<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a Party other than the Registrant /X/
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Synthetic Industries,L.P.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
The Mills Law Firm
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------------------
1
<PAGE>
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
2
<PAGE>
[The Mills Law Firm letterhead]
November __, 1997
Re: Synthetic Industries, L.P. ("the Partnership")
Dear Limited Partners:
This mailing will update you about the class action lawsuits which have been
filed in Delaware and California by two of the approximately 415 limited
partners we represent and give you information on other important matters.
A SECOND COURT HAS PROHIBITED THE IMPLEMENTATION OF THE
GENERAL PARTNER'S PROPOSED PLAN
We previously reported to you that, on October 23, 1997, the Delaware Court of
Chancery issued a preliminary injunction against the proposed "Plan of
Withdrawal and Dissolution for the Partnership" ("the Proposed Plan"). ON
NOVEMBER 6, 1997, THE U.S. DISTRICT COURT FOR THE NORTHERN DISTRICT OF
CALIFORNIA ALSO RESTRAINED THE IMPLEMENTATION OF THE PROPOSED PLAN. The
District Court issued a temporary restraining order prohibiting the General
Partner and the other defendants in the California case from implementing the
Proposed Plan.
The District Court based its decision on entirely different grounds from those
supporting the injunction issued by the Delaware Chancery Court. The District
Court found that the lead plaintiff in the California case raised serious
questions regarding whether the defendants violated the Limited Partnership
Rollup Reform Act of 1993 ("the Rollup Reform Act"). In addition, the District
Court found that serious questions were raised as to whether the defendants
properly disclosed what the limited partners had to do in order to require the
Proposed Plan to be approved by two-thirds in interest of the limited partners.
Please see page 8 of the enclosed Proxy Statement for more details on the
District Court's ruling.
THE CALIFORNIA LAWSUIT ALLEGES THAT THE UNDERWRITTEN SALE
CANNOT OCCUR
On October 31, 1997, the lead plaintiff in the California case filed a Revised
Proposed First Amended and Supplemental Complaint, which contains a very
important new claim. The proposed complaint alleges that the Proposed Plan does
not provide limited partners who vote against the Plan certain
1
<PAGE>
dissenters' rights ("Dissenters' Rights") set forth in the Rollup Reform Act.
The proposed complaint further alleges that, as a result of the Proposed Plan's
failure to provide Dissenters' Rights, the major stock exchanges (such as the
New York Stock Exchange and the American Stock Exchange) and NASDAQ will be
prohibited from listing or trading the Company's stock. The proposed complaint
alleges that, consequently, the Proposed Plan's Underwritten Sale cannot take
place, and the value and liquidity of the Company's stock would be substantially
diminished if the Proposed Plan is allowed to be implemented by the courts.
Please refer to the "Dissenters' Rights / Rights of Appraisal" section of the
enclosed Proxy Statement (p. 12) for more details about these allegations.
OUR GOAL IS TO OBTAIN FULL LIQUIDITY FOR YOU AT THE HIGHEST
POSSIBLE PRICE AS SOON AS POSSIBLE
WE WISH TO EMPHASIZE THAT WE DO NOT WANT THE LIQUIDATION OF THE PARTNERSHIP TO
BE TIED UP IN A DRAWN-OUT LITIGATION -- WE WANT TO OBTAIN LIQUIDITY FOR YOU NOW
WITH THE HIGHEST POSSIBLE RETURN. Our success at stopping the Proposed Plan is
a key step toward accomplishing this goal.
We will next attempt to settle the pending lawsuits in a manner that is in the
best interests of the limited partners. However, if the defendants do not agree
to a settlement that we believe is in the best interests of the limited
partners, we intend to work together with interested limited partners in
proposing for a vote an alternative plan involving:
- Removal of the General Partner.
- Appointment of a liquidating trustee to oversee the liquidation of the
Partnership. This trustee would be charged with obtaining the highest possible
return for your investment, including using his best efforts to realize a
control premium.
The point of seeking an independent trustee is to vest the decision-making
regarding the liquidation of your investment in neutral hands. As alleged in
the lawsuits, our concern is that the current General Partner is affected by
conflicts of interest on this issue and may not be pursuing the course of action
most likely to be in YOUR best interests as a limited partner.
2
<PAGE>
The task of the liquidating trustee would be to use his best efforts to realize
a control premium for the Partnership through a change-of-control transaction
such as selling the Partnership's controlling interest in the Company (or
selling the Company as a whole) to a third party. If the liquidating trustee
were to determine that a control premium cannot be obtained, the liquidating
trustee would then PROMPTLY liquidate the Partnership in another manner
calculated to maximize the return to the limited partners. To minimize any
delay, these two options could be explored simultaneously.
We believe that such an alternative proposal would probably allow you to receive
a HIGHER return than the General Partner's Proposed Plan, because the General
Partner's Plan fails to realize a control premium for the Partnership. Our
proposal to engage in a change-of-control transaction such a sale to a single
buyer would likely, if successful, be CHEAPER than the General Partner's
proposal because it would not involve underwriting commissions. Our alternative
proposal would probably provide full liquidity SOONER than the General Partner's
Proposed Plan because, even if the Proposed Plan is implemented, some of you may
not receive full liquidity for your investment until approximately two years
after implementation commences.(*)
WE NEED YOUR SUPPORT
As alleged in the lawsuits, we believe that your interests as limited partners
on the issues regarding liquidation are different from, and in conflict with,
the interests of the General Partner. Therefore, we urge you not to sit idly by
while the General Partner opposes us in what could be a lengthy and expensive
court battle, but to affirmatively act now to protect your interests. The
history of limited partnerships involves many examples where limited partners'
interests were not well served by their general partners. In past cases handled
by our firm, when large numbers of limited partners joined together we were able
to obtain favorable results for our clients.
(*) Any such alternative proposal would require the development and filing of
proxy solicitation materials with the Securities and Exchange Commission
("SEC"), review of the proxy solicitation materials by the SEC, and approval of
the proposal by limited partners holding a majority of the limited partnership
units. Implementing these steps could involve substantial expenses and a
significant amount of time, and there is no assurance that all these steps could
be completed.
3
<PAGE>
We would like volunteers to help us with the development, presentation, and/or
financing of a limited-partner-oriented alternative proposal. We do not plan to
undertake the development of such an alternative proposal without the support
and help of limited partners like you. If you are interested in participating,
or have any comments or suggestions, please contact us.
PLEASE REVIEW THE ENCLOSED PROXY STATEMENT
We encourage you to review the enclosed Proxy Statement, which makes detailed
disclosures about us, the two class action lawsuits that two of our clients have
filed on behalf of all the limited partners, and other matters relating to the
Proposed Plan. We will stay in touch and continue to update you on new
developments. In the meantime, please feel free to call me at (415) 464-4770 if
you wish to discuss the protection of your investment in the Partnership.
Yours very truly,
/s/ Robert W. Mills
Robert W. Mills
4
<PAGE>
PROXY STATEMENT
FROM: THE MILLS LAW FIRM
300 DRAKE'S LANDING
SUITE #155
GREENBRAE, CA 94904
(415) 464-4770
TO: ALL LIMITED PARTNERS IN SYNTHETIC INDUSTRIES, L.P.
RE: SYNTHETIC INDUSTRIES, L.P.
309 LAFAYETTE ROAD
CHICKAMAUGA, GEORGIA 30707
NOVEMBER __, 1997
WHY DID WE SEND YOU THIS PROXY STATEMENT?
On October 17, 1997, we (The Mills Law Firm) sent a communication concerning the
proposed "Plan of Withdrawal and Dissolution" for Synthetic Industries, L.P.
("the Proposed Plan") to the approximately 414 limited partners in Synthetic
Industries, L.P. ("the Partnership") who have retained us. On October 31, 1997,
we sent a communication concerning the Proposed Plan to all the limited partners
in the Partnership ("the Limited Partners"). Because the Securities and
Exchange Commission ("SEC") or a court may consider the October 17 and/or the
October 31 communications to be "proxy solicitations" subject to the federal
securities regulations, we have sent you this Proxy Statement, which makes
detailed disclosures pursuant to the federal securities regulations.(1)
WHO WE ARE
- ------------------------
(1) Rule 14a-12 of the federal securities regulations provides that a
communication may be sent to security holders prior to the dissemination of a
proxy statement if the communication opposes a proxy solicitation which
advocates for a transaction and if certain other requirements are met. We filed
our October 17 and October 31 letters with the SEC as communications made
pursuant to Rule 14a-12. By doing so, and by filing and sending you this Proxy
Statement and the cover letter which accompanies it, we have not conceded and do
not concede that our October 17 letter, our October 31 letter, or this Proxy
Statement and the cover letter to it were or are "proxy solicitations" within
the meaning of the federal securities regulations.
1
<PAGE>
We are a law firm which represents investors in limited partnerships, other
types of investors, consumers, and victims of fraud throughout the nation. Our
practice consists mainly of class actions dealing with breaches of fiduciary
duty involving limited partnerships and trusts, with business fraud and
deceptive practices, with product liability, and with environmental law.
We have been retained by approximately 415 of the Limited Partners ("the
Represented Partners") -- approximately 22 percent of all the Limited Partners.
Two of the Represented Partners have filed, on behalf of all the Limited
Partners, class action lawsuits against the General Partner and the entities and
individuals which control it.
The first lawsuit, filed in state court in Delaware ("the Delaware Lawsuit"),
alleges that the defendants have breached their fiduciary duties and the
Partnership Agreement in connection with the Proposed Plan and with other
actions they have taken over the past four years. The second lawsuit, filed in
federal court in California ("the California Lawsuit"), alleges that the
defendants have violated the federal securities laws in connection with the
Proposed Plan and proxy solicitations made for the Proposed Plan. While a
motion for class certification has not yet been filed in either lawsuit, we
anticipate that a motion for class certification will be made in one or both
lawsuits.
We have a financial interest in receiving attorney's fees and costs in
connection with the California and Delaware Lawsuits and our representation of
the Represented Partners. It is likely that the amount of attorney's fees we
could be entitled to will be higher if we increase the amount of money the
Limited Partners receive in the liquidation of the Partnership. For more
details about our interest in attorney's fees and costs, please refer to the
section entitled "Our Financial Interest in this Matter" (p. 11).
ABOUT THE DELAWARE LAWSUIT
THE PROCEEDINGS IN THE DELAWARE LAWSUIT
The Delaware Lawsuit was filed by Dr. Dwight E. Wininger, a Represented Partner,
on February 11, 1997. We are working together with a Delaware law firm, Smith,
Katzenstein & Furlow LLP, in jointly prosecuting the Delaware Lawsuit on behalf
of its plaintiffs.
2
<PAGE>
The original plaintiff amended his complaint in the Delaware Lawsuit on June 11,
1997, and again on October 3, 1997. Gary T. Charlebois, a Represented Partner,
became the second named plaintiff in the Delaware Lawsuit when the Delaware
complaint was amended on October 3, 1997. On June 25, 1997, the defendants
filed a motion to dismiss the Delaware Lawsuit. This motion has not been
decided.
On September 24, 1997, the plaintiffs filed a motion for a preliminary
injunction against the Proposed Plan. On October 23, 1997, THE DELAWARE
CHANCERY COURT GRANTED THE PLAINTIFFS' MOTION FOR A PRELIMINARY INJUNCTION, AND
ENJOINED THE DEFENDANTS FROM TAKING ANY ACTION TO IMPLEMENT THE PROPOSED PLAN.
The Chancery Court ruled on October 23 that the plaintiffs are probably correct
on the Delaware Lawsuit's claims that the Proposed Plan violates the Partnership
Agreement ("the Agreement"). The Chancery Court held that the Proposed Plan
probably violates rights which each Limited Partner has under the Agreement to
receive the same distributions (on a PRO RATA basis relative to the Limited
Partner's original investment) as all other Limited Partners.
The Chancery Court also ruled on October 23 that the plaintiffs are probably
correct on the Delaware Lawsuit's claims that the proposed amendments to the
Agreement necessary for implementation of the Proposed Plan cannot be validly
adopted unless an opinion of special counsel is obtained. The Agreement
provides that this opinion of special counsel must state that the proposed
amendments are legal, would not subject any Limited Partner to liability as a
general partner, and would not alter the Partnership's status for tax purposes.
The Agreement also provides that this opinion of special counsel must be
approved by a majority in interest of the Limited Partners.
The plaintiffs had also argued that the defendants were trying to unlawfully
coerce Limited Partners into voting for the Proposed Plan. The proxies sent out
by the General Partner on September 19, 1997 represented that Limited Partners
had to vote for the Proposed Plan in order to participate in the Proposed Plan's
Underwritten Sale. After the plaintiffs alleged that the Proposed Plan was
unlawfully coercive because of this voting requirement and for other reasons,
the defendants sent out a letter on September 26, 1997 which stated that Limited
Partners did not have to vote for the Proposed Plan in order to participate in
the Underwritten Sale. However, on October 10, 1997, the defendants' proxy
solicitation agent again sent out the
3
<PAGE>
original proxies, which represented that Limited Partners did have to vote for
the Proposed Plan in order to participate in the Underwritten Sale. In
response, on October 16, 1997, the plaintiffs filed a brief renewing their
argument that this voting requirement was unlawfully coercive. The defendants
responded on October 17 by invalidating all proxies they had previously received
and sending out a letter and a revised proxy which stated that Limited Partners
did not have to vote for the Proposed Plan in order to participate in the
Underwritten Sale. On October 23, the Chancery Court concluded that the
plaintiffs' other arguments that the Proposed Plan was unlawfully coercive were
not persuasive.
While the Chancery Court enjoined the defendants from taking any action to
implement the Proposed Plan, the Chancery Court did not prohibit the defendants
from continuing to solicit proxies or holding the special meeting which took
place on November 7, 1997 ("the Special Meeting"). Defendants have appealed the
Chancery Court's decision to the Delaware Supreme Court. The Delaware Supreme
Court has scheduled oral argument on the defendants' appeal for December 2,
1997.
We believe that the Chancery Court's ruling will probably be upheld. However,
as with any decision by a trial court, there is a possibility that the decision
will be reversed.
THE CLAIMS OF THE DELAWARE LAWSUIT
The defendants deny and oppose the allegations of the Delaware Lawsuit. As
discussed above, the Chancery Court has ruled that the plaintiffs are probably
correct on the Delaware Lawsuit's claims that the Proposed Plan violates the
Partnership Agreement, but THE CHANCERY COURT HAS NOT YET RULED ON THE VALIDITY
OF MOST OF THE OTHER ALLEGATIONS OF THE DELAWARE LAWSUIT. The only rulings made
by the Chancery Court relating to the merits of claims in the Delaware Lawsuit
were the rulings made on October 23, 1997, which are described above. The
central allegations of the Delaware Lawsuit that have not yet been ruled on are
that:
- The defendants have breached their fiduciary duties to the Limited
Partners by failing to adequately market the Partnership's controlling interest
in Synthetic Industries, Inc. ("the Company") as a block and to explore
transactions which could realize a control premium for the Partnership, such as
transactions involving a sale of the controlling interest to a single buyer.
(Please refer to our October 31 letter for more details about this claim.)
4
<PAGE>
- The individual defendants -- Leonard Chill, Ralph Kenner, W. Wayne
Freed, W. Gardner Wright, and Jon Beckman (collectively, "Management") -- have
conflicts of interest. (The members of Management own and control the General
Partner. Four of them also have executive positions with the Company which pay
them substantial salaries, bonuses, and benefits, and the fifth receives
$125,000 per year as a consultant to the Company. The Delaware Lawsuit alleges
that Management has incentives not to explore transactions which could involve a
change of control of the Company and which could thereby realize a control
premium for the Partnership, because such a transaction could cause the members
of Management to lose their lucrative positions with the Company. The Delaware
Lawsuit also alleges that defendants Chill, Kenner, Freed, and Wright have
fiduciary duties to the minority shareholders in the Company which actually or
potentially conflict with their fiduciary duties to the Limited Partners.
Please refer to our October 31 letter for more about this claim.)
- The defendants breached their fiduciary duties to the Limited Partners
by causing the Partnership to approve the granting of stock options to the
members of Management and to other officers and directors of the Company at an
exercise price of $10.72 per share. (On November __, 1997, the Company's stock
closed at __ per share.)
- The defendants breached their fiduciary duties to the Limited Partners
by causing the Company to grant defendants Chill, Kenner, Freed, and Wright
employment agreements with lucrative "golden parachute" provisions which would
entitle the four men to receive lump sum payments in excess of twice their
annual salaries should they be terminated in connection with a change of control
of the Company.
- The defendants breached their fiduciary duties to the Limited Partners
by attempting to sell all the Partnership's stock in the Company in a public
offering in August 1996 prior to the announcement of significantly increased
Company earnings. (This proposal was abandoned after over ten percent in
interest of the Limited Partners, with our assistance, requested a Partnership
meeting to vote on the proposal.)
- The defendants breached their fiduciary duties to the Limited Partners
by conducting a public offering in November 1996 of newly-issued Company stock
at $13 per
5
<PAGE>
share, prior to the announcement of significantly increased Company earnings
which caused the stock price to rise. (The Delaware Lawsuit alleges that this
public offering, because of its timing, unfairly diminished the value of the
Partnership's stock in the Company.)
RELIEF REQUESTED IN THE DELAWARE LAWSUIT
The main remedies requested by the Delaware Lawsuit are:
- Removal of the General Partner.
- Dissolution of the Partnership.
- Appointment of a liquidating trustee charged with ensuring that the
Limited Partners receive the highest possible return for their investment upon
dissolution.
- An order requiring the defendants to disgorge any profits they may
receive through their stock options or the "golden parachute" provisions of
their employment agreements.
- An injunction against the Proposed Plan.
- A declaratory judgment stating, among other things, that the Proposed
Plan would violate the Partnership Agreement and that the defendants' fiduciary
duties require them to obtain the highest possible return for the Limited
Partners in the liquidation of the Partnership.
- Compensatory damages.
- An award of costs of suit, including attorney's fees and expenses.
HOW TO GET MORE INFORMATION ABOUT THE DELAWARE LAWSUIT
If you want to know more details about the Delaware Lawsuit, we will send you,
upon request and free of charge, a copy of the complaint in the Delaware
Lawsuit, and a copy of the transcript of the Chancery Court's October 23 ruling.
ABOUT THE CALIFORNIA LAWSUIT
THE PROCEEDINGS IN THE CALIFORNIA LAWSUIT
6
<PAGE>
The California Lawsuit was filed by Dr. Dwight E. Wininger, a Represented
Partner, on May 1, 1997, before the U.S. District Court for the Northern
District of California ("the District Court"). In its initial phase, the
California Lawsuit alleged that the defendants violated the federal securities
laws by advocating for the Proposed Plan, in advance of the dissemination of a
proxy statement, in a letter dated March 21, 1997 and a press release dated June
9, 1997. On May 23, 1997, the plaintiff moved for a preliminary injunction to
remedy these alleged violations.
On August 4, 1997, the District Court issued an order which decided the May 23
motion for a preliminary injunction. The District Court ruled that the
plaintiff demonstrated a likelihood of success on the merits on the California
Lawsuit's claims that the defendants violated the federal securities laws in
connection with their March 21 letter and their June 9 press release. The
District Court's August 4 order stated that "Defendants made statements that are
probably prohibited by SEC regulations." However, the District Court denied the
May 23 motion for a preliminary injunction, ruling that the equities weighed
against granting injunctive relief as of August 4.
On August 19, 1997, the District Court appointed plaintiff Wininger as lead
plaintiff and appointed us as class counsel, though the District Curt stated
that these appointments are subject to reconsideration at the time class
certification is determined. On September 19, 1997, the lead plaintiff filed a
motion for partial summary judgment that defendants violated federal securities
regulations in connection with their March 21 letter and their June 9 press
release.
On October 1, 1997, the lead plaintiff filed a motion for a temporary
restraining order and a preliminary injunction to prohibit the defendants from
implementing the Proposed Plan, holding the Special Meeting, or continuing to
solicit proxies for the Proposed Plan. This motion also requested expedited
discovery. On October 1, the lead plaintiff also filed an EX PARTE motion to
amend and supplement the California Lawsuit's complaint.
On October 15, 1997, in the California Lawsuit, three Limited Partners, with the
aid of another law firm, filed a motion to intervene in the California Lawsuit
and a motion for a temporary restraining order. The latter motion requested
that the Limited Partners be given at least 120 days to obtain an opinion of
counsel. The effect of such an opinion of counsel would be to require the
Proposed Plan to
7
<PAGE>
be approved by two-thirds in interest of the Limited Partners.
On October 15, 1997, the District Court issued an order ruling that good cause
did not appear to amend and supplement the California Lawsuit's complaint EX
PARTE and that the lead plaintiff's motion to amend and supplement the complaint
was denied without prejudice to being refiled as a regularly scheduled motion.
On October 31, 1997, the lead plaintiff renewed, as a regularly scheduled
motion, his motion to amend and supplement the complaint, and the lead plaintiff
filed a revised proposed first amended and supplemental complaint.
ON NOVEMBER 6, 1997, THE DISTRICT COURT ISSUED A TEMPORARY RESTRAINING ORDER
PROHIBITING THE DEFENDANTS FROM IMPLEMENTING THE PROPOSED PLAN. The District
Court did not, however, enjoin the defendants from proceeding with the Special
Meeting, meaning that the lead plaintiff's motion for a temporary restraining
order was granted in part and denied in part. The District Court's order stated
that the District Court will consider whether to issue a preliminary injunction
"if it becomes clear that the question is not moot, that is, the Court will
consider whether to issue an injunction if the Proposed Plan is approved at the
Special Meeting and the preliminary injunction issued by the Delaware Chancery
Court is lifted."
The District Court found that the lead plaintiff raised at least two serious
questions. First, the District Court found that the lead plaintiff raised
serious questions as to whether the defendants properly disclosed what the
Limited Partners had to do in order to require the Proposed Plan to be approved
by two-thirds in interest of the Limited Partners.
Second, the District Court found that the lead plaintiff raised serious
questions regarding whether the Proposed Plan is a "roll-up transaction"
governed by the Limited Partnership Rollup Reform Act of 1993 ("the Rollup
Reform Act"). The District Court noted that one of the requirements of the
Rollup Reform Act is giving Limited Partners at least 60 days to vote on a
proposed transaction, and that you were given less than 60 days to decide how to
vote on the Proposed Plan.
In issuing a temporary restraining order, the District Court considered the
papers filed by the three Limited Partners seeking to intervene in the
California Lawsuit, though the District Court did not decide their motion to
intervene. On
8
<PAGE>
November 14, 1997, the District Court issued an order requesting additional
briefing relating to the Rollup Reform Act and scheduled a hearing on the lead
plaintiff's motion for a preliminary injunction for December 5, 1997.
The lead plaintiff's motion for partial summary judgment is also scheduled to be
heard on December 5, 1997. On November 14, 1997, the parties stipulated that
the lead plaintiff's revised proposed first amended and supplemental complaint
would be filed and deemed effective as of December 5, 1997.
THE CLAIMS OF THE CALIFORNIA LAWSUIT
The defendants deny and oppose the allegations of the California Lawsuit. THE
DISTRICT COURT HAS NOT YET RULED ON THE VALIDITY OF MOST OF THE ALLEGATIONS OF
THE CALIFORNIA LAWSUIT. The only rulings made by the District Court relating to
the merits of claims in the California Lawsuit were the court's August 4 and
November 6 orders, which are described above. The central allegations of the
California Lawsuit are that:
- Because the defendants' Proposed Plan does not provide to Limited
Partners the dissenters' rights described in the Rollup Reform Act, major stock
exchanges (such as the New York Stock Exchange and the American Stock Exchange)
and the NASDAQ will be prohibited from listing or trading the Company's stock.
(The California Lawsuit alleges that, as a result, the Underwritten Sale cannot
be implemented, and the value and liquidity of the Company's stock will be
substantially diminished if the courts allow the Proposed Plan to proceed.)
- Defendants failed to adequately disclose their conflicts of interest
to the Limited Partners.
- Defendants failed to disclose that the Partnership could receive a
control premium by engaging in a transaction involving a sale or other block
transfer of its controlling interest in the Company.
- Defendants failed to adequately disclose that, under the Proposed
Plan, the underwriters of the Underwritten Sale would have an option to purchase
up to 450,000 shares of newly issued Company stock and sell these shares in the
Underwritten Sale.
- Defendants violated the Rollup Reform Act by not giving you at least
60 days to vote on the Proposed Plan.
9
<PAGE>
- Defendants failed to disclose what the Limited Partners had to do in
order to require the Proposed Plan to be approved by two-thirds in interest of
the Limited Partners.
- Defendants falsely represented that upon the liquidation and
termination of the Partnership, after a priority return is reached, the General
Partner would be entitled to 100% of the profits of the Partnership until the
ratio of the aggregate capital accounts of all partners reached 30% for the
General Partner and 70% for the Limited Partners. (The California Lawsuit
alleges that the General Partner has no right to receive 100% of the profits of
the Partnership at any time and only has the right to receive 30% of the profits
of the Partnership after the priority return is reached.)
- Defendants violated the federal securities laws by making numerous
false and misleading statements and failing to disclose many material facts
(in addition to the alleged nondisclosures described above) in the proxy
solicitations they sent to you on or after September 19, 1997.
- Defendants violated the federal securities laws by advocating in
favor of the Proposed Plan, prior to disseminating a proxy statement, in
their March 21 letter and their June 9 press release.
RELIEF REQUESTED IN THE CALIFORNIA LAWSUIT
The main remedies requested by the California Lawsuit are:
- An injunction against the Proposed Plan.
- A declaratory judgment stating that the defendants have violated the
federal securities laws.
- A declaratory judgment stating that the Proposed Plan is a "roll-up
transaction" within the meaning of the Rollup Reform Act and the regulations
promulgated pursuant to that Act.
- Damages, as according to proof.
- An award of costs of suit, including attorney's fees and expenses.
10
<PAGE>
HOW TO GET MORE INFORMATION ABOUT THE CALIFORNIA LAWSUIT
If you wish, you can obtain more details about the California Lawsuit through
the internet by going to http://securities.stanford.edu/cases/si_mgt.html. In
addition, upon request and free of charge, we will mail you a copy of the
revised proposed first amended and supplemental complaint in the California
Lawsuit, a copy of the District Court's August 4 order, and a copy of the
District Court's November 6 order.
PREPARATION AND FINANCING OF THIS PROXY STATEMENT
This Proxy Statement is from us (The Mills Law Firm), not from the Partnership
or the General Partner. We (The Mills Law Firm) paid for the cost of preparing
and mailing this Proxy Statement, the cover letter accompanying it, our October
17 letter, and our October 31 letter.
OUR FINANCIAL INTEREST IN THIS MATTER
In connection with our representation of the Represented Partners (including our
representation of Represented Partners in the Delaware Lawsuit, the California
Lawsuit, and/or with respect to the preparation and dissemination of
communications to the Limited Partners), we may receive attorney's fees and
reimbursement for the costs we incur relating to such representation. The costs
for which we may be reimbursed may include the costs incurred in connection with
the preparation and dissemination of our October 17 letter, our October 31
letter, this Proxy Statement, and the accompanying materials. We may receive
attorney's fees and costs through an award of fees and costs by a court or based
on contingency fee agreements we have with the other Represented Partners.
We have a financial incentive to increase the return you receive for your
investment as much as possible, because doing so would be likely to increase the
amount of attorney's fees we would be entitled to. The contingency fee
agreements between us and the Represented Partners provide that our attorney's
fees go up in proportion to the amount the Represented Partners receive in the
liquidation of the Partnership. Similarly, in class actions, courts often, but
not always, award attorney's fees in proportion to the benefit generated by the
attorneys on behalf of the class.
Neither The Mills Law Firm, nor any of its attorneys or other employees, own any
Units in the Partnership. Neither
11
<PAGE>
The Mills Law Firm, nor any of its attorneys or other employees, have any
financial interest relating to the Partnership other than the interest in
attorney's fees and costs disclosed above.
THE VOTE ON THE PROPOSED PLAN
The Special Meeting of the Partnership at which the Proposed Plan was voted on
occurred on November 7, 1997, at 10:00 a.m., at the offices of Synthetic
Industries in Chickamauga, Georgia. The Special Meeting had originally been
scheduled for October 24, 1997, and was postponed to November 7, 1997.
According to the General Partner, 70.72% of the outstanding limited partnership
units were voted in favor of the Proposed Plan, 13.53% were voted against the
Proposed Plan, and 0.61% abstained. The California Lawsuit alleges, as
described in more detail in the next section, that the affirmative vote received
was insufficient to satisfy dissenters' rights requirements of the Rollup Reform
Act because less than 75 percent of the outstanding units were voted in favor of
the Proposed Plan.
DISSENTERS' RIGHTS / RIGHTS OF APPRAISAL
The Partnership Agreement and Delaware law do not give Limited Partners any
rights of appraisal or similar rights of dissenters with respect to the Proposed
Plan. However, the California Lawsuit alleges that the Limited Partnership
Rollup Reform Act of 1993 ("the Rollup Reform Act") will effectively prevent the
Proposed Plan's Underwritten Sale from proceeding because the Proposed Plan
fails to provide certain dissenters' rights to Limited Partners who vote against
the Proposed Plan.
The Rollup Reform Act requires all registered national securities exchanges -
such as the New York Stock Exchange ("the NYSE") and the American Stock Exchange
("the AMEX") - to adopt rules prohibiting the exchanges from listing any
security issued in a roll-up transaction unless the transaction provides the
dissenters' rights enumerated in the Rollup Reform Act ("Dissenters' Rights").
Similarly, the Rollup Reform Act requires all registered national securities
associations, such as the National Association of Securities Dealers ("the
NASD"), to adopt rules prohibiting their members from participating in roll-up
transactions where Dissenters' Rights are not provided. Moreover, the Reform
Act requires registered national securities associations to adopt rules
prohibiting the quotation on automated interdealer quotation systems which are
sponsored by registered national securities associations (such as the
12
<PAGE>
NASDAQ, which is sponsored by the NASD) of securities issued in roll-up
transactions where Dissenters' Rights were not provided.
The rules required by the Rollup Reform Act have been adopted by the NYSE, the
AMEX, numerous other major stock exchanges (including the Chicago Stock
Exchange, the Cincinnati Stock Exchange, the Pacific Stock Exchange, the Chicago
Board Options Exchange, the Boston Stock Exchange, and the Philadelphia Stock
Exchange), and the NASD. Therefore, unless Dissenters' Rights are provided, the
NYSE, the AMEX, and other registered national securities exchanges are not
permitted to list securities issued in a roll-up transaction, the NASDAQ is
prohibited from providing quotes for such securities, and broker/dealers who are
members of a registered national securities association such as the NASD are not
permitted to participate in the roll-up transaction.
The Dissenters' Rights which must thus effectively be provided under the Rollup
Reform Act are that limited partners who vote against a roll-up transaction must
be given one of the following rights:
(i) an appraisal and compensation;
(ii) retention of a security under substantially the same terms
and conditions as the original issue;
(iii) approval of the limited partnership rollup transaction by
not less than 75 percent of the outstanding securities of each
of the participating limited partnerships;
(iv) the use of a committee of limited partners that is
independent . . . of the general partner or sponsor, that has
been approved by a majority of the outstanding units of each of
the participating limited partnerships, and that has such
authority as is necessary to protect the interest of limited
partners, including the authority to hire independent advisors,
to negotiate with the general partner or sponsor on behalf of
the limited partners, and to make a recommendation to the
limited partners with respect to the proposed transaction; or
(v) other comparable rights that are prescribed by rule [of the
registered national securities exchange or registered national
securities association trading the security] and that are
designed to protect dissenting limited partners.
13
<PAGE>
The California Lawsuit alleges that the Proposed Plan is a roll-up transaction
which is subject to the Rollup Reform Act. The California Lawsuit further
alleges that the Proposed Plan does not provide Dissenters' Rights because less
than 75 percent of the outstanding limited partnership units were voted in favor
of the Proposed Plan and none of the other options set forth in the Rollup
Reform Act for providing Dissenters' Rights were satisfied.
The California Lawsuit alleges that, as a result, THE PROPOSED PLAN'S
UNDERWRITTEN SALE CANNOT TAKE PLACE, since it would require the participation of
the NASD and the major stock exchanges. The California Lawsuit also alleges
that, due to the Rollup Reform Act, IMPLEMENTATION OF THE PROPOSED PLAN WOULD
CAUSE THE COMPANY'S STOCK - the stock that would be distributed in the Proposed
Plan's Dissolution phase - TO NO LONGER BE TRADED OR LISTED ON THE NYSE, THE
AMEX, THE OTHER MAJOR EXCHANGES, AND THE NASDAQ.
ADDITIONAL INFORMATION
If you would like to discuss your investment in the Partnership, please do not
hesitate to contact us at (415) 464-4770. Also, additional information relating
to the Proposed Plan, the Company, and the Partnership appears in the Joint
Proxy Statement and Prospectus sent to you by the General Partner on September
19, 1997.
/s/ Robert W. Mills
-------------------
(Robert W. Mills)
14
