph Sinicropi
(c)(7) Employment Letter of Intent, dated November 5, 1999,
between Parent and Charles T. Koerner
(c)(8) Employment Letter of Intent, dated November 5, 1999,
between Parent and John Michael Long
(c)(9) Employment Letter of Intent, dated November 5, 1999,
between Parent and Proctor Allen
(c)(10) Employment Letter of Intent, dated November 5, 1999,
between Parent and Louis Ziebold
(d) None
(e) Not applicable
(f) None
</TABLE>
* To be filed by amendment.
<PAGE>
Offer To Purchase For Cash
All Outstanding Shares Of Common Stock
of
Synthetic Industries, Inc.
at
$33.00 Net Per Share
by
SIND Acquisition, Inc.
a wholly owned subsidiary of
SIND Holdings, Inc.
a corporation formed at the direction of
Investcorp S.A.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT NEW YORK CITY
TIME ON FRIDAY, DECEMBER 10, 1999 UNLESS THE OFFER IS EXTENDED.
THE BOARD OF DIRECTORS OF SYNTHETIC INDUSTRIES, INC. (THE "COMPANY"), BY
UNANIMOUS VOTE AT A MEETING DULY CALLED AND HELD, HAS APPROVED THE MERGER
AGREEMENT, THE OFFER AND THE MERGER, HAS DETERMINED THAT THE TERMS OF THE
OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY AND
ITS STOCKHOLDERS, HAS RECOMMENDED THAT THE COMPANY'S STOCKHOLDERS ACCEPT AND
TENDER THEIR SHARES PURSUANT TO THE OFFER, AND HAS RECOMMENDED THAT THE
COMPANY'S STOCKHOLDERS ADOPT THE MERGER AGREEMENT.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN BY THE EXPIRATION DATE OF THE OFFER A NUMBER OF
SHARES WHICH WOULD REPRESENT AT LEAST A MAJORITY OF SHARES ISSUED AND
OUTSTANDING ON A FULLY-DILUTED BASIS. THE OFFER IS ALSO SUBJECT TO THE OTHER
CONDITIONS SET FORTH IN THIS OFFER TO PURCHASE.
---------------
IMPORTANT
Any stockholder of the Company desiring to tender all or any portion of his
or her Shares (as defined herein) should either (1) complete and sign the
enclosed Letter of Transmittal (or a facsimile copy thereof) in accordance
with the Instructions in the Letter of Transmittal, mail or deliver it and any
other required documents to the Depositary (as defined herein) and either
deliver the certificates evidencing such Shares to the Depositary along with
the Letter of Transmittal or tender such Shares pursuant to the procedure for
book-entry transfer set forth in Section 3 of this Offer to Purchase, unless
an Agent's Message is utilized, or (2) request such stockholder's broker,
dealer, commercial bank, trust company or other nominee to effect the
transaction for the stockholder. Stockholders having Shares registered in the
name of a broker, dealer, commercial bank, trust company or other nominee must
contact such broker, dealer, commercial bank, trust company or other nominee
if they desire to tender their Shares.
A stockholder of the Company who desires to tender Shares and whose
certificates evidencing Shares are not immediately available, or who cannot
comply with the procedures for book-entry transfer described in this Offer to
Purchase on a timely basis, may tender such Shares by following the procedure
for guaranteed delivery set forth in Section 3 of this Offer to Purchase.
Questions and requests for assistance, as well as requests for additional
copies of this Offer to Purchase, the Letter of Transmittal or other tender
offer materials, may be directed to the Information Agent at the address and
telephone number set forth on the back cover of the Offer to Purchase. Holders
of Shares may also contact brokers, dealers, commercial banks or trust
companies for assistance concerning the Offer.
---------------
The Information Agent for the Offer is:
D.F. KING & CO., INC.
November 12, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
INTRODUCTION.............................................................. 1
THE TENDER OFFER.......................................................... 3
1. Terms of the Offer; Expiration Date................................. 3
2. Acceptance for Payment and Payment for Shares....................... 4
3. Procedure for Tendering Shares...................................... 5
4. Withdrawal Rights................................................... 8
5. Certain Federal Income Tax Consequences............................. 9
6. Price Range of the Shares........................................... 10
7. Possible Effects of the Offer on the Market for Shares; Nasdaq
National Market System Quotation; Exchange Act Registration; Margin
Regulations......................................................... 10
8. Certain Information Concerning the Company.......................... 11
9. Certain Information Concerning Investcorp, Parent and Purchaser..... 14
10. Background of the Offer and the Merger; Contacts with the Company... 16
11. Purpose of the Offer and the Merger; Plans for the Company; the
Merger Agreement; Appraisal Rights in the Merger; the Stockholder
Agreement; Other Matters............................................ 17
12. Source and Amount of Funds.......................................... 32
13. Dividends and Distributions......................................... 36
14. Certain Conditions of the Offer..................................... 36
15. Certain Legal Matters; Regulatory Approvals......................... 37
16. Fees and Expenses................................................... 39
17. Miscellaneous....................................................... 39
Schedule I................................................................ I-1
</TABLE>
i
<PAGE>
To the Holders of Common Stock of Synthetic Industries, Inc.:
INTRODUCTION
SIND Acquisition, Inc., a Delaware corporation ("Purchaser") and wholly
owned subsidiary of SIND Holdings, Inc., a Delaware corporation ("Parent")
formed at the direction of Investcorp S.A., a Luxembourg corporation
("Investcorp"), hereby offers to purchase all of the issued and outstanding
shares of common stock, $1.00 par value per share (collectively, the
"Shares"), of Synthetic Industries, Inc., a Delaware corporation (the
"Company"), upon the terms and subject to the conditions set forth in this
Offer to Purchase and in the related Letter of Transmittal (which, together
with any amendments or supplements hereto or thereto, collectively constitute
the "Offer"), at a purchase price of $33.00 per Share (the "Offer Price"), net
to the seller in cash, without interest thereon.
Tendering stockholders will not be obligated to pay brokerage commissions,
solicitation fees or, subject to Instruction 6 of the Letter of Transmittal,
stock transfer taxes on the purchase of Shares pursuant to the Offer.
Purchaser will pay all charges and expenses of BankBoston, N.A., as Depositary
(in such capacity, the "Depositary") and D.F. King & Co., Inc., as Information
Agent (in such capacity, the "Information Agent"), incurred in connection with
the Offer. For a description of the fees and expenses to be paid by Purchaser,
see "THE TENDER OFFER--16. Fees and Expenses."
The board of directors of the Company (the "Company Board"), by unanimous
vote at a meeting duly called and held, has approved the Merger Agreement, the
Offer and the Merger, has determined that the terms of the Offer and the
Merger are fair to and in the best interests of the Company and its
stockholders, has recommended that the Company's stockholders accept and
tender their shares pursuant to the Offer, and has recommended that the
Company's stockholders adopt the Merger Agreement. The factors considered by
the Company Board in arriving at its decision to approve the Merger Agreement,
the Stockholder Agreement, the Offer, the Merger and the other transactions
contemplated by the Merger Agreement and the Stockholder Agreement and to
recommend that stockholders of the Company accept and tender their shares
pursuant to the Offer are described in the Company's
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-
9"), which is being mailed to stockholders of the Company herewith and filed
with the Securities and Exchange Commission (the "Commission") on the date
hereof.
The Beacon Group Capital Services, LLC (the "Financial Advisor") has
delivered a written opinion to the Company Board, dated November 4, 1999, to
the effect that, as of that date, the consideration to be received in the
Offer and the Merger is fair to the Company's stockholders from a financial
point of view. The full text of the Financial Advisor's opinion is attached to
the Schedule 14D-9. Stockholders are urged to, and should, read such opinion
carefully and in its entirety for a description of assumptions made and
matters considered by and limits of the review of the Financial Advisor.
The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn by the Expiration Date (as defined herein) a number
of shares which would represent at least a majority of Shares issued and
outstanding on a fully-diluted basis (the "Minimum Condition"). The Offer is
also subject to the other conditions set forth in this Offer to Purchase. See
"THE TENDER OFFER--14. Certain Conditions of the Offer."
The Offer is being made pursuant to the terms of an Agreement and Plan of
Merger, dated as of November 5, 1999 (the "Merger Agreement"), by and among
Parent, Purchaser and the Company. Among other things, the Merger Agreement
provides for the making of the Offer and that, following the purchase of
Shares pursuant to the Offer and on the second business day following or as
soon as practicable after the satisfaction or waiver of certain other
conditions, Purchaser will be merged with and into the Company (the "Merger").
The Company will be the surviving corporation in the Merger and will continue
as a wholly owned subsidiary of Parent (the
<PAGE>
"Surviving Corporation"). At the effective time of the Merger, each
outstanding Share (except for Shares owned by the Company, Parent or
Purchaser, or by any subsidiary of the Company or Parent, and except for
Shares, if any, held by the Company's stockholders who have properly exercised
appraisal rights under Delaware law), will be converted into the right to
receive the Offer Price, net to the holder in cash, without interest thereon
(the "Merger Consideration"). The Merger Agreement is more fully described in
"THE TENDER OFFER--11. Purpose of the Offer and the Merger; Plans for the
Company; the Merger Agreement; Appraisal Rights in the Merger; the Stockholder
Agreement; Other Matters."
Consummation of the Merger is subject to receipt of applicable regulatory
approvals, if any, and the satisfaction or waiver of certain other conditions,
including the approval by the stockholders of the Company if such approval is
required by applicable law. See "THE TENDER OFFER--15. Certain Legal Matters;
Regulatory Approvals." If Purchaser acquires a majority of the outstanding
Shares, it will have sufficient voting power to approve and adopt the Merger
Agreement and the Merger without the vote of any other stockholder of the
Company. If Purchaser acquires at least 90% of the outstanding Shares,
Purchaser intends to approve and consummate the Merger without any action by,
or any further prior notice to, the other stockholders of the Company pursuant
to Section 253 of the Delaware General Corporation Law (the "DGCL").
In connection with the Merger Agreement, Parent and Purchaser have entered
into a Stockholder Agreement (the "Stockholder Agreement") with Synthetic
Industries, L.P. (the "Stockholder"), which owns 5,699,194 outstanding Shares,
representing approximately 66% of the issued and outstanding Shares. Pursuant
to the Stockholder Agreement, upon the terms and subject to the conditions
therein, the Stockholder has agreed to promptly tender and not withdraw all
Shares owned by the Stockholder, has agreed to vote such Shares in favor of
approval of the Merger Agreement and the transactions contemplated thereby and
against specified acquisition proposals and specified actions and has granted
an irrevocable proxy to Purchaser with respect to such Shares. The Stockholder
Agreement is more fully described in "THE TENDER OFFER--11. Purpose of the
Offer and the Merger; Plans for the Company; the Merger Agreement; Appraisal
Rights in the Merger; the Stockholder Agreement; Other Matters."
The Company has informed Purchaser that as of November 1, 1999, there were
8,664,819 Shares issued and outstanding and outstanding options to purchase
865,848 additional Shares. The Minimum Condition should therefore be satisfied
if at least 4,765,334 Shares are validly tendered and not withdrawn by the
Expiration Date (up to 5,699,194 Shares will be tendered to Purchaser pursuant
to the Stockholder Agreement).
No dissenters' or appraisal rights are available to the Company's
stockholders in connection with the Offer. Appraisal rights are available to
the Company's stockholders in connection with the Merger as described in "THE
TENDER OFFER--11. Purpose of the Offer and the Merger; Plans for the Company;
the Merger Agreement; Appraisal Rights in the Merger; the Stockholder
Agreement; Other Matters."
Certain federal income tax consequences of the sale of Shares pursuant to
the Offer and the conversion of Shares into the Merger Consideration pursuant
to the Merger are described in "THE TENDER OFFER--5. Certain Federal Income
Tax Consequences."
This Offer to Purchase and the related Letter of Transmittal contain
important information which should be read carefully before any decision is
made with respect to the Offer. Also see "THE TENDER OFFER--17. Miscellaneous"
for information regarding certain additional documents filed with the
Commission in connection with the Offer.
2
<PAGE>
THE TENDER OFFER
1. Terms of the Offer; Expiration Date
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension
or amendment) and the Merger Agreement, Purchaser will accept for payment and
pay for all Shares validly tendered and not properly withdrawn on or prior to
the Expiration Date and in accordance with the terms set forth in Section 4 of
this Offer to Purchase. The term "Expiration Date" means 12:00 midnight, New
York City time, on Friday, December 10, 1999, unless and until Purchaser,
subject to restrictions contained in the Merger Agreement, has extended the
period of time during which the Offer is open, in which event the term
"Expiration Date" means the latest time and date at which the Offer, as so
extended by Purchaser, will expire.
Purchaser expressly reserves the right to waive any conditions to the Offer,
except that, without the consent of the Company, Purchaser may not waive the
Minimum Condition. Purchaser expressly reserves the right to modify the terms
of the Offer, except that, without the consent of the Company, Purchaser may
not, (i) reduce the number of Shares subject to the Offer; (ii) reduce the
Offer Price to be paid pursuant to the Offer; (iii) modify or add to the
conditions to Purchaser's obligation to purchase Shares set forth in Exhibit A
to the Merger Agreement in any manner materially adverse to the holders of
Shares; (iv) extend the Offer; (v) change the form of consideration payable in
the Offer; or (vi) otherwise amend the Offer in any manner adverse to the
holders of Shares. The conditions set forth in Exhibit A to the Merger
Agreement are described in Section 14 of this Offer to Purchase.
Notwithstanding the foregoing, Purchaser may, without the consent of the
Company, (w) extend the Offer, if at the scheduled Expiration Date any of the
conditions to Purchaser's obligation to purchase Shares set forth in the
Merger Agreement or Exhibit A to the Merger Agreement are not satisfied, until
such time as such conditions are satisfied or waived; (x) extend the Offer for
a period of not more than 15 business days beyond the initial Expiration Date,
if on the date of such extension less than 90% of the outstanding Shares have
been validly tendered and not properly withdrawn pursuant to the Offer; (y)
extend the Offer for any period required by applicable law, including any
rule, regulation, interpretation or position of the Commission applicable to
the Offer; and (z) extend the Offer for any reason for a period of not more
than ten business days beyond the latest Expiration Date that would otherwise
be permitted as described in this sentence. As used in this Offer to Purchase,
"business day" generally means any day other than a federal holiday or a day
on which the Nasdaq National Market System is closed.
Subject to the applicable rules and regulations of the Commission and
subject to the terms and conditions of the Merger Agreement, Purchaser
expressly reserves the right, at any time and from time to time, upon the
failure to be satisfied of any of the conditions to the Offer, to (i)
terminate or amend the Offer, (ii) extend the Offer and postpone acceptance
for payment of any Shares or (iii) waive any condition, by giving oral or
written notice of such termination, amendment, extension or waiver to the
Depositary. During any such extension, all Shares previously tendered and not
properly withdrawn will remain subject to any such extension and will remain
tendered, subject to the right of a tendering stockholder to withdraw such
stockholder's Shares. The ability of Purchaser to delay payment for Shares
that it has accepted for payment is limited by Rule 14e-1(c) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), which
requires that a person making a tender offer pay the consideration offered or
return the tendered securities promptly after the termination or withdrawal of
a tender offer. If Purchaser waives any of the conditions set forth in Section
14 of this Offer to Purchase, the Commission may, if the waiver is deemed to
constitute a material change to the information previously provided to the
Company's stockholders, require that the Offer remain open for an additional
period of time and/or that Purchaser disseminate information concerning such
waiver.
If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition to the Offer,
Purchaser will disseminate additional tender offer materials (including by
public announcement as set forth below) and extend the Offer to the extent
required by Rules 14d-4(c),
3
<PAGE>
14d-6(d) and 14e-1 under the Exchange Act. Such rules generally provide that
the minimum period during which a tender offer must remain open following a
material change in the terms of the offer or information concerning the offer,
other than a change in price or a change in percentage of securities sought,
will depend upon the facts and circumstances, including the relative
materiality of the changes in the terms or information. In the Commission's
view, an offer should remain open for a minimum of five business days from the
date a material change is first published, sent or given to securityholders,
and, if material changes are made with respect to information that approaches
the significance of price and share levels, a minimum of ten business days may
be required to allow for adequate dissemination and investor response. With
respect to a change in price or a change in percentage of securities sought, a
minimum ten business day period is generally required to allow for adequate
dissemination to stockholders and for investor response.
Any extension, amendment or termination of the Offer will be followed as
promptly as practicable by public announcement in accordance with the public
announcement requirements of Rule 14e-1(d) under the Exchange Act. Subject to
applicable law (including Rules 14d-4(c) and 14d-6(d) under the Exchange Act,
which require that any material change in the information published, sent or
given to stockholders in connection with the Offer be promptly disseminated to
them in a manner reasonably designed to inform stockholders of such change),
and without limiting the manner in which Purchaser may choose to make any
public announcement, Purchaser has no obligation to publish, advertise or
otherwise communicate any such public announcement other than by making a
release to the Dow Jones News Service.
The Company has provided Purchaser with its stockholder list and security
position listings for the purpose of disseminating the Offer to holders of
Shares. This Offer to Purchase, the related Letter of Transmittal and other
relevant materials will be mailed to record holders of Shares and furnished to
brokers, dealers, commercial banks, trust companies and similar persons whose
names, or the names of whose nominees, appear on the stockholder list or, if
applicable, who are listed as participants in a clearing agency's security
position listing, for subsequent transmittal to beneficial owners of Shares.
2. Acceptance for Payment and Payment for Shares
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of the Offer, as so
extended or amended), promptly after the Expiration Date, Purchaser will
accept for payment, and will pay for, any and all Shares validly tendered on
or prior to the Expiration Date and not properly withdrawn in accordance with
Section 4 below. Subject to applicable rules of the Commission and the terms
and conditions of the Merger Agreement, Purchaser expressly reserves the
right, in its sole discretion, to delay acceptance for payment of, or payment
for, Shares in order to comply in whole or in part with any applicable law or
government regulation.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (i)
the Share Certificates evidencing such Shares (or timely Book-Entry
Confirmation (as defined below) of the book-entry transfer of such Shares into
the Depositary's account at the Book-Entry Transfer Facility pursuant to the
procedures set forth under Section 3 below), (ii) the Letter of Transmittal
(or a facsimile copy thereof), properly completed and duly executed, together
with any required signature guarantees, or an Agent's Message in connection
with a book-entry transfer, and (iii) any other documents required by the
Letter of Transmittal. The term "Agent's Message" means a message, transmitted
by the Book-Entry Transfer Facility to, and received by, the Depositary and
forming a part of the Book-Entry Confirmation, which states that the Book-
Entry Transfer Facility has received an express acknowledgment from the
participant in the Book-Entry Transfer Facility tendering the Shares, that
such participant has received the Letter of Transmittal and agrees to be bound
by the terms of the Letter of Transmittal and that Purchaser may enforce such
agreement against such participant.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered to Purchaser and not
properly withdrawn as, if and when Purchaser gives oral or written notice to
the Depositary of Purchaser's acceptance for payment of such Shares. In all
cases, upon the terms and
4
<PAGE>
subject to the conditions of the Offer, payment for Shares so accepted for
payment will be made by the deposit of the purchase price therefor with the
Depositary, which will act as agent for tendering stockholders for the purpose
of receiving payment from Purchaser and transmitting payment to validly
tendering stockholders. Under no circumstances will interest be paid by
Purchaser on the purchase price of the Shares tendered pursuant to the Offer,
regardless of any extension of the Offer or any delay in making such payment.
Upon the deposit of funds with the Depositary for the purpose of making
payments to tendering stockholders, Purchaser's obligation to make such
payments will be satisfied and tendering stockholders must thereafter look
solely to the Depositary for payment of amounts owed to them by reason of
Purchaser's acceptance for payment of Shares. Purchaser will pay or caused to
be paid any stock transfer taxes with respect to the transfer and sale to it
or on its order pursuant to the Offer, except as otherwise provided in
Instruction 6 of the Letter of Transmittal, as well as any charges and
expenses of the Depositary and the Information Agent.
If any tendered Shares are not purchased pursuant to the Offer because of an
invalid tender or for any other reason, Share Certificates evidencing any such
Shares will be returned, without expense, to the tendering stockholder (or, in
the case of Shares delivered by book-entry transfer of such Shares into the
Depositary's account at the Book-Entry Transfer Facility pursuant to the
procedures described in Section 3 below, such Shares will be credited to an
account maintained at the Book-Entry Transfer Facility) as promptly as
practicable following the expiration or termination of the Offer.
If, prior to the Expiration Date, Purchaser increases the consideration to
be paid per Share pursuant to the Offer, Purchaser will pay the increased
consideration for all Shares purchased pursuant to the Offer, whether or not
the Shares were tendered prior to the increase in consideration.
Purchaser reserves the right, subject to the Merger Agreement, to transfer
or assign, in whole or from time to time in part, to one or more of Parent's
subsidiaries or affiliates the right to purchase all or any portion of the
Shares tendered pursuant to the Offer, but any such transfer or assignment
will not relieve Purchaser of its obligations under the Offer or prejudice the
rights of tendering stockholders to receive payment for Shares validly
tendered and accepted for payment pursuant to the Offer.
3. Procedure for Tendering Shares
Valid Tender of Shares
For a stockholder to validly tender Shares pursuant to the Offer either: (a)
(i) a properly completed and duly executed Letter of Transmittal (or manually
signed facsimile thereof), together with any required signature guarantees, or
an Agent's Message in connection with a book-entry delivery of Shares, and any
other required documents, must be received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase, and (ii)
either certificates for tendered Shares ("Share Certificates") must be
received by the Depositary at one of its addresses or such tendered Shares
must be delivered pursuant to the procedure for book-entry transfer described
below (and a Book-Entry Confirmation received by the Depositary), in each case
on or prior to the Expiration Date; or (b) the tendering stockholder must
comply with the guaranteed delivery procedures described below.
The method of delivery of Shares, the Letter of Transmittal and all other
required documents is at the election and sole risk of the tendering
stockholder, and delivery will be deemed made only when actually received at
the Depositary. If delivery is by mail, then insured or registered mail with
return receipt requested is recommended. In all cases, sufficient time should
be allowed to ensure timely delivery.
Book-Entry Transfer
The Depositary will establish an account with respect to the Shares at The
Depository Trust Company (the "Book-Entry Transfer Facility") for purposes of
the Offer within two business days after the date of this Offer to Purchase.
Any financial institution that is a participant in the Book-Entry Transfer
Facility may make book-entry delivery of the Shares by causing the book-entry
transfer system to transfer such Shares into the
5
<PAGE>
Depositary's account at the Book-Entry Transfer Facility in accordance with
the Book-Entry Transfer Facility's procedure for such transfer. Although
delivery of Shares may be effected through book-entry transfer at the Book-
Entry Transfer Facility, a properly completed and duly executed Letter of
Transmittal (or manually signed facsimile thereof), with any required
signature guarantees, or an Agent's Message in connection with a book-entry
transfer, and any other required documents, must, in any case, be transmitted
to, and received by, the Depositary at one of its addresses set forth on the
back cover of this Offer to Purchase on or prior to the Expiration Date, or
the tendering stockholder must comply with the guaranteed delivery procedures
described below. The confirmation of a book-entry transfer of Shares into the
Depositary's account at the Book-Entry Transfer Facility as described above is
referred to herein as a "Book-Entry Confirmation." Delivery of documents to
the Book-Entry Transfer Facility in accordance with its book-entry procedures
does not constitute valid delivery to the Depositary.
Signature Guarantees
No signature guarantee on the Letter of Transmittal is required if (i) the
Letter of Transmittal is signed by the registered holder of the Shares (which
term, for purposes of this Section, includes any participant in the Book-Entry
Transfer Facility system whose name appears on a security position listing as
the owner of the Shares) tendered therewith and such registered holder has not
completed either the box entitled "Special Delivery Instructions" or the box
entitled "Special Payment Instructions" on such Letter of Transmittal or (ii)
such Shares are tendered for the account of a bank, broker, dealer, credit
union, savings association or other entity that is a member in good standing
of the Securities Transfer Agents Medallion Program, the New York Stock
Exchange Medallion Signature Guarantee Program or the Stock Exchange Medallion
Program (each, an "Eligible Institution"). In all other cases, all signatures
on the Letter of Transmittal must be guaranteed by an Eligible Institution.
See Instructions 1 and 5 to the Letter of Transmittal.
If (a) the Share Certificates are registered in the name of a person other
than the signer of the Letter of Transmittal or (b)(i) payment is to be made
to or (ii) Share Certificates not validly tendered, not accepted for payment
or not purchased are to be issued or returned to, a person other than the
registered holder of the Share Certificates, the tendered Share Certificates
must be endorsed in blank or accompanied by appropriate stock powers, signed
exactly as the name of the registered holder appears on the Share Certificates
with the signature on such Share Certificates or stock powers guaranteed by an
Eligible Institution. See Instructions 1 and 5 to the Letter of Transmittal.
If the Share Certificates are forwarded separately to the Depositary, a
properly completed and duly executed Letter of Transmittal (or manually signed
facsimile thereof) must accompany each such delivery.
Guaranteed Delivery
If (a) a stockholder desires to tender Shares pursuant to the Offer and
(b)(i) such stockholder's Share Certificates are not immediately available,
(ii) the procedures for book-entry transfer cannot be completed on a timely
basis or (iii) time will not permit all required documents to reach the
Depositary on or prior to the Expiration Date, such Shares may nevertheless be
tendered provided that all of the following guaranteed delivery procedures are
duly complied with:
(a) such tender is made by or through an Eligible Institution;
(b) the Depositary receives (by hand, mail, telegram or facsimile
transmission) on or prior to the Expiration Date, a properly completed and
duly executed Notice of Guaranteed Delivery, substantially in the form
provided by Purchaser; and
(c) the Share Certificates evidencing all tendered Shares, in proper form
for transfer (or Book-Entry Confirmation with respect to such Shares),
together with a properly completed and duly executed Letter of Transmittal
(or manually signed facsimile thereof) and any other documents required by
the Letter of Transmittal, or an Agent's Message in the case of a book-
entry transfer, are received by the Depositary within three Nasdaq trading
days after the date of such Notice of Guaranteed Delivery. A "Nasdaq
trading day" is any day on which securities are traded on the Nasdaq
National Market System.
6
<PAGE>
The Notice of Guaranteed Delivery may be delivered by hand, or may be
transmitted by telegram, facsimile transmission or mail, to the Depositary and
must include a guarantee by an Eligible Institution in the form set forth in
such Notice of Guaranteed Delivery.
Notwithstanding anything else described in this Offer to Purchase, payment
for Shares accepted for payment pursuant to the Offer will in all cases be
made only after timely receipt by the Depositary of (i) Share Certificates for
(or a timely Book-Entry Confirmation with respect to) such Shares, (ii) a
properly completed and duly executed Letter of Transmittal (or manually signed
facsimile thereof) or, in the case of book-entry transfer, an Agent's Message,
and (iii) any other documents required by the Letter of Transmittal.
Accordingly, tendering stockholders may be paid at different times depending
upon when Share Certificates, Book-Entry Confirmations and such other
documents are actually received by the Depositary. Under no circumstances will
interest be paid by Purchaser on the purchase price of the Shares to any
tendering stockholders, regardless of any extension of the Offer or any delay
in making such payment.
Backup Federal Income Tax Withholding
To prevent backup federal income tax withholding on payments of cash
pursuant to the Offer, a stockholder tendering Shares in the Offer must
provide the Depositary with such stockholder's correct taxpayer identification
number ("TIN") on a Substitute Form W-9 and certify under penalties of perjury
that such TIN is correct and that such stockholder is not subject to backup
withholding. If a stockholder does not provide its correct TIN or fails to
provide the certification described herein, under U.S. federal income tax
laws, the Depositary will be required to withhold 31% of the amount of any
payment made to such stockholder pursuant to the Offer. All stockholders
tendering Shares pursuant to the Offer should complete and sign the Substitute
Form W-9 included as a part of the Letter of Transmittal, and stockholders who
are not subject to backup withholding should provide the information and
certification on such Substitute Form W-9 necessary to avoid backup
withholding. Noncorporate foreign stockholders should complete and sign a Form
W-8, Certificate of Foreign Status, a copy of which may be obtained from the
Depositary, in order to avoid backup withholding. See Instruction 10 to the
Letter of Transmittal.
Determination of Validity
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for payment of any tender of Shares will be determined
by Purchaser in its sole discretion, which determination will be final and
binding. Purchaser reserves the absolute right to reject any or all tenders of
Shares that it determines are not in proper form or which the acceptance for
payment of, or payment for, may, in the opinion of Purchaser's counsel, be
unlawful. Purchaser also reserves the absolute right to waive any of the
conditions of the Offer or any defect or irregularity in the tender of any
Shares with respect to any particular stockholder, whether or not similar
defects or irregularities are waived in the case of other stockholders. None
of Investcorp, Parent, Purchaser, the Depositary, the Information Agent or any
other person will be under any duty to give notice of any defects or
irregularities in tenders or incur any liability for failure to give any such
notice. Purchaser's interpretation of the terms and conditions of the Offer
(including the Letter of Transmittal and the instructions thereto) will be
final and binding.
Appointment as Proxy
By executing the Letter of Transmittal, a tendering stockholder irrevocably
appoints designees of Purchaser as such stockholder's attorneys-in-fact and
proxies, each with full power of substitution, in the manner set forth in the
Letter of Transmittal, to the full extent of such stockholder's rights with
respect to the Shares tendered by such stockholder and accepted for payment by
Purchaser (and with respect to any and all other Shares or other securities or
rights issued or issuable in respect of such Shares on or after the Expiration
Date), effective when, if and to the extent that Purchaser accepts such Shares
for payment pursuant to the Offer. All such attorneys-in-fact and proxies will
be considered coupled with an interest in the tendered Shares. Upon such
acceptance for payment, all prior proxies given by such stockholder with
respect to such Shares accepted for payment or other securities or rights
will, without further action, be revoked, and no subsequent proxies may be
given. Such
7
<PAGE>
designees of Purchaser will, with respect to such Shares for which the
appointment is effective, be empowered to exercise all voting and other rights
of such stockholder as they in their sole discretion may deem proper in
respect of any annual or special meeting of the Company's stockholders or any
adjournment or postponement thereof, by written consent in lieu of any such
meeting or otherwise.
Purchaser reserves the right to require that, in order for Shares to be
deemed validly tendered, immediately upon Purchaser's payment for such Shares,
Purchaser must be able to exercise full voting rights with respect to such
Shares.
Purchaser's acceptance for payment of Shares tendered pursuant to any of the
procedures described herein will constitute a binding agreement between the
tendering stockholder and Purchaser upon the terms and subject to the
conditions of the Offer.
4. Withdrawal Rights
Except as provided in this section, tenders of Shares made pursuant to the
Offer are irrevocable. Shares tendered pursuant to the Offer may be withdrawn
at any time on or prior to the Expiration Date and, unless theretofore
accepted for payment by Purchaser as provided in this Offer to Purchase, may
also be withdrawn at any time after January 10, 2000.
If Purchaser is delayed in its acceptance for payment of, or payment for,
tendered Shares or is unable to accept for payment or pay for such Shares
pursuant to the Offer for any reason, then, without prejudice to Purchaser's
rights under the Offer (but subject to Purchaser's obligations under Rule 14e-
1(c) under the Exchange Act to pay for or return the tendered Shares promptly
after the termination or withdrawal of the Offer), the Depositary may,
nevertheless, retain tendered Shares on behalf of Purchaser, and such Shares
may not be withdrawn except to the extent tendering stockholders are entitled
to exercise, and duly exercise, withdrawal rights as described in this
section.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase.
Any notice of withdrawal must specify the name of the person who tendered the
Shares to be withdrawn, the number of Shares to be withdrawn and the name of
the registered holder of the Shares to be withdrawn as set forth on such Share
Certificates if different from the name of the person who tendered such
Shares. If Share Certificates have been delivered or otherwise identified to
the Depositary, then, prior to the physical release of such Share
Certificates, the serial numbers shown on such Share Certificates must be
furnished to the Depositary and, unless such Shares have been tendered by an
Eligible Institution, the signatures on the notice of withdrawal must be
guaranteed by an Eligible Institution. If Shares have been delivered pursuant
to the procedures for book-entry transfer described in Section 3 above, any
notice of withdrawal must specify the name and number of the account at the
Book-Entry Transfer Facility to be credited with such withdrawn Shares and
otherwise comply with the Book-Entry Transfer Facility's procedures for
withdrawal, in which case a notice of withdrawal will be effective if
delivered to the Depositary by any method of delivery described in the first
sentence of this paragraph.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by Purchaser in its sole discretion,
and its determination will be final and binding. None of Investcorp, Parent,
Purchaser, the Depositary, the Information Agent or any other person will be
obligated to give notice of any defects or irregularities in any notice of
withdrawal, nor will any of them incur any liability for failure to give any
such notice.
Withdrawals of tendered Shares may not be rescinded, and any Shares properly
withdrawn will thereafter be deemed not validly tendered for purposes of the
Offer. However, withdrawn Shares may be retendered by following one of the
procedures described in Section 3 above at any time on or prior to the
Expiration Date.
8
<PAGE>
5. Certain Federal Income Tax Consequences
The summary of U.S. federal income tax consequences set forth below is for
general information only and is based on Purchaser's understanding of the law
as currently in effect. The tax consequences to each stockholder will depend
in part upon such stockholder's particular situation. Special tax consequences
not described herein may be applicable to particular classes of taxpayers,
such as financial institutions, brokers, dealers, persons who are not citizens
or residents of the United States, tax exempt organizations, persons who
acquired their Shares as part of a straddle, hedge or other integrated
instrument, and stockholders who acquired their Shares through the exercise of
an employee stock option or otherwise as compensation.
Consequences of the Offer and the Merger to Stockholders
The receipt of cash for Shares pursuant to the Offer (or the Merger,
including pursuant to the exercise of appraisal rights) will be a taxable
transaction for U.S. federal income tax purposes and may also be a taxable
transaction under applicable state, local or foreign tax laws. Generally, a
stockholder who receives cash for Shares pursuant to the Offer (or the Merger)
will recognize gain or loss for federal income tax purposes equal to the
difference between the amount of cash received in exchange for the Shares sold
and such stockholder's adjusted tax basis in such Shares. Provided that the
Shares constitute capital assets in the hands of the stockholder, such gain or
loss will be capital gain or loss, and will be long-term capital gain or loss
if the stockholder has held the Shares for more than one year at the time of
sale. Gain or loss will be calculated separately for each block of Shares
(i.e., a group of Shares with the same tax basis and holding period) tendered
pursuant to the Offer. The maximum federal income tax rate applicable to non-
corporate taxpayers on long-term capital gain is 20%, and the use of capital
losses to offset other income is subject to limitations.
Backup Tax Withholding
A stockholder (other than certain exempt stockholders including, among
others, all corporations and certain foreign individuals and entities) that
tenders Shares may be subject to 31% backup withholding unless the stockholder
provides its TIN and certifies that such number is correct or properly
certifies that it is awaiting a TIN, or unless an exemption applies. A
stockholder who does not furnish its TIN may be subject to a penalty imposed
by the Internal Revenue Service (the "IRS"). See Section 3 of this Offer to
Purchase. If backup withholding applies to a stockholder, the Depositary is
required to withhold 31% from payments to such stockholder. Backup withholding
is not an additional tax. Rather, the amount of the backup withholding can be
credited against the federal income tax liability of the person subject to the
backup withholding, provided that the required information is given to the
IRS. If backup withholding results in an overpayment of tax, a refund can be
obtained by the stockholder upon filing an appropriate income tax return on a
timely basis.
All stockholders should consult with their own tax advisors as to the
particular tax consequences of the Offer and the Merger to them, including the
applicability and effect of the alternative minimum tax and any state, local
or foreign income and other tax laws and of changes in such tax laws.
9
<PAGE>
6. Price Range of the Shares
The Shares are traded on the Nasdaq National Market System under the symbol
"SIND." The following table sets forth, for the periods indicated, the high
and low sales prices of the Shares as reported on the Nasdaq National Market
System for such periods, in each case as reported by published sources:
<TABLE>
<CAPTION>
Trading
-----------------
High Low
-------- --------
<S> <C> <C>
Fiscal Year Ended September 30, 1997:
First Quarter (from November 1, 1996).................... $16 3/8 $12
Second Quarter........................................... $20 1/2 $15
Third Quarter............................................ $22 1/2 $17 1/2
Fourth Quarter........................................... $29 3/8 $21 3/8
Fiscal Year Ended September 30, 1998:
First Quarter............................................ $30 $24 1/4
Second Quarter........................................... $26 1/2 $21
Third Quarter............................................ $25 1/2 $13 3/8
Fourth Quarter........................................... $20 1/8 $13 7/8
Fiscal Year Ended September 30, 1999:
First Quarter............................................ $18 $13 1/4
Second Quarter........................................... $20 1/8 $16 1/4
Third Quarter............................................ $30 7/16 $16 1/2
Fourth Quarter........................................... $30 $24 3/8
Fiscal Year Ended September 30, 2000:
First Quarter (through November 11, 1999)................ $32 1/2 $25 5/16
</TABLE>
On November 4, 1999, the last day of trading on which any Shares were traded
prior to the public announcement of the execution of the Merger Agreement,
according to published sources, the last reported sale price of the Shares on
the Nasdaq National Market System was $29 1/16 per Share. On November 11,
1999, the last full day of trading prior to the commencement of the Offer,
according to published sources, the last reported sale price of the Shares on
the Nasdaq National Market System was $32 3/8 per Share. Stockholders are
urged to obtain a current market quotation for the Shares.
7. Possible Effects of the Offer on the Market for Shares; Nasdaq National
Market System Quotation; Exchange Act Registration; Margin Regulations
Possible Effects of the Offer on the Market for the Shares
The purchase of Shares by Purchaser pursuant to the Offer will reduce the
number of Shares that might otherwise trade publicly and the number of holders
of Shares, and could thereby adversely affect the liquidity and market value
of the remaining publicly held Shares. It is expected that, following the
Offer, a large percentage of the Shares will be owned by Purchaser. Purchaser
cannot predict whether the reduction in the number of Shares that might
otherwise trade publicly would have an adverse or beneficial effect on the
market price for or marketability of the Shares or whether it would cause
future market prices to be greater or less than the Offer Price therefor.
Nasdaq National Market System Quotation
Depending upon the number of Shares purchased pursuant to the offer, the
Shares may no longer meet the requirements of the National Association of
Securities Dealers, Inc. (the "NASD") for continued inclusion on the Nasdaq
National Market System. The maintenance for continued inclusion requires the
Company to substantially meet one of two maintenance standards. The Company
must have either (a) (i) at least 750,000 publicly held shares, (ii) at least
400 stockholders of round lots, (iii) a market value of at least $5 million,
(iv) a minimum bid price per Share of $1.00, (v) at least two registered and
active market makers for its Shares and
10
<PAGE>
(vi) net tangible assets of at least $4 million; or (b) (i) at least 1,100,000
publicly held shares, (ii) at least 400 stockholders of round lots, (iii) a
market value of at least $15 million, and (iv) either (X) a market
capitalization of at least $50 million or (Y) total assets and total revenue
of at least $50 million, in its most recently completed fiscal year or two of
its last three most recently completed fiscal years, (v) a minimum bid price
per Share of $5.00 and (vi) at least four registered and active market makers.
Shares held directly or indirectly by directors, officers or beneficial owners
or more than 10% of the Shares are not considered as being publicly held for
this purpose.
If, as a result of the purchase of Shares pursuant to the Offer or
otherwise, the Shares no longer meet the requirements of the NASD for
continued inclusion in the Nasdaq National Market System or in any other tier
of the Nasdaq Stock Market, and the Shares are, in fact, no longer included in
the Nasdaq National Market System or in any other tier of the Nasdaq Stock
Market, the market for Shares could be adversely affected.
In the event that the Shares no longer meet the requirements of the NASD for
continued inclusion in any tier of the Nasdaq Stock Market, it may be possible
that the Shares would continue to trade in the over-the-counter market and
that price quotations would be reported by other sources. The extent of the
public market for the Shares and the availability of such quotations would,
however, depend upon the number of holders of Shares remaining at such time,
the interest in maintaining a market in Shares on the part of securities
firms, the possible termination of registration of the Shares under the
Exchange Act, as described below, and other factors.
Exchange Act Registration
The Shares are currently registered under the Exchange Act. Registration
under the Exchange Act may be terminated upon application by the Company to
the Commission if the Shares are not listed on a national securities exchange
and there are fewer than 300 record holders. Termination of the Exchange Act
registration of the Shares would substantially reduce the information required
to be furnished by the Company to holders of Shares and to the Commission and
would make certain provisions of the Exchange Act, such as the short-swing
profit recovery provisions of Section 16(b), the requirements of furnishing a
proxy statement in connection with stockholders' meetings and the related
requirement of furnishing annual and quarterly reports to stockholders and the
requirements of Rule 13e-3 under the Exchange Act with respect to "going
private" transactions, no longer applicable to the Shares. In addition,
"affiliates" of the Company and persons holding "restricted securities" of the
Company may be deprived of the ability to dispose of such securities pursuant
to Rule 144 promulgated under the Securities Act. If registration of the
Shares under the Exchange Act were terminated, the Shares would no longer be
"margin securities" or be eligible for Nasdaq Stock Market reporting. Parent
currently intends to seek to cause the Company to terminate the registration
of the Shares under the Exchange Act as soon after consummation of the Offer
as the requirements for termination of registration are met.
Margin Regulations
The Shares are currently "margin securities" under the regulations of the
Board of Governors of the Federal Reserve System (the "Federal Reserve
Board"), which has the effect, among other things, of allowing brokers to
extend credit on the collateral of such Shares for the purpose of buying,
carrying or trading in securities ("Purpose Loans"). Depending upon factors
similar to those described above regarding the continued listing, public
trading and market quotations of the Shares, it is possible that, following
the purchase of the Shares pursuant to the Offer, the Shares would no longer
constitute "margin securities" for the purposes of the margin regulations of
the Federal Reserve Board and therefore could no longer be used as collateral
for Purpose Loans made by brokers.
8. Certain Information Concerning the Company
General
The Company is a Delaware corporation with its principal executive offices
located at 309 LaFayette Road, Chickamauga, Georgia 30707.
11
<PAGE>
The Company manufactures and markets a wide range of primarily
polypropylene-based materials designed for support, strength and stabilization
applications. The Company's products replace commonly used materials in
diverse applications including: floor covering, geotextiles, erosion control,
concrete reinforcement and furniture construction fabrics. The Company
manufactures and sells more than 2,000 products in over 65 end-use markets
predominantly in North America, Europe and Asia.
The Company's products are sold along three principal product lines: carpet
backing, construction and civil engineering products and technical textiles.
The Company has a worldwide presence in carpet backing, a fabric used in all
modern tufted carpets, and is one of the two leading manufacturers in the U.S.
that produce a broad range of primary and secondary carpet backing. The
Company's construction and civil engineering products include fiber additives
for concrete reinforcement and geosynthetic products used in environmental and
infrastructure applications, with such end uses as landfill waste containment
and soil stabilization. The Company's technical textile products are comprised
of specialty fabrics, industrial yarns and fibers used in furniture and
bedding construction and filtration applications. The Company's products are
principally sold through direct sales to customers by the Company's sales
force and through a broad network of distributors located across North and
South America, Europe and the Pacific Rim.
Available Information
The Shares are registered under the Exchange Act. Accordingly, the Company
is subject to the informational filing requirements of the Exchange Act and,
in accordance therewith, is required to file periodic reports, proxy
statements and other information with the Commission relating to its business,
financial condition and other matters. Certain information, as of particular
dates, concerning the Company's directors and officers (including their
remuneration, stock options granted to them and Shares held by them), the
principal holders of the Company's securities and any material interest of
such persons in transactions with the Company is required to be disclosed in
proxy statements and annual reports distributed to the Company's stockholders
and filed with the Commission. These reports, proxy statements and other
information are available for inspection and copying at the public reference
facilities of the Commission located in Judiciary Plaza, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, and at the regional offices of the
Commission located in Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and in Seven World Trade Center, Suite 1300, New York,
New York 10048. Copies of these materials may also be obtained by mail, upon
payment of the Commission's customary fees, from the Commission's principal
office at 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission also
maintains an Internet site on the World Wide Web at http://www.sec.gov that
contains reports, proxy statements and other information. In addition, such
material should also be available for inspection at The Nasdaq Stock Market,
Inc., 1735 K Street, N.W., Washington, D.C. 20006.
12
<PAGE>
Summary Financial Information
Set forth below is certain selected consolidated financial information with
respect to the Company and its consolidated subsidiaries contained in the
Company's Annual Report on Form 10-K for the year ended September 30, 1998
(the "Company 1998 Annual Report") and the Company's Quarterly Reports on Form
10-Q for the quarters ended June 30, 1999 (the "Company Third Quarter 1999 10-
Q") and June 30, 1998 (the "Company Third Quarter 1998 10-Q"). More
comprehensive financial information is included in the Company 1998 Annual
Report, the Company Third Quarter 1999 10-Q and the Company Third Quarter 1998
10-Q and other documents filed by the Company with the Commission, and the
following summary is qualified in its entirety by reference to the Company
1998 Annual Report, the Company Third Quarter 1999 10-Q and the Company Third
Quarter 1998 10-Q and such other documents and all the financial information
(including any related notes) contained therein. The Company 1998 Annual
Report, the Company Third Quarter 1999 10-Q and the Company Third Quarter 1998
10-Q are available for inspection as described in "Available Information."
Synthetic Industries, Inc.
Selected Consolidated Financial Data
(Amounts in thousands, except share and per share data)
<TABLE>
<CAPTION>
Nine Months Ended Year Ended
------------------- -----------------------------------------
June 30, June 30, September 30, September 30, September 30,
1999 1998 1998 1997 1996
--------- --------- ------------- ------------- -------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Summary of Operations
Data:
Net sales............. $ 275,663 $ 260,383 $ 368,996 $ 345,572 $ 299,532
Gross profit.......... 93,586 84,184 122,319 112,385 91,211
Operating income...... 29,847 31,945 49,317 51,430 38,474
Income from continuing
operations before
provision for income
taxes and
extraordinary item... 15,236 17,339 30,073 30,691 15,002
Income from continuing
operations before
extraordinary item... 9,370 10,339 18,218 18,150 8,102
Extraordinary item--
loss from early
extinguishment of
debt................. -- -- -- (11,950) --
Net income............ 9,370 10,339 18,218 6,200 8,102
Diluted income per
share from continuing
operations before
extraordinary item... 1.05 1.14 2.03 2.08 1.37
Weighted average
shares outstanding... 8,919,551 9,046,468 8,995,314 8,719,458 5,930,502
Balance Sheet Data:
Working capital....... $ 92,831 $ 86,340 $ 86,265 $ 89,828 $ 64,077
Total assets.......... 460,993 447,163 440,514 396,591 324,058
Long-term debt........ 246,375 245,832 236,843 220,464 194,353
Stockholders' equity.. 132,432 114,452 122,645 105,817 65,844
</TABLE>
Except as otherwise noted in this Offer to Purchase, all of the information
with respect to the Company set forth in this Offer to Purchase has been
derived from publicly available information. Although Investcorp, Parent and
Purchaser have no knowledge that any of such information is untrue, none of
Investcorp, Parent, Purchaser, the Depositary or the Information Agent takes
any responsibility for the accuracy or completeness of information contained
in this Offer to Purchase with respect to the Company or for any failure by
the Company to disclose events which may have occurred or may affect the
significance or accuracy of any such information.
13
<PAGE>
Certain Company Projections
During the course of the discussions between Investcorp and the Company, the
Financial Advisor provided Investcorp with certain business and financial
information, based on information provided by the Company, that was not
publicly available. The information provided included the Company's financial
projections relating to income statement, cash flow and balance sheet data
prepared by management.
The following is a summary of the Company's projections which were furnished
to Investcorp.
<TABLE>
<CAPTION>
Year Ended
---------------------------------
September September September
30, 1999 30, 2000 30, 2001
--------- --------- ---------
(In millions)
<S> <C> <C> <C> <C> <C>
Net Sales.............................. $388.0 $431.0 $484.0
Net Income............................. 19.7(/1/) 25.7 34.9
</TABLE>
- --------
(/1/) Before expenses of plant combination taken through the third quarter and
the expenses related to the sale of the Company.
According to the Company, the Company's projections were not prepared with a
view to public disclosure or compliance with published guidelines of the
Commission or the guidelines established by the American Institute of
Certified Public Accountants regarding projections, and are included in this
Offer to Purchase only because such projections were provided to Investcorp.
None of Investcorp, Parent, Purchaser or any of their representatives assumes
any responsibility for the accuracy of the Company's projections. While
presented with numerical specificity, the Company's projections are based upon
a variety of assumptions (not all of which were stated therein and not all of
which were provided to Investcorp) relating to the businesses of the Company
which may not be realized and are subject to significant financial, market,
economic and competitive uncertainties and contingencies which are difficult
or impossible to predict accurately, many of which are beyond the control of
the Company. There can be no assurance that the results in the projections
will be realized, and actual results may vary materially from those shown. The
inclusion of the Company's projections should not be regarded as a
representation by Investcorp, Parent, Purchaser or any of their respective
affiliates or representatives or by the Company or any of its affiliates or
representatives that the budgeted results will be achieved. The Company's
projections should be read together with the financial statements of the
Company referred to herein.
9. Certain Information Concerning Investcorp, Parent and Purchaser
Investcorp is a Luxembourg corporation which, through its subsidiaries, acts
as a principal and intermediary in international investment transactions.
Investcorp's principal executive offices are located at 37 rue Notre-Dame,
Luxembourg.
Investcorp focuses on three lines of business: corporate investment, real
estate investment and asset management. The firm has completed over 50
corporate acquisitions with an aggregate value of approximately $13 billion.
In the United States, Investcorp and its clients currently own ten corporate
investments, including Stratus Computer, Werner Holdings, Falcon Building
Products, NationsRent, Inc. and The William Carter Company. Several North
American investments have been listed on the New York Stock Exchange,
including Prime Service, Tiffany & Co., the Circle K Corporation, Saks Fifth
Avenue and CSK Auto. In Europe, Investcorp and its clients currently own seven
corporate investments, including Avecia (formerly Zeneca Specialties), Leica
Geosystems, Polestar, Welcome Break and Helly Hansen. Additional information
about Investcorp may be found on the Internet at www.Investcorp.com.
References in this Offer to Purchase to Investcorp include, as the context
requires, entities affiliated with Investcorp and certain international
investors with whom Investcorp maintains an administrative relationship who
are expected to participate in this investment through an indirect equity
investment in Parent. Investcorp International Inc. ("III"), a Delaware
corporation wholly owned indirectly by Investcorp, acts as Investcorp's
financial advisor on all U.S.-based investments. References to Investcorp in
this Offer to Purchase include, as the context requires, III acting in such
advisory capacity.
14
<PAGE>
Parent is a Delaware corporation formed at the direction of Investcorp to
acquire, hold and vote the Shares. Parent's principal executive offices are
located at c/o Gibson, Dunn & Crutcher LLP, 200 Park Avenue, New York, New
York 10166.
Purchaser, a Delaware corporation, is a newly formed, wholly owned
subsidiary of Parent which was formed to acquire the Company and has not
conducted any unrelated activities since its organization. Purchaser's
principal executive offices are located at c/o Gibson, Dunn & Crutcher LLP,
200 Park Avenue, New York, New York 10166.
Because (i) the only consideration in the Offer and the Merger is cash, (ii)
the Offer is for all of the outstanding Shares and (iii) there is no financing
condition in the Merger Agreement, each of Investcorp, Parent and Purchaser
believes that the financial condition of Investcorp, Parent and Purchaser is
not material to a decision by a holder of Shares whether to sell, tender or
hold Shares pursuant to the Offer. Notwithstanding the foregoing, set forth
below is certain summary selected financial information with respect to
Investcorp. Such information is provided for supplemental information purposes
only and is neither intended nor required to comply with the requirements of
the Exchange Act.
<TABLE>
<CAPTION>
Year Ended
December 31, 1998
-----------------
(In thousands)
<S> <C>
Total Assets............................................... $ 2,232,356
Total Shareholders' Funds.................................. 671,750
</TABLE>
The name, business or residence address, citizenship, present principal
occupation or employment and five year employment history of each of the
directors and executive officers of Investcorp, Parent and Purchaser are set
forth in Schedule I to this Offer to Purchase.
Except as set forth in this Offer to Purchase, none of Investcorp, Parent or
Purchaser, or to the best of Investcorp's, Parent's and Purchaser's knowledge,
any of the persons listed in Schedule I to this Offer to Purchase, or any
associate or subsidiary of any of the foregoing, beneficially owns or has any
right to acquire directly or indirectly any Shares. Except as set forth in
this Offer to Purchase, none of Investcorp, Parent or Purchaser, or to the
best of Investcorp's, Parent's and Purchaser's knowledge, any of the persons
listed in Schedule I to this Offer to Purchase or any associate or subsidiary
of any of the foregoing, or any of the respective directors, executive
officers or subsidiaries of any of the foregoing, has effected any transaction
in the Shares during the past 60 days.
Except as set forth in this Offer to Purchase, none of Investcorp, Parent or
Purchaser, or to the best of Investcorp's, Parent's and Purchaser's knowledge,
any of the persons listed in Schedule I to this Offer to Purchase, has any
contract, arrangement, understanding or relationship with any other person
with respect to any Shares, including, but not limited to, any contract,
arrangement, understanding or relationship concerning the transfer or the
voting of any Shares, joint ventures, loan or option arrangements, puts or
calls, guaranties of loans, guaranties against loss, or the giving or
withholding of proxies.
Except as set forth in this Offer to Purchase, since October 1, 1996, none
of Investcorp, Parent or Purchaser, or to the best of Investcorp's, Parent's
and Purchaser's knowledge, any of the persons listed in Schedule I to this
Offer to Purchase, has had any transaction with the Company or any of its
executive officers, directors or affiliates that is required to be reported
under the rules and regulations of the Commission applicable to the Offer.
Except as set forth in this Offer to Purchase, since October 1, 1996, there
have been no contacts, negotiations or transactions between Investcorp, Parent
or Purchaser, or to the best of Investcorp's, Parent's and Purchaser's
knowledge, any of the persons listed in Schedule I to this Offer to Purchase
on the one hand, and the Company or its affiliates on the other hand,
concerning a merger, consolidation or acquisition, a tender offer for or other
acquisition of securities of any class of the Company, an election of
directors of the Company, or a sale or other transfer of a material amount of
assets of the Company or any of its subsidiaries.
15
<PAGE>
10. Background of the Offer and the Merger; Contacts with the Company
As described more fully in reports filed by the Company with the Commission,
in connection with a court-approved settlement of certain litigation involving
the Company and the Stockholder, an independent committee of the Company Board
(the "Special Committee") was empowered to take such actions as may be
necessary to complete a sale of the Company consistent with the procedures set
forth in the court-approved settlement agreement. As a part of that
settlement, the general partner of the Stockholder resigned and a liquidating
trustee (the "Liquidating Trustee") was appointed to wind up the affairs of
the Stockholder after completion of a sale of the Company or, if no such sale
were to occur within six months, to liquidate the Stockholder and distribute
Shares held by the Stockholder in accordance with the settlement agreement.
The Special Committee commenced the sale process in June 1999 by contacting,
through the Financial Advisor, several dozen potential bidders, including
Investcorp.
On June 7, 1999, the Company and Investcorp entered into a confidentiality
agreement. Shortly thereafter, Investcorp received a confidential information
memorandum describing the Company and its business from the Financial Advisor.
During June and July, 1999, Investcorp conducted its preliminary investment
analysis concerning the Company. On July 30, 1999, Investcorp submitted to the
Financial Advisor Investcorp's initial indication of interest with a price
range of $29 to $35 per share in cash and a proposed transaction structure
which would qualify for treatment as a recapitalization for accounting
purposes.
Shortly thereafter, Investcorp was advised by the Financial Advisor that on
the basis of Investcorp's initial bid, Investcorp, along with other bidders,
would be given an opportunity to meet with management of the Company and would
be given access to diligence materials. On August 18, 1999, representatives of
Investcorp, together with Investcorp's legal and financial advisors, met with
management of the Company and attended a presentation given by the Financial
Advisor and the Company concerning the Company. On that day, Investcorp and
its advisors also began a detailed diligence review of the Company. On August
25, 1999, Investcorp submitted a detailed supplemental diligence request list.
On September 10, 1999, based upon its diligence to such date, Investcorp
submitted a non-binding indication of interest to the Financial Advisor,
setting forth a price range of $30 to $35 share in cash with the same
recapitalization structure. During the month of September 1999, Investcorp and
its advisors continued their diligence efforts, including tours of certain of
the Company's facilities, review of additional diligence materials and
discussions with management.
On September 20, 1999, the Financial Advisor delivered a proposed form of
merger agreement to Investcorp.
On October 1, 1999, the Financial Advisor invited Investcorp to submit a
third round bid together with a mark-up of the form of merger agreement
reflecting Investcorp's requested changes.
On October 15, 1999, Investcorp and its counsel submitted a final bid letter
and a mark-up of the form of merger agreement to the Financial Advisor. This
bid indicated a price of $32.50 per share and an all-cash tender offer
structure without the recapitalization accounting condition contained in
Investcorp's earlier bids. Investcorp stated that its bid was premised on
entering into a separate agreement with the Stockholder, concurrently with
entering into the definitive Merger Agreement, which separate agreement would
represent a commitment on the part of the Stockholder to participate in and
support the transactions contemplated by the Merger Agreement. This bid was
also conditioned upon successful negotiation with members of management of the
Company regarding management compensation and equity participation following
the Merger. This bid also noted certain outstanding diligence items that would
need to be resolved prior to entering into definitive agreements.
On October 20, 1999, the Financial Advisor advised Investcorp that the
Special Committee planned to meet the following day to evaluate the final
round bids it had received, and requested Investcorp to consider improving its
bid. Later that day, Investcorp informed the Financial Advisor that it had
increased its bid to $33 per share.
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On October 22, 1999, Investcorp was informed by the Financial Advisor that
the Company desired to commence negotiations of a definitive merger agreement,
although such negotiations would not be exclusive and the Company may proceed
concurrently with other bidders.
During the week of October 25, 1999, representatives of Investcorp engaged
in negotiations with representatives of the Company regarding the terms of the
Merger Agreement and related matters. Representatives of Investcorp met with
members of management of the Company and their counsel to outline Investcorp's
proposals for management compensation and equity participation following
consummation of the Merger.
On October 27, 1999, counsel for Investcorp delivered a form of Stockholder
Agreement to counsel for the Company. At such time, Investcorp and its counsel
reiterated the necessity of such agreement in order for Investcorp to proceed
with its proposal to acquire the Company in a tender offer at $33 per share.
During the week of November 1, 1999, representatives of Investcorp and their
legal advisors continued their diligence review of the Company, and the
parties and their legal advisors conducted further negotiations with respect
to the Merger Agreement and the Stockholder Agreement. The parties also
negotiated management compensation and equity participation arrangements.
On November, 4, 1999, the Special Committee voted to approve Investcorp's
bid and to recommend to the Company Board the approval of the Offer, the
Merger, the Merger Agreement, the Stockholder Agreement and the transactions
contemplated by the Merger Agreement. Following the adjournment of the meeting
of the Special Committee, the Company Board met and voted unanimously to
ratify the actions of the Special Committee. Based upon these approvals, the
Liquidating Trustee agreed to enter into the Stockholder Agreement.
The parties executed the Merger Agreement and the Stockholder Agreement, and
the Company and Parent publicly announced the transaction prior to the opening
of trading on the Nasdaq National Market System on November 5, 1999. The Offer
formally commenced on the date of this Offer to Purchase.
11. Purpose of the Offer and the Merger; Plans for the Company; the Merger
Agreement; Appraisal Rights in the Merger; the Stockholder Agreement; Other
Matters
Purpose of the Offer and the Merger
The purpose of the Offer is for Investcorp and Parent to acquire,
indirectly, the entire equity interest in the Company. The purpose of the
Merger is for Investcorp, indirectly through Parent, to acquire all of the
equity interest in the Company not acquired pursuant to the Offer. Upon
consummation of the Merger, the Company will become a direct wholly owned
subsidiary of Parent. The acquisition of the entire equity interest in the
Company has been structured as a cash tender offer followed by a cash merger
in order to provide a prompt transfer of ownership of the equity interest in
the Company from the Company's stockholders to Parent and to provide the
Company's stockholders with cash for all of their Shares.
Leonard Chill, Chairman and Chief Executive Officer of the Company, holds
options to purchase 72,174 Shares, which options were granted as "incentive
stock options" under federal tax laws ("ISOs") (Mr. Chill also holds other
options which are not ISOs). Parent and Mr. Chill have discussed the
possibility of Mr. Chill exercising such ISOs prior to the Merger and of
making arrangements which would enable him to retain the Shares purchased upon
such exercise after the Merger has been completed. Parent and Mr. Chill have
also discussed the possibility of making arrangements to enable Mr. Chill to
retain the ISOs themselves through and following the Merger. If either of
these alternatives were implemented, Mr. Chill would own following the Merger
an equity interest in the Company of approximately 1% (in addition to Mr.
Chill's expected equity interest in Parent following the Merger). As a result,
the Company would not be "wholly owned" by Parent as reflected in this Offer
to Purchase and related documents. Rather, Parent would own approximately 99%
of the equity interest of the Company.
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Plans for the Company
As described in this section under "The Merger Agreement--Stockholder
Meeting," the only remaining corporate action of the Company that may be
required to consummate the Merger after consummation of the
Offer is the approval and adoption of the Merger Agreement and the
transactions contemplated thereby by the holders of a majority of the Shares.
If the Minimum Condition is satisfied (up to 5,699,194 Shares will be tendered
to Purchaser pursuant to the Stockholder Agreement), Purchaser will have
sufficient voting power to cause the approval and adoption of the Merger
Agreement and the transactions contemplated thereby without the affirmative
vote of any other stockholder of the Company. Pursuant to the Merger
Agreement, Parent has agreed to vote, or cause to be voted, at any such
meeting, all Shares owned by it, Purchaser or any other subsidiary of Parent
in favor of the Merger. If Purchaser acquires at least 90% of the Shares in
the Offer, under Section 253 of the DGCL, it will be able to consummate the
Merger without a vote of the Company's stockholders.
Other than the Merger, the transactions described in this section under "The
Merger Agreement--Debt Offer," "The Merger Agreement--Cooperation With
Financing Efforts" and "The Merger Agreement--Board Representation" and in
Section 12, and except as set forth elsewhere in this Offer to Purchase, none
of Investcorp, Parent or Purchaser, or to the best of Investcorp's, Parent's
and Purchaser's knowledge, any of the persons listed in Schedule I to this
Offer to Purchase, has any current plans or proposals that would result in an
extraordinary corporate transaction, such as a merger, reorganization or
liquidation of the Company or any of its subsidiaries with or into any third
entity, the sale or transfer of a material amount of the Company's or any of
its subsidiaries' assets to a third party, a material change in the Company's
capitalization or dividend structure or any other material change in the
Company's corporate structure or business. Notwithstanding the foregoing,
following consummation of the Offer and the Merger, Investcorp and Parent
intend to evaluate and review the Company's operations and the potential
opportunities for realization of operating efficiencies, including those of
its subsidiaries, and to consider what changes, if any, would be desirable in
light of the results of such evaluation and review. After such evaluation and
review, Investcorp and Parent will determine what actions or changes, if any,
would be desirable in light of the circumstances which then exist, and
reserves the right to effect such actions or changes.
The Merger Agreement
The following is only a summary of certain provisions of the Merger
Agreement and is qualified in its entirety by reference to the Merger
Agreement. A copy of the Merger Agreement has been filed with the Commission
as an exhibit to Investcorp's, Parent's and Purchaser's Tender Offer Statement
on Schedule 14D-1. Reference is hereby made to such exhibit for a more
complete description of the terms and conditions of the Merger Agreement.
The Offer. The Merger Agreement provides for the making of the Offer.
Pursuant to the Offer, each tendering stockholder will receive the Offer Price
for each Share tendered in the Offer. Purchaser's obligation to accept for
payment or pay for Shares is subject to the satisfaction of the conditions
that are described in Section 14 of this Offer to Purchase, including the
Minimum Condition.
Pursuant to the Merger Agreement, Purchaser expressly reserves the right to
waive any conditions to the Offer, except that, without the consent of the
Company, Purchaser may not waive the Minimum Condition. Purchaser expressly
reserves the right to modify the terms of the Offer, except that, without the
consent of the Company, Purchaser may not, (i) reduce the number of Shares
subject to the Offer; (ii) reduce the Offer Price to be paid pursuant to the
Offer; (iii) modify or add to the conditions to Purchaser's obligation to
purchase Shares set forth in Exhibit A to the Merger Agreement in any manner
materially adverse to the holders of Shares; (iv) extend the Offer; (v) change
the form of consideration payable in the Offer; or (vi) otherwise amend the
Offer in any manner adverse to the holders of Shares. The conditions set forth
in Exhibit A to the Merger Agreement are described in Section 14 of this Offer
to Purchase.
Notwithstanding the foregoing, Purchaser may, without the consent of the
Company, (w) extend the Offer, if at the scheduled Expiration Date any of the
conditions to Purchaser's obligation to purchase Shares set forth in
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the Merger Agreement or Exhibit A to the Merger Agreement are not satisfied,
until such time as such conditions are satisfied or waived; (x) extend the
Offer for a period of not more than 15 business days beyond the initial
Expiration Date, if on the date of such extension less than 90% of the
outstanding Shares have been validly tendered and not properly withdrawn
pursuant to the Offer; (y) extend the Offer for any period required by
applicable law, including any rule, regulation, interpretation or position of
the Commission applicable to the Offer; and (z) extend the Offer for any
reason for a period of not more than ten business days beyond the latest
Expiration Date that would otherwise be permitted as described in this
sentence.
Board Representation. The Merger Agreement provides that promptly upon
Purchaser's acceptance for payment of, and payment for, any Shares tendered
pursuant to the Offer, Purchaser will be entitled to designate, and the
Company will cause to be elected, such number of directors on the Company
Board as will give Purchaser, subject to compliance with Section 14(f) of the
Exchange Act, representation on the Company Board equal to at least that
number of directors, rounded up to the next whole number, which is the product
of (a) the total number of directors on the Company Board (after giving effect
to the directors elected pursuant to this sentence) multiplied by (b) the
percentage that (i) such number of Shares so accepted for payment and paid for
by Purchaser plus the number of Shares otherwise owned by Purchaser or any
other subsidiary of Parent bears to (ii) the total number of Shares
outstanding. Notwithstanding the foregoing, in the event that Purchaser's
designees are appointed or elected to the Company Board, the Merger Agreement
provides that until the Effective Time (as defined below) the Company Board
will have at least three directors who were directors on November 5, 1999 and
who are not officers of the Company (the "Independent Directors"). If the
number of Independent Directors is reduced below three for any reason, any
remaining Independent Directors (or Independent Director, if there is only one
remaining) will be entitled to designate persons to fill such vacancies who
will be deemed to be Independent Directors for purposes of the Merger
Agreement or, if no Independent Directors then remain, the other directors
will designate three persons to fill such vacancies who are not officers,
stockholders or affiliates of the Company, Parent or Purchaser, and such
persons will be deemed to be Independent Directors for purposes of the Merger
Agreement. Pursuant to the Merger Agreement, the Company has agreed to
promptly, at the option of Purchaser, either increase the size of the Company
Board or obtain the resignation of such number of its current directors as is
necessary to enable Purchaser's designees to be elected or appointed to the
Company Board, and subject to applicable law, to take all action requested by
Parent necessary to effect any such election, including mailing to its
stockholders an information statement containing the information required by
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder.
Assuming that it accepts for payment and pays for Shares tendered pursuant to
the Offer and that it exercises its rights with respect to representation on
the Company Board, Purchaser will select its designees from the persons set
forth in the Information Statement required by Rule 14f-1 under the Exchange
Act included as Schedule I to the Company's Solicitation/Recommendation
Statement on Schedule 14D-9.
The Merger. Pursuant to the Merger Agreement, on the second business day
following the satisfaction (or, to the extent permitted by law, waiver by all
parties) of the conditions to the Merger, or as soon as practicable after all
the conditions to the Merger have been satisfied (or, to the extent permitted
by law, waived by the parties entitled to the benefits thereof), or at such
other date as agreed in writing between Parent and the Company, Purchaser will
be merged with and into the Company (the "Closing Date"). Following the
Merger, the separate corporate existence of Purchaser will cease. The Company
will be the surviving corporation in the Merger and will continue as a wholly
owned subsidiary of Parent. The Merger will become effective at such time as
Parent files with the Secretary of State of the State of Delaware a
certificate of merger in such form and manner as required by the DGCL (the
"Certificate of Merger"), or at such other time as Parent and the Company
agree and specify in the Certificate of Merger (the "Effective Time"). The
Company, as the surviving corporation, will continue its corporate existence
under the laws of the State of Delaware. The Merger Agreement provides that
the Certificate of Incorporation of the Company in effect immediately prior to
the Effective Time will be amended in its entirety, and as amended, will be
the Certificate of Incorporation of the Surviving Corporation, and that the
bylaws of the Company in effect immediately prior to the Effective Time will
be the bylaws of the Surviving Corporation until thereafter changed or amended
as provided therein or by applicable law. The Merger Agreement also provides
that the directors of Purchaser at the Effective Time will be the directors of
the Surviving Corporation until they resign or are removed or their respective
successors are duly elected and
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qualified, and that the officers of the Company at the Effective Time will be
the officers of the Surviving Corporation until they resign or are removed or
their respective successors are duly elected and qualified.
Parent may elect at any time prior to the Merger, instead of merging
Purchaser with and into the Company as described above, to merge the Company
with and into Purchaser, in which case Purchaser would be the Surviving
Corporation. In such event, the parties will, if required, execute an
appropriate amendment to the Merger Agreement in order to reflect this
election.
Consideration to Be Paid in the Merger. By virtue of the Merger, each
outstanding Share (except for Shares owned by the Company, Parent or Purchaser
or by any subsidiary of the Company or Parent, which will be canceled and
retired and will cease to exist without any payment with respect thereto or in
exchange therefor, and except for Shares held by the Company's stockholders
who have properly exercised appraisal rights under Delaware law) will be
converted into the right to receive the Merger Consideration. Each share of
common stock of Purchaser issued and outstanding immediately prior to the
Effective Time will be converted into one share of common stock of the
Surviving Corporation.
Cancellation of Stock Options. Pursuant to the Merger Agreement, immediately
prior to the Effective Time, each outstanding option to purchase shares of the
Company's common stock granted under any of the Company's stock option plans
which is then exercisable or becomes exercisable as a result of the Offer or
the Merger will be canceled by the Company. At the Effective Time or as soon
as practicable thereafter, in consideration for such cancellation, the holder
of such option will be entitled to receive from the Surviving Corporation as
of or as soon as practicable after the Effective Time an amount in cash equal
to the product of (i) the number of shares of the Company's common stock
previously subject to such stock option and (ii) the excess, if any, of the
Merger Consideration over the exercise price per share for such stock option,
reduced by the amount of withholding or other taxes required by law to be
withheld. Except as provided in the Merger Agreement or as otherwise agreed by
the parties, the Company's stock option plans and any other plan, program or
arrangement providing for the issuance or grant of any interest in respect of
the Company's common stock will terminate as of the Effective Time.
The cancellation of stock options pursuant to the Merger may not apply to
stock options held by certain members of management of the Company, who have
indicated an interest in exchanging their options to acquire shares of common
stock of the Company into options to acquire shares of capital stock of Parent
in connection with the closing of the Merger. See the description of the
employment letters of intent under the caption "Other Matters" in this
section.
Stockholder Meeting. Under the DGCL, the approval of the Company Board and,
under certain circumstances, the affirmative vote of the holders of a majority
of the Shares present at a duly constituted meeting, is required to approve
and adopt the Merger Agreement and the transactions contemplated thereby. If a
vote of the stockholders is required, the Company has agreed, at Parent's
request, as soon as practicable following the expiration of the Offer, to
prepare and file with the Commission a proxy statement in preliminary form, to
respond as promptly as practicable to the comments, if any, of the Commission
with respect to such proxy statement, and to mail the proxy statement to the
Company's stockholders as promptly as practicable after filing the proxy
statement with the Commission. In the event that a stockholder vote is
required, the Company has also agreed to, at Parent's request, as soon as
practicable following the expiration of the Offer, duly call, give notice of,
convene and hold a meeting of its stockholders for the purpose of seeking the
vote required to approve and adopt the Merger Agreement and the transactions
contemplated thereby. As provided in the Merger Agreement, if a stockholder
vote is required, the Company Board, subject to its fiduciary duties, will
recommend to its stockholders that they vote in favor of the Merger Agreement
and the transactions contemplated thereby. Notwithstanding the foregoing, if
Parent, Purchaser or any other subsidiary of Parent has acquired at least 90%
of the outstanding Shares, the parties will take all necessary and appropriate
actions to cause the Merger to become effective as soon as practicable after
the expiration of the Offer without a stockholder meeting in accordance with
Section 253 of the DGCL.
Representations and Warranties. The Merger Agreement contains customary
representations and warranties of the parties. These include representations
and warranties of the Company with respect to corporate organization, standing
and power, subsidiaries and equity interests, capitalization, corporate
authority
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relative to the Merger Agreement, corporate authority relative to Section 203
of the DGCL, noncontravention, consents and approvals necessary for the Offer
and the Merger, filings with the Commission, accuracy of financial statements,
absence of undisclosed liabilities, disclosures in offer documents and
proxystatements, absence of certain changes in the Company's business, tax
matters, employee benefit plans and compliance with ERISA, employment and
related matters, litigation, environmental matters, properties and assets,
confidentiality agreements, brokers' fees, opinion of the Financial Advisor,
compliance with laws, governmental permits, material agreements, insurance,
intellectual property, labor relations and related party transactions. The
Merger Agreement also contains representations and warranties of the Company
with respect to compliance of the Offer and the Merger with the Stipulation
and certain liabilities with respect to the litigation resulting in the
Stipulation.
The representations and warranties contained in the Merger Agreement also
include representations and warranties of Parent and Purchaser with respect to
corporate organization, standing and power, operations and capitalization of
Purchaser, corporate authority relative to the Merger Agreement,
noncontravention, consents and approvals necessary for the Offer and the
Merger, disclosures in offer documents and proxy statements, brokers' fees,
availability of financing and litigation.
No representations or warranties made by the Company, Parent or Purchaser
will survive beyond the Effective Time.
Conduct of Business Before the Effective Time. Pursuant to the Merger
Agreement, from November 5, 1999 to the Effective Time, the Company has agreed
to conduct, and to cause each of its subsidiaries to conduct, its business in
the usual, regular and ordinary course in substantially the same manner as
previously conducted (subject to the conditions set forth below) and, to the
extent consistent therewith, use its reasonable efforts to preserve intact its
current business organization, keep available the services of its current
officers and key employees and keep its relationships with customers,
suppliers, licensors, licensees, distributors and others having business
dealings with them so that its goodwill and ongoing business will not be
materially impaired at the Effective Time. Without limiting the generality of
the foregoing, except as otherwise contemplated by the Merger Agreement, until
the Effective Time, the Company may not, nor permit any of its subsidiaries
to, do any of the following without the prior written consent of Parent:
(i) (A) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock, other than dividends
and distributions by a direct or indirect wholly owned subsidiary of the
Company to its parent, (B) split, combine or reclassify any of its capital
stock or issue or authorize the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock or (C)
purchase, redeem or otherwise acquire any shares of its capital stock or
any other securities thereof or any rights, warrants or options to acquire
any such shares or other securities;
(ii) authorize for issuance, issue, deliver, sell, pledge or grant (A)
any shares of its capital stock, (B) any debt securities which have the
right, or are convertible into the right, to vote on matters which the
Company's stockholders may vote, or other voting securities, (C) any
securities convertible into or exchangeable for, or any options, warrants
or rights to acquire, any such shares, voting securities or convertible or
exchangeable securities or (D) any "phantom" stock, "phantom" stock rights,
stock appreciation rights or stock-based performance units, other than the
issuance of the Company's common stock upon the exercise of stock options
outstanding on November 5, 1999 and in accordance with their present terms;
(iii) amend its certificate of incorporation, bylaws or other comparable
charter or organizational documents;
(iv) (A) enter into, or propose or negotiate to enter into, any material
contract, (B) amend, or propose or negotiate to amend, the terms of any
existing material contracts or agreements of the type described in the
foregoing clause, (C) acquire, or propose or negotiate to acquire, any
interest in a corporation, partnership or joint venture arrangement, (D)
sell, transfer, assign, relinquish, terminate or make any other material
change (taken on an individual basis) in, or propose or negotiate to take
any such action with respect to, the Company's material interests (as of
November 5, 1999) in the equity or debt securities of any corporation,
partnership or joint venture arrangement which holds such an interest,
including, without
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limitation, the imposition of any lien on any of the foregoing, (E) give,
or propose or negotiate to give, any approvals relating to development
plans, work plans, budgets or capital expenditure commitments in connection
with any such interests or (F) make, or propose to make, any material
change in the Company's material interests;
(v) enter into any significant further commitment or arrangement with
respect to the Company's pending SAP project or any other significant
systems project;
(vi) acquire or agree to acquire (A) by merging or consolidating with, or
by purchasing a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, joint venture,
association or other business organization or division thereof or (B) any
assets that are material, individually or in the aggregate, to the Company
and its subsidiaries taken as a whole;
(vii) (A) grant to any officer or director of the Company or any of its
subsidiaries any increase in compensation, except to the extent required
under employment agreements in effect as of September 30, 1998, (B) grant
to any employee, officer or director of the Company or any its subsidiaries
any increase in severance or termination pay, except to the extent required
under any agreement in effect as of September 30, 1998, (C) enter into any
new employment, consulting, indemnification, severance or termination
agreement with any such employee, officer or director, (D) establish,
adopt, enter into or amend in any material respect any collective
bargaining agreement or employee benefit plan or (E) take any action to
accelerate any rights or benefits (including vesting under the Company's
401(k) plan), or make any material determinations not in the ordinary
course of business consistent with prior practice, under any collective
bargaining agreement or employee benefit plan;
(viii) make any change in accounting methods, principles or practices
materially affecting the reported consolidated assets, liabilities or
results of operations of the Company, except insofar as may have been
required by a change in generally accepted accounting principles;
(ix) sell, lease, license or otherwise dispose of or subject to any lien
any properties or assets, except sales of inventory and excess or obsolete
assets in the ordinary course of business consistent with past practice;
(x) (A) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of the Company or
any of its subsidiaries, guarantee any debt securities of another person,
enter into any "keep well" or other agreement to maintain any financial
condition of another person or enter into any arrangement having the
economic effect of any of the foregoing, except for short-term borrowings
incurred in the ordinary course of business consistent with past practice
or (B) make any loans, advances or capital contributions to, or investments
in, any other person, other than to or in the Company or any direct or
indirect wholly owned subsidiary of the Company;
(xi) make or agree to make any new capital expenditure or expenditures
other than capital expenditures which do not exceed the amount budgeted
thereto in the Company's annual capital expenditures budget for fiscal year
2000 previously provided to Parent;
(xii) make any material tax election or settle or compromise any material
tax liability or refund, consent to any extension or waiver of the statute
of limitations period applicable to any tax claim or action, if any such
election, settlement, compromise, consent or other action would have the
effect of materially increasing the tax liability or reducing any net
operating loss, foreign tax credit, net capital loss or any other credit or
tax attribute of the Company or any its subsidiaries (including, without
limitation, deductions and credits related to alternative minimum taxes);
(xiii) enter into any hedging agreement or other financial agreement or
arrangement designed to protect the Company against fluctuations in
commodities prices or currency exchange rates, except agreements or
arrangements entered into in the ordinary course of business consistent
with past practice;
(xiv) (A) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the
ordinary course of business consistent with past practice or in accordance
with their terms, of liabilities reflected or reserved against in, or
contemplated by, the most recent consolidated financial statements (or the
notes
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thereto) of the Company or incurred in the ordinary course of business
consistent with past practice, (B) cancel any material indebtedness
(individually or in the aggregate) or waive any claims or rights of
substantial value or (C) waive the benefits of, or agree to modify in any
manner, any confidentiality, standstill or similar agreement to which the
Company or any of its subsidiaries is a party;
(xv) make any material change (including failing to renew) in the amount
or nature of the insurance policies covering the Company and its
subsidiaries;
(xvi) waive any material claims or rights relating to the Company's or
any of its subsidiaries' business;
(xvii) amend or otherwise modify the Stipulation; or
(xviii) authorize any of, or commit or agree to take any of, the
foregoing actions.
In addition, the Merger Agreement provides that the Company and Parent may
not, nor may they permit any of their respective subsidiaries to, take any
action that would, or that could reasonably be expected to, result in: (x) any
of the representations and warranties of such party set forth in the Merger
Agreement that is qualified as to materiality becoming untrue; (y) any of such
representations and warranties that is not so qualified becoming untrue in any
material respect; or (z) except as otherwise permitted by the provisions of
the Merger Agreement described below in "--No Solicitation", any condition to
the Offer set forth in Exhibit A to the Merger Agreement or any condition to
the Merger not being satisfied. The conditions set forth in Exhibit A are
described in Section 14 of this Offer to Purchase, and the conditions to the
Merger are described in "--Conditions to the Merger."
No Solicitation. The Merger Agreement provides that the Company Board will
promptly advise Parent orally and in writing of any Company Takeover Proposal
or Company Superior Proposal. The term "Company Takeover Proposal" means,
other than the transactions contemplated by the Merger Agreement, any of the
following:
. any inquiry, proposal or offer from any person relating to any direct or
indirect acquisition or purchase of a business that constitutes 25% or
more of the net revenues, net income or the assets of the Company and its
subsidiaries taken as a whole, or 25% or more of any class of equity
securities of the Company or any of its subsidiaries.
. any tender offer or exchange offer that if consummated would result in
any person beneficially owning 25% or more of any class of equity
securities of the Company or any company subsidiary.
. any merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving the Company or
any of its subsidiaries.
The term "Company Superior Proposal" means any bona fide proposal which:
1. is made by a third party to acquire, directly or indirectly, including
pursuant to a tender offer, exchange offer, merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar
transaction, for consideration consisting of cash and/or securities, 100%
of the outstanding Shares or all or substantially all the assets of the
Company;
2. the Company Board determines in its good faith judgment, based on the
written advice of the Financial Advisor, is reasonably capable of being
completed, taking into account all legal, financial, regulatory and other
aspects of the proposal and the third party making such proposal; and
3. is made on terms that the Company Board determines in its good faith
judgment (based on the written advice of the Financial Advisor) provide
greater present value to the Company's stockholders than the cash
consideration to be received by such stockholders pursuant to the Offer and
the Merger, as the Offer and the Merger may be amended from time to time.
The Merger Agreement provides that the Company may not, nor may it permit
any of its subsidiaries to, nor may it authorize or permit any officer,
director or employee of, or any investment banker, attorney or other advisor,
agent or representative of the Company or any of its subsidiaries
(collectively, the "Company Representatives") to: (a) solicit, initiate or
encourage the submission of any Company Takeover Proposal; (b) enter into any
agreement with respect to any Company Takeover Proposal; or (c) participate in
any discussions or negotiations regarding, or furnish to any person any
information with respect to, or take any other action to
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facilitate any inquiries or the making of any proposal that constitutes, or
may reasonably be expected to lead to, any Company Takeover Proposal.
Notwithstanding the foregoing, at any time prior to the consummation of the
Offer, in response to a Company Superior Proposal that was not solicited by
the Company or any Company Representative on or after November 5, 1999 and
that did not otherwise result from a breach of the Company's no solicitation
covenant described in the preceding paragraph, the Company Board may
participate in discussions regarding such Company Superior Proposal, subject
to its providing prior written notice of its decision to take such action to
Parent and to its previously advising Parent orally and in writing of any
Company Takeover Proposal or Company Superior Proposal.
The Merger Agreement does not prohibit the Company Board from taking and
disclosing to its stockholders a position contemplated by Rule 14e-2(a)
promulgated under the Exchange Act or from changing its recommendation made
pursuant to Section 251 of the DGCL, or making any disclosure to the Company's
stockholders if, in the good faith judgment of the Company, after consultation
with outside counsel, failure so to disclose would be inconsistent with its
obligations under applicable law.
Access to Information; Confidentiality. The Company has agreed to afford,
and to cause each of its subsidiaries to afford, Parent and its directors,
officers, employees, accountants, counsel, financial advisers, financing
sources and other representatives reasonable access during normal business
hours during the period prior to the Effective Time to all of the Company's
and its subsidiaries' respective properties, books, contracts, commitments,
personnel and records. The Company has also agreed to furnish, and to cause
each of its subsidiaries to furnish, promptly to Parent during the period
prior to the Effective Time (i) a copy of each report, schedule, registration
statement and other document filed by it during such period pursuant to the
requirements of federal or state securities laws and (ii) all other
information concerning its business, properties and personnel as Parent may
reasonably request. The Merger Agreement provides that all nonpublic
information so exchanged will be subject to the confidentiality agreement
dated as of June 7, 1999, as amended (the "Confidentiality Agreement"),
between the Company and Investcorp. The Confidentiality Agreement is described
below under the caption "Other Matters."
Reasonable Efforts. Each of the Company, Parent and Purchaser has agreed,
subject to the terms and conditions of the Merger Agreement, to use all
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with the other parties in doing,
all things necessary, proper or advisable to consummate and make effective, in
the most expeditious manner practicable, the Offer, the Merger and the other
obligations of such party under the Merger Agreement. These things include:
(i) the obtaining of all necessary actions or nonactions, waivers, consents
and approvals from governmental entities and the making of all necessary
registrations and filings (including filings with governmental entities, if
any) and the taking of all reasonable steps as may be necessary to obtain an
approval or waiver from, or to avoid an action or proceeding by, any
governmental entity; (ii) the obtaining of all necessary consents, approvals
or waivers from third parties; (iii) the defending of any lawsuits or other
legal proceedings, whether judicial or administrative, challenging the Merger
Agreement or the consummation of the Merger Agreement, including seeking to
have any stay or temporary restraining order entered by any court or other
governmental entity vacated or reversed; and (iv) the execution and delivery
of any additional instruments necessary to consummate the Merger Agreement and
to fully carry out the purposes of the Merger Agreement. Without limiting the
foregoing, the Company has also agreed to (x) take all action necessary to
ensure that no state takeover statute or similar statute or regulation is or
becomes applicable to the Merger Agreement and (y) if any state takeover
statute or similar statute or regulation becomes applicable to the Merger
Agreement, take all action necessary to ensure that the Offer and the Merger
may be consummated as promptly as practicable on the terms contemplated by the
Merger Agreement and otherwise to minimize the effect of such statute or
regulation on the Offer and the Merger. The Merger Agreement provides that
none of its provisions may be deemed to require any party to waive any
substantial rights or agree to any substantial limitation on its operations or
to take any action that would result in any of the consequences referred to in
paragraph (a) of Exhibit A to the Merger Agreement. Paragraph (a) of Exhibit A
is described in subparagraph (a) of Section 14 of this Offer to Purchase.
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Notification. The Company has agreed to give prompt notice to Parent, and
Parent and Purchaser have agreed to give prompt notice to the Company, of (i)
any representation or warranty made by it contained in the Merger Agreement
that is qualified as to materiality becoming untrue or inaccurate in any
respect or any such representation or warranty that is not so qualified
becoming untrue or inaccurate in any material respect and (ii) any failure by
it to comply with or satisfy in any material respect any covenant, condition
or agreement to be complied with or satisfied by it under the Merger
Agreement. The Merger Agreement provides that no such notification will affect
the representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under the Merger Agreement.
Employee Benefit Plans. Parent has agreed, for one year after the Closing
Date, to either (i) cause the Surviving Corporation to continue to sponsor and
maintain the Company's existing employee benefit plans (the "Company Benefit
Plans") or (ii) provide benefits to the employees of the Company who continue
to be employed by the Surviving Corporation (the "Company Employees") under
employee benefit plans, programs, policies or arrangements that in the
aggregate are no less favorable than those benefits provided to the Company
Employees by the Company immediately prior to the Closing Date. With respect
any employee benefit plan, program, policy or arrangement sponsored or
maintained by Parent and offered to the Company Employees in addition to or as
a substitute for the Company Benefit Plans, Parent has agreed to give the
Company Employees service credit for their employment with the Company for
eligibility and vesting purposes under all such employee benefit plans,
programs, policies or arrangements as if such service had been performed with
Parent.
Parent has also agreed, following the Effective Time, to cause the Surviving
Corporation and its subsidiaries to honor, subject to its obligations
described in this section and in "--Indemnification," all obligations under
any contracts, agreements and commitments of the Company and its subsidiaries
prior to November 5, 1999 (or as established or amended in accordance with or
permitted by the Merger Agreement), the existence of which did not constitute
a violation of the terms of the Merger Agreement, and which apply to any
current or former employee or director of the Surviving Corporation or any of
its subsidiaries.
Nothing in the Merger Agreement gives any employee of the Company or of any
of the Company's subsidiaries, except those employees listed in the disclosure
letter to the Merger Agreement, any right to continued employment following
the Effective Time.
Indemnification. Parent has agreed, after the earlier of the Effective Time
or the consummation of the Offer, to indemnify and cause the Surviving
Corporation to indemnify the present and former officers and directors of the
Company and its subsidiaries (each, an "Indemnified Party") against all
losses, claims, damages, liabilities, fees and expenses (including reasonable
fees and disbursements of counsel and judgments, fines, losses, claims,
liabilities and amounts paid in settlement, provided that any such settlement
is effected with the written consent of Parent or the Surviving Corporation)
incurred by reason of the fact that such person is or was an officer or
director of the Company or any of its subsidiaries and arising out of actions
or omissions occurring on or prior to the Effective Time to the full extent
permitted by law, with each Indemnified Party's right to such indemnification
including the advancement of expenses incurred in the defense of any action or
suit. The Merger Agreement provides that any determination which is required
to be made with respect to whether an Indemnified Party is entitled to such
indemnification, including any determination whether an Indemnified Party's
conduct complies with the standards set forth under the DGCL, will be made at
Parent's expenses by independent counsel mutually acceptable to Parent and the
Indemnified Party. The Merger Agreement further provides that none of its
provisions shall impair any rights or obligations of any present or former
directors or officers of the Company.
Parent has also agreed, to the fullest extent permitted by law, to cause the
Surviving Corporation to honor all of the Company's obligations to indemnify
(including any obligations to advance funds for expenses) the members of the
Special Committee and current or former directors or officers of the Company
and its subsidiaries for acts or omissions by such directors and officers
occurring prior to the Effective Time to the extent that such obligations of
the Company exist on November 5, 1999, whether pursuant to the Company's
Certificate of Incorporation, the Company's bylaws, individual indemnity
agreements or otherwise. The Merger Agreement provides that such
indemnification obligations will survive the Merger and will continue in full
force and effect in accordance with the terms of the Company's Certificate of
Incorporation, the Company's bylaws and such
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individual indemnity agreements from the Effective Time until the expiration
of the applicable statute of limitations with respect to any claims against
such directors or officers arising out of such acts or omissions.
Insurance. Parent has agreed, for a period of six years after the Effective
Time, to cause to be maintained in effect the current policies of directors'
and officers' liability insurance maintained by the Company with respect to
claims arising from or related to facts or events which occurred at or before
the Effective Time, provided that Parent may substitute for such current
policies new policies with reputable and financially sound carriers of at
least the same coverage and amounts containing terms and conditions which are
no less advantageous. However, Parent will not be obligated to make annual
premium payments for such insurance to the extent such premiums exceed 200% of
the annual premiums paid as of November 5, 1999 by the Company for such
insurance (such 200% amount, the "Maximum Premium"). If such insurance
coverage cannot be obtained at all, or can only be obtained at an annual
premium in excess of the Maximum Premium, Parent must maintain the most
advantageous policies of directors' and officers' insurance obtainable for an
annual premium equal to the Maximum Premium. The Company has represented in
the Merger Agreement that the Maximum Premium is $578,000.
Fees and Expenses. The Merger Agreement provides that all fees and expenses
incurred in connection with the Merger will be paid by the party incurring
such fees or expenses, whether or not the Merger is consummated.
Public Announcements. Parent and Purchaser, on the one hand, and the
Company, on the other hand, have agreed to consult with each other before
issuing, and to provide each other the opportunity to review and comment upon,
any press release or other public statements with respect to the Offer, the
Merger and the other obligations under the Merger Agreement, and have agreed
not to issue any such press release or make any such public statement prior to
such consultation, except as may be required by applicable law, court process
or by obligations pursuant to any listing agreement with any national
securities exchange. The Company has also agreed to give at least 24 hours'
prior written notice to Parent and Purchaser of any proposed press release or
other public statement not relating to the Offer, the Merger or any of the
obligations under the Merger Agreement, which notice is to include the text of
such press release or public statement.
Transfer Taxes. The Company has agreed to pay any state, local, foreign or
provincial tax which is attributable to the transfer of the beneficial
ownership of the Company's or the Company's subsidiaries' real property
(collectively, the "Transfer Taxes"), if any, and any penalties or interest
with respect to the Transfer Taxes, payable in connection with the
consummation of the Offer or the Merger. Pursuant to the Merger Agreement,
Purchaser and the Company, in their reasonable discretion, will determine the
portion of the consideration to be received by holders of Shares in connection
with the Offer and the Merger that is allocable to the real property of the
Company and its subsidiaries in any jurisdiction imposing such Transfer Taxes.
The Merger Agreement provides that the stockholders of the Company will be
deemed to have agreed to be bound by this allocation in the preparation of any
return with respect to the Transfer Taxes, and that Purchaser may withhold the
amount of the Transfer Taxes payable with respect to any Shares from the
amount to be paid pursuant to the Offer and the Merger with respect to such
Shares, unless the date on which the beneficial owner of such Shares acquired
such beneficial ownership is certified to Purchaser.
The Company has also agreed to pay any state, local, foreign or provincial
tax which is attributable solely to and imposed upon the transfer of the
Shares pursuant to the Merger Agreement (collectively, the "Stock Transfer
Taxes") and any penalties or interest with respect to any such Stock Transfer
Taxes.
Debt Offer. Pursuant to the Merger Agreement, the Company has commenced an
offer to purchase for cash (the "Debt Offer") all of the Company's outstanding
9 1/4% Senior Subordinated Notes due 2007 (the "Existing Notes") on the terms
and conditions set forth in the Offer to Purchase and Consent Solicitation
which has been mailed to the holders of the Existing Notes concurrently with
the mailing of this Offer to Purchase to the holders of the Company's Shares.
In conjunction with the Debt Offer, the Company is soliciting consents from
the holders of the Existing Notes relating to proposed amendments which would
eliminate substantially all of the covenants contained in the Indenture, dated
as of February 11, 1997, between the Company and United States
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<PAGE>
Trust Company of New York, as Trustee, under which the Existing Notes were
issued. The Company has agreed to waive any of the conditions to the Debt
Offer and to make any other changes in the terms and conditions of the Debt
Offer as may be reasonably requested by Purchaser. The Company may not,
without Purchaser's prior written consent: (a) waive any material condition to
the Debt Offer; (b) make any changes to certain terms and conditions of the
Debt Offer relating to (i) the consideration to be paid by the Company for
Existing Notes tendered pursuant to the Debt Offer, (ii) payments to be made
to holders of the Existing Notes who consent to the proposed amendments by a
certain time, (iii) payment of accrued interest on the Existing Notes and (iv)
the conditions to the Company's obligation to accept for payment and pay for
Existing Notes tendered pursuant to the Debt Offer; or (c) make any other
material changes in the terms and conditions of the Debt Offer.
The Company has agreed, subject to the terms and conditions of the Merger
Agreement, including but not limited to the conditions to the Debt Offer, to
accept for payment and pay for the Existing Notes as soon as such conditions
to the Debt Offer are satisfied and the Company is permitted to do so under
applicable law, and to coordinate the timing of any such purchase with
Purchaser in order to obtain the greatest participation in the Debt Offer.
The obligations of Parent and Purchaser to consummate the Offer and to
effect the Merger are not subject to the successful completion of the Debt
Offer.
Cooperation With Financing Efforts. The Company has agreed to provide, and
to cause its subsidiaries and its and their respective officers, employees and
advisors to provide, such reasonable cooperation in connection with the
arrangement of any financing to be consummated contemporaneously with or at or
after the Effective Time in respect of the transactions contemplated by the
Merger Agreement as may be reasonably requested by Purchaser. In addition, in
conjunction with the obtaining of any such financing and in addition to the
Company's obligation with respect to the Debt Offer described above, the
Company has agreed, at the request of Purchaser, to call for prepayment or
redemption, or to repay, redeem and/or renegotiate, any other existing
indebtedness of the Company. No such prepayments or redemptions will actually
be made until contemporaneously with or after the Effective Time, and the
Company is not be required to make any call for redemption or prepayment that
is irrevocable when made. Purchaser intends to cause the Company to repay the
outstanding indebtedness of the Company, including amounts outstanding under
the Loan and Security Agreement, dated as of December 18, 1997, as amended, by
and among the Company, the financial institutions party to the Loan and
Security Agreement from time to time and BankBoston, N.A., as agent for such
financial institutions. In addition, the Company has agreed to use its best
efforts to cause its fiscal year end audit to be completed by December 20,
1999.
Consents. The Merger Agreement provides that from and after November 5, 1999
until the Closing Date, the Company and its subsidiaries will use their
respective best efforts to obtain certain consents.
Conditions to the Merger. The obligation of each of Parent, Purchaser and
the Company to effect the Merger is subject to the satisfaction or waiver on
or prior to the Closing Date of each of the following conditions:
. If required by law, the Merger Agreement shall have been adopted by the
holders of a majority of the outstanding Shares.
. The waiting period (and any extension thereof) applicable to the Merger
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR
Act"), if any, shall have been terminated or shall have expired. Any
consents, approvals and filings under any foreign antitrust law, the
absence of which would prohibit the consummation of Merger, shall have
been obtained or made.
. No temporary restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or other legal
restraint or prohibition preventing the consummation of the Merger shall
be in effect, provided that each of Parent, Purchaser and the Company
shall have used all reasonable efforts to prevent the entry of any such
injunction or other order and to appeal as promptly as possible any such
injunction or other order that may be entered.
. Purchaser shall have previously accepted for payment and paid for Shares
tendered and not withdrawn pursuant to the Offer.
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<PAGE>
Termination. The Merger Agreement may be terminated at any time prior to the
Effective Time, before or after a majority of the stockholders of the Company
have adopted the Merger Agreement, in the following ways:
1. Parent, Purchaser and the Company agree to terminate the Merger
Agreement by mutual written consent.
2. Either Parent or the Company decides to terminate the Merger Agreement
because:
a. the Merger is not consummated on or before February 28, 2000,
unless the failure to consummate the Merger is the result of a willful
or material breach of the Merger Agreement by the party seeking to
terminate the Merger Agreement, provided that the passage of such
period is to be tolled for any part thereof during which any party is
subject to a nonfinal order, decree, ruling or action restraining,
enjoining or otherwise prohibiting the consummation of the Merger;
b. any governmental entity issues an order, decree or ruling or takes
any other action permanently enjoining, restraining or otherwise
prohibiting the Merger, and such order, decree, ruling or other action
has become final and nonappealable;
c. as the result of the failure of any of the conditions set forth in
Exhibit A to the Merger Agreement, the Offer has terminated or expired
in accordance with its terms without Purchaser having purchased any
Shares pursuant to the Offer; or
d. upon a vote at a duly held meeting to obtain the adoption of the
Merger Agreement by the holders of a majority of the outstanding
Shares, such adoption is not obtained, provided that the Merger
Agreement may not be terminated by Parent if Parent or Purchaser is in
breach of its covenant to vote to adopt and approve the Merger
Agreement and the Merger at such meeting.
3. Parent decides to terminate the Merger Agreement because:
a. the Company breaches or fails to perform in any material respect
any of its covenants contained in the Merger Agreement, which breach or
failure to perform would give rise to the failure of a condition set
forth in Exhibit A to the Merger Agreement; or
b. the Company Board withdraws, modifies or changes in any manner
adverse to Parent and Purchaser its approval or recommendation of the
Offer, the Merger and the Merger Agreement.
4. The Company decides to terminate the Merger Agreement because Parent
or Purchaser breaches or fails to perform in any material respect any of
their respective covenants contained in the Merger Agreement.
The conditions set forth in Exhibit A to the Merger Agreement are described in
Section 14 of this Offer to Purchase.
Effect of Termination. The Merger Agreement provides that it will, upon
termination of the Merger Agreement by either the Company or Parent as
described above, become void and have no effect without any liability or
obligation on the part of the Company, Parent or Purchaser, except to the
extent that such termination results from the willful and material breach by a
party of any representation, warranty or covenant set forth in the Merger
Agreement, and except for: (i) the representation made by each of the Company,
Parent and Purchaser with respect to brokers' fees; (ii) the obligations of
each of the Company, Parent and Purchaser with respect to confidentiality, as
described in "--Access to Information; Confidentiality," and with respect to
fees and expenses, as described in "--Fees and Expenses"; (iii) the provision
of the Merger Agreement described in this paragraph; and (iv) certain
miscellaneous provisions of the Merger Agreement, including provisions
relating to assignment and enforcement.
Extension; Waiver. The Merger Agreement provides that at any time prior to
the Effective Time, the Company, Parent and Purchaser may: (i) extend the time
for the performance of any of the obligations or other acts of the other
parties; (ii) waive any inaccuracies in the representations and warranties
contained in the Merger Agreement or in any document delivered pursuant to the
Merger Agreement; or (iii) subject to the provisions of the Merger Agreement
with respect to amendment described in "--Amendment," waive compliance with
any of the agreements or conditions contained in the Merger Agreement. The
Merger Agreement further provides that the failure of the Company, Parent or
Purchaser to assert any of its rights under the Merger Agreement or otherwise
will not constitute a waiver of such rights.
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Amendment. The Merger Agreement provides that it may be amended by the
Company, Parent and Purchaser at any time, before or after a majority of the
stockholders of the Company have adopted the Merger Agreement, provided that
after such adoption, there has been no amendment which by law requires further
approval by such stockholders without such further approval.
Assignment. The Merger Agreement provides that neither it nor any of the
rights, interests or obligations under it may be assigned, in whole or in
part, by operation of law or otherwise by any of the parties without the prior
written consent of the other parties. Notwithstanding the foregoing, Purchaser
may assign, in its sole discretion, any of or all its rights, interests and
obligations under the Merger Agreement to Parent or to any direct or indirect
wholly owned subsidiary of Parent, provided that no such assignment will
relieve Purchaser of any of its obligations under Merger Agreement.
Appraisal Rights in the Merger
Each Share held by a stockholder exercising appraisal rights with respect to
such Shares pursuant to the DGCL, who has not effectively withdrawn or lost
such rights, will not be converted into or represent a right to receive the
Merger Consideration, but such stockholder will be entitled only to such
rights as are granted by the DGCL. Specifically, if the Merger is consummated,
stockholders of the Company have certain rights under the DGCL to dissent and
demand appraisal of, and payment in cash of the fair value of, their Shares.
In the event that appraisal rights are available, an objecting stockholder,
upon exercise of such appraisal rights, shall cease to have any rights as a
stockholder with respect to the Shares except the right to receive payment of
the fair value thereof. The stockholder's rights may be restored only upon (i)
the withdrawal, with the consent of the Company, of the demand for payment,
(ii) the non-filing of a petition for appraisal within the time required,
(iii) a determination of the court that the stockholder is not entitled to an
appraisal or (iv) the abandonment or rescission of the Merger. Each Share held
by a stockholder at the Effective Time who, after the Effective Time, loses
his or her appraisal rights or withdraws such demand for appraisal or payment
of fair market value pursuant to the DGCL, will be deemed to be converted, as
of the Effective Time, into the right to receive the Merger Consideration. The
Merger Agreement requires the Company to give prompt notice to Parent of any
demands received by the Company for appraisal of any Shares, and gives Parent
the right to participate in and direct all negotiations and proceedings with
respect to such demands. Furthermore, the Company may not, except with the
prior written consent of Parent, make any payment with respect to, or settle
or offer to settle, any such demands, or agree to do any of the foregoing.
Appraisal rights, if the statutory procedures set forth in Section 262 of
the DGCL are complied with, could lead to a judicial determination of the fair
value (excluding any element of value arising from the accomplishment or
expectation of the Merger) required to be paid in cash to such dissenting
stockholders for their Shares. Any such judicial determination of the fair
value of Shares could be based upon considerations other than or in addition
to the price paid in the Offer and the market value of the Shares, including
asset values and the investment value of the Shares. The value so determined
could be more or less than the Offer Price or the Merger Consideration.
The foregoing summary of the rights of objecting stockholders does not
purport to be a complete statement of the procedures to be followed by
stockholders desiring to exercise their appraisal rights.
Failure to follow the steps required by the DGCL for perfecting appraisal
rights may result in the loss of such rights. The preservation and exercise of
appraisal rights are conditioned on strict adherence to the applicable
provisions of the DGCL.
The Stockholder Agreement
The following is only a summary of certain provisions of the Stockholder
Agreement and is qualified in its entirety by reference to the Stockholder
Agreement. A copy of the Stockholder Agreement has been filed as an exhibit to
Investcorp's, Parent's and Purchaser's Tender Offer Statement on Schedule 14D-
1. Reference is hereby made to such exhibit for a more complete description of
the terms and conditions of the Stockholder Agreement.
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<PAGE>
Tender of Shares. In connection with the execution of the Merger Agreement,
Parent and Purchaser have entered into a Stockholder Agreement with the
Stockholder, who owns 5,699,194 outstanding Shares (the 5,699,194 Shares,
together with any additional Shares which are acquired by the Stockholder
prior to the termination of the Stockholder Agreement, the "Owned Shares")
representing approximately 66% of the issued and outstanding Shares. Pursuant
to the Stockholder Agreement, the Stockholder has agreed to validly tender the
Owned Shares pursuant to and in accordance with the terms of the Offer no
later than the second business day after commencement of the Offer, and has
agreed not to thereafter withdraw such tender, provided that there has been no
modification or amendment to the terms of the Offer which would require the
consent of the Company as described in Section 1 of this Offer to Purchase.
Term. The "Term" shall mean the period from November 5, 1999 until the
earliest to occur of (i) termination of the Stockholder Agreement as described
in "--Termination," (ii) the expiration of the Stock Option which is described
in "--Stock Option" and (iii) the closing of any exercise of such Stock
Option.
Voting of Shares. The Stockholder has agreed, during the Term, at any
meeting of the stockholders of the Company, to vote the Owned Shares (a) in
favor of the Merger and the Merger Agreement; (b) against any Company Takeover
Proposal (as defined in the Merger Agreement) and against any proposal (i) for
action or agreement which would result in a breach of any covenant,
representation or warranty or any other obligation or agreement of the Company
under the Merger Agreement or which is reasonably likely to result in any of
the conditions of the Company's obligations under the Merger Agreement not
being fulfilled or (ii) for any other action which could reasonably be
expected to impede, interfere with, delay, postpone or materially adversely
affect the transactions contemplated by the Merger Agreement or the likelihood
of such transactions being consummated; and (c) in favor of any other matter
necessary for consummation of the transactions contemplated by the Merger
Agreement.
Irrevocable Proxy. The Stockholder has appointed Purchaser and Parent, or
any nominee of Purchaser and Parent, with full power of substitution and
resubstitution, at any time during the Term, as its true and lawful attorney
and proxy (the "Proxy") to vote each of the Owned Shares, including the right
to sign its name as stockholder to any consent, certificate or other document
relating to the Company. The Proxy is irrevocable and coupled with an
interest.
Stock Option. The Stockholder has granted to Purchaser an irrevocable option
(the "Stock Option") to purchase all, but not less than all, of the Owned
Shares at a purchase price of $33.00 per share (the "Exercise Price").
Purchaser may exercise the Stock Option if the Offer is not consummated due to
the failure by the Stockholder to validly tender and not withdraw the Owned
Shares.
Conditions to Exercise. The Stockholder Agreement provides that the Stock
Option will become exercisable, in whole but not in part, on (a) the date on
which the event described in "--Stock Option" occurs or if later, (b) the date
on which (i) all waiting periods under the HSR Act, if any, required for the
purchase of the Owned Shares upon such exercise have expired or are waived and
(ii) there is not in effect any preliminary or final injunction or other order
issued by any court or governmental, administrative or regulatory agency or
authority prohibiting the exercise of the Stock Option. The Stock Option will
remain exercisable for 30 days following the date on which the Stock Option
became exercisable.
No Solicitation. During the Term, the Stockholder may not, nor permit or
authorize any of its partners, employees, agents or representatives
(collectively, the "Stockholder Representatives") to, (i) solicit, initiate or
encourage, directly or indirectly, any inquiries regarding or the submission
of any Company Takeover Proposal; (ii) participate in any discussions or
negotiations regarding, or furnish to any person any information or data with
respect to, or take any other action to knowingly facilitate the making of any
proposal that constitutes or may reasonably be expected to lead to, any
Company Takeover Proposal; or (iii) enter into any agreement with respect to
any Company Takeover Proposal or approve or resolve to approve any Company
Takeover Proposal. The Stockholder has agreed to cease and cause the
Stockholder Representatives to cease any existing activities, discussions or
negotiations with any parties conducted with respect to any of the prohibited
activities described in the preceding sentence. In addition, the Stockholder
has agreed to promptly notify Parent of the existence of
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any proposal, discussion, negotiation or inquiry received by the Stockholder,
and to immediately communicate to Parent the terms of any proposal,
discussion, negotiation or inquiry which it may receive and the identity of
the Person making such proposal or inquiry or engaging in such discussion or
negotiation. The Stockholder Agreement provides that any action taken by the
Company or its directors and officers consistent with the provisions of the
Merger Agreement described in "The Merger Agreement--No Solicitation" will be
not deemed to violate the Stockholder's obligations described in this
paragraph.
No Inconsistent Arrangements. During the Term, the Stockholder has agreed
not to: (i) transfer or consent to any transfer of any or all of the Owned
Shares or any interest therein, or create or permit to exist any encumbrance
on the Owned Shares; (ii) enter into any contract, option or other agreement
or understanding with respect to any transfer of any or all of the Owned
Shares or any interest therein; (iii) grant any proxy, power-of-attorney or
other authorization in or with respect to the Owned Shares; (iv) deposit the
Owned Shares into a voting trust or enter into a voting agreement or
arrangement with respect to the Owned Shares; or (v) take any other action
that would in any way restrict, limit or interfere with either the performance
of its obligations under the Stockholder Agreement or the transactions
contemplated by the Stockholder Agreement or the Merger Agreement. The
Stockholder has also agreed not to request that the Company register the
transfer (book-entry or otherwise) of any certificate or uncertificated
interest representing any of the Owned Shares, unless such transfer is made in
compliance with the Stockholder Agreement.
Waiver of Appraisal Rights. Pursuant to the Stockholder Agreement, the
Stockholder has waived any rights of appraisal or rights to dissent from the
Merger.
Representations and Warranties. The Stockholder Agreement contains certain
customary representations and warranties of Parent, Purchaser and the
Stockholder, including without limitation representations and warranties by
the Stockholder as to ownership of the Owned Shares, governmental consents and
corporate power and authority.
Termination. The Stockholder Agreement will terminate (i) upon the written
mutual consent of Parent, Purchaser and the Stockholder or (ii) upon the
earlier of the Effective Time and the termination of the Merger Agreement in
accordance with its terms.
Limitation of Liability. The Stockholder Agreement provides (i) that none of
the obligations of the Stockholder under or contemplated by the Stockholder
Agreement will be a personal obligation of the liquidating trustee for the
Stockholder, the former general partner or any limited partner of the
Stockholder or any of their respective officers, directors, stockholders,
limited partners, general partners or owners and (ii) that any monetary
obligation of the Stockholder under the Stockholder Agreement will be
satisfied solely out of the assets of the Stockholder.
Other Matters
Employment Letters of Intent. Parent has entered into letters of intent with
the following six executives of the Company: Joseph Dana, Joseph Sinicropi,
Charles T. Koerner, John Michael Long, Proctor Allen and Louis Ziebold. Each
employee, pursuant to his letter of intent, has indicated his intent to enter
into a new employment agreement that is not materially inconsistent with his
current employment agreement.
Each employee has also indicated his intent, pursuant to his letter of
intent, to enter into definitive documentation implementing an equity
participation by the employee in Parent having a value at least equal to the
sum of (i) 50% of the sum of the employee's net value of existing options to
purchase shares of the Company's capital stock and (ii) 50% of certain after-
tax transaction-related cash payments to be received by the employee. Each
employee's equity investment in Parent will be through either (x) the rollover
of his existing stock options into options to purchase shares of Parent
capital stock or (y) a combination of such rollover of options and the
investment of after-tax transaction-related cash payments into shares of
Parent capital stock at $33.00 per share. The options to purchase Parent
capital stock upon rollover will be granted at a discount from the Offer Price
to preserve the aggregate spread on each such existing rollover option.
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In addition, Parent has entered into a letter of intent with Leonard Chill,
the Chief Executive Officer of the Company. Pursuant to the letter of intent,
Mr. Chill has indicated his intent to enter into a new employment agreement
that is not materially inconsistent with his current employment agreement. In
addition, he has indicated his intent to enter into definitive documentation
implementing an equity participation in Parent in an amount no less than $1.6
million. Mr. Chill's equity investment in Parent will be through the rollover
of his existing stock options into options to purchase shares of Parent
capital stock. The options to purchase Parent capital stock upon rollover will
be granted at a discount from the Offer Price to preserve the aggregate spread
on each such existing rollover option.
As discussed above in "--Purpose of the Offer and the Merger," Mr. Chill
holds 72,174 ISOs, as well as other options which are not ISOs. Parent and Mr.
Chill have discussed the possibility of Mr. Chill exercising such ISOs prior
to the Merger and of making arrangements which would enable him to retain the
Shares purchased upon such exercise after the Merger has been completed.
Parent and Mr. Chill have also discussed the possibility of making
arrangements to enable Mr. Chill to retain the ISOs themselves through and
following the Merger. If either of these alternatives were implemented, Mr.
Chill would own following the Merger an equity interest in the Company of
approximately 1% (in addition to Mr. Chill's expected equity interest in
Parent following the Merger). As a result, the Company would not be "wholly
owned" by Parent as reflected in this Offer to Purchase and related documents.
Rather, Parent would own approximately 99% of the equity interest of the
Company.
The employment arrangements with the executives named above will include the
grant of stock options from a reserve of options exercisable for common stock
representing 11% of the common stock of the Company on a fully-diluted basis,
of which approximately 2.5% will be reserved for future grants and
approximately 8.5% will be granted upon or promptly following the Merger. The
options will have seven year terms and vest 20% each year over a five year
period subject to the achievement by the Company of specified EBITDA
performance targets. The options will be subject to additional vesting in
certain circumstances, including time-based vesting following an initial
public offering and vesting upon a sale of the Company.
The foregoing is only a summary of certain provisions of the employment
letters of intent and is qualified in its entirety by reference to the
employment letters of intent. Copies of the employment letters of intent have
been filed with the Commission as exhibits to Investcorp's, Parent's and
Purchaser's Tender Offer Statement on Schedule 14D-1. If new employment
agreements are executed prior to the Expiration Date, copies of such
agreements will be filed as exhibits to the Schedule 14D-1.
Confidentiality Agreement. On June 7, 1999, the Company and Investcorp
International Inc. entered into a Confidentiality Agreement in contemplation
of exchange of information relating to potential merger negotiations. A copy
of the Confidentiality Agreement has been filed with the Commission as an
exhibit to Investcorp's, Parent's and Purchaser's Tender Offer Statement on
Schedule 14D-1.
Going Private Transactions. The Merger must comply with any applicable
federal law operating at the time of its consummation. Rule 13e-3 under the
Exchange Act is applicable to certain "going private" transactions. Each of
Investcorp, Parent and Purchaser does not believe that Rule 13e-3 will be
applicable to the Merger unless the Merger is consummated more than one year
after the Offer. If applicable, Rule 13e-3 requires, among other things, that
certain financial information concerning the Company and certain information
relating to the fairness of the Merger and the consideration offered to
minority stockholders be filed with the Commission and disclosed to minority
stockholders prior to the consummation of the Merger.
12. Source and Amount of Funds
Investcorp, Parent and Purchaser estimate that the total amount of funds
required by Purchaser to consummate the Offer, the Merger and the Debt Offer,
including the repayment or refinancing of certain other outstanding
indebtedness of the Company and the payment of the fees and expenses of the
Offer, the Merger and the Debt Offer (including fees paid to affiliates of
Investcorp for financial advisory services), will be approximately $595
million.
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Purchaser will receive, indirectly through Parent, funds from Investcorp,
affiliates of Investcorp and certain international investors with whom
Investcorp maintains an administrative relationship (the "Investcorp
Investors") and one or more other institutional investors in the form of an
equity contribution at least equal to $190 million (the "Equity
Contribution"). In addition, Investcorp Investment Equity Limited, an
affiliate of Investcorp ("IIEL"), has obtained financing commitments,
described in further detail below, from third parties in the aggregate amount
of approximately $475 million, consisting of (i) a commitment to provide
Purchaser with approximately $325 million in financing in the form of senior
secured credit facilities, which include approximately $225 million in term
loan facilities and approximately $100 million in a revolving credit facility
(collectively, the "Credit Facilities") and (ii) a commitment to provide
Purchaser with approximately $150 million in financing in the form of an
unsecured senior subordinated bridge facility (the "Bridge Facility"). The
proceeds of the term loans, revolving credit loans and bridge loan made to
Purchaser will be used to finance the Offer, the Merger and the Debt Offer,
pay certain fees and expenses relating to the Offer, the Merger and the Debt
Offer and repay or refinance certain other outstanding indebtedness of the
Company. The proceeds of the revolving credit loans will also be made
available after the Merger to the Surviving Corporation and its subsidiaries
and will be used for general corporate purposes. Purchaser's obligation to
purchase Shares tendered in the Offer and to consummate the Merger is not
subject to financing. Each of Investcorp, Parent and Purchaser expects that
the Equity Contribution, the Credit Facilities and the Bridge Facility will
provide sufficient funds to finance the Offer and the Merger.
The Bridge Facility
IIEL has obtained a commitment letter and related term sheet (the "Bridge
Commitment Letter") from Bear Stearns Corporate Lending Inc., Bear, Stearns &
Co. Inc., The Chase Manhattan Bank and Chase Securities Inc. (the "Banks") to
provide the Bridge Facility to Purchaser. In connection with the Bridge
Facility, Purchaser will be obligated to comply with certain financial
covenants, the breach of which will constitute a default with respect to the
Bridge Facility. Bear, Stearns & Co. Inc. and Chase Securities Inc. (the "Co-
Arrangers") intend to syndicate the Bridge Facility to various lenders (the
"Bridge Lenders").
The Bridge Commitment Letter provides that initial loans in the aggregate
amount of $150 million (the "Initial Loans") will be made on the date of the
consummation of the Offer, the Debt Offer described below in Section 11 of
this Offer to Purchase and the initial funding under the Credit Facility (the
"Initial Date"). On the date occurring one year following the Initial Date,
the initial Bridge Lenders may elect to exchange the Initial Loans for
Exchange Notes (the "Exchange Notes") which will mature on the date occurring
six months following the final maturity of the Credit Facilities (the "Final
Maturity Date"). If an initial Bridge Lender elects not to exchange its
Initial Loans for Exchange Notes, such lender will be required to extend the
maturity of such Initial Loans to another date selected by the lender. If, at
such extended maturity, such lender does not exchange its Initial Loans, the
lender will again be required to extend the maturity of such Initial Loans to
another date selected by the lender, provided that the lender will not be
required to extend the maturity of such Initial Loans beyond the date
occurring six months following the Final Maturity Date.
Prior to the Maturity Date, the Initial Loans will bear interest at a rate
per annum plus certain fees. The rate of interest is equal to the greatest of:
(i) the three month adjusted London Interbank Offered Rate ("LIBOR") plus
6.75%; (ii) the rate borne by U.S. Treasury Notes due 8 1/2 years after the
Initial Date plus 6.75%; and (iii) the Bear Stearns Single B High Yield Index
plus 1.75%. If the Initial Loans are not repaid in full within six months
following the Initial Date, the interest rate will increase by 1.00% at the
end of such six month period and will further increase by an additional 0.50%
at the end of each three month period thereafter until the Maturity Date.
After the Maturity Date, the Initial Loans will bear interest at the rate
applicable to the Exchange Notes plus certain fees. The rate applicable to the
Exchange Notes is equal to the greatest of: (w) the interest rate borne by the
Initial Loans as determined one day prior to the Maturity Date plus 0.50%; (x)
the three month adjusted LIBOR plus 8.75%; (y) the rate as determined on the
Maturity Date borne by U.S. Treasury Notes due 8 1/2 years after the Initial
Date plus 8.75%; and (z) the Bear Stearns Single B High Yield Index as
determined on the Maturity Date plus 3.75%.
Pursuant to the Bridge Commitment Letter, the Surviving Corporation has
certain obligations with respect to the registration of the Exchange Notes and
the substitution of registered notes for the Exchange Notes.
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The availability of financing under the Bridge Commitment Facility is
subject to customary conditions, including the following:
. there not having occurred and being continuing, as reasonably determined
by the Banks, a material disruption of or material adverse change in
financial, banking or capital market (including, without limitation,
high-yield market) conditions since November 2, 1999.
. there not having occurred a material adverse change in the business,
operations, properties, assets, condition, contingent liabilities,
material agreements or results of operations of Parent, the Company and
their respective subsidiaries, taken as a whole, since September 30,
1998.
. the execution and delivery of definitive financing agreements and related
documentation with respect to the Credit Facilities which are reasonably
satisfactory in form and substance to the Co-Arrangers in conformity with
the material terms of the Credit Commitment Letter.
. the consummation of the Transactions prior to or simultaneous with the
closing under the Bridge Facility in accordance with applicable law, the
Merger Agreement and all other related documentation.
. Purchaser's receipt of at least $190 million in cash proceeds from the
issuance of its common equity to Parent, and receipt by Parent of at
least the same amount from the issuance of equity to the Investcorp
Investors.
. the effectiveness of the Credit Facilities and the borrowing of at least
$250 million under the Credit Facilities.
. the Banks' and Co-Arrangers' receipt of and satisfaction with certain
earnings calculations, pro forma calculations and financial ratios,
certificates and statements.
IIEL has agreed to indemnify, and to cause Purchaser and the guarantors
under the Credit Facilities to indemnify, the Banks, the other Bridge Lenders
and certain affiliated persons of the Banks and the other Bridge Lenders
against certain liabilities and expenses, including certain liabilities and
expenses under the federal securities laws. The Banks' commitment under the
Bridge Commitment Letter will automatically terminate in the event that the
initial borrowing under the Bridge Facility does not occur on or before
January 31, 2000, unless the Banks and the Co-Arrangers elect to extend the
commitment.
The foregoing is only a summary of certain provisions of the Bridge
Commitment Letter and is qualified in its entirety by reference to the Bridge
Commitment Letter. A copy of the Bridge Commitment Letter has been filed as an
exhibit to Investcorp's, Parent's and Purchaser's Tender Offer Statement on
Schedule 14D-1. If definitive documentation with respect to the Bridge
Facility is executed prior to the Expiration Date, copies of such
documentation will be filed as exhibits to the Schedule 14D-1.
The Engagement Letter
IIEL has entered into an Engagement Letter with the Co-Arrangers, dated
November 2, 1999, pursuant to which IIEL has agreed to engage, and to cause
Purchaser, Parent and the affiliates of IIEL, Purchaser and Parent to engage
the Co-Arrangers as joint underwriters of, joint placement agents for or joint
initial purchasers of, any public or private offering of debt securities
financing by the Company, Parent or any of their respective affiliates in
connection with any refinancing of any senior subordinated debt financing or
any senior unsecured financing provided to Purchaser, Parent or any of their
respective affiliates by a syndicate or syndicates led by the Co-Arrangers in
connection with the Transactions whether completed prior to, on or after the
consummation of the Offer.
IIEL has agreed to indemnify, and to cause Purchaser and the guarantors
under the Credit Facilities to indemnify, the Banks, the other Bridge Lenders
and certain affiliated persons of the Banks and the other Bridge Lenders,
against certain liabilities and expenses, including certain liabilities and
expenses under the federal securities laws.
A copy of the Engagement Letter has been filed as an exhibit to
Investcorp's, Parent's and Purchaser's Tender Offer Statement on Schedule 14D-
1. Reference is hereby made to such exhibit for a more complete description of
the terms and conditions of the Engagement Letter.
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Credit Facilities
In this section "Credit Facilities" and in this section only, the term
"Company" is used to refer to both the Company before the Merger and the
Surviving Corporation after the Merger. IIEL has obtained a commitment letter
and related term sheet (the "Credit Commitment Letter") from the Banks to
provide the Credit Facilities. In connection with the Credit Facilities, the
Company will be obligated to comply with certain financial covenants, the
breach of which will constitute a default with respect to the Credit
Facilities. The Co-Arrangers intend to syndicate the Credit Facilities to
various lenders (the "Credit Lenders"). The Chase Manhattan Bank will act as
administrative agent (the "Administrative Agent") and Bear, Stearns & Co. Inc.
will act as Syndication Agent (the "Syndication Agent," and together with the
Administrative Agent, the "Agents") in respect of the Credit Facilities.
The Credit Facilities provide for a term loan and revolving credit
facilities of approximately $325 million in the aggregate. The Credit
Facilities consist of a six year amortizing term loan facility of $25 million
(the "Tranche A Term Facility"), an eight year amortizing term loan facility
of $200 million (the "Tranche B Term Facility") and a six year revolving
credit facility of up to $100 million (the "Revolving Credit Facility").
The Credit Facilities will be secured by a perfected first priority security
interest in substantially all the assets of the Company and its domestic
subsidiaries and in all of the capital stock of the Company and each of its
subsidiaries (but limited to 65% in the case of foreign subsidiaries and other
exceptions to be agreed upon).
Loans made under the Revolving Credit Facility and the Tranche A Term
Facility will bear interest at a rate per annum, in addition to certain fees,
equal to the rate at which eurodollar deposits for one, two, three or six
months, or if available to all of the relevant Credit Lenders, nine or twelve
months, are offered to the Administrative Agent in the interbank eurodollar
market (the "Eurodollar Rate") plus 3.00%, or the highest of (i) the Federal
Funds Rate plus 0.50%, (ii) the secondary market rate for three month
certificates of deposit of money center banks plus 1% or (iii) the
Administrative Agent's prime commercial lending rate (the highest such rate,
the "Alternate Base Rate"), plus 2.00%; in each case the rate will be subject
to reduction based on certain financial tests. Loans made under the Tranche B
Term Facility will bear interest at a rate per annum, in addition to certain
fees, equal to the Eurodollar Rate plus 3.50%, or the Alternate Base Rate plus
2.50%. A commitment fee will accrue on the portion of the Revolving Credit
Facility that is unused from time to time at a rate initially equal to 0.50%
per annum, subject to reduction based on certain financial tests.
The term loans made under the Credit Facilities amortize on a quarterly
basis. In the event that Existing Notes in excess of an amount to be agreed
upon remain outstanding on August 15, 2006, all remaining loans outstanding
under the Tranche B Term Facility will be payable in full. The Revolving
Credit Facility is repayable in full six years after the initial funding under
the Credit Facilities, without any scheduled reduction in availability before
that date. The Company will be required to prepay the term loans under the
Credit Facilities with the net proceeds of asset sales and certain debt and
equity financings and a portion of the Company's consolidated excess cash
flow.
The availability of financing under the Credit Facilities is subject to
customary conditions, including the following:
. there not having occurred a material disruption of or material adverse
change in financial, banking or capital market conditions that in the
Banks' good faith opinion could materially impair the syndication of the
Credit Facilities.
. the approval of the Transactions by the Company Board.
. there not having occurred a material adverse condition or material
adverse change in the business, operations, property or condition of the
Company and its subsidiaries, taken as a whole, since September 30, 1998.
. the execution and delivery of definitive financing agreements and related
documentation with respect to the Credit Facilities which are reasonably
satisfactory in form and substance to the Agents in conformity with the
material terms of the Credit Commitment Letter.
. the consummation of the Offer prior to or simultaneous with the closing
under the Credit Facilities in accordance with applicable law, the Merger
Agreement and all other related documentation.
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. Purchaser's receipt of at least $190 million in common equity proceeds
from the issuance of its common equity.
. Purchaser's receipt of at least $150 million either (i) in borrowings
under the Bridge Facility or (ii) in cash proceeds from the issuance of
the Senior Subordinated Notes.
. the Credit Lenders' and Agents' receipt of and satisfaction with certain
earnings calculations, pro forma calculations and financial ratios,
certificates and statements.
. the Administrative Agent having a perfected security interest in all
assets as required by the Credit Commitment Letter.
The foregoing is only a summary of certain provisions of the Credit
Commitment Letter and is qualified in its entirety by reference to the Credit
Commitment Letter. A copy of the Credit Commitment Letter will be filed as an
exhibit to Investcorp's, Parent's and Purchaser's Tender Offer Statement on
Schedule 14D-1. If definitive documentation with respect to the Credit
Facilities is executed prior to the Expiration Date, copies of such
documentation will be filed as exhibits to the Schedule 14D-1.
13. Dividends and Distributions
Pursuant to the terms of the Merger Agreement, the Company may not, without
the prior written consent of Parent, (i) declare, set aside or pay any
dividends on, or make any other distributions in respect of, the Shares, (ii)
split, combine or reclassify the Shares or issue or authorize the issuance of
any other securities in respect of, in lieu of or in substitution for any
Shares, or (iii) purchase, redeem or otherwise acquire any Shares or any
rights, warrants or options to acquire Shares.
14. Certain Conditions of the Offer
Notwithstanding any other term of the Offer or the Merger Agreement,
Purchaser will not be required to accept for payment or, subject to any
applicable rules and regulations of the Commission, including Rule 14e-1(c)
under the Exchange Act (relating to Purchaser's obligation to pay for or
return tendered Shares promptly after the termination or withdrawal of the
Offer), to pay for any Shares tendered pursuant to the Offer unless there has
been validly tendered and not withdrawn by the Expiration Date a number of
Shares which would represent at least a majority of the Shares on a fully-
diluted basis (the "Minimum Condition" referred to in "INTRODUCTION" above).
Furthermore, notwithstanding any other term of the Offer or the Merger
Agreement, Purchaser will not be required accept for payment or, subject to
the Minimum Condition, to pay for any Shares not theretofore accepted for
payment or paid for, and may terminate or amend the Offer, (1) with the
consent of the Company or (2) if, at any time after November 5, 1999 and
before the acceptance of such Shares for payment or the payment therefor, any
of the following conditions exists:
(a) there has been threatened or pending any suit, action or proceeding
by any governmental entity or any other person: (i) challenging the
acquisition by Parent or Purchaser of any Shares, seeking to restrain or
prohibit the making or consummation of the Offer or the Merger or any other
transaction contemplated by the Merger Agreement, or resulting in a
material delay in or material restriction on the ability of Purchaser to
consummate the Offer or the Merger or seeking to obtain from the Company,
Parent or Purchaser any damages that could result in a Company Material
Adverse Effect (as defined at the end of this paragraph); (ii) seeking to
prohibit or limit the ownership or operation by the Company, Parent or any
of their respective subsidiaries of any material portion of the business or
assets of the Company, Parent or any of their respective subsidiaries, or
to compel the Company, Parent or any of their respective subsidiaries to
dispose of or hold separate any material portion of their respective
businesses or assets, as a result of the Offer, the Merger or any other
transaction contemplated by the Merger Agreement; (iii) seeking to impose
limitations on the ability of Parent or Purchaser to acquire or hold, or
exercise full rights of ownership of, any Shares, including the right to
vote the Shares purchased by it on all matters properly presented to the
stockholders
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of the Company; (iv) seeking to prohibit Parent or any of its subsidiaries
from effectively controlling in any material respect the business or
operations of the Company and its subsidiaries; or (v) which otherwise is
reasonably likely to have a Company Material Adverse Effect;
(b) any statute, rule, regulation, legislation, interpretation, judgment,
order or injunction has been threatened, proposed, sought, enacted,
entered, enforced, promulgated, amended or issued with respect to, or
deemed applicable to, or any consent or approval withheld with respect to:
(i) Parent, the Company or any of their respective subsidiaries; or (ii)
the Offer, the Merger or any other transaction contemplated by the Merger
Agreement, by any governmental entity that is reasonably likely to result,
directly or indirectly, in any of the consequences referred to in
subparagraph (a) above;
(c) there has occurred any event, change, effect or development that,
individually or in the aggregate, has had a Company Material Adverse
Effect;
(d) there has occurred: (i) any general suspension of trading of
securities on any national securities exchange or in the over-the-counter
market in the United States (excluding any coordinated trading halt
triggered solely as a result of a specified decrease in a market index);
(ii) a declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States; (iii) any limitation (whether or not
mandatory) by any governmental entity on, or other event that might
materially affect, the extension of credit by banks or other lending
institutions; (iv) a commencement of a war or armed hostilities or other
national or international calamity directly or indirectly involving the
United States; or (v) in the case of any of the foregoing existing on
November 5, 1999, a material acceleration or worsening thereof;
(e) the representations and warranties by the Company contained in the
Merger Agreement are not true and correct as of November 5, 1999 and at the
scheduled or extended Expiration Date, except to the extent such
representation and warranty expressly relates to an earlier date (in which
case on and as of such earlier date); provided, however, that, other than
with respect to the representations contained in the Merger Agreement as to
the number of issued and outstanding shares of capital stock of the Company
and stock options granted under the Company's stock option plans, the
condition set forth in this subparagraph (e) will be considered satisfied
unless, ignoring for this purpose all qualifications as to materiality and
Company Material Adverse Effect in such representations and warranties, the
inaccuracies in the representations and warranties (with all such
inaccuracies taken in the aggregate) have had or would reasonably be
expected to have a Company Material Adverse Effect.
(f) the Company has failed to perform in any material respect any
obligation or to comply in any material respect with any agreement or
covenant of the Company to be performed or complied with by the Company
under the Merger Agreement;
(g) the Merger Agreement has been terminated in accordance with its
terms; or
(h) the Company Board withdraws, modifies or changes in any manner
adverse to Parent and Purchaser its approval or recommendation of the
Offer, the Merger and the Merger Agreement.
The term "Company Material Adverse Effect" means a material adverse effect
that something has had or could reasonably be expected, individually or in the
aggregate, to have on the business, assets, properties, financial condition,
results of operations or prospects of the Company and its subsidiaries, taken
as a whole, or on the ability of the Company to consummate the transactions
contemplated by the Merger Agreement.
The foregoing conditions to the Offer are for the benefit of Parent and
Purchaser and may be asserted by Parent or Purchaser regardless of the
circumstances giving rise to any such condition (including any action or
inaction by Parent or Purchaser not inconsistent with the terms the Merger
Agreement).
15. Certain Legal Matters; Regulatory Approvals
General
Except as described below, none of Investcorp, Parent or Purchaser is aware
of any license or regulatory permit that appears to be material to the
business of the Company and its subsidiaries, taken as a whole, that might be
adversely affected by the acquisition of Shares pursuant to the Offer, or of
any approval or other action
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by any governmental, administrative or regulatory agency or authority or
public body, domestic or foreign, that would be required for the acquisition
or ownership of Shares pursuant to the Offer. Should any such approval or
other action be required, it is presently contemplated that such approval or
action would be sought except as described in this section under "State
Takeover Statutes." While, except as otherwise expressly described herein,
Purchaser does not currently intend to delay acceptance for payment of Shares
tendered pursuant to the Offer pending the outcome of any such matter, there
can be no assurance that any such approval or other action, if needed, would
be obtained without substantial conditions or that adverse consequences might
not result to the Company's business or that certain parts of the Company's
business might not have to be disposed of in the event that such approvals
were not obtained or such other actions were not taken or in order to obtain
any such approval or other action, any of which could cause Purchaser to
decline to accept for payment or pay for any Shares tendered. Purchaser's
obligation under the Offer to accept for payment and pay for Shares is subject
to the conditions to the Offer set forth in Exhibit A to the Merger Agreement,
including conditions relating to legal matters discussed in this section. The
conditions set forth in Exhibit A are described in Section 14 of this Offer to
Purchase.
Antitrust
Under the HSR Act and the rules promulgated thereunder by the Federal Trade
Commission (the "FTC"), certain acquisition transactions may not be
consummated unless certain information has been furnished to the Antitrust
Division of the Department of Justice (the "Antitrust Division") and the FTC
and certain waiting period requirements have been satisfied. Expiration or
early termination of the applicable waiting periods, if any, under the HSR Act
is a condition to Purchaser's obligation to accept for payment and pay for
Shares tendered pursuant to the Offer. Each of Investcorp, Parent and
Purchaser believes that neither the acquisition of Shares pursuant to the
Offer nor the Merger is subject to such informational filings or waiting
periods.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed purchase of the Shares
pursuant to the Offer. At any time before or after such purchase, the
Antitrust Division or the FTC could take such action under the antitrust laws
as it deems necessary or desirable in the public interest, including seeking
to enjoin the transaction or seeking divestiture of the Shares so acquired or
divestiture of substantial assets of Parent or the Company. Litigation seeking
similar relief could be brought by private parties.
Each of Investcorp, Parent and Purchaser do not believe that consummation of
the Offer and the other transactions contemplated by the Merger Agreement will
result in the violation of any applicable antitrust laws. However, there can
be no assurance that a challenge to the Offer and the other transactions
contemplated by the Merger Agreement on antitrust grounds will not be made, or
if such a challenge is made, what the result will be. See Section 14 of this
Offer to Purchase for certain conditions to the purchase of the Shares
pursuant to the Offer, including conditions with respect to litigation and
certain governmental actions.
State Takeover Statutes
The Company is incorporated under the laws of the State of Delaware. In
general, Section 203 of the DGCL prevents an "interested stockholder"
(generally, a person who owns or has the right to acquire 10% or more of a
corporation's outstanding voting stock, or an affiliate or associate thereof)
from engaging in a "business combination" (defined to include mergers and
certain other transactions) with a Delaware corporation for a period of three
years following the date such person became an interested stockholder unless,
among other things, prior to such date the board of directors of the
corporation approved either the business combination or the transaction in
which the interested director became an interested stockholder. None of
Investcorp, Parent or Purchaser is an interested stockholder, and the Company
has represented in the Merger Agreement that the Company Board has taken all
actions necessary to render Section 203 inapplicable to the Offer, the Merger,
the Merger Agreement, the Stockholder Agreement and the transactions
contemplated by the Merger Agreement and the Stockholder Agreement.
38
<PAGE>
In addition, several decisions by Delaware courts have held that, in certain
instances, a controlling stockholder of a corporation involved in a merger has
a fiduciary duty to the other stockholders that requires the merger to be fair
to such other stockholders. In determining whether a merger is fair to
minority stockholders, the Delaware courts have considered, among other
things, the type and amount of consideration to be received by the
stockholders and whether there were fair dealings among the parties. The
Delaware Supreme Court has indicated in recent decisions that in most cases
the remedy available in a merger that is found not to be "fair" to minority
stockholders is the right to appraisal described above or a damages remedy
based on essentially the same principles.
A number of states have adopted "takeover" statutes that purport to apply to
attempts to acquire corporations that are incorporated in such states, or
whose business operations have substantial economic effects in such states, or
which have substantial assets, security holders, employees, principal
executive offices or places of business in such states.
In Edgar v. MITE Corporation, the Supreme Court of the United States
invalidated on constitutional grounds the Illinois Business Takeover Act,
which, as a matter of state securities law, made takeovers of corporations
meeting certain requirements more difficult. However, in CTS Corp. v. Dynamics
Corp. of America, the Supreme Court held that a state may, as a matter of
corporate law and, in particular, those laws concerning corporate governance,
constitutionally disqualify a potential acquirer from voting on the affairs of
a target corporation without prior approval of the remaining stockholders,
provided that such laws were applicable only under certain conditions, in
particular, that the corporation has a substantial number of stockholders in
the state and is incorporated there.
Based on information supplied by the Company, each of Investcorp, Parent and
Purchaser does not believe that any state takeover statutes (other than
Section 203 of the DGCL) purport to apply to the Offer or the Merger. None of
Investcorp, Parent or Purchaser has currently complied with any other state
takeover statute or regulation. Each of Investcorp, Parent and Purchaser
reserves the right to challenge the applicability or validity of any other
state law purportedly applicable to the Offer or the Merger, and nothing in
this Offer to Purchase or any action taken in connection with the Offer or the
Merger is intended as a waiver of such right. If it is asserted that any other
state takeover statute is applicable to the Offer or the Merger and if an
appropriate court does not determine that it is inapplicable or invalid as
applied to the Offer or the Merger, Investcorp, Parent and Purchaser might be
required to file certain information with, or to receive approvals from, the
relevant state authorities, and Purchaser might be unable to accept for
payment or pay for Shares tendered pursuant to the Offer, or be delayed in
consummating the Offer or the Merger. In such case, Purchaser may not be
obliged to accept for payment or pay for any Shares tendered pursuant to the
Offer.
16. Fees and Expenses
Parent has retained D.F. King & Co., Inc. to act as the Information Agent
and BankBoston, N.A. to serve as the Depositary in connection with the Offer.
The Information Agent and the Depositary each will receive reasonable and
customary compensation for their services and will be reimbursed for certain
reasonable out-of-pocket expenses. Parent has also agreed to indemnify the
Information Agent and the Depositary against certain liabilities and expenses
in connection with the Offer, including certain liabilities under the federal
securities laws.
Parent will not pay any fees or commissions to any broker or dealer or any
other person for soliciting tenders of Shares pursuant to the Offer. Brokers,
dealers, commercial banks, trust companies and other nominees will, upon
request, be reimbursed by Parent for customary mailing and handling expenses
incurred by them in forwarding offering materials to their customers.
17. Miscellaneous
Purchaser is not aware of any state where the making of the Offer is
prohibited by administrative or judicial action pursuant to any valid statute.
If Purchaser becomes aware of any valid state statute prohibiting the making
of the Offer or the acceptance of the Shares pursuant thereto, Purchaser will
make a good faith effort to comply with such statute or seek to have such
statute declared inapplicable to the Offer. If, after such good faith effort,
39
<PAGE>
Purchaser cannot comply with such state statute, the Offer will not be made to
(nor will tenders be accepted from or on behalf of) holders of Shares in any
such state. In any jurisdiction where securities, blue sky or other laws
require the Offer to be made by a licensed broker or dealer, the Offer shall
be deemed to be made on behalf of Purchaser by one or more registered brokers
or dealers licensed under the laws of such jurisdiction.
Investcorp, Parent and Purchaser have filed with the Commission a Tender
Offer Statement on Schedule 14D-l, together with exhibits, pursuant to Rule
14d-3 under the Exchange Act, furnishing certain additional information with
respect to the Offer. In addition, the Company has filed with the Commission a
Solicitation/Recommendation Statement on Schedule 14D-9, together with
exhibits, pursuant to Rule 14d-9 under the Exchange Act, setting forth the
recommendations of the Company Board with respect to the Offer and the reasons
for such recommendations and furnishing certain additional related
information. Such Schedules and any amendments thereto, including exhibits,
may be inspected and copies may be obtained from the Commission in the manner
set forth in Section 8 of this Offer to Purchase (except that they will not be
available at the regional offices of the Commission).
Except for the Depositary's authorization to enter into agreements or
arrangements with the Book-Entry Transfer Facility, no person has been
authorized to give any information or to make any representation on behalf of
Parent or Purchaser not contained herein or in the Letter of Transmittal and,
if given or made, such information or representation must not be relied upon
as having been authorized by Parent or Purchaser.
Neither the delivery of this Offer to Purchase nor any purchase pursuant to
the Offer shall, under any circumstances, create any implication that there
has been no change in the affairs of the Company, Parent or Purchaser since
the date as of which information is furnished or the date of this Offer to
Purchase.
SIND Acquisition, Inc.
November 12, 1999
40
<PAGE>
SCHEDULE I
DIRECTORS OF INVESTCORP
The following table sets forth the name, citizenship, business address,
principal occupation and other material positions held during the last five
years, if any of each director of Investcorp. Unless otherwise indicated, each
person's position indicated below has been for the past five years, and each
person has been a director of Investcorp for the past five years.
<TABLE>
<CAPTION>
Other
Name, Citizenship Present Material Positions Held
and Business Address Principal Occupation During the Past Five Years
-------------------- ---------------------------- ----------------------------
<S> <C> <C>
Abdul-Rahman Salim Al- Chairman, Bahrain Middle None.
Ateeqi East Bank.
Kuwait
P.O. Box 848
Safat 13009
Kuwait
Omar A. Aggad Chairman and President, Chairman and President of
Saudi Arabia Aggad Investment Co. the following entities:
P.O. Box 2256 Almultaka Trade Est.;
Riyadh 11451 Aluminum Manufacturing Co.
Kingdom of Saudi Arabia Ltd.; Arabian Elevator &
Escalator Co. Ltd.; Arabian
Tile Co. Ltd.; Hygienic
Paper Co. Ltd.; Integrated
Systems Co. Ltd.; Medical &
Cosmetic Products Co. Ltd.;
Medical Supplies & Services
Co. Ltd.; National Advanced
Systems Co. Ltd.; National
Pigment Masterbatch Co.
Ltd.; Rana Confectionery
Products Co.; Saudi
Continental Insurance Co.
EC; Saudi Industries for
Desalination Membranes &
Systems Ltd.; United Arab
Motors Co. Ltd. Director of
Saudi British Bank and Saudi
Agricultural Development Co.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Other
Name, Citizenship Present Material Positions Held
and Business Address Principal Occupation During the Past Five Years
-------------------- ---------------------------- ----------------------------
<S> <C> <C>
Easa Saleh Al Gurg Chairman of the following Director of the following
United Arab Emirates entities: Easa Saleh Al Gurg entities: Emirates
P.O. Box 325 Group of Companies, Dubai, a International, Dubai;
Dubai trading house; Arabian Egyptian British Bank,
United Arab Emirates Explosives Co. LLC, a Cairo; Emirates Bank
Director since 1994 manufacturer of industrial International PJSC. Deputy
explosives; Al Gurg Leight's Chairman, National Bank of
Paints LLP, a manufacturer Fujairah.
of industrial paints; Gulf
Metal Foundry LLC, a
manufacturer of carbon,
steel, stainless steel,
manganese steel and SG iron
castings; Al Gurg Lever LLC,
a foodstuffs and consumer
goods company; Al Gurg
Fosroc LLC, a manufacturer
of construction chemicals.
Ahmed Abdullah Al Mannai Chairman, Mannai Corporation Director of the following
Qatar Ltd., a corporation entities: Qatar Insurance
P.O. Box 76 comprised of trading, Co.; Gulf Publishing &
Doha construction, marine Printing Organization;
Qatar services, technical services Manwijs Ltd.; Egyptian
and engineering companies. International Service
Chairman, Ahmed Mannai & Co. Engineering Co., Egypt.
(QSC).
</TABLE>
<TABLE>
<S> <C> <C>
Khalid Rashid Al Zayani Group Chairman, Al Zayani Chairman of the following
Bahrain Investments Group of companies: Al Zayani
P.O. Box 5553 Companies, a group with Investments WLL; Zayani
Manama interests in banking, Motors WLL; Euro Motors WLL;
Bahrain industry, insurance, Al Zayani Hotels
property, hotels, joint Corporation; Al Zayani
ventures, services and Commercial Services WLL;
trading. Bahrain Commercial Services
WLL; Intersteel WLL; Midal
Cables Ltd.; Metal Form WLL;
Alutec BSC(c); Aluwheel WLL;
Gulf Closures WLL; Al
Rashidiya Real Estate Co.;
Steinweg Bahrain Ltd.;
Horizons Publishing House
WLL. First Deputy Chairman
and Chairman of the
Executive Committee, Bahrain
Islamic Bank BSC. Director
and Member of the Executive
Committee, Bahrain Islamic
Investments Co. BSC(c).
Director of Bahrain Kuwait
Insurance Co. and Bahrain
Commercial Facilities Co.
</TABLE>
I-2
<PAGE>
<TABLE>
<CAPTION>
Other
Name, Citizenship Present Material Positions Held
and Business Address Principal Occupation During the Past Five Years
-------------------- ---------------------------- ----------------------------
<S> <C> <C>
Hussain Ibrahim Al- Chairman, Alfardan Group of Vice Chairman, Gulf
Fardan Companies (Holdings) Publishing & Printing
Qatar WLL, a group comprised of Organization WLL. Managing
P.O. Box 63 jewelry, trading, Director, The Commercial
Doha automobile, real estate and Bank of Qatar Ltd. QSC.
Qatar investment and trading
services companies.
Nasser Ibrahim Al-Rashid Chairman, Rashid None.
Saudi Arabia Engineering, an engineering
P.O. Box 4354 consulting firm.
Riyadh 11491
Kingdom of Saudi Arabia
Abdul Rahman Ali Al- Chairman and Chief Executive Chairman of Al-Sagr Al-Saudi
Turki Officer, A.A. Turki Group of Insurance Co., EC, Bahrain
Saudi Arabia Companies, a company with and Sagr Al-Bayda Commercial
P.O. Box 718 industrial construction, Agencies Ltd., Al-Khobar,
Dammam 31421 manufacturing and commercial Saudi Arabia. Vice Chairman,
Kingdom of Saudi Arabia intersts. Chairman and Chief Bahrain Specialist Hospital,
Executive Officer of ATCO Bahrain. Director of the
Development, Inc., Houston, following entities: Dhahran
Texas and ATCO Development International Exhibition
Ltd., London. Co., Dhahran, Saudi Arabia;
United Gulf Corp. for Fiber
Glass Industries, Jubail,
Saudi Arabia; Sun Hung Kai
China Development, Hong
Kong; Majyma Industries,
Hong Kong; Arab Investment
Co., Cairo, Egypt; Rasmalah
Investment Fund, Dubai,
United Arab Emirates.
Mohammed Abdullah Al- Chairman, A.H. Al-Zamil Chairman, Grindlays Bahrain
Zamil Group of Companies, a group Bank BSC(c) and Savola
Bahrain engaging in steel and Bahrain Co. Vice Chairman,
P.O. Box 285 aluminum fabrication, air Gulf Union Insurance &
Manama conditioning, nails and Reinsurance Co. Director of
Bahrain screws, food manufacturing, the following entities:
marble design and Bahrain Islamic Bank BSC(c);
installation, stained glass General Organization for
window production, Social Insurance; Saudi
industrial power coating, Cement Co., Saudi Arabia;
operations and maintenance Al-Boustan Commercial Center
and general trading and Co., Cairo; Ifabanque SA,
agency representation. Paris.
</TABLE>
I-3
<PAGE>
<TABLE>
<CAPTION>
Other
Name, Citizenship Present Material Positions Held
and Business Address Principal Occupation During the Past Five Years
-------------------- ---------------------------- ----------------------------
<S> <C> <C>
Abdullah Mohamed Alireza Chairman of the following Chairman and Owner, Alireza
Saudi Arabia entities: Reza Investment Investment Co. President of
P.O. Box 1555 Co., a water resources the Board of Trustees,
Jeddah 21441 development, sports and Mohamed & Ali Alireza Trust.
Kingdom of Saudi Arabia leisure and retail
Director since 1998 distribution company; Reza
Food Services Co., a
McDonald's franchise in
Western Province, Saudi
Arabia; International
Chemical Industries &
Trading Co. Vice Chairman,
Supervisory Board, Haji
Abdullah Alireza & Co.
Abdullah Taha Bakhsh Chairman, TRACO (Trading, Chairman of the following
Saudi Arabia Engineering & Kingdom of entities: Saudi Maritime
P.O. Box 459 Contracting Corporation), Holding Co.; Bakhsh Kellogg
Jeddah 21411 a holding company for Saudi Arabia Ltd.; Medscan
Kingdom of Saudi Arabia investments and general Terminal Co.; Southern
trading, including the Valley Cement Co., Giza,
following divisions: TRACO Egypt. Director of the
(Real Estate), a marketing following entities: National
and wholesaling of lands, Pipe Co.; Arabian
real estate development and International Maritime Co.;
property management company; Saudi Company for Hardware;
TRACO (Engineering), a civil Beirut-Riyad Bank, London;
contracting, concrete and Arabian Gulf Investment Far
steel structural renovation, East Ltd., Hong Kong;
marine and deep sea Marketing Services &
engineering company; TRACO Commercial Project
(Hotels), a hotel ownership Operations Co.
and management company.
Faraj Ali Bin Hamoodah President, Bin Hamoodah Chairman, Abu Dhabi National
United Arab Emirates Group of Companies, a group Co. for Building Materials.
P.O. Box 203 active in local and Director of the following
Abu Dhabi international investments, entities: Abu Dhabi Radio &
United Arab Emirates general trading and Television Corporation;
international services, National Bank of Abu Dhabi;
construction, manufacturing, Al Dhafra Insurance Co.
real estate management and
agriculture.
Mustafa Jassim Boodai Chairman, Boodai None.
Kuwait Corporation, a corporation
P.O. Box 1287 comprised of trading,
Safat 13013 transportation, engineering,
Kuwait aviation, construction,
concrete, cement and
automobile companies.
Mohammed Yousef Jalal Chairman, Mohammed Jalal & Chairman, Bahrain Tourism
Bahrain Sons Group of Companies, a Co. and Al-Ahli Commercial
P.O. Box 113 trading and contracting Bank BSC. Vice Chairman of
Manama group with worldwide Bahrain International Golf
Bahrain interests. Course Co. BSC and National
Import & Export Co.
Director, Bahrain Airport
Services Co.
</TABLE>
I-4
<PAGE>
<TABLE>
<CAPTION>
Other
Name, Citizenship Present Material Positions Held
and Business Address Principal Occupation During the Past Five Years
-------------------- ---------------------------- ----------------------------
<S> <C> <C>
Nemir Amin Kirdar President and Chief None.
Bahrain Executive Officer,
P.O. Box 5340 Investcorp Bank E.C.
Manama
Bahrain
Abdul Aziz Jassim Kanoo Deputy Chairman and Deputy Director of the following
Saudi Arabia Chief Executive Officer, entities: Eastern Province
P.O. Box 37 Yusuf Bin Ahmed Kanoo Group, Cement Co.; Saudi Public
Dammam 31411 Saudi Arabia, a group active Transport Co.; Gulf Union
Kingdom of Saudi Arabia in shipping, trading, Insurance & Reinsurance Co.,
property, travel, machinery Bahrain; United Arab
sales and services, oil Shipping Agencies Co. (SA)
field supplies and services, Ltd.
chemicals, procurement
services, insurance and
domestic and overseas
investments. Chairman of the
following entities: Saudi
Arabian Industrial & Trading
Est.; Baroid (Saudi Arabia)
Ltd.; Saudi Arabian Lube
Additives Co. Ltd.; Key
Communications Development
Ltd.
</TABLE>
I-5
<PAGE>
EXECUTIVE OFFICERS OF INVESTCORP
The following table sets forth the name, citizenship, business address,
present principal occupation and other material positions held during the last
five years, if any, of each executive officer of Investcorp. Unless otherwise
indicated, all of the persons listed below are citizens of the United States
of America. The business address of each person listed below is Investcorp
S.A., P.O. Box 5340, Manama, Bahrain. Each person listed below has been an
executive officer of Investcorp for the past five years.
<TABLE>
<CAPTION>
Other
Name, Citizenship Present Material Positions Held
and Business Address Principal Occupation During the Past Five Years
- ---------------------------- ---------------------------- ----------------------------
<S> <C> <C>
Nemir Amin Kirdar President and Chief None.
Bahrain Executive Officer,
Investcorp Bank E.C.
Lawrence B. Kessler Chief Administrative None.
Officer, Investcorp S.A.
Gary S. Long Chief Financial Officer, None.
Investcorp S.A.
Salman A. Abbasi Secretary, Investcorp S.A. None.
</TABLE>
I-6
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS OF PARENT
Set forth below is the name, position with Parent, present principal
occupation and five year employment history of each director and executive
officer of Parent. The business address of person listed below is Investcorp
International Inc., 280 Park Avenue, 37th Floor, New York, New York 10017.
Each person listed below is a citizen of the United States of America.
<TABLE>
<CAPTION>
Position Present Principal Occupation
Name With Parent and Five Year Employment History
---------------------- ------------ ------------------------------------------
<C> <C> <S>
Christopher J. O'Brien Director and Mr. O'Brien has been an executive of
President Investcorp or one or more of its wholly
owned subsidiaries since December 1993.
Prior to joining Investcorp, Mr. O'Brien
was a Managing Director of Mancuso &
Company, a private New York-based merchant
bank.
Charles K. Marquis Director Mr. Marquis has been an executive of
Investcorp or one or more of its wholly
owned subsidiaries since January 1999.
Prior to joining Investcorp, Mr. Marquis
was a partner in the law firm of Gibson,
Dunn & Crutcher LLP.
Sean P. Madden Secretary Mr. Madden has been an executive of
Investcorp or one or more of its wholly
owned subsidiaries since October 1998.
Prior to joining Investcorp, Mr. Madden
was a Vice President of Credit Suisse
First Boston from June 1994 to October
1998.
</TABLE>
I-7
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER
Set forth below is the name, position with Purchaser, present principal
occupation and five year employment history of each director and executive
officer of Purchaser. The business address of each person listed below is
Investcorp International Inc., 280 Park Avenue, 37th Floor, New York, New York
10017. Each person listed below is a citizen of the United States of America.
<TABLE>
<CAPTION>
Position Present Principal Occupation
Name With Purchaser and Five Year Employment History
---------------------- -------------- ----------------------------------------
<C> <C> <S>
Christopher J. O'Brien Director and Mr. O'Brien has been an executive of
President Investcorp or one or more of its wholly
owned subsidiaries since December 1993.
Prior to joining Investcorp, Mr. O'Brien
was a Managing Director of Mancuso &
Company, a private New York-based
merchant bank.
Charles K. Marquis Director Mr. Marquis has been an executive of
Investcorp or one or more of its wholly
owned subsidiaries since January 1999.
Prior to joining Investcorp, Mr. Marquis
was a partner in the law firm of Gibson,
Dunn & Crutcher LLP.
Sean P. Madden Secretary Mr. Madden has been an executive of
Investcorp or one or more of its wholly
owned subsidiaries since October 1998.
Prior to joining Investcorp, Mr. Madden
was a Vice President of Credit Suisse
First Boston from June 1994 to October
1998.
</TABLE>
I-8
<PAGE>
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. Letters of Transmittal and certificates for Shares should be sent or
delivered by each stockholder of the Company or his broker, dealer, commercial
bank or trust company to the Depositary at one of its addresses set forth
below:
The Depositary for the Offer is:
[LOGO OF BankBoston]
By Mail: By Overnight Courier: By Hand:
BankBoston, N.A. BankBoston, N.A. Securities Transfer &
Attn: Corporate Attn: Corporate Reorganization
Reorganization Reporting Services, Inc.
150 Royall Street c/o Boston EquiServe LP
P.O. Box 8029 Canton, MA 02021 100 Williams Street/Galleria
Boston, MA 02266-8029 New York, NY 10038
By Facsimile Transmission Confirm Receipt of Facsimile
(For Eligible Institutions by Telephone Only:
Only): (781) 575-3120
(781) 575-2233/2232
Any questions or requests for assistance, as well as requests for additional
copies of this Offer to Purchase and the Letter of Transmittal, may be
directed to the Information Agent at its address and telephone number set
forth below. Stockholders may also contact their brokers, dealers, commercial
banks or trust companies for assistance concerning the Offer.
The Information Agent for the Offer is:
D.F. KING & CO., INC.
77 Water Street
New York, NY 10005-4495
Banks and Brokers Call Collect: (212) 269-5550
All Others Call Toll-Free: (888) 246-5358
<PAGE>
Letter Of Transmittal
To Tender Shares of Common Stock
of
Synthetic Industries, Inc.
at
$33.00 Net Per Share
Pursuant to the Offer to Purchase
Dated November 12, 1999
of
SIND Acquisition, Inc.
a wholly owned subsidiary of
SIND Holdings, Inc.
a corporation formed at the direction of
Investcorp S.A.
The Depositary for the Offer is:
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT NEW YORK CITY
TIME ON FRIDAY, DECEMBER 10, 1999 UNLESS THE OFFER IS EXTENDED.
[LOGO OF BankBoston]
By Mail: By Overnight Courier: By Hand:
BankBoston, N.A. BankBoston, N.A. Securities Transfer &
Attn: Corporate Attn: Corporate Reorganization Reporting
Reorganization 150 Royall Street Services, Inc.
P.O. Box 8029 Canton, MA 02021 c/o Boston EquiServe LP
Boston, MA 02266-8029 100 Williams
Street/Galleria
New York, NY 10038
By Facsimile Confirm Receipt of
Transmission Facsimile
(For Eligible by Telephone Only:
Institutions Only): (781) 575-3120
(781) 575-2233/2232
DESCRIPTION OF SHARES TENDERED
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Name(s) and Address(es) of Registered Holder(s)
(Please fill in, if blank, exactly as name(s) appear(s) Share Certificate(s) and Share(s) Tendered
on Share Certificate(s)) (Attach additional list if necessary)
- ------------------------------------------------------------------------------------------------------
Total
Number of
Share Shares Number
Certificate Represented by of Shares
Number(s)* Certificate(s) Tendered**
--------------------------------------------------------
--------------------------------------------------------
--------------------------------------------------------
--------------------------------------------------------
--------------------------------------------------------
--------------------------------------------------------
<S> <C> <C> <C>
Total Shares
</TABLE>
- -------------------------------------------------------------------------------
*Need not be completed by stockholders tendering by book-entry transfer.
**Unless otherwise indicated, it will be assumed that all Shares being
delivered to the Depositary are being tendered. See Instruction 4.
The names and addresses of the registered holder(s) should be printed exactly
as they appear on the certificates representing Shares tendered hereby. The
certificates and number of Shares that the undersigned wishes to tender should
be indicated in the appropriate boxes.
<PAGE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN ONE LISTED
ABOVE, DOES NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN THIS LETTER OF
TRANSMITTAL IN THE APPROPRIATE SPACE PROVIDED, WITH SIGNATURE GUARANTEE IF
REQUIRED, AND COMPLETE THE SUBSTITUTE FORM W-9 SET FORTH BELOW. SEE
INSTRUCTION 1.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be used by stockholders of Synthetic
Industries, Inc. either if certificates evidencing Shares (as defined below)
are to be forwarded herewith or, unless an Agent's Message (as defined in the
Offer to Purchase, dated November 12, 1999 (the "Offer to Purchase")) is
utilized, if delivery of Shares is to be made by book-entry transfer to the
account maintained by BankBoston, N.A. (the "Depositary") at The Depository
Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedures
set forth in Section 3 of the Offer to Purchase. Stockholders whose
certificates are not immediately available or who cannot deliver their
certificates or deliver confirmation of the book-entry transfer of their
Shares into the Depositary's account at the Book-Entry Transfer Facility (each
such confirmation, a "Book-Entry Confirmation") and all other documents
required hereby to the Depositary on or prior to the Expiration Date (as
defined in the Offer to Purchase) may nevertheless tender their Shares
according to the guaranteed delivery procedures set forth in Section 3 of the
Offer to Purchase. See Instruction 2. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY
TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
Any questions or requests for assistance, as well as requests for additional
copies of this Offer to Purchase and the Letter of Transmittal, may be
directed to the Information Agent at its address and telephone number set
forth below. Stockholders may also contact their brokers, dealers, commercial
banks or trust companies for assistance concerning the Offer.
[_]CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE DEPOSITARY WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN A BOOK-
ENTRY TRANSFER FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER):
Name of Tendering Institution: ___________________________________________
Account Number: __________________________________________________________
Transaction Code Number: _________________________________________________
[_]CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Holder(s): _________________________________________
Window Ticket Number (if any): ___________________________________________
Date of Execution of Notice of Guaranteed Delivery: ______________________
Name of Institution That Guaranteed Delivery: ____________________________
Account Number: __________________________________________________________
Transaction Code Number: _________________________________________________
2
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ CAREFULLY THE ACCOMPANYING INSTRUCTIONS.
Ladies and Gentlemen:
The undersigned hereby tenders to SIND Acquisition, Inc., a Delaware
corporation ("Purchaser") and wholly owned subsidiary of SIND Holdings, Inc.,
a Delaware corporation ("Parent") formed at the direction of Investcorp S.A.,
a Luxembourg corporation ("Investcorp"), the above described shares of common
stock, $1.00 par value per share (the "Shares"), of Synthetic Industries,
Inc., a Delaware corporation (the "Company"), pursuant to Purchaser's offer to
purchase all of the outstanding Shares upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated November 12, 1999 (the
"Offer to Purchase"), receipt of which is hereby acknowledged, and in this
Letter of Transmittal (which, together with any amendments or supplements
thereto, collectively constitute the "Offer"), at a purchase price of $33.00
per Share, net to the seller in cash, without interest thereon.
Subject to, and effective upon, acceptance for payment of the Shares
tendered herewith, in accordance with the terms and subject to the conditions
of the Offer (including, if the Offer is extended or amended, the terms and
conditions of any such extension or amendment), the undersigned hereby sells,
assigns and transfers to, or upon the order of, Purchaser all right, title and
interest in and to all the Shares that are being tendered hereby (and any and
all other Shares or other securities issued or issuable in respect thereof on
or after November 12, 1999) and irrevocably constitutes and appoints the
Depositary the true and lawful agent and attorney-in-fact of the undersigned
with respect to such Shares (and any such other Shares or securities) with
full power of substitution (such power of attorney being deemed to be an
irrevocable power coupled with an interest) to (i) deliver certificates for
such Shares (and any such other Shares or securities), or transfer ownership
of such Shares (and any such other Shares or securities) on the account books
maintained by the Book-Entry Transfer Facility, together in either such case
with all accompanying evidences of transfer and authenticity, to or upon the
order of Purchaser upon receipt by the Depositary, as the undersigned's agent,
of the purchase price (adjusted, if appropriate, as provided in the Offer to
Purchase), (ii) present such Shares (and any such other Shares or securities)
for transfer on the books of the Company and (iii) receive all benefits and
otherwise exercise all rights of beneficial ownership of such Shares (and any
such other Shares or securities), all in accordance with the terms of the
Offer.
The undersigned hereby irrevocably appoints each designee of Purchaser as
the attorney-in-fact and proxy of the undersigned, each with full power of
substitution, to the full extent of such stockholder's rights with respect to
the Shares tendered and hereby accepted for payment by Purchaser (and any and
all other Shares or other securities), to vote in such manner as each such
attorney and proxy or his substitute shall in his sole discretion deem proper,
and otherwise act (including pursuant to written consent) with respect to all
the Shares tendered hereby which have been accepted for payment by Purchaser
prior to the time of such vote or action (and any and all other Shares or
securities issued or issuable in respect thereof on or after November 12,
1999), which the undersigned is entitled to vote at any meeting of
stockholders (whether annual or special and whether or not an adjourned
meeting) of the Company, or consent in lieu of any such meeting, or otherwise.
This power of attorney and proxy is coupled with an interest in the Company
and in the Shares and is irrevocable and is granted in consideration of, and
is effective upon, the acceptance for payment by Purchaser of Shares tendered
in accordance with the terms of the Offer. Such acceptance for payment shall
revoke, without further action, all prior powers of attorney and proxies
granted by the undersigned at any time with respect to such Shares (and any
such other Shares or other securities) and no subsequent powers of attorney,
proxies, consents or revocations shall be given (and if given shall be deemed
not to be effective) with respect thereto by the undersigned. The undersigned
acknowledges that in order for Shares to be deemed validly tendered,
immediately upon the acceptance for payment of such Shares, the Purchaser or
the Purchaser's designee must be able to exercise full voting and all other
rights which inure to a record and beneficial holder with respect to such
Shares.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Shares tendered
hereby (and any and all other Shares or other securities issued or issuable in
respect thereof after November 12, 1999), that the undersigned owns the Shares
tendered hereby within the meaning of Rule 14e-4 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), that the
tender of the tendered Shares complies with Rule 14e-4 under the Exchange Act
and that when the same are accepted for payment by Purchaser, Purchaser shall
acquire good, marketable and unencumbered title thereto, free and clear of all
liens, restrictions, charges and
3
<PAGE>
encumbrances and the same will not be subject to any adverse claim. The
undersigned, upon request, shall execute and deliver any additional documents
deemed by the Depositary or Purchaser to be necessary or desirable to complete
the sale, assignment and transfer of the Shares tendered hereby (and any and
all such other Shares or other securities). In addition, the undersigned shall
remit and transfer promptly to the Depositary for the account of Purchaser all
Shares or other securities issued in respect of the Shares tendered hereby,
accompanied by appropriate documentation of transfer, and, pending such
remittance and transfer or appropriate assurance thereof, Purchaser shall be
entitled to all rights and privileges as owner of each such issued Share or
security and may withhold the entire purchase price of the Shares tendered
hereby or deduct from such purchase price the amount or value of such issued
Share or security as determined by Purchaser in its sole discretion.
All authority herein conferred or agreed to be conferred in this Letter of
Transmittal shall not be affected by, and shall survive, the death or
incapacity of the undersigned and any obligation of the undersigned hereunder
shall be binding upon the successors, assigns, heirs, executors,
administrators and legal representatives of the undersigned. Except as stated
in the Offer to Purchase, this tender is irrevocable.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in Section 3 of the Offer to Purchase and in the
instructions hereto shall constitute a binding agreement between the
undersigned and Purchaser upon the terms and subject to the conditions of the
Offer. The undersigned recognizes that, under certain circumstances set forth
in the Offer to Purchase, Purchaser may not be required to accept for payment
any of the Shares tendered hereby.
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price and/or return any certificates
for Shares not tendered or accepted for payment in the name(s) of the
undersigned. Similarly, unless otherwise indicated under "Special Delivery
Instructions," please mail the check for the purchase price and/or return any
certificates for Shares not tendered or accepted for payment (and accompanying
documents, as appropriate) to the undersigned at the address shown below the
undersigned's signature. In the event that both the Special Delivery
Instructions and the Special Payment Instructions are completed, please issue
the check for the purchase price and/or return any certificates for Shares not
tendered or accepted for payment in the name(s) of, and deliver such check
and/or return such certificates to the person or persons so indicated.
Stockholders tendering Shares by book-entry transfer may request that any
Shares not accepted for payment be returned by crediting the account
maintained at the Book-Entry Transfer Facility by making an appropriate entry
under "Special Payment Instructions." The undersigned recognizes that
Purchaser shall have no obligation pursuant to the Special Payment
Instructions to transfer any Shares from the name of the registered holder(s)
thereof if Purchaser does not accept for payment any of the Shares so
tendered.
4
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS (SEE SPECIAL PAYMENT INSTRUCTIONS (SEE
INSTRUCTIONS 1, 5, 6 AND 7) INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if certifi- To be completed ONLY if certifi-
cates for Shares not tendered or cates for Shares not tendered or
not purchased and/or the check not purchased and/or the check
for the purchase price of Shares for the purchase price of Shares
purchased are to be issued in the purchased are to be sent to some-
name of someone other than the one other than the undersigned,
undersigned, or if Shares ten- or to the undersigned at an ad-
dered by book-entry transfer dress other than that shown
which are not purchased are to be above.
returned by credit to an account
maintained at The Depository Issue check and/or certificate
Trust Company. to:
Issue check and/or certificate Name: ____________________________
to: (Please Print)
Name: ____________________________ Address: _________________________
(Please Print)
__________________________________
Address: _________________________
__________________________________
__________________________________ (Including Zip Code)
__________________________________ __________________________________
(Including Zip Code) (Tax Identification or Social
Security Number)
__________________________________
(Tax Identification or Social (Also Complete Substitute Form W-
Security Number) 9 Below)
(Also Complete Substitute Form W-
9 Below)
Credit unpurchased Shares deliv-
ered by book-entry transfer to an
account maintained at The Deposi-
tory Trust Company.
__________________________________
(Account Number)
5
<PAGE>
IMPORTANT
SIGN HERE
(Also Complete Substitute Form W-9)
X _________________________________________________________________________
X _________________________________________________________________________
(Signature(s) of Holders(s))
Dated: , 1999
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
share certificate(s) or on a security position listing or by person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, agent, officer of a corporation
or other person acting in a fiduciary or representative capacity, please
provide the following information. See Instructions 1 and 5.)
Name(s): __________________________________________________________________
___________________________________________________________________________
(Please Print)
Capacity (Full Title): ____________________________________________________
(See Instructions)
Address: __________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
(Including Zip Code)
Area Code and Telephone Number: ___________________________________________
Employer Identification or Social Security Number: ________________________
(Complete Substitute Form W-9)
GUARANTEE OF SIGNATURE(S)
(If Required-See Instructions 1 and 5)
Authorized Signature: _____________________________________________________
Name(s): __________________________________________________________________
(Please Print)
Title: ____________________________________________________________________
Name of Firm: _____________________________________________________________
Address: __________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
(Including Zip Code)
Area Code and Telephone Number: ___________________________________________
Dated: , 1999
6
<PAGE>
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Offer
1. Guarantee of Signature. No signature guarantee on this Letter of
Transmittal is required if (i) this Letter of Transmittal is signed by the
registered holder(s) of the Shares (which term, for purposes of this document,
includes any participant in the Book-Entry Transfer Facility whose name
appears on a security position listing as the owner of the Shares) tendered
herewith, unless such holder(s) has completed either the box entitled "Special
Payment Instructions" or the box entitled "Special Delivery Instructions" or
(ii) such Shares are tendered for the account of a bank, broker, dealer,
credit union, savings association or other entity that is a member in good
standing of the Securities Transfer Agents Medallion Program, the New York
Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange
Medallion Program (each, an "Eligible Institution"). In all other cases, all
signatures on this Letter of Transmittal must be guaranteed by an Eligible
Institution. See Instruction 5.
2. Delivery of Letter of Transmittal and Certificates. This Letter of
Transmittal is to be completed by stockholders either if certificates for
Shares are to be forwarded herewith, or unless an Agent's Message is utilized,
if tenders of Shares are to be made pursuant to the procedures for tender by
book-entry transfer set forth in Section 3 of the Offer to Purchase.
Certificates evidencing all physically tendered Shares, or any Book-Entry
Confirmation of Shares, as the case may be, as well as a properly completed
and duly executed Letter of Transmittal (or manually signed facsimile
thereof), together with any required signature guarantees, or an Agent's
Message in the case of a book-entry transfer, and any other documents required
by this Letter of Transmittal, must be received by the Depositary at one of
its addresses set forth herein on or prior to the Expiration Date (as defined
in the Offer to Purchase).
Stockholders whose certificates for Shares are not immediately available or
who cannot deliver their certificates for Shares or Book-Entry Confirmation
and all other required documents to the Depositary on or prior to the
Expiration Date may tender their Shares by properly completing and duly
executing the Notice of Guaranteed Delivery pursuant to the guaranteed
delivery procedure set forth in Section 3 of the Offer to Purchase. Pursuant
to this procedure, (i) the tender of Shares must be made by or through an
Eligible Institution, (ii) a properly completed and duly executed Notice of
Guaranteed Delivery, substantially in the form provided by Purchaser, must be
received by the Depositary on or prior to the Expiration Date and (iii) the
certificates evidencing all physically tendered Shares or Book-Entry
Confirmations, as the case may be, together with a properly completed and duly
executed Letter of Transmittal (or manually signed facsimile thereof),
together with any required signature guarantees, or an Agent's Message in the
case of a book-entry transfer, and any other documents required by this Letter
of Transmittal, must be received by the Depositary within three Nasdaq
National Market System trading days after the date of execution of such Notice
of Guaranteed Delivery, all as provided in Section 3 of the Offer to Purchase.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE CERTIFICATES FOR
SHARES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-
ENTRY TRANSFER FACILITY, IS AT THE SOLE OPTION AND RISK OF THE TENDERING
STOCKHOLDER AND, EXCEPT AS OTHERWISE PROVIDED IN THIS INSTRUCTION 2, THE
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF
DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering stockholders, by execution
of this Letter of Transmittal (or a facsimile copy hereof), waive any right to
receive any notice of the acceptance of their Shares for payment.
3. Inadequate Space. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares and any other required
information should be listed on a separate signed schedule attached hereto.
7
<PAGE>
4. Partial Tender (not applicable to stockholders who tender by book-entry
transfer). If fewer than all the Shares evidenced by any certificate(s)
submitted are to be tendered, fill in the number of Shares that are to be
tendered in the box entitled "Description of Shares Tendered." In such case,
new certificate(s) for the remainder of the Shares that were evidenced by your
old certificate(s) will be sent to you, unless otherwise provided in the
appropriate box on this Letter of Transmittal, as soon as practicable after
the Expiration Date or the termination of the Offer. All Shares represented by
certificates delivered to the Depositary will be deemed to have been tendered
unless otherwise indicated.
5. Signatures on Letter of Transmittal, Stock Powers and Endorsements. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond exactly with the name(s) as
they appear on the face of the certificate(s) evidencing such Shares without
alteration, enlargement or any change whatsoever.
If any of the Shares tendered hereby are held of record by two or more joint
holders, all such holders must sign this Letter of Transmittal.
If any of the Shares tendered hereby are registered in different names on
several certificates, it will be necessary to complete, sign and submit as
many separate Letters of Transmittal as there are different registrations of
such certificates.
If this Letter of Transmittal or any certificates or stock powers are signed
by a trustee, executor, administrator, guardian, attorney-in-fact, officer of
a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to Purchaser of such person's authority to so act must be
submitted.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares listed and tendered hereby, no endorsements of certificates or separate
stock powers are required, unless payment is to be made, or certificates for
Shares not tendered or not purchased are to be issued, to a person other than
the registered holder(s), in which case, the certificates evidencing the
Shares tendered hereby must be endorsed or accompanied by appropriate stock
powers, in either case signed exactly as the name(s) of the registered
holder(s) appear(s) on such certificate(s). Signatures on such certificates or
stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares listed, the certificates must be endorsed
or accompanied by appropriate stock powers, in either case corresponding
exactly with the name(s) of the registered holder(s) appearing on the
certificates. Signatures on such certificates or stock powers must be
guaranteed by an Eligible Institution.
6. Stock Transfer Taxes. Except as set forth in this Instruction 6,
Purchaser will pay or cause to be paid any stock transfer taxes with respect
to the transfer and sale of purchased Shares to it or its order pursuant to
the Offer. If payment of the purchase price is to be made to, or if
certificates for Shares not tendered or purchased are to be registered in the
name of, any person other than the registered holder(s), or if tendered
certificates are registered in the name of any person other than the person(s)
signing this Letter of Transmittal, the amount of any stock transfer taxes
(whether imposed on the registered holder(s) or such person(s)) payable on
account of the transfer to such person will be deducted from the purchase
price unless satisfactory evidence of the payment of such taxes or exemption
therefrom is submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES LISTED IN THIS LETTER OF
TRANSMITTAL.
7. Special Payment and Delivery Instructions. If a check for the purchase
price of any Shares tendered hereby is to be issued, or certificates
evidencing unpurchased Shares are to be issued in the name of a person other
than the signer of this Letter of Transmittal, or if a check is to be sent
and/or such certificates are to be
8
<PAGE>
returned to someone other than the persons signing this Letter of Transmittal
or to an address other than that shown in the box entitled "Description of
Shares Tendered," the appropriate boxes on this Letter of Transmittal must be
completed. A stockholder tendering Shares by book-entry transfer may request
that Shares not purchased be credited to such account maintained at the Book-
Entry Transfer Facility as such stockholders may designate in the box entitled
"Special Payment Instructions." If no such instructions are given, such Shares
not purchased will be returned by crediting the account at the Book-Entry
Transfer Facility designated above from which such Shares were delivered.
8. Requests for Assistance or Additional Copies. Requests for assistance may
be directed to the Information Agent at the address and telephone number set
forth on the back cover of this Letter of Transmittal. Additional copies of
the Offer to Purchase, this Letter of Transmittal and the Notice of Guaranteed
Delivery may be obtained from the Information Agent at the address set forth
below or from your broker, dealer, commercial bank or trust company.
9. Waiver of Conditions. Subject to the terms of the Merger Agreement (as
defined in the Offer to Purchase), the conditions of the Offer may be waived
by Purchaser, in whole or in part, at any time and from time to time in
Purchaser's sole discretion, in the case of any Shares tendered.
10. Substitute Form W-9. A tendering stockholder is required to provide the
Depositary with a correct Taxpayer Identification Number ("TIN") on Substitute
Form W-9 which is provided under "Important Tax Information" below, and to
certify whether the stockholder is subject to backup withholding of federal
income tax. If a tendering stockholder is subject to backup withholding, the
stockholder must cross out item (2) of the Certification box of the Substitute
Form W-9. Failure to provide the information on the Substitute Form W-9 may
subject the tendering stockholder to federal income tax withholding of 31% of
the payment of the purchase price. If the tendering stockholder has not been
issued a TIN and has applied for a number or intends to apply for a number in
the near future, he or she should write "Applied For" in the space provided
for the TIN in Part I, and sign and date both the Substitute Form W-9 and the
"Certificate of Awaiting Taxpayer Identification Number." If "Applied For" is
written in Part I and the Depositary is not provided with a TIN by the time of
payment, the Depositary will withhold 31% of all payments of the purchase
price, but such withholding will be refunded if the tendering stockholder
provides a TIN within 60 days.
11. Lost, Destroyed or Stolen Certificates. If any certificate(s) evidencing
Shares has been lost, destroyed or stolen, the stockholder should promptly
notify the Depositary. The stockholder will then be instructed as to the steps
that must be taken in order to replace the certificate(s). This Letter of
Transmittal and related documents cannot be processed until the procedures for
replacing lost or destroyed certificates have been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE COPY HEREOF), PROPERLY
COMPLETED AND DULY EXECUTED, WITH ANY REQUIRED SIGNATURE GUARANTEES, OR IN THE
CASE OF BOOK-ENTRY TRANSFER, AN AGENT'S MESSAGE, TOGETHER WITH SHARE
CERTIFICATES OR BOOK-ENTRY CONFIRMATIONS AND ALL OTHER REQUIRED DOCUMENTS,
MUST BE RECEIVED BY THE DEPOSITARY, OR A PROPERLY COMPLETED AND DULY EXECUTED
NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY, ON OR PRIOR
TO THE EXPIRATION DATE.
9
<PAGE>
IMPORTANT TAX INFORMATION
Under U.S. federal income tax law, a stockholder whose tendered Shares are
accepted for payment is required to provide the Depositary with such
stockholder's correct TIN on Substitute Form W-9 below. If such stockholder is
an individual, the TIN is his or her social security number. If a tendering
stockholder is subject to backup withholding, he or she must cross out item
(2) of the Certification box on the Substitute Form W-9. If the Depositary is
not provided with the correct TIN, the stockholder may be subject to a $50
penalty imposed by the Internal Revenue Service. In addition, payments that
are made to such stockholder with respect to Shares purchased pursuant to the
Offer may be subject to backup withholding of 31%.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, that stockholder must submit a W-8, signed under penalties of
perjury, attesting to that individual's exempt status. A Form W-8 may be
obtained from the Depositary. Exempt stockholders, other than foreign
individuals, should furnish their TIN, write "Exempt" on the face of the
Substitute Form W-9 below and sign, date and return the Substitute Form W-9 to
the Depositary. See the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional instructions.
If backup withholding applies, the Depositary is required to withhold 31% of
any payments made to the stockholder. Backup withholding is not an additional
tax. Rather, the tax liability of persons subject to backup withholding will
be reduced by the amount of tax withheld. If withholding results in an
overpayment of taxes, a refund may be obtained.
Purpose of Substitute Form W-9
To prevent backup withholding on payments that are made to a stockholder
with respect to Shares purchased pursuant to the Offer, the stockholder is
required to notify the Depositary of his or her correct TIN by completing the
form below certifying that the TIN provided on the Substitute Form W-9 is
correct (or that such stockholder is awaiting a TIN), and that such
stockholder is not subject to backup withholding because (i) such stockholder
has not been notified by the Internal Revenue Service that such stockholder is
subject to backup withholding as a result of a failure to report all interest
or dividends, or (ii) the Internal Revenue Service has notified such
stockholder that such stockholder is no longer subject to backup withholding.
To prevent possible erroneous backup withholding, exempt stockholders (other
than certain foreign individuals) should certify in accordance with the
Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9 that such stockholder is exempt from backup withholding.
What Number to Give the Depositary
The stockholder is required to give the Depositary the social security
number or employer identification number of the record holder(s) of the
Shares. If the Shares are in more than one name or are not in the name of the
actual holder(s), consult the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 for additional
guidelines on which number to report. If the tendering stockholder has not
been issued a TIN and has applied for a number or intends to apply for a
number in the near future, such stockholder should write "Applied For" in the
space provided for the TIN in Part I, and sign and date the Substitute Form W-
9. If "Applied For" is written in Part I, the Depositary will withhold 31% on
all payments of the purchase price, but such withholdings will be refunded if
the tendering stockholder provides a TIN within 60 days.
10
<PAGE>
TO BE COMPLETED BY ALL TENDERING STOCKHOLDERS
(See Instruction 10)
PAYER'S NAME: BankBoston, N.A.
- -------------------------------------------------------------------------------
Part I--Please provide your
SUBSTITUTE TIN in the box at right and ----------------------
certify by signing and Social Security Number
dating below. or Employer
Identification
Number(if awaiting TIN
write "Applied For")
FORM W-9
Department of the Treasury
Internal Revenue
Service
Part II--For Payees exempt from backup withholding,
see the attached Guidelines for Certification
of Taxpayer Identification Number on Substitute
Form W-9 and complete as instructed therein.
--------------------------------------------------------
CERTIFICATION--Under penalties of perjury, I certify
Payer's Request for that:
Taxpayer (1) The number shown on this form is my correct
Identification Taxpayer Identification Number (or I am waiting
Number ("TIN") for a Taxpayer Identification Number to be issued
to me), and
--------------------------------------------------------
(2) I am not subject to backup withholding because I
have not been notified by the IRS that I am
subject to backup withholding as a result of a
failure to report all interest or dividends, or
the IRS has notified me that I am no longer
subject to backup withholding.
--------------------------------------------------------
CERTIFICATION INSTRUCTIONS--You must cross out item
(2) above if you have been notified by the IRS that
you are subject to backup withholding because of
underreporting interest or dividends on your tax re-
turn. However, if after being notified by the IRS
that you were subject to backup withholding you re-
ceived another notification from the IRS that you are
no longer subject to backup withholding, do not cross
out item (2). (Also see instructions in the enclosed
Guidelines.)
Signature: _____________________________ Date: ______
Name: ________________________________________________
Address: _____________________________________________
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU WROTE "APPLIED FOR" IN PART
I OF THE SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a Taxpayer Identification
Number has not been issued to me and either (1) I have mailed or delivered
an application to receive a Taxpayer Identification Number to the
appropriate Internal Revenue Service Center or Social Security
Administration Office or (2) I intend to mail or deliver an application in
the near future. I understand that if I do not provide a Taxpayer
Identification Number by the time of payment, 31% of all reportable
payments made to me will be withheld, but that such amounts will be
refunded to me if I then provide a Taxpayer Identification Number within 60
days.
Signature: ______________________________ Date: , 1999
The Information Agent for the Offer is:
D.F. KING & CO., INC.
77 Water Street
New York, NY 10005-4495
Banks and Brokers Call Collect: (212) 269-5550
All Others Call Toll-Free: (888) 246-5358
11
<PAGE>
Notice of Guaranteed Delivery
for
Tender of Shares of Common Stock
of
Synthetic Industries, Inc.
to
SIND Acquisition, Inc.
a wholly owned subsidiary of
SIND Holdings, Inc.
a corporation formed at the direction of
Investcorp S.A.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT NEW YORK
CITY TIME ON FRIDAY, DECEMBER 10, 1999 UNLESS THE OFFER IS EXTENDED.
This Notice of Guaranteed Delivery, or one substantially equivalent to this
form, must be used to accept the Offer (as defined below) if certificates
representing shares of common stock, $1.00 par value per share (collectively,
the "Shares"), of Synthetic Industries, Inc., a Delaware corporation (the
"Company"), are not immediately available, if the procedure for book-entry
transfer cannot be completed on a timely basis, or if time will not permit all
required documents to reach BankBoston, N.A. (the "Depositary") on or prior to
the Expiration Date (as defined in the Offer to Purchase). This form may be
delivered by hand or transmitted by telegram, facsimile transmission or mail
to the Depositary. See Section 3 of the Offer to Purchase.
The Depositary for the Offer is:
[LOGO OF BankBoston]
By Mail: By Overnight Courier: By Hand:
BankBoston, N.A. BankBoston, N.A. Securities Transfer &
Attn: Corporate Attn: Corporate Reporting Services, Inc.
Reorganization Reorganization 150 c/o Boston EquiServe LP
P.O. Box 8029 Royall Street 100 Williams
Boston, MA 02266-8029 Canton, MA 02021 Street/Galleria
New York, NY 10038
By Facsimile Transmission Confirm Receipt of Facsimile
(For Eligible Institutions Only): by Telephone Only:
(781) 575-2233/2232 (781) 575-3120
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN ONE
SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION
OTHER THAN THE FACSIMILE NUMBER SET FORTH ABOVE, DOES NOT CONSTITUTE A VALID
DELIVERY.
<PAGE>
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible
Institution" under the Instructions thereto, such signature guarantee must
appear in the applicable space provided in the signature box on the Letter of
Transmittal.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and
certificates for shares to the Depositary within the time period shown herein.
Failure to do so could result in a financial loss to such Eligible
Institution.
THE GUARANTEE ON PAGE 3 MUST BE COMPLETED.
2
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to SIND Acquisition, Inc., a Delaware
corporation ("Purchaser") and wholly owned subsidiary of SIND Holdings, Inc.,
a Delaware corporation ("Parent") formed at the direction of Investcorp S.A.,
a Luxembourg corporation ("Investcorp"), upon the terms and subject to the
conditions set forth in the Offer to Purchase dated November 12, 1999 and the
related Letter of Transmittal (which, together with any amendments or
supplements thereto, collectively constitute the "Offer"), receipt of which is
hereby acknowledged, the number of Shares indicated below pursuant to the
guaranteed delivery procedures set forth in Section 3 of the Offer to
Purchase.
Certificate No(s). (if available):
-------------------------------------------
Number of Shares tendered:
---------------------------------------------------
Check if Shares will be tendered by book-entry transfer
Account Number at The Depository Trust Company:
------------------------------
Dated: , 1999
--------------------------------------------------------------
Name(s) of Record Holder(s):
-------------------------------------------------
(Please Type or Print)
Address(es):
------------------------------------------------------------------------
(Zip Code)
Area Code and Telephone Number: _____________________________________________
Signature(s):
----------------------------------------------------------------
GUARANTEE
(Not To Be Used For Signature Guarantee)
The undersigned, a bank, broker, dealer, credit union, savings association
or other entity that is a member in good standing of the Securities Transfer
Agents Medallion Program, the New York Stock Exchange Medallion Signature
Guarantee Program or the Stock Exchange Medallion Program (a) represents
that the above named person(s) "own(s)" the Shares tendered hereby within
the meaning of Rule 14e-4 promulgated under the Securities Exchange Act of
1934, as amended, (b) represents that such tender of Shares complies with
Rule 14e-4 under the Exchange Act, and (c) guarantees delivery to the
Depositary, at one of its addresses set forth above, of certificates
representing the Shares tendered hereby in proper form for transfer, or
confirmation of book-entry transfer of such Shares into the Depositary's
account at The Depository Trust Company, in each case with delivery of a
properly completed and duly executed Letter of Transmittal (or manually
signed facsimile thereof) with any required signature guarantees or an
Agent's Message (as defined in Section 3 of the Offer to Purchase), and any
other required documents, within three Nasdaq National Market System trading
days after the date hereof.
Name of Firm:_________________________ ____________________________
(Authorized Signature)
_______________________________
(Title)
Address:______________________________ Name:__________________________
(Please Type or Print)
______________________________________
(Zip Code) Title:_________________________
Area Code and
Telephone Number:_____________________ Date:__________________, 1999
NOTE: DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE. SHARE CERTIFICATES
SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL
3
<PAGE>
Offer To Purchase For Cash
All Outstanding Shares Of Common Stock
of
Synthetic Industries, Inc.
at
$33.00 Net Per Share
by
SIND Acquisition, Inc.
a wholly owned subsidiary of
SIND Holdings, Inc.
a corporation formed at the direction of
Investcorp S.A.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT NEW YORK CITY
TIME ON FRIDAY, DECEMBER 10, 1999 UNLESS THE OFFER IS EXTENDED.
November 12, 1999
To Brokers, Dealers, Commercial Banks,
Trust Companies And Other Nominees:
We have been engaged to act as Information Agent in connection with the
offer by SIND Acquisition, Inc., a Delaware corporation ("Purchaser") and
wholly owned subsidiary of SIND Holdings, Inc., a Delaware corporation
("Parent") formed at the direction of Investcorp S.A., a Luxembourg
corporation ("Investcorp"), to purchase all outstanding shares of common
stock, $1.00 par value per share (collectively, the "Shares"), of Synthetic
Industries, Inc., a Delaware corporation (the "Company"), at a purchase price
of $33.00 per Share, net to the seller in cash, without interest thereon, upon
the terms and subject to the conditions set forth in the Offer to Purchase
dated November 12, 1999 (the "Offer to Purchase"), and the related Letter of
Transmittal (which, together with any amendments or supplements thereto,
collectively constitute the "Offer"). Please furnish copies of the enclosed
materials to those of your clients for whose accounts you hold Shares
registered in your name or in the name of your nominee.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN BY THE EXPIRATION DATE A NUMBER OF SHARES WHICH
WOULD REPRESENT AT LEAST A MAJORITY OF SHARES ISSUED AND OUTSTANDING ON A
FULLY-DILUTED BASIS. THE OFFER IS ALSO SUBJECT TO THE OTHER CONDITIONS SET
FORTH IN THE OFFER TO PURCHASE.
For your information and for forwarding to your clients for whom you hold
Shares registered in your name or in the name of your nominee, or who hold
Shares registered in their own names, we are enclosing the following
documents:
1. Offer to Purchase dated November 12, 1999.
<PAGE>
2. Letter of Transmittal to tender Shares for your use and for the
information of your clients. Facsimile copies of the Letter of Transmittal
(with manual signatures) may be used to tender Shares.
3. Letter to Clients which may be sent to your clients for whose accounts
you hold Shares in your name or in the name of your nominee, with space
provided for obtaining such clients' instructions with regard to the Offer.
4. Notice of Guaranteed Delivery to be used to accept the Offer if
certificates for Shares are not immediately available or time will not
permit all required documents to reach the Depositary on or prior to the
Expiration Date (as defined in the Offer to Purchase), or if the procedures
for book-entry transfer, as set forth in the Offer to Purchase, cannot be
completed on a timely basis.
5. The Letter to Stockholders of the Company from Leonard Chill, the
Chief Executive Officer of the Company, accompanied by the Company's
Solicitation/Recommendation Statement on Schedule 14D-9.
6. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
7. Return envelope addressed to BankBoston, N.A., as Depositary.
Purchaser will not pay any fees or commissions to any broker or dealer or
other person in connection with the solicitation of tenders of Shares pursuant
to the Offer. However, Purchaser will, upon request, reimburse you for
customary mailing and handling expenses incurred by you in forwarding the
enclosed materials to your clients.
Purchaser will pay or cause to be paid any stock transfer taxes payable on
the transfer of Shares to it, except as otherwise provided in Instruction 6 of
the enclosed Letter of Transmittal.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, DECEMBER 10, 1999, UNLESS THE OFFER
IS EXTENDED.
In order to accept the Offer, a duly executed and properly completed Letter
of Transmittal (or manually signed facsimile thereof) and any other required
documents with any required signature guarantees, or an Agent's Message in the
case of a book-entry transfer, should be sent to the Depositary, and
certificates representing the tendered Shares should be delivered, or such
Shares should be tendered by book-entry transfer, all in accordance with the
Instructions set forth in the Letter of Transmittal and the Offer to Purchase.
If holders of Shares wish to tender, but it is impracticable for them to
forward their certificates or other required documents by the Expiration Date,
a tender may be effected by following the guaranteed delivery procedures
specified under Section 3 in the Offer to Purchase.
Any inquires you may have with respect to the Offer should be addressed to
the Information Agent at its address and telephone numbers set forth on the
back cover page of the enclosed Offer to Purchase. Additional copies of the
enclosed materials may be obtained from the Information Agent.
Very truly yours,
D.F. King & Co., Inc.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY PERSON AS AN AGENT OF PARENT, PURCHASER, THE COMPANY, AN AFFILIATE OF
THE FOREGOING, THE DEPOSITARY OR THE INFORMATION AGENT, OR AUTHORIZE YOU OR
ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF ANY
OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED AND THE
STATEMENTS CONTAINED THEREIN.
2
<PAGE>
Offer To Purchase For Cash
All Outstanding Shares Of Common Stock
of
Synthetic Industries, Inc.
at
$33.00 Net Per Share
by
SIND Acquisition, Inc.
a wholly owned subsidiary of
SIND Holdings, Inc.
a corporation formed at the direction of
Investcorp S.A.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT NEW YORK CITY
TIME ON FRIDAY, DECEMBER 10, 1999 UNLESS THE OFFER IS EXTENDED.
November 12, 1999
To Our Clients:
Enclosed for your consideration is an Offer to Purchase dated November 12,
1999 and the related Letter of Transmittal (which, together with any
amendments or supplements thereto, collectively constitute the "Offer")
relating to an offer by SIND Acquisition, Inc., a Delaware corporation
("Purchaser") and wholly owned subsidiary of SIND Holdings, Inc., a Delaware
corporation ("Parent") formed at the direction of Investcorp S.A., a
Luxembourg corporation ("Investcorp"), to purchase all outstanding shares of
common stock, $1.00 par value per share (collectively, the "Shares"), of
Synthetic Industries, Inc., a Delaware corporation (the "Company"), at a
purchase price of $33.00 per Share, net to the seller in cash, without
interest thereon, upon the terms and subject to the conditions set forth in
the Offer.
We are the holder of record of Shares held by us for your account. The
Letter of Transmittal is furnished to you for your information only and cannot
be used by you to tender Shares. A tender of Shares may be made only by us as
the holder of record and pursuant to your instructions.
We request instructions as to whether you wish to tender any or all Shares
held by us for your account, pursuant to the terms and conditions set forth in
the Offer.
Your attention is directed to the following:
1. The tender price is $33.00 per Share, net to the seller in cash,
without interest thereon.
2. The Offer is being made for all outstanding Shares.
3. This Offer is being made pursuant to the terms of an Agreement and
Plan of Merger, dated as of November 5, 1999 (the "Merger Agreement"), by
and among Parent, Purchaser and the Company. The Merger Agreement provides,
among other things, for the making of the Offer by Purchaser, and further
provides that, following the purchase of Shares pursuant to the Offer and
promptly after the satisfaction or
<PAGE>
waiver of certain other conditions, Purchaser will be merged with and into
the Company (the "Merger"). The Company will be the surviving corporation
in the Merger and will continue as a wholly owned subsidiary of Parent.
4. The board of directors of the Company, by unanimous vote at a meeting
duly called and held, has approved the Merger Agreement, the Offer and the
Merger, has determined that the terms of the Offer and the Merger are fair
to and in the best interests of the Company and its stockholders, has
recommended that the Company's stockholders accept and tender their shares
pursuant to the Offer, and has recommended that the Company's stockholders
adopt the Merger Agreement.
5. The Offer and withdrawal rights will expire at 12:00 midnight, New
York City time, on Friday, December 10, 1999, unless extended.
6. The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn by the Expiration Date a number of shares which
would represent at least a majority of Shares issued and outstanding on a
fully-diluted basis. The Offer is also subject to the other conditions set
forth in the Offer to Purchase.
7. Stockholders who tender Shares will not be obligated to pay brokerage
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, transfer taxes on the purchase of Shares by Purchaser pursuant
to the Offer.
8. In all cases, payment for Shares tendered and accepted for payment
pursuant to the Offer will be made only after timely receipt by the
Depositary of (i) the Share Certificates evidencing such Shares (or timely
Book-Entry Confirmation (as defined in the Offer to Purchase) of the book-
entry transfer of such Shares into the Depositary's account at the Book-
Entry Transfer Facility (as defined in the Offer to Purchase) pursuant to
the procedures set forth in Section 3 of the Offer to Purchase), (ii) the
Letter of Transmittal (or a facsimile copy thereof), properly completed and
duly executed, together with any required signature guarantees, or an
Agent's Message (as defined in the Offer to Purchase) in connection with a
book-entry transfer and (iii) any other documents required by the Letter of
Transmittal. Accordingly, payment may not be made to all tendering
stockholders at the same time depending upon when certificates for or
confirmations of book-entry transfer of such Shares into the Depositary's
account at the Book-Entry Transfer Facility are actually received by the
Depositary.
The Offer is made solely by the Offer to Purchase, dated November 12, 1999,
and the related Letter of Transmittal and any amendments and supplements
thereto, and is being made to all holders of Shares. Purchaser is not aware of
any state where the making of the Offer is prohibited by administrative or
judicial action pursuant to any valid statute. If Purchaser becomes aware of
any valid state statute prohibiting the making of the Offer or the acceptance
of the Shares pursuant thereto, Purchaser will make a good faith effort to
comply with such statute or seek to have such statute declared inapplicable to
the Offer. If, after such good faith effort, Purchaser cannot comply with such
state statute, the Offer will not be made to (nor will tenders be accepted
from or on behalf of) holders of Shares in any such state. In any jurisdiction
where securities, blue sky or other laws require the Offer to be made by a
licensed broker or dealer, the Offer shall be deemed to be made on behalf of
Purchaser by one or more registered brokers or dealers licensed under the laws
of such jurisdiction.
If you wish to have us tender any or all of your Shares, please so instruct
us by completing, signing and returning the form set forth on page 3. The
enclosed Letter of Transmittal is furnished to you as an example and should
not be used to tender Shares. An envelope to return your instructions to us is
enclosed. Your instructions to us should be forwarded in ample time to permit
us to submit a tender on your behalf prior to the expiration of the Offer. If
you authorize the tender of your Shares, all such Shares will be tendered
unless otherwise specified on page 3.
2
<PAGE>
Instructions With Respect To
The Offer To Purchase For Cash
All Outstanding Shares Of Common Stock
of
Synthetic Industries, Inc.
at
$33.00 Net Per Share
by
SIND Acquisition, Inc.
a wholly owned subsidiary of
SIND Holdings, Inc.
a corporation formed at the direction of
Investcorp S.A.
The undersigned acknowledge(s) receipt of your letter and the enclosed Offer
to Purchase, dated November 12, 1999, of SIND Acquisition, Inc., a Delaware
corporation ("Purchaser") and wholly owned subsidiary of SIND Holdings, Inc.,
a Delaware corporation formed at the direction of Investcorp S.A., a
Luxembourg corporation ("Investcorp"), and the related Letter of Transmittal
(which, together with any amendments or supplements thereto, collectively
constitute the "Offer"), relating to shares of common stock, $1.00 par value
per share (collectively, the "Shares"), of Synthetic Industries, Inc., a
Delaware corporation.
This will instruct you to tender to Purchaser the number of Shares indicated
below (or, if no number is indicated below, all Shares) held by you for the
account of the undersigned, on the terms and subject to the conditions set
forth in the Offer.
NUMBER OF SHARES TO BE TENDERED: SIGN HERE
_________ SHARES* ____________________________________
____________________________________
Signature(s)
Account Number:_________________ ____________________________________
Please print name(s) here
____________________________________
Please print address(es) here
____________________________________
Area Code and Telephone Number
Dated:_________, 1999 ____________________________________
Tax Identification or Social
Security Number
- --------
* Unless otherwise indicated, it will be assumed that all of your Shares held
by us for your account are to be tendered.
3
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens:
i.e., 000-00-0000. Employer identification numbers have nine digits separated
by only one hyphen: i.e., 00-0000000. The table below will help determine the
number to give the payer.
- ------------------------------------- -------------------------------------
<TABLE>
<CAPTION>
Give the
SOCIAL SECURITY
For this type of account: number of--
- ---------------------------------------------------
<S> <C>
1. An individual's account The individual
2. Two or more individuals The actual owner of
(joint account) the account or, if
combined funds, the
first individual on
the account(1)
3. Husband and wife (joint The actual owner of
account) the account or, if
joint funds, either
person(1)
4. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
5. Adult and minor (joint The adult or, if
account) the minor is the
only contributor,
the minor(1)
6. Account in the name of The ward, minor, or
guardian or committee incompetent
for a designated ward, person(3)
minor, or incompetent
person
7.a. The usual revocable The grantor-
savings trust account trustee(1)
(grantor is also
trustee)
b. So-called trust account The actual owner(1)
that is not a legal or
valid trust under State
law
8. Sole proprietorship The owner(4)
account
- ------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Give the EMPLOYER
IDENTIFICATION
For this type of account: number of--
- ------------------------------------------------
<S> <C>
9. A valid trust, estate, The legal entity
or pension trust (Do not furnish the
identifying number
of the personal
representative or
trustee unless the
legal entity itself
is not designated
in the account
title.)(5)
10. Corporate account The corporation
11. Religious, charitable, The organization
or educational
organization account
12. Partnership account The partnership
held in the name of the
business
13. Association, club, or The organization
other tax-exempt
organization
14. A broker or registered The broker or
nominee nominee
15. Account with the The public entity
Department of
Agriculture in the name
of a public entity
(such as a State or
local government,
school district, or
prison) that receives
agricultural program
payments
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension
trust.
Note: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Page 2
Obtaining a Number
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5 Application for a Social Security Number Card, or
Form SS-4, Application for an Employer Identification Number, at the local
office of the Social Security Administration or the Internal Revenue Service
and apply for a number.
Payees Exempt From Backup Withholding
Payees specifically exempted from backup withholding on ALL payments include
the following:
. A corporation.
. A financial institution.
. An organization exempt from tax under Section 501(a), or an individual
retirement plan.
. The United States or any agency or instrumentality thereof.
. A State, the District of Columbia, a possession of the United States, or
. any subdivision or instrumentality thereof.
. An international organization or any agency, or instrumentality thereof.
. A registered dealer in securities or commodities registered in the U.S. or
a possession of the U.S.
. A real estate investment trust.
. A common trust fund operated by a bank under Section 584(a).
. An exempt charitable remainder trust, or a non-exempt trust described in
Section 4947(a) (1).
. An entity registered at all times under the Investment Company Act of
1940.
. A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
. Payments to nonresident aliens subject to withholding under Section 1441.
. Payments to partnerships not engaged in a trade or business in the U.S.
and which have a least one nonresident alien partner.
. Payments of patronage dividends where the amount received is not paid in
money.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
. Payments of interest on obligations issued by individuals. Note: You may
be subject to backup withholding if this interest is $600 or more and is
paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.
. Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
. Payments described in Section 6049(b)(5) to nonresident aliens.
. Payments on tax-free covenant bonds under Section 1451.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER. WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT
TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS,
ALSO SIGN AND DATE THE FORM.
Certain payments, other than interest, dividends, and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
Privacy Act Notice.--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Payers must generally withhold 31% of taxable
interest, dividend, and certain other payments to a payee who does not furnish
a taxpayer identification number to a payer. Certain penalties may also apply.
Penalties
(1) Penalty for Failure to Furnish Taxpayer Identification Number.--If you
fail to furnish your taxpayer identification number to a payer, you are
subject to a penalty of $50 for each such failure unless your failure is due
to reasonable cause and not to willful neglect.
(2) Failure to Report Certain Dividend and Interest Payments.--If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 5% on any portion of an
underpayment attributable to that failure unless there is clear and convincing
evidence to the contrary.
(3) Civil Penalty for False Information With Respect to Withholding.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) Criminal Penalty for Falsifying Information.--Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE>
Exhibit (a)(7)
This announcement is neither an offer to purchase nor a solicitation of an
offer to sell Shares (as defined below). The Offer is made solely by the
Offer to Purchase, dated November 12, 1999, and the related Letter of
Transmittal and any amendments and supplements thereto, and is being made
to all holders of Shares. SIND Acquisition, Inc. is not aware of any state
where the making of the Offer is prohibited by administrative or judicial
action pursuant to any valid statute. If SIND Acquisition, Inc. becomes
aware of any valid state statute prohibiting the making of the Offer or
the acceptance of the Shares pursuant thereto, SIND Acquisition, Inc.
will make a good faith effort to comply with such statute or seek to
have such statute declared inapplicable to the Offer. If, after such
good faith effort, SIND Acquisition, Inc. cannot comply with such
state statute, the Offer will not be made to (nor will tenders be
accepted from or on behalf of) holders of Shares in any such state.
In any jurisdiction where securities, blue sky or other laws
require the Offer to be made by a licensed broker or dealer, the
Offer shall be deemed to be made on behalf of SIND Acquisition,
Inc. by one or more registered brokers or dealers licensed under
the laws of such jurisdiction.
Notice Of Offer To Purchase For Cash
All Outstanding Shares of Common Stock
of
Synthetic Industries, Inc.
at
$33.00 Net Per Share
by
SIND Acquisition, Inc.
a wholly owned subsidiary of
SIND Holdings, Inc.
a corporation formed at the direction of
Investcorp S.A.
SIND Acquisition, Inc., a Delaware corporation ("Purchaser") and wholly
owned subsidiary of SIND Holdings, Inc., a Delaware corporation ("Parent")
formed at the direction of Investcorp S.A., a Luxembourg corporation
("Investcorp"), is offering to purchase all outstanding shares of common
stock, $1.00 par value per share (collectively, the "Shares"), of Synthetic
Industries, Inc., a Delaware corporation (the "Company"), at a purchase price
of $33.00 per Share, net to the seller in cash, without interest thereon, upon
the terms and subject to the conditions set forth in the Offer to Purchase
dated November 12, 1999 (the "Offer to Purchase"), and in the related Letter
of Transmittal (which, together with any amendments or supplements thereto,
collectively constitute the "Offer").
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, DECEMBER 10, 1999, UNLESS THE OFFER IS EXTENDED.
The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn by the Expiration Date (as defined below) a number
of shares which would represent at least a majority of Shares issued and
outstanding on a fully-diluted basis. The Offer is also subject to the other
conditions set forth in the Offer to Purchase.
1
<PAGE>
The Offer is being made pursuant to the terms of an Agreement and Plan of
Merger, dated as of November 5, 1999 (the "Merger Agreement"), by and among
Parent, Purchaser and the Company. Among other things, the Merger Agreement
provides for the making of the Offer and that, following the purchase of
Shares pursuant to the Offer and on the second business day following or as
soon as practicable after the satisfaction or waiver of certain other
conditions, Purchaser will be merged with and into the Company (the "Merger").
Following the Merger, the Company will continue as the surviving corporation
and a wholly owned subsidiary of Parent (the "Surviving Corporation"). At the
effective time of the Merger, each outstanding Share (except for Shares owned
by the Company, Parent or Purchaser, or by any subsidiary of the Company or
Parent, and except for Shares, if any, held by the Company's stockholders who
have properly exercised appraisal rights under Delaware law), will be
converted into the right to receive the Offer Price, net to the holder in
cash, without interest thereon (the "Merger Consideration"). The Merger
Agreement is more fully described in Section 11 of the Offer to Purchase.
In connection with the Merger Agreement, Parent and Purchaser have entered
into a Stockholder Agreement with Synthetic Industries, L.P. (the
"Stockholder"), which owns 5,699,194 outstanding Shares, representing
approximately 65.8% of the issued and outstanding Shares. Pursuant to the
Stockholder Agreement, the Stockholder has agreed to promptly tender to
Purchaser and not withdraw all Shares owned by the Stockholder, has agreed to
vote such Shares in favor of approval of the Merger Agreement and the
transactions contemplated thereby and against specified acquisition proposals
and specified actions and has granted an irrevocable proxy to Purchaser with
respect to such Shares. The Stockholder Agreement is more fully described in
Section 11 of the Offer to Purchase.
The board of directors of the Company (the "Company Board"), by unanimous
vote at a meeting duly called and held, has approved the Merger Agreement, the
Offer and the Merger, has determined that the terms of the Offer and the
Merger are fair to and in the best interests of the Company and its
stockholders, has recommended that the Company's stockholders accept and
tender their shares pursuant to the Offer, and has recommended that the
Company's stockholders adopt the Merger Agreement. The factors considered by
the Company Board in arriving at its decision to approve the Merger Agreement,
the Stockholder Agreement, the Offer, the Merger and the other transactions
contemplated by the Merger Agreement and the Stockholder Agreement and to
recommend that stockholders of the Company accept and tender their shares
pursuant to the Offer are described in the Company's
Solicitation/Recommendation Statement on Schedule 14D-9, which is being mailed
to stockholders of the Company and filed with the Securities and Exchange
Commission (the "Commission").
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered to Purchaser and not
withdrawn as, if and when Purchaser gives oral or written notice to
BankBoston, N.A., as Depositary (in such capacity, the "Depositary") of
Purchaser's acceptance for payment of such Shares. In all cases, upon the
terms and subject to the conditions of the Offer, payment for Shares so
accepted for payment will be made by the deposit of the purchase price
therefor with the Depositary, which will act as agent for tendering
stockholders for the purpose of receiving payment from Purchaser and
transmitting payment to validly tendering stockholders. In all cases, payment
for Shares tendered and accepted for payment pursuant to the Offer will be
made only after timely receipt by the Depositary of (i) the certificates
evidencing such Shares (the "Share Certificates") (or timely Book-Entry
Confirmation (as defined in the Offer to Purchase) of the book-entry transfer
of such Shares into the Depositary's account at the Book-Entry Transfer
Facility (as defined in the Offer to Purchase) pursuant to the procedures set
forth in Section 3 of the Offer to Purchase), (ii) the Letter of Transmittal
(or a facsimile copy thereof), properly completed and duly executed, together
with any required signature guarantees, or an Agent's Message (as defined in
the Offer to Purchase) in connection with a book-entry transfer and (iii) any
other documents required by the Letter of Transmittal. Under no circumstances
will interest be paid by Purchaser on the purchase price of the Shares
tendered pursuant to the Offer, regardless of any extension of the Offer or
any delay in making such payment.
Consummation of the Merger is subject to receipt of applicable regulatory
approvals, if any, and the satisfaction or waiver of a number of other
conditions, including the approval by the stockholders of the
2
<PAGE>
Company if such approval is required by applicable law. See Section 15 of the
Offer to Purchase. If Purchaser acquires a majority of the outstanding Shares,
it will have sufficient voting power to approve and adopt the Merger Agreement
and the Merger without the vote of any other stockholder of the Company. If
Purchaser acquires at least 90% of the outstanding Shares, Purchaser intends
to approve and consummate the Merger without any action by, or any further
prior notice to, the nontendering stockholders of the Company pursuant to
Section 253 of the Delaware General Corporation Law.
The term "Expiration Date" means 12:00 midnight, New York City time, on
Friday, December 10, 1999, unless and until Purchaser, subject to restrictions
contained in the Merger Agreement, has extended the period of time during
which the Offer is open, in which event the term "Expiration Date" means the
latest time and date at which the Offer, as so extended by Purchaser, will
expire.
Subject to the applicable rules and regulations of the Commission and
subject to the terms and conditions of the Merger Agreement, Purchaser
expressly reserves the right, at any time and from time to time, upon the
failure to be satisfied of any of the conditions to the Offer, to (i)
terminate or amend the Offer, (ii) extend the Offer and postpone acceptance
for payment of any Shares or (iii) waive any condition, by giving oral or
written notice of such termination, amendment, extension or waiver to the
Depositary. During any such extension, all Shares previously tendered and not
properly withdrawn will remain subject to any such extension and will remain
tendered, subject to the right of a tendering stockholder to withdraw such
stockholder's Shares. Any extension of the Offer will be followed by a public
announcement thereof no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date. During any such
extension, all Shares previously tendered and not properly withdrawn will
remain subject to any such extension and will remain tendered, subject to the
right of a tendering stockholder to withdraw such stockholder's Shares.
Shares tendered pursuant to the Offer may be withdrawn at any time on or
prior to the Expiration Date and, unless theretofore accepted for payment by
Purchaser as provided in this Offer to Purchase, may also be withdrawn at any
time after January 10, 2000. For a withdrawal to be effective, a written,
telegraphic or facsimile transmission notice of withdrawal must be timely
received by the Depositary at one of its addresses set forth on the back cover
of the Offer to Purchase. Any notice of withdrawal must specify the name of
the person who tendered the Shares to be withdrawn, the number of Shares to be
withdrawn and the name of the registered holder of the Shares to be withdrawn
as set forth on such Share Certificates if different from the name of the
person who tendered such Shares. If Share Certificates have been delivered or
otherwise identified to the Depositary, then, prior to the physical release of
such Share Certificates, the serial numbers shown on such Share Certificates
must be furnished to the Depositary and, unless such Shares have been tendered
by an Eligible Institution (as defined in the Offer to Purchase), the
signatures on the notice of withdrawal must be guaranteed by an Eligible
Institution. If Shares have been delivered pursuant to the procedures for
book-entry transfer described in Section 3 of the Offer to Purchase, any
notice of withdrawal must specify the name and number of the account at the
Book-Entry Transfer Facility to be credited with such withdrawn Shares and
otherwise comply with the Book-Entry Transfer Facility's procedures for
withdrawal, in which case a notice of withdrawal will be effective if
delivered to the Depositary by any method of delivery described in the first
sentence of this paragraph. Withdrawals of tendered Shares may not be
rescinded, and any Shares properly withdrawn will thereafter be deemed not
validly tendered for purposes of the Offer. However, withdrawn Shares may be
retendered by following one of the procedures described in Section 3 of the
Offer to Purchase at any time on or prior to the Expiration Date. All
questions as to the form and validity (including time of receipt) of notices
of withdrawal will be determined by Purchaser in its sole discretion, and its
determination will be final and binding.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the
Securities Exchange Act of 1934, as amended, is contained in the Offer to
Purchase and is incorporated herein by reference.
The Company has provided Purchaser with its stockholder list and security
position listings for the purpose of disseminating the Offer to holders of
Shares. The Offer to Purchase, the related Letter of Transmittal and other
relevant documents will be mailed to record holders of Shares whose names
appear on the stockholder list and
3
<PAGE>
will be furnished to brokers, dealers, commercial banks, trust companies and
similar persons whose names, or the names of whose nominees, appear on the
Company's stockholder lists or, if applicable, who are listed as participants
in a clearing agency's security position listing, for subsequent transmittal
to beneficial owners of Shares.
The Offer to Purchase and the related Letter of Transmittal contain
important information which should be read carefully before any decision is
made with respect to the Offer.
Questions and requests for assistance may be directed to the Information
Agent, at its address and telephone numbers set forth below. Requests for
copies of the Offer to Purchase, the Letter of Transmittal and other related
materials may be directed to the Information Agent or to brokers, dealers,
commercial banks or trust companies and copies will be furnished promptly at
Purchaser's expense. No fees or commissions will be paid to any broker or
dealer or other person for soliciting tenders of Shares pursuant to the Offer.
The Information Agent for the Offer is:
D.F. KING & CO., INC.
77 Water Street
New York, NY 10005-4495
Banks and Brokers Call Collect: (212) 269-5550
All Others Call Toll-Free: (888) 246-5358
November 12, 1999
4
<PAGE>
Exhibit (a)(8)
INVESTCORP TO ACQUIRE SYNTHETIC INDUSTRIES, INC.
FOR $33.00 PER SHARE IN CASH
CHICKAMAUGA, GA and NEW YORK, NY - NOVEMBER 5, 1999 - Synthetic Industries, Inc.
(NASDAQ: SIND) today announced that it has entered into a definitive merger
agreement with SIND Holdings, Inc., a company organized by Investcorp, a global
investment group, and certain international co-investors, under which SIND
Holdings will acquire outstanding Synthetic shares for $33 per share in cash,
representing a 13.6 percent premium to the value of the Company's shares at the
close of trading on November 4, 1999, and over a 60 percent premium to the
average trading price of Synthetic shares in the 30 days preceding the public
announcement of the initiation of the sale process. The total value of the
transaction is approximately $535 million, based on 9.2 million fully diluted
shares outstanding, as well as the assumption or repayment of approximately $230
million in Synthetic debt. The acquisition is scheduled to close by mid-
December 1999.
The proposed acquisition concludes a sale process commenced in May 1999 by a
committee of independent members of the Company's Board of Directors. The sale
process was initiated in accordance with the terms of a settlement agreement
relating to two civil suits involving the Company and the general partner of
Synthetic Industries, L.P., a limited partnership which currently owns
approximately 65% of the common stock of Synthetic Industries, Inc. Synthetic
Industries, L.P. has agreed to tender its shares in the offer.
The transaction will be structured as a cash tender offer for all outstanding
Synthetic shares followed by a merger in which all nontendering Synthetic
shareholders will receive $33 per share. The tender offer will be made by a
wholly-owned subsidiary of SIND Holdings and will be commenced within the next
several days. The transactions are subject to customary conditions.
Christopher O'Brien, a member of Investcorp's Management Committee, said,
"Synthetic Industries possesses all of the attributes we look for in our
investments: an excellent management team; a sharp focus on customers' needs
supported by strong product development; and exceptional growth prospects. We
look forward to partnering with Synthetic's senior management team as they
continue to grow the Company and its broad offerings of commercially successful
products."
<PAGE>
Leonard Chill, Chairman and Chief Executive Officer of Synthetic Industries,
Inc. said: "We look forward to working with Investcorp as we continue to grow
the Company with new product initiatives that we believe will increase the
Company's presence in a range of its target markets."
Beacon Group Capital Services, LLC acted as the Company's financial advisor in
the sale process.
Synthetic Industries manufactures and markets a wide range of high performance
fabrics and fibers designed for support, strength and stabilization
applications. The Company operates in three primary markets: construction
materials, carpet backing and technical textiles. Specific products include
geotextiles, erosion control products, concrete reinforcement fibers, carpet
backing, filtration media, and furniture construction fabrics. The Company,
which is based in Chickamauga, Georgia, operates from eight manufacturing
facilities and employs over 2,700 people. Additional information about
Synthetic Industries may be found at www.Sind.com.
------------
Investcorp is a global investment group with offices in New York, London and
Bahrain. It focuses on three lines of business: corporate investment, real
estate investment and asset management. The firm has completed over 50
corporate acquisitions with an aggregate value of approximately $13 billion.
In the U.S., Investcorp and its clients currently own 10 corporate investments,
including Stratus Computer, Werner Holdings, Falcon Building Products,
NationsRent, Inc. and The William Carter Company. Several North American
investments have been listed on the New York Stock Exchange, including Prime
Service, Tiffany & Co., the Circle K Corporation, Saks Fifth Avenue and CSK
Auto. In Europe, Investcorp and its clients currently own seven corporate
investments, including Avecia (formerly Zeneca Specialties), Leica Geosystems,
Polestar, Welcome Break and Helly Hansen. Additional information about
Investcorp may be found at www.Investcorp.com.
------------------
Contacts: Investcorp Synthetic Industries, Inc.
---------- --------------------------
Todd Fogarty/Jim Fingeroth Cheryl Schneider/John Blackwell
Kekst and Company Morgen-Walke Associates
212-521-4800 212-850-5600
# # #
<PAGE>
Exhibit (b)(1)
BEAR STEARNS COPORATE LENDING INC.
BEAR, STEARNS & CO. INC.
245 Park Avenue
New York, New York 10167
THE CHASE MANHATTAN BANK
CHASE SECURITIES INC.
270 Park Avenue
New York, New York 10017
November 2, 1999
Investcorp Investment Equity Limited,
on its own behalf and on behalf of
certain of its affiliates and other
international investors
c/o Investcorp Bank E.C.
P.O. Box 5460
Bahrain
Attention of Mr. Sean Madden
Project Poly
------------
Senior Subordinated Credit Facility
-----------------------------------
Commitment Letter
-----------------
Ladies and Gentlemen:
You have advised Bear Stearns Corporate Lending Inc. ("BSCL"), Bear,
----
Stearns & Co. Inc. ("Bear Stearns"), The Chase Manhattan Bank ("Chase" and,
------------ -----
together with BSCL, the "Banks") and Chase Securities Inc. ("CSI" and, together
----- ---
with Bear Stearns, the "Co-Arrangers") that Investcorp S.A., on its own behalf
------------
and on behalf of certain of its affiliates (collectively, "Sponsor" or
-------
"Investcorp") and other international investors, intends to: (a) form a holding
- -----------
company ("Holdings") which, through a wholly-owned acquisition vehicle ("Merger
-------- ------
Co"), will make a tender offer (the "Tender Offer") for 100% of the issued and
- -- ------------
outstanding capital stock of Synthetic Industries, Inc., a Delaware corporation
(the "Company"), and (b) consummate the Acquisition and the other Transactions
-------
(such terms and each other capitalized term used but not defined herein having
the meanings assigned to them in the Summary of Principal Terms and Conditions
attached hereto as Exhibit A (the "Term Sheet")).
----------
You have requested that (a) the Co-Arrangers agree to structure, arrange
and syndicate the Facility and serve as the advisors, joint-lead arrangers and
joint-book managers for the Facility, (b) the Banks commit to provide the entire
principal amount of the Facility and (c) the Banks agree to serve as the joint-
administrative agents, joint-syndication agents and joint-documentation agents
for the Facility.
<PAGE>
In connection with the foregoing, (a) BSCL is pleased to advise you of its
commitment to provide 50% of the principal amount of the Facility, upon the
terms and subject to the conditions set forth or referred to in this Commitment
Letter and in the Term Sheet and (b) Chase is pleased to advise you of its
commitment to provide 50% of the principal amount of the Facility, upon the
terms and subject to the conditions set forth or referred to in this Commitment
Letter and in the Term Sheet. You hereby appoint the Co-Arrangers to act, and
the Co-Arrangers hereby agree to act, as advisors, joint-lead arrangers and
joint-book managers for the Facility on the terms set forth or referred to in
this Commitment Letter and in the Term Sheet.
It is understood and agreed that the Banks will act as the joint-
administrative agents, joint-syndication agents and joint-documentation agents
for the Facility and will perform the duties customarily associated with such
roles. It is further understood and agreed that (a) other than the Initial
Lenders (as defined below), no additional agents, co-agents, advisors, co-
advisors, arrangers, co-arrangers, book managers or co-book managers will be
appointed, and no other titles will be awarded, in connection with the Facility
without the approval of the Banks and the Co-Arrangers and (b) no Lender (as
defined below) will receive compensation outside the terms contained herein, in
the Term Sheet and in the Fee Letter referred to below in order to obtain its
commitment to participate in the Facility.
Each Bank reserves the right, prior to or after the execution of definitive
documentation for the Facility, to syndicate through the Co-Arrangers, in
accordance with the last two sentences of this paragraph, all or a portion of
its commitment hereunder to one or more financial institutions or Permitted
Assignees that will become parties to such definitive documentation (the
financial institutions or Permitted Assignees becoming parties to such
definitive documentation being collectively called the "Lenders"). Upon the
-------
acceptance of the commitment of any Lender to provide a portion of the Facility,
each Bank, at its option, shall be released and relieved from a portion of its
commitment in an amount equal to 50% of the commitment of such Lender. As used
herein, "Permitted Assignee" means (i) any "qualified institutional buyer" (as
------------------
defined in Rule 144A), (ii) any "accredited investor" (as defined in Section
2(15) of the Securities Act of 1933, as amended), or (iii) the Mayer Fund I, a
bridge lending fund managed by one of BSCL's affiliates and in which it
participates as an investor through a separate affiliate (the "Mayer Fund").
----------
You understand that the Banks intend to commence syndication efforts promptly,
and you agree actively to assist the Banks and the Co-Arrangers in completing a
timely and orderly syndication satisfactory to the Co-Arrangers. Such
assistance shall include (a) your using commercially reasonable efforts to
ensure that the Co-Arrangers' syndication efforts benefit from your existing
lending relationships and those of the Company, (b) direct contact during the
syndication between your senior management, representatives and advisors and
those of the Company, on the one hand, and the proposed Lenders, on the other
hand, (c) you and the Company providing assistance (including the use of your
reasonable best efforts to cause your and its affiliates and advisors to provide
assistance) in the preparation of a Confidential Information Memorandum for the
Facility and other marketing materials to be used in connection with the
syndication and (d) the hosting, with the Co-Arrangers, of one or more meetings
of prospective Lenders at mutually convenient times and locations. To the
extent that the syndication of any credit facility (other than the Senior
Facilities) in connection with any other Sponsor investment could disrupt or
otherwise interfere with the orderly syndication of the
2
<PAGE>
Facility, it is understood and agreed that you will provide the Co-Arrangers
with reasonable prior notice of the syndication of such other credit facility
and, upon the Banks' or the Co-Arrangers' request, coordinate the syndication of
such credit facility with the syndication of the Facility, provided that the
foregoing shall not apply to the syndication of the senior credit facility and
subordinated bridge facilities for a currently pending acquisition of which the
Co-Arrangers have been advised (the "Pending Financings"). It is understood and
------------------
agreed that (a) the Company or the Sponsor may, prior to or during the
syndication of the Facility, propose that certain additional financial
institutions (collectively with the Banks, the "Initial Lenders") purchase on a
---------------
pro rata basis from the Banks, with the Banks' consent (not to be unreasonably
withheld), a portion (not to exceed 25%) of the Banks' aggregate commitment
hereunder and (b) no such purchase of a portion of the Banks' commitment
hereunder shall affect the Banks' right to syndicate all or a portion of their
remaining commitment hereunder (and, if the Co-Arrangers so agree with the other
Initial Lenders, the commitments of the Initial Lenders). It is agreed, however,
that the Sponsor shall have the right to consent (such consent not to be
unreasonably withheld) to any assignment prior to the Closing Date of the Banks'
or any other Initial Lender's commitment under or syndication of the Facility to
the extent that such assignment or syndication would result in greater than 49%
of the aggregate principal amount of the commitments in respect of the Facility
being held by Lenders other than the Initial Lenders (or, if there are no other
Initial Lenders, the Banks).
It is understood and agreed that the Co-Arrangers will, in consultation
with you, manage all aspects of the syndication of the Facility, including
determination of the potential Lenders to be approached and when the Co-
Arrangers will approach such potential Lenders, final selection of Lenders,
determination of the time of acceptance of the Lenders' commitments, any naming
rights and the final allocation of commitments among the Lenders. It is also
understood and agreed that the amount and distribution of fees among the Lenders
(other than the Initial Lenders) will be at the Co-Arrangers' discretion. To
assist the Co-Arrangers in their syndication efforts, you agree promptly to
cause the Company to provide to the Banks and the Co-Arrangers all information
with respect to Holdings and the Company and their respective subsidiaries, the
Transactions and the other transactions contemplated hereby, including all
financial information and projections (the "Projections") as they may reasonably
-----------
request in connection with the structuring, arrangement and syndication of the
Facility. You hereby represent and covenant that (a) all information other than
information of a general economic nature or the Projections (the "Information")
-----------
that has been or will be made available to the Banks or the Co-Arrangers by or
on behalf of you, Holdings or the Company or any of your or its authorized
representatives, when taken as a whole, is or will be (after giving effect to
all written updates thereto delivered to the Banks and the Co-Arrangers prior to
the Closing Date), when furnished, complete and correct in all material respects
and does not or will not, when furnished, contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements contained therein not materially misleading in light of the
circumstances under which such statements are made and (b) the Projections that
have been or will be made available to the Banks or the Co-Arrangers by or on
behalf of you, Holdings or the Company or any of your or its authorized
representatives have been or will be prepared in good faith based upon
assumptions believed by you to be reasonable at the time made and at the time
the related Projections are made available to the Banks or the Co-Arrangers (it
being understood that the Projections are subject to
3
<PAGE>
significant uncertainties and contingencies, many of which are beyond your and
Holding's and the Company's control, and that no assurance can be given that
such Projections will be realized). You agree that if, at any time from and
including the date hereof until the Closing Date, any of the representations in
the preceding sentence would be incorrect if the Information and the Projections
were being furnished, and such representations were being made, at such time,
then you will promptly supplement the Information and the Projections so that
such representations will be correct under those circumstances. In arranging the
Facility including the syndication of the Facility, the Banks and the Co-
Arrangers will be entitled to use and rely primarily on the Information and the
Projections without responsibility for independent verification thereof.
As consideration for the Banks' commitment hereunder and the Co-Arrangers'
agreement to structure, arrange and syndicate the Facility and to provide
advisory services in connection therewith, you agree to pay (and to cause
Holdings or the Company to pay) to the Banks the fees as set forth in the Term
Sheet and in the Fee Letter dated the date hereof and delivered herewith (the
"Fee Letter"). Once paid, such fees shall not be refundable under any
----------
circumstances. You agree that no compensation (other than that expressly
contemplated by the Term Sheet and the Fee Letter) will be paid in connection
with the Facility unless you and we shall so agree.
The commitment of the Banks hereunder and the agreement of the Co-Arrangers
to perform the services described herein are subject to (a) the Banks not having
discovered or otherwise becoming aware of Information or Projections not
previously disclosed to the Banks that the Banks reasonably believe to be
materially inconsistent with their understanding, based on the Information or
Projections provided to the Banks prior to the date hereof, of the business,
operations, properties, assets, condition (financial or otherwise), contingent
liabilities, material agreements or results of operations of Holdings, the
Company and their respective subsidiaries, taken as a whole, (b) there not
having occurred and being continuing, as reasonably determined by the Banks, a
material disruption of or material adverse change in financial, banking or
capital market (including, without limitation, high-yield market) conditions
since the date hereof, (c) the Banks' satisfaction that, prior to and during the
syndication of the Facility, there shall be no competing issues of debt
securities or commercial bank or other credit facilities of Holdings and the
Company and their respective subsidiaries being offered, placed or arranged
(other than the Senior Facilities and the Pending Financings), (d) the Banks'
reasonable satisfaction in all respects (i) that the structure of the
Acquisition and of the other Transactions are consistent with the terms set
forth in this Commitment Letter and the exhibits hereto and are otherwise
reasonably satisfactory to the Banks with respect to all tax, legal and
environmental matters and the accounting treatment related thereto, (ii) with
the material terms of the agreements to be entered into in connection with the
Transactions and (iii) with the capitalization, structure and equity ownership
of Holdings, the Company and their respective subsidiaries after giving effect
to the Transactions (except that, to the extent reflected herein or previously
disclosed to the Banks or the Co-Arrangers in writing, the capitalization,
structure and equity ownership terms of the Company shall be deemed
satisfactory), (e) the negotiation, execution and delivery of definitive
documentation with respect to the Facility reasonably satisfactory to the Banks,
their counsel and you, (f) there not having occurred a material adverse change
in the business, operations, properties, assets, condition (financial or
otherwise), contingent liabilities, material agreements or results of operations
of Holdings, the Company and their respective subsidiaries,
4
<PAGE>
taken as a whole, since September 30, 1998 and (g) the other conditions set
forth in the Term Sheet. Those matters that are not covered by or made clear
under the provisions hereof and of the Term Sheet will be addressed in
definitive documentation satisfactory to the Banks, the Co-Arrangers, you,
Holdings and the Company.
Whether or not the Initial Loans are consummated, the Sponsor hereby agrees
to, and effective upon the closing of the Tender Offer, agrees to cause the
Borrower to (a) reimburse the Banks for all reasonable fees and disbursements of
counsel and all of the Banks' reasonable out-of-pocket expenses, in each case
incurred in connection with this Commitment Letter, the Fee Letter and the
Transactions or otherwise arising out of the Banks' commitment hereunder
(excluding costs and expenses excluded under paragraph 5(d) of the Engagement
Letter) and (b) defend, indemnify and hold harmless the Banks, the Lenders and
each of the other Indemnified Persons identified and as set forth in the
indemnification provisions attached as Exhibit B hereto (the "Indemnification
---------------
Provisions") and hereby made a part hereof as though fully set forth herein.
- ----------
The obligations of the Sponsor and the Borrower under this paragraph shall
survive expiration or termination of this Commitment Letter.
You acknowledge that the Banks, the Co-Arrangers and their affiliates may
be providing debt financing, equity capital or other services (including
financial advisory services) to other companies in respect of which you may have
conflicting interests regarding the transactions described herein and otherwise.
Neither the Banks, the Co-Arrangers nor any of their affiliates will use
confidential information obtained from you, Holdings or the Company by virtue of
the transactions contemplated by this Commitment Letter or its other
relationships with you in connection with the performance by the Banks, the
Co-Arrangers or any of their affiliates of services for other companies, and
neither the Banks, the Co-Arrangers nor any of their affiliates will furnish any
such information to other companies. You also acknowledge that neither the
Banks, the Co-Arrangers nor any of their affiliates has any obligation to use in
connection with the transactions contemplated by this Commitment Letter, or to
furnish to you, Holdings or the Company, confidential information obtained by
either the Banks, the Co-Arrangers or any of their affiliates from other
companies.
You agree to cause Holdings and the Company to comply with each of its
respective obligations hereunder and under the Fee Letter.
This Commitment Letter and the Banks' commitment hereunder shall not be
assignable by you without the prior written consent of the Banks and the
Co-Arrangers, and any attempted assignment without such consent shall be void;
provided, however, that this Commitment Letter, the Banks' commitment hereunder
- -------- -------
and the Fee Letter may be assigned by you to Merger Co and the Company pursuant
to an instrument in writing reasonably satisfactory to the Banks and the
Co-Arrangers, so long as you remain liable for all your obligations hereunder
and thereunder. This Commitment Letter may not be amended or any provision
hereof waived or modified except by an instrument in writing signed by the
Banks, the Co-Arrangers and you. This Commitment Letter may be executed in any
number of counterparts, each of which shall be an original and all of which,
when taken together, shall constitute one agreement. Delivery of an executed
counterpart of a signature page of this Commitment Letter by facsimile
transmission shall be
5
<PAGE>
effective as delivery of a manually executed counterpart of this Commitment
Letter. This Commitment Letter is intended to be solely for the benefit of the
parties hereto and is not intended to confer any benefits upon, or create any
rights in favor of, any person other than the parties hereto. This Commitment
Letter shall be governed by, and construed in accordance with, the laws of the
State of New York.
You agree that you will not disclose this Commitment Letter, the Fee Letter
or the Term Sheet, the contents of any of the foregoing or the activities of the
Banks or the Co-Arrangers pursuant thereto to any person without prior written
approval of the Banks and the Co-Arrangers (such approval not to be unreasonably
withheld) except that (a) you may disclose this Commitment Letter, the Fee
Letter or the Term Sheet and the contents hereof and thereof (i) to your
officers, employees, attorneys and advisors on a confidential and need to know
basis and (ii) as required by applicable law, applicable regulation (including
in the case of this Commitment Letter and the Term Sheet (but not the Fee Letter
or the contents thereof), as deemed necessary by your counsel in connection with
the Tender Offer and the Debt Tender Offer (as defined in the Term Sheet)) or
compulsory legal process (in which case you will promptly notify the Banks and
the Co-Arrangers thereof) and (b) you may disclose this Commitment Letter and
the Term Sheet and the contents hereof and thereof (but not the Fee Letter or
the contents thereof) to the Company and its attorneys and advisors on a
confidential basis in connection with the Transactions and on a confidential and
need-to-know basis. The provisions contained in this paragraph shall remain in
full force and effect notwithstanding the termination of this Commitment Letter
or the Banks' commitment hereunder.
Notwithstanding any provision herein to the contrary, from and after the
Closing Date, the Sponsor shall be automatically released from each and all of
its obligations under this Commitment Letter, including the Indemnification
Provisions, other than those relating to confidentiality (without any further
action on the part of any person or entity) and all references herein to the
term "the Sponsor" or "you" shall be deemed to be a reference to the Company
exclusively; provided that the Sponsor shall have delivered to the Lenders
--------
documents reasonably satisfactory in all material respects to the Lenders which
provide for the assumption by the Company of each and all of the Sponsor's
obligations under this Commitment Letter.
Please indicate your acceptance of the terms hereof and of the Fee Letter
by signing in the appropriate space below and in the Fee Letter and returning to
the Banks the enclosed duplicate originals (or facsimiles) of this Commitment
Letter and the Fee Letter not later than 5:00 p.m., New York City time, on
November 7, 1999. The Banks' commitment hereunder will expire at such time in
the event that the Banks have not received such executed duplicate originals (or
facsimiles) in accordance with the immediately preceding sentence. In the event
that the initial borrowing in respect of the Facility does not occur on or
before January 31, 2000, then this Commitment Letter and the Banks' commitment
hereunder shall automatically terminate unless the Banks and the Co-Arrangers
shall, in their discretion, agree in writing to an extension. The compensation,
reimbursement, confidentiality and indemnification provisions contained herein
and in the Fee Letter shall remain in full force and effect regardless of
whether definitive financing documentation shall be executed and delivered and
notwithstanding the termination of this Commitment Letter or the Banks'
commitment hereunder.
6
<PAGE>
Neither this Commitment Letter nor the Fee Letter creates, nor shall either
of them be construed as creating, any rights enforceable by a person or entity
not a party hereto, except for you and the Borrower and as provided in the
Indemnification Provisions. The Sponsor, on behalf of itself and the Borrower,
acknowledges and agrees that they have been advised by counsel in the
negotiation, execution and delivery of this Commitment Letter, the Fee Letter
and the other agreements and transactions contemplated hereby, that neither of
the Banks or the Co-Arrangers has any fiduciary relationship with or duty to the
Sponsor, the Company or the Borrower or any other person arising out of or in
connection with this Commitment Letter, the Fee letter or any of the other
agreements or transactions contemplated hereby and that neither of the Banks or
the Co-Arrangers has been retained to advise or has advised the Sponsor, the
Company or the Borrower or any other person regarding the wisdom, prudence or
advisability of entering into or consummating the Transactions.
No party hereto shall be liable for any special, indirect or consequential
damages or, to the fullest extent that a claim for punitive damages may lawfully
be waived, for any punitive damages on any claim (whether founded in contract,
tort, legal duty or any other theory of liability) arising from or related in
any manner to this Commitment Letter or the negotiation, execution,
administration, performance, breach or enforcement of this Commitment Letter,
the Facility or the instruments and agreements evidencing, governing or relating
to the other Transactions contemplated hereby or any amendment thereto or the
funding of the Loans or the consummation of, or any failure to consummate, any
of the Transactions or any act, omission, breach or wrongful conduct in any
manner related thereto.
If any term, provision, covenant or restriction contained in this letter
agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable or against public policy, the remainder of the terms, provisions,
covenants and restrictions contained herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated. You, Holdings,
the Company and the Co-Arrangers shall endeavor in good faith negotiations to
replace the invalid, void or unenforceable provisions with valid provisions the
economic effect of which comes as close as possible to that of the invalid, void
or unenforceable provisions.
You and the Borrower irrevocably and unconditionally submit to the
exclusive jurisdiction of any state or federal court sitting in the City of New
York over any suit, action or proceeding arising out of or relating to this
letter agreement or any Transaction. You and the Borrower hereby agree that
service of any process, summons, notice or document by registered mail addressed
to you or the Borrower, as applicable, shall be effective service of process for
any suit, action or proceeding brought in any such court. You and the Borrower
irrevocably and unconditionally waive any objection to the laying of venue of
any such suit, action or proceeding brought in any such court and any claim that
any such suit, action or proceeding has been brought in an inconvenient forum.
You and the Borrower agree that a final judgment in any such suit, action or
proceeding brought in any such court shall be conclusive and binding upon you or
the Borrower and may be enforced in any other courts to whose jurisdiction you
or the Borrower are or may be subject, by suit upon judgment. Each of you, the
Borrower, the Banks and the Co-Arrangers irrevocably agree to waive trial by
jury in any suit, action, proceeding, claim or
7
<PAGE>
counterclaim brought by or on behalf of any party related to or arising out of
this letter agreement.
[This Space Left Intentionally Blank]
8
<PAGE>
The Banks and the Co-Arrangers are pleased to have been given the
opportunity to assist you in connection with the financing for the Transactions.
Very truly yours,
BEAR STEARNS CORPORATE LENDING INC.
By: /s/ Donald R. Mullen
--------------------
Name: Donald R. Mullen
Title: Senior Managing Director
BEAR, STEARNS & CO. INC.
By: /s/ Daniel A. Celentano
----------------------
Name: Daniel A. Celentano
Title: Senior Managing Director
THE CHASE MANHATTAN BANK
By: /s/ Laurie R. Perper
--------------------
Name: Laurie R. Perper
Title: Vice President
CHASE SECURITIES INC.
By: /s/ Gerard J. Murray
--------------------
Name: Gerard J. Murray
Title: Managing Director
Accepted and agreed to as of
the date first above written:
INVESTCORP INVESTMENT EQUITY LIMITED
By: /s/ Patricia Tricarico
----------------------
Name: The Director Ltd.
Title: Director
9
<PAGE>
CONFIDENTIAL EXHIBIT A
November 2, 1999
Project Poly
------------
Senior Subordinated Credit Facility
-----------------------------------
Summary of Principal Terms and Conditions
-----------------------------------------
Initial Loans: The Lenders (as defined below) will make loans
(the "Initial Loans") to the Borrower (as
-------------
defined below) on the Closing Date (as defined
below) in an aggregate principal amount not to
exceed $150,000,000. Bear Stearns Corporate
Lending Inc. ("BSCL") and The Chase Manhattan
----
Bank ("Chase", and together with BSCL, the
-----
"Banks") and each assignee of any portion of
-----
the Initial Loans or of the Banks' commitment
to make the Initial Loans are collectively
referred to as the "Lenders".
-------
Borrower: A newly-formed acquisition vehicle ("Merger
------
Co"), wholly-owned by a newly formed Delaware
--
corporation ("Holdings") wholly-owned by
--------
Investcorp S.A. and certain of its affiliates
(collectively, the "Sponsor") and certain
-------
other international investors (together with
Sponsor, the "Investor Group"), provided that
-------------- --------
to the extent the amount of the Facility,
taken together with the Equity Contribution
(as defined below), exceeds the amount
necessary to fund the Tender Offer and costs,
fees and expenses payable by Merger Co, the
balance of the Facility will be made available
to Synthetic Industries, Inc., a Delaware
corporation (the "Company"), to be used
-------
exclusively as set forth below under the
caption "Use of Proceeds". The term Borrower
means Merger Co and, to the extent Initial
Loans are made to it, the Company.
Merger: As soon as reasonably practicable after the
consummation of the Tender Offer, Merger Co
will be merged with and into the Company and
all obligations of Merger Co under the
Facility will be assumed by the Company (the
"Merger"). If more than 90% of the outstanding
------
common stock of the Company is acquired in the
Tender Offer, the Merger is expected to occur
immediately following the making of the
Initial Loans.
i
<PAGE>
Guarantees: The obligations of the Borrower in respect of
the Initial Loans will be unconditionally and
irrevocably guaranteed on a senior
subordinated basis by each guarantor, if any,
of the Senior Facilities (as defined below).
Guarantors will be released in a manner
consistent with the Senior Facilities.
Co-Agents: The Banks.
Co-Arrangers: Bear, Stearns & Co. Inc. ("Bear Stearns") and
------------
Chase Securities Inc. ("CSI").
---
Lenders: A syndicate of banking and financial
institutions arranged by the Co-Arrangers.
Acquisition and Other Pursuant to or in connection with an
Transactions: acquisition agreement (the "Acquisition
-----------
Agreement") to be entered into among (a) the
---------
Company, (b) Holdings and (c) Merger Co,
Merger Co will make a tender offer for 100% of
the issued and outstanding capital stock of
the Company (the "Tender Offer"). The Tender
------------
Offer will be conditioned, among other things,
upon 51% of the issued and outstanding common
stock of the Company being acquired and will
be followed as soon as practicable after the
closing of the Tender Offer (the "Closing
-------
Date") by a merger of Merger Co with and into
----
the Company (the "Merger"). After giving
------
effect to the Tender Offer the Investor Group
will own and control, indirectly, in excess of
50% of the outstanding common stock of the
Company. After giving effect to the Tender
Offer and the Merger (collectively, the
"Acquisition"), the Investor Group will own
-----------
and control, indirectly, 100% of the
outstanding common stock of the Company.
In connection with the Tender Offer, (a) the
Investor Group will contribute (indirectly
through Holdings) to Merger Co an aggregate
amount of not less than $190,000,000 in common
equity (the "Equity Contribution"); (b) the
-------------------
Company and each of its subsidiaries will
repay or repurchase in full all its existing
indebtedness (other than the Existing Notes
(as defined below)) (the "Existing
--------
Indebtedness"), including all amounts
------------
outstanding under the Company's existing Loan
and Security Agreement
ii
<PAGE>
dated as of December 18, 1997, as amended (the
"Existing Credit Agreement"), among the
-------------------------
Company, the lenders named therein and certain
other parties; (c) the Existing Credit
Agreement and any related guarantees and
collateral documents shall be terminated; (d)
the Company will make a tender offer, and, if
necessary, a change of control offer,
(collectively, the "Debt Tender Offer") for
-----------------
all its outstanding 9-1/4% Senior Subordinated
Notes (the "Existing Notes") pursuant to which
--------------
the covenants in the indenture governing the
Existing Notes remaining outstanding after the
Debt Tender Offer shall be waived or
eliminated in a manner reasonably satisfactory
to the Banks (it being understood that the
change of control provisions will not be
eliminated); (e) the Company will pay tender
premiums and consent fees (the "Debt Tender
-----------
Premium") in connection with the Debt Tender
-------
Offer in an aggregate amount not to exceed an
amount to be agreed upon (it being understood
that the Debt Tender Premium shall be
calculated in accordance with market practice
on the basis of a yield to maturity of the
U.S. Treasury Note that is due closest to the
first redemption date of the Existing Notes);
(f) the Company will pay all outstanding
accrued and unpaid interest in connection with
its repayment of the Existing Indebtedness and
its redemption of the Existing Notes; (g) the
Company will obtain approximately $325,000,000
of senior secured credit facilities (the
"Senior Facilities") comprised of $225,000,000
-----------------
in term loan facilities (the "Term Loan
---------
Facilities") and a $100,000,000 revolving
----------
credit facility (the "Revolving Credit
----------------
Facility"), approximately $25,000,000 of which
--------
will be drawn at closing; (h) the Borrower
will borrow approximately $150,000,000 in
senior subordinated loans from one or more
lenders under a senior subordinated credit
facility (the "Facility"); and (i) costs and
--------
expenses (other than the Debt Tender Premium)
(the "Transaction Costs and Expenses") in an
------------------------------
amount not to exceed $55,000,000 incurred in
connection with the Transactions (as defined
below) will be paid. In the event that any
Existing Notes remain outstanding after
consummation of the Debt Tender Offer, the
aggregate principal amount of the Facility
shall be reduced on a dollar-for-dollar basis.
The Acquisition and the other
iii
<PAGE>
transactions described in this paragraph and
in the immediately preceding paragraph are
collectively referred to herein as the
"Transactions".
------------
Use of Proceeds: The proceeds of the Initial Loans, together
with the proceeds of the initial borrowings
under the Senior Facilities and the Equity
Contribution, will be used solely to
consummate the Transactions and the other
transactions contemplated hereby. Pending use,
the proceeds of the Initial Loans shall be
deposited into and held in a segregated
deposit account; provided that to the extent
--------
Initial Loans are made to Holdings, such
deposit account will be a deposit account of
Holdings. The estimated sources and uses of
funds necessary to consummate the Transactions
and the other transactions contemplated hereby
must be reasonably satisfactory to the Co-
Arrangers (to the extent reflected herein or
previously disclosed to the Banks or the Co-
Arrangers, such sources and uses shall be
deemed satisfactory).
Funding: The Lenders will make the Initial Loans
simultaneously with (a) the consummation of
the Debt Tender Offer and the Tender Offer
(including the Equity Contribution) and (b)
the initial funding under the Senior
Facilities. The date on which such Initial
Loans are made is herein called the "Closing
-------
Date".
----
Maturity/Exchange: All the Initial Loans will mature on the date
that is one year following the Closing Date
(the "Maturity Date"). If any Initial Loan has
-------------
not been previously repaid in full on or prior
to the Maturity Date, the Lender in respect of
such Initial Loan thereafter will have the
option at any time or from time to time to
receive Exchange Notes (the "Exchange Notes")
--------------
in exchange for such Initial Loan having the
terms set forth in the term sheet attached
hereto as Annex I; provided, however, that a
-------- -------
Lender may not elect to exchange only a
portion of its outstanding Initial Loans for
Exchange Notes unless such Lender intends at
the time of such partial exchange of Initial
Loans promptly to sell the Exchange Notes
received in such exchange. If any Lender does
not exchange its Initial Loans for Exchange
Notes on the Maturity Date, such Lender shall
be required to extend the maturity of such
Initial
iv
<PAGE>
Loans to another date selected by such Lender.
If, at such extended maturity, such Lender
does not exchange its Initial Loans, such
Lender shall be required again to extend the
maturity of such Initial Loans to another date
selected by such Lender (provided that such
Lender shall not be required to extend the
maturity of such Initial Loans beyond the date
which is six months following the final
maturity of the Senior Facilities (the "Final
-----
Maturity Date")), and this sentence shall
-------------
apply to each extended maturity of such
Initial Loans prior to the Final Maturity
Date.
The Initial Loans and the Exchange Notes shall
be pari passu for all purposes.
----------
Interest: Prior to the Maturity Date, the Initial Loans
- --------
will accrue interest at a rate per annum equal
to the greater of (a) three-month Adjusted
LIBOR ("Adjusted LIBOR") plus the applicable
--------------
spread (the "Spread"), (b) the Treasury Rate
------
(as defined) plus the applicable Spread and
(c) the Bear Stearns Single B High Yield Index
plus the applicable Spread (such greater
amount plus the applicable Spread, the
"Initial Rate"). The "Spread" will initially
------------ ------
be (a) with respect to any Adjusted LIBOR
loans, 675 basis points (b) with respect to
any Treasury Rate loans, 675 basis points and
(c) with respect to any Bear Stearns Single B
High Yield Index loans, 175 basis points. If
the Initial Loans are not repaid in whole
within six months following the Closing Date,
the Initial Rate will increase by 100 basis
points at the end of such six-month period and
shall increase by an additional 50 basis
points at the end of each three-month period
thereafter until the Maturity Date.
"Treasury Rate" means (a) the rate borne by
-------------
direct obligations of the United States
maturing on the date which is eight and one-
half years after the Closing Date and (b) if
there are no such obligations, the rate
determined by linear interpolation between the
rates borne by the two direct obligations of
the United States maturing closest to, but
straddling, the date which is eight and one-
half years after the Closing Date, in each
case as published by the Board of Governors of
the Federal Reserve System.
v
<PAGE>
Notwithstanding the foregoing, (a) the
interest rate in effect at any time prior to
the Maturity Date shall not exceed 17% per
annum, (b) the interest rate in effect at any
time prior to the Maturity Date shall not be
less than 13% per annum and (c) to the extent
the interest payable on any Initial Loan
exceeds a rate of 15% per annum, the Borrower
may, at its option, cause such excess interest
to be paid by adding such excess interest to
the principal amount of such Initial Loan. In
no event shall the interest rate on the
Initial Loans exceed the highest lawful rate
permitted under applicable law.
Following the Maturity Date, all outstanding
Initial Loans will accrue interest at the rate
provided for the Exchange Notes in Annex I
hereto, subject to the absolute and cash caps
applicable to the Exchange Notes.
In the event that Adjusted LIBOR cannot be
determined, or any Lender is unable to
maintain a loan accruing interest at Adjusted
LIBOR, the affected Initial Loans will accrue
interest until the Maturity Date at the
"Alternate Base Rate", which will be the
-------------------
higher of (a) Chase's Prime Rate and (b) the
Federal Funds Effective Rate plus, in each
case, the Spread.
Calculation of interest shall be on the basis
of actual days elapsed in a year of 360 days
(or 365 or 366 days, as the case may be, in
the case of Initial Loans based on Chase's
Prime Rate). Adjusted LIBOR will at all times
include statutory reserves.
All accrued interest will be payable in
arrears (a) for Initial Loans accruing
interest at a rate based on Adjusted LIBOR, at
the end of each Adjusted LIBOR period
following the Closing Date and on the Maturity
Date, (b) for Initial Loans accruing interest
at the Alternate Base Rate, at the end of each
fiscal quarter of the Company following the
Closing Date and on the Maturity Date, (c) for
Initial Loans outstanding after the Maturity
Date, at the end of each fiscal quarter of the
Company following the Maturity Date and (d) in
vi
<PAGE>
case of any exchange of Initial Loans for
Exchange Notes on a date after the Maturity
Date, on the date of such exchange, provided
that in the case of Initial Loans bearing
interest at Adjusted LIBOR, the interest
period under the Initial Loans shall continue
and all accrued interest shall be paid on the
first interest payment date under the Exchange
Notes following such exchange.
Subordination: The Initial Loans will be subordinated to the
- ------------- Senior Facilities and other senior
indebtedness of the Borrower on terms
customary for senior subordinated facilities
and transactions of this type.
Senior Facilities: The Company will obtain the $325,000,000
- ----------------- Senior Facilities, all as described in the
letter agreement dated on or about the date
hereof among Investcorp Investment Equity
Limited and the other parties thereto (the
"Senior Facilities Commitment Letter").
-----------------------------------
Mandatory Redemption: The Borrower will be required to prepay
- -------------------- Initial Loans (and, if issued, to redeem
Exchange Notes, to the extent required by the
terms of such Exchange Notes) on a pro rata
--------
basis subject, in certain circumstances, to
the non-call provisions of any Fixed Rate
Exchange Notes (as described in Annex I
hereto), at par plus accrued and unpaid
interest (or, in the case of Fixed Rate
Exchange Notes, at par plus accrued and unpaid
interest plus any applicable premiums), from
the net proceeds (after deduction of, among
other things, amounts required to repay the
Senior Facilities) from the incurrence of any
debt (subject to customary exceptions to be
agreed upon) or the issuance of any equity
(other than any equity issued on or prior to
the Closing Date in connection with the
Transactions and subject to customary
exceptions to be agreed upon) or from all
nonordinary course asset sales.
Optional Prepayment: The Initial Loans may be prepaid, in whole or
- ------------------- in part, at the option of the Borrower, at any
time upon ten days' prior notice, at par plus
accrued and unpaid interest, subject to
reimbursement of the Lenders' actual
redeployment costs in the case of a prepayment
of Adjusted LIBOR borrowings other than on the
last day of the relevant interest period.
vii
<PAGE>
If the Borrower elects to optionally prepay
all or any portion of the Initial Loans, then
the Borrower shall be required to optionally
redeem on a pro rata basis outstanding
--- ----
Exchange Notes, if any, subject, in certain
circumstances, to the non-call provisions of
any Fixed Rate Exchange Notes, at par plus
accrued and unpaid interest (or, in the case
of Fixed Rate Exchange Notes at par plus
accrued and unpaid interest plus any
applicable premiums).
Documentation: Usual for facilities and transactions of this
- ------------- type and reasonably satisfactory to the Co-
Arrangers and the Sponsor.
Representations and Warranties: Usual for facilities and transactions of this
- ------------------------------ type and reasonably satisfactory to the Co-
Arrangers and the Sponsor.
Conditions Precedent: Usual for facilities and transactions of this
- -------------------- type, those specified below and others to be
reasonably agreed upon by the Co-Arrangers and
the Sponsor, including but not limited to
delivery of satisfactory legal opinions,
borrowing and compliance certificates, audited
and unaudited financial statements and other
financial information to be agreed upon;
execution of guarantees, which shall be in
full force and effect; accuracy of
representations and warranties; absence of
defaults, prepayment events or creation of
liens under debt instruments or other
agreements as a result of the Transactions and
the other transactions contemplated hereby;
evidence of authority; material consents of
all persons; compliance with applicable laws
and regulations (including but not limited to
ERISA, margin regulations, bank regulatory
limitations and environmental laws); absence
of any material adverse change in the
business, operations, properties, assets,
condition (financial or otherwise), contingent
liabilities, material agreements or results of
operations of the Company and its
subsidiaries, taken as a whole, since
September 30, 1998; payment of fees and
expenses; and obtaining of satisfactory
insurance.
The Loan Parties (as defined in the Senior
Facilities Commitment Letter) shall have
executed and delivered
viii
<PAGE>
definitive financing agreements and related
documentation with respect to the Senior
Facilities reasonably satisfactory in form and
substance to the Co-Arrangers in conformity
with the material terms of the Senior
Facilities Commitment Letter.
The Lenders shall be reasonably satisfied with
the structure and terms of the Transactions
and with the Acquisition Agreement (except
that, to the extent reflected herein or
previously disclosed in writing to the
Lenders, the terms of the Acquisition and the
other Transactions shall be deemed
satisfactory).
The Lenders shall have received not less than
ten business days' prior written notice of the
targeted funding date under the Facility and
not less than three business days' prior
written notice of the actual funding date
under the Facility which cannot be earlier
than two business days prior to the original
targeted funding date.
The Acquisition and other Transactions shall
be consummated prior to or simultaneously with
the closing under the Facility in accordance
with applicable law, the Acquisition Agreement
and all other related documentation (without
giving effect to any amendments to or waivers
of such documentation not approved by the
Required Lenders, such approval not to be
unreasonably withheld).
There shall be no litigation or administrative
proceedings or other legal or regulatory
developments, actual or threatened, that could
be reasonably expected to prohibit or to
impose burdensome conditions on the
Transactions or the other transactions
contemplated hereby or to result in a material
adverse change in the business, operations,
properties, assets, condition (financial or
otherwise), contingent liabilities, material
agreements or results of operations of the
Company and its subsidiaries, taken as a
whole.
To the extent the management of the Company
has prepared and provided to the Sponsor
management's estimate of, and final financial
statements with respect to, the twelve month
period ended September 30, 1999
ix
<PAGE>
and the three month period ending December 31,
1999, the Sponsor shall make such estimates
and financial statements available to the
Banks.
The Lenders shall be satisfied that the
aggregate level of fees and expenses to be
paid in connection with the Acquisition, the
other Transactions, and the other transactions
contemplated hereby, shall not exceed
$55,000,000.
Prior to the Closing Date, neither Merger Co
nor Holdings shall conduct any business or
incur any liabilities other than business
conducted or liabilities incurred in
connection with the Transactions and other
transactions contemplated hereby.
After giving effect to the Transactions and
the other transactions contemplated hereby,
the Company and its subsidiaries shall have
outstanding no preferred stock and no
indebtedness other than (a) the loans and
other extensions of credit under the Senior
Facilities, (b) the Initial Loans, (c) Capital
Leases and Industrial Revenue Bonds in an
aggregate amount not to exceed $12,000,000 and
(d) other limited indebtedness to be agreed
upon. The terms and conditions of all
indebtedness to remain outstanding after the
Closing Date (including, but not limited to,
terms and conditions relating to interest
rates, fees, amortization, maturity,
redemption, subordination, covenants, events
of default and remedies) shall be reasonably
satisfactory in all respects to the Lenders
(it being understood that the terms and
conditions of the Senior Facilities set forth
in the Senior Facilities Commitment Letter are
reasonably satisfactory).
All conditions to the purchase of the Existing
Notes in the Debt Tender Offer shall have been
satisfied without giving effect to any waiver
or amendment thereof that is adverse to the
Lenders in any material respect and not
reasonably satisfactory to the Banks; the
Company shall have purchased not less than a
majority in principal amount of the Existing
Notes, the negative covenants with respect to
the Existing Notes shall have been eliminated
or modified in a manner reasonably
satisfactory to the Banks, including, among
other
x
<PAGE>
things, so that, after giving effect to the
Transactions, no default or event of default
shall exist under the Existing Notes, the
Senior Facilities or the Facility, and any
"change of control" provisions with respect to
the Existing Notes shall have been eliminated,
modified in a manner reasonably satisfactory
to the Banks or waived.
After giving effect to the Tender Offer, the
Debt Tender Offer, the borrowing under the
Facility, the initial borrowing under the
Senior Facilities, the Equity Contribution and
the other transactions contemplated hereby to
be consummated on the Closing Date (the
"Closing Transactions"), the Investor Group
--------------------
shall hold, indirectly through Holdings, more
than 50% of the outstanding common stock of
the Company.
The Lenders shall have received a pro forma
consolidated balance sheet of the Company
giving effect to the Closing Transactions,
together with a certificate of the Company to
the effect that such pro forma balance sheet
fairly presents in all material respects the
pro forma financial position of the Company
and its subsidiaries in accordance with
generally accepted accounting principles, and
the Lenders shall be reasonably satisfied that
such balance sheet is not materially
inconsistent with the Information or
Projections delivered to the Lenders prior to
the date hereof. The Company shall also have
provided such other financial information as
the Banks may reasonably request in connection
with the Transactions.
The Lenders shall have received a solvency
certificate of the chief financial officer of
the Company, in form and substance
satisfactory to the Banks, together with such
other evidence reasonably requested by the
Lenders of the solvency of each of the Company
and its subsidiaries on a consolidated basis
after giving effect to the Closing
Transactions.
All requisite material governmental
authorities and third parties shall have
approved or consented to the Closing
Transactions to the extent required, all
applicable appeal periods shall have expired
and there
xi
<PAGE>
shall be no governmental or judicial action,
actual or threatened, that has or could have a
reasonable likelihood of restraining,
preventing or imposing burdensome conditions
on the Transactions or the consummation of the
other transactions contemplated hereby.
The consummation of the Closing Transactions
shall not (a) violate any applicable law,
statute, rule or regulation or (b) result in a
default or event of default under, any
material agreement of the Borrower or any of
its subsidiaries, and the Lenders shall have
received a legal opinion to such effect,
reasonably satisfactory to the Banks, from
counsel to the Borrower.
The Lenders shall have been afforded the
opportunity to review all corporate documents
and other instruments as are customary for
transactions of this type or as it may
reasonably request, and shall be reasonably
satisfied in all respects with such
documentation.
The Lenders shall be reasonably satisfied,
based upon the results of the environmental
diligence conducted by the Co-Arrangers and
its advisors in cooperation with the Company,
with respect to environmental hazards,
conditions or liabilities and employee health
and safety exposures to which the Company or
any of its subsidiaries may be subject.
The Lenders shall be reasonably satisfied with
all legal and tax matters relating to the
Transactions and all other transactions
contemplated hereby.
Merger Co shall have received at least
$190,000,000 in cash proceeds from the
issuance of its common equity to Holdings (and
Holdings shall have received at least the same
amount by issuance of equity to the Investor).
The Senior Facilities shall have become
effective and the Company shall have borrowed
not less than $250,000,000 thereunder
(excluding unused revolving commitments).
The Banks and the Co-Arrangers shall be
satisfied that Consolidated EBITDA of the
Company and its
xii
<PAGE>
consolidated subsidiaries for the twelve month
period ended September 30, 1999, shall equal
or exceed $72,000,000 from planned continuing
operations (before deducting approximately
$4.3 million in restructuring charges taken by
the Company and any charges relating to the
Transactions and other transactions
contemplated hereby), and the Company shall
provide support for such calculation of a
nature that is reasonably satisfactory to the
Co-Arrangers (and, in any event, in conformity
with Regulation S-X promulgated by the
Securities and Exchange Commission
("Regulation S-X")).
--------------
The Lenders shall have received a certificate
of a financial officer of the Company with
respect to the ratio of Total Debt (to be
defined) as of September 30, 1999 to the pro
forma Consolidated EBITDA (to be defined) of
the Company (after giving effect to the
Transactions) for the twelve month period
ended on such date, and such ratio shall not
exceed 5.5 to 1.0. All pro forma adjustments
to Consolidated EBITDA for any such twelve
month period shall be in compliance with
generally accepted accounting principles and
practices in the United States and prepared in
accordance with Regulation S-X.
The Lenders shall have received unaudited
consolidated balance sheets and related
statements of income, changes in stockholders'
equity and cash flows of the Company for each
fiscal month ending after September 30, 1999
and at least 30 days before the Closing Date,
which financial statements shall not be
materially inconsistent with the financial
statements and forecasts previously provided
to the Lenders.
The Co-Arrangers shall have received
management's consolidated financial
projections for the Company and its
subsidiaries for the period of six years
following the Closing Date, detailed on a
quarter-by-quarter basis for fiscal year 2000,
which projections shall reflect the
Transactions and the other transactions
contemplated hereby and include the written
assumptions upon which such projections are
based, and such projections shall be
reasonably satisfactory in all respects to the
Co-Arrangers, including with respect to any
cost
xiii
<PAGE>
savings projected for the Company and its
subsidiaries therein. Such projections shall be
substantially similar in form to the projections
(the "Initial Projections") received by the
-------------------
Co-Arrangers prior to the date of the Commitment
Letter to which this Exhibit A is attached.
Senior Subordinated Notes: The Company will use its reasonable best efforts
- ------------------------- to refinance the Initial Loans as promptly as
practicable after the Closing Date with an issue
of Senior Subordinated Notes of not less than the
aggregate principal amount of the Initial Loans
(the "Senior Subordinated Notes") and shall issue
-------------------------
debt securities of Holdings ("Holdings
--------
Securities" or, together with the Senior
----------
Subordinated Notes, the "Debt Securities") as and
---------------
when required by the Fee Letter.
The Company shall prepare and shall be in a
position to print not later than December 31,
1999 (or, in the case of any issuance of Holdings
Securities, as soon as practicable), a complete
printed preliminary prospectus or preliminary
offering memorandum or preliminary private
placement memorandum that is suitable for use in
a customary "high-yield road show" relating to
the Debt Securities and contains all financial
statements and other data to be included therein
(including all audited financial statements, all
unaudited financial statements and all
appropriate pro forma financial statements
prepared in accordance with, or reconciled to,
generally accepted accounting principles in the
United States and prepared in accordance with
Regulation S-X (or as otherwise may be reasonably
acceptable to the Co-Arrangers and the Sponsor)
and all other data (including selected financial
data) that the Securities and Exchange Commission
would require in a registered offering of the
Debt Securities or that would be necessary for
the Co-Arrangers to receive customary "comfort"
(including "negative assurance" comfort) from
independent accountants in connection with the
offering of the Debt Securities.
Covenants: Usual for facilities and transactions of this
- --------- type by issuers sponsored by Investcorp, adjusted
as necessary for market conditions and reasonably
satisfactory to the Co-Arrangers and the Sponsor.
xiv
<PAGE>
The affirmative covenants shall in any event
include delivery of projections of the Company
and its subsidiaries updated quarterly in a form
substantially similar to that described above
under the heading "Conditions Precedent".
Following the Maturity Date, all outstanding
Initial Loans will have covenants substantially
identical to the covenants of the Exchange Notes.
Events of Default: Usual for facilities and transactions of this
- ----------------- type by issuers sponsored by Investcorp, adjusted
as necessary for market conditions and reasonably
satisfactory to the Co-Arrangers and the Sponsor.
Following the Maturity Date, the events of
default relevant to the Initial Loans will have
events of default substantially identical to the
events of default relevant to the Exchange Notes.
Cost and Yield Protection: Usual for facilities and transactions of this
- ------------------------- type.
Assignment and Participation: The Lenders will have the absolute and
- ---------------------------- unconditional right to assign Initial Loans and
commitments to Permitted Assignees or other
financial institutions without the consent of the
Company; provided, however, that the Sponsor
shall have the right to consent (such consent not
to be unreasonably withheld) to assignment prior
to the Closing Date or the syndication of all or
any portion of the Facility to the extent that
such assignment or syndication would result in
greater than 49% of the aggregate principal
amount of the commitments in respect of the
Facility being held by Lenders other than the
Initial Lenders (as defined in the Commitment
Letter to which this Exhibit A is attached) or,
if there are no other Initial Lenders, the Banks.
The Co-Agents will receive a processing and
recordation fee of $3,500, payable by the
assignor and/or the assignee, with each
assignment. Assignments will be by novation which
will release the obligation of the assigning
Lender. The Banks will act as Administrative
Agent for all assignees (if any) holding the
Initial Loans from time to time.
Lenders will be permitted to participate their
Initial
xv
<PAGE>
Loans to Permitted Assignees or other financial
institutions without restriction, other than
customary voting limitations. Participants will
have the same benefits as the selling Lenders
would have (and will be limited to the amount of
such benefits) with regard to yield protection
and increased costs.
Voting: Amendments and waivers of the documentation for
- ------ the Initial Loans and the other definitive credit
documentation related thereto will require the
approval of the Banks and of Lenders holding more
than 50% of the outstanding Initial Loans, except
that the consent of each affected Lender will be
required for (a) reductions of principal,
interest rates or Spread, (b) except as provided
under "Maturity/Exchange" above, extensions of
the Maturity Date, (c) additional restrictions on
the right to exchange Initial Loans for Exchange
Notes or any amendment of the rate of such
exchange or (d) prior to the issuance of any
Exchange Notes, any amendment to the form of
Exchange Notes or related indenture that would,
if any Exchange Notes were outstanding, require
the approval of all holders of Exchange Notes.
Expenses and Indemnification: All reasonable out-of-pocket expenses (including
- ---------------------------- but not limited to expenses incurred in
connection with due diligence) of the Lenders,
the Banks and the Co-Arrangers associated with
the preparation, execution and delivery,
administration, waiver or modification and
enforcement of the Facility and the other
documentation contemplated hereby and thereby
(including the reasonable fees, disbursements an
other charges of one counsel) are to be paid by
the Company. In addition, all reasonable out-of-
pocket expenses of the Lenders for enforcement
costs and documentary taxes associated with the
facility are to be paid by the Company.
The Company will indemnify the Lenders, the Banks
and the Co-Arrangers, and their respective
officers, directors, employees, affiliates,
agents and controlling persons, and hold them
harmless from and against all costs, expenses
(including but not limited to reasonable fees and
out-of-pocket charges and disbursements of one
counsel) and liabilities of any such Lender, the
xvi
<PAGE>
Banks or the Co-Arrangers arising out of or
relating to any claim or any litigation or other
proceeding (regardless of whether any such
Lender, the Banks or the Co-Arrangers is a party
thereto) that relate to the proposed
transactions, including but not limited to the
Transactions or any transactions connected
therewith; provided, however, that no such person
-------- -------
will be indemnified for costs, expenses or
liabilities arising from such person's gross
negligence or willful misconduct.
Governing Law and Forum: New York.
Counsel for the Banks and Latham & Watkins.
the Co-Arrangers:
xvii
<PAGE>
ANNEX I
to Exhibit A
Project Poly
------------
Summary of Principal Terms and Conditions
-----------------------------------------
of Exchange Notes
-----------------
Capitalized terms used but not defined herein have the meanings given in
the Summary of Principal Terms and Conditions of the $150,000,000 Senior
Subordinated Credit Facility to which this Annex I is attached.
Issuer: The Company will issue Exchange Notes under an
indenture that complies with the Trust Indenture
Act (the "Indenture"). The Company will appoint a
trustee reasonably acceptable to the holders of
the Exchange Notes. The Company in its capacity
as issuer of the Exchange Notes is referred to as
the "Issuer".
Guarantor: Same as Initial Loans.
Principal Amount: The Exchange Notes will be available only in
exchange for the Initial Loans. The principal
amount of any Exchange Note will equal 100% of
the aggregate principal amount (including any
accrued interest not required to be paid in cash)
of the Initial Loan for which it is exchanged.
Maturity: The Exchange Notes will mature six months
following the final maturity of the Senior
Facilities.
Interest Rate: The Exchange Notes will bear interest at a rate
equal to the Initial Rate (as defined below) plus
the Exchange Spread (as defined below).
Notwithstanding the foregoing, (a) the interest
rate in effect at any time shall not exceed 17%
per annum and (b) to the extent the interest
payable on any Exchange Note exceeds a rate of
15% per annum, the Issuer may, at its option,
cause such excess interest to be paid by issuing
additional Exchange Notes in a principal amount
equal to such excess interest. In no event shall
the interest rate on the Exchange Notes exceed
the highest lawful rate permitted under
applicable law.
"Exchange Spread" shall mean 0 basis points
---------------
during the three-month period commencing on the
Maturity
<PAGE>
Date and shall increase by 50 basis points at the
beginning of each subsequent three-month period.
"Initial Rate" shall be determined on the
------------
Maturity Date and shall equal the greatest of (a)
the interest rate borne by the Initial Loans on
the day immediately preceding the Maturity Date
plus 50 basis points, (b) three-month Adjusted
LIBOR plus 875 basis points, (c) the Treasury
Rate on the Maturity Date plus 875 basis points,
and (d) the Bear Stearns Single B High Yield
Index on the Maturity Date plus 375 basis points.
"Treasury Rate" means (a) the rate borne by
-------------
direct obligations of the United States maturing
on the date which is eight and one-half years
after the Closing Date and (b) if there are no
such obligations, the rate determined by linear
interpolation between the rates borne by the two
direct obligations of the United States maturing
closest to, but straddling, the date which is
eight and one-half years after the Closing Date,
in each case as published by the Board of
Governors of the Federal Reserve System.
Interest will be payable in arrears at the end of
each fiscal quarter of the Issuer.
Subordination: Same as Initial Loans.
Mandatory Redemption: The Issuer will be required to redeem the
Exchange Notes or, in the case of Fixed Rate
Exchange Notes, to offer to purchase such notes
(and, if outstanding, repay the Initial Loans) on
a pro rata basis, at par plus accrued and unpaid
interest, from the net proceeds (after deduction
of, among other things, amounts required to repay
the Senior Facilities) from the incurrence of any
debt (subject to customary exceptions to be
agreed upon) or the issuance of any equity (other
than any equity issued on or prior to the Closing
Date in connection with the Transactions and
subject to customary exceptions to be agreed
upon) or from all nonordinary course asset sales.
Optional Subject to the following sentence, the Exchange
Redemption: Notes will be redeemable at the option of the
Issuer, in whole or in part, at any time at par
plus accrued and unpaid interest to the
redemption date. If any Exchange Note
<PAGE>
is sold by a Lender to a third party purchaser,
such Lender shall have the right to fix the
interest rate on such Exchange Note (each such
Note, a "Fixed Rate Exchange Note") at a rate not
higher than the then applicable rate of interest
on such Exchange Note. If such Lender exercises
such right, such Fixed Rate Exchange Note will be
non-callable for four years from the date of
issuance and will be callable thereafter at par
plus accrued interest plus a premium equal to 50%
of the coupon in effect on the date of sale of
the Exchange Notes, which premium shall decline
ratably on each yearly anniversary of the date of
such sale to zero one year prior to the maturity
of the Exchange Notes, provided, that such call
protection shall not apply to any call for
redemption issued prior to the sale to such third
party purchaser.
If the Issuer elects to optionally redeem all or
any portion of the Exchange Notes, then the
Issuer shall be required to optionally prepay on
a pro rata basis outstanding Initial Loans, if
any, at par plus accrued and unpaid interest.
Registration Rights: The Issuer will file within 30 days after the
Maturity Date, and will use its best efforts to
cause to become effective as soon thereafter as
practicable, a shelf registration statement with
respect to the Exchange Notes (a "Shelf
Registration Statement") and/or a registration
statement relating to a Registered Exchange Offer
(as described below). If a Shelf Registration
Statement is filed, the Issuer will keep such
registration statement effective and available
(subject to customary exceptions) until it is no
longer needed to permit unrestricted resales of
Exchange Notes but in no event longer than two
years from the Maturity Date. If within 120 days
from the Maturity Date, a Shelf Registration
Statement for the Exchange Notes has not been
declared effective or the Issuer has not effected
an exchange offer (a "Registered Exchange Offer")
whereby the Issuer has offered registered notes
having terms identical to the Exchange Notes (the
"Substitute Notes") in exchange for all
outstanding Exchange Notes and Initial Loans (it
being understood that a Shelf Registration
Statement is required to be made available in
respect of Exchange
<PAGE>
Notes the holders of which could not receive
Substitute Notes through the Registered
Exchange Offer which, in the opinion of
counsel, would be freely saleable by such
holders without registration or requirement
for delivery of a current prospectus under the
Securities Act (other than a prospectus
delivery requirement imposed on a broker-
dealer who is exchanging Exchange Notes
acquired for its own account as a result of a
market making or other trading activities)),
then the Issuer will pay additional interest
of $0.192 per week per $1,000 principal amount
of Exchange Notes and Initial Loans
outstanding to holders of such Exchange Notes
and Initial Loans who are unable freely to
transfer Exchange Notes from and including the
121st day after the date of the first issuance
of Exchange Notes to but excluding the earlier
of the effective date of such Shelf
Registration Statement or the date of
consummation of such Registered Exchange Offer
(such damages to be payable in the form of
additional Initial Loans or Exchange Notes, as
applicable, if the then interest rate thereon
exceeds the applicable cash interest rate
cap). The Issuer will also pay such additional
interest for any period of time (subject to
customary exceptions) following the
effectiveness of a Shelf Registration
Statement that such Shelf Registration
Statement is not available for resales
thereunder. In addition, unless and until the
Issuer has consummated the Registered Exchange
Offer and, if required, caused the Shelf
Registration Statement to become effective,
the holders of the Exchange Notes will have
the right to "piggy-back" the Exchange Notes
in the registration of any debt securities
(subject to customary scale-back provisions)
that are registered by the Issuer (other than
on a Form S-4) unless all the Exchange Notes
and Initial Loans will be redeemed or repaid
from the proceeds of such securities.
Right to Transfer Exchange Notes: The holders of the Exchange Notes shall have
the absolute and unconditional right to
transfer such Exchange Notes in compliance
with applicable law to any third parties.
Covenants: Usual for an indenture governing a high yield
senior subordinated note issue by issuers
sponsored by
<PAGE>
Investcorp, adjusted as necessary for market
conditions and with certain additional
restrictions to be mutually agreed.
Events of Default: Usual for an indenture governing a high yield
senior subordinated note issue by issuers
sponsored by Investcorp, adjusted as necessary
for market conditions and with certain
additional restrictions to be mutually agreed.
Governing Law and Forum: New York.
<PAGE>
EXHIBIT B
INDEMNIFICATION PROVISIONS
Capitalized terms used and not otherwise defined herein are used with the
meanings attributed thereto in the Commitment Letter dated November 2, 1999 (the
"Commitment Letter") from Bear Stearns Corporate Lending Inc. and Chase
-----------------
Securities Inc. to Investcorp International Equity Limited (collectively with
its affiliates, the "Sponsor") of which these Indemnification Provisions form an
-------
integral part.
To the fullest extent permitted by applicable law, the Sponsor agrees that
it will, and, upon consummation of the Tender Offer (at which time the Sponsor
shall be automatically released from liability hereunder), will cause the
Borrower (as defined in the Commitment Letter) and each of the Guarantors
(referred to in the Commitment Letter; the Guarantors together with the
Borrower, the "Obligors"), jointly and severally, to indemnify and hold harmless
--------
each of the Banks, the other Lenders and the affiliated entities, directors,
officers, employees, legal counsel, agents and controlling persons (within the
meaning of the federal securities laws) of each of the Banks, and the other
Lenders (all of the foregoing, collectively, the "Indemnified Persons"), from
-------------------
and against any and all losses, claims, damages, obligations, penalties,
judgments, awards, liabilities, costs, expenses and disbursements and any and
all actions, suits, proceedings and investigations in respect thereof and any
and all legal or other costs, expenses and disbursements in giving testimony or
furnishing documents in response to a subpoena or otherwise (including, without
limitation, the costs, expenses and disbursements, as and when incurred, of
investigating, preparing or defending any such action, proceeding or
investigation (whether or not in connection with litigation in which any of the
Indemnified Persons is a party) and including, without limitation, any and all
losses, claims, damages, obligations, penalties, judgments, awards, liabilities,
costs, expenses and disbursements, resulting from any negligent act or omission
of any of the Indemnified Persons), directly or indirectly, caused by, relating
to, based upon, arising out of or in connection with (i) the Transactions or the
documents entered into in connection with the Transactions (ii) the Commitment
Letter or (iii) any untrue statement or alleged untrue statement of a material
fact contained in, or omissions or alleged omissions from, any filing with any
governmental agency or similar statements or omissions in or from any
Information furnished by the Sponsor or the Borrower or any of their respective
subsidiaries or affiliates to any of the Indemnified Persons or any other person
in connection with the Transactions or the Commitment Letter, provided, however,
-------- -------
such indemnity agreement shall not apply to any portion of any such loss, claim,
damage, obligation, penalty, judgment, award, liability, cost, expense or
disbursement to the extent it is found in a final judgment by a court of
competent jurisdiction (not subject to further appeal) to have resulted
primarily and directly from the gross negligence or willful misconduct of any of
the Indemnified Persons.
These Indemnification Provisions shall be in additional to any liability
which the Sponsor, the Borrower or any other Obligor may have to the Indemnified
Persons.
<PAGE>
If any action, suit, proceeding or investigation is commenced, as to which
any of the Indemnified Persons proposes to demand indemnification, it shall
notify the Sponsor or the Borrower with reasonable promptness; provided,
--------
however, that any failure by any of the Indemnified Persons to so notify the
- -------
Sponsor or the Borrower shall not relieve the Sponsor, the Borrower or any other
Obligor from its obligations hereunder. The Banks, on behalf of the Indemnified
Persons, shall have the right to retain counsel of their choice to represent the
Indemnified Persons, and the Sponsor and the Borrower shall, or shall cause the
other Obligors, jointly and severally, to pay the fees, expenses and
disbursement of such counsel; and such counsel shall, to the extent consistent
with its professional responsibilities, cooperate with the Sponsor, the Borrower
and other Obligors and any counsel designated by the Sponsor, the Borrower or
other Obligors. The Sponsor, the Borrower and the Obligors shall be jointly and
severally liable for any settlement of any claim against any of the Indemnified
Persons made with the Sponsor's or the Borrower's written consent, which consent
shall not be unreasonably withheld. Without the prior written consent of each
of the Banks, the Sponsor and the Borrower shall not, and shall not permit any
of the other Obligors to, settle or compromise any claim, or permit a default or
consent to the entry of any judgment in respect thereof, unless such settlement,
compromise or consent includes, as an unconditional term thereof, the giving by
the claimant to each of the Indemnified Persons of any unconditional and
irrevocable release from all liability in respect of such claim.
In order to provide for just and equitable contribution, if a claim for
indemnification pursuant to these Indemnification Provisions is made but is
found in a final judgment by a court of competent jurisdiction (not subject to
further appeal) that such indemnification may not be enforced in such case, even
though the express provisions hereof provide for indemnification in such case,
then the Sponsor, the Borrower and other Obligors, if any, on the one hand, and
the Indemnified Persons, on the other hand, shall contribute to the losses,
claims, damages, obligations, penalties, judgments, awards, liabilities, costs,
expenses and disbursements to which the Indemnified Persons may be subject in
accordance with the relative benefits received by the Sponsor, the Borrower and
the other Obligors, on the one hand, and the Indemnified Persons, on the other
hand, and also the relative fault of the Sponsor, the Borrower and the other
Obligors, on the one hand, and the Indemnified Persons, on the other hand, in
connection with the statements, acts or omissions which results in such losses,
claims, damages, obligations, penalties, judgments, awards, liabilities, costs,
expenses and disbursements and the relevant equitable considerations shall also
be considered. No person found liable for a fraudulent misrepresentation shall
be entitled to contribution from any other person who is not also found liable
for such fraudulent misrepresentation. Notwithstanding the foregoing, none of
the Indemnified Persons shall be obligated to contribute any amount hereunder
that exceeds the amount of fees previously received by such Indemnified Person
pursuant to the Commitment Letter.
Neither expiration or termination of the Facility nor funding or repayment
of any of the Initial Loans or the Exchange Notes shall affect these
Indemnification Provisions which shall then remain operative and in full force
and effect.
2
<PAGE>
Exhibit (b)(2)
BEAR, STEARNS & CO. INC.
245 Park Avenue
New York, New York 10167
CHASE SECURITIES INC.
270 Park Avenue
New York, New York 10017
November 2, 1999
Investcorp Investment Equity Limited,
on its own behalf and on behalf of
certain of its affiliates and other
international investors
c/o Investcorp Bank E.C.
P.O. Box 5460
Bahrain
Attention of Mr. Sean Madden
Ladies and Gentlemen:
You have advised Bear, Stearns, & Co. Inc. ("Bear Stearns") and Chase
------------
Securities Inc. ("CSI" and, together with Bear Stearns, the "Co-Arrangers") that
--- ------------
pursuant to or in connection with an acquisition agreement (the "Acquisition
-----------
Agreement") to be entered into among (a) Synthetic Industries, Inc., a Delaware
- ---------
corporation (the "Company"), (b) a newly formed Delaware corporation
-------
("Holdings") wholly-owned by Investcorp S.A., on its own behalf and on behalf of
--------
certain of its affiliates (collectively, "Sponsor" or "Investcorp") and certain
------- ----------
other international investors (together with Sponsor, the "Investor Group") and
--------------
(c) a newly formed acquisition vehicle wholly-owned by Holdings ("Merger Co"),
---------
Merger Co will make a tender offer for 100% of the issued and outstanding
capital stock of the Company (the "Tender Offer"). The Tender Offer will be
------------
conditioned, among other things, upon 51% of the issued and outstanding common
stock of the Company being acquired and will be followed as soon as practicable
after the closing of the Tender Offer (the "Closing Date") by a merger of Merger
------------
Co with and into the Company (the "Merger"). After giving effect to the Tender
------
Offer, the Investor Group will own and control, indirectly, in excess of 50% of
the outstanding common stock of the Company. After giving effect to the Tender
Offer and the Merger (collectively, the "Acquisition"), the Investor Group will
-----------
own and control, indirectly, 100% of the outstanding common stock of the
Company.
In connection with the Tender Offer, (a) the Investor Group will
contribute (indirectly through Holdings) to Merger Co an aggregate amount of not
less than $190,000,000 in common equity (the "Equity Contribution"); (b) the
-------------------
Company and each of its subsidiaries will repay or repurchase in full all its
existing indebtedness (other than the Existing Notes (as defined below)) (the
"Existing Indebtedness"), including all amounts outstanding under the Company's
---------------------
<PAGE>
existing Loan and Security Agreement dated as of December 18, 1997, as amended
(the "Existing Credit Agreement"), among the Company, the lenders named therein
-------------------------
and certain other parties; (c) the Existing Credit Agreement and any related
guarantees and collateral documents shall be terminated; (d) the Company will
make a tender offer, and, if necessary, a change of control offer,
(collectively, the "Debt Tender Offer") for all its outstanding 9-1/4% Senior
-----------------
Subordinated Notes (the "Existing Notes") pursuant to which the covenants in the
--------------
indenture governing the Existing Notes remaining outstanding after the Debt
Tender Offer shall be waived or eliminated in a manner reasonably satisfactory
to the Banks (it being understood that the change of control provisions will not
be eliminated); (e) the Company will pay tender premiums and consent fees (the
"Debt Tender Premium") in connection with the Debt Tender Offer in an aggregate
-------------------
amount not to exceed an amount to be agreed upon (it being understood that the
Debt Tender Premium shall be calculated in accordance with market practice on
the basis of a yield to maturity of the U.S. Treasury Note that is due closest
to the first redemption date of the Existing Notes); (f) the Company will pay
all outstanding accrued and unpaid interest in connection with its repayment of
the Existing Indebtedness and its redemption of the Existing Notes; (g) the
Company will obtain approximately $325,000,000 of senior secured credit
facilities (the "Senior Facilities") comprised of $225,000,000 in term loan
-----------------
facilities (the "Term Loan Facilities") and a $100,000,000 revolving credit
--------------------
facility (the "Revolving Credit Facility"), approximately $25,000,000 of which
-------------------------
will be drawn at closing; (h) the Borrower will borrow approximately
$150,000,000 in senior subordinated loans from one or more lenders under a
senior subordinated credit facility (the "Facility"); and (i) costs and expenses
--------
(other than the Debt Tender Premium) (the "Transaction Costs and Expenses") in
------------------------------
an amount not to exceed $55,000,000 incurred in connection with the Transactions
(as defined below) will be paid. In the event that any Existing Notes remain
outstanding after consummation of the Debt Tender Offer, the aggregate principal
amount of the Facility shall be reduced on a dollar-for-dollar basis. The
Acquisition and the other transactions described in this paragraph and in the
immediately preceding paragraph are collectively referred to herein as the
"Transactions".
------------
1. Engagement of the Co-Arrangers. You hereby engage the Co-
------------------------------
Arrangers to provide to you, the Borrower, Holdings and your and its respective
affiliates such capital markets and other financial advisory services in
connection with the Transactions, including the financing and refinancing
thereof, as you, the Borrower, Holdings and/or one or more of your or its
respective affiliates may reasonably request, and you agree that you shall cause
the Borrower, Holdings and/or one or more of their affiliates, as the case may
be, to engage the Co-Arrangers to be the joint-underwriters of, or joint-
placement agents for, or joint-initial purchasers of, any public or private
offering of debt securities ("Securities") by the Company, Holdings or
----------
any one or more of their respective affiliates in connection with any
refinancing of any senior subordinated debt financing and/or any senior
unsecured financing (including the Facility) provided to the Borrower, Holdings
or any of their respective affiliates by a syndicate or syndicates led by Bear
Stearns Corporate Lending Inc. ("BSCL") and The Chase Manhattan Bank ("Chase"
-----
and, together with BSCL, the "Banks") in connection with the Transactions (any
-----
such offering being referred to herein as an "Offering") whether completed prior
--------
to, on or after the Closing Date, including, but not limited to, the
contemplated issuance by the Company of Senior Subordinated Notes after the
Closing Date having standard market terms comparable to similar offerings by
issuers sponsored by Investcorp, adjusted as necessary for market conditions
2
<PAGE>
and as shall be agreed between the Company and the Co-Arrangers (the "Proposed
--------
Financing", which expression includes any senior unsecured notes issued in lieu
- ---------
of an equivalent principal amount of such Senior Subordinated Notes). You agree
that, in any Offering, the Co-Arrangers will act as exclusive joint-lead
managers and exclusive joint-bookrunning managers and each of the Co-Arrangers
will be the underwriter of, or placement agent for, or initial purchaser of, 50%
of the aggregate amount of the Offering; provided that in an Offering in which
--------
Initial Lenders other than the Banks have committed to provide a portion of the
Facility (not to exceed 25% of the Facility), the other Initial Lenders (or
their designated securities affiliates) will act as co-managers (the "Co-
--
Managers") of that percentage of the aggregate amount of the Offering equal to
- --------
their commitment percentage of the Facility and each of the Co-Arrangers will be
the underwriter of, or placement agent for, or initial purchaser of, 50% of the
remaining aggregate amount of the Offering.
The Co-Arrangers reserve the right not to participate in any Offering,
and the foregoing is not an agreement by the Co-Arrangers to underwrite, place
or purchase any Securities or otherwise provide any financing. In connection
with any Offering in which the Co-Arrangers elect to participate, you agree that
you shall cause the Company, Holdings or one or more of their respective
affiliates, as the case may be, to enter into an underwriting agreement,
placement agency agreement or purchase agreement, as applicable, with the Co-
Arrangers and the Co-Managers, which agreement shall be consistent with this
letter agreement and otherwise containing mutually acceptable terms.
It is currently expected that the Proposed Financing will be
consummated after the Closing Date. You agree that the Company, in consultation
with the Co-Arrangers, will as soon as reasonably practicable after the Closing
Date commence the preparation of a registration statement or a Rule 144A
offering memorandum or other private placement memorandum relating to the
Proposed Financing. You further agree that you, the Company or, as applicable
Holdings, will prepare and shall be in a position to print not later than
December 31, 1999, a complete printed preliminary prospectus or preliminary
offering memorandum or preliminary private placement memorandum that is suitable
for use in a customary "high-yield road show" relating to the issuance of such
Securities and contains all financial statements and other data required to be
included therein (including all audited financial statements, all unaudited
financial statements and all appropriate pro forma financial statements prepared
in accordance with, or reconciled to, generally accepted accounting principles
in the United States and prepared in accordance with Regulation S-X promulgated
by the Securities and Exchange Commission ("Regulation S-X") and all other data
--------------
(including selected financial data) that the Securities and Exchange Commission
would require in a registered offering of such Securities or that would be
necessary for the Co-Arrangers to receive customary "comfort" (including
"negative assurance" comfort) from independent accountants in connection with
the Proposed Financing). Not later than December 31, 1999, the Company shall
have prepared materials for a presentation to Standard & Poor's Rating Group
and Moody's Investors Service, Inc. (collectively, the "Rating Agencies") for a
---------------
rating on the Proposed Financing and shall, upon the request of the Co-
Arrangers, meet with such Rating Agencies. In the event of a Securities Demand
(as defined in the Fee Letter dated the date hereof among us and you) that
includes Holdings Securities, the Company shall prepare materials for a
presentation to the Rating Agencies for a rating on the
3
<PAGE>
Holdings Securities as soon as practicable and shall, upon the request of the
Co-Arrangers, meet with such Rating Agencies.
2. Exclusive Engagement. During the period from
--------------------
the date hereof through the date which is 12 months after the Closing Date (the
"Payment Date"), you will not, and will cause Holdings, the Company and your and
------------
their respective affiliates not to, initiate, solicit or enter into any
discussions or negotiations looking toward the issuance, offering or sale of any
Securities to any third parties, except through both of the Co-Arrangers and the
Co-Managers, if any. In the event that you, your affiliates or Holdings, the
Company or any of their affiliates receives any inquiry concerning any
Securities, you agree that the party so receiving such inquiry will promptly
inform the Co-Arrangers of such inquiry. In addition, you agree that from the
date hereof until the earlier of the termination of this letter agreement or the
closing of the sale of the Securities in the Proposed Financing, none of you,
Holdings, the Company or any of your or their affiliates will offer, sell,
contract to sell or otherwise dispose of any securities substantially similar to
such Securities without the Co-Arrangers' prior written consent. You further
represent and agree that no offers or sales of securities of the same or a
similar class as the Securities in the Proposed Financing have been made or will
be made by the Company or on its behalf which would be integrated with the offer
and sale of such Securities under the doctrine of integration referred to in
Regulation D under the Securities Act.
You acknowledge that the Co-Arrangers have been retained solely to
provide the services set forth in this letter agreement. In rendering such
services, each of the Co-Arrangers shall act as an independent contractor, and
any duties of the Co-Arrangers arising out of its engagement hereunder shall be
owed solely to you, the Company, Holdings and any of their respective affiliates
making an Offering.
You acknowledge that the Co-Arrangers are securities firms that are
engaged in securities trading and brokerage activities, as well as providing
investment banking and financial advisory services. In the ordinary course of
trading and brokerage activities, the Co-Arrangers and their affiliates may at
any time hold long or short positions, and may trade or otherwise effect
transactions, for their own account or the accounts of customers, in debt or
equity securities of the Company, Holdings or other entities that may be
involved in the transactions contemplated hereby. The Co-Arrangers recognize
their responsibility for compliance with federal securities laws in connection
with such activities.
You agree that none of you, Holdings, the Company or any of your or
their affiliates will appoint any third party as an additional underwriter,
placement agent or initial purchaser for any Offering without obtaining the
Co-Arrangers' prior written consent to such appointment and to the terms of such
third party's participation in such Offering.
You hereby engage the Co-Arrangers (and agree to cause the Company to
confirm the engagement of the Co-Arrangers) as joint dealer managers and
solicitation agents for the Debt Tender Offer, on terms to be agreed upon by the
Co-Arrangers, Holdings and you.
3. Termination. This letter agreement may be terminated by the
-----------
Co-Arrangers at any time upon ten days' prior written notice to you, Holdings or
the Company. This
4
<PAGE>
letter agreement may be terminated by you, Holdings or the Company upon ten days
prior written notice to the Co-Arrangers after the earlier of (a) the Payment
Date and (b) receipt by the Company, Holdings and/or any one or more of their
affiliates of aggregate gross proceeds of not less than $150,000,000, or such
lesser amount equal to the amount of any senior subordinated debt financing
and/or senior unsecured financing provided to the Company, Holdings or any of
their respective affiliates by a syndicate or syndicates led by the Banks in
connection with the Transactions, from the sale through the Co-Arrangers of any
Securities consummated after the Closing Date.
Upon any termination of this letter agreement, the obligations of the
parties hereunder shall terminate, except that all obligations in this letter
agreement relating to keeping proprietary information confidential, the payment
of fees and expenses and indemnification and contribution will survive any
termination or expiration of this letter agreement.
4. Indemnification. In consideration of the engagement hereunder,
you (the "Indemnifying Party") agree to indemnify and hold harmless the
Co-Arrangers to the extent set forth in Annex A hereto, the provisions of which
are incorporated by reference herein and constitute a part hereof.
5. Fees and Expenses.
(a) In any Offering of Securities that is consummated prior to
termination of this letter agreement and in which the Co-Arrangers act as
sole or lead underwriters, sole or lead placement agents or sole or lead
initial purchasers, you shall cause the applicable issuer to pay aggregate
underwriters' or initial purchasers' discounts, or placement agency fees,
as applicable, equal to 3.0% (or 3.25% in the case of an Offering in which
the issuer is Holdings) of the gross proceeds of such Offering, payable at
the closing of such Offering out of the proceeds thereof.
(b) If the Proposed Financing shall not have been consummated
prior to the Payment Date, you or the applicable issuer shall pay to the
Co-Arrangers on the Payment Date for their services hereunder a cash fee
equal to 3.0% of the aggregate principal amount outstanding on the Payment
Date of any debt financing of the Company, Holdings and/or one or more of
their affiliates issued on or about the Closing Date under the Facility.
The obligation to pay such fee shall be absolute and unconditional and
shall not be subject to reduction by way of set-off or counterclaim.
(c) If prior to the termination of this letter agreement, any
permanent financing consisting of equity is provided to the Company in
which both Co-Arrangers do not act as lead underwriters, lead placement
agents or lead initial purchasers, you shall cause the applicable issuer to
pay a cash fee equal to 7.0% of the amount of the Initial Loans or Exchange
Notes paid or redeemed with the proceeds of such equity financing.
(d) You or the applicable issuer, as the case may be, shall be
entitled to a partial refund of, and the Co-Arrangers and the Co-Managers
shall refund to you or the applicable issuer, as the case may be, any fee
actually paid pursuant to paragraph 5(b)
5
<PAGE>
above in an amount equal to the product of (i) the gross spread (i.e., the
underwriter's or initial purchaser's discount) or placement agency fees
received by the Co-Arrangers after the Payment Date in connection with each
Offering in which the Co-Arrangers act as lead underwriters, lead placement
agents or lead initial purchasers, as applicable, and that is consummated
during the period specified in Column A below following the Payment Date
times (ii) the percentage set forth opposite such period in Column B below.
<TABLE>
<CAPTION>
Column A Column B
- -------------------------------------------------------------------------------------------------
<S> <C>
0-89 days 75%
- --------------------------------------------------------------------------------------------------
90-179 days 50%
- --------------------------------------------------------------------------------------------------
180-364 days 25%
- --------------------------------------------------------------------------------------------------
365 days and thereafter 0%
==================================================================================================
</TABLE>
In no event shall the Co-Arrangers be required to refund pursuant to this
paragraph 5(c) more than the amount of the fee actually paid to the Co-Arrangers
pursuant to paragraph 5(b) above.
(e) In addition, whether or not the Transactions are consummated,
you shall cause the Company, Holdings or one of their affiliates, as the
case may be, to reimburse the Co-Arrangers promptly upon request for all
its reasonable out-of-pocket costs and expenses (including, without
limitation, reasonable fees, disbursements and other charges of counsel)
incurred in connection with the preparation of this letter agreement or any
of the transactions contemplated hereby, whether or not any Securities are
issued, offered or sold; provided, however, that there shall be no
-------- -------
obligation to reimburse any such costs and expenses (including the
Co-Arrangers' fees, disbursements and other charges of counsel) incurred in
connection with any Offering in which the Co-Arrangers participate. In
connection with any Offering, the Company or one of its affiliates, as the
case may be, shall in any case be responsible for all printing costs,
filing fees and, "blue-sky" fees and expenses.
6. Disclosure. In connection with their engagement hereunder, the
----------
Co-Arrangers will assist the Company in preparing a prospectus, offering
circular, private placement memorandum or other document to be used in
connection with the Proposed Financing or any other Offering (the "Offering
--------
Document"). You agree to cause the Company or Holdings to furnish the
--------
Co- Arrangers with all financial and other information concerning the Company,
Holdings, the Transactions and related matters (the "Information") which the
-----------
Co-Arrangers may reasonably request for inclusion in the Offering Document or
otherwise. You represent that (a) the Information and the Offering Document
will be complete and correct in all material respects and will not include an
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading, (b) all historical financial data
provided to the Co-Arrangers will be prepared in accordance with U.S. GAAP and
will fairly present the financial condition
6
<PAGE>
and operations of the Company or Holdings and (c) any projections, financial or
otherwise, provided to the Co-Arrangers will be prepared in good faith with a
reasonable basis for the assumptions and the conclusions reached therein and on
a basis consistent with Holdings or the Company's historical financial data. You
agree that you, Holdings or the Company will notify the Co-Arrangers promptly of
any material adverse change, or development that may lead to any material
adverse change, in the business, properties, operations, or financial condition
of the Company or Holdings or concerning any statement contained in any Offering
Document or in any historical financial data provided to the Co-Arrangers which
is not accurate or which is incomplete or misleading in any material respect.
You acknowledge that the Co-Arrangers may rely, without independent
verification, upon the accuracy and completeness of the Information and the
Offering Document, and that the Co-Arrangers do not assume any responsibility
therefor.
You hereby acknowledge the proprietary nature of the products and services
that the Co-Arrangers may provide to you, Holdings, the Company and/or one or
more of your or their respective affiliates hereunder, and you, Holdings, the
Company and your and their affiliates agree not to divulge or discuss the
contents of any confidential documents, structural characteristics or similar
matters relating to any Securities with any person other than your, the Co-
Agents' and the Company's directors, officers, employees, agents, attorneys,
advisors, regulators and rating agencies, in each case on a need-to-know basis,
without obtaining the Co-Arrangers' prior written consent, except that such
proprietary information may be disclosed only to the extent required by
applicable law or regulation, as you, Holdings and the Company may be advised by
counsel.
You hereby acknowledge and consent that the Co-Arrangers may share the
Offering Document, the Information and any other information or matters relating
to Holdings, the Company, the Transactions or the other transactions
contemplated hereby with affiliates of the Co-Arrangers, including the Banks,
and that such affiliates may likewise share information relating to the Company,
Holdings, the Transactions or such other transactions with the Co-Arrangers.
7. Confidentiality.
---------------
(a) The Co-Arrangers agree to use all non-public information
provided to it by or on behalf of Holdings or the Company hereunder solely
for the purpose of providing the services which are the subject of this
letter agreement and to treat confidentially all such information; provided
--------
that nothing herein shall prevent the Co-Arrangers from disclosing any such
information (i) to purchasers or prospective purchasers of any Securities
in connection with an Offering of such Securities, (ii) pursuant to the
order of any court or administrative agency or in any pending legal or
administrative proceeding, (iii) upon the request or demand of any
regulatory authority having jurisdiction over the Co-Arrangers or any of
their affiliates, (iv) to the extent that such information becomes publicly
available other than by reason of disclosure by the Co-Arrangers, (v) to
the Co-Arrangers' employees, legal counsel, independent auditors and other
experts or agents who need to know such information and are informed of the
7
<PAGE>
confidential nature of such information or (vi) to any of its affiliates as
set forth in Section 6 above.
(b) You agree that you will not disclose this letter agreement,
the contents hereof or the activities of the Co-Arrangers pursuant hereto
to any person without the prior written approval of the Co-Arrangers,
except that you may disclose this letter agreement and the contents hereof
(i) to your directors, officers, employees, agents, attorneys and advisors,
on a confidential and need-to-know basis, and (ii) as required by
applicable law or compulsory legal process or in the prosecution of any
proceeding initiated by Holdings or the Company; provided, however, that
-------- -------
you may disclose this letter agreement and the contents hereof to Holdings
or the Company and their directors, officers, employees, shareholders,
agents, attorneys and advisors in connection with the transactions
contemplated hereby on a confidential and need-to-know basis. The
provisions contained in this Section 7 shall remain in full force and
effect notwithstanding the termination of this letter agreement.
You, Holdings and the Company agree that, after the completion of the
sale of the Securities, the Co-Arrangers may, at its option and expense, publish
an announcement in such newspapers, periodicals and other publications as it may
elect which describes the terms of any Offering and the Co-Arrangers'
participation therein.
8. Governing Law and Submission to Jurisdiction. This letter
--------------------------------------------
agreement shall be governed by and construed in accordance with the laws of the
State of New York, without giving effect to the conflicts of laws principles
thereof.
You, Holdings and the Company irrevocably and unconditionally submit
to the exclusive jurisdiction of any state or federal court sitting in the City
of New York over any suit, action or proceeding arising out of or relating to
this letter agreement, any Transaction or the performance of services hereunder.
You, Holdings and the Company hereby agree that service of any process, summons,
notice or document by registered mail addressed to you, Holdings or the Company,
as applicable, shall be effective service of process for any suit, action or
proceeding brought in any such court. You, Holdings and the Company irrevocably
and unconditionally waive any objection to the laying of venue of any such suit,
action or proceeding brought in any such court and any claim that any such suit,
action or proceeding has been brought in an inconvenient forum. You, Holdings
and the Company agree that a final judgment in any such suit, action or
proceeding brought in any such court shall be conclusive and binding upon you,
Holdings and the Company and may be enforced in any other courts to whose
jurisdiction you, Holdings and the Company are or may be subject, by suit upon
judgment. You, Holdings, the Company and the Co-Arrangers irrevocably agree to
waive trial by jury in any suit, action, proceeding, claim or counterclaim
brought by or on behalf of any party related to or arising out of this letter
agreement, the Transactions or the performance of services hereunder.
9. Miscellaneous. This letter agreement contains the entire
-------------
agreement between the parties relating to the subject matter hereof and
supersedes all oral statements and prior writings with respect thereto. This
letter agreement may not be amended or modified
8
<PAGE>
except by a writing executed by each of the parties hereto. Section headings
herein are for convenience only and are not a part of this letter agreement.
This letter agreement is solely for the benefit of you, Holdings, the Company
and the Co-Arrangers, and no other person (except for Indemnified Persons to the
extent set forth in Annex A hereto) shall acquire or have any rights under or by
virtue of this letter agreement. This letter agreement may not be assigned by
you without the Co-Arrangers' prior written consent. You agree to cause
Holdings, the Company and its affiliates to fulfill each of its obligations
under this letter agreement.
If any term, provision, covenant or restriction contained in this
letter agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable or against public policy, the remainder of the terms,
provisions, covenants and restrictions contained herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated. You,
Holdings, the Company and the Co-Arrangers shall endeavor in good faith
negotiations to replace the invalid, void or unenforceable provisions with valid
provisions the economic effect of which comes as close as possible to that of
the invalid, void or unenforceable provisions.
Notwithstanding any provision herein to the contrary, from and after
the Closing Date, the Sponsor shall be automatically released from each and all
of its obligations under this Engagement Letter other than those relating to
confidentiality (without any further action on the part of any person or entity)
and all references herein to the term "the Sponsor" or "you" shall be deemed to
be a reference to the Company exclusively; provided that the Sponsor shall have
--------
delivered documents reasonably satisfactory in all material respects to the Co-
Arrangers which provide for the assumption by the Company of each and all of the
Sponsor's obligations under this Engagement Letter.
This Engagement Letter does not create, nor shall it be construed as
creating, any rights enforceable by a person or entity not a party hereto,
except for you and the Borrower and as provided in the Indemnification
Provisions. The Sponsor, on behalf of itself and the Borrower acknowledges and
agrees that they have been advised by counsel in the negotiation, execution and
delivery of this Engagement Letter and the other agreements and transactions
contemplated hereby, that neither of the Co-Arrangers has any fiduciary
relationship with or duty to the Sponsor, the Company or the Borrower or any
other person arising out of or in connection with this Engagement Letter or any
of the other agreements or transactions contemplated hereby and that neither of
the Co-Arrangers has been retained to advise or has advised the Sponsor, the
Company or the Borrower or any other person regarding the wisdom, prudence or
advisability of entering into or consummating the Transactions.
No party hereto shall be liable for any special, indirect or
consequential damages or, to the fullest extent that a claim for punitive
damages may lawfully be waived, for any punitive damages on any claim (whether
founded in contract, tort, legal duty or any other theory of liability) arising
from or related in any manner to this Engagement Letter or the negotiation,
execution, administration, performance, breach or enforcement of this Engagement
Letter or the instruments and agreements evidencing, governing or relating to
the other Transactions contemplated hereby or any amendment thereto or the
consummation of, or any failure to
9
<PAGE>
consummate, any of the Transactions or any act, omission, breach or wrongful
conduct in any manner related thereto.
This letter agreement may be executed in counterparts, each of which
will be deemed an original, and all of which taken together will constitute one
agreement. Delivery of an executed counterpart of a signature page of this
letter agreement by facsimile transmission shall be effective as delivery of a
manually executed counterpart of this letter agreement.
Capitalized terms used but not defined in this letter agreement shall
have the meanings assigned to them in the Commitment Letter dated the date
hereof among us and you (including the Term Sheet referred to therein).
[This Space Left Intentionally Blank]
10
<PAGE>
If the foregoing correctly sets forth our understanding, please indicate
your acceptance of the terms hereof by signing in the appropriate space below
and returning to CSI the enclosed duplicate original hereof, whereupon this
letter agreement shall become a binding agreement between us.
BEAR, STEARNS & CO. INC.
By: /s/ John T. Kilgallon
---------------------
Name: John T. Kilgallon
Title: Senior Managing Director
CHASE SECURITIES INC.
By: /s/ Gerard J. Murray
--------------------
Name: Gerard J. Murray
Title: Managing Director
Accepted and agreed to as of
the date first above written:
INVESTCORP INVESTMENT EQUITY LIMITED
By: /s/ Patricia Tricarico
----------------------
Name: The Director Ltd.
Title: Director
11
<PAGE>
ANNEX A
INDEMNIFICATION PROVISIONS
Capitalized terms used and not otherwise defined herein are used with the
meanings attributed thereto in the Engagement Letter dated November 2, 1999 (the
"Engagement Letter") from Bear, Stearns & Co. Inc. and Chase Securities Inc. to
-----------------
Investcorp International Equity Limited (collectively with its affiliates, the
"Sponsor") of which these Indemnification Provisions form an integral part.
-------
To the fullest extent permitted by applicable law, the Sponsor agrees that
it will, and, upon consummation of the Tender Offer (at which time the Sponsor
shall be automatically released from liability hereunder), will cause the
Borrower (as defined in the Commitment Letter) and each of the Guarantors
(referred to in the Commitment Letter; the Guarantors together with the
Borrower, the "Obligors"), jointly and severally, to indemnify and hold harmless
--------
each of the Co-Arrangers and the affiliated entities, directors, officers,
employees, legal counsel, agents and controlling persons (within the meaning of
the federal securities laws) of each of the Co-Arrangers (all of the foregoing,
collectively, the "Indemnified Persons"), from and against any and all losses,
-------------------
claims, damages, obligations, penalties, judgments, awards, liabilities, costs,
expenses and disbursements and any and all actions, suits, proceedings and
investigations in respect thereof and any and all legal or other costs, expenses
and disbursements in giving testimony or furnishing documents in response to a
subpoena or otherwise (including, without limitation, the costs, expenses and
disbursements, as and when incurred, of investigating, preparing or defending
any such action, proceeding or investigation (whether or not in connection with
litigation in which any of the Indemnified Persons is a party) and including,
without limitation, any and all losses, claims, damages, obligations, penalties,
judgments, awards, liabilities, costs, expenses and disbursements, resulting
from any negligent act or omission of any of the Indemnified Persons), directly
or indirectly, caused by, relating to, based upon, arising out of or in
connection with (i) the Transactions, the documents entered into in connection
with the Transactions or the Use of Proceeds, (ii) the Engagement Letter or the
Fee Letter, or (iii) any untrue statement or alleged untrue statement of a
material fact contained in, or omissions or alleged omissions from, any filing
with any governmental agency, any offering memorandum or registration statement
relating to the Securities or similar statements or omissions in or from any
Information furnished by the Sponsor or the Borrower or any of their respective
subsidiaries or affiliates to any of the Indemnified Persons or any other person
in connection with the Transactions, the financing therefor, the Use of
Proceeds, the Engagement Letter or the Fee Letter, provided, however, such
-------- -------
indemnity agreement shall not apply to any portion of any such loss, claim,
damage, obligation, penalty, judgment, award, liability, cost, expense or
disbursement to the extent it is found in a final judgment by a court of
competent jurisdiction (not subject to further appeal) to have resulted
primarily and directly from the gross negligence or willful misconduct of any of
the Indemnified Persons.
These Indemnification Provisions shall be in additional to any liability
which the Sponsor, the Borrower or any other Obligor may have to the Indemnified
Persons.
12
<PAGE>
If any action, suit, proceeding or investigation is commenced, as to which
any of the Indemnified Persons proposes to demand indemnification, it shall
notify the Sponsor or the Borrower with reasonable promptness; provided,
--------
however, that any failure by any of the Indemnified Persons to so notify the
- -------
Sponsor or the Borrower shall not relieve the Sponsor, the Borrower or any other
Obligor from its obligations hereunder. The Banks, on behalf of the Indemnified
Persons, shall have the right to retain counsel of their choice to represent the
Indemnified Persons, and the Sponsor and the Borrower shall, or shall cause the
other Obligors, jointly and severally, to pay the fees, expenses and
disbursement of such counsel; and such counsel shall, to the extent consistent
with its professional responsibilities, cooperate with the Sponsor, the Borrower
and other Obligors and any counsel designated by the Sponsor, the Borrower or
other Obligors. The Sponsor, the Borrower and the Obligors shall be jointly and
severally liable for any settlement of any claim against any of the Indemnified
Persons made with the Sponsor's or the Borrower's written consent, which consent
shall not be unreasonably withheld. Without the prior written consent of each
of the Banks, the Sponsor and the Borrower shall not, and shall not permit any
of the other Obligors to, settle or compromise any claim, or permit a default or
consent to the entry of any judgment in respect thereof, unless such settlement,
compromise or consent includes, as an unconditional term thereof, the giving by
the claimant to each of the Indemnified Persons of any unconditional and
irrevocable release from all liability in respect of such claim.
In order to provide for just and equitable contribution, if a claim for
indemnification pursuant to these Indemnification Provisions is made but is
found in a final judgment by a court of competent jurisdiction (not subject to
further appeal) that such indemnification may not be enforced in such case, even
though the express provisions hereof provide for indemnification in such case,
then the Sponsor, the Borrower and other Obligors, if any, on the one hand, and
the Indemnified Persons, on the other hand, shall contribute to the losses,
claims, damages, obligations, penalties, judgments, awards, liabilities, costs,
expenses and disbursements to which the Indemnified Persons may be subject in
accordance with the relative benefits received by the Sponsor, the Borrower and
the other Obligors, on the one hand, and the Indemnified Persons, on the other
hand, and also the relative fault of the Sponsor, the Borrower and the other
Obligors, on the one hand, and the Indemnified Persons, on the other hand, in
connection with the statements, acts or omissions which results in such losses,
claims, damages, obligations, penalties, judgments, awards, liabilities, costs,
expenses and disbursements and the relevant equitable considerations shall also
be considered. No person found liable for a fraudulent misrepresentation shall
be entitled to contribution from any other person who is not also found liable
for such fraudulent misrepresentation. Notwithstanding the foregoing, none of
the Indemnified Persons shall be obligated to contribute any amount hereunder
that exceeds the amount of fees previously received by such Indemnified Person
pursuant to the Commitment Letter, the Fee Letter and/or the Engagement Letter,
as applicable.
Neither expiration or termination of the Facility nor funding or repayment
of any of the Initial Loans or the Exchange Notes shall affect these
Indemnification Provisions which shall then remain operative and in full force
and effect.
13
<PAGE>
AGREEMENT AND PLAN OF MERGER
Dated as of November 5, 1999,
Among
SIND HOLDINGS, INC.,
SIND ACQUISITION, INC.
and
SYNTHETIC INDUSTRIES, INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE I THE OFFER AND THE MERGER
<S> <C>
SECTION 1.01 The Offer............................................................. 2
SECTION 1.02 Company Actions....................................................... 3
SECTION 1.03 The Merger............................................................ 4
SECTION 1.04 Closing............................................................... 4
SECTION 1.05 Effective Time........................................................ 4
SECTION 1.06 Effects............................................................... 4
SECTION 1.07 Certificate of Incorporation and By-laws.............................. 4
SECTION 1.08 Directors............................................................. 5
SECTION 1.09 Officers.............................................................. 5
ARTICLE II EFFECT ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES
SECTION 2.01 Effect on Capital Stock............................................... 5
SECTION 2.02 Exchange of Certificates.............................................. 6
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.01 Organization, Standing and Power...................................... 8
SECTION 3.02 Company Subsidiaries; Equity Interests................................ 9
SECTION 3.03 Capital Structure..................................................... 9
SECTION 3.04 Authority; Execution and Delivery; Enforceability..................... 10
SECTION 3.05 No Conflicts; Consents................................................ 11
SECTION 3.06 SEC Documents; Undisclosed Liabilities................................ 11
SECTION 3.07 Information Supplied.................................................. 12
SECTION 3.08 Absence of Certain Changes or Events.................................. 13
SECTION 3.09 Taxes................................................................. 13
SECTION 3.10 Employee Benefit Plans................................................ 14
SECTION 3.11 Litigation; Settlement of Stockholder Disputes........................ 16
SECTION 3.12 Environmental Matters; Compliance with Environmental Laws;
Other Applicable Laws................................................. 17
SECTION 3.13 Title to Properties................................................... 18
SECTION 3.14 Confidentiality and Other Agreements.................................. 18
SECTION 3.15 Brokers; Schedule of Fees and Expenses................................ 19
SECTION 3.16 Opinion of Financial Advisor.......................................... 19
SECTION 3.17 Compliance With Laws; Permits......................................... 19
SECTION 3.18 Contracts............................................................. 19
SECTION 3.19 Insurance............................................................. 20
SECTION 3.20 Intellectual Property................................................. 20
SECTION 3.21 Labor Relations....................................................... 21
SECTION 3.22 Transactions With Affiliates.......................................... 21
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
SECTION 4.01 Organization, Standing and Power...................................... 21
SECTION 4.02 Merger Sub............................................................ 21
SECTION 4.03 Authority; Execution and Delivery; Enforceability..................... 22
SECTION 4.04 No Conflicts; Consents................................................ 22
SECTION 4.05 Information Supplied.................................................. 22
SECTION 4.06 Brokers............................................................... 23
SECTION 4.07 Financing............................................................. 23
SECTION 4.08 Litigation............................................................ 23
SECTION 4.09 Copies of Documents................................................... 23
</TABLE>
<PAGE>
<TABLE>
ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS
<S> <C>
SECTION 5.01 Conduct of Business................................................... 23
SECTION 5.02 No Solicitation....................................................... 26
ARTICLE VI ADDITIONAL AGREEMENTS
SECTION 6.01 Preparation of Proxy Statement; Stockholders Meeting.................. 27
SECTION 6.02 Access to Information; Confidentiality................................ 28
SECTION 6.03 Reasonable Efforts; Notification...................................... 28
SECTION 6.04 Benefit Plans......................................................... 29
SECTION 6.05 Indemnification....................................................... 30
SECTION 6.06 Fees and Expenses..................................................... 31
SECTION 6.07 Public Announcements.................................................. 31
SECTION 6.08 Transfer Taxes........................................................ 31
SECTION 6.09 Directors............................................................. 32
SECTION 6.10 Debt Offer............................................................ 32
SECTION 6.11 Cooperation With Financing Efforts.................................... 33
SECTION 6.12 Consents.............................................................. 34
ARTICLE VII CONDITIONS PRECEDENT
SECTION 7.01 Conditions to Each Party's Obligation to Effect the Merger............ 34
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01 Termination........................................................... 34
SECTION 8.02 Effect of Termination................................................. 35
SECTION 8.03 Amendment............................................................. 35
SECTION 8.04 Extension; Waiver..................................................... 36
SECTION 8.05 Procedure for Termination Amendment, Extension or Waiver.............. 36
ARTICLE IX GENERAL PROVISIONS
SECTION 9.01 Nonsurvival of Representations and Warranties......................... 36
SECTION 9.02 Notices............................................................... 36
SECTION 9.03 Definitions........................................................... 37
SECTION 9.04 Interpretation; Disclosure Letters.................................... 38
SECTION 9.05 Severability.......................................................... 38
SECTION 9.06 Counterparts.......................................................... 38
SECTION 9.07 Entire Agreement; No Third-Party Beneficiaries........................ 38
SECTION 9.08 Governing Law......................................................... 38
SECTION 9.09 Assignment............................................................ 38
SECTION 9.10 Enforcement........................................................... 39
</TABLE>
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of November 5, 1999 by and among SIND
HOLDINGS, INC., a Delaware corporation ("Parent"), SIND ACQUISITION, INC., a
Delaware corporation and a wholly owned subsidiary of Parent ("Merger Sub"), and
SYNTHETIC INDUSTRIES, INC., a Delaware corporation (the "Company").
WHEREAS, Parent has formed Merger Sub as a wholly owned subsidiary
corporation of Parent under the Delaware General Corporation Law (the "DGCL")
for the purpose of Merger Sub merging with and into the Company pursuant to the
applicable provisions of the DGCL (the "Merger") so that the Company will
continue as the surviving corporation of the Merger and will become a wholly
owned subsidiary of Parent;
WHEREAS, in furtherance of the Merger, Parent proposes to cause Merger Sub
to make a tender offer (as it may be amended from time to time as permitted
under this Agreement, the "Offer") for the purchase of all the issued and
outstanding shares of common stock of the Company, par value $1.00 per share
(the "Company Common Stock"), at a price per share of $33.00, net cash to each
seller of Company Common Stock, upon the terms and subject to the conditions set
forth in this Agreement;
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and the
Company have determined that the Merger is fair to and in the best interests of
their respective stockholders and have approved the Merger on the terms and
subject to the conditions set forth in this Agreement;
WHEREAS, the Company, Gibraltar, L.P., a Delaware limited partnership (the
"Stockholder"), and the limited partners of the Stockholder are subject to the
terms of the Stipulation and Agreement of Settlement, dated as of April 1, 1999
(the "Stipulation"), among the parties to the action styled Wininger v. SI
Management L.P., et. al., No. C97-1622 CW, United States District Court for the
Northern District of California (the "Wininger Litigation"), which has been
incorporated into a final order of such court pursuant to which such court has
directed and empowered the Special Committee of the Board of Directors (the
"Special Committee") of the Company to take such actions as may be necessary to
negotiate and approve the consummation of the transactions contemplated by this
Agreement consistent with the process set forth in the Stipulation;
WHEREAS, Parent, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger and also to prescribe various conditions to the Offer and
the Merger; and
WHEREAS, concurrently with the execution and delivery of this Agreement,
Parent is entering into an agreement with a certain stockholder of the Company
(the "Stockholder Agreement") pursuant to which, among other things, such
stockholder shall agree to take certain actions to support the transactions
contemplated by this Agreement.
<PAGE>
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
THE OFFER AND THE MERGER
SECTION 1.01 The Offer. (a) Subject to the conditions of this
Agreement, as promptly as practicable, but in no event later than five business
days after the date of the execution and delivery of this Agreement, Merger Sub
shall, and Parent shall cause Merger Sub to, commence the Offer within the
meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). The obligation of Merger Sub to, and of Parent to cause Merger
Sub to, commence the Offer and accept for payment, and pay for, any shares of
Company Common Stock tendered pursuant to the Offer shall be subject to the
conditions set forth in Exhibit A (any of which may be waived by Merger Sub in
---------
its sole discretion, provided that, without the consent of the Company, Merger
Sub may not waive the Minimum Tender Condition (as defined in Exhibit A)) and to
---------
the other conditions in this Agreement. The initial expiration date of the Offer
shall be the 20th business day following the commencement of the Offer. Merger
Sub expressly reserves the right to modify the terms of the Offer, except that,
without the consent of the Company, Merger Sub shall not, except as provided in
the next sentence: (i) reduce the number of shares of Company Common Stock
subject to the Offer; (ii) reduce the price per share of Company Common Stock to
be paid pursuant to the Offer; (iii) modify or add to the conditions set forth
in Exhibit A in any manner materially adverse to the holders of Company Common
---------
Stock; (iv) extend the Offer; (v) change the form of consideration payable in
the Offer; or (vi) otherwise amend the Offer in any manner adverse to the
holders of Company Common Stock. Notwithstanding the foregoing, Merger Sub may,
without the consent of the Company (w) extend the Offer, if at the scheduled
expiration date of the Offer any of the conditions to Merger Sub's obligation to
purchase shares of Company Common Stock set forth herein or in Exhibit A are not
satisfied, until such time as such conditions are satisfied or waived; (x)
extend the Offer for a period of not more than 15 business days beyond the
initial expiration date of the Offer, if on the date of such extension less than
90% of the outstanding shares of Company Common Stock have been validly tendered
and not properly withdrawn pursuant to the Offer; (y) extend the Offer for any
period required by applicable law, including any rule, regulation,
interpretation or position of the SEC applicable to the Offer; and (z) extend
the Offer for any reason for a period of not more than 10 business days beyond
the latest expiration date that would otherwise be permitted under this Section
1.01(a). It is agreed that the conditions to the Offer are for the benefit of
Parent and Merger Sub and may be asserted by Parent or Merger Sub regardless of
the circumstances giving rise to any such condition (including any action or
inaction by Parent or Merger Sub not inconsistent with the terms hereof). On the
terms and subject to the conditions of the Offer and this Agreement, Merger Sub
shall, and Parent shall cause Merger Sub to, pay for all shares of Company
Common Stock validly tendered and not withdrawn pursuant to the Offer that
Merger Sub becomes obligated to purchase pursuant to the Offer as soon as
practicable after the expiration of the Offer.
(b) On the date of commencement of the Offer, Parent and Merger Sub
shall file with the SEC a Tender Offer Statement on Schedule 14D-1 with respect
to the Offer, which shall contain,
<PAGE>
among other things, an offer to purchase and a related letter of transmittal and
other ancillary documents (such Schedule 14D-l and the documents included
therein pursuant to which the Offer will be made, together with any supplements
or amendments thereto, the "Offer Documents"). Each of Parent and Merger Sub on
the one hand, and the Company on the other hand, shall promptly correct any
information provided by it for use in the Offer Documents if and to the extent
that such information is false or misleading in any material respect, and each
of Parent and Merger Sub shall take all steps necessary to amend or supplement
the Offer Documents and to cause the Offer Documents as so amended or
supplemented to be filed with the SEC and to be disseminated to the Company's
stockholders, in each case as and to the extent required by applicable Federal
securities laws. Parent and Merger Sub shall promptly notify the Company and its
counsel regarding any comments that Parent, Merger Sub or their counsel receive
from the SEC or its staff with respect to the Offer Documents and shall promptly
provide to the Company and its counsel copies of such written comments, if any.
The Company shall cooperate with Parent and Merger Sub in responding to any
comments received from the SEC with respect to the Offer Documents.
(c) Subject to the terms and conditions of this Agreement, Parent shall
provide or cause to be provided to Merger Sub on a timely basis the funds
necessary to purchase any shares of Company Common Stock that Merger Sub
becomes obligated to purchase pursuant to the Offer.
SECTION 1.02 Company Actions. (a) The Company hereby approves of and
consents to the Offer, the Merger and the other transactions contemplated by
this Agreement.
(b) In accordance with Rule 14d-9(e) of the Exchange Act, and prior to the
Company Stockholders Approval (as defined in Section 3.04(c)), if any, the
Company shall file with the SEC a Solicitation/ Recommendation Statement on
Schedule 14D-9 with respect to the Offer (such Schedule 14D-9, as amended from
time to time and including the exhibits thereto, the "Schedule 14D-9")
containing the recommendations described in Section 3.04(b) hereof and shall
mail the Schedule 14D-9 to the stockholders of the Company. Each of the Company,
Parent and Merger Sub shall promptly correct any information provided by it for
use in the Schedule 14D-9 if and to the extent that such information is false or
misleading in any material respect, and the Company shall take all steps
necessary to amend or supplement the Schedule 14D-9 and to cause the Schedule
14D-9 as so amended or supplemented to be filed with the SEC and disseminated to
the Company's stockholders, in each case as and to the extent required by
applicable Federal securities laws. The Company shall promptly notify Parent and
its counsel regarding any comments the Company or its counsel may receive from
the SEC or its staff with respect to the Schedule 14D-9 and shall promptly
provide to the Parent and its counsel copies of such written comments, if any.
(c) In connection with the Offer, the Company shall cause its transfer
agent to furnish Merger Sub promptly with mailing labels containing the names
and addresses of the record holders of Company Common Stock as of a recent date
and of those persons becoming record holders subsequent to such date, together
with copies of all lists of stockholders, security position listings and
computer files and all other information in the Company's possession or control
regarding the beneficial owners of Company Common Stock, and shall furnish to
Merger Sub such information and assistance (including updated lists of
stockholders, security position listings and computer files) as Parent may
reasonably request in communicating the Offer to the
<PAGE>
stockholders of the Company. Subject to the requirements of applicable law, and
except for such steps as are necessary to disseminate the Offer Documents and
any other documents necessary to consummate this Agreement, Parent and Merger
Sub shall hold in confidence the information contained in any such labels,
listings and files, shall use such information only in connection with the Offer
and the Merger and, if this Agreement is terminated, shall, upon request,
deliver to the Company or destroy all copies of such information then in their
possession, followed promptly by written certification of copies destroyed, if
any.
SECTION 1.03 The Merger. On the terms and subject to the conditions set
forth in this Agreement, Merger Sub shall be merged with and into the Company at
the Effective Time (as defined in Section 1.05) whereupon the separate corporate
existence of Merger Sub shall cease and the Company shall continue as the
surviving corporation (the "Surviving Corporation"). Notwithstanding the
foregoing, Parent may elect at any time prior to the Merger, instead of merging
Merger Sub into the Company as provided above, to merge the Company with and
into Merger Sub, in which case Merger Sub shall be the Surviving Corporation;
provided, however, that the Company shall not be deemed to have breached any of
its representations, warranties or covenants set forth in this Agreement solely
by reason of such election. In such event, the parties shall, if required,
execute an appropriate amendment to this Agreement in order to reflect the
foregoing. At the election of Parent, any direct or indirect wholly owned
subsidiary of Parent may be substituted for Merger Sub as a constituent
corporation in the Merger. In such event, the parties shall execute an
appropriate amendment to this Agreement in order to reflect the foregoing.
SECTION 1.04 Closing. The closing of the Merger (the "Closing")
shall take place at the offices of Gibson, Dunn & Crutcher, 200 Park Avenue, New
York, New York 10166 at 10:00 a.m. on the second business day following the
satisfaction (or, to the extent permitted by law, waiver by all parties) of the
conditions set forth in Section 7.01, or as soon as practicable after all the
conditions set forth in Section 7.01 have been satisfied (or, to the extent
permitted by law, waived by the parties entitled to the benefits thereof), or at
such other place, time and date as shall be agreed in writing between Parent and
the Company. The date on which the Closing occurs is referred to in this
Agreement as the "Closing Date".
SECTION 1.05 Effective Time. Prior to the Closing, Parent shall prepare,
and on the Closing Date or as soon as practicable thereafter Parent shall file
with the Secretary of State for the State of Delaware, a certificate of merger
or certificate of ownership (in any such case, the "Certificate of Merger")
executed in accordance with the relevant provisions of the DGCL and shall make
all other filings or recordings required under the DGCL. The Merger shall become
effective at such time as the Certificate of Merger is duly filed with such
Secretary of State, or at such other time as Parent and the Company shall agree
and specify in the Certificate of Merger (the time the Merger becomes effective
being the "Effective Time").
SECTION 1.06 Effects. The Merger shall have the effects set forth in
Section 259 of the DGCL.
SECTION 1.07 Certificate of Incorporation and By-laws. (a) The
Certificate of Incorporation of the Company, as in effect immediately prior to
the Effective Time, shall be amended in its entirety to read as set forth on
Exhibit B, and, as so amended, such Certificate of
- ---------
<PAGE>
Incorporation shall be the Certificate of Incorporation of the Surviving
Corporation until thereafter changed or amended as provided therein or by
applicable law. If, pursuant to Section 1.03 hereof, the Merger Sub is the
Surviving Corporation, its Certificate of Incorporation shall not be amended in
the Merger.
(b) The By-Laws of the Company as in effect immediately prior to the
Effective Time shall be the By-Laws of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law. If,
pursuant to Section 1.03 hereof, the Merger Sub is the Surviving Corporation,
its By-Laws shall not be amended in the Merger.
SECTION 1.08 Directors. The directors of Merger Sub immediately prior to
the Effective Time shall become the directors of the Surviving Corporation,
until the earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be.
SECTION 1.09 Officers. The officers of the Company immediately prior
to the Effective Time shall become the officers of the Surviving Corporation,
until the earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be.
ARTICLE II
EFFECT ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.01 Effect on Capital Stock. At the Effective Time, by virtue
of the Merger and without any action on the part of any holder of Company Common
Stock or any shares of capital stock of Merger Sub:
(a) Capital Stock of Merger Sub. Each issued and outstanding share of
capital stock of Merger Sub shall be converted into and become one fully paid
and nonassessable share of common stock, par value $0.01 per share, of the
Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Stock. Each share of
Company Common Stock that is owned by the Company, Parent or Merger Sub, or any
wholly-owned subsidiary of the Company or Parent, shall no longer be outstanding
and shall automatically be canceled and retired and shall cease to exist, and no
consideration shall be delivered or deliverable in exchange therefor.
(c) Conversion of Company Common Stock. Subject to Sections 2.01(b) and
2.01(d), each issued and outstanding share of Company Common Stock shall be
converted into the right to receive in cash from the Company an amount equal to
the price per share of Company Common Stock paid pursuant to the Offer (the
"Merger Consideration"). As of the Effective Time, all such shares of Company
Common Stock shall no longer be outstanding and shall automatically be canceled
and retired and shall cease to exist, and each holder of a certificate
representing any such shares of Company Common Stock shall cease to have any
rights with
<PAGE>
respect thereto, except the right to receive the Merger Consideration upon
surrender of such certificate in accordance with Section 2.02, without interest.
(d) Appraisal Rights. Notwithstanding anything in this Agreement to the
contrary, shares of Company Common Stock that are issued and outstanding
immediately prior to the Effective Time and that are held by persons who are
entitled to demand and properly demand appraisal of such shares pursuant to, and
who comply in all respects with, Section 262 of the DGCL ("Appraisal Shares")
shall not be converted into the right to receive the Merger Consideration as
provided in Section 2.01(c) hereof, but rather shall be entitled to payment of
the fair market value of such Appraisal Shares in accordance with Section 262 of
the DGCL; provided, however, that if any holder of Appraisal Shares fails to
perfect or otherwise waives, withdraws or loses the right to appraisal under
Section 262 of the DGCL, then the right of such holder to be paid the fair value
of such holder's Appraisal Shares shall cease and such Appraisal Shares shall be
treated as if they had been converted as of the Effective Time into the right to
receive the Merger Consideration as provided in Section 2.01(c). The Company
shall serve prompt notice to Parent of any demands received by the Company for
appraisal of any shares of Company Common Stock, and Parent shall have the right
to participate in and direct all negotiations and proceedings with respect to
such demands. The Company shall not, except with the prior written consent of
Parent, make any payment with respect to, or settle or offer to settle, any such
demands, or agree to do any of the foregoing.
(e) Treatment of Options. Immediately prior to the Effective Time, each
outstanding Company Stock Option (as defined in Section 3.03) granted under any
of the Company Stock Plans (as defined in Section 3.03), which is then
exercisable or becomes exercisable as a result of the consummation of the
transactions contemplated by this Agreement, shall be canceled by the Company,
and at the Effective Time or as soon as practicable thereafter, the holder
thereof shall be entitled to receive from the Surviving Corporation as of or as
soon as practicable after the Effective Time in consideration for such
cancellation an amount in cash equal to the product of (i) the number of shares
of Company Common Stock previously subject to such Company Stock Option and (ii)
the excess, if any, of the Merger Consideration over the exercise price per
share for such Company Stock Option, reduced by the amount of withholding or
other taxes required by law to be withheld.
Except as provided herein or as otherwise agreed by the parties, the
Company Stock Plans and any other plan, program or arrangement providing for
the issuance or grant of any interest in respect of the capital stock of the
Company shall terminate as of the Effective Time.
Prior to the Effective Time, the Company Board (as defined in Section
3.04(b)) and the Compensation Committee of the Company Board shall adopt such
resolutions and the Company shall take such other actions as are necessary to
carry out the terms of this Section 2.01(e).
SECTION 2.02 Exchange of Certificates. (a) Paying Agent. Prior to the
Effective Time, Parent shall select a bank or trust company to act as paying
agent (the "Paying Agent") for the payment of the Merger Consideration upon
surrender of certificates (the "Certificates") representing Company Common
Stock. Parent shall take all steps necessary to enable and cause
<PAGE>
the Surviving Corporation to provide to the Paying Agent immediately following
the Effective Time all the cash necessary to pay for the shares of Company
Common Stock converted into the right to receive the Merger Consideration
pursuant to Section 2.01(c) (such cash being hereinafter referred to as the
"Exchange Fund").
(b) Exchange Procedure. Promptly after the Effective Time, the Paying Agent
shall mail to each holder of record of a Certificate or Certificates that
immediately prior to the Effective Time represented Company Common Stock whose
shares were converted into the right to receive the Merger Consideration
pursuant to Section 2.01: (i) a letter of transmittal which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Paying Agent and shall be in
a form and have such other provisions as Parent may reasonably specify; and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for the Merger Consideration. Upon surrender of a Certificate for cancellation
to the Paying Agent or to such other agent or agents as may be appointed by the
Parent, together with such letter of transmittal, duly executed, and such other
documents as may reasonably be required by the Paying Agent, the holder of such
Certificate shall be entitled to receive in exchange therefor the amount of cash
into which the shares of Company Common Stock theretofore represented by such
Certificate shall have been converted pursuant to Section 2.01, and the
Certificate so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of Company Common Stock which is not registered in the
transfer records of the Company, payment may be made to a person other than the
person in whose name the Certificate so surrendered is registered, if such
Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the person requesting such payment shall pay any transfer or other
taxes required by reason of the payment to a person other than the registered
holder of such Certificate or establish to the satisfaction of the Surviving
Corporation that such tax has been paid or is not applicable. Until surrendered
as contemplated by this Section 2.02, each Certificate shall be deemed at any
time after the Effective Time to represent only the right to receive upon such
surrender the amount of cash, without interest, into which the shares of Company
Common Stock theretofore represented by such Certificate shall have been
converted pursuant to Section 2.01. No interest shall be paid or shall accrue on
the cash payable upon the surrender of any Certificate.
(c) No Further Ownership Rights in Company Common Stock. The Merger
Consideration paid in accordance with the terms of this Article II, upon
conversion of any shares of Company Common Stock, shall be deemed to have been
paid in full satisfaction of all rights pertaining to such shares, and there
shall be no further registration of transfers on the stock transfer books of the
Surviving Corporation of shares of Company Common Stock that were outstanding
immediately prior to the Effective Time. If, after the Effective Time, any
Certificates formerly representing shares of Company Common Stock are presented
to the Surviving Corporation or the Paying Agent for any reason, they shall be
canceled and exchanged as provided in this Article II.
(d) Termination of Exchange Fund. Any portion of the Exchange Fund
(including any interest and other income received by the Paying Agent in
respect of such funds) that remains undistributed to the holders of Certificates
representing Company Common Stock as provided in this Section 2.02 for six
months after the Effective Time shall be delivered to the Surviving Corporation,
upon demand, and any holder of Company Common Stock who has not theretofore
<PAGE>
complied with this Article II shall thereafter look only to the Surviving
Corporation for payment of its claim for the Merger Consideration.
(e) No Liability. None of Parent, Merger Sub, the Company or the
Paying Agent shall be liable to any person in respect of any cash from the
Exchange Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. If any Certificate has not been
surrendered prior to five years after the Effective Time (or immediately prior
to such earlier date on which the Merger Consideration in respect of such
Certificate would otherwise escheat to or become the property of any
Governmental Entity (as defined in Section 3.05), any such shares, cash,
dividends or distributions in respect of such Certificate shall, to the extent
permitted by applicable law, become the property of the Surviving Corporation,
free and clear of all claims or interest of any person previously entitled
thereto.
(f) Investment of Exchange Fund. The Paying Agent shall invest any cash
included in the Exchange Fund as directed by the Surviving Corporation. Any
interest and other income resulting from such investments shall be paid to the
Surviving Corporation.
(g) Withholding Rights. Parent and the Surviving Corporation shall be
entitled to deduct and withhold from the consideration otherwise payable to any
holder of Company Common Stock pursuant to this Agreement such amounts as may be
required to be deducted and withheld with respect to the making of such payment
under any provision of Federal, state, local or foreign tax law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub as follows:
SECTION 3.01 Organization, Standing and Power. Each of the Company
and each Significant Company Subsidiary (as defined below) is duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is organized and has the corporate power and authority to own and
operate its properties and assets and to conduct its businesses as presently
conducted. The Company and each Significant Company Subsidiary is duly qualified
to do business in each jurisdiction where the nature of its business make such
qualification necessary or the failure to so qualify has had or could reasonably
be expected, individually or in the aggregate, to have a material adverse effect
on the business, assets, properties, financial condition, results of operations
or prospects of the Company and the Company Subsidiaries (as defined in Section
3.02), taken as a whole, or on the ability of the Company to consummate the
transactions contemplated by this Agreement (a "Company Material Adverse
Effect"). The Company has made available to Parent true and complete copies of
the Certificate of Incorporation of the Company, as amended to the date of this
Agreement (as so amended, the "Company Charter") and the By-laws of the Company,
as amended to the date of this Agreement (as so amended, the "Company By-laws"),
and the comparable charter and organizational documents of each Significant
Company Subsidiary, in each case as amended through the date of this Agreement.
For purposes of this Agreement, a "Significant Company
<PAGE>
Subsidiary" means any subsidiary of the Company that constitutes a significant
subsidiary within the meaning of Rule 1-02 of Regulation S-X of the SEC.
SECTION 3.02 Company Subsidiaries; Equity Interests. (a) Section
3.02 of the letter, dated as of the date of this Agreement, from the Company to
Parent and Merger Sub (the "Company Disclosure Letter") lists each Significant
Company Subsidiary. All the issued and outstanding shares of capital stock of
each Company Subsidiary have been validly issued and are fully paid and
nonassessable and, except as set forth in the Company Disclosure Letter, are
owned by the Company, by another subsidiary of the Company (a "Company
Subsidiary") or by the Company and another Company Subsidiary, free and clear of
all pledges, liens, charges, mortgages, encumbrances and security interests of
any kind or nature whatsoever (collectively, "Liens").
(b) Except for its interests in the Company Subsidiaries and except for
the ownership interests set forth in Section 3.02 of the Company Disclosure
Letter, the Company does not own, directly or indirectly, any capital stock,
membership interest, partnership interest, joint venture interest or other
ownership or equity interest in any person.
SECTION 3.03 Capital Structure. (a) The authorized capital stock of the
Company consists of 25,000,000 shares of Company Common Stock. At the close of
business on November 1, 1999: (i) 8,664,819 shares of Company Common Stock were
issued and outstanding; (ii) 17,248 shares of Company Common Stock were held by
the Company in its treasury; (iii) 865,848 shares of Company Common stock were
subject to outstanding Company Stock Options (as defined in this Section 3.03);
and (iv) 14,071 additional shares of Company Common Stock were reserved for
issuance pursuant to the Company Stock Plans (as defined in this Section 3.03).
No other shares of capital stock or other voting securities of the Company were
issued, reserved for issuance or outstanding. Since November 1, 1999, no
additional shares of capital stock have been issued by the Company (except such
shares of Company Common Stock, if any, that have been issued pursuant to the
exercise of Company Stock Options so identified in Section 3.03 of the Company
Disclosure Letter) and, except as set forth in Section 3.03 of the Company
Disclosure Letter, no additional Company Stock Options or other stock rights
have been granted. There are no outstanding Company SARs (as defined in this
Section 3.03) that were not granted in tandem with a related Company Stock
Option. All issued and outstanding shares of Company Common Stock are, and all
such shares that may be issued prior to the Effective Time will be (when
issued), duly authorized, validly issued, fully paid and nonassessable and not
subject to or issued in violation of any purchase option, call option, right of
first refusal, preemptive right, subscription right or any similar right to
which the Company is subject. There are no bonds, debentures, notes or other
debts of the Company which have the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on which
stockholders of the Company may vote ("Voting Company Debt"). Except as set
forth above, as of the date of this Agreement, there are no options, warrants,
calls, rights, convertible or exchangeable securities, "phantom" stock rights,
stock appreciation rights, stock-based performance units, commitments,
contracts, arrangements, employee benefit plans or undertakings of any kind to
which the Company or any Company Subsidiary is a party or by which any of them
is bound which: (i) obligate the Company or any Company Subsidiary to issue,
deliver, redeem, repurchase or sell, or cause to be issued, delivered redeemed,
repurchased or sold, additional shares of capital stock or other equity
interests in, or any security convertible
<PAGE>
or exercisable for or exchangeable into any capital stock of or other equity
interest in, the Company or of any Company Subsidiary; (ii) obligate the Company
or any Company Subsidiary to issue, grant, extend or enter into any such option,
warrant, call, right, security, commitment, contract, arrangement, employee
benefit plan or undertaking; or (iii) give any person the right to receive any
economic benefit or right similar to or derived from the economic benefits and
rights accruing to holders of Company Common Stock. As of the date of this
Agreement, there are no outstanding contractual obligations of the Company or
any Company Subsidiary to repurchase, redeem or otherwise acquire any shares of
capital stock of the Company or any Company Subsidiary.
(b) As used herein:
"Company Stock Option" means any option to purchase Company Common
Stock granted under any Company Stock Plan.
"Company SAR" means any stock appreciation right linked to the price
of Company Common Stock and granted under any Company Stock Plan.
"Company Stock Plans" means the plans providing for the grant of
Company Stock Options or any other issuance of Company Capital Stock and
listed in the Company Disclosure Letter.
SECTION 3.04 Authority; Execution and Delivery; Enforceability. (a) The
Company has the requisite corporate power and authority to execute this
Agreement and to consummate the transactions contemplated herein. The execution
and delivery by the Company of this Agreement and the consummation by the
Company of the transactions contemplated herein have been duly authorized by all
necessary corporate action on the part of the Company, subject, in the case of
the Merger, to receipt of the Company Stockholder Approval. The Company has
duly executed and delivered this Agreement, and this Agreement constitutes its
legal, valid and binding obligation, enforceable against it in accordance with
its terms.
(b) The Board of Directors of the Company (the "Company Board"), at a
meeting duly called and held on November 4, 1999, duly and unanimously adopted
resolutions: (i) approving this Agreement, the Offer and the Merger; (ii)
determining that the terms of the Offer and the Merger are fair to and in the
best interests of the Company and its stockholders; (iii) recommending that the
holders of Company Common Stock accept and tender their shares of Company
Common Stock pursuant to the Offer; and (iv) recommending that the Company's
stockholders adopt this Agreement, and assuming that neither Parent nor Merger
Sub is an Interested Stockholder (as such term is defined in Section 203 of the
DGCL) immediately prior to the Company Board taking the actions described in
this Section 3.04(b), taken all other actions necessary to render the
restrictions on business combinations contained in Section 203 of the DGCL
inapplicable to the Offer, the Merger, this Agreement and the Stockholder
Agreement, and the transactions contemplated hereby and thereby.
(c) Assuming that neither Parent nor Merger Sub is an Interested
Stockholder (as such term is defined in Section 203 of the DGCL) immediately
prior to the Company Board taking the actions described in this Section 3.04(b),
the only vote of holders of any class or series of capital
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11
stock of the Company necessary to approve and adopt this Agreement and the
Merger is the adoption of this Agreement by the holders of a majority of the
outstanding Company Common Stock (the "Company Stockholder Approval").
SECTION 3.05 No Conflicts; Consents. Except as set forth in Section 3.05
of the Company Disclosure Letter, the execution and delivery by the Company of
this Agreement does not, and the consummation of the Offer and the Merger and
compliance with the terms hereof will not, conflict with, or result in any
violation of or default (with or without notice or lapse of time, or both)
under, or give rise to a right of recission, termination, cancellation or
acceleration of any obligation or to loss of a material benefit under, or result
in the creation of any Lien upon any of the properties or assets of the Company
or any Company Subsidiary under, any provision of: (i) the Company Charter, the
Company By-Laws or the comparable charter or organizational documents of any
Company Subsidiary; (ii) any material contract, lease, license, indenture, note,
bond, agreement, permit, concession, franchise or other instrument (a
"Contract") to which the Company or any Company Subsidiary is a party; (iii)
subject to the filings and other matters referred to in the following sentence,
any judgment, award, ruling, order or decree ("Judgment") or statute, law,
ordinance, rule or regulation applicable to the Company or any Company
Subsidiary or any of their respective assets ("Applicable Law") including,
without limitation, the Applicable Law of any foreign country, except where such
conflict, violation or default, individually or in the aggregate, has not had
and would not reasonably be expected to have a Company Material Adverse Effect.
No consent, approval, license, permit, order or authorization ("Consent") of, or
registration, declaration or filing with, any Federal, state, local or foreign
government or any court of competent jurisdiction, administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign (a "Governmental Entity") or any other person, is required to be
obtained or made by or with respect to the Company or any Company Subsidiary in
connection with the execution, delivery and performance of this Agreement or the
consummation of the transactions hereunder, other than: (i) compliance with and
filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR
Act"), if applicable; (ii) the filing with the SEC of (A) the Schedule 14D-9,
(B) a proxy or information statement relating to the approval and adoption of
this Agreement and the Merger by the Company's stockholders (the "Proxy
Statement"), if required; (C) any information statement (the "Information
Statement") required under Rule 14f-1 of the Exchange Act, in connection with
the Offer, and (D) such reports under Section 13 of the Exchange Act as may be
required in connection with this Agreement, the Offer and the Merger and the
other transactions contemplated hereby; (iii) the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware and appropriate
documents with the relevant authorities of the other jurisdictions in which the
Company is qualified to do business; (iv) compliance with and such filings as
may be required under applicable Federal, state or local environmental laws; (v)
such filings as may be required in connection with the taxes described in
Section 6.08; (vi) filings under any applicable state takeover law; (vii) such
other items (A) required solely by reason of the participation of Parent (as
opposed to any third party) in the transactions contemplated hereby or (B) as
are set forth in Section 3.05 of the Company Disclosure Letter; and (viii)
Consents the failure of which to obtain, individually or in the aggregate, has
not had and would not reasonably be expected to have a Company Material Adverse
Effect.
SECTION 3.06 SEC Documents; Undisclosed Liabilities. The Company and the
Company Subsidiaries have filed all reports, schedules, forms, statements and
other documents
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12
required to be filed by them with the SEC since November 1, 1996, pursuant to
Sections 13(a) and 15(d) of the Exchange Act (the "Company SEC Documents"). As
of its respective date, each Company SEC Document (a) complied in all material
respects with the requirements of the Exchange Act or the Securities Act of
1933, as amended (the "Securities Act"), as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such Company SEC
Document and (b) did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The consolidated financial statements of the Company
included in the Company SEC Documents comply as to form in all material respects
with applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with U.S.
generally accepted accounting principles ("GAAP") (except, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly present the consolidated financial position of the
Company and its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments) and are in all material respects in accordance with the books of
accounts and records of the Company and the Company Subsidiaries. Except as set
forth in the Company SEC Documents filed and publicly available prior to the
date of this Agreement (the "Filed Company SEC Documents"), and except as set
forth in Section 3.06 of the Company Disclosure Letter, as of the date of this
Agreement neither the Company nor any Company Subsidiary has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
required by GAAP to be set forth on a consolidated balance sheet of the Company
and its consolidated subsidiaries or in the notes thereto and that, individually
or in the aggregate, has had or could reasonably be expected to have a Company
Material Adverse Effect.
SECTION 3.07 Information Supplied. None of the information supplied
or to be supplied by the Company for inclusion or incorporation by reference in:
(i) the Offer Documents, the Schedule 14D-9 or any Information Statement will,
at the time such document is filed with the SEC, at any time it is amended or
supplemented or at the time it is first published, sent or given to the
stockholders of the Company, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading; or (ii) the Proxy Statement, if
required, will, at the date it is first mailed to the Company's stockholders or
at the time of the Company Stockholders Meeting (as defined in Section 6.01) or
at the time of any action by written consent in lieu of a meeting pursuant to
Section 228 of the DGCL with respect to this Agreement and the Merger, as
applicable, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. The Schedule 14D-9, the Information Statement and the Proxy
Statement, if required, will comply as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations thereunder,
except that no representation is made by the Company with respect to statements
made or incorporated by reference therein based solely on information supplied
by Parent or Merger Sub for inclusion or incorporation by reference therein.
<PAGE>
13
SECTION 3.08 Absence of Certain Changes or Events. Except as
disclosed in the Filed Company SEC Documents or in Section 3.08 of the Company
Disclosure Letter, from the date of the most recent audited financial statements
included in the Filed Company SEC Documents to the date of this Agreement, the
Company has conducted its business only in the ordinary course consistent with
past practice, and during such period there has not been:
(i) any event, change, effect or development that, individually or
in the aggregate, has had or could reasonably be expected to have a Company
Material Adverse Effect;
(ii) any acquisition of any interest in a corporation, partnership
or joint venture arrangement, that, individually or in the aggregate,
involves or would involve an investment or expenditure by the Company in
excess of $5,000,000;
(iii) any material change in the Company's business as presently
conducted (as in existence on the date of the Company's most recent audited
financial statements);
(iv) any declaration, setting aside or payment of any dividend or
other distribution (whether in cash, stock or property) with respect to any
Company Common Stock, or any repurchase for value by the Company of any
Company Capital Stock;
(v) any split, combination or reclassification of any Company
Common Stock or any issuance or the authorization of any issuance of any
other securities in respect of, in lieu of or in substitution for shares of
Company Common Stock;
(vi) any agreement by the Company or any Company Subsidiary
authorizing any director or executive officer of the Company or any Company
Subsidiary to receive (A) any increase in compensation, except as was
required under employment agreements in effect as of the date of the most
recent audited financial statements included in the Company SEC Documents,
(B) any increase in severance or termination pay, except as was required
under any employment, severance or termination agreements in effect as of
the date of the most recent audited financial statements included in the
Filed Company SEC Documents, or (C) any new employment, severance or
termination agreement;
(vii) any change in accounting methods, principles or practices by
the Company any Company Subsidiary materially affecting the consolidated
assets, liabilities or results of operations of the Company, except insofar
as may have been required by change in GAAP;
(viii) any action taken by the Company or any Company Subsidiary that
would be prohibited after the date of this Agreement by Section 5.01
hereof.; or
(ix) any agreement by the Company to do any of the foregoing.
SECTION 3.09 Taxes. (a) The Company and each Company Subsidiary have: (i)
filed (or received valid extensions with respect to) all Federal, state and
local and foreign Tax Returns which are required to be filed through the date
hereof, and all such Tax Returns are true, complete and accurate in all material
respects; and (ii) paid all Taxes shown on such returns and
<PAGE>
14
all assessments received by them except where, in the case of state and local
and foreign Tax Returns, the failure to file or extend the due date of or pay
the Taxes due and payable, in the aggregate, has not had and could not
reasonably be expected to have a Company Material Adverse Effect.
(b) The Company has no knowledge of any tax deficiency which has been or
might be asserted against the Company or any of its subsidiaries which has had
or could reasonably be expected to have a Company Material Adverse Effect.
(c) Except as disclosed in Section 3.09 of the Company Disclosure Letter,
there is no material dispute or claim concerning any Tax liability of the
Company or any Company Subsidiary that (i) has been claimed or raised by any
authority in writing or (ii) as to which the directors and officers of the
Company or any Company Subsidiary has any personal knowledge based upon personal
contact with any agent of such authority.
(d) The Company has made available to Parent correct and complete copies
of all Tax Returns filed by the Company and each Company Subsidiary pursuant to
the laws or regulations of any federal, state, local or foreign tax authority
that have been examined or audited by the IRS or any other appropriate authority
during the preceding ten years. Except as disclosed in Section 3.09 of the
Company Disclosure Letter, no tax examination or audit is in progress.
(e) Except as disclosed in Section 3.09 of the Company Disclosure Letter,
neither the Company nor any Company Subsidiary (i) has been a member of an
affiliated group of corporations filing a consolidated federal income Tax Return
(other than a group the common parent of which was the Company) or (ii) has any
liability for the Taxes of any person (other than the Company and any Company
Subsidiary) under Treas. Reg. (S) 1.1502-6 or any similar provision of state,
local or foreign law, as a transferee or successor, by contract or otherwise.
(f) For purposes of this Agreement, the term "Tax" shall mean any federal,
state, local or foreign income or gross receipts tax, alternative or add-on
minimum tax, sales and use tax, customs duty or other tax, charge, fee, levy or
other assessment including without limitation property, transfer, occupation,
service, license, payroll, franchise, excise, withholding, ad valorem,
severance, stamp, premium, windfall profit, employment, rent or other tax,
governmental fee or like assessment or charge of any kind whatsoever, together
with any interest, fine or penalty thereon, and addition to tax, additional
amount, deficiency, assessment or governmental charge, imposed by any federal,
state, local or foreign taxing authority. The term "Tax Return" shall mean any
material report, statement, form, return or other document or information
required to be supplied to a taxing authority in connection with Taxes.
(g) Except as set forth in Section 3.09 of the Company Disclosure Letter,
neither the Company nor any Company Subsidiary has made any payments, is
obligated to make any payments, or is a party to any agreement that could
obligate it to make a payment that will not be deductible under Section 280G of
the Code.
SECTION 3.10 Employee Benefit Plans. (a) Except as disclosed in the Filed
Company SEC Documents or in Section 3.10 of the Company Disclosure Letter, there
are no collective bargaining agreements, any employee benefit plans (within the
meaning of
<PAGE>
15
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) or any bonus, pension, profit sharing, deferred compensation,
incentive compensation, stock ownership, stock purchase, stock option, phantom
stock, retirement, welfare, vacation, severance, disability, death benefit,
hospitalization, medical, life or other plan, arrangement or understanding
(whether or not legally binding) providing benefits to any current or former
employee, officer or director of the Company or any Company Subsidiary
(collectively, "Company Benefit Plans"), and, from the date of the most recent
audited financial statements included in the Filed Company SEC Documents to the
date of this Agreement, there has been no amendment, termination or adoption of
any Company Benefit Plan which would materially increase the Company's liability
thereunder. Except as disclosed in the Filed Company SEC Documents or in Section
3.10 of the Company Disclosure Letter, as of the date of this Agreement there
are no employment, consulting, indemnification, severance or termination
agreements or arrangements between the Company or any Company Subsidiary and any
current or former employee, officer or director of the Company or any Company
Subsidiary.
(b) None of the Company Benefit Plans (i) is a multiemployer plan, within
the meaning of Section 3(37) or 4001(a)(3) of ERISA or a single employer pension
plan, within the meaning of Section 4001(a)(15) of ERISA, for which the Company
could incur liability under Section 4063 or 4064 of ERISA, (ii) is an employee
pension benefit plan that is subject to Title IV of ERISA or the minimum funding
standards of Section 302 of ERISA or Section 412 of the Internal Revenue Code of
1986, as amended (the "Code"), or (iii) provides or promises to provide retiree
medical or life insurance benefits.
(c) All Company Benefit Plans are in compliance in all material respects
with the requirements prescribed by applicable statutes, orders or governmental
rules or regulations currently in effect with respect thereto, and the Company
has performed all material obligations required to be performed by it under, and
is not in any material respect in default under or in violation of, any of the
Company Benefit Plans. Each Company Benefit Plan that is intended to be a tax-
qualified plan is, in both form and operation, in material compliance with the
requirements of Section 401(a) of the Code, has received or has applied for one
or more IRS determination letters to such effect, and the Company is unaware of
any facts that could cause the qualified status of such Company Benefit Plan to
be adversely affected. All benefits due under each Company Benefit Plan have
been timely paid and there is no material lawsuit or claim, other than routine
uncontested claims for benefits, pending, or to the knowledge of Company
threatened, against any Company Benefit Plan or the fiduciaries of any such plan
or otherwise involving or pertaining to any such plan, and no basis exists for
any such lawsuit or claim. No audit or investigation by any governmental
authority is pending, or to the knowledge of Company threatened, regarding any
Company Benefit Plan, and no party dealing with any Company Benefit Plan has
engaged in any prohibited non-exempt transactions (within the meaning of Section
406 of ERISA or Section 4975 of the Code) or any breach of fiduciary duty.
(d) The Company has not incurred any material liability to the Pension
Benefit Guaranty Corporation or any "withdrawal liability" within the meaning of
Section 4201 of ERISA, in either case relating to any Company Benefit Plan or
any pension plan maintained by any company which would be treated as a single
employer with the Company, under Section 4001 of ERISA.
<PAGE>
16
(e) The Company has made available to Parent correct and complete copies
of: (1) each Company Benefit Plan, including all amendments to such plan, and
all summary plan descriptions and other summaries of such plan, (2) each trust
agreement, annuity or insurance contract, or other funding instrument pertaining
to each Company Benefit Plan, (3) the most recent determination letter issued by
the IRS with respect to each Company Benefit Plan that is intended to be tax
qualified and a copy of any pending applications for such IRS letters, (4) the
two most recent actuarial valuation reports for each Company Benefit Plan for
which an actuarial valuation report has been prepared, (5) the two most recent
annual reports (IRS Form 5500 Series), including all schedules to such reports,
if applicable, filed with respect to each Company Benefit Plan, (6) the most
recent plan audits, financial statements, and accountant's opinion (with
footnotes) for each Company Benefit Plan, and (7) all relevant schedules and
reports concerning the administrative costs, benefit payments, employee and
employer contributions, claims experience, financial information, and insurance
premiums for each Company Benefit Plan, and (8) all correspondence with
government authorities concerning any Company Benefit Plan (other than as
previously referenced above).
(f) Each Company Benefit Plan can be amended or terminated at any time
without approval from any person, without advance notice, and without any
liability other than for benefits accrued prior to such amendment or
termination.
(g) Except as disclosed in the Filed Company SEC Documents or in Section
3.10 of the Company Disclosure Letter, no Company Benefit Plan provides for any
severance pay, accelerated payments, deemed satisfaction of goals or conditions,
new or increased benefits, forgiveness or modification of loans, or vesting
conditioned in whole or in part upon a change in control of the Business or any
plant closing.
(h) Except as disclosed in the Filed Company SEC Documents or in Section
3.10 of the Company Disclosure Letter, the Company neither maintains nor
participates in any Voluntary Employees' Beneficiary Association ("VEBA"), under
Code Sections 419 and 419A, which is intended to be exempt from taxation under
section 501(c)(9) of the Code.
(i) The Company does not maintain, participate in, contribute to, or have
any obligation to contribute or any liability with respect to any multiple
employer plan, as defined in 29 C.F.R. (S)2530.210(c)i ii, or has had any
obligation with respect to such a plan during the six years immediately
preceding the date of this Agreement.
SECTION 3.11 Litigation; Settlement of Stockholder Disputes. (a) Except
as disclosed in the Filed Company SEC Documents or in Section 3.11 of the
Company Disclosure Letter, there is no suit, action or proceeding or
governmental investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company or any Company Subsidiary (and the
Company is not aware of any basis for any such suit, action or proceeding) that,
individually or in the aggregate, has had or could reasonably be expected to
have a Company Material Adverse Effect, nor are there any Judgments outstanding
against the Company or any Company Subsidiary that, individually or is the
aggregate, has had or could reasonably be expected to have a Company Material
Adverse Effect.
<PAGE>
17
(b) The Company and the Stockholder have been involved in certain
litigation brought in the United States District Court for the Northern District
of California and in the Chancery Court of Delaware and in connection therewith
have entered into the Stipulation. The Order (as defined in the Stipulation) has
been entered by the United States District Court for the Northern District of
California and is final and nonappealable. The Company does not have, and, to
its knowledge, will not have following the Closing, any liability or obligation
to any person arising out of the Wininger Litigation or the Stipulation, except
as set forth in the Stipulation. The receipt of all approvals and the other
actions required to be taken pursuant to the Stipulation in connection with the
Offer and the Merger have been, or at the time of the Closing will have been,
duly taken.
SECTION 3.12 Environmental Matters; Compliance with Environmental Laws;
Other Applicable Laws. (a) Neither the Company nor any Company Subsidiary has
received any notice or has been threatened with a claim alleging any past or
present violation of, or liability for damages pursuant to any applicable
Federal, state, local or foreign laws, statutes, ordinances, common law rules,
regulations, orders or determinations of any Governmental Entity applicable to
the Company or applicable to any Company Subsidiary, as the case may be, in its
respective jurisdiction of operation relating to the protection of human health
and safety, the environment or Hazardous Substances ("Environmental Laws"), to
the extent that any such violation or liability, or such violations or
liabilities in the aggregate, has had or would reasonably be expected to have a
Company Material Adverse Effect. The Company and all Company Subsidiaries are,
and at all times in the past have been, in compliance with all applicable
Environmental Laws, except where such non-compliance did not have, or would not
reasonably be expected to have, a Company Material Adverse Effect.
(b) No Hazardous Substance has been stored, treated or disposed of by the
Company or any Company Subsidiary or to the knowledge of the Company by any
person on any real estate currently or formerly owned or leased by the Company
or the Company Subsidiaries, respectively, except in compliance with applicable
Environmental Laws; and the Company and the Company Subsidiaries have lawfully
disposed of their Hazardous Substances with respect to the operations of their
businesses except, in each case, where such failure to be in compliance or to
obtain, store, treat or dispose of such Hazardous Substances, individually or in
the aggregate, has not had or would not have a Company Material Adverse Effect.
(c) The Company is not aware of any facts or circumstances that could
reasonably lead the Company or any Company Subsidiary to conclude that the costs
and liabilities, associated with the effect of Environmental Laws on the
business, operations and properties of the Company and the Company Subsidiaries
(including, without limitation, any capital or operating expenditures required
for clean-up, closure of properties or compliance with Environmental Laws or any
permit, license or approval, any related constraints on operating activities and
any potential liabilities to third parties) could, individually or in the
aggregate, have a Company Material Adverse Effect.
(d) "Hazardous Substances" means any substances or materials: (i) the
presence of which requires investigation or remediation under any Environmental
Law; or (ii) the generation, storage, treatment, transportation, disposal,
remediation, removal, handling or management of which is regulated by any
Environmental Law; or (iii) that is defined as a "hazardous waste" or
<PAGE>
18
"hazardous substance" under any Environmental Law; or (iv) that is toxic,
explosive, corrosive, flammable, infectious, radioactive, carcinogenic or
mutagenic or otherwise hazardous and is regulated by any Governmental Entity
having or asserting jurisdiction over the Company or any Company Subsidiary; or
(v) the presence of which poses a hazard to the health or safety of persons; or
(vi) the presence of which constitutes a nuisance, trespass or other tortious
condition for which the Company of any Company Subsidiary could be or is alleged
to be liable; or (vii) without limitation, that contains gasoline, diesel fuel
or other petroleum hydrocarbons, polychlorinated biphenols (PCBs) or asbestos.
SECTION 3.13 Title to Properties. Section 3.13 of the Company Disclosure
Letter contains a true and complete list of all real property owned or leased by
the Company and the Company Subsidiaries except for such real property on which
the failure to hold title or have a valid lease has not had and could not
reasonably be expected to have a Company Material Adverse Effect. Except as set
forth in Section 3.13 of the Company Disclosure Letter, each of the Company and
each Company Subsidiary, as the case may be, has good and marketable title to,
or valid leasehold interests in, all its properties and assets except for such
as are no longer used or useful in the conduct of its businesses or as have been
disposed of in the ordinary course of business and except for defects in title,
easements, restrictive covenants and similar encumbrances or impediments that,
in the aggregate, do not and will not materially interfere with its ability to
conduct its business as currently conducted or have not had and could not
reasonably be expected to have a Company Material Adverse Effect. All such
assets and properties, other than assets and properties in which the Company or
any Company Subsidiary has leasehold interests, are free and clear of all Liens,
claims, imperfections of title, encroachments, easements, rights of way,
covenants and restrictions other than those set forth in Section 3.13 of the
Company Disclosure Letter and except for Liens, claims, imperfections of title,
encroachments, easements, rights of way, covenants and restrictions that, in the
aggregate, do not and will not materially interfere with the ability of the
Company and each Company Subsidiary to conduct business as currently conducted
or have not had and could not reasonably be expected to have a Company Material
Adverse Effect. Except as set forth in Section 3.13 of the Company Disclosure
Letter, the Company and each Company Subsidiary has complied in all material
respects with the terms of all material leases to which it is a party and under
which it is in occupancy, and all such leases are in full force and effect.
Neither the Company nor any Company Subsidiary has received notice that the
buildings and improvements located on any real property owned or leased by the
Company or the Company Subsidiaries or the operation or maintenance thereof as
operated and maintained (i) contravene any zoning or building law or ordinance
or other administrative regulation or (ii) violate any restrictive covenant,
encumbrance, impairment or any provision of any applicable federal, state, local
or foreign law, except for such contraventions or violation that, individually
or in the aggregate, have not had and would not reasonably be expected to have a
Company Material Adverse Effect. There is no pending or, to the knowledge of the
Company, threatened condemnation or eminent domain proceeding with respect to,
or that could affect, any property of the Company or the Company Subsidiaries,
and no casualty has occurred with respect to any such property.
SECTION 3.14 Confidentiality and Other Agreements. (a) The Company has no
confidentiality agreement or standstill agreement with any third party with
respect to a Company Takeover Proposal (as defined in Section 5.02) by such
third party (each, a "Company
<PAGE>
19
Confidentiality Agreement") in effect as of the date of this Agreement that has
not been provided to Parent or Merger Sub.
(b) Except as set forth in the Company Disclosure Letter, neither the
Company nor any Company Subsidiary is subject to any noncompetition or similar
agreement that prohibits or restricts the Company or any of its affiliates from
engaging in any business or other activities.
SECTION 3.15 Brokers; Schedule of Fees and Expenses. No broker, investment
banker, financial advisor or other person, other than The Beacon Group Capital
Services, LLC ("Beacon"), the fees and expenses of which will be paid by the
Company, is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the Offer, the Merger or any of the
other transactions contemplated herein, based upon arrangements made by or on
behalf of the Company or any Company Subsidiary or affiliate of the Company. The
Company has provided to Parent an estimate of all fees and expenses incurred or
to be incurred by the Company in connection with this Agreement and consummation
of the transactions contemplated hereby.
SECTION 3.16 Opinion of Financial Advisor. The Company has received the
opinion of Beacon, dated as of the date of this Agreement, to the effect that,
as of such date, the consideration to be received in the Offer and the Merger by
the Company's stockholders is fair to the Company's stockholders from a
financial point of view, a signed copy of which has been delivered to Parent.
SECTION 3.17 Compliance With Laws; Permits. Except as disclosed in the
Filed Company SEC Documents or in Section 3.17 of the Company Disclosure Letter,
each of the Company and the Company Subsidiaries is in compliance with all
applicable laws, regulations, orders, judgments and decrees, except for such
failures to comply that, individually or in the aggregate, have not had and
would not reasonably be expected to have a Company Material Adverse Effect. The
Company and the Company Subsidiaries hold, own or possess all governmental,
regulatory and other filings, licenses, permits, approvals, registrations,
consents, franchises and concessions (collectively, "Governmental Permits") as
are necessary for the ownership and leasing of the property and conduct of the
businesses of the Company and the Company Subsidiaries as currently conducted,
except for such Governmental Permits which the failure to hold, own or possess,
individually or in the aggregate, has not had and would not reasonably be
expected to have a Company Material Adverse Effect. Except as disclosed in the
Filed Company SEC Documents or set forth in Section 3.17 of the Company
Disclosure Letter, the Company and the Company Subsidiaries are in compliance
with their respective obligations under such Governmental Permits, with such
exceptions as, individually or in the aggregate, have not had and would not
reasonably be expected to have a Company Material Adverse Effect. Except for
matters that, individually or in the aggregate, have not had and would not
reasonably be expected to have a Company Material Adverse Effect, during the
last two years none of such Governmental Permits has been challenged or revoked
and no statement of intention to challenge, revoke or fail to renew any such
Governmental Permit has been received by the Company or any Company Subsidiary.
SECTION 3.18 Contracts. There are no Company Material Agreements (as
hereinafter defined) other than those disclosed in the Filed Company SEC
Documents or set forth in
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20
Section 3.18 of the Company Disclosure Letter. Except as set forth in Section
3.18 of the Company Disclosure Letter, each Company Material Agreement is in
full force and effect and, to the knowledge of the Company, is valid and
enforceable by the Company or a Company Subsidiary, as the case may be, in
accordance with its terms. Except as set forth in Section 3.18 of the Company
Disclosure Letter, neither the Company nor any of the Company Subsidiaries is in
default in the observance or the performance of any term or obligation to be
performed by it under any Company Material Agreement except for such defaults
the effect of which, individually or in the aggregate, has not had and would not
reasonably be expected to have a Company Material Adverse Effect. To the
knowledge of the Company, no other person is in default in the observance or the
performance of any term or obligation to be performed by it under any Company
Material Agreement. As used in this Agreement, "Company Material Agreement"
shall mean each agreement, arrangement, instrument, bond, commitment, franchise,
indemnity, indenture, lease, license or understanding, whether or not in
writing, to which the Company, any of the Company Subsidiaries or any of their
respective properties is subject that (i) obligates the Company or any of the
Company Subsidiaries to pay, or results in the payment to the Company or any
Company Subsidiary of, an amount in excess of $5,000,000 in any twelve-month
period; (ii) provides for the extension of credit by the Company or any Company
Subsidiary outside the ordinary course of business; (iii) provides for a
guaranty by the Company or any of the Company Subsidiaries of obligations of
others for borrowed money in excess of $1,000,000; (iv) represents a contract
upon which the Company and the Company Subsidiaries, taken as a whole, are
substantially dependent or is otherwise material to the business of the Company
and the Company Subsidiaries, taken as a whole; or (v) limits, in any material
respect, the ability of the Company or any of the Company Subsidiaries to engage
in any line of business, compete with any person or expand the nature or
geographic scope of its business.
SECTION 3.19 Insurance. The Company has made available to Parent correct
and complete copies of all material policies and binders of insurance held by or
on behalf of the Company and the Company Subsidiaries or relating to their
respective businesses or properties. Each of these policies and binders is valid
and enforceable in accordance with its terms and is outstanding and duly in
force. Neither the Company nor any of the Company Subsidiaries is in material
default with respect to any provision contained in any such policy or binder,
nor has there been any failure to give notice or to present any claim relating
to the Company or any of the Company Subsidiaries under any such policy or
binder in a timely fashion or in the manner or detail required by the policy or
binder. There are no outstanding unpaid premiums (except premiums not yet due
and payable), and no notice of cancellation or nonrenewal with respect to, or
disallowance of any claim under, any such policy or binder has been received by
the Company or any of the Company Subsidiaries.
SECTION 3.20 Intellectual Property. Except as disclosed in Section 3.20 of
the Company Disclosure Letter, and except for claims which, individually or in
aggregate, would not have a Company Material Adverse Effect, there are no
pending or, to the knowledge of the Company, threatened claims of which the
Company or the Company Subsidiaries have been given notice by any person against
their use of any trademarks, trade names, service marks, service names, mark
registrations, logos, assumed names and copyright registrations, patents and all
applications therefor which are owned by the Company or the Company Subsidiaries
and used in their respective operations as currently conducted (collectively,
the "Company Intellectual Property"). The Company and the Company Subsidiaries
have such ownership of or
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21
such rights by license, lease or other agreement to the Company Intellectual
Property as are necessary to permit them to conduct their respective operations
as currently conducted, except where the failure to have such rights,
individually or in the aggregate, has not had and would not reasonably be
expected to have a Company Material Adverse Effect.
SECTION 3.21 Labor Relations. There are no pending or, to the knowledge
of the Company, threatened labor grievances or unfair labor practice claims or
charges against the Company or any Company Subsidiary which, individually or in
the aggregate, has had or would reasonably be expected to have a Company
Material Adverse Effect. As of the date hereof, except for matters that,
individually or in the aggregate, have not had and would not reasonably be
expected to have a Company Material Adverse Effect, (i) to the knowledge of the
Company there are no organizing efforts by any union or other group seeking to
represent any employees of the Company or any Company Subsidiary and (ii) there
are no strikes or other material labor disputes against the Company or any
Company Subsidiary pending or, to the knowledge of the Company, threatened.
SECTION 3.22 Transactions With Affiliates. As of the date hereof, except
as set forth in Section 3.22 of the Company Disclosure Letter or as disclosed in
the Filed Company SEC Documents, there are no agreements, arrangements or
transactions ("Related Party Agreements") which would be required to be
disclosed pursuant to Rule 404(a) of Regulation S-K under the Securities Act.
Except for those described in Section 3.22 of the Company Disclosure Letter,
there will be no Related Party Agreements in effect after the Effective Time.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub, jointly and severally, represent and warrant to the
Company as follows:
SECTION 4.01 Organization, Standing and Power. Each of Parent and Merger
Sub, is duly organized, validly existing and in good standing under the laws of
the State of Delaware and has full corporate power and authority to own its
properties and to conduct its businesses as presently conducted. Parent is duly
qualified to do business and is in good standing in each jurisdiction in which
the conduct of its business requires such qualification, except for
jurisdictions in which the failure to be so qualified or to be in good standing
would not, individually or in the aggregate, have a material adverse effect on
the business, results of operations or financial condition of Parent.
SECTION 4.02 Merger Sub. (a) Since the date of its incorporation, Merger
Sub has not carried on any business or conducted any operations other than the
execution of the Transaction Documents to which it is a party, the performance
of its obligations hereunder and thereunder and matters ancillary thereto.
(b) The authorized capital stock of Merger Sub consists of 1,000 shares of
common stock, par value $0.01 per share, all of which have been validly
issued, are fully paid and
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22
nonassessable and are owned by Parent free and clear of any Lien. No other
capital stock or equity securities of or interests in Merger Sub are authorized
or outstanding.
SECTION 4.03 Authority; Execution and Delivery; Enforceability. Each of
Parent and Merger Sub has all requisite corporate power and authority to execute
and deliver this Agreement and to perform its obligations hereunder. The
execution and delivery by each of Parent and Merger Sub of this Agreement and
the performance by it of its obligations have been duly authorized by all
necessary corporate action on the part of Parent and Merger Sub. Parent, as sole
stockholder of Merger Sub, has approved and adopted this Agreement. Each of
Parent and Merger Sub has duly executed and delivered this Agreement, and this
Agreement constitutes its legal, valid and binding obligation, enforceable
against it in accordance with its terms and conditions.
SECTION 4.04 No Conflicts; Consents. The execution and delivery of this
Agreement by each of Parent and Merger Sub, does not, and the consummation of
the Offer and the Merger and compliance with the terms hereof and thereof will
not, conflict with, or result in any violation of or default (with or without
notice or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss of a material benefit
under, or result in the creation of any Lien upon any of the properties or
assets of Parent or any of its subsidiaries under, any provision of: (i) the
charter or organizational documents of Parent or any of its subsidiaries; (ii)
any Contract to which Parent or any of its subsidiaries is a party or by or to
which any of their respective properties or assets is bound or subject; or (iii)
subject to the filings and other matters referred to in the following sentence,
any Judgment or Applicable Law applicable to Parent or any of its subsidiaries
or their respective properties or assets, other than, in the case of clauses
(ii) and (iii) above, any such items that, individually or in the aggregate,
have not had and could not reasonably be expected to have a material adverse
effect on the ability of Parent and Merger Sub to consummate the Offer and the
Merger (a "Parent Material Adverse Effect"). No Consent of, notice to, or
registration, declaration or filing with, any Governmental Entity is required to
be obtained or made by or with respect to Parent or any of its subsidiaries in
connection with the execution, delivery and performance of this Agreement or its
obligations hereunder, other than: (i) compliance with and filings under the HSR
Act, if applicable; (ii) the filing with the SEC of (A) the Offer Documents and
(B) such reports under Sections 13 and 16 of the Exchange Act, as may be
required in connection with this Agreement, the Offer and the Merger; (iii) the
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware; (iv) compliance with and such filings as may be required under
applicable environmental laws; (v) such filings as may be required in connection
with the taxes described in Section 6.08; (vi) filings under any applicable
state takeover law; and (vii) such other items (A) required solely by reason of
the participation of the Company (as opposed to any third party) in this
Agreement (B) that, individually or in the aggregate, have not had and could not
reasonably be expected to have a Parent Material Adverse Effect or (C) as are
set forth in the letter, dated as of the date of this Agreement, from Parent to
Merger Sub.
SECTION 4.05 Information Supplied. None of the information supplied or to
be supplied by Parent or Merger Sub for inclusion or incorporation by reference
in the Offer Documents, the Schedule 14D-9 or the Information Statement will, at
the time such document is filed with the SEC, at any time it is amended or
supplemented or at the time it is first published, sent or given to the
Company's stockholders, contain any untrue statement of a material fact or
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23
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading. The Offer Documents will comply as
to form in all material respects with the requirements of the Securities Act and
the rules and regulations thereunder, except that no representation is made by
Parent or Merger Sub with respect to statements made or incorporated by
reference therein based on information supplied by the Company for inclusion or
incorporation by reference therein.
SECTION 4.06 Brokers. No broker, investment banker, financial advisor or
other person is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with this Agreement, the Offer and the
Merger based upon arrangements made by or on behalf of Parent or Merger Sub.
SECTION 4.07 Financing. Parent and Merger Sub have funds available, or
binding commitments to provide funds, in either case sufficient to consummate
the Offer, the Merger and the transactions contemplated by this Agreement on the
terms contemplated by this Agreement, and, at the expiration of the Offer and
the Effective Time, Parent and Merger Sub will have available all of the funds
necessary for the acquisition of all shares of Common Stock pursuant to the
Offer and the Merger, as the case may be, and to perform any other transactions
contemplated hereunder and their respective obligations under this Agreement.
SECTION 4.08 Litigation. There is no action, suit, proceeding or
investigation pending or currently threatened against Parent or Merger Sub that
questions the validity of this Agreement or Parent's or Merger Sub's right to
enter into this Agreement, or to consummate the transactions contemplated hereby
or which, if decided in a manner adverse to Parent or Merger Sub, would
reasonably be expected to have a Parent Material Adverse Effect.
SECTION 4.09 Copies of Documents. Parent and Merger Sub have caused to be
made available for inspection and copying by the Company and its advisers, true,
complete and correct copies of all documents referred to in this Article IV or
in any schedule furnished by Parent and Merger Sub to the Company or reasonably
requested in writing by the Company.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 5.01 Conduct of Business. (a) Business of the Company. Except for
matters set forth in Section 5.01 of the Company Disclosure Letter or otherwise
contemplated by this Agreement, from the date of this Agreement to the Effective
Time, the Company shall, and shall cause each Company Subsidiary to, conduct its
business in the usual, regular and ordinary course in substantially the same
manner as previously conducted (subject to the express restrictions set forth
below) and, to the extent consistent therewith, use its reasonable efforts to
preserve intact its current business organization, keep available the services
of its current officers and key employees and keep its relationships with
customers, suppliers, licensors, licensees, distributors and others having
business dealings with them so that its goodwill and ongoing business shall not
be materially impaired at the Effective Time. In addition, and without limiting
the generality of the foregoing, except for matters set forth in Section 5.01 of
the Company
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24
Disclosure Letter or otherwise contemplated by this Agreement, from
the date of this Agreement to the Effective Time, the Company shall not, and
shall not permit any Company Subsidiary to, do any of the following without the
prior written consent of Parent:
(i) (A) declare, set aside or pay any dividends on, or make any
other distributions in respect of, any of its capital stock, other than
dividends and distributions by a direct or indirect wholly owned subsidiary
of the Company to its parent, (B) split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock,
or (C) purchase, redeem or otherwise acquire any shares of capital stock of
the Company or any Company Subsidiary or any other securities thereof or
any rights, warrants or options to acquire any such shares or other
securities;
(ii) authorize for issuance, issue, deliver, sell, pledge or grant
(A) any shares of its capital stock, (B) any Voting Company Debt or other
voting securities, (C) any securities convertible into or exchangeable for,
or any options, warrants or rights to acquire, any such shares, voting
securities or convertible or exchangeable securities, or (D) any "phantom"
stock, "phantom" stock rights, stock appreciation rights or stock-based
performance units, other than the issuance of Company Common Stock upon the
exercise of Company Stock Options outstanding on the date of this Agreement
and in accordance with their present terms;
(iii) amend its certificate of incorporation, by-laws or other
comparable charter or organizational documents;
(iv) (A) enter into, or propose or negotiate to enter into, any
material contract, (B) amend, or propose or negotiate to amend, the terms
of any existing material contracts or agreements of the type described in
the foregoing clause, (C) acquire, or propose or negotiate to acquire, any
interest in a corporation, partnership or joint venture arrangement (D)
sell, transfer, assign, relinquish, terminate or make any other material
change (taken on an individual basis) in, or propose or negotiate to take
any such action with respect to, the Company's material interests (as of
the date of this Agreement) in the equity or debt securities of any
corporation, partnership or joint venture arrangement which holds such an
interest, including, without limitation, the imposition of any Lien on any
of the foregoing, (E) give, or propose or negotiate to give, any approvals
relating to development plans, work plans, budgets or capital expenditure
commitments in connection with any such interests or (F) make, or propose
to make, any material change in the Company's material interests;
(v) enter into any significant further commitment or arrangement
with respect to the Company's pending SAP project or any other significant
systems project;
(vi) acquire or agree to acquire (A) by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or by any
other manner, any business or any corporation, partnership, joint venture,
association or other business organization or division thereof, or (B) any
assets that are material, individually or in the aggregate, to the Company
and the Company Subsidiaries taken as a whole;
<PAGE>
25
(vii) (A) grant to any officer or director of the Company or any
Company Subsidiary any increase in compensation, except to the extent
required under employment agreements in effect as of the date of the most
recent audited financial statements included in the Company SEC Documents,
(B) grant to any employee, officer or director of the Company or any
Company Subsidiary any increase in severance or termination pay, except to
the extent required under any agreement in effect as of the date of the
most recent audited financial statements, (C) enter into any new
employment, consulting, indemnification, severance or termination agreement
with any such employee, officer or director, (D) establish, adopt, enter
into or amend in any material respect any collective bargaining agreement
or Company Benefit Plan, or (E) take any action to accelerate any rights or
benefits (including vesting under the Company's 401(K) Plan), or make any
material determinations not in the ordinary course of business consistent
with prior practice, under any collective bargaining agreement or Company
Benefit Plan;
(viii) make any change in accounting methods, principles or practices
materially affecting the reported consolidated assets, liabilities or
results of operations of the Company, except insofar as may have been
required by a change in GAAP;
(ix) sell, lease, license or otherwise dispose of or subject to any
Lien any properties or assets, except sales of inventory and excess or
obsolete assets in the ordinary course of business consistent with past
practice;
(x) (A) incur any indebtedness for borrowed money or guarantee any
such indebtedness of another person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of the Company or
any Company Subsidiary, guarantee any debt securities of another person,
enter into any "keep well" or other agreement to maintain any financial
statement condition of another person or enter into any arrangement having
the economic effect of any of the foregoing, except for short-term
borrowings incurred in the ordinary course of business consistent with past
practice, or (B) make any loans, advances or capital contributions to, or
investments in, any other person, other than to or in the Company or any
direct or indirect wholly owned subsidiary of the Company;
(xi) make or agree to make any new capital expenditure or
expenditures other than capital expenditures which do not exceed the amount
budgeted therefor in the Company's annual capital expenditures budget for
fiscal year 2000 previously provided to Parent.
(xii) make any material Tax election or settle or compromise any
material Tax liability or refund, consent to any extension or waiver of the
statute of limitations period applicable to any Tax claim or action, if any
such election, settlement, compromise, consent or other action would have
the effect of materially increasing the Tax liability or reducing any net
operating loss, foreign tax credit, net capital loss or any other credit or
tax attribute of the Company or any of the Company Subsidiaries (including,
without limitation, deductions and credits related to alternative minimum
Taxes);
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26
(xiii) enter into any hedging agreement or other financial agreement
or arrangement designed to protect the Company against fluctuations in
commodities prices or currency exchange rates, except agreements or
arrangements entered into in the ordinary course of business consistent
with past practice;
(xiv) (A) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the
ordinary course of business consistent with past practice or in accordance
with their terms, of liabilities reflected or reserved against in, or
contemplated by, the most recent consolidated financial statements (or the
notes thereto) of the Company or incurred in the ordinary course of
business consistent with past practice, (B) cancel any material
indebtedness (individually or in the aggregate) or waive any claims or
rights of substantial value, or (C) waive the benefits of, or agree to
modify in any manner, any confidentiality, standstill or similar agreement
to which the Company or any Company Subsidiary is a party;
(xv) make any material change (including failing to renew) in the
amount or nature of the insurance policies covering the Company and the
Company Subsidiaries;
(xvi) waive any material claims or rights relating to the Company's
or any of the Company Subsidiaries' business;
(xvii) amend or otherwise modify the Stipulation; or
(xviii) authorize any of, or commit or agree to take any of, the
foregoing actions.
(b) Other Actions. The Company and Parent shall not, and shall not permit
any of their respective subsidiaries to, take any action that would, or that
could reasonably be expected to, result in: (i) any of the representations and
warranties of such party set forth in this Agreement that is qualified as to
materiality becoming untrue; (ii) any of such representations and warranties
that is not so qualified becoming untrue in any material respect; or (iii)
except as otherwise permitted by Section 5.02, any condition to the Offer set
forth in Exhibit A, or any condition to the Merger set forth in Article VII, not
-------
being satisfied.
SECTION 5.02 No Solicitation. (a) The Company shall not, nor shall it
permit any Company Subsidiary to, nor shall it authorize or permit any officer,
director or employee of, or any investment banker, attorney or other advisor,
agent or representative of the Company or any Company Subsidiary (collectively,
"Company Representatives") to: (i) solicit, initiate or encourage the submission
of, any Company Takeover Proposal (as defined below); (ii) enter into any
agreement with respect to any Company Takeover Proposal; or (iii) participate in
any discussions or negotiations regarding, or furnish to any person any
information with respect to, or take any other action to facilitate any
inquiries or the making of any proposal that constitutes, or may reasonably be
expected to lead to, any Company Takeover Proposal; provided, however, that, at
any time prior to the consummation of the Offer (the "Applicable Period"), the
Company Board may, in response to a Company Superior Proposal (as defined below)
that was not solicited by the Company or any Company Representative on or after
the date hereof and that did not otherwise result from a breach of this Section
5.02(a), and subject to providing prior written
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27
notice of its decision to take such action to Parent (the "Company Notice") and
compliance with Section 5.02(b), participate in discussions regarding such
Company Superior Proposal. For purposes of this Agreement, "Company Takeover
Proposal" means any inquiry, proposal or offer from any person relating to any
direct or indirect acquisition or purchase of a business that constitutes 25% or
more of the net revenues, net income or the assets of the Company and the
Company Subsidiaries taken as a whole, or 25% or more of any class of equity
securities of the Company or any Company Subsidiary, any tender offer or
exchange offer that if consummated would result in any person beneficially
owning 25% or more of any class of equity securities of the Company or any
Company Subsidiary, or any merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving the
Company or any Company Subsidiary, other than the transactions contemplated by
this Agreement. For purposes of this Agreement, a "Company Superior Proposal"
means any bona fide proposal made by a third party to acquire, directly or
indirectly, including pursuant to a tender offer, exchange offer, merger,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction, for consideration consisting of cash and/or securities,
100% of the outstanding shares of Company Common Stock or all or substantially
all the assets of the Company and otherwise on terms which the Company Board
determines in its good faith judgment (based on the written advice of Beacon)
(x) is reasonably capable of being completed, taking into account all legal,
financial, regulatory and other aspects of the proposal and the third party
making such proposal, and (y) provides greater present value to the Company's
stockholders than the cash consideration to be received by such stockholder
pursuant to the Offer and the Merger, as the Offer and the Merger may be amended
from time to time.
(b) The Company Board shall promptly advise Parent orally and in writing
of any Company Takeover Proposal or Company Superior Proposal.
(c) Nothing contained in this Section 5.02 shall prohibit the Company
Board from taking and disclosing to its stockholders a position contemplated by
Rule 14e-2(a) promulgated under the Exchange Act or from changing its
recommendation made pursuant to Section 251 of the DGCL, or making any
disclosure to the Company's stockholders if, in the good faith judgment of the
Company, after consultation with outside counsel, failure so to disclose would
be inconsistent with its obligations under applicable law.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01 Preparation of Proxy Statement; Stockholders Meeting. (a) If
the approval and adoption of this Agreement by the Company's stockholders is
required by law, the Company shall, at Parent's request, as soon as practicable
following the expiration of the Offer, prepare and file with the SEC the Proxy
Statement in preliminary form, and the Company shall use its best efforts to
respond as promptly as practicable to any comments of the SEC with respect
thereto. The Company shall notify Parent promptly of the receipt of any comments
from the SEC or its staff and of any request by the SEC or its staff for
amendments or supplements to the Proxy Statement or for additional information
and shall supply Parent with copies of all correspondence between the Company or
any of its representatives, on the one hand, and the
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28
SEC or its staff, on the other hand, with respect to the Proxy Statement. If at
any time prior to receipt of the Company Stockholder Approval there shall occur
any event that should be set forth in an amendment or supplement to the Proxy
Statement, the Company shall promptly prepare and mail to its stockholders such
an amendment or supplement. The Company shall not mail any Proxy Statement, or
any amendment or supplement thereto, to which Parent reasonably objects. The
Company shall use its best efforts to cause the Proxy Statement to be mailed to
the Company's stockholders as promptly as practicable after filing with the SEC.
(b) To the extent that this Agreement requires Company Stockholder
Approval, the Company shall, if requested by Parent and as soon as practicable
following the expiration of the Offer, duly call, give notice of, convene and
hold a meeting of its stockholders (the "Company Stockholders Meeting") for the
purpose of seeking the Company Stockholder Approval (including establishing the
record date, if requested by Parent, to be the date immediately after the date
Merger Sub first purchases any shares of Company Common Stock pursuant to the
Offer). The Company Board, subject to its fiduciary duties, shall recommend to
its stockholders that they give the Company Stockholder Approval. If Merger Sub
or any other subsidiary of Parent shall acquire at least 90% of the outstanding
shares of the Company Common Stock, the parties shall, at the request of Parent,
take all necessary and appropriate action to cause the Merger to become
effective as soon as practicable after the expiration of the Offer without a
stockholders meeting in accordance with Section 253 of the DGCL.
(c) Parent agrees to cause all shares of Common Stock purchased pursuant
to the Offer and all other shares of Common Stock owned by Merger Sub or any
other subsidiary of Parent to vote to adopt and approve this Agreement and the
Merger at the Company Stockholders Meeting or, at the election of Parent, to be
subject to action by written consent in favor of the Company Stockholder
Approval pursuant to Section 228 of the DGCL.
SECTION 6.02 Access to Information; Confidentiality. The Company shall,
and shall cause each of its subsidiaries to, afford to Parent, and to Parent's
directors, officers, employees, accountants, counsel, financial advisers,
financing sources and other representatives, reasonable access during normal
business hours during the period prior to the Effective Time to all their
respective properties, books, contracts, commitments, personnel and records and,
during such period, the Company shall, and shall cause each of its subsidiaries
to, furnish promptly to Parent: (i) a copy of each report, schedule,
registration statement and other document filed by it during such period
pursuant to the requirements of Federal or state securities laws; and (ii) all
other information concerning its business, properties and personnel as Parent
may reasonably request. All nonpublic information exchanged pursuant to this
Section 6.02 shall be subject to the confidentiality agreement dated as of June
7, 1999, as amended and/or supplemented from time to time thereafter, between
the Company and Parent (the "Confidentiality Agreement").
SECTION 6.03 Reasonable Efforts; Notification. (a) Upon the terms and
subject to the conditions set forth in this Agreement, each of the parties shall
use all reasonable efforts to take, or cause to be taken, all actions, and to
do, or cause to be done, and to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Offer, the Merger and
the other obligations of such party hereunder, including: (i) the obtaining of
all necessary actions or nonactions, waivers, consents and approvals from
Governmental Entities and the making of all
<PAGE>
29
necessary registrations and filings (including filings with Governmental
Entities, if any) and the taking of all reasonable steps as may be necessary to
obtain an approval or waiver from, or to avoid an action or proceeding by, any
Governmental Entity; (ii) the obtaining of all necessary consents, approvals or
waivers from third parties; (iii) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Agreement or
the consummation of this Agreement, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed; and (iv) the execution and delivery of any additional
instruments necessary to consummate this Agreement and to fully carry out the
purposes of this Agreement. In connection with and without limiting the
foregoing, the Company shall: (x) take all action necessary to ensure that no
state takeover statute or similar statute or regulation is or becomes applicable
to this Agreement; and (y) if any state takeover statute or similar statute or
regulation becomes applicable to this Agreement, take all action necessary to
ensure that the Offer and the Merger may be consummated as promptly as
practicable on the terms contemplated by this Agreement and otherwise to
minimize the effect of such statute or regulation on the Offer and the Merger.
Nothing in this Agreement shall be deemed to require any party to waive any
substantial rights or agree to any substantial limitation on its operations or
to take any action that would result in any of the consequences referred to in
paragraph (a) of Exhibit A.
---------
(b) The Company shall give prompt notice to Parent, and Parent or Merger
Sub shall give prompt notice to the Company, of: (i) any representation or
warranty made by it contained in this Agreement that is qualified as to
materiality becoming untrue or inaccurate in any respect or any such
representation or warranty that is not so qualified becoming untrue or
inaccurate in any material respect; or (ii) the failure by it to comply with or
satisfy in any material respect any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement; provided, however, that
no such notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement.
SECTION 6.04 Benefit Plans. (a) For one year after the Closing Date,
Parent shall either (i) cause the Surviving Corporation to continue to sponsor
and maintain the Company Benefit Plans, or (ii) provide benefits to the
employees of the Company who continue to be employed by the Surviving
Corporation (the "Company Employees") under employee benefit plans, programs,
policies or arrangements that in the aggregate are no less favorable than those
benefits provided to the Company Employees by the Company immediately prior to
the Closing Date. With respect any employee benefit plan, program, policy or
arrangement sponsored or maintained by Parent and offered to the Company
Employees in addition to or as a substitute for the Company Benefit Plans,
Parent shall give the Company Employees service credit for their employment with
the Company for eligibility and vesting purposes under all such employee benefit
plans, programs, policies or arrangements as if such service had been performed
with Parent. If Parent offers health benefits to the Company Employees under a
group health plan that is not a Company Benefit Plan, Parent shall waive any
pre-existing condition exclusions under such group health plan to the extent
coverage exists for such condition under the Company Benefit Plan and shall
credit each Company Employee with all deductible payments and co-payments paid
by such Company Employee under the Company's health plan prior to the Closing
Date during the current plan year for purposes of determining the extent to
which any
<PAGE>
30
such Company Employee has satisfied his or her deductible and whether he or she
has reached the out-of-pocket maximum under any health plan for such plan year.
(b) Following the Effective Time, Parent shall cause the Company and its
subsidiaries to honor (subject to this Section 6.04 and Section 6.05) all
obligations under any contracts, agreements and commitments of the Company and
its subsidiaries prior to the date hereof (or as established or amended in
accordance with or permitted by this Agreement) the existence of which does not
constitute a violation of the terms of this Agreement, which apply to any
current or former employee, or current or former director of the parties hereto
or any of their subsidiaries; provided, however, that this undertaking is not
intended to prevent the Company or any subsidiary of the Company from enforcing
such contracts, agreements and commitments in accordance with their terms,
including, any reserved right to amend, modify, suspend, revoke or terminate any
such contract, agreement or commitment.
(c) Nothing herein shall be construed as giving any employee of the
Company or any Company Subsidiary, except those employees set forth in the
Company Disclosure Letter, any right to continued employment following the
Effective Time.
SECTION 6.05 Indemnification. (a) After the earlier of (1) the Effective
Time or (2) the consummation of the Offer, Parent shall and shall cause the
Surviving Corporation (or any successor to the Surviving Corporation) to
indemnify, defend and hold harmless the present and former officers and
directors of the Company and its Subsidiaries (each an "Indemnified Party"),
against all losses, claims, damages, liabilities, fees and expenses (including
reasonable fees and disbursements of counsel and judgments, fines, losses,
claims, liabilities and amounts paid in settlement (provided that any such
settlement is effected with the written consent of the Parent or the Surviving
Corporation, such consent not to be unreasonably withheld)) incurred by reason
of the fact that such person is or was an officer or director of the Company or
any of its Subsidiaries and arising out of actions or omissions occurring at or
prior to the Effective Time to the full extent permitted by law, such right to
include advancement of expenses incurred in the defense of any action or suit;
provided that any determination required to be made with respect to whether such
Indemnified Party is entitled to indemnity hereunder (including without
limitation whether, with respect to the indemnification of such Indemnified
Party by the Surviving Corporation, an Indemnified Party's conduct complies with
the standards set forth under the DGCL), shall be made at Parent's expense by
independent counsel mutually acceptable to Parent and the Indemnified Party;
provided further, that nothing herein shall impair any rights or obligations of
any present or former directors or officers of the Company.
(b) Parent shall, to the fullest extent permitted by law, cause the
Surviving Corporation to honor all the Company's obligations to indemnify
(including any obligations to advance funds for expenses) the members of the
Special Committee and current or former directors or officers of the Company and
Company Subsidiaries for acts or omissions by such directors and officers
occurring prior to the Effective Time to the extent that such obligations of the
Company exist on the date of this Agreement, whether pursuant to the Company
Charter, the Company By-Laws, individual indemnity agreements or otherwise, and
such obligations shall survive the Merger and shall continue in full force and
effect in accordance with the terms of the Company Charter, the Company By-Laws
and such individual indemnity agreements from the Effective Time until the
<PAGE>
31
expiration of the applicable statute of limitations with respect to any claims
against such directors or officers arising out of such acts or omissions.
(c) For a period of six years after the Effective Time, Parent shall cause
to be maintained in effect the current policies of directors' and officers'
liability insurance maintained by the Company (provided that Parent may
substitute therefor policies with reputable and financially sound carriers of at
least the same coverage and amounts containing terms and conditions which are no
less advantageous) with respect to claims arising from or related to facts or
events which occurred at or before the Effective Time; provided, however, that
Parent shall not be obligated to make annual premium payments for such insurance
to the extent such premiums exceed 200% of the annual premiums paid as of the
date hereof by the Company for such insurance (such 200% amount, the "Maximum
Premium"). If such insurance coverage cannot be obtained at all, or can only be
obtained at an annual premium in excess of the Maximum Premium, Parent shall
maintain the most advantageous policies of directors' and officers' insurance
obtainable for an annual premium equal to the Maximum Premium. The Company
represents to Parent that the Maximum Premium is $578,000.
SECTION 6.06 Fees and Expenses. All fees and expenses incurred in
connection with the Merger shall be paid by the party incurring such fees or
expenses, whether or not the Merger is consummated.
SECTION 6.07 Public Announcements. (a) Parent and Merger Sub, on the one
hand, and the Company, on the other hand, shall consult with each other before
issuing, and provide each other the opportunity to review and comment upon, any
press release or other public statements with respect to the Offer, the Merger
and the other obligations under this Agreement and shall not issue any such
press release or make any such public statement relating thereto prior to such
consultation, except as may be required by applicable law, court process or by
obligations pursuant to any listing agreement with any national securities
exchange.
(b) The Company shall give at least 24 hours' prior written notice to
Parent Sub of any proposed press release or other public statement not relating
to the Offer, the Merger or any of the obligations under this Agreement, which
notice shall include the text of such press release or public statement.
SECTION 6.08 Transfer Taxes. The Company shall pay any state, local,
foreign or provincial Tax which is attributable to the transfer of the
beneficial ownership of the Company's or the Company's subsidiaries' real
property (collectively, the "Transfer Taxes"), if any, and any penalties or
interest with respect to the Transfer Taxes, payable in connection with the
consummation of the Offer or the Merger, any state, local, foreign or provincial
Tax which is attributable solely to and imposed upon the transfer of Company
Common Stock pursuant to this Agreement (collectively, "Stock Transfer Taxes")
and any penalties or interest with respect to any such Stock Transfer Taxes.
The Company shall file any returns with respect to the Transfer Taxes, including
supplying in a timely manner a complete list of all real property interests held
by the Company that are located in any jurisdiction imposing such Transfer Taxes
and any information with respect to such property that is reasonably necessary
to complete such returns. The portion of the consideration to be received by
holders of Company Common Stock in connection with the Offer and the Merger that
is allocable to the real property of the Company
<PAGE>
32
and its subsidiaries in any jurisdiction imposing such Transfer Taxes shall be
determined by Merger Sub and the Company in their reasonable discretion. The
stockholders of the Company shall be deemed to have agreed to be bound by the
allocation established pursuant to this Section 6.08 in the preparation of any
return with respect to the Transfer Taxes. The Company acknowledges that the
amount of the Transfer Taxes payable with respect to any shares of Company
Common Stock may be withheld by Merger Sub from the amount to be paid pursuant
to the Offer and the Merger with respect to such shares, unless the date on
which the beneficial owner of such shares acquired beneficial ownership thereof
is certified to Merger Sub.
SECTION 6.09 Directors. Promptly upon the acceptance for payment of, and
payment by Merger Sub for, any shares of Company Common Stock pursuant to the
Offer, Merger Sub shall be entitled to designate such number of directors on the
Company Board as will give Merger Sub, subject to compliance with Section 14(f)
of the Exchange Act, representation on the Company Board equal to at least that
number of directors, rounded up to the next whole number, which is the product
of (a) the total number of directors on the Company Board (giving effect to the
directors elected pursuant to this sentence) multiplied by (b) the percentage
that (i) such number of shares of Company Common Stock so accepted for payment
and paid for by Merger Sub plus the number of shares of Company Common Stock
otherwise owned by Merger Sub or any other subsidiary of Parent bears to (ii)
the number of such shares outstanding, and the Company shall, at such time,
cause Merger Sub's designees to be so elected; provided, however, that in the
event that Merger Sub's designees are appointed or elected to the Company Board,
until the Effective Time the Company Board shall have at least three directors
who are Directors on the date of this Agreement and who are not officers of the
Company (the "Independent Directors"); and provided further that, in such event,
if the number of Independent Directors shall be reduced below three for any
reason whatsoever, any remaining Independent Directors (or Independent Director,
if there shall be only one remaining) shall be entitled to designate persons to
fill such vacancies who shall be deemed to be Independent Directors for purposes
of this Agreement or, if no Independent Directors then remain, the other
directors shall designate three persons to fill such vacancies who shall not be
officers, stockholders or affiliates of the Company, Parent or Merger Sub, and
such persons shall be deemed to be Independent Directors for purposes of this
Agreement. Subject to applicable law, the Company shall take all action
requested by Parent necessary to effect any such election, including mailing to
its stockholders the Information Statement containing the information required
by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, and
the Company shall make such mailing with the mailing of the Schedule 14D-9
(provided that Merger Sub shall have provided to the Company on a timely basis
all information required to be included in the Information Statement with
respect to Merger Sub's designees). In connection with the foregoing, the
Company shall promptly, at the option of Merger Sub, either increase the size of
the Company Board or obtain the resignation of such number of its current
directors as is necessary to enable Merger Sub's designees to be elected or
appointed to the Company Board as provided above.
SECTION 6.10 Debt Offer.
(a) Provided that this Agreement shall not have been terminated, the
Company shall promptly (but in no event later than 5 business days after the
date hereof), commence an offer to purchase, accompanied by a related consent
solicitation regarding covenant amendments, all of the Company's outstanding 9
1/4% Senior Subordinated Notes Due 2007 (the "Senior
<PAGE>
33
Subordinated Notes"), on the terms set forth in Section 6.10 of the Company
Disclosure Letter and such other customary terms and conditions as are
reasonably acceptable to Merger Sub (as amended from time to time, the "Debt
Offer"). The Company shall waive any of the conditions to the Debt Offer and
make any other changes in the terms and conditions of the Debt Offer as may be
reasonably requested by Merger Sub. The Company shall not, without Merger Sub's
prior written consent, waive any material condition to the Debt Offer, make any
changes to the terms and conditions of the Debt Offer set forth in Section 6.10
of the Company Disclosure Letter or make any other material changes in the terms
and conditions of the Debt Offer. The Company covenants and agrees that, subject
to the terms and conditions of this Agreement, including but not limited to the
conditions in the Debt Offer, it will accept for payment and pay for the Senior
Subordinated Notes as soon as such conditions to the Debt Offer are satisfied
and it is permitted to do so under applicable law, provided that the Company
shall coordinate the timing of any such purchase with Merger Sub in order to
obtain the greatest participation in the Debt Offer.
(b) Promptly following the date of this Agreement, Merger Sub shall
prepare, subject to comments of, and reasonable approval by, the Company and its
counsel, an offer to purchase and related documents necessary to consummate the
repurchase of the Senior Subordinated Notes and related consent solicitation (as
amended from time to time, the "Debt Offer Documents"). All mailings to the
holders of Senior Subordinated Notes in connection with the Debt Offer shall be
subject to the prior review of Merger Sub. The Company will use its best efforts
to cause the Debt Offer Documents to be mailed to the holders of the Senior
Subordinated Notes as promptly as practicable following receipt of a request
from Merger Sub to do so. The Company agrees promptly to correct any information
in the Debt Offer Documents that shall be or have become false or misleading in
any material respect.
(c) The obligations of Parent and Merger Sub to consummate the Offer and
to effect the Merger shall not be subject to the successful completion of the
Debt Offer.
SECTION 6.11 Cooperation With Financing Efforts.
(a) The Company agrees to provide, and will cause the Company Subsidiaries
and its and their respective officers, employees and advisors to provide,
reasonable cooperation in connection with the arrangement of any financing to be
consummated contemporaneously with or at or after the Effective Time in respect
of the transactions contemplated by this Agreement, including without
limitation, participation in meetings, due diligence sessions, road shows, the
preparation of offering memoranda, private placement memoranda, prospectuses and
similar documents, the execution and delivery of any commitment letters,
underwriting or placement agreements, pledge and security documents, other
definitive financing documents, or other requested certificates or documents,
including a customary certificate of the chief financial officer of the Company
with respect to solvency matters, comfort letters of accountants, legal opinions
and real estate title documentation as may be reasonably requested by Merger
Sub. In addition, in conjunction with the obtaining of any such financing and in
addition to the Company's obligations pursuant to Section 6.10, the Company
agrees, at the request of Merger Sub, to call for prepayment or redemption, or
to repay, redeem and/or renegotiate, as the case may be, any other existing
indebtedness of the Company; provided that no such prepayments or redemptions
shall themselves actually be made until contemporaneously with or after the
<PAGE>
34
Effective Time and the Company shall not be required to make any call for
redemption or prepayment that is irrevocable when made.
(b) In addition, the Company agrees to use its best efforts to cause its
fiscal year end audit to be completed by December 20, 1999.
SECTION 6.12 Consents. From and after the date of this Agreement and
until the Closing, the Company and the Company Subsidiaries shall use their
respective best efforts to obtain the consents of the parties listed in Section
3.05 of the Company Disclosure Letter.
ARTICLE VII
CONDITIONS PRECEDENT
SECTION 7.01 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Stockholder Approval. If required by law, the Company shall have
obtained the Company Stockholder Approval.
(b) Antitrust. The waiting period (and any extension thereof) applicable
to the Merger under the HSR Act, if any, shall have been terminated or shall
have expired. Any consents, approvals and filings under any foreign antitrust
law, the absence of which would prohibit the consummation of Merger, shall have
been obtained or made.
(c) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect; provided, however, that each of
the parties shall have used all reasonable efforts to prevent the entry of any
such injunction or other order and to appeal as promptly as possible any such
injunction or other order that may be entered.
(d) Purchase of Stock. Merger Sub shall have previously accepted for
payment and paid for the shares of Company Common Stock tendered and not
withdrawn pursuant to the Offer.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after the Company Stockholder
Approval:
(a) By mutual written consent of Parent, Merger Sub and the Company;
(b) By either Parent or the Company if:
<PAGE>
35
(i) the Merger is not consummated on or before February 28,
2000 (the "Outside Date"), unless the failure to consummate the
Merger is the result of a willful or material breach this Agreement
by the party seeking to terminate this Agreement; provided,
however, that the passage of such period shall be tolled for any
part thereof during which any party shall be subject to a nonfinal
order, decree, ruling or action restraining, enjoining or otherwise
prohibiting the consummation of the Merger;
(ii) any Governmental Entity issues an order, decree or ruling
or takes any other action permanently enjoining, restraining or
otherwise prohibiting the Merger and such order, decree, ruling or
other action shall have become final and nonappealable;
(iii) as the result of the failure of any of the conditions set
forth Exhibit A to this Agreement, the Offer shall have terminated
---------
or expired in accordance with its terms without Merger Sub having
purchased any shares of Company Common Stock pursuant to the Offer;
or
(iv) upon a vote at a duly held stockholders meeting to obtain
the Company Stockholder Approval, the Company Stockholder Approval
is not obtained; provided, however, that this Agreement may not be
terminated by Parent pursuant to this clause (iv) if Parent or
Merger Sub is in breach of Section 6.01;
(c) by Parent, if the Company breaches or fails to perform in any material
respect any of its covenants contained in this Agreement, which breach or
failure to perform would give rise to the failure of a condition set forth
in Exhibit A;
---------
(d) by Parent, if the Company Board withdraws, modifies or changes in any
manner adverse to Parent and Merger Sub its approval or recommendation of
the Offer, the Merger and this Agreement; or
(e) by the Company, if Parent or Merger Sub breaches or fails to perform
in any material respect any of their respective covenants contained in this
Agreement.
SECTION 8.02 Effect of Termination. In the event of termination of this
Agreement by either the Company or Parent as provided in Section 8.01, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Parent, Merger Sub or the Company, other than
Section 3.15, Section 4.06, Section 6.02, Section 6.06, this Section 8.02 and
Article IX and except to the extent that such termination results from the
willful and material breach by a party of any representation, warranty or
covenant set forth in this Agreement.
SECTION 8.03 Amendment. This Agreement may be amended by the parties at
any time before or after receipt of the Company Stockholder Approval; provided,
however, that after receipt of the Company Stockholder Approval, there shall be
made no amendment that by law requires further approval by such stockholders
without the further approval of such stockholders.
<PAGE>
36
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties.
SECTION 8.04 Extension; Waiver. At any time prior to the Effective Time,
the parties may: (i) extend the time for the performance of any of the
obligations or other acts of the other parties; (ii) waive any inaccuracies in
the representations and warranties contained in this Agreement or in any
document delivered pursuant to this Agreement; or (iii) subject to the proviso
of Section 8.03, waive compliance with any of the agreements or conditions
contained in this Agreement. Any agreement on the part of a party to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party. The failure of any party to this Agreement to
assert any of its rights under this Agreement or otherwise shall not constitute
a waiver of such rights.
SECTION 8.05 Procedure for Termination Amendment, Extension or Waiver. A
termination of this Agreement pursuant to Section 8.01, an amendment of this
Agreement pursuant to Section 8.03 or an extension or waiver pursuant to Section
8.04 shall, in order to be effective, require in the case of Parent, Merger Sub
or the Company, action by its Board of Directors or the duly authorized designee
of its Board of Directors.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time. This Section 9.01
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
SECTION 9.02 Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given upon receipt by the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
<PAGE>
37
(a) If to Parent or Merger Sub, to:
Attention: SIND HOLDINGS, Inc.
c/o Investcorp Management Services Limited
P.O. Box 5430
Investcorp House
Manama
Bahrain
Telecopier; 011-973-530-816
Attention: H. Richard Lukens, III
with a copy to: Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, NY 10166
Tel: (212) 351-4000
Fax: (212) 351-4035
Attention: E. Michael Greaney
(b) If to the Company, to:
Synthetic Industries, Inc.
309 LaFayette Road
Chickamauga, Georgia 30707
Attention: Joseph P. Dana
Tel: (423) 553-3403
Fax: (706) 375-6953
with a copy to:
King & Spalding
1185 Avenue of the Americas
New York, New York 10036
Attention: Mark Zvonkovic
Tel: (212) 556-2250
Fax: (212) 556-2222
SECTION 9.03 Definitions. For purposes of this Agreement:
An "affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first person.
A "person" means any individual, firm, corporation, partnership, company,
limited liability company, trust, joint venture, association, Governmental
Entity or other entity.
<PAGE>
38
A "subsidiary" of any person means another person, an amount of the voting
securities, other voting ownership or voting partnership interests of which is
sufficient to elect at least a majority of its Board of Directors or other
governing body (or, if there are no such voting interests, 50% or more of the
equity interests of which) is owned directly or indirectly by such first person.
SECTION 9.04 Interpretation; Disclosure Letters. When a reference is
made in this Agreement to a Section, such reference shall be to a Section of
this Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Whenever the words
"include", "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation". Any matter disclosed in
one section of the Company Disclosure Letter shall be deemed disclosed for
another section of the Company Disclosure Letter if and only to the extent that
it is apparent from such disclosure that it is intended for both purposes.
SECTION 9.05 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule or law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that transactions contemplated hereby are fulfilled to the extent
possible.
SECTION 9.06 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
SECTION 9.07 Entire Agreement; No Third-Party Beneficiaries. This
Agreement: (i) constitutes the entire agreement, and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the transactions contemplated hereunder and (ii) except for the
provisions of Article II and Section 6.05, is not intended to confer upon any
person other than the parties any rights or remedies.
SECTION 9.08 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
SECTION 9.09 Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by any of the parties without the prior
written consent of the other parties, except that Merger Sub may assign, in its
sole discretion, any of or all its rights, interests and obligations under this
Agreement to Parent or to any direct or indirect wholly owned subsidiary of
Parent, but no such assignment shall relieve Merger Sub of any of its
obligations under this Agreement.
<PAGE>
39
Any purported assignment without such consent shall be void. Subject to the
preceding sentences, this Agreement will be binding upon, inure to the benefit
of, and be enforceable by, the parties and their respective successors and
assigns.
SECTION 9.10 Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any Delaware state court or any
Federal court located in the State of Delaware, this being in addition to any
other remedy to which they are entitled at law or in equity. In addition, each
of the parties hereto: (i) consents to submit itself to the personal
jurisdiction of any Delaware state court or any Federal court located in the
State of Delaware in the event any dispute arises out of this Agreement or any
transactions contemplated hereunder; (ii) agrees that it will not attempt to
deny or defeat such personal jurisdiction by motion or other request for leave
from any such court; (iii) agrees that it will not bring any action relating to
this Agreement or any transactions contemplated hereunder in any court other
than any Delaware state court or any Federal court sitting in the State of
Delaware; and (iv) waives any right to trial by jury with respect to any action
related to or arising out of this Agreement or any transactions contemplated
hereunder.
[signatures follow on separate page]
<PAGE>
40
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have duly executed
this Agreement, all as of the date first written above.
SIND HOLDINGS, INC.
By________________________________
Name:
Title:
SIND ACQUISITION, INC.
By________________________________
Name:
Title:
SYNTHETIC INDUSTRIES, INC.
By________________________________
Name: Joseph F. Dana
Title: President and Chief Operating
Officer
<PAGE>
EXHIBIT A
Conditions of the Offer
Notwithstanding any other term of the Offer or this Agreement, Merger Sub
shall not be required to accept for payment or, subject to any applicable rules
and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act
(relating to Merger Sub's obligation to pay for or return tendered shares of
Company Common Stock promptly after the termination or withdrawal of the Offer),
to pay for any shares of Common Stock tendered pursuant to the Offer unless
there shall have been validly tendered and not withdrawn prior to the expiration
of the Offer that number of shares of Company Common Stock which would represent
at least a majority of the Fully Diluted Shares (the "Minimum Tender
Condition"). The term "Fully Diluted Shares" means all outstanding securities
entitled generally to vote in the election of directors of the Company on a
fully diluted basis, after giving effect to the exercise or conversion of all
options, rights and securities exercisable or convertible into such voting
securities. Furthermore, notwithstanding any other term of the Offer or this
Agreement, Merger Sub shall not be required to commence the Offer, accept for
payment or, subject as aforesaid, to pay for any shares of Company Common Stock
not theretofore accepted for payment or paid for, and may terminate or amend the
Offer, (i) with the consent of the Company or (ii) if, at any time on or after
the date of this Agreement and before the acceptance of such shares for payment
or the payment therefor, any of the following conditions exists:
(a) there shall be threatened or pending any suit, action or
proceeding by any Governmental Entity or any other person: (i) challenging
the acquisition by Parent or Merger Sub of any Company Common Stock,
seeking to restrain or prohibit the making or consummation of the Offer or
the Merger or any other transaction contemplated by this Agreement, or
resulting in a material delay in or material restriction on the ability of
Merger Sub to consummate the Offer or the Merger or seeking to obtain from
the Company, Parent or Merger Sub any damages that could result in a
Company Material Adverse Effect; (ii) seeking to prohibit or limit the
ownership or operation by the Company, Parent or any of their respective
subsidiaries of any material portion of the business or assets of the
Company, Parent or any of their respective subsidiaries, or to compel the
Company, Parent or any of their respective subsidiaries to dispose of or
hold separate any material portion of their respective businesses or
assets, as a result of the Offer, the Merger or any other Transaction;
(iii) seeking to impose limitations on the ability of Parent or Merger Sub
to acquire or hold, or exercise full rights of ownership of, any shares of
Company Common Stock, including the right to vote the Company Common Stock
purchased by it on all matters properly presented to the stockholders of
the Company; (iv) seeking to prohibit Parent or any of its subsidiaries
from effectively controlling in any material respect the business or
operations of the Company and the Company Subsidiaries; or (v) which
otherwise is reasonably likely to have a Company Material Adverse Effect;
<PAGE>
(b) any statute, rule, regulation, legislation, interpretation,
judgment, order or injunction shall be threatened, proposed, sought,
enacted, entered, enforced, promulgated, amended or issued with respect to,
or deemed applicable to, or any consent or approval withheld with respect
to: (i) Parent, the Company or any of their respective subsidiaries; or
(ii) the Offer, the Merger or any other Transaction, by any Governmental
Entity that is reasonably likely to result, directly or indirectly, in any
of the consequences referred to in subparagraph (a) above;
(c) there shall have occurred any event, change, effect or development
that, individually or in the aggregate, has had a Company Material Adverse
Effect;
(d) there shall have occurred: (i) any general suspension of trading
of securities on any national securities exchange or in the over-the-
counter market in the United States (excluding any coordinated trading halt
triggered solely as a result of a specified decrease in a market index);
(ii) a declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States; (iii) any limitation (whether or not
mandatory) by any Governmental Entity on, or other event that might
materially affect, the extension of credit by banks or other lending
institutions; (iv) a commencement of a war or armed hostilities or other
national or international calamity directly or indirectly involving the
United States; or (v) in the case of any of the foregoing existing on the
date of this Agreement, a material acceleration or worsening thereof;
(e) the representations and warranties by the Company contained in
this Agreement shall not be true and correct as of the date of this
Agreement and at the scheduled or extended expiration of the Offer, except
to the extent such representation and warranty expressly relates to an
earlier date (in which case on and as of such earlier date); provided,
however, that, other than with respect to the representations in Section
3.03 (Capital Structure) as to the number of issued and outstanding shares
of capital stock of the Company and Company Stock Options, the condition
set forth in this subparagraph (e) shall be considered satisfied unless,
ignoring for this purpose all qualifications as to materiality and Company
Material Adverse Effect in such representations and warranties, the
inaccuracies in the representations and warranties (with all such
inaccuracies taken in the aggregate) have had or would reasonably be
expected to have a Company Material Adverse Effect.
(f) the Company shall have failed to perform in any material respect
any obligation or to comply in any material respect with any agreement or
covenant of the Company to be performed or complied with by the Company
under this Agreement;
(g) this Agreement shall have been terminated in accordance with its
terms; or
(h) the Company Board withdraws, modifies or changes in any manner
adverse to Parent and Merger Sub its approval or recommendation of the
Offer, the Merger and this Agreement.
<PAGE>
SCHEDULE I
Definitions
<TABLE>
<CAPTION>
Term Defined in Section
- ---- ------------------
<S> <C>
"affiliate" 9.03
"Applicable Law" 3.05(a)
"Applicable Period" 5.02(a)
"Appraisal Shares" 2.01(d)
"Beacon" 3.15
"Certificate of Merger" 1.05
"Certificates" 2.02(a)
"Closing" 1.04
"Closing Date" 1.04
"Code" 3.10(b)
"Company" Recitals
"Company Benefit Plans" 3.10
"Company Board" 3.04(b)
"Company By-Laws" 3.01
"Company Charter" 3.01
"Company Common Stock" Recitals
"Company Confidentiality Agreement" 3.14(a)
"Company Disclosure Letter" 3.02(a)
"Company Employees" 6.04(a)
"Company Intellectual Property" 3.20
"Company Material Adverse Effect" 3.01
"Company Material Agreement" 3.18
"Company Notice" 5.02(a)
"Company SAR" 3.03(b)
"Company SEC Documents" 3.06
"Company Stock Option" 3.03(b)
"Company Stock Plans" 3.03(b)
"Company Stockholder Approval" 3.04(c)
"Company Stockholders Meeting" 6.01(b)
"Company Subsidiary" 3.02(a)
"Company Superior Proposal" 5.02(a)
"Company Takeover Proposal" 5.02(a)
"Confidentiality Agreement" 6.02(b)
"Contract" 3.05(a)
"Consent" 3.05(a)
"Debt Offer" 6.10(a)
"Debt Offer Documents" 6.10(b)
"DGCL" Recitals
"Effective Time" 1.05
"ERISA" 3.11(a)
"Environmental Laws" 3.13(a)
</TABLE>
<PAGE>
<TABLE>
<S> <C>
"Exchange Act" 1.01(a)
"Exchange Fund" 2.02 (a)
"Filed Company SEC Documents" 3.06
"Fully Diluted Shares" Exhibit A
"GAAP" 3.06
"Governmental Entity" 3.05(a)
"Governmental Permits" 3.17
"Hazardous Substance" 3.12(d)
"HSR Act" 3.05(a)
"Indemnified Party" 6.05
"Independent Directors" 6.09
"Information Statement" 3.05(a)
"Judgment" 3.05(a)
"Liens" 3.02(a)
"Maximum Premium" 6.05(b)
"Merger" Recitals
"Merger Consideration" 2.01(c)
"Merger Sub" Recitals
"Minimum Tender Condition" Exhibit A
"Offer" Recitals
"Offer Documents" 1.01(b)
"Outside Date" 8.01(b)
"Parent" Recitals
"Parent Material Adverse Effect" 4.04(iii)
"Paying Agent" 2.02(a)
"person" 9.03
"Proxy Statement" 3.05(a)
"Related Party Agreement" 3.22
"SEC" 1.01(a)
"Senior Subordinated Notes" 6.20(a)
"Securities Act" 3.06
"Schedule 14D-9" 1.02(b)
"Significant Company Subsidiary" 3.01
"Special Committee" Recitals
"Stipulation" Recitals
"Stock Transfer Taxes" 6.08
"Stockholder" Recitals
"subsidiary" 9.03
"Surviving Corporation" 1.03
"Tax" 3.09(f)
"Tax Return" 3.09(f)
"Transfer Taxes" 6.08
"Voting Company Debt" 3.03
"Wininger Litigation" Recitals
</TABLE>
<PAGE>
Exhibit (c)(2)
EXECUTION COPY
STOCKHOLDER AGREEMENT
THIS STOCKHOLDER AGREEMENT, dated as of November 5, 1999 (the
"Agreement"), among SIND Holdings, Inc., a Delaware corporation ("Parent"), SIND
Acquisition, Inc., a Delaware corporation and a wholly owned subsidiary of
Parent ("Merger Sub"), and Synthetic Industries, L.P., a Delaware limited
partnership (the "Stockholder").
W I T N E S S E T H:
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, Parent, Merger Sub and Synthetic Industries, Inc., a Delaware
corporation (the "Company"), are entering into an Agreement and Plan of Merger,
dated as of the date hereof (the "Merger Agreement"), which provides for, upon
the terms and subject to the conditions set forth therein, (i) the commencement
by Merger Sub of a tender offer (the "Offer") for all of the issued and
outstanding shares of common stock, par value $1.00 per share, of the Company
(the "Shares"), at a price of $33.00 per share, net to the seller in cash, and
(ii) the subsequent merger of Merger Sub with and into the Company (the
"Merger");
WHEREAS, as of the date hereof, the Stockholder owns, beneficially and
of record, 5,699,194 Shares (all such Shares together with any additional Shares
which may hereafter be acquired by the Stockholder prior to the termination of
this Agreement, whether upon the exercise of options or by means of purchase,
dividend, distribution or otherwise, being referred to herein as the "Owned
Shares");
WHEREAS, Frederick S. Wyle, the independent liquidating trustee (the
"Liquidating Trustee") of the Stockholder appointed pursuant to Section 17-
803(a) of the Delaware Revised Uniform Partnership Act, is required to take such
actions as may be necessary or desirable to consummate properly the transactions
contemplated by the Merger Agreement;
WHEREAS, as a condition to their willingness to enter into the Merger
Agreement, Parent and Merger Sub have required that the Stockholder enter into
this Agreement; and
WHEREAS, in order to induce Parent and Merger Sub to enter into the
Merger Agreement, the Stockholder is willing to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Parent, Merger Sub and the Stockholder hereby agree as follows:
<PAGE>
ARTICLE I.
TRANSFER AND VOTING OF SHARES;
OTHER COVENANTS OF THE STOCKHOLDER
SECTION 1.1. Voting of Shares. From the date hereof until the
----------------
earliest to occur of (x) termination of this Agreement pursuant to Section 6.2
hereof, (y) the expiration of the Stock Option (as defined in Section 3.1
hereof) with respect to the Owned Shares and (z) the closing of any exercise of
such Stock Option (the "Term"), at any meeting of the stockholders of the
Company, however called, the Stockholder shall vote the Owned Shares (i) in
favor of the Merger and the Merger Agreement (as amended from time to time),
(ii) against any Company Takeover Proposal and against any proposal for action
or agreement that would result in a breach of any covenant, representation or
warranty or any other obligation or agreement of the Company under the Merger
Agreement or which is reasonably likely to result in any of the conditions of
the Company's obligations under the Merger Agreement, not being fulfilled, or
any other action which could reasonably be expected to impede, interfere with,
delay, postpone or materially adversely affect the transactions contemplated by
the Merger Agreement or the likelihood of such transactions being consummated
and (iii) in favor of any other matter necessary for consummation of the
transactions contemplated by the Merger Agreement.
SECTION 1.2. No Inconsistent Arrangements. Except as contemplated by
----------------------------
this Agreement and the Merger Agreement, the Stockholder shall not during the
Term (i) transfer (which term shall include, without limitation, any sale,
assignment, gift, pledge, hypothecation or other disposition), or consent to any
transfer of, any or all of the Owned Shares or any interest therein, or create
or permit to exist any Encumbrance (as defined in Section 4.3 hereof) on such
Owned Shares, (ii) enter into any contract, option or other agreement or
understanding with respect to any transfer of any or all of the Owned Shares or
any interest therein, (iii) grant any proxy, power-of-attorney or other
authorization in or with respect to the Owned Shares, (iv) deposit the Owned
Shares into a voting trust or enter into a voting agreement or arrangement with
respect to the Owned Shares, or (v) take any other action that would in any way
restrict, limit or interfere with the performance of its obligations hereunder
or the transactions contemplated hereby or by the Merger Agreement.
SECTION 1.3. Proxy. The Stockholder represents that any proxies
-----
heretofore given in respect of the Owned Shares are not irrevocable and hereby
revokes any and all such proxies or powers of attorney. The Stockholder hereby
constitutes and appoints Merger Sub and Parent, or any nominee of Merger Sub and
Parent, with full power of substitution and resubstitution, at any time during
the Term, as its true and lawful attorney and proxy (its "Proxy"), for and in
its name, place and stead, to vote each of the Owned Shares, including the right
to sign its name (as stockholder) to any consent, certificate or other document
relating to the Company, as provided in Section 1.1.
THE FOREGOING PROXY AND POWER OF ATTORNEY ARE IRREVOCABLE AND COUPLED
WITH AN INTEREST THROUGHOUT THE TERM.
2
<PAGE>
SECTION 1.4. Waiver of Appraisal Rights. The Stockholder hereby
--------------------------
waives any rights of appraisal or rights to dissent from the Merger.
SECTION 1.5. Stop Transfer. The Stockholder shall not request that
-------------
the Company register the transfer (book-entry or otherwise) of any certificate
or uncertificated interest representing any of the Owned Shares, unless such
transfer is made in compliance with this Agreement.
SECTION 1.6. No Solicitation. During the Term, the Stockholder shall
---------------
not, nor shall it permit or authorize any of its partners, employees, agents or
representatives (collectively, the "Representatives") to, (i) solicit or
initiate, or encourage, directly or indirectly, any inquiries regarding or the
submission of, any Company Takeover Proposal, (ii) participate in any
discussions or negotiations regarding, or furnish to any Person any information
or data with respect to, or take any other action to knowingly facilitate the
making of any proposal that constitutes, or may reasonably be expected to lead
to, any Company Takeover Proposal or (iii) enter into any agreement with respect
to any Company Takeover Proposal or approve or resolve to approve any Company
Takeover Proposal. Upon execution of this Agreement, the Stockholder shall, and
it shall cause its Representatives to, immediately cease any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any of the foregoing. The Stockholder will promptly notify
Parent of the existence of any proposal, discussion, negotiation or inquiry
received by the Stockholder, and the Stockholder will immediately communicate to
Parent the terms of any proposal, discussion, negotiation or inquiry which it
may receive (and will promptly provide to Parent copies of any written materials
received by it in connection with such proposal, discussion, negotiation or
inquiry) and the identity of the Person making such proposal or inquiry or
engaging in such discussion or negotiation. Any action taken by the Company or
its directors or officers consistent with Section 5.02 of the Merger Agreement
shall not be considered to violate this Section 1.6.
ARTICLE II.
TENDER OF SHARES
SECTION 2.1. Tender. The Stockholder shall validly tender the Owned
------
Shares pursuant to and in accordance with the terms of the Offer, not later than
the second business day after commencement of the Offer pursuant to Section 1.01
of the Merger Agreement and Rule 14d-2 under the Exchange Act, and not
thereafter withdraw such tender; provided that there has been no modification or
amendment to the terms of the Offer which would require the consent of the
Company pursuant to Section 1.01 of the Merger Agreement. The Stockholder
hereby acknowledges and agrees that Parent's and Merger Sub's obligation to
accept for payment and pay for the Owned Shares in the Offer is subject to the
terms and conditions of the Offer.
SECTION 2.2. Certain Warranties. Without limiting the generality or
------------------
effect of any other term or condition of the Offer, the transfer by the
Stockholder of the Owned Shares to Merger Sub pursuant to the Offer shall pass
to and unconditionally vest in Merger Sub good and valid title to the Owned
Shares, free and clear of all Encumbrances whatsoever.
3
<PAGE>
SECTION 2.3. Disclosure. The Stockholder hereby authorizes Parent
----------
and Merger Sub to publish and disclose in the Offer Documents and, if approval
of the Company's stockholders is required under applicable law, the Proxy
Statement (including all documents and schedules filed with the SEC), its
identity and ownership of the Owned Shares and the nature of its commitments,
arrangements and understandings under this Agreement.
ARTICLE III
OPTION
SECTION 3.1. Grant of Option. In order to induce Parent and Merger
---------------
Sub to enter into the Merger Agreement, the Stockholder hereby grants to Merger
Sub an irrevocable option (the "Stock Option") to purchase all, but not less
than all, of the Owned Shares at a purchase price of $33.00 per share (the
"Exercise Price").
SECTION 3.2. Right to Exercise. The Stock Option may be exercised by
-----------------
Merger Sub if the Offer is not consummated due to the failure by the Stockholder
to tender validly and not withdraw the Owned Shares.
SECTION 3.3. Conditions. The Stock Option (i) shall become
----------
exercisable, in whole but not in part, on the date on which the event referred
to in Section 3.2 hereof shall occur or, if later, the date on which (A) all
waiting periods under the HSR Act, if any, required for the purchase of the
Owned Shares upon such exercise shall have expired or been waived and (B) there
shall not be in effect any preliminary or final injunction or other order issued
by any court or governmental, administrative or regulatory agency or authority
prohibiting the exercise of the Stock Option pursuant to this Agreement, and
(ii) shall remain exercisable until the date which is thirty (30) days following
the date on which the Stock Option becomes exercisable.
SECTION 3.4. Payment and Delivery. If Merger Sub wishes to exercise
--------------------
the Stock Option it shall, prior to the expiration thereof, send a written
notice to the Stockholder identifying the time and place for the closing of such
purchase at least three but not more than 10 business days prior to such
closing. On the date of such closing, Parent shall deliver the Exercise Price
multiplied by the total number of Owned Shares being acquired against delivery
by the Stockholder of all certificates representing the Owned Shares, duly
endorsed or accompanied by appropriate instruments of transfer. Upon such
delivery by the Stockholder, good and valid title to the Owned Shares shall pass
to and unconditionally vest in Merger Sub, free and clear of all Encumbrances
whatsoever.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER
The Stockholder hereby represents and warrants to Parent and Merger
Sub as follows:
4
<PAGE>
SECTION 4.1. Due Authorization, etc. The Stockholder has all
----------------------
requisite power and authority to execute, deliver and perform this Agreement, to
appoint Merger Sub and Parent as its Proxy and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement,
the appointment of Merger Sub and Parent as the Stockholder's Proxy and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary action on the part of the Stockholder. This Agreement has been
duly executed and delivered by or on behalf of the Stockholder and constitutes a
legal, valid and binding obligation of such Stockholder, enforceable against the
Stockholder in accordance with its terms, except as enforcement may be limited
by bankruptcy, insolvency, moratorium or other similar laws and except that the
availability of equitable remedies, including specific performance, is subject
to the discretion of the court before which any proceeding for such remedy may
be brought.
SECTION 4.2. No Conflicts; Required Filings and Consents.
-------------------------------------------
(a) Except as would not materially impair or delay the ability of the
Stockholder to consummate the transactions contemplated hereby, the execution
and delivery of this Agreement by the Stockholder does not, and the performance
of this Agreement by the Stockholder will not, (i) subject to the filings
referred to in Section 4.2(b), conflict with or violate any law applicable to
the Stockholder or by which the Stockholder or any of the Stockholder's assets
is bound or affected or (ii) result in any breach of or constitute a default (or
an event that with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, acceleration or cancellation
of, or result in the creation of an Encumbrance on any assets of the
Stockholder, including, without limitation, Owned Shares, pursuant to, any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Stockholder is a party
or by which the Stockholder or any of the Stockholder's assets is bound or
affected.
(b) Except as would not materially impair or delay the ability of the
Stockholder to consummate the transactions contemplated hereby, the execution
and delivery of this Agreement by the Stockholder does not, and the performance
of this Agreement by the Stockholder will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority (other than any necessary filing under the HSR Act or
the Exchange Act).
SECTION 4.3. Title to Shares. The Stockholder is the sole record and
---------------
beneficial owner of the Owned Shares, free and clear of any pledge, lien,
security interest, mortgage, charge, claim, equity, option, proxy, voting
restriction, voting trust or agreement, understanding, arrangement, right of
first refusal, limitation on disposition, adverse claim of ownership or use or
encumbrance of any kind ("Encumbrances"), except for Encumbrances or proxies
arising pursuant to this Agreement, the Stockholder's Partnership Agreement or
the Stipulation. As of the date hereof, the Owned Shares are the only Shares
owned of record or beneficially by Stockholder.
SECTION 4.4. No Finder's Fees. No broker, investment banker,
----------------
financial advisor or other person is entitled to any broker's, finder's,
financial advisor's or other similar fee
5
<PAGE>
or commission in connection with the transactions contemplated hereby based upon
arrangements made by or on behalf of the Stockholder (except as may be reflected
in Section 3.05 of the Merger Agreement or in the Stipulation). The Stockholder,
on behalf of itself and its affiliates, hereby acknowledges that it is not
entitled to receive any broker's, finder's, financial advisor's or other similar
fee or commission in connection with the transactions contemplated hereby or by
the Merger Agreement.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF
PARENT AND MERGER SUB
Parent and Merger Sub hereby, jointly and severally, represent and
warrant to the Stockholder as follows:
SECTION 5.1. Due Organization, Authorization, etc. Merger Sub and
------------------------------------
Parent are duly organized, validly existing and in good standing under the laws
of their jurisdiction of incorporation. Merger Sub and Parent have all
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby by each of Merger Sub and Parent have been duly authorized by all
necessary corporate action on the part of Merger Sub and Parent, respectively.
This Agreement has been duly executed and delivered by each of Merger Sub and
Parent and constitutes a legal, valid and binding obligation of each of Merger
Sub and Parent, enforceable against Merger Sub and Parent in accordance with its
terms, except as enforcement may be limited by bankruptcy, insolvency,
moratorium or other similar laws and except that the availability of equitable
remedies, including specific performance, is subject to the discretion of the
court before which any proceeding for such remedy may be brought.
SECTION 5.2. Investment Intent. Merger Sub is acquiring the Stock
-----------------
Option and, if and when it exercises the Stock Option, will be acquiring the
Owned Shares purchased upon the exercise thereof for its own account and not
with a view to distribution or resale in any manner which would be in violation
of the Securities Act.
ARTICLE VI.
MISCELLANEOUS
SECTION 6.1. Definitions. Terms used but not otherwise defined in
-----------
this Agreement have the meanings ascribed to such terms in the Merger Agreement.
SECTION 6.2. Termination. This Agreement (including the Option)
-----------
shall terminate and be of no further force and effect (i) by the written mutual
consent of the parties hereto or (ii) automatically and without any required
action of the parties hereto upon the earlier of (A) the Effective Time and (B)
the termination of the Merger Agreement in accordance with
6
<PAGE>
its terms. No such termination of this Agreement shall relieve any party hereto
from any liability for any breach of this Agreement prior to termination.
SECTION 6.3. Further Assurance. From time to time, at another
-----------------
party's request and without consideration, each party hereto shall execute and
deliver such additional documents and take all such further action as may be
necessary or desirable to consummate and make effective, in the most expeditious
manner practicable, the transaction contemplated by this Agreement.
SECTION 6.4. Certain Events. The Stockholder agrees that this
--------------
Agreement and the Stockholder's obligations hereunder shall attach to the Owned
Shares and shall be binding upon any person or entity to which legal or
beneficial ownership of the Owned Shares shall pass, whether by operation of law
or otherwise. Notwithstanding any transfer of the Owned Shares, the transferor
shall remain liable for the performance of all its obligations under this
Agreement.
SECTION 6.5. Specific Performance. The Stockholder acknowledges that
--------------------
if the Stockholder fails to perform any of its obligations under this Agreement
immediate and irreparable harm or injury would be caused to Parent and Merger
Sub for which money damages would not be an adequate remedy. In such event, the
Stockholder agrees that each of Parent and Merger Sub shall have the right, in
addition to any other rights it may have, to specific performance of this
Agreement. Accordingly, if Parent or Merger Sub should institute an action or
proceeding seeking specific enforcement of the provisions hereof, the
Stockholder hereby waives the claim or defense that Parent or Merger Sub, as the
case may be, has an adequate remedy at law and hereby agrees not to assert in
any such action or proceeding the claim or defense that such a remedy at law
exists. The Stockholder further agrees to waive any requirements for the
securing or posting of any bond in connection with obtaining any such equitable
relief.
SECTION 6.6. Notice. All notices and other communications given or
------
made pursuant hereto shall be in writing and shall be deemed to have been duly
given or made (i) as of the date delivered or sent by facsimile if delivered
personally or by facsimile, and (ii) on the third business day after deposit in
the U.S. mail, if mailed by registered or certified mail (postage prepaid,
return receipt requested), in each case to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice, except that notices of changes of address shall be effective upon
receipt):
(a) If to Parent or Merger Sub: SIND Holdings, Inc.
c/o Investcorp Management Services
Limited
P.O. Box 5430
Investcorp House
Manama
Bahrain
Telecopier: 011-973-530-816
Attention: H. Richard Lukens, III
7
<PAGE>
with a copy to: Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, NY 10166
Telecopier: 212-351-4065
Attention: E. Michael Greaney, Esq.
(b) If to the Stockholder: Synthetic Industries, L.P.
c/o Frederick S. Wyle
Three Embarcadero Center
San Francisco, CA 94111
Telecopier:
with a copy to: Howard Rice Nemerovski Canady Falk &
Rabin
Three Embarcadero Center, 7th Floor
San Francisco, CA 94111
Telecopier: (415) 217-5910
Attention: James L. Lopes, Esq.
and to: King & Spalding
1185 Avenue of the Americas
New York, NY 10036
Telecopier: 212-556-2222
Attention: Mark Zvonkovic, Esq.
SECTION 6.7. Expenses. Except as otherwise expressly set forth
--------
herein or in the Merger Agreement, all fees, costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such fees, costs and expenses.
SECTION 6.8. Headings. The headings contained in this Agreement are
--------
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 6.9. Severability. If any term or other provision of this
------------
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the maximum extent
possible.
8
<PAGE>
SECTION 6.10. Entire Agreement; No Third-Party Beneficiaries. This
----------------------------------------------
Agreement constitutes the entire agreement and supersede any and all other prior
agreements and undertakings, both written and oral, among the parties, or any of
them, with respect to the subject matter hereof, and this Agreement is not
intended to confer upon any other person any rights or remedies hereunder.
SECTION 6.11. Assignment. This Agreement shall not be assigned by
----------
operation of law or otherwise; provided Parent or Merger Sub may assign, in its
sole discretion, its rights and obligations hereunder to any direct or indirect
wholly owned subsidiary of Parent, but no such assignment shall relieve Parent
or Merger Sub of its obligations hereunder if such assignee does not perform
such obligations.
SECTION 6.12. Governing Law. This Agreement shall be governed by,
-------------
and construed in accordance with, the laws of the State of Delaware applicable
to contracts executed in and to be performed entirely within that State.
SECTION 6.13. Amendment. This Agreement may not be amended except by
---------
an instrument in writing signed by the parties hereto.
SECTION 6.14. Waiver. Any party hereto may (a) extend the time for
------
the performance of any of the obligations or other acts of the other parties
hereto, (b) waive any inaccuracies in the representations and warranties of the
other parties hereto contained herein or in any document delivered pursuant
hereto and (c) waive compliance by the other parties hereto with any of their
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only as against such party
and only if set forth in an instrument in writing signed by such party. The
failure of any party hereto to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of those rights.
SECTION 6.15. Counterparts. This Agreement may be executed in one or
------------
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
shall constitute one and the same agreement.
SECTION 6.16. Limited Liability of Partners. Without limiting the
-----------------------------
obligations of the Stockholder hereunder, (i) none of the obligations of the
Stockholder under or contemplated by this Agreement shall be a personal
obligation of the Liquidating Trustee or the former general partner or any
limited partner of the Stockholder, or any of their respective officers,
directors, stockholders, limited partners, general partners or owners and (ii)
any monetary obligation of the Stockholder under this Agreement shall be
satisfied solely out of the assets of the Stockholder.
9
<PAGE>
IN WITNESS WHEREOF, Parent, Merger Sub and the Stockholder have caused
this Agreement to be executed as of the date first written above.
SIND Holdings, Inc.
By: /s/ Christopher J. O'Brien
--------------------------
Name: Christopher J. O'Brien
Title: President
SIND Acquisition, Inc.
By: /s/ Christopher J. O'Brien
--------------------------
Name: Christopher J. O'Brien
Title: President
Synthetic Industries, L.P.
By: /s/ Frederick S. Wyle
---------------------
Name: Frederick S. Wyle
Title: Liquidating Trustee
10
<PAGE>
Exhibit (c)(3)
SYNTHETIC INDUSTRIES, INC.
309 Lafayette Road
Chicamauga, Georgia 30707
CONFIDENTIAL
- ------------
June 7, 1999
Mr. Sean Madden
Investcorp
280 Park Avenue
37th Floor
New York, NY 10017
Dear Sean:
This Agreement sets forth the terms and conditions pursuant to which Synthetic
Industries, Inc. (the "Company") will furnish to you certain information
concerning the business, financial performance and condition, operations and
liabilities of the Company in connection with your consideration of a possible
negotiated transaction (a "Transaction") involving the Company.
1. All information concerning the Company, whether prepared by the Company,
its advisors or otherwise and irrespective of the form of communication,
which has been or is furnished to you by or on behalf of the Company
(collectively, the "Evaluation Material") shall be treated and handled by
you as provided in this Agreement.
2. The Evaluation Material shall include, without limitation, all financial,
business, operating and other data, reports, interpretations, forecasts and
records that contain or reflect information concerning the Company which
the Company or its affiliates or the directors, partners, officers,
employees, agents or advisors, including attorneys, accountants,
consultants, bankers and financial advisors, (collectively,
"Representatives") of either the Company or its affiliates, furnish to you,
and all notes, analyses, compilations, studies, interpretations or other
documents prepared by you or your Representatives which contain, reflect or
are based, in whole or in part, on that information. The Evaluation
Material shall not include (i) information which is or becomes generally
available to the public other than as a result of a disclosure by you or
your Representatives or (ii) information that you can demonstrate was
either in your possession prior to its being furnished to you by or on
behalf of the Company or becomes available to you on a non-confidential
basis from a source other than the Company or its
<PAGE>
Page 2
Representatives, provided that in either case referred to in this
subparagraph (ii) the source of the information is not bound by a
confidentiality agreement with, or any other contractual, legal or
fiduciary obligation of confidentiality to, the Company or any other party
with respect to the information.
3. The Evaluation Material shall be kept confidential by you and your
Representatives, shall be used by you and your Representatives solely for
the purpose of evaluating a Transaction and shall not be used in any way,
directly or indirectly, that is detrimental to the Company or its
affiliates. You and your Representatives shall not disclose any of the
Evaluation Material to any person in any manner whatsoever, provided that
you may disclose the Evaluation Material (a) to the extent that the Company
gives its prior written consent and (b) to your Representatives that need
to know information in the Evaluation Material for the sole purpose of
evaluating a Transaction, so long as such Representatives agree to keep
that information confidential and are provided with a copy of this
Agreement and agree to be bound by the terms and conditions hereof to the
same extent as if they were parties hereto, provided further, that without
the written consent of the Company, prospective financing sources shall not
be considered Representatives to whom Evaluation Material may be disclosed
in accordance with this paragraph. You shall be responsible for a breach
of this Agreement by your Representatives, and at your sole expense you
shall take all reasonable action, including court proceedings, to restrain
your Representatives from prohibited or unauthorized disclosure or use of
the Evaluation Material.
4. Without the prior written consent of the Company, you and your
Representatives shall not disclose to any other person (a) that the
Evaluation Material has been made available to you or them, (b) that
discussions or negotiations are taking place concerning a Transaction or
(c) any of the terms, conditions or other facts with respect to a
Transaction, including the status thereof, unless and until in the opinion
of your outside legal counsel the disclosure is required by law, and in
that event only after giving as much prior written notice to the Company as
is practicable under the circumstances. For purposes of this Agreement,
the term "person" shall be broadly interpreted to include the media and any
individual, corporation, partnership, group or other entity.
5. Without the prior consent of the Company, all communications by you or your
Representatives regarding a Transaction, requests by you or your
Representatives for additional information in that connection and
discussions or questions by you or your Representatives regarding
procedures with respect thereto shall be submitted or directed only to The
Beacon Group Capital Services, LLC ("Beacon") and not to the Company or its
affiliates or their respective Representatives other than Beacon. Unless
you have been specifically authorized in writing by the Company to do so,
you or your Representatives shall not contact any officer, director,
employee, agent, customer, vendor or affiliate of the Company regarding
this Agreement, the Evaluation Material or any Transaction.
<PAGE>
Page 3
6. If you or your Representatives are requested or required, by deposition,
interrogatories, requests for information or documents in legal
proceedings, subpoena, civil investigative demand or other similar process,
to disclose any of the Evaluation Material, you shall provide the Company
with prompt written notice of the request or requirement so that the
Company may seek a protective order or other appropriate remedy or waive
compliance by you or your Representatives with the provisions of this
Agreement. In the absence of a protective order or other remedy or the
receipt of a waiver from the Company, if you or your Representatives are,
in the opinion of your outside legal counsel, legally compelled to disclose
any of the Evaluation Material to any tribunal or else be held in contempt
or suffer other censure or penalty, you or your Representatives may,
without liability hereunder, disclose to the tribunal only such portion of
the Evaluation Material that your legal counsel advises you is legally
required to be disclosed, provided that in that connection you shall use
your best efforts to preserve the contidentiality thereof, including
cooperating with the Company to obtain an appropriate protective order or
other reliable assurance that confidential treatment will be accorded that
portion of the Evaluation Material by the tribunal.
7. If you decide that you do not wish to participate in a Transaction, you
shall promptly inform the Company of that decision. In that case, or at
any time upon the request of the Company for any reason, you and your
Representatives shall promptly deliver to the Company all documents and
other written information which has been furnished to you or your
Representatives by or on behalf of the Company and all copies, extracts or
other reproductions, in whole or in part, thereof. In the event of such a
decision or request, the original and all copies of any of the Evaluation
Material prepared by you or your Representatives shall be destroyed.
Compliance by you and your Representatives with the preceding provisions
regarding the return or destruction of Evaluation Material shall, upon the
Company's request, be certified in writing to the Company by your
authorized officer supervising such return and destruction.
Notwithstanding the return or destruction of the Evaluation Material, you
and your Representatives shall continue to be bound by your confidentiality
and other obligations hereunder.
8. For a period of two years from the date hereof, (a) you, your affiliates
and your Representatives shall not, without obtaining the prior written
consent of the Company, employ or solicit to employ any of the current
officers or employees of the Company or its affiliates, and (b) none of
you, your affiliates or your Representatives shall knowingly divert or
attempt to divert any business, customer or supplier from the Company or
any of its affiliates. However, you shall not be prohibited from employing
any such person who contacts you on his or her own initiative without
solicitation directly or indirectly by you or an agent of you. Nothing
herein shall preclude generalized searches by you or your affiliates for
employees through the use of advertisement in the media (including trade
media) or through engagement of firms to conduct searches that are not
targeted or focused on the Company or its subsidiaries' employees.
9. For a period of three years from the date hereof, none of you, your
affiliates or your Representatives shall, directly or indirectly, (a)
propose to, or enter into any discussions,
<PAGE>
Page 4
negotiations, arrangements or understanding with, the Company or any other
person concerning a transaction of any kind, including a Transaction,
between you or any of your affiliates and the Company or any of its
affiliates or any of their respective security holders or involving any of
the Company's securities or security holders unless the Company shall have
requested in writing that you make such a proposal, (b) agree to acquire,
acquire or assist, advise or encourage any other person, or otherwise act
in concert with any other person, in acquiring (i) ownership or control of
the Company, any of its affiliates or any of their businesses, assets or
liabilities or (ii) ownership or control, including beneficial ownership
("Beneficial Ownership") as defined in Rule 13d-3 under the Securities
Exchange Act of 1934, as amended (the "1934 Act"), of any of the capital
stock, debt securities, bank debt, including a participation interest
therein, options, warrants or other securities or indebtedness of the
Company or any of its affiliates unless the Company shall have given its
prior written consent to such action, (c) make or participate in any
"solicitation" of "proxies", as those terms are used in the proxy rules
under the 1934 Act, to vote, or seek to advise or influence any person with
respect to the voting of, any voting securities of the Company or any of
its affiliates or form, join or in any way participate in a "group", within
the meaning of Section 13(d) of the 1934 Act, with respect to any voting
securities of the Company or any of its affiliates, (d) seek or propose,
alone or in concert with others, to influence or control the Company's
management or policies, (e) disclose any intention, plan or arrangement
inconsistent with the foregoing, (f) advise, assist, encourage, act as a
financing source for or otherwise invest in any other person in connection
with any of the foregoing or (g) ask the Company or its Representatives to
amend or waive any provision of this paragraph. You shall promptly advise
the Company of any inquiry or proposal made to you with respect to any of
the foregoing.
10. None of the Company, its affiliates or their Representatives, including
Beacon, makes any representation or warranty, express or implied,
concerning the accuracy or completeness of the Evaluation Material or has
any liability to you or your Representatives relating to or resulting from
the use of the Evaluation Material by you or your Representatives. Only
those representations or warranties which are made in a final definitive
agreement regarding a Transaction, when, as and if executed and delivered
by the Company and you, and subject to the limitations and restrictions
contained therein, shall have any such effect.
11. Unless and until a final definitive agreement regarding a Transaction has
been executed and delivered by the Company and you, neither the Company nor
you shall be under any legal obligation of any kind with respect to a
Transaction by virtue of this Agreement except for the matters specifically
provided for herein. The Company reserves the right in its sole
discretion, to reject any proposal made by you, your affiliates or your
Representatives with regard to a Transaction or any other matter and to
terminate discussions and negotiations with you with respect to a
Transaction or any other matter at any time for any reason or no reason.
You understand that (a) the Company and its Representatives shall be free
to conduct any process for any Transaction as they in their sole discretion
shall determine, including negotiating with any of the prospective parties
<PAGE>
Page 5
to such Transaction and entering into a definitive agreement without prior
notice to you or any other person, (b) any procedures relating to such
Transaction may be changed at any time without notice to you or any other
person, and (c) the Company may terminate the process at any time in its
sole discretion.
12. No failure or delay by the Company in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise thereof preclude any other or further exercise thereof
or the exercise of any other right, power or privilege hereunder.
13. Money damages are not an adequate remedy for a breach of this Agreement by
you or your Representatives, and the Company shall be entitled to equitable
relief, including injunction and specific performance, as a remedy for such
a breach. You waive any requirement for the securing or posting of a bond
in connection with such equitable relief and acknowledge that equitable
relief shall not be deemed to be the exclusive remedy for a breach of this
Agreement by you or your Representatives but shall be in addition to all
other remedies available at law or equity to the Company.
14. You hereby acknowledge that you are aware, and you agree to advise your
Representatives who are provided Evaluation Material or who are otherwise
informed as to the matters that are the subject of this Agreement, that any
person who receives from the Company or you, directly or indirectly, any
material, non-public information concerning the Company (including
material, non-public information regarding the matters contemplated by this
Agreement) is subject to applicable United States securities laws that
prohibit the purchase or sale by such person of the Company's securities or
from the communication by such person of any such material, non-public
information to any other person under circumstances in which it is
reasonably foreseeable that such other person will thereaftcr purchase or
sell the Company's securities.
15. If any provision of this Agreement is held to be illegal or contrary to
public policy or otherwise unenforceable, that provision shall be deemed
eliminated herefrom or modified to the extent necessary to make the
provision enforceable. Otherwise, the terms of this Agreement may be
amended, modified, superseded or waived only by a separate written
agreement executed by you and the Company that expressly states that it so
amends, modifies, supersedes or waives a term or terms of this Agreement.
16. You shall not assign any of your rights or delegate any of your duties
under this Agreement, including by operation of law, without the prior
written consent of the Company, and any purported assignment not consented
to shall be absolutely void and of no force and effect.
17. This Agreement shall be governed by and construed in accordance with the
laws of the State of New York without regard to the conflict of law
provisions thereof.
18. This Agreement may be executed by the parties hereto in counterparts, both
of which, taken together, shall constitute one and the same Agreement.
<PAGE>
Page 6
Please confirm your agreement to the foregoing by signing and returning the
accompanying copy of this Agreement, whereupon this Agreement shall become
binding on the parties hereto and on their respective successors and permitted
assignees.
Very truly yours,
SYNTHETIC INDUSTRIES, INC.
By: /s/ Joseph F. Dana
------------------
Agreed as of the date
first written above:
By: /s/ Sean P. Madden
------------------
<PAGE>
Exhibit (c)(4)
November 5, 1999
SIND Holdings, Inc.
c/o Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, New York 10166
Dear Sirs:
This will confirm my current intent to enter into appropriate documentation
implementing (a) the arrangements summarized on the attached term sheets in
connection with the consummation of the transactions contemplated by the
Agreement and Plan of Merger of even date herewith by and among Synthetic
Industries, Inc. (the "Company"), SIND Holdings, Inc. ("Holdings") and SIND
Acquisition, Inc. (the "Agreement") and (b) an equity participation by me in
Holdings at least equal to $1,600,000. The equity investment in Holdings will
be through the rollover of existing stock options into new Holdings stock
options. The new Holdings rollover stock options will be granted at a discount
from the $33 per share Agreement price to preserve the aggregate spread on each
such existing rollover option.
Sincerely,
/s/ Leonard Chill
-----------------
Leonard Chill
Accepted:
SIND Holdings, Inc.
By /s/ Christopher J. O'Brien
--------------------------
<PAGE>
PROJECT POLY
OUTLINE OF KEY COMPENSATION PLANS
Bonus Plan
. Generally keep existing financial opportunity the same (except for
promotions, etc.); provided that the Board shall review with management, on
a case-by-case basis, the competitiveness of the Company's total
compensation (salary, bonus, long-term compensation/ownership plan)
. Bonuses for senior executives generally tied to EBITDA targets -
minimum/maximum ranges consistent with current plan levels, as modified to
the extent necessary as determined on a case-by-case basis by Investcorp
and management
- 75% of bonuses tied to EBITDA targets and based upon a sliding scale
consistent with the Company's current program
- 25% of bonuses tied to alternative performance measures (measurable or
board discretion)
. 50% of eligible bonus earned at 90% of target EBITDA, with the balance up
to 100% earned pro rata up to 100% of target EBITDA; up to 125% of eligible
bonus may be earned if EBITDA is 110% or more of target
. Can be tailored by position
. EBITDA results are exclusive of reserve reversals if not in the budget and
would be adjusted for significant acquisitions or capital infusions or
accounting principle changes
Nonqualified Option Plan
. 11% of the fully diluted ownership
. 2.5% (of the 11%) of the plan left as "dry powder" for future management,
promotions, etc.; going forward, the Board shall have the discretion to
allocate remaining unallocated options
. Allocated to management based upon recommendation of CEO/President in
consultation with Investcorp
. Can be earned in 5 separate ways
- Meeting 100% of EBITDA targets on an annual basis (20%/year); meeting
at least 95% but less than 100% of annual EBITDA targets results in
vesting of one-half of options available for vesting (i.e. 10%/year)
- Cumulative catch-up provision for any prior year misses (applies to
both 95% and 100% thresholds)
- Time-vested after 7 years
- In case of IPO, unvested options convert to time lapse options
- In case of sale of Company, unvested options vest in whole or in part
if Investcorp earns a 20% or greater fully diluted return
. Put/call rights
. Option pool worth a total (net of option exercise cost) of $55 million to
management in year 5 based on management's projections and a 7.5x exit
multiple
Direct Side-by-Side Investment with Investcorp
. Buy-in at Investcorp's purchase price
<PAGE>
. Rollover shares
. Rollover options
- Exchange existing in-the-money options for new in-the-money options
. Loan program to assist in additional share purchases by selected officers
. Loan program also to be available for end of term option exercises
<PAGE>
MANAGEMENT ARRANGEMENTS/1/
--------------------------
New Stock Options
- -----------------
Number: An aggregate of 11% of fully diluted common stock,
of which 2.5% will be reserved for future grants
(as allocated by the Board of Directors in its sole
discretion) with the balance (8.5%) to be granted
at or promptly after closing.
Exercise Price: Per share price paid by Investcorp.
Term: 7 years and 30 days.
Vesting: (a) Up to 20% per year (the "Annual Portion") for 5
years, based upon achievement of specified
EBITDA performance targets. If the Company's
EBITDA performance equals or exceeds 95% of a
target in a given year but is less than 100% of
the target, one-half of the Annual Portion for
that year will vest. Options that do not vest
in any year may vest in any subsequent year
within such five-year period based upon
cumulative results.
(b) Upon an Initial Public Offering ("IPO"),
options that are unvested as of the IPO closing
date shall thereafter vest ratably at the end
of each of the following three anniversaries of
the closing of the IPO. In addition,
historically we have initiated a new option
program (and granted additional options) upon
an IPO at the IPO price.
(c) Upon a sale of the Company prior to an IPO (i)
up to 50% of unvested options will vest if, in
connection with such sale, Investcorp realizes
a 20% annual internal rate of return on a
fully-diluted basis, (ii) up to 75% of
unvested options will vest if, in connection
with such sale, Investcorp realizes a 25%
annual internal rate of return on a fully-
diluted basis, and (iii) up to 100% of
unvested options will vest if, in connection
with such sale, Investcorp realizes a 30%
annual internal rate of return on a fully-
diluted basis.
(d) Any options remaining unvested will vest 7
years from closing (without regard to any
performance targets).
- ----------------------------
/1/ Certain modifications, as described separately, are applicable for Leonard
Chill.
<PAGE>
Effect of Termination Unvested options expire immediately upon
of Employment: termination of employment for any reason, except
if employment is terminated by the Company
without cause, by the employee for good reason
or by reason of employee's death or disability,
in which case a pro rata portion (equal to the
ratio the number of days elapsed in such year
prior to termination bears to 365) of the Annual
Portion for such year will vest at the end of
such year if the performance targets for such
year are met. Vested options expire per Schedule
A.
Rollover Options
- ----------------
The existing stock options that are to be rolled
over into Parent options will preserve the
spread between the strike price and the
acquisition price and will be fully vested.
Vested rollover options will have a term of 7
years and 30 days unless terminated earlier per
Schedule A.
Puts/Calls
- ----------
Applicability: Applies to rollover shares and option shares
(including rollover option shares).
Call: Company may call shares upon any termination of
employment prior to an IPO per Schedule B.
Put: If the call is unexercised, under certain
circumstances the Executive may require the
Company to repurchase the shares per Schedule B.
FMV: Determined in good faith by the Company's board
of directors, based upon a valuation of the
entire Company, without taking into account any
minority or illiquidity discounts, subject to an
appraisal that may be requested by the
Executive. If the Executive seeks an appraisal,
each of the Executive and the board of
director's will select one appraiser, who shall
select a third. If the valuation determined by
the appraisers is less than or equal to 110% of
the board's determination the Executive shall
pay the entire cost of the appraisal. If such
valuation is greater than 110% but less than or
equal to 120%, than cost shall be borne equally
by the Company and by the Executive. If the
valuation is greater than 120% of the board's
determination, the Company shall bear the entire
cost of the appraisal.
Cost: In the case of rollover shares and rollover
option shares, Cost is equal to the per share
price paid by Investcorp. In the case of new
options, Cost is equal to the exercise price of
such options, which shall be equal to the per
share price paid by Investcorp for options
granted at the time of the closing of the
transactions and for a period of six months
thereafter.
Other Provisions
- ----------------
2
<PAGE>
Withholding: Exercise price and tax withholding obligations
may be satisfied by having option shares
withheld.
Tag/Drag Rights: The rollover shares and option shares will have
the right to participate pro rata in a sale of
the Company and Investcorp will have the right
to require such participation. These tag/drag
rights expire upon an IPO.
Restrictions on Prior to an IPO, rollover shares and option
Transfer: shares will be subject to restrictions on
transfer with flexibility for estate planning
purposes.
Access to Trading Following an IPO: (i) The Company will file
Markets Post-IPO: an S-8 registration statement covering stock
option exercises, (ii) Rule 144 would generally
be available and (iii) management holders of
rollover shares would have piggyback
registration rights to participate in secondary
offerings subject to limitations.
IPO and Secondary Management holders of rollover shares, options
Offerings: and option shares will be subject to customary
underwriter lock-up arrangements for the IPO and
secondary offerings. Generally, participation by
senior management in the IPO is not available.
Certain Definitions
- -------------------
Cause: Grounds for termination of executive for
"Cause": (1) conviction of a felony or plea of
guilty or nolo contendere to a felony, (2) act
of fraud or dishonesty which is materially
injurious to the Company, (3) willful and
continual refusal to perform duties or (4) gross
misconduct materially injurious to the Company.
Good Reason: Grounds for termination by executive for "Good
Reason": (1) assignment of duties or position
constituting a material diminution in
executive's role, responsibilities or authority,
(2) reduction in base salary or bonus
participation opportunities, (3) demand by the
Company that Executive relocate to a place more
than a reasonable distance (to be determined)
from current location, or (4) material breach of
executive's employment agreement by the Company.
Employment Each Executive will enter into an employment
---------- agreement with the Company on terms that are
Agreements not materially inconsistent with the current
---------- employment agreements; provided that if the IRS
asserts that any benefit payable under the
Executive's current employment agreement or
otherwise payable as a result of this
transaction (regardless of whether a termination
of employment occurs) is subject to a parachute
excise tax, the Company will indemnify such
Executive on a full gross-up basis. The Company
and each Executive will take all reasonable
steps to avoid the imposition of such tax.
3
<PAGE>
SCHEDULE A
----------
<TABLE>
<CAPTION>
Termination Event Unvested Options Terminate Vested Options Terminate
<S> <C> <C>
Executive terminated by Immediately 30 days after terminating event/(1)/
Company for Cause
Executive quits without Good Immediately 90 days after terminating event/(1)/
Reason
Executive quits with Good Immediately/(2)/ 180 days after terminating event/(1)/
Reason
Executive terminated by the Immediately/(2)/ 180 days after terminating event/(1)/
Company without Cause
Death or disability Immediately/(2)/ One year after terminating event/(1)/
</TABLE>
/(1)/ Subject to (2) below, the options are exercisable only to the extent
exercisable on the day of the terminating event.
/(2)/ A pro rata portion (equal to the ratio the number of days elapsed in such
year prior to termination bears to 365) of the Annual Portion for such
year will vest at the end of such year if the targets for such year are
met.
4
<PAGE>
SCHEDULE B
----------
<TABLE>
<CAPTION>
Call Provision Call Price
---------------------------------------------------------------------------
<S> <C> <C>
If Within 3 Years If After 3 Years
Employee terminated without Cause FMV FMV
Employee leaves with Good Reason FMV FMV
Employee leaves without Good Reason Lower of Cost or FMV/(1)/ FMV
Employee is terminated for Cause Lower of Cost or FMV/(1)/ Lower of Cost or FMV
Death, disability, retirement FMV FMV
</TABLE>
<TABLE>
<CAPTION>
Put Provision Put Price
-----------------------------------------------------------------------------
<S> <C> <C>
If Within 3 Years (2 Years in the If After 3 Years (2 Years in the
case of termination without Cause) case of termination without
Cause)
Employee terminated without Cause Lower of Cost or FMV/(1)/ FMV
Employee leaves with Good Reason FMV FMV
Employee leaves without Good Reason No put FMV
Employee is terminated for Cause No put No put
Death, disability, retirement FMV FMV
</TABLE>
/(1)/ Within the 1st year, it will be at Cost
5
<PAGE>
Modifications to Synthetic Management Arrangements for Leonard Chill
The terms of the attached Management Arrangements shall be modified as they
apply to Leonard Chill as described below:
Options Rollover: All non-qualified options to be rolled into
new seven-year options, aggregating $1.6
million of rolled, in-the-money value; counsel
to discuss potential tax-advantaged approach
to ISOs
New Options Grant: Granted at an exercise price equal to the the
per share price paid by Investcorp in two
pieces and structured to avoid adverse
accounting treatment: (i) three-fifths of
total grant covering years 1-3 ("Grant 1"),
and (ii) two-fifths covering years 4-5 ("Grant
2"); provided, however, that Grant 2 shall be
operative only in the event that Chill's
employment continues beyond three years
Puts/Calls: There shall be no puts or calls applicable to
Chill's shares/options until the expiration of
the term of the options (i.e. seven years);
provided, however, that the Company shall have
a right of first refusal with respect to
Chill's shares
Effect of Death or Disability: Notwithstanding the provisions of the option
plan to the contrary, upon death or disability
of Chill, 50% of Chill's unvested Grant 1
options which are capable of becoming vested
based on achieving EBITDA targets for that
year or a subsequent year (disregarding for
this purpose vesting opportunities with
respect to prior years based on cumulative
results) shall vest immediately
NA993130.122/1
<PAGE>
Exhibit (c)(5)
November 5, 1999
SIND Holdings, Inc.
c/o Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, New York 10166
Dear Sirs:
This will confirm my current intent to enter into appropriate documentation
implementing (a) the arrangements summarized on the attached term sheets in
connection with the consummation of the transactions contemplated by the
Agreement and Plan of Merger of even date herewith by and among Synthetic
Industries, Inc. (the "Company"), SIND Holdings, Inc. ("Holdings") and SIND
Acquisition, Inc. (the "Agreement") and (b) an equity participation by me in
Holdings having a value at least equal to 50% of the sum of my net option value
of existing Company stock options and 50% of the after-tax transaction-related
cash payments to be received by me. The equity investment in Holdings will be
through the rollover of existing stock options into new Holdings stock options
or through a combination of such rollover and investment of after-tax
transaction-related cash payments into new Holdings shares at $33 per new
Holdings share. The new Holdings rollover stock options will be granted at a
discount from the $33 per share Agreement price to preserve the aggregate spread
on each such existing rollover option.
Sincerely,
/s/ Joseph Dana
------------------------
Joseph Dana
Accepted:
SIND Holdings, Inc.
By /s/ Christopher J. O'Brien
--------------------------
<PAGE>
PROJECT POLY
- --------------------------------------------------------------------------------
OUTLINE OF KEY COMPENSATION PLANS
- --------------------------------------------------------------------------------
Bonus Plan
. Generally keep existing financial opportunity the same (except for
promotions, etc.); provided that the Board shall review with
management, on a case-by-case basis, the competitiveness of the
Company's total compensation (salary, bonus, long-term
compensation/ownership plan)
. Bonuses for senior executives generally tied to EBITDA targets -
minimum/maximum ranges consistent with current plan levels, as
modified to the extent necessary as determined on a case-by-case basis
by Investcorp and management
- 75% of bonuses tied to EBITDA targets and based upon a sliding
scale consistent with the Company's current program
- 25% of bonuses tied to alternative performance measures
(measurable or board discretion)
. 50% of eligible bonus earned at 90% of target EBITDA, with the balance
up to 100% earned pro rata up to 100% of target EBITDA; up to 125% of
eligible bonus may be earned if EBITDA is 110% or more of target
. Can be tailored by position
. EBITDA results are exclusive of reserve reversals if not in the budget
and would be adjusted for significant acquisitions or capital
infusions or accounting principle changes
Nonqualified Option Plan
. 11% of the fully diluted ownership
. 2.5% (of the 11%) of the plan left as "dry powder" for future
management, promotions, etc.; going forward, the Board shall have the
discretion to allocate remaining unallocated options
. Allocated to management based upon recommendation of CEO/President in
consultation with Investcorp
. Can be earned in 5 separate ways
- Meeting 100% of EBITDA targets on an annual basis (20%/year);
meeting at least 95% but less than 100% of annual EBITDA
targets results in vesting of one-half of options available
for vesting (i.e. 10%/year)
- Cumulative catch-up provision for any prior year misses
(applies to both 95% and 100% thresholds)
- Time-vested after 7 years
- In case of IPO, unvested options convert to time lapse options
- In case of sale of Company, unvested options vest in whole or
in part if Investcorp earns a 20% or greater fully diluted
return
. Put/call rights
. Option pool worth a total (net of option exercise cost) of $55 million
to management in year 5 based on management's projections and a 7.5x
exit multiple
Direct Side-by-Side Investment with Investcorp
. Buy-in at Investcorp's purchase price
<PAGE>
. Rollover shares
. Rollover options
- Exchange existing in-the-money options for new in-the-money
options
. Loan program to assist in additional share purchases by selected
officers
. Loan program also to be available for end of term option exercises
<PAGE>
MANAGEMENT ARRANGEMENTS/1/
--------------------------
New Stock Options
- -----------------
Number: An aggregate of 11% of fully diluted common stock,
of which 2.5% will be reserved for future grants
(as allocated by the Board of Directors in its sole
discretion) with the balance (8.5%) to be granted
at or promptly after closing.
Exercise Price: Per share price paid by Investcorp.
Term: 7 years and 30 days.
Vesting: (a) Up to 20% per year (the "Annual Portion") for
5 years, based upon achievement of specified
EBITDA performance targets. If the Company's
EBITDA performance equals or exceeds 95% of a
target in a given year but is less than 100%
of the target, one-half of the Annual Portion
for that year will vest. Options that do not
vest in any year may vest in any subsequent
year within such five-year period based upon
cumulative results.
(b) Upon an Initial Public Offering ("IPO"),
options that are unvested as of the IPO
closing date shall thereafter vest ratably at
the end of each of the following three
anniversaries of the closing of the IPO. In
addition, historically we have initiated a new
option program (and granted additional
options) upon an IPO at the IPO price.
(c) Upon a sale of the Company prior to an IPO (i)
up to 50% of unvested options will vest if, in
connection with such sale, Investcorp realizes
a 20% annual internal rate of return on a
fully-diluted basis, (ii) up to 75% of
unvested options will vest if, in connection
with such sale, Investcorp realizes a 25%
annual internal rate of return on a fully-
diluted basis, and (iii) up to 100% of
unvested options will vest if, in connection
with such sale, Investcorp realizes a 30%
annual internal rate of return on a fully-
diluted basis.
(d) Any options remaining unvested will vest 7
years from closing (without regard to any
performance targets).
____________________
/1/ Certain modifications, as described separately, are applicable for Leonard
Chill.
<PAGE>
Effect of Termination of Unvested options expire immediately upon
Employment: termination of employment for any reason,
except if employment is terminated by the
Company without cause, by the employee for
good reason or by reason of employee's death
or disability, in which case a pro rata
portion (equal to the ratio the number of days
elapsed in such year prior to termination
bears to 365) of the Annual Portion for such
year will vest at the end of such year if the
performance targets for such year are met.
Vested options expire per Schedule A.
Rollover Options
- ----------------
The existing stock options that are to be
rolled over into Parent options will preserve
the spread between the strike price and the
acquisition price and will be fully vested.
Vested rollover options will have a term of 7
years and 30 days unless terminated earlier
per Schedule A.
Puts/Calls
- ----------
Applicability: Applies to rollover shares and option shares
(including rollover option shares).
Call: Company may call shares upon any termination
of employment prior to an IPO per Schedule B.
Put: If the call is unexercised, under certain
circumstances the Executive may require the
Company to repurchase the shares per Schedule
B.
FMV: Determined in good faith by the Company's
board of directors, based upon a valuation of
the entire Company, without taking into
account any minority or illiquidity discounts,
subject to an appraisal that may be requested
by the Executive. If the Executive seeks an
appraisal, each of the Executive and the board
of director's will select one appraiser, who
shall select a third. If the valuation
determined by the appraisers is less than or
equal to 110% of the board's determination the
Executive shall pay the entire cost of the
appraisal. If such valuation is greater than
110% but less than or equal to 120%, than cost
shall be borne equally by the Company and by
the Executive. If the valuation is greater
than 120% of the board's determination, the
Company shall bear the entire cost of the
appraisal.
Cost: In the case of rollover shares and rollover
option shares, Cost is equal to the per share
price paid by Investcorp. In the case of new
options, Cost is equal to the exercise price
of such options, which shall be equal to the
per share price paid by Investcorp for options
granted at the time of the closing of the
transactions and for a period of six months
thereafter.
Other Provisions
- ----------------
2
<PAGE>
Withholding: Exercise price and tax withholding obligations
may be satisfied by having option shares
withheld.
Tag/Drag Rights: The rollover shares and option shares will
have the right to participate pro rata in a
sale of the Company and Investcorp will have
the right to require such participation. These
tag/drag rights expire upon an IPO.
Restrictions on Transfer: Prior to an IPO, rollover shares and option
shares will be subject to restrictions on
transfer with flexibility for estate planning
purposes.
Access to Trading Markets Following an IPO: (i) The Company will file
Post-IPO: an S-8 registration statement covering stock
option exercises, (ii) Rule 144 would
generally be available and (iii) management
holders of rollover shares would have
piggyback registration rights to participate
in secondary offerings subject to limitations.
IPO and Secondary Offerings: Management holders of rollover shares, options
and option shares will be subject to customary
underwriter lock-up arrangements for the IPO
and secondary offerings. Generally,
participation by senior management in the IPO
is not available.
Certain Definitions
- -------------------
Cause: Grounds for termination of executive for
"Cause": (1) conviction of a felony or plea of
guilty or nolo contendere to a felony, (2) act
---- ----------
of fraud or dishonesty which is materially
injurious to the Company, (3) willful and
continual refusal to perform duties or (4)
gross misconduct materially injurious to the
Company.
Good Reason: Grounds for termination by executive for "Good
Reason": (1) assignment of duties or position
constituting a material diminution in
executive's role, responsibilities or
authority, (2) reduction in base salary or
bonus participation opportunities, (3) demand
by the Company that Executive relocate to a
place more than a reasonable distance (to be
determined) from current location, or (4)
material breach of executive's employment
agreement by the Company.
Employment Each Executive will enter into an employment
- ---------- agreement with the Company on terms that are
Agreements not materially inconsistent with the current
- ---------- employment agreements; provided that if the
IRS asserts that any benefit payable under the
Executive's current employment agreement or
otherwise payable as a result of this
transaction (regardless of whether a
termination of employment occurs) is subject
to a parachute excise tax, the Company will
indemnify such Executive on a full gross-up
basis. The Company and each Executive will
take all reasonable steps to avoid the
imposition of such tax.
3
<PAGE>
SCHEDULE A
----------
<TABLE>
<CAPTION>
Termination Event Unvested Options Terminate Vested Options Terminate
<S> <C> <C>
Executive terminated by Immediately 30 days after terminating event/(1)/
Company for Cause
Executive quits without Good Immediately 90 days after terminating event/(1)/
Reason
Executive quits with Good Reason Immediately/(2)/ 180 days after terminating event/(1)/
Executive terminated by the Immediately/(2)/ 180 days after terminating event/(1)/
Company without Cause
Death or disability Immediately/(2)/ One year after terminating event/(1)/
</TABLE>
/(1)/ Subject to (2) below, the options are exercisable only to the extent
exercisable on the day of the terminating event.
/(2)/ A pro rata portion (equal to the ratio the number of days elapsed in such
year prior to termination bears to 365) of the Annual Portion for such
year will vest at the end of such year if the targets for such year are
met.
4
<PAGE>
SCHEDULE B
----------
<TABLE>
<CAPTION>
Call Provision Call Price
-------------------------------------------------------------
<S> <C> <C>
If Within 3 Years If After 3 Years
Employee terminated without FMV FMV
Cause
Employee leaves with Good FMV FMV
Reason
Employee leaves without Good Lower of Cost or FMV/(1)/ FMV
Reason
Employee is terminated for Lower of Cost or FMV/(1)/ Lower of Cost or FMV
Cause
Death, disability, retirement FMV FMV
<CAPTION>
Put Provision Put Price
-------------------------------------------------------------------------
<S> <C> <C>
If Within 3 Years (2 Years in the If After 3 Years (2 Years in the
case of termination without Cause) case of termination without
Cause)
Employee terminated without Lower of Cost or FMV/(1)/ FMV
Cause
Employee leaves with Good FMV FMV
Reason
Employee leaves without Good No put FMV
Reason
Employee is terminated for No put No put
Cause
Death, disability, retirement FMV FMV
/(1)/Within the 1st year, it will be at Cost
</TABLE>
5
<PAGE>
Exhibit (c)(6)
November 5, 1999
SIND Holdings, Inc.
c/o Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, New York 10166
Dear Sirs:
This will confirm my current intent to enter into appropriate documentation
implementing (a) the arrangements summarized on the attached term sheets in
connection with the consummation of the transactions contemplated by the
Agreement and Plan of Merger of even date herewith by and among Synthetic
Industries, Inc. (the "Company"), SIND Holdings, Inc. ("Holdings") and SIND
Acquisition, Inc. (the "Agreement") and (b) an equity participation by me in
Holdings having a value at least equal to 50% of the sum of my net option value
of existing Company stock options and 50% of the after-tax transaction-related
cash payments to be received by me. The equity investment in Holdings will be
through the rollover of existing stock options into new Holdings stock options
or through a combination of such rollover and investment of after-tax
transaction-related cash payments into new Holdings shares at $33 per new
Holdings share. The new Holdings rollover stock options will be granted at a
discount from the $33 per share Agreement price to preserve the aggregate spread
on each such existing rollover option.
Sincerely,
/s/ Joseph Sinicropi
--------------------
Joseph Sinicropi
Accepted:
SIND Holdings, Inc.
By /s/ Christopher J. O'Brien
--------------------------
<PAGE>
PROJECT POLY
OUTLINE OF KEY COMPENSATION PLANS
Bonus Plan
. Generally keep existing financial opportunity the same (except for
promotions, etc.); provided that the Board shall review with
management, on a case-by-case basis, the competitiveness of the
Company's total compensation (salary, bonus, long-term
compensation/ownership plan)
. Bonuses for senior executives generally tied to EBITDA targets -
minimum/maximum ranges consistent with current plan levels, as
modified to the extent necessary as determined on a case-by-case basis
by Investcorp and management
- 75% of bonuses tied to EBITDA targets and based upon a
sliding scale consistent with the Company's current program
- 25% of bonuses tied to alternative performance measures
(measurable or board discretion)
. 50% of eligible bonus earned at 90% of target EBITDA, with the balance
up to 100% earned pro rata up to 100% of target EBITDA; up to 125% of
eligible bonus may be earned if EBITDA is 110% or more of target
. Can be tailored by position
. EBITDA results are exclusive of reserve reversals if not in the budget
and would be adjusted for significant acquisitions or capital
infusions or accounting principle changes
Nonqualified Option Plan
. 11% of the fully diluted ownership
. 2.5% (of the 11%) of the plan left as "dry powder" for future
management, promotions, etc.; going forward, the Board shall have the
discretion to allocate remaining unallocated options
. Allocated to management based upon recommendation of CEO/President in
consultation with Investcorp
. Can be earned in 5 separate ways
- Meeting 100% of EBITDA targets on an annual basis (20%/year);
meeting at least 95% but less than 100% of annual EBITDA
targets results in vesting of one-half of options available
for vesting (i.e. 10%/year)
- Cumulative catch-up provision for any prior year misses
(applies to both 95% and 100% thresholds)
- Time-vested after 7 years
- In case of IPO, unvested options convert to time lapse options
- In case of sale of Company, unvested options vest in whole or
in part if Investcorp earns a 20% or greater fully diluted
return
. Put/call rights
. Option pool worth a total (net of option exercise cost) of $55 million
to management in year 5 based on management's projections and a 7.5x
exit multiple
Direct Side-by-Side Investment with Investcorp
. Buy-in at Investcorp's purchase price
<PAGE>
. Rollover shares
. Rollover options
- Exchange existing in-the-money options for new in-the-money
options
. Loan program to assist in additional share purchases by selected
officers
. Loan program also to be available for end of term option exercises
<PAGE>
MANAGEMENT ARRANGEMENTS/1/
--------------------------
New Stock Options
- -----------------
Number: An aggregate of 11% of fully diluted common stock,
of which 2.5% will be reserved for future grants
(as allocated by the Board of Directors in its sole
discretion) with the balance (8.5%) to be granted
at or promptly after closing.
Exercise Price: Per share price paid by Investcorp.
Term: 7 years and 30 days.
Vesting: (a) Up to 20% per year (the "Annual Portion") for 5
years, based upon achievement of specified
EBITDA performance targets. If the Company's
EBITDA performance equals or exceeds 95% of a
target in a given year but is less than 100% of
the target, one-half of the Annual Portion for
that year will vest. Options that do not vest
in any year may vest in any subsequent year
within such five-year period based upon
cumulative results.
(b) Upon an Initial Public Offering ("IPO"),
options that are unvested as of the IPO closing
date shall thereafter vest ratably at the end
of each of the following three anniversaries of
the closing of the IPO. In addition,
historically we have initiated a new option
program (and granted additional options) upon
an IPO at the IPO price.
(c) Upon a sale of the Company prior to an IPO (i)
up to 50% of unvested options will vest if, in
connection with such sale, Investcorp realizes
a 20% annual internal rate of return on a
fully-diluted basis, (ii) up to 75% of unvested
options will vest if, in connection with such
sale, Investcorp realizes a 25% annual internal
rate of return on a fully-diluted basis, and
(iii) up to 100% of unvested options will vest
if, in connection with such sale, Investcorp
realizes a 30% annual internal rate of return
on a fully-diluted basis.
(d) Any options remaining unvested will vest 7
years from closing (without regard to any
performance targets).
________________________
/1/ Certain modifications, as described separately, are applicable for Leonard
Chill.
<PAGE>
Effect of Termination of Unvested options expire immediately upon
Employment: termination of employment for any reason,
except if employment is terminated by the
Company without cause, by the employee for
good reason or by reason of employee's death
or disability, in which case a pro rata
portion (equal to the ratio the number of
days elapsed in such year prior to
termination bears to 365) of the Annual
Portion for such year will vest at the end
of such year if the performance targets for
such year are met. Vested options expire per
Schedule A.
Rollover Options
- ----------------
The existing stock options that are to be
rolled over into Parent options will
preserve the spread between the strike price
and the acquisition price and will be fully
vested. Vested rollover options will have a
term of 7 years and 30 days unless
terminated earlier per Schedule A.
Puts/Calls
- ----------
Applicability: Applies to rollover shares and option shares
(including rollover option shares).
Call: Company may call shares upon any termination
of employment prior to an IPO per Schedule
B.
Put: If the call is unexercised, under certain
circumstances the Executive may require the
Company to repurchase the shares per
Schedule B.
FMV: Determined in good faith by the Company's
board of directors, based upon a valuation
of the entire Company, without taking into
account any minority or illiquidity
discounts, subject to an appraisal that may
be requested by the Executive. If the
Executive seeks an appraisal, each of the
Executive and the board of director's will
select one appraiser, who shall select a
third. If the valuation determined by the
appraisers is less than or equal to 110% of
the board's determination the Executive
shall pay the entire cost of the appraisal.
If such valuation is greater than 110% but
less than or equal to 120%, than cost shall
be borne equally by the Company and by the
Executive. If the valuation is greater than
120% of the board's determination, the
Company shall bear the entire cost of the
appraisal.
Cost: In the case of rollover shares and rollover
option shares, Cost is equal to the per
share price paid by Investcorp. In the case
of new options, Cost is equal to the
exercise price of such options, which shall
be equal to the per share price paid by
Investcorp for options granted at the time
of the closing of the transactions and for a
period of six months thereafter.
Other Provisions
- ----------------
2
<PAGE>
Withholding: Exercise price and tax withholding
obligations may be satisfied by having
option shares withheld.
Tag/Drag Rights: The rollover shares and option shares will
have the right to participate pro rata in a
sale of the Company and Investcorp will have
the right to require such participation.
These tag/drag rights expire upon an IPO.
Restrictions on Transfer: Prior to an IPO, rollover shares and option
shares will be subject to restrictions on
transfer with flexibility for estate
planning purposes.
Access to Trading Markets Following an IPO: (i) The Company will
Post-IPO: file an S-8 registration statement covering
stock option exercises, (ii) Rule 144 would
generally be available and (iii) management
holders of rollover shares would have
piggyback registration rights to participate
in secondary offerings subject to
limitations.
IPO and Secondary Management holders of rollover shares,
Offerings: options and option shares will be subject to
customary underwriter lock-up arrangements
for the IPO and secondary offerings.
Generally, participation by senior
management in the IPO is not available.
Certain Definitions
- -------------------
Cause: Grounds for termination of executive for
"Cause": (1) conviction of a felony or plea
of guilty or nolo contendere to a felony,
---- ----------
(2) act of fraud or dishonesty which is
materially injurious to the Company, (3)
willful and continual refusal to perform
duties or (4) gross misconduct materially
injurious to the Company.
Good Reason: Grounds for termination by executive for
"Good Reason": (1) assignment of duties or
position constituting a material diminution
in executive's role, responsibilities or
authority, (2) reduction in base salary or
bonus participation opportunities, (3)
demand by the Company that Executive
relocate to a place more than a reasonable
distance (to be determined) from current
location, or (4) material breach of
executive's employment agreement by the
Company.
Employment Each Executive will enter into an employment
- ---------- agreement with the Company on terms that
Agreements are not materially inconsistent with the
- ---------- current employment agreements; provided that
if the IRS asserts that any benefit payable
under the Executive's current employment
agreement or otherwise payable as a result
of this transaction (regardless of whether a
termination of employment occurs) is subject
to a parachute excise tax, the Company will
indemnify such Executive on a full gross-up
basis. The Company and each Executive will
take all reasonable steps to avoid the
imposition of such tax.
3
<PAGE>
SCHEDULE A
----------
<TABLE>
<CAPTION>
Termination Event Unvested Options Terminate Vested Options Terminate
<S> <C> <C>
Executive terminated by Immediately 30 days after terminating event/(1)/
Company for Cause
Executive quits without Good Immediately 90 days after terminating event/(1)/
Reason
Executive quits with Good Reason Immediately/(2)/ 180 days after terminating event/(1)/
Executive terminated by the Immediately/(2)/ 180 days after terminating event/(1)/
Company without Cause
Death or disability Immediately/(2)/ One year after terminating event/(1)/
</TABLE>
/(1)/ Subject to (2) below, the options are exercisable only to the extent
exercisable on the day of the terminating event.
/(2)/ A pro rata portion (equal to the ratio the number of days elapsed in such
year prior to termination bears to 365) of the Annual Portion for such
year will vest at the end of such year if the targets for such year are
met.
4
<PAGE>
SCHEDULE B
----------
<TABLE>
<CAPTION>
Call Provision Call Price
--------------------------------------------------------------------
If Within 3 Years If After 3 Years
<S> <C> <C>
Employee terminated without FMV FMV
Cause
Employee leaves with Good FMV FMV
Reason
Employee leaves without Good Lower of Cost or FMV/(1)/ FMV
Reason
Employee is terminated for Cause Lower of Cost or FMV/(1)/ Lower of Cost or FMV
Death, disability, retirement FMV FMV
<CAPTION>
Put Provision Put Price
---------------------------------------------------------------------------
If Within 3 Years (2 Years in the If After 3 Years (2 Years in the
case of termination without Cause) case of termination without Cause)
<S> <C> <C>
Employee terminated without Lower of Cost or FMV/(1)/ FMV
Cause
Employee leaves with Good FMV FMV
Reason
Employee leaves without Good No put FMV
Reason
Employee is terminated for No put No put
Cause
Death, disability, retirement FMV FMV
</TABLE>
/(1)/ Within the 1st year, it will be at Cost
5
<PAGE>
The terms of Schedule B to the Management Arrangements shall be modified as they
apply to Joseph Sinicropi as described below:
<TABLE>
<CAPTION>
Call Provision Call Price
-------------------------------------------------------------
If Within If Within If After
Years 1 - 2 Year 3 3 Years
<S> <C> <C> <C>
Employee leaves without Good Lower of Cost or FMV FMV FMV
Reason
<CAPTION>
Put Provision Put Price
-------------------------------------------------------------
If Within If Within If After
Years 1 - 2 Year 3 3 Years
<S> <C> <C> <C>
Employee leaves without Good None Lower of Cost or FMV
Reason FMV (with an
additional put right
in the first 30 days
of Year 4 at FMV)
</TABLE>
<PAGE>
Exhibit (c)(7)
November 5, 1999
SIND Holdings, Inc.
c/o Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, New York 10166
Dear Sirs:
This will confirm my current intent to enter into appropriate documentation
implementing (a) the arrangements summarized on the attached term sheets in
connection with the consummation of the transactions contemplated by the
Agreement and Plan of Merger of even date herewith by and among Synthetic
Industries, Inc. (the "Company"), SIND Holdings, Inc. ("Holdings") and SIND
Acquisition, Inc. (the "Agreement") and (b) an equity participation by me in
Holdings having a value at least equal to 50% of the sum of my net option value
of existing Company stock options and 50% of the after-tax transaction-related
cash payments to be received by me. The equity investment in Holdings will be
through the rollover of existing stock options into new Holdings stock options
or through a combination of such rollover and investment of after-tax
transaction-related cash payments into new Holdings shares at $33 per new
Holdings share. The new Holdings rollover stock options will be granted at a
discount from the $33 per share Agreement price to preserve the aggregate spread
on each such existing rollover option.
Sincerely,
/s/ C. Ted Koerner
------------------
C. Ted Koerner
Accepted:
SIND Holdings, Inc.
By /s/ Christopher J. O'Brien
--------------------------
<PAGE>
PROJECT POLY
OUTLINE OF KEY COMPENSATION PLANS
Bonus Plan
. Generally keep existing financial opportunity the same (except for
promotions, etc.); provided that the Board shall review with
management, on a case-by-case basis, the competitiveness of the
Company's total compensation (salary, bonus, long-term
compensation/ownership plan)
. Bonuses for senior executives generally tied to EBITDA targets -
minimum/maximum ranges consistent with current plan levels, as
modified to the extent necessary as determined on a case-by-case basis
by Investcorp and management
- 75% of bonuses tied to EBITDA targets and based upon a sliding
scale consistent with the Company's current program
- 25% of bonuses tied to alternative performance measures
(measurable or board discretion)
. 50% of eligible bonus earned at 90% of target EBITDA, with the balance
up to 100% earned pro rata up to 100% of target EBITDA; up to 125% of
eligible bonus may be earned if EBITDA is 110% or more of target
. Can be tailored by position
. EBITDA results are exclusive of reserve reversals if not in the budget
and would be adjusted for significant acquisitions or capital
infusions or accounting principle changes
Nonqualified Option Plan
. 11% of the fully diluted ownership
. 2.5% (of the 11%) of the plan left as "dry powder" for future
management, promotions, etc.; going forward, the Board shall have the
discretion to allocate remaining unallocated options
. Allocated to management based upon recommendation of CEO/President in
consultation with Investcorp
. Can be earned in 5 separate ways
- Meeting 100% of EBITDA targets on an annual basis (20%/year);
meeting at least 95% but less than 100% of annual EBITDA
targets results in vesting of one-half of options available
for vesting (i.e. 10%/year)
- Cumulative catch-up provision for any prior year misses
(applies to both 95% and 100% thresholds)
- Time-vested after 7 years
- In case of IPO, unvested options convert to time lapse options
- In case of sale of Company, unvested options vest in whole or
in part if Investcorp earns a 20% or greater fully diluted
return
. Put/call rights
. Option pool worth a total (net of option exercise cost) of $55 million
to management in year 5 based on management's projections and a 7.5x
exit multiple
Direct Side-by-Side Investment with Investcorp
<PAGE>
. Buy-in at Investcorp's purchase price
. Rollover shares
. Rollover options
- Exchange existing in-the-money options for new in-the-money
options
. Loan program to assist in additional share purchases by selected
officers
. Loan program also to be available for end of term option exercises
<PAGE>
MANAGEMENT ARRANGEMENTS/1/
--------------------------
New Stock Options
- -----------------
Number: An aggregate of 11% of fully diluted common
stock, of which 2.5% will be reserved for
future grants (as allocated by the Board of
Directors in its sole discretion) with the
balance (8.5%) to be granted at or
promptly after closing.
Exercise Price: Per share price paid by Investcorp.
Term: 7 years and 30 days.
Vesting: (a) Up to 20% per year (the "Annual Portion")
for 5 years, based upon achievement of
specified EBITDA performance targets. If
the Company's EBITDA performance equals
or exceeds 95% of a target in a given
year but is less than 100% of the target,
one-half of the Annual Portion for that
year will vest. Options that do not vest
in any year may vest in any subsequent
year within such five-year period based
upon cumulative results.
(b) Upon an Initial Public Offering ("IPO"),
options that are unvested as of the IPO
closing date shall thereafter vest
ratably at the end of each of the
following three anniversaries of the
closing of the IPO. In addition,
historically we have initiated a new
option program (and granted additional
options) upon an IPO at the IPO price.
(c) Upon a sale of the Company prior to an
IPO (i) up to 50% of unvested options
will vest if, in connection with such
sale, Investcorp realizes a 20% annual
internal rate of return on a fully-
diluted basis, (ii) up to 75% of unvested
options will vest if, in connection with
such sale, Investcorp realizes a 25%
annual internal rate of return on a
fully-diluted basis, and (iii) up to 100%
of unvested options will vest if, in
connection with such sale, Investcorp
realizes a 30% annual internal rate of
return on a fully-diluted basis.
(d) Any options remaining unvested will vest
7 years from closing (without regard to
any performance targets).
________________________
/1/ Certain modifications, as described separately, are applicable for Leonard
Chill.
<PAGE>
Effect of Termination of Unvested options expire immediately upon
Employment: termination of employment for any reason,
except if employment is terminated by the
Company without or disability, in which case
a pro rata portion (equal to the ratio the
number of days elapsed in such year prior to
termination bears to 365) of the Annual
Portion for such year will vest at the end
of such year if the performance targets for
such year are met. Vested options expire per
Schedule A.
Rollover Options
- ----------------
The existing stock options that are to be
rolled over into Parent options will
preserve the spread between the strike price
and the acquisition price and will be fully
vested. Vested rollover options will have a
term of 7 years and 30 days unless
terminated earlier per Schedule A.
Puts/Calls
- ----------
Applicability: Applies to rollover shares and option shares
(including rollover option shares).
Call: Company may call shares upon any termination
of employment prior to an IPO per Schedule
B.
Put: If the call is unexercised, under certain
circumstances the Executive may require the
Company to repurchase the shares per
Schedule B.
FMV: Determined in good faith by the Company's
board of directors, based upon a valuation
of the entire Company, without taking into
account any minority or illiquidity
discounts, subject to an appraisal that may
be requested by the Executive. If the
Executive seeks an appraisal, each of the
Executive and the board of director's will
select one appraiser, who shall select a
third. If the valuation determined by the
appraisers is less than or equal to 110% of
the board's determination the Executive
shall pay the entire cost of the appraisal.
If such valuation is greater than 110% but
less than or equal to 120%, than cost shall
be borne equally by the Company and by the
Executive. If the valuation is greater than
120% of the board's determination, the
Company shall bear the entire cost of the
appraisal.
Cost: In the case of rollover shares and rollover
option shares, Cost is equal to the per
share price paid by Investcorp. In the case
of new options, Cost is equal to the
exercise price of such options, which shall
be equal to the per share price paid by
Investcorp for options granted at the time
of the closing of the transactions and for a
period of six months thereafter.
Other Provisions
- ----------------
2
<PAGE>
Withholding: Exercise price and tax withholding
obligations may be satisfied by having
option shares withheld.
Tag/Drag Rights: The rollover shares and option shares will
have the right to participate pro rata in a
sale of the Company and Investcorp will have
the right to require such participation.
These tag/drag rights expire upon an IPO.
Restrictions on Transfer: Prior to an IPO, rollover shares and option
shares will be subject to restrictions on
transfer with flexibility for estate
planning purposes.
Access to Trading Following an IPO: (i) The Company will
Markets Post-IPO: file an S-8 registration statement covering
stock option exercises, (ii) Rule 144 would
generally be available and (iii) management
holders of rollover shares would have
piggyback registration rights to participate
in secondary offerings subject to
limitations.
IPO and Secondary Management holders of rollover shares,
Offerings: options and option shares will be subject to
customary underwriter lock-up arrangements
for the IPO and secondary offerings.
Generally, participation by senior
management in the IPO is not available.
Certain Definitions
- -------------------
Cause: Grounds for termination of executive for
"Cause": (1) conviction of a felony or plea
of guilty or nolo contendere to a felony,
---- ----------
(2) act of fraud or dishonesty which is
materially injurious to the Company, (3)
willful and continual refusal to perform
duties or (4) gross misconduct materially
injurious to the Company.
Good Reason: Grounds for termination by executive for
"Good Reason": (1) assignment of duties or
position constituting a material diminution
in executive's role, responsibilities or
authority, (2) reduction in base salary or
bonus participation opportunities, (3)
demand by the Company that Executive
relocate to a place more than a reasonable
distance (to be determined) from current
location, or (4) material breach of
executive's employment agreement by the
Company.
Employment Each Executive will enter into an
---------- employment agreement with the Company
Agreements on terms that are not materially
---------- inconsistent with the current employment
agreements; provided that if the IRS asserts
that any benefit payable under the
Executive's current employment agreement or
otherwise payable as a result of this
transaction (regardless of whether a
termination of employment occurs) is subject
to a parachute excise tax, the Company will
indemnify such Executive on a full gross-up
basis. The Company and each Executive will
take all reasonable steps to avoid the
imposition of such tax.
3
<PAGE>
SCHEDULE A
----------
<TABLE>
<CAPTION>
Termination Event Unvested Options Terminate Vested Options Terminate
<S> <C> <C>
Executive terminated by Immediately 30 days after terminating event/(1)/
Company for Cause
Executive quits without Good Immediately 90 days after terminating event/(1)/
Reason
Executive quits with Good Immediately/(2)/ 180 days after terminating event/(1)/
Reason
Executive terminated by the Immediately/(2)/ 180 days after terminating event/(1)/
Company without Cause
Death or disability Immediately/(2)/ One year after terminating event/(1)/
</TABLE>
/(1)/ Subject to (2) below, the options are exercisable only to the extent
exercisable on the day of the terminating event.
/(2)/ A pro rata portion (equal to the ratio the number of days elapsed in such
year prior to termination bears to 365) of the Annual Portion for such
year will vest at the end of such year if the targets for such year are
met.
4
<PAGE>
SCHEDULE B
----------
<TABLE>
<CAPTION>
Call Provision Call Price
----------------------------------------------------------
If Within 3 Years If After 3 Years
<S> <C> <C>
Employee terminated without FMV FMV
Cause
Employee leaves with Good FMV FMV
Reason
Employee leaves without Good Lower of Cost or FMV/(1)/ FMV
Reason
Employee is terminated for Lower of Cost or FMV/(1)/ Lower of Cost or FMV
Cause
Death, disability, retirement FMV FMV
<CAPTION>
Put Provision Put Price
-----------------------------------------------------------------------------
If Within 3 Years (2 Years in the If After 3 Years (2 Years in the
case of termination without Cause) case of termination without Cause)
<S> <C> <C>
Employee terminated without Lower of Cost or FMV(1) FMV
Cause
Employee leaves with Good FMV FMV
Reason
Employee leaves without Good No put FMV
Reason
Employee is terminated for No put No put
Cause
Death, disability, retirement FMV FMV
</TABLE>
/(1)/ Within the 1st year, it will be at Cost
5
<PAGE>
Exhibit (c)(8)
November 5, 1999
SIND Holdings, Inc.
c/o Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, New York 10166
Dear Sirs:
This will confirm my current intent to enter into appropriate documentation
implementing (a) the arrangements summarized on the attached term sheets in
connection with the consummation of the transactions contemplated by the
Agreement and Plan of Merger of even date herewith by and among Synthetic
Industries, Inc. (the "Company"), SIND Holdings, Inc. ("Holdings") and SIND
Acquisition, Inc. (the "Agreement") and (b) an equity participation by me in
Holdings having a value at least equal to 50% of the sum of my net option value
of existing Company stock options and 50% of the after-tax transaction-related
cash payments to be received by me. The equity investment in Holdings will be
through the rollover of existing stock options into new Holdings stock options
or through a combination of such rollover and investment of after-tax
transaction-related cash payments into new Holdings shares at $33 per new
Holdings share. The new Holdings rollover stock options will be granted at a
discount from the $33 per share Agreement price to preserve the aggregate spread
on each such existing rollover option.
Sincerely,
/s/ John Michael Long
---------------------
John Michael Long
Accepted:
SIND Holdings, Inc.
By /s/ Christopher J. O'Brien
--------------------------
<PAGE>
PROJECT POLY
OUTLINE OF KEY COMPENSATION PLANS
Bonus Plan
. Generally keep existing financial opportunity the same (except for
promotions, etc.); provided that the Board shall review with
management, on a case-by-case basis, the competitiveness of the
Company's total compensation (salary, bonus, long-term
compensation/ownership plan)
. Bonuses for senior executives generally tied to EBITDA targets -
minimum/maximum ranges consistent with current plan levels, as
modified to the extent necessary as determined on a case-by-case basis
by Investcorp and management
- 75% of bonuses tied to EBITDA targets and based upon a sliding
scale consistent with the Company's current program
- 25% of bonuses tied to alternative performance measures
(measurable or board discretion)
. 50% of eligible bonus earned at 90% of target EBITDA, with the balance
up to 100% earned pro rata up to 100% of target EBITDA; up to 125% of
eligible bonus may be earned if EBITDA is 110% or more of target
. Can be tailored by position
. EBITDA results are exclusive of reserve reversals if not in the budget
and would be adjusted for significant acquisitions or capital
infusions or accounting principle changes
Nonqualified Option Plan
. 11% of the fully diluted ownership
. 2.5% (of the 11%) of the plan left as "dry powder" for future
management, promotions, etc.; going forward, the Board shall have the
discretion to allocate remaining unallocated options
. Allocated to management based upon recommendation of CEO/President in
consultation with Investcorp
. Can be earned in 5 separate ways
- Meeting 100% of EBITDA targets on an annual basis (20%/year);
meeting at least 95% but less than 100% of annual EBITDA
targets results in vesting of one-half of options available
for vesting (i.e. 10%/year)
- Cumulative catch-up provision for any prior year misses
(applies to both 95% and 100% thresholds)
- Time-vested after 7 years
- In case of IPO, unvested options convert to time lapse options
- In case of sale of Company, unvested options vest in whole or
in part if Investcorp earns a 20% or greater fully diluted
return
. Put/call rights
. Option pool worth a total (net of option exercise cost) of $55 million
to management in year 5 based on management's projections and a 7.5x
exit multiple
Direct Side-by-Side Investment with Investcorp
. Buy-in at Investcorp's purchase price
<PAGE>
. Rollover shares
. Rollover options
- Exchange existing in-the-money options for new in-the-money
options
. Loan program to assist in additional share purchases by selected
officers
. Loan program also to be available for end of term option exercises
<PAGE>
MANAGEMENT ARRANGEMENTS/1/
--------------------------
New Stock Options
- -----------------
Number: An aggregate of 11% of fully diluted common
stock, of which 2.5% will be reserved for
future grants (as allocated by the Board of
Directors in its sole discretion) with the
balance (8.5%) to be granted at or promptly
after closing.
Exercise Price: Per share price paid by Investcorp.
Term: 7 years and 30 days.
Vesting: (a) Up to 20% per year (the "Annual
Portion") for 5 years, based upon
achievement of specified EBITDA
performance targets. If the Company's
EBITDA performance equals or exceeds 95%
of a target in a given year but is less
than 100% of the target, one-half of the
Annual Portion for that year will vest.
Options that do not vest in any year may
vest in any subsequent year within such
five-year period based upon cumulative
results.
(b) Upon an Initial Public Offering ("IPO"),
options that are unvested as of the IPO
closing date shall thereafter vest
ratably at the end of each of the
following three anniversaries of the
closing of the IPO. In addition,
historically we have initiated a new
option program (and granted additional
options) upon an IPO at the IPO price.
(c) Upon a sale of the Company prior to an
IPO (i) up to 50% of unvested options
will vest if, in connection with such
sale, Investcorp realizes a 20% annual
internal rate of return on a fully-
diluted basis, (ii) up to 75% of
unvested options will vest if, in
connection with such sale, Investcorp
realizes a 25% annual internal rate of
return on a fully-diluted basis, and
(iii) up to 100% of unvested options
will vest if, in connection with such
sale, Investcorp realizes a 30% annual
internal rate of return on a fully-
diluted basis.
(d) Any options remaining unvested will vest
7 years from closing (without regard to
any performance targets).
_______________
/1/ Certain modifications, as described separately, are applicable for Leonard
Chill.
<PAGE>
Effect of Termination Unvested options expire immediately upon
of Employment: termination of employment for any reason,
except if employment is terminated by the
Company without cause, by the employee for
good reason or by reason of employee's death
or disability, in which case a pro rata
portion (equal to the ratio the number of days
elapsed in such year prior to termination
bears to 365) of the Annual Portion for such
year will vest at the end of such year if the
performance targets for such year are met.
Vested options expire per Schedule A.
Rollover Options
- ----------------
The existing stock options that are to be
rolled over into Parent options will preserve
the spread between the strike price and the
acquisition price and will be fully vested.
Vested rollover options will have a term of 7
years and 30 days unless terminated earlier
per Schedule A.
Puts/Calls
- ----------
Applicability: Applies to rollover shares and option shares
(including rollover option shares).
Call: Company may call shares upon any termination
of employment prior to an IPO per Schedule B.
Put: If the call is unexercised, under certain
circumstances the Executive may require the
Company to repurchase the shares per Schedule
B.
FMV: Determined in good faith by the Company's
board of directors, based upon a valuation of
the entire Company, without taking into
account any minority or illiquidity discounts,
subject to an appraisal that may be requested
by the Executive. If the Executive seeks an
appraisal, each of the Executive and the board
of director's will select one appraiser, who
shall select a third. If the valuation
determined by the appraisers is less than or
equal to 110% of the board's determination the
Executive shall pay the entire cost of the
appraisal. If such valuation is greater than
110% but less than or equal to 120%, than cost
shall be borne equally by the Company and by
the Executive. If the valuation is greater
than 120% of the board's determination, the
Company shall bear the entire cost of the
appraisal.
Cost: In the case of rollover shares and rollover
option shares, Cost is equal to the per share
price paid by Investcorp. In the case of new
options, Cost is equal to the exercise price
of such options, which shall be equal to the
per share price paid by Investcorp for options
granted at the time of the closing of the
transactions and for a period of six months
thereafter.
Other Provisions
- ----------------
2
<PAGE>
Withholding: Exercise price and tax withholding obligations
may be satisfied by having option shares
withheld.
Tag/Drag Rights: The rollover shares and option shares will
have the right to participate pro rata in a
sale of the Company and Investcorp will have
the right to require such participation. These
tag/drag rights expire upon an IPO.
Restrictions on Prior to an IPO, rollover shares and option
Transfer: shares will be subject to restrictions on
transfer with flexibility for estate planning
purposes.
Access to Trading Following an IPO: (i) The Company will file
Markets Post-IPO: an S-8 registration statement covering stock
option exercises, (ii) Rule 144 would
generally be available and (iii) management
holders of rollover shares would have
piggyback registration rights to participate
in secondary offerings subject to limitations.
IPO and Secondary Management holders of rollover shares,
Offerings: options and option shares will be subject to
customary underwriter lock-up arrangements for
the IPO and secondary offerings. Generally,
participation by senior management in the IPO
is not available.
Certain Definitions
- -------------------
Cause: Grounds for termination of executive for
"Cause": (1) conviction of a felony or plea of
guilty or nolo contendere to a felony, (2) act
---- ----------
of fraud or dishonesty which is materially
injurious to the Company, (3) willful and
continual refusal to perform duties or (4)
gross misconduct materially injurious to the
Company.
Good Reason: Grounds for termination by executive for "Good
Reason": (1) assignment of duties or position
constituting a material diminution in
executive's role, responsibilities or
authority, (2) reduction in base salary or
bonus participation opportunities, (3) demand
by the Company that Executive relocate to a
place more than a reasonable distance (to be
determined) from current location, or (4)
material breach of executive's employment
agreement by the Company.
Employment Each Executive will enter into an employment
- ---------- agreement with the Company on terms that are
Agreements not materially inconsistent with the current
- ---------- employment agreements; provided that if the
IRS asserts that any benefit payable under the
Executive's current employment agreement or
otherwise payable as a result of this
transaction (regardless of whether a
termination of employment occurs) is subject
to a parachute excise tax, the Company will
indemnify such Executive on a full gross-up
basis. The Company and each Executive will
take all reasonable steps to avoid the
imposition of such tax.
3
<PAGE>
SCHEDULE A
----------
<TABLE>
<CAPTION>
Termination Event Unvested Options Terminate Vested Options Terminate
<S> <C> <C>
Executive terminated by Immediately 30 days after terminating event/(1)/
Company for Cause
Executive quits without Good Immediately 90 days after terminating event/(1)/
Reason
Executive quits with Good Immediately/(2)/ 180 days after terminating event/(1)/
Reason
Executive terminated by the Immediately/(2)/ 180 days after terminating event/(1)/
Company without Cause
Death or disability Immediately(2) One year after terminating event/(1)/
</TABLE>
/(1)/ Subject to (2) below, the options are exercisable only to the extent
exercisable on the day of the terminating event.
/(2)/ A pro rata portion (equal to the ratio the number of days elapsed in such
year prior to termination bears to 365) of the Annual Portion for such
year will vest at the end of such year if the targets for such year are
met.
4
<PAGE>
SCHEDULE B
----------
<TABLE>
<CAPTION>
Call Provision Call Price
----------------------------------------------------------------
If Within 3 Years If After 3 Years
<S> <C> <C>
Employee terminated without FMV FMV
Cause
Employee leaves with Good FMV FMV
Reason
Employee leaves without Good Lower of Cost or FMV/(1)/ FMV
Reason
Employee is terminated for Lower of Cost or FMV/(1)/ Lower of Cost or FMV
Cause
Death, disability, retirement FMV FMV
<CAPTION>
Put Provision Put Price
---------------------------------------------------------------------------
If Within 3 Years (2 Years in the If After 3 Years (2 Years in the
case of termination without Cause) case of termination without
Cause)
<S> <C> <C>
Employee terminated without Lower of Cost or FMV/(1)/ FMV
Cause
Employee leaves with Good FMV FMV
Reason
Employee leaves without Good Reason No put FMV
Employee is terminated for Cause No put No put
Death, disability, retirement FMV FMV
</TABLE>
/(1)/Within the 1st year, it will be at Cost
5
<PAGE>
Exhibit (c)(9)
November 5, 1999
SIND Holdings, Inc.
c/o Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, New York 10166
Dear Sirs:
This will confirm my current intent to enter into appropriate documentation
implementing (a) the arrangements summarized on the attached term sheets in
connection with the consummation of the transactions contemplated by the
Agreement and Plan of Merger of even date herewith by and among Synthetic
Industries, Inc. (the "Company"), SIND Holdings, Inc. ("Holdings") and SIND
Acquisition, Inc. (the "Agreement") and (b) an equity participation by me in
Holdings having a value at least equal to 50% of the sum of my net option value
of existing Company stock options and 50% of the after-tax transaction-related
cash payments to be received by me. The equity investment in Holdings will be
through the rollover of existing stock options into new Holdings stock options
or through a combination of such rollover and investment of after-tax
transaction-related cash payments into new Holdings shares at $33 per new
Holdings share. The new Holdings rollover stock options will be granted at a
discount from the $33 per share Agreement price to preserve the aggregate spread
on each such existing rollover option.
Sincerely,
/s/ Proctor Allen
--------------------------------
Proctor Allen
Accepted:
SIND Holdings, Inc.
By /s/ Christopher J. O'Brien
-----------------------------------
<PAGE>
PROJECT POLY
OUTLINE OF KEY COMPENSATION PLANS
Bonus Plan
. Generally keep existing financial opportunity the same (except for
promotions, etc.); provided that the Board shall review with
management, on a case-by-case basis, the competitiveness of the
Company's total compensation (salary, bonus, long-term
compensation/ownership plan)
. Bonuses for senior executives generally tied to EBITDA targets -
minimum/maximum ranges consistent with current plan levels, as
modified to the extent necessary as determined on a case-by-case basis
by Investcorp and management
- 75% of bonuses tied to EBITDA targets and based upon a sliding
scale consistent with the Company's current program
- 25% of bonuses tied to alternative performance measures
(measurable or board discretion)
. 50% of eligible bonus earned at 90% of target EBITDA, with the balance
up to 100% earned pro rata up to 100% of target EBITDA; up to 125% of
eligible bonus may be earned if EBITDA is 110% or more of target
. Can be tailored by position
. EBITDA results are exclusive of reserve reversals if not in the budget
and would be adjusted for significant acquisitions or capital
infusions or accounting principle changes
Nonqualified Option Plan
. 11% of the fully diluted ownership
. 2.5% (of the 11%) of the plan left as "dry powder" for future
management, promotions, etc.; going forward, the Board shall have the
discretion to allocate remaining unallocated options
. Allocated to management based upon recommendation of CEO/President in
consultation with Investcorp
. Can be earned in 5 separate ways
- Meeting 100% of EBITDA targets on an annual basis (20%/year);
meeting at least 95% but less than 100% of annual EBITDA
targets results in vesting of one-half of options available
for vesting (i.e. 10%/year)
- Cumulative catch-up provision for any prior year misses
(applies to both 95% and 100% thresholds)
- Time-vested after 7 years
- In case of IPO, unvested options convert to time lapse options
- In case of sale of Company, unvested options vest in whole or
in part if Investcorp earns a 20% or greater fully diluted
return
. Put/call rights
. Option pool worth a total (net of option exercise cost) of $55 million
to management in year 5 based on management's projections and a 7.5x
exit multiple
Direct Side-by-Side Investment with Investcorp
. Buy-in at Investcorp's purchase price
<PAGE>
. Rollover shares
. Rollover options
- Exchange existing in-the-money options for new in-the-money
options
. Loan program to assist in additional share purchases by selected
officers
. Loan program also to be available for end of term option exercises
<PAGE>
MANAGEMENT ARRANGEMENTS/1/
--------------------------
New Stock Options
- -----------------
Number: An aggregate of 11% of fully diluted common stock,
of which 2.5% will be reserved for future grants
(as allocated by the Board of Directors in its
sole discretion) with the balance (8.5%) to be
granted at or promptly after closing.
Exercise Price: Per share price paid by Investcorp.
Term: 7 years and 30 days.
Vesting: (a) Up to 20% per year (the "Annual Portion") for
5 years, based upon achievement of specified
EBITDA performance targets. If the Company's
EBITDA performance equals or exceeds 95% of a
target in a given year but is less than 100%
of the target, one-half of the Annual Portion
for that year will vest. Options that do not
vest in any year may vest in any subsequent
year within such five-year period based upon
cumulative results.
(b) Upon an Initial Public Offering ("IPO"),
options that are unvested as of the IPO
closing date shall thereafter vest ratably at
the end of of the following three
anniversaries of the closing of the IPO. In
addition, historically we have initiated a
new option program (and granted additional
options) upon an IPO at the IPO price. (c)
(c) Upon a sale of the Company prior to an IPO
(i) up to 50% of unvested options will vest
if, in connection with such sale, Investcorp
realizes a 20% annual internal rate of return
on a fully-diluted basis, (ii) up to 75% of
unvested options will vest if, in connection
with such sale, Investcorp realizes a 25%
annual internal rate of return on a fully-
diluted basis, and (iii) up to 100% of
unvested options will vest if, in connection
with such sale, Investcorp realizes a 30%
annual internal rate of return on a fully-
diluted basis.
(d) Any options remaining unvested will vest 7
years from closing (without regard to any
performance targets).
____________________
/1/ Certain modifications, as described separately, are applicable for Leonard
Chill.
<PAGE>
Effect of Termination of Unvested options expire immediately upon
for Employment: termination of employment any reason, except
if employment is terminated by the Company
without cause, by the employee for good
reason or by reason of employee's death or
disability, in which case a pro rata portion
(equal to the ratio the number of days
elapsed in such year prior to termination
bears to 365) of the Annual Portion for such
year will vest at the end of such year if
the performance targets for such year are
met. Vested options expire per Schedule A.
Rollover Options
- ----------------
The existing stock options that are to be
rolled over into Parent options will
preserve the spread between the strike price
and the acquisition price and will be fully
vested. Vested rollover options will have a
term of 7 years and 30 days unless
terminated earlier per Schedule A.
Puts/Calls
- ----------
Applicability: Applies to rollover shares and option shares
(including rollover option shares).
Call: Company may call shares upon any termination
of employment prior to an IPO per Schedule
B.
Put: If the call is unexercised, under certain
circumstances the Executive may require the
Company to repurchase the shares per
Schedule B.
FMV: Determined in good faith by the Company's
board of directors, based upon a valuation
of the entire Company, without taking into
account any minority or illiquidity
discounts, subject to an appraisal that may
be requested by the Executive. If the
Executive seeks an appraisal, each of the
Executive and the board of director's will
select one appraiser, who shall select a
third. If the valuation determined by the
appraisers is less than or equal to 110% of
the board's determination the Executive
shall pay the entire cost of the appraisal.
If such valuation is greater than 110% but
less than or equal to 120%, than cost shall
be borne equally by the Company and by the
Executive. If the valuation is greater than
120% of the board's determination, the
Company shall bear the entire cost of the
appraisal.
Cost: In the case of rollover shares and rollover
option shares, Cost is equal to the per
share price paid by Investcorp. In the case
of new options, Cost is equal to the
exercise price of such options, which shall
be equal to the per share price paid by
Investcorp for options granted at the time
of the closing of the transactions and for a
period of six months thereafter.
Other Provisions
- ----------------
2
<PAGE>
Withholding: Exercise price and tax withholding
obligations may be satisfied by having option
shares withheld.
Tag/Drag Rights: The rollover shares and option shares will
have the right to participate pro rata in a
sale of the Company and Investcorp will have
the right to require such participation.
These tag/drag rights expire upon an IPO.
Restrictions on Transfer: Prior to an IPO, rollover shares and option
shares will be subject to restrictions on
transfer with flexibility for estate planning
purposes.
Access to Trading Markets Following an IPO: (i) The Company will file
Post-IPO: an S-8 registration statement covering stock
option exercises, (ii) Rule 144 would
generally be available and (iii) management
holders of rollover shares would have
piggyback registration rights to participate
in secondary offerings subject to
limitations.
IPO and Secondary Offerings: Management holders of rollover shares,
options and option shares will be subject to
customary underwriter lock-up arrangements
for the IPO and secondary offerings.
Generally, participation by senior management
in the IPO is not available.
Certain Definitions
- -------------------
Cause: Grounds for termination of executive
for"Cause": (1) conviction of a felony or
plea of guilty or nolo contendere to a
---------------
felony, (2) act of fraud or dishonesty which
is materially injurious to the Company, (3)
willful and continual refusal to perform
duties or (4) gross misconduct materially
injurious to the Company.
Good Reason: Grounds for termination by executive for
"Good Reason": (1) assignment of duties or
position constituting a material diminution
in executive's role, responsibilities or
authority, (2) reduction in base salary or
bonus participation opportunities, (3) demand
by the Company that Executive relocate to a
place more than a reasonable distance (to be
determined) from current location, or (4)
material breach of executive's employment
agreement by the Company.
Employment Agreements Each Executive will enter into an employment
- ---------------------
agreement with the Company on terms that are
not materially inconsistent with the current
employment agreements; provided that if the
IRS asserts that any benefit payable under
the Executive's current employment agreement
or otherwise payable as a result of this
transaction (regardless of whether a
termination of employment occurs) is subject
to a parachute excise tax, the Company will
indemnify such Executive on a full gross-up
basis. The Company and each Executive will
take all reasonable steps to avoid the
imposition of such tax.
3
<PAGE>
SCHEDULE A
----------
<TABLE>
<CAPTION>
Termination Event Unvested Options Terminate Vested Options Terminate
<S> <C> <C>
Executive terminated by Company Immediately 30 days after terminating event/(1)/
for Cause
Executive quits without Good Immediately 90 days after terminating event/(1)/
Reason
Executive quits with Good Reason Immediately/(2)/ 180 days after terminating event/(1)/
Executive terminated by the Immediately/(2)/ 180 days after terminating event/(1)/
Company without Cause
Death or disability Immediately/(2)/ One year after terminating event/(1)/
</TABLE>
/(1)/ Subject to (2) below, the options are exercisable only to the extent
exercisable on the day of the terminating event.
/(2)/ A pro rata portion (equal to the ratio the number of days elapsed in such
year prior to termination bears to 365) of the Annual Portion for such
year will vest at the end of such year if the targets for such year are
met.
4
<PAGE>
SCHEDULE B
----------
<TABLE>
<CAPTION>
Call Provision Call Price
---------------------------------------------------------------------------
<S> <C> <C>
If Within 3 Years If After 3 Years
Employee terminated without Cause FMV FMV
Employee leaves with Good Reason FMV FMV
Employee leaves without Good Reason Lower of Cost or FMV/(1)/ FMV
Employee is terminated for Cause Lower of Cost or FMV/(1)/ Lower of Cost or FMV
Death, disability, retirement FMV FMV
</TABLE>
<TABLE>
<CAPTION>
Put Provision Put Price
---------------------------------------------------------------------------
<S> <C> <C>
If Within 3 Years (2 Years in the If After 3 Years (2 Years in the
case of termination without Cause) case of termination without
Cause)
Employee terminated without Cause Lower of Cost or FMV/(1)/ FMV
Employee leaves with Good Reason FMV FMV
Employee leaves without Good Reason No put FMV
Employee is terminated for Cause No put No put
Death, disability, retirement FMV FMV
</TABLE>
(1)Within the 1st year, it will be at Cost
5
<PAGE>
Exhibit (c)(10)
November 5, 1999
SIND Holdings, Inc.
c/o Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, New York 10166
Dear Sirs:
This will confirm my current intent to enter into appropriate documentation
implementing (a) the arrangements summarized on the attached term sheets in
connection with the consummation of the transactions contemplated by the
Agreement and Plan of Merger of even date herewith by and among Synthetic
Industries, Inc. (the "Company"), SIND Holdings, Inc. ("Holdings") and SIND
Acquisition, Inc. (the "Agreement") and (b) an equity participation by me in
Holdings having a value at least equal to 50% of the sum of my net option value
of existing Company stock options and 50% of the after-tax transaction-related
cash payments to be received by me. The equity investment in Holdings will be
through the rollover of existing stock options into new Holdings stock options
or through a combination of such rollover and investment of after-tax
transaction-related cash payments into new Holdings shares at $33 per new
Holdings share. The new Holdings rollover stock options will be granted at a
discount from the $33 per share Agreement price to preserve the aggregate spread
on each such existing rollover option.
Sincerely,
/s/ Louis Ziebold
---------------------------------
Louis Ziebold
Accepted:
SIND Holdings, Inc.
By /s/ Christopher J. O'Brien
--------------------------------
<PAGE>
PROJECT POLY
- --------------------------------------------------------------------------------
OUTLINE OF KEY COMPENSATION PLANS
- --------------------------------------------------------------------------------
Bonus Plan
. Generally keep existing financial opportunity the same (except for
promotions, etc.); provided that the Board shall review with
management, on a case-by-case basis, the competitiveness of the
Company's total compensation (salary, bonus, long-term
compensation/ownership plan)
. Bonuses for senior executives generally tied to EBITDA targets -
minimum/maximum ranges consistent with current plan levels, as
modified to the extent necessary as determined on a case-by-case basis
by Investcorp and management
- 75% of bonuses tied to EBITDA targets and based upon a
sliding scale consistent with the Company's current program
- 25% of bonuses tied to alternative performance measures
(measurable or board discretion)
. 50% of eligible bonus earned at 90% of target EBITDA, with the balance
up to 100% earned pro rata up to 100% of target EBITDA; up to 125% of
eligible bonus may be earned if EBITDA is 110% or more of target
. Can be tailored by position
. EBITDA results are exclusive of reserve reversals if not in the budget
and would be adjusted for significant acquisitions or capital
infusions or accounting principle changes
Nonqualified Option Plan
. 11% of the fully diluted ownership
. 2.5% (of the 11%) of the plan left as "dry powder" for future
management, promotions, etc.; going forward, the Board shall have the
discretion to allocate remaining unallocated options
. Allocated to management based upon recommendation of CEO/President in
consultation with Investcorp
. Can be earned in 5 separate ways
- Meeting 100% of EBITDA targets on an annual basis
(20%/year); meeting at least 95% but less than 100% of
annual EBITDA targets results in vesting of one-half of
options available for vesting (i.e. 10%/year)
- Cumulative catch-up provision for any prior year misses
(applies to both 95% and 100% thresholds)
- Time-vested after 7 years
- In case of IPO, unvested options convert to time lapse
options
- In case of sale of Company, unvested options vest in whole
or in part if Investcorp earns a 20% or greater fully
diluted return
. Put/call rights
. Option pool worth a total (net of option exercise cost) of $55 million
to management in year 5 based on management's projections and a 7.5x
exit multiple
Direct Side-by-Side Investment with Investcorp
. Buy-in at Investcorp's purchase price
<PAGE>
. Rollover shares
. Rollover options
- Exchange existing in-the-money options for new in-the-money
options
. Loan program to assist in additional share purchases by selected
officers
. Loan program also to be available for end of term option exercises
<PAGE>
MANAGEMENT ARRANGEMENTS/1/
--------------------------
New Stock Options
- -----------------
Number: An aggregate of 11% of fully diluted common stock,
of which 2.5% will be reserved for future grants
(as allocated by the Board of Directors in its sole
discretion) with the balance (8.5%) to be granted
at or promptly after closing.
Exercise Price: Per share price paid by Investcorp.
Term: 7 years and 30 days.
Vesting: (a) Up to 20% per year (the "Annual Portion") for
5 years, based upon achievement of specified
EBITDA performance targets. If the Company's
EBITDA performance equals or exceeds 95% of a
target in a given year but is less than 100%
of the target, one-half of the Annual Portion
for that year will vest. Options that do not
vest in any year may vest in any subsequent
year within such five-year period based upon
cumulative results.
(b) Upon an Initial Public Offering ("IPO"),
options that are unvested as of the IPO
closing date shall thereafter vest ratably at
the end of each of the following three
anniversaries of the closing of the IPO. In
addition, historically we have initiated a new
option program (and granted additional
options) upon an IPO at the IPO price.
(c) Upon a sale of the Company prior to an IPO (i)
up to 50% of unvested options will vest if, in
connection with such sale, Investcorp realizes
a 20% annual internal rate of return on a
fully-diluted basis, (ii) up to 75% of
unvested options will vest if, in connection
with such sale, Investcorp realizes a 25%
annual internal rate of return on a fully-
diluted basis, and (iii) up to 100% of
unvested options will vest if, in connection
with such sale, Investcorp realizes a 30%
annual internal rate of return on a fully-
diluted basis.
(d) Any options remaining unvested will vest 7
years from closing (without regard to any
performance targets).
_____________________
/1/ Certain modifications, as described separately, are applicable for Leonard
Chill.
<PAGE>
Effect of Termination of Unvested options expire immediately upon
Employment: termination of employment for any reason,
except if employment is terminated by the
Company without cause, by the employee for
good reason or by reason of employee's death
or disability, in which case a pro rata
portion (equal to the ratio the number of
days elapsed in such year prior to
termination bears to 365) of the Annual
Portion for such year will vest at the end
of such year if the performance targets for
such year are met. Vested options expire per
Schedule A.
Rollover Options
- ----------------
The existing stock options that are to be
rolled over into Parent options will
preserve the spread between the strike price
and the acquisition price and will be fully
vested. Vested rollover options will have a
term of 7 years and 30 days unless
terminated earlier per Schedule A.
Puts/Calls
- ----------
Applicability: Applies to rollover shares and option shares
(including rollover option shares).
Call: Company may call shares upon any termination
of employment prior to an IPO per Schedule
B.
Put: If the call is unexercised, under certain
circumstances the Executive may require the
Company to repurchase the shares per
Schedule B.
FMV: Determined in good faith by the Company's
board of directors, based upon a valuation
of the entire Company, without taking into
account any minority or illiquidity
discounts, subject to an appraisal that may
be requested by the Executive. If the
Executive seeks an appraisal, each of the
Executive and the board of director's will
select one appraiser, who shall select a
third. If the valuation determined by the
appraisers is less than or equal to 110% of
the board's determination the Executive
shall pay the entire cost of the appraisal.
If such valuation is greater than 110% but
less than or equal to 120%, than cost shall
be borne equally by the Company and by the
Executive. If the valuation is greater than
120% of the board's determination, the
Company shall bear the entire cost of the
appraisal.
Cost: In the case of rollover shares and rollover
option shares, Cost is equal to the per
share price paid by Investcorp. In the case
of new options, Cost is equal to the
exercise price of such options, which shall
be equal to the per share price paid by
Investcorp for options granted at the time
of the closing of the transactions and for a
period of six months thereafter.
Other Provisions
- ----------------
2
<PAGE>
Withholding: Exercise price and tax withholding
obligations may be satisfied by having
option shares withheld.
Tag/Drag Rights: The rollover shares and option shares will
have the right to participate pro rata in a
sale of the Company and Investcorp will have
the right to require such participation.
These tag/drag rights expire upon an IPO.
Restrictions on Transfer: Prior to an IPO, rollover shares and option
shares will be subject to restrictions on
transfer with flexibility for estate
planning purposes.
Access to Trading Following an IPO: (i) The Company will file
an S-8 registration Markets Post-IPO:
statement covering stock option exercises,
(ii) Rule 144 would generally be available
and (iii) management holders of rollover
shares would have piggyback registration
rights to participate in secondary offerings
subject to limitations.
IPO and Secondary Management holders of rollover shares,
Offerings: options and option shares will be subject to
customary underwriter lock-up arrangements
for the IPO and secondary offerings.
Generally, participation by senior
management in the IPO is not available.
Certain Definitions
- -------------------
Cause: Grounds for termination of executive for
"Cause": (1) conviction of a felony or plea
of guilty or nolo contendere to a felony,
(2) act of fraud or dishonesty which is
materially injurious to the Company, (3)
willful and continual refusal to perform
duties or (4) gross misconduct materially
injurious to the Company.
Good Reason: Grounds for termination by executive for
"Good Reason": (1) assignment of duties or
position constituting a material diminution
in executive's role, responsibilities or
authority, (2) reduction in base salary or
bonus participation opportunities, (3)
demand by the Company that Executive
relocate to a place more than a reasonable
distance (to be determined) from current
location, or (4) material breach of
executive's employment agreement by the
Company.
Employment Each Executive will enter into an
- ----------
Agreements employment agreement with the Company on
- ----------
terms that are not materially inconsistent
with the current employment agreements;
provided that if the IRS asserts that any
benefit payable under the Executive's
current employment agreement or otherwise
payable as a result of this transaction
(regardless of whether a termination of
employment occurs) is subject to a parachute
excise tax, the Company will indemnify such
Executive on a full gross-up basis. The
Company and each Executive will take all
reasonable steps to avoid the imposition of
such tax.
3
<PAGE>
SCHEDULE A
----------
<TABLE>
<CAPTION>
Termination Event Unvested Options Terminate Vested Options Terminate
<S> <C> <C>
Executive terminated by Immediately 30 days after terminating event/(1)/
Company for Cause
Executive quits without Immediately 90 days after terminating event/(1)/
Good Reason
Executive quits with Good Immediately/(2)/ 180 days after terminating event/(1)/
Reason
Executive terminated by the Immediately/(2)/ 180 days after terminating event/(1)/
Company without Cause
Death or disability Immediately/(2)/ One year after terminating event/(1)/
</TABLE>
/(1)/ Subject to (2) below, the options are exercisable only to the extent
exercisable on the day of the terminating event.
/(2)/ A pro rata portion (equal to the ratio the number of days elapsed in such
year prior to termination bears to 365) of the Annual Portion for such
year will vest at the end of such year if the targets for such year are
met.
4
<PAGE>
SCHEDULE B
----------
<TABLE>
<CAPTION>
Call Provision Call Price
----------------------------------------------------------------
If Within 3 Years If After 3 Years
<S> <C> <C>
Employee terminated without FMV FMV
Cause
Employee leaves with Good FMV FMV
Reason
Employee leaves without Good Lower of Cost or FMV(1) FMV
Reason
Employee is terminated for Lower of Cost or FMV(1) Lower of Cost or FMV
Cause
Death, disability, retirement FMV FMV
<CAPTION>
Put Provision Put Price
-----------------------------------------------------------------------------
If Within 3 Years (2 Years in the If After 3 Years (2 Years in the
case of termination without Cause) case of termination without
Cause)
<S> <C> <C>
Employee terminated without Lower of Cost or FMV/(1)/ FMV
Cause
Employee leaves with Good FMV FMV
Reason
Employee leaves without Good No put FMV
Reason
Employee is terminated for No put No put
Cause
Death, disability, retirement FMV FMV
</TABLE>
/(1)/ Within the 1st year, it will be at Cost
5
