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UNITED STATES
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
(Amendment No. 1)*
SYNTHETIC INDUSTRIES L.P.
(Name of Subject Company)
MERCER ACQUISITION LLC
(Bidder)
UNITS OF LIMITED PARTNERSHIP INTEREST
(Title of Class of Securities)
Not Applicable
(CUSIP Number of Class of Securities)
Mark S. Britton
Connie R. Collingsworth
Preston Gates & Ellis LLP
701 Fifth Avenue, Suite 5000
Seattle, Washington 98104
(206) 623-7580
(Name, Address and Telephone Number of Persons Authorized to Receive
Notices and Communications on behalf of Bidder)
CALCULATION OF FILING FEE
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Transaction Valuation(1) Amount of filing fee
------------------------------------- ---------------------------------
$2,000,000.00 $400.00
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(1) For purposes of calculating the filing fee only. This calculation assumes
the purchase of 40 Units at a purchase price of $50,000 per Unit in the
partnership. The amount of the filing fee, calculated in accordance with
Regulation 0-11 of the Securities and Exchange Act of 1934, as amended, equals
1/50 of one percent of the value of units assumed to be purchased.
/X/ Check box if any part of the fee is offset as provided by Rule
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: $400.00
Form or Registration No.: 005-56229
Filing Party: Mercer Acquisition LLC
Date Filed: May 4, 1999
NOTE: The remainder of this cover page is only to be completed if this Schedule
14D-1 (or amendment thereto) is being filed, inter alia, to satisfy the
reporting requirements of section 13(d) of the Securities Exchange Act of 1934.
See General Instructions D, E, and F to Schedule 14D-1.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter the
disclosure provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
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CUSIP No.: Not applicable.
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1 NAME OF REPORTING PERSON
Mercer Acquisition LLC
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
91-1768846
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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 SOURCE OF FUNDS
WC
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5 CHECK 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
Washington
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7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
39.625 Units
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8 CHECK IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES [ ]
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9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
4.95%
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10 TYPE OF REPORTING PERSON
CO
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AMENDMENT NO. 1 TO SCHEDULE 14D-1
This Amendment No. 1 amends the Tender Offer Statement on Schedule 14D-1,
filed by Mercer Acquisition LLC, a Washington Limited Liability Company (the
"Purchaser") with the Securities and Exchange Commission on May 4, 1999,
relating to the offer by the Purchaser to purchase up to 40 units of limited
partnership interests ("Units") of Synthetic Industries Limited Partnership, a
Delaware limited partnership, upon the terms and subject to the conditions set
forth in the Purchaser's Offer to Purchase dated May 4, 1999, and the related
Agreement of Sale, to include the information set forth below. Terms not
otherwise set forth below shall have the meanings ascribed to them in the
Schedule 14D-1 and the Offer to Purchase.
ITEM 1. SECURITY AND SUBJECT COMPANY
(b) The information set forth in the "Introduction" of the Offer to
Purchase as amended by Supplement No. 1 is incorporated herein by reference.
(c) The information set forth in the "Introduction" and Section 7 ("Purpose
and Effects of the Offer") of the Offer to Purchase as amended by Supplement No.
1 is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND
(a)-(d) and (g) The information set forth in the "Introduction," Section 10
("Certain Information Concerning the Purchaser"), Section 11 ("Source and Amount
of Funds") and Schedule 1 of the Offer to Purchase as amended by Supplement No.
1 is incorporated herein by reference.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER
(a)-(g) The information set forth in the "Introduction," Section 7
("Purpose and Effects of the Offer") and Section 8 ("Future Plans") of the Offer
to Purchase as amended by Supplement No. 1 is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY
(b) Between April 13, 1998 and December 30, 1998, via three consecutive
offer letters, the Purchaser purchased an aggregate of 39.625 Units, or 4.95% of
the total Units outstanding, in the following amounts and prices: 5.75 Units for
$80,000 per Unit, 26.875 Units for $60,000 per Unit and 7 Units for $50,000 per
Unit. The investors who tendered their Units to the Purchaser for $60,000 and
$50,000 per Unit paid all agency commissions associated with their respective
sale.
After acquiring the foregoing shares, the Purchaser was advised by legal
counsel that it may have violated Regulation 14D as promulgated under the
Securities Exchange Act of 1934. The Purchaser accordingly sent an offer of
rescission to all investors who sold Units to the Purchaser, disclosing that the
Purchaser may have violated the securities laws and setting forth
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the procedure for rescission. Mercer's rescission offer was accomplished by
sending a letter via first class mail to each of the individuals or entities
from whom Mercer purchased the Units. Included with the letter were the
Partnership's Forms 10-K and 10-Q dating back to September 30, 1997.
Mercer mailed this letter on February 17, 1999. By the terms of the letter,
the rescission offer expired at midnight, Pacific Standard Time, on March 18,
1999. Mercer offered to return the Units to investors, in exchange for the price
which Mercer paid for the Units, less any commissions paid by the investor to
the transfer agent at the time of the original sale. For example, if Mercer
purchased one Unit from an investor for $50,000 per Unit, and in so doing the
investor paid a commission to the transfer agent of $1,125, Mercer offered to
return the Unit in exchange for $48,875.
In making the rescission offer, Mercer relied on Section 4(1) of the
Securities Act of 1933, as amended. Mercer relied on this exemption after
consulting both Barbara Jacobs of the SEC's Office of Small Business and Laurie
Green of the SEC's Office of Mergers and Acquisitions. No investors accepted the
offer of rescission.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS
The Purchaser's unaudited balance sheet as of March 31, 1999 is attached as
Exhibit A to the Offer to Purchase as amended by Supplement No. 1. Audited
financial statements are not available or obtainable without unreasonable cost
or expense because the Purchaser is not subject to the periodic requirements of
the Securities Exchange Act of 1934 and, therefore, does not have current
audited financial statements. The time and expense associated with having the
Purchaser's financial statements audited would be unduly burdensome, as well as
potentially negate the feasibility of the Offer.
ITEM 10. ADDITIONAL INFORMATION
(b) The information set forth in the "Introduction," Section 7 ("Purpose
and Effects of the Offer") and Section 13 ("Certain Legal Matters and Regulatory
Approvals") of the Offer to Purchase as amended by Supplement No. 1 is
incorporated herein by reference.
(f) Reference hereby is made to the Offer to Purchase as amended by
Supplement No. 1 and the related Agreement of Sale, Mercer's Press Release
relating to the Offer, and Mercer's letter to Unit Holders dated May 27, 1999,
copies of which have been previously filed or are attached hereto as Exhibits
(a)(3)-(5) which are incorporated in their entirety herein by
reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS
(a)(1) Offer to Purchase, dated May 4, 1999. Previously filed on
May 4, 1999, and incorporated herein by reference.
(a)(2) Agreement of Sale. Previously filed on May 4, 1999, and
incorporated herein by reference.
(a)(3) Supplement No. 1 dated May 27, 1999 to Offer to Purchase
(a)(4) Press Release.
(a)(5) Form of letter from Purchaser to Unit Holders, dated May 27,
1999.
(b)-(e) Not applicable.
(f) See Exhibits (a)(1)-(5).
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SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated: May 27, 1999 MERCER ACQUISITION LLC
/s/ Jennifer Sabelhaus
------------------
By: Jennifer Sabelhaus
------------------
its Manager
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<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT NO. DESCRIPTION
- -------------------- --------------------------------------------------
<S> <C>
(a)(1) Offer to Purchase, dated May 4, 1999. Previously filed
on May 4, 1999, and incorporated herein by reference.
(a)(2) Agreement of Sale. Previously filed on May 4, 1999,
and incorporated herein by reference.
(a)(3) Supplement No. 1 dated May 27, 1999 to Offer to
Purchase
(a)(4) Press Release.
(a)(5) Form of letter from Purchaser to Unit Holders, dated
May 27, 1999
(b) Not applicable.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f) See Exhibits (a)(1)-(5).
</TABLE>
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SUPPLEMENT NO. 1 DATED MAY 27, 1999 TO OFFER TO
PURCHASE DATED MAY 4, 1999
The Offer to Purchase Dated May 4, 1999 is supplemented by the following:
COVER PAGE
THE COVER PAGE IS AMENDED TO READ AS FOLLOWS:
OFFER TO PURCHASE FOR CASH
UP TO 40 UNITS OF LIMITED PARTNERSHIP INTERESTS
OF
SYNTHETIC INDUSTRIES L.P.
AT
$50,000 PER UNIT WITHOUT INTEREST, LESS (I) TRANSFER FEES IN THE AMOUNT OF
$3,750 PER UNIT AND (II) THE AMOUNT OF ANY CASH DISTRIBUTIONS
DECLARED OR PAID WITH RESPECT TO THE UNITS AFTER MAY 4, 1999
BY
MERCER ACQUISITION LLC
THE OFFER, WITHDRAWAL RIGHTS AND PRORATION PERIOD
WILL EXPIRE AT 12:00 MIDNIGHT, EASTERN TIME,
ON JUNE 4, 1999, UNLESS THE OFFER IS EXTENDED.
Mercer Acquisition LLC, a Washington limited liability company (the
"Purchaser" or "Mercer"), hereby offers to purchase up to 40 units of limited
partnership interests including any rights attributable to claims, damages,
recoveries, including recoveries from any class action lawsuits, and causes of
action accruing to the ownership of such units of limited partnership interests
("Units") in Synthetic Industries, L.P., a Delaware limited partnership (the
"Partnership"), at a purchase price of $50,000 per Unit, without interest, less
(i) transfer fees in the amount of $3,750 per Unit, and (ii) the amount of any
cash distributions declared or paid, including any cash return of capital, if
any, with respect to the Units after May 4, 1999, upon the terms and subject to
the conditions set forth in this Offer to Purchase (the "Offer to Purchase") and
in the related Agreement of Sale, as each may be supplemented or amended from
time to time (which together constitute the "Offer").
The Offer applies to whole and fractional Units. The purchase price
and transfer fees for fractional Units will be adjusted according to the
percentage of a full Unit represented by the fractional Unit. For example the
purchase price of a 1/2 Unit will be $25,000 (1/2 x $50,000) less transfer fees
in the amount of $1,875 (1/2 x $3,750), and less the amount of any cash
distributions declared or paid with respect to the 1/2 Unit after May 4, 1999.
The 40 Units sought to be purchased pursuant to the Offer represent, to the best
knowledge of the Purchaser, approximately 5% of the Units outstanding as of the
date of the Offer.
THE OFFER TO PURCHASE IS NOT CONDITIONED UPON THE VALID TENDER OF ANY
MINIMUM NUMBER OF UNITS. IF MORE THAN 40 UNITS ARE VALIDLY TENDERED AND NOT
WITHDRAWN, THE PURCHASER WILL ACCEPT FOR PURCHASE UP TO 40 OF THE TENDERED
UNITS, ON A PRO RATA BASIS, SUBJECT TO THE TERMS AND CONDITIONS HEREIN, SEE
"OFFER TO PURCHASE SECTION 12. CERTAIN CONDITIONS OF THE OFFER." A HOLDER OF
UNITS ("UNIT HOLDER") MAY TENDER ANY OR ALL UNITS OWNED BY SUCH UNIT HOLDER. IF
NOT MORE THAN 40 UNITS ARE VALIDLY
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TENDERED AND NOT PROPERLY WITHDRAWN, THE PURCHASER, UPON THE TERMS AND SUBJECT
TO THE TERMS AND CONDITIONS OF THE OFFER, WILL ACCEPT FOR PAYMENT ALL SUCH UNITS
SO TENDERED.
Any Unit Holder desiring to tender any or all of his/her Units should
complete and sign the Agreement of Sale in accordance with the instructions in
the Agreement of Sale and mail or deliver a fully executed original of the
Agreement of Sale along with any other required documents to Chase Manhattan
Trust Company, National Association ("Depositary") at 1301 5th Avenue, Suite
3410, Seattle, WA 98101. If you need any help in completing the Agreement of
Sale, please call the Depositary at (206) 903-4906.
The Purchaser has retained D.F. King & Co. (the "Information Agent")
to solicit responses to and answer any questions regarding this Offer. You may
reach the Information Agent at (800) 488-8075. Additionally, any requests for
assistance or additional copies of this Offer to Purchase or the Agreement of
Sale may be directed to Jennifer Sabelhaus, Mercer's Manager, at (800) 207-4698.
THE INTRODUCTION SECTION OF THE OFFER TO PURCHASE IS AMENDED TO READ AS FOLLOWS:
INTRODUCTION
Mercer hereby offers to purchase up to 40 Units at a purchase price
(the "Purchase Price") of $50,000 per Unit, without interest, less (i) transfer
fees in the amount of $3,750 per Unit, and (ii) the amount of any cash
distributions declared or paid, including any cash return of capital, if any,
with respect to the Units after May 4, 1999 (collectively hereinafter referred
to as "Distributions"), upon the terms and subject to the conditions set forth
in this Offer to Purchase (the "Offer to Purchase") and in the related Agreement
of Sale, as each may be supplemented or amended from time to time (which
together constitute the "Offer").
The Offer applies to whole and fractional Units. The Purchase Price
and transfer fees for fractional Units will be adjusted according to the
percentage of a full Unit represented by the fractional Unit. For example the
Purchase Price for a 1/2 Unit will be $25,000 (1/2 x $50,000) less transfer fees
in the amount of $1,875, and less the amount of any cash distributions declared
or paid after May 4, 1999. The 40 Units sought to be purchased pursuant to the
Offer represent, to the best knowledge of the Purchaser, approximately 5% of the
Units outstanding as of the date of the Offer.
We encourage you to consider the following factors:
- Unit Holders who tender their Units will be giving up the opportunity
to participate in any future potential benefits represented by
ownership of Units, including, for example, the right to participate
in any future distribution of cash or property, whether from
operations, the proceeds of a sale of the Partnership's assets or in
connection with any future liquidation of the Partnership. However,
there is no guarantee of future results of the Partnership and
investment in the Partnership.
- In this regard, it is particularly important to note that attorneys
for certain Unit Holders and the General Partner of the Partnership
have entered into a settlement agreement, which is intended to resolve
several pending class action lawsuits and outstanding claims brought
on behalf of all Unit Holders. The settlement
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agreement contemplates the sale of Synthetic Industries, Inc. (66% of
which is owned by the Partnership) and ultimately liquidation of the
Partnership. See "Section 13. Certain Legal Matters and Required
Regulatory Approvals, Liquidation of the Partnership." If Synthetic
Industries, Inc. is sold, the sale proceeds received by the
Partnership will be distributed pro rata to Unit Holders of the
Partnership. According to the settlement agreement, if Synthetic
Industries, Inc. is not sold, (1) the Partnership will be dissolved
and liquidated in accordance with the terms of the Partnership
Agreement, and (2) the Synthetic Industries, Inc. stock will be
distributed pro rata to the Unit Holders. Mercer has been advised that
the court approved the settlement agreement on May 24, 1999. ANY UNIT
HOLDER WHO TENDERS IN THIS OFFER WILL GIVE UP THE RIGHT TO PARTICIPATE
IN THE SETTLEMENT AND LIQUIDATION OF THE PARTNERSHIP. The basic terms
of the settlement are summarized in a notice ("Notice of Settlement"),
which was purportedly sent to all limited partners of the Partnership.
If you did not receive a copy of the Notice of Settlement, contact the
Mills Law Firm, 300 Drake's Landing, Suite 155, Greenbrae, California
94904, Telephone: (415) 464-4770, Facsimile: (415) 464-4777; or Smith,
Katzenstein & Furlow, LLP, 800 Delaware Avenue, P.O. Box 410,
Wilmington, DE 19899, Telephone: (302) 652-8400; Facsimile: (302)
652-8405.
- The Purchase Price is substantially less than the Purchaser's
valuation of the Units as of May 4, 1999. See "Section 7. Purpose and
Effects of the Offer -- Determination of Purchase Price." In
determining the Purchase Price, the Purchaser considered the
illiquidity of the Units and the cyclical nature of the business of
Synthetic Industries, Inc. The Purchaser cannot predict the future
value of the Partnership's assets on a per Unit basis because (1)
there is no assurance that Synthetic Industries, Inc. can be sold in a
timely manner, and (2) the costs of liquidating the Partnership's
assets are not yet settled. For example, Mercer has been advised that
the court has not yet determined the amount of attorney's fees to be
awarded pursuant to the settlement agreement. However, if the
Partnership is liquidated relatively soon, it is likely that the
Purchase Price will be significantly less than the net proceeds that
will be recognized on a per Unit basis from the sale of the
Partnership's assets and liquidation of the Partnership according to
the settlement agreement.
- The tax consequences of the Offer to a particular Unit Holder may be
different from those of other Unit Holders and we urge you to consult
your own tax advisors in connection with the Offer.
- The Purchaser is making the Offer with a view towards making a profit.
Accordingly, there may be a conflict between the desire of the
Purchaser to acquire the Units at a low price and the desire of the
Unit Holders to sell the Units at a high price. No independent person
has been retained to evaluate or render any opinion with respect to
the fairness of the Purchase Price and no representation is made as to
such fairness. Other measures of value may be relevant to a Unit
Holder and all Unit Holders are urged to carefully consider all of the
information contained in the Offer to Purchase and Agreement of Sale
and to consult with their own advisors (tax, financial or otherwise)
in evaluating the terms of the Offer before deciding whether to tender
their Units.
- The Purchaser believes that liquidation of the Partnership is in the
best interests of the Unit Holders and generally supports liquidation
of the Partnership.
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- Between April 13, 1998 and December 30, 1998, via three consecutive
offer letters, the Purchaser purchased an aggregate of 39.625 Units,
or 4.95% of the total Units outstanding, in the following amounts and
prices: 5.75 Units for $80,000 per Unit, 26.875 Units for $60,000 per
Unit and 7 Units for $50,000 per Unit. The investors who tendered
their Units to the Purchaser for $60,000 and $50,000 per Unit paid all
agency commissions, which were equal to 7% of the sales price,
associated with their respective sale.
- The successful purchase of 5% of the outstanding Units by the
Purchaser will cause the Purchaser to own approximately 9.95% of the
outstanding Units. The Purchaser may then be in a position to
influence the General Partner and the operation of the Partnership.
However, the Purchaser is acquiring the Units pursuant to the Offer
for investment purposes only, has no current intentions to change
current management or operations of the Partnership and has no current
plans for any extraordinary transactions involving the Partnership.
If you wish to accept this offer and sell some or all of your Units
now, please read carefully the enclosed Offer to Purchase and the Agreement of
Sale. All you need to do is complete the Agreement of Sale, including all forms
attached thereto, in accordance with the instructions provided therein, sign
where indicated, have your signature Medallion Guaranteed and return it to the
Depositary in the pre-addressed return envelope. Please carefully follow the
instructions on the Agreement of Sale. Errors will delay and possibly prevent
acceptance of your tender of the Units.
If, prior to the Expiration Date, the Purchaser increases the
consideration offered to Unit Holders pursuant to the Offer, such increased
consideration will be paid with respect to all Units that are purchased pursuant
to the Offer, whether or not such Units were tendered prior to such increase in
consideration. The term "Expiration Date" shall mean 12:00 midnight, Eastern
Time, on June 4, 1999, unless and until the Purchaser shall have extended the
period of time for which the Offer is open, in which event the term "Expiration
Date" shall mean the latest date on which the Offer, as so extended by the
Purchaser shall expire.
The Offer is being made by the Purchaser as a speculative investment
based upon the belief that the Units represent an attractive investment at the
price offered based upon, in part, the expected liquidation of the Partnership's
assets. The purpose of the Offer is to allow the Purchaser to benefit from any
of the following: (i) cash distributions from Partnership operations in the
ordinary course of business; (ii) distributions of net proceeds from the
liquidation of any Partnership assets after the Partnership has satisfied its
liabilities; and/or (iii) cash from any redemption of the Units by the
Partnership.
The Offer is not conditioned upon the valid tender of any minimum
number of the Units. If more than 40 Units are validly tendered and not
withdrawn, the Purchaser will accept up to 40 of the tendered Units for purchase
on a pro rata basis, subject to the terms and conditions herein. See "Section
12. Certain Conditions of the Offer." The Purchaser expressly reserves the right
to terminate the Offer at any time and to waive any or all of the conditions of
the Offer, although the Purchaser does not presently intend to waive any such
conditions. If not more than 40 Units are validly tendered and not properly
withdrawn prior to the Expiration Date, the Purchaser, upon the terms and
subject to the conditions of the Offer, will accept for payment all such Units
so tendered.
The Partnership is subject to the information and reporting
requirements of the Securities Exchange Act of 1934, as amended ("Exchange
Act"), and in accordance therewith is required to file
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reports and other information with the Securities and Exchange Commission
("Commission") relating to its business, financial condition and other matters.
Such reports and other information are available on the Commission's Electronic
Data Gathering and Retrieval System ("EDGAR"), at its internet website at
www.sec.gov and may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street N.W., Washington,
D.C. 20549, as well as at the Regional Offices of the Commission at the New York
Regional Office, 7 World Trade Center, 12th Floor, New York, New York 10007, and
the Chicago Regional Office, Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of the schedule can
also be obtained at prescribed rates from the Public Reference Section of the
Commission at 450 Fifth Street N.W., Washington D.C. 20549.
The Purchaser has filed with the Commission a Tender Offer Statement
on Schedule 14D-1 (including exhibits) pursuant to Rule 14d-3 of the General
Rules and Regulations under the Exchange Act, which provides certain additional
information with respect to the Offer. Such Statement and any amendments
thereto, including exhibits, may be inspected and copies may be obtained from
the Commission in the manner specified above.
According to publicly available information, there were 800 Units
issued and outstanding at December 31, 1998, held by approximately 1,917 Unit
Holders of record. The Purchaser currently owns 39.625 Units which is
approximately 4.95% of the outstanding Units.
Information contained in this Offer to Purchase which relates to, or
represents statements made by the Partnership or the General Partner, has been
derived from information provided in reports and other information filed with
the Commission by the Partnership and General Partner.
Unit Holders are urged to read this Offer to Purchase and the
accompanying Agreement of Sale carefully before deciding whether to tender their
Units.
OFFER TO PURCHASE
SECTION 3. PROCEDURES FOR TENDERING UNITS
THE "VALID TENDER" PARAGRAPH OF SECTION 3 OF THE OFFER TO PURCHASE IS AMENDED TO
READ AS FOLLOWS:
VALID TENDER
For Units to be validly tendered pursuant to the Offer, a properly
completed and duly executed Agreement of Sale must be received by the Depositary
at its address set forth in the Agreement of Sale on or prior to the Expiration
Date. A Unit Holder may tender any or all Units owned by such Unit Holder.
In order for a tendering Unit Holder to participate in the Offer, Units
must be validly tendered and not withdrawn prior to the Expiration Date, which
is 12:00 midnight, Eastern Time, on June 4, 1999.
Although the Purchaser has included a pre-addressed envelope with this
Offer for the convenience of Unit Holders, the method of delivery of the
Agreement of Sale is at the option and sole risk of the tendering Unit Holder,
and the delivery will be deemed made only when actually
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received by the Purchaser. If delivery is by mail, registered mail with return
receipt requested is recommended. In all cases, sufficient time should be
allowed to ensure timely delivery.
THE "OTHER REQUIREMENTS" PARAGRAPH OF SECTION 3 OF THE OFFER TO PURCHASE IS
AMENDED TO READ AS FOLLOWS:
OTHER REQUIREMENTS
By executing and delivering the Agreement of Sale, a tendering Unit
Holder irrevocably appoints the Purchaser and/or designees of the Purchaser and
each of them as such Unit Holder's proxies, with full power of substitution, in
the manner set forth in the Agreement of Sale.
By executing and delivering the Agreement of Sale, a tendering Unit
Holder also irrevocably assigns to the Purchaser, and its assigns, all of the
right, title and interest, free and clear of all liens and encumbrances of any
kind, of such Unit Holder in the Partnership with respect to the Units tendered
and purchased pursuant to the Offer, including, without limitation, such Unit
Holder's right, title and interest in and to any and all Distributions made by
the Partnership after May 4, 1999 in respect of the Units tendered by such Unit
Holder and accepted for payment by the Purchaser, regardless of the fact that
the record date for any such Distribution may be a date prior to June 4, 1999.
By executing an Agreement of Sale as set forth above, a tendering Unit
Holder also agrees that notwithstanding any provisions of the Partnership
Agreement which provide that any transfer is not effective until a date
subsequent to the date of any transfer of Units under the Offer, the Purchase
Price shall be reduced by any Distributions with respect to the Units after May
4, 1999.
SECTION 5 OF THE OFFER TO PURCHASE IS AMENDED TO READ AS FOLLOWS:
SECTION 5. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT
The Purchaser expressly reserves the right at any time and from time
to time, (i) to extend the period of time during which the Offer is open and
thereby delay acceptance for payment of, and the payment for, any Units by
giving oral or written notice of such extension, (ii) to terminate the Offer, or
to delay the acceptance for payment of, or payment for, any Units not heretofore
accepted for payment or paid for, upon the failure to satisfy any of the
conditions specified in Section 12, by giving oral or written notice of such
termination or delay, and (iii) to amend the Offer in any respect (including,
without limitation, by increasing or decreasing the consideration offered or the
number of Units being sought in the Offer or both) by giving oral or written
notice of such amendment. Any extension, termination or amendment will be
followed as promptly as practicable by public announcement, the announcement in
the case of an extension to be issued no later than 9:00 a.m., Eastern Time, on
the next business day after the previously scheduled Expiration Date, in
accordance with the public announcement requirement of Rule 14e-1(d) under the
Exchange Act.
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If the Purchaser makes a material change in the terms of the Offer or
the information concerning the Offer or waives a material condition of the
Offer, the Purchaser will extend the Offer to the extent required by Rules
14d-4(c) and 14d-6(d) under the Exchange Act. The minimum period during which an
offer must remain open following a material change in the terms of the offer or
of 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 change in the terms or information.
With respect to a change in price or a change in percentage of securities sought
(other than an increase of not more than 2% of the securities sought), however,
a minimum ten business day period is generally required to allow for adequate
dissemination to security holders and for investor response. As used in this
Offer, "business day" means any day other than a Saturday, Sunday or a federal
holiday, and consists of the time period from 12:01 a.m. through 12:00 midnight,
Eastern Time.
SECTION 6 OF THE OFFER TO PURCHASE IS AMENDED TO READ AS FOLLOWS:
SECTION 6. CERTAIN TAX CONSEQUENCES
The following is a summary of certain federal income tax consequences
of a sale of Units pursuant to the Offer assuming that the Partnership is a
partnership for federal income tax purposes and that it is not a "publicly
traded partnership" as defined in Section 7704 of the Internal Revenue Code of
1986, as amended (the "Code"). This summary is based on the Code, applicable
Treasury Regulations thereunder, administrative rulings, practice and procedures
and judicial authorities as of the date of the Offer. All of the foregoing are
subject to change, and any such change could affect the continuing accuracy of
this summary. This summary does not address all aspects of federal income
taxation that may be relevant to a particular Unit Holder in light of such Unit
Holder's specific circumstances, or that may be relevant to Unit Holders subject
to special treatment under the federal income tax laws (for example, foreign
persons, dealers in securities, banks, insurance companies and tax-exempt
entities), nor does it address any aspect of state, local, foreign or other tax
laws. Sales of Units pursuant to the Offer will be taxable transactions for
federal income tax purposes, and may also be taxable transactions under
applicable state, local, foreign and other tax laws. EACH UNIT HOLDER SHOULD
CONSULT HIS OR HER TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO SUCH
UNIT HOLDER OF SELLING UNITS PURSUANT TO THE OFFER, INCLUDING, WITHOUT
LIMITATION, FEDERAL, STATE AND LOCAL TAX CONSEQUENCES.
CONSEQUENCES TO TENDERING UNIT HOLDER
A Unit Holder will recognize gain or loss on a sale of Units pursuant
to the Offer equal to the difference between (i) the Unit Holder's "amount
realized" on the sale and (ii) the Unit Holder's adjusted tax basis in the Units
sold. The "amount realized" with respect to a Unit sold pursuant to the Offer
will be a sum equal to the amount of cash received by the Unit Holder for the
Unit plus the amount of Partnership liabilities allocable to the Unit (as
determined under Code Section 752). The amount of a Unit Holder's adjusted tax
basis in Units sold pursuant to the Offer will vary depending upon the Unit
Holder's particular circumstances and will be affected by allocations of
Partnership taxable income or loss to a Unit Holder with respect to such Units,
and distributions to a Unit Holder. In this regard, tendering Unit Holders will
be allocated a pro rata share of the Partnership's taxable income or loss with
respect to Units sold pursuant to the Offer through the last day of the month
preceding the effective date of the sale.
7
<PAGE>
Subject to Code Section 751 (discussed below), the gain or loss
recognized by a Unit Holder on a sale of a Unit pursuant to the Offer generally
will be treated as a capital gain or loss if the Unit was held by the Unit
Holder as a capital asset. Changes to the federal income tax laws in recent
years modified applicable capital gain rates and holding periods. Gain with
respect to Units held for more than one year will be taxed at long-term capital
gain rates not exceeding 20 percent. Gain with respect to Units held one year or
less will be taxed at ordinary income rates, up to a maximum rate of 39.6
percent. To the extent of depreciation recapture of previously deducted
straight-line depreciation with respect to real property, a maximum rate of 25
percent is imposed (assuming eligibility for long-term capital gain treatment).
A portion of the gain realized by a Unit Holder with respect to the disposition
of the Units may be subject to this maximum 25 percent rate to the extent that
the gain is attributable to depreciation recapture inherent in the properties of
the Partnership.
Capital losses are deductible only to the extent of capital gains,
except that non-corporate taxpayers may deduct up to $3,000 of capital losses in
excess of the amount of their capital gains against ordinary income. Excess
capital losses generally can be carried forward to succeeding years (a
corporation's carry forward period is five years and non-corporate taxpayers can
carry forward such capital losses indefinitely). In addition, corporations (but
not non-corporate taxpayers) are allowed to carry back excess capital losses to
the three preceding taxable years.
A portion of a Unit Holder's gain or loss on a sale of a Unit pursuant
to the Offer may be treated as ordinary income or loss. Such portion will be
determined by allocating a Unit Holder's amount realized for a Unit between
amounts received in exchange for all or a part of the Unit Holder's interest in
the Partnership attributable to "Section 751 items" and non-Section 751 items.
Section 751 items include "inventory items" and "unrealized receivables"
(including depreciation recapture) as defined in Code Section 751. The
difference between the portion of the Unit Holders amount realized that is
allocable to Section 751 items and the portion of the Unit Holder's adjusted tax
basis in the Units sold that is so allocable will be treated as ordinary income
or loss. The difference between the Unit Holder's remaining amount realized and
adjusted tax basis will be treated as capital gain or loss assuming the Units
were held by the Unit Holder as a capital asset.
Under Code Section 469, a non-corporate taxpayer or personal service
corporation can deduct passive activity losses in any taxable year only to the
extent of such person's passive activity income for such year. Closely held
corporations may offset passive activity losses against passive activity income
and active income, but may not offset such losses against portfolio income. If a
Unit Holder is subject to these restrictions and has unused passive losses from
prior years, such losses will generally become available upon a sale of Units,
provided the Unit Holder sells all of his or her Units. If a Unit Holder does
not sell all of his or her Units, the deductibility of such losses would
continue to be subject to the passive activity loss limitation until the Unit
Holder sells his or her remaining Units.
Gain realized by a foreign Unit Holder on a sale of a Unit pursuant to
the Offer will be subject to federal income tax. Under Code Section 1445 of the
Code, the transferee of a partnership interest held by a foreign person is
generally required to deduct and withhold a tax equal to 10% of the amount
realized on the disposition. The Purchaser will withhold 10% of the amount
realized by a tendering Unit Holder from the Purchase Price payable to such Unit
Holder unless the Unit Holder properly completes and signs the Agreement of Sale
certifying the accuracy of the Unit Holder's TIN and address, and that such Unit
Holder is not a foreign person. Amounts withheld are creditable against a
foreign Unit Holder's federal income tax liability. If amounts withheld are in
excess of such liability, a refund can be obtained.
8
<PAGE>
A Unit Holder who tenders Units must file an information statement
with his or her federal income tax return for the year of the sale which
provides the information specified in Treasury Regulation Section 1.751-1(a)(3).
THE FOREGOING DISCUSSION IS FOR INFORMATIONAL PURPOSES ONLY AND UNIT
HOLDERS SHOULD CONSULT THEIR RESPECTIVE TAX ADVISORS AS TO THE PARTICULAR TAX
CONSEQUENCES TO EACH SUCH UNIT HOLDER OF SELLING UNITS PURSUANT TO THE OFFER.
SECTION 7. PURPOSE AND EFFECTS OF THE OFFER
THE "DETERMINATION OF PURCHASE PRICE" PARAGRAPH OF SECTION 7 OF THE OFFER TO
PURCHASE IS AMENDED TO READ AS FOLLOWS:
DETERMINATION OF PURCHASE PRICE
The Purchaser established the Purchase Price of $50,000 per Unit based
on a number of factors, including (i) the remaining assets of the Partnership,
(ii) the illiquid nature of the investment, and (iii) the costs to the Purchaser
associated with acquiring the Units.
The Purchase Price represents the price at which the Purchasers are
willing to purchase Units. No independent person has been retained by the
Purchaser to evaluate or render any opinion with respect to the fairness of the
Purchase Price to the Sellers and no representation is made as to such fairness.
The Purchaser urges those Unit Holders that are considering tendering their
Units pursuant to the Offer to first consult with their own advisors (e.g., tax,
financial) in evaluating the terms of the Offer before deciding whether or not
to tender Units.
The Purchaser is offering to purchase Units which are a relatively
illiquid investment and is not offering to purchase the Partnership's underlying
assets. Consequently, the Purchaser does not believe that the underlying asset
value of the Partnership is determinative in arriving at the Purchase Price.
Nevertheless, using publicly available information concerning the Partnership
contained in the Partnership's Annual Report on Form 10-K for the year ended
September 30, 1998, and the Quarterly Report on Form 10-Q for the period ended
December 31, 1998, the Purchaser used an estimated asset value to derive an
estimated market value for the Units solely for purposes of formulating the
Offer.
In determining the estimated value of the Units, the Purchaser first
analyzed the market value of the common stock (the "Common Stock") of Synthetic
Industries, Inc. (the "Company"), the Partnership's principal asset. On May 4,
1999, the 30 day trading average for the Common Stock was approximately $ 18.21.
Analyzing the financial data of the Company, particularly its current net
operating income and asset value, as set forth in its periodic SEC reports, the
Purchaser determined that the Company's financial data supported its stock
price.
9
<PAGE>
Using this stock price as a basis, the Purchaser determined that the
Units were aggregately worth approximately $104,219,472, as the Partnership owns
approximately 66% of the Common Stock; and determined that each individual Unit
was worth approximately $ 130,274, as each Unit is comprised of approximately
7,155 shares of Common Stock. The Purchaser then calculated a revised asset
value by: (i) deducting from the aggregate Unit value the costs of liquidating
the partnership, estimated by the Purchaser at approximately $1 million, based
largely upon the costs set forth in the liquidation proposals (see "Section 13.
Certain Legal Matters and Required Regulatory Approvals - Liquidation of the
Partnership); (ii) deducting from the aggregate Unit value the Purchaser's costs
of acquiring the Units, estimated by the Purchaser at approximately $50,000: and
(iii) most importantly, determining a present value for the Units based upon the
illiquid nature of the Units and the cyclical nature of the business of
Synthetic Industries, Inc. In this regard, the Purchaser estimated that the
Partnership would not be liquidated for at least five more years, and that it
would require a rate of return of approximately 14%, after taxes and expenses,
in order to hold the Units for such period. Based upon the foregoing, the
Purchaser determined that, on May 4, 1999, it was only comfortable investing in
up to 40 Units at a price of $50,000 per Unit.
Other measures of value may be relevant to a Unit Holder and all Unit
Holders are urged to carefully consider all of the information contained in the
Offer to Purchase, the Agreement of Sale and the Notice of Settlement and to
consult with their own advisors (tax, financial or otherwise) in evaluating the
terms of the Offer before deciding whether to tender Units. The Offer is being
made as a speculative investment by the Purchaser based on its belief that there
is inherent underlying value in the assets of the Partnership; however, it is
important to note that even the Purchaser is uncertain as to the ultimate
liquidation value of the Partnership. As a consequence, the Purchaser has
purchased the Units in three different tender offers at three different prices,
$50,000, $60,000 and $80,000.
The Partnership disclosed in its Annual Report on Form 10-K for the
year ended September 30, 1998 filed with the Commission in December, 1998 (the
"1998 10-K"), the following information with regard to restrictions on transfer
of Units:
"There is no established trading market for the Units. In addition,
the limited partnership agreement of the Partnership (the "Limited
Partnership Agreement") places restrictions on the transferability of
Units. No transferee of all or any part of a Unit may be admitted to
the Partnership as a limited partner ("Limited Partner") without the
written consent of Management L.P., which consent may be withheld in
the absolute discretion of Management L.P. The Limited Partnership
Agreement also provides that the transfer of the whole or any portion
of a Unit shall not be effective to entitle the transferee to receive
distributions of cash or other property from the Partnership
applicable to the Unit acquired by reason of such transfer, unless
Management L.P. consents in writing to such transfer."
THE "EFFECTS OF THE OFFER" PARAGRAPH OF SECTION 7 OF THE OFFER TO PURCHASE IS
AMENDED TO READ AS FOLLOWS:
EFFECTS OF THE OFFER
Purchaser believes that the fact that the Units are to be purchased
pursuant to a tender offer pursuant to Schedule 14D-1 filed with the Commission
should not cause the Partnership to constitute
10
<PAGE>
a "publicly traded partnership" for federal income tax purposes. In determining
the number of Units for which the Offer is made (representing approximately 5%
of the outstanding Units), the Purchaser took these restrictions into account
and has conditioned the Offer on not causing the Partnership to constitute a
"publicly traded partnership." See "Section 12. Certain Conditions of the
Offer." The foregoing are hereafter referred to as the "Transfer Restrictions."
It is important that the sale of Units to Purchaser not cause the
Partnership to constitute a "publicly traded partnership" because a "publicly
traded partnership" is taxed as a corporation under the rules of section 7704 of
the Internal Revenue Code. A corporation is a separate taxpayer for federal
income tax purposes and income realized by a corporation is subject to two
levels of tax--once at the corporate level and again at the shareholder level on
distribution of a dividend. A partnership that is not viewed as a "publicly
traded partnership" is a flow-through for federal income tax purposes, and is
not a separate taxpayer.
SECTION 8 OF THE OFFER TO PURCHASE IS AMENDED TO READ AS FOLLOWS:
SECTION 8. FUTURE PLANS
The successful purchase of 5% of the outstanding Units by the
Purchaser will cause the Purchaser to own approximately 9.95% of the outstanding
Units. The Purchaser may then be in a position to influence the General Partner
and the operation of the Partnership. However, the Purchaser is acquiring the
Units pursuant to the Offer for investment purposes only, has no current
intentions to change current management or operations of the Partnership and has
no current plans for any extraordinary transactions involving the Partnership.
The Purchaser believes that current market conditions are such that a
sale of the Partnership's assets would be in the best interests of the Unit
Holders. The Purchaser supports the proposal to liquidate the Partnership as
described in the Notice of Settlement. See "Section 13. Certain Legal Matters
and Required Regulatory Approvals, Liquidation of the Partnership".
The Purchaser and its affiliates may acquire additional Units through
private purchases, one or more future tender offers or by any other means deemed
advisable. The Purchaser, however, has no present intent to purchase additional
Units. Future purchases, if any, will also be for investment purposes only and
may be at prices higher or lower than the Purchase Price.
SECTION 10 OF THE OFFER TO PURCHASE IS AMENDED TO READ AS FOLLOWS:
SECTION 10. CERTAIN INFORMATION CONCERNING THE PURCHASER
The Purchaser is a Washington Limited Liability Company which was
organized in 1997 for the purpose of entering into strategic investments. Since
its organization, the Purchaser has purchased limited partnership interests in
several limited partnerships, including Synthetic. The Purchaser's offices are
located at 425 Pike Street, Suite 600, Seattle, Washington 98101. The Purchaser
owns 39.625 Units which is approximately 4.95% of the issued and outstanding
Units.
Except as otherwise set forth herein: (i) neither the Purchaser nor,
to the best knowledge of the Purchaser, any of the persons listed on Schedule 1,
or any affiliate of the Purchaser beneficially owns or has a right to acquire
any Units; (ii) neither the Purchaser nor, to the best knowledge of the
Purchaser, any of the persons listed on Schedule 1, or any affiliate of the
Purchaser or any member,
11
<PAGE>
director, executive officer, or subsidiary of any of the foregoing has effected
any transaction in the Units; (iii) neither the Purchaser nor, to the best
knowledge of the Purchaser, any of the persons listed on Schedule 1 or any
affiliate of the Purchaser has any contract, arrangement, understanding, or
relationship with any other person with respect to any securities of the
Partnership, including but not limited to, contracts, arrangements,
understandings, or relationships concerning the transfer or voting thereof,
joint ventures, loan or option arrangements, puts or calls, guarantees of loans,
guarantees against loss, or the giving or withholding of proxies, consents, or
authorizations; (iv) there have been no transactions or business relationships
which would be required to be disclosed under the rules and regulations of the
Commission between any of the Purchasers, or, to the best knowledge of the
Purchaser, any of the persons listed on Schedule 1 or any affiliate of the
Purchaser, on the one hand, and the Partnership or affiliates, on the other
hand; and (v) there have been no contracts, negotiations, or transactions
between the Purchaser or to the best knowledge of the Purchaser, any of the
persons listed on Schedule 1 or any affiliate of the Purchaser, on the one hand,
and the Partnership or its affiliates, on the other hand, concerning a merger,
consolidation or acquisition, tender offer (other than as described in Section 8
of this Offer) or other acquisition of securities, an election or removal of the
General Partner, or a sale or other transfer of a material amount of assets.
The Commission has informed the Purchaser that its balance sheet is
material to a Unit Holder's decision to accept or reject the Offer. Accordingly,
the Purchaser's unaudited balance sheet as of March 31, 1999 is attached hereto
as Exhibit A.
SECTION 12. CERTAIN CONDITIONS OF THE OFFER
ITEM "(h)" OF SECTION 12 OF THE OFFER TO PURCHASE IS AMENDED TO READ AS FOLLOWS:
(h) the failure to occur of any necessary approval or
authorization by any federal or state authorities necessary to
consummation of the Purchaser of all or any part of the Units to be
acquired hereby, which in the reasonable judgment of the Purchaser in
any such case, and regardless of the circumstances (including any
action of the Purchaser) giving rise thereto, makes it inadvisable to
proceed with such purchase or payment; or
SECTION 13. CERTAIN LEGAL MATTERS AND REQUIRED REGULATORY APPROVALS
THE "LIQUIDATION OF THE PARTNERSHIP" PARAGRAPH OF SECTION 13 OF THE OFFER TO
PURCHASE IS SUPPLEMENTED WITH THE FOLLOWING STATEMENTS:
The Purchaser has been advised that the court approved the settlement
agreement on May 24, 1999. The court reserved determination of attorney's fees
pursuant to the settlement agreement until a later date.
Mercer Acquisition LLC
May 27, 1999
12
<PAGE>
EXHIBIT A
MERCER ACQUISITION, LLC
BALANCE SHEET
MARCH 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current Assets
Cash--Checking/Savings $ 197,805
Other Current Assets:
Due from CPA Investments 300
Total Current Assets 198,105
Fixed Assets
Organization Costs 1,321
Accumulated Amortization (176)
Total Fixed Assets 1,145
Other Assets
LP Investments 6,503,467
-----------
Total Other Assets 6,503,467
-----------
Total Assets $ 6,702,717
-----------
-----------
LIABILITIES AND EQUITY
Equity
Partners Capital $ 5,150,000
Retained Earnings 1,552,717
-----------
Total Liabilities and Equity $ 6,702,717
-----------
-----------
</TABLE>
<PAGE>
Exhibit (a)(4)
FOR IMMEDIATE RELEASE
FOR FURTHER INFORMATION CONTACT:
Tom Long Jennifer Sabelhaus
D.F. King & Co. Mercer Acquisition LLC
(800) 488-8075 (800) 207-4698
MERCER ACQUISITION LLC ANNOUNCES EXTENSION OF TENDER OFFER
TENDER OFFER FOR LIMITED PARTNERSHIP INTERESTS IN SYNTHETIC INDUSTRIES, L.P.
EXTENDED UNTIL 12:00 MIDNIGHT, EASTERN TIME, ON JUNE 4, 1999
SEATTLE, Wash. (May 13, 1999) -- Mercer Acquisition LLC, a Washington
limited liability company, announced today that it is extending the expiration
date of its offer to purchase up to 40 units of limited partnership interests in
Synthetic Industries, L.P., a Delaware limited partnership, until 12:00
Midnight, Eastern Time, on June 4, 1999. A half (1/2) unit has been deposited
to date in response to Mercer's offer, which was commenced on May 4, 1999.
<PAGE>
[LETTERHEAD OF MERCER ACQUISITION LLC]
May 27, 1999
To the Holders of Units of Limited Partnership Interests in Synthetic
Industries, L.P.:
On May 4, 1999, we delivered to you an Offer to Purchase and Agreement of
Sale (the "Offer Materials") in which we offered to purchase your units of
limited partnership interests ("Units") in Synthetic Industries, L.P (the
"Partnership"). Since that time, the Securities & Exchange Commission (the
"SEC"), as part of its normal review process, has requested that we revise
portions of the Offer Materials and notify you of certain revisions. In
response, we have prepared a supplement to the Offer to Purchase (the
"Supplement") and filed it with the SEC as an exhibit to Amendment No.1 to
Schedule 14D-1. Reproduced below are certain sections of the Supplement that the
SEC has requested we bring to your attention.
Please note that the Supplement contains additional revisions to the
original Offer to Purchase that are not contained in this letter. The entire
Supplement is attached as an exhibit to Amendment No. 1 to Schedule 14D-1 and is
available on the SEC's Electronic Data Gathering and Retrieval System ("EDGAR"),
at its internet website at www.sec.gov and may be inspected and copied at the
public reference facilities maintained by the SEC at Room 1024, 450 Fifth Street
N.W., Washington, D.C. 20549, as well as at the Regional Offices of the
Commission at the New York Regional Office, 7 World Trade Center, 12th Floor,
New York, New York 10007, and the Chicago Regional Office, Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511.
Copies of the schedule can also be obtained at prescribed rates from the Public
Reference Section of the Commission at 450 Fifth Street N.W., Washington D.C.
20549.
The revisions to the Offer to Purchase that the SEC has requested we bring
to your attention are as follows:
1. The second bullet point of the "Introduction" section of the Offer to
Purchase is amended to read as follows:
- In this regard, it is particularly important to note that attorneys
for certain Unit Holders and the General Partner of the Partnership
have entered into a settlement agreement, which is intended to resolve
several pending class action lawsuits and outstanding claims brought
on behalf of all Unit Holders. The settlement agreement contemplates
the sale of Synthetic Industries, Inc. (66% of which is owned by the
Partnership) and ultimately liquidation of the Partnership. See
"Section 13. Certain Legal Matters and Required Regulatory Approvals,
Liquidation of the Partnership." If Synthetic Industries, Inc. is
sold, the sale proceeds received by the Partnership will be
distributed pro rata to Unit Holders of the Partnership. According to
the settlement agreement, if Synthetic Industries, Inc. is not sold,
(1) the Partnership will be dissolved and liquidated in accordance
with the terms of the Partnership Agreement,
<PAGE>
May 27, 1999
Page 2
and (2) the Synthetic Industries, Inc. stock will be distributed
pro rata to the Unit Holders. Mercer has been advised that the court
approved the settlement agreement on May 24, 1999. ANY UNIT HOLDER WHO
TENDERS IN THIS OFFER WILL GIVE UP THE RIGHT TO PARTICIPATE IN THE
SETTLEMENT AND LIQUIDATION OF THE PARTNERSHIP. The basic terms of the
settlement are summarized in a notice ("Notice of Settlement"), which
was purportedly sent to all limited partners of the Partnership. If
you did not receive a copy of the Notice of Settlement, contact the
Mills Law Firm, 300 Drake's Landing, Suite 155, Greenbrae, California
94904, Telephone: (415) 464-4770, Facsimile: (415) 464-4777; or Smith,
Katzenstein & Furlow, LLP, 800 Delaware Avenue, P.O. Box 410,
Wilmington, DE 19899, Telephone: (302) 652-8400; Facsimile: (302)
652-8405.
2. The third bullet point in the "Introduction" section of the Offer to
Purchase is amended to read as follows:
- The Purchase Price is substantially less than the Purchaser's
valuation of the Units as of May 4, 1999. See "Section 7. Purpose and
Effects of the Offer -- Determination of Purchase Price." In
determining the Purchase Price, the Purchaser considered the
illiquidity of the Units and the cyclical nature of the business of
Synthetic Industries, Inc. The Purchaser cannot predict the future
value of the Partnership's assets on a per Unit basis because (1)
there is no assurance that Synthetic Industries, Inc. can be sold in a
timely manner, and (2) the costs of liquidating the Partnership's
assets are not yet settled. For example, Mercer has been advised that
the court has not yet determined the amount of attorney's fees to be
awarded pursuant to the settlement agreement. However, if the
Partnership is liquidated relatively soon, it is likely that the
Purchase Price will be significantly less than the net proceeds that
will be recognized on a per Unit basis from the sale of the
Partnership's assets and liquidation of the Partnership according to
the settlement agreement.
3. The following bullet point is added to the "Introduction" section of the
Offer to Purchase:
- Between April 13, 1998 and December 30, 1998, via three consecutive
offer letters, the Purchaser purchased an aggregate of 39.625 Units,
or 4.95% of the total Units outstanding, in the following amounts and
prices: 5.75 Units for $80,000 per Unit, 26.875 Units for $60,000 per
Unit and 7 Units for $50,000 per Unit. The investors who tendered
their Units to the Purchaser for $60,000 and $50,000 per Unit paid all
agency commissions, which were equal to 7% of the sales price,
associated with their respective sale.
4. Section 6 of the Offer to Purchase is amended to read as follows:
SECTION 6. CERTAIN TAX CONSEQUENCES
The following is a summary of certain federal income tax consequences of a
sale of Units
<PAGE>
May 27, 1999
Page 3
pursuant to the Offer assuming that the Partnership is a partnership for federal
income tax purposes and that it is not a "publicly traded partnership" as
defined in Section 7704 of the Internal Revenue Code of 1986, as amended (the
"Code"). This summary is based on the Code, applicable Treasury Regulations
thereunder, administrative rulings, practice and procedures and judicial
authorities as of the date of the Offer. All of the foregoing are subject to
change, and any such change could affect the continuing accuracy of this
summary. This summary does not address all aspects of federal income taxation
that may be relevant to a particular Unit Holder in light of such Unit Holder's
specific circumstances, or that may be relevant to Unit Holders subject to
special treatment under the federal income tax laws (for example, foreign
persons, dealers in securities, banks, insurance companies and tax-exempt
entities), nor does it address any aspect of state, local, foreign or other tax
laws. Sales of Units pursuant to the Offer will be taxable transactions for
federal income tax purposes, and may also be taxable transactions under
applicable state, local, foreign and other tax laws. EACH UNIT HOLDER SHOULD
CONSULT HIS OR HER TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO SUCH
UNIT HOLDER OF SELLING UNITS PURSUANT TO THE OFFER, INCLUDING, WITHOUT
LIMITATION, FEDERAL, STATE AND LOCAL TAX CONSEQUENCES.
CONSEQUENCES TO TENDERING UNIT HOLDER
A Unit Holder will recognize gain or loss on a sale of Units pursuant to
the Offer equal to the difference between (i) the Unit Holder's "amount
realized" on the sale and (ii) the Unit Holder's adjusted tax basis in the Units
sold. The "amount realized" with respect to a Unit sold pursuant to the Offer
will be a sum equal to the amount of cash received by the Unit Holder for the
Unit plus the amount of Partnership liabilities allocable to the Unit (as
determined under Code Section 752). The amount of a Unit Holder's adjusted tax
basis in Units sold pursuant to the Offer will vary depending upon the Unit
Holder's particular circumstances and will be affected by allocations of
Partnership taxable income or loss to a Unit Holder with respect to such Units,
and distributions to a Unit Holder. In this regard, tendering Unit Holders will
be allocated a pro rata share of the Partnership's taxable income or loss with
respect to Units sold pursuant to the Offer through the last day of the month
preceding the effective date of the sale.
Subject to Code Section 751 (discussed below), the gain or loss recognized
by a Unit Holder on a sale of a Unit pursuant to the Offer generally will be
treated as a capital gain or loss if the Unit was held by the Unit Holder as a
capital asset. Changes to the federal income tax laws in recent years modified
applicable capital gain rates and holding periods. Gain with respect to Units
held for more than one year will be taxed at long-term capital gain rates not
exceeding 20 percent. Gain with respect to Units held one year or less will be
taxed at ordinary income rates, up to a maximum rate of 39.6 percent. To the
extent of depreciation recapture of previously deducted straight-line
depreciation with respect to real property, a maximum rate of 25 percent is
imposed (assuming eligibility for long-term capital gain treatment). A portion
of the gain realized by a Unit Holder with respect to the disposition of the
Units may be subject to this maximum 25 percent rate to the extent that the gain
is attributable to depreciation recapture inherent in the properties of the
Partnership.
Capital losses are deductible only to the extent of capital gains, except
that non-corporate taxpayers may deduct up to $3,000 of capital losses in excess
of the amount of their capital gains
<PAGE>
May 27, 1999
Page 4
against ordinary income. Excess capital losses generally can be carried forward
to succeeding years (a corporation's carry forward period is five years and
non-corporate taxpayers can carry forward such capital losses indefinitely). In
addition, corporations (but not non-corporate taxpayers) are allowed to carry
back excess capital losses to the three preceding taxable years.
A portion of a Unit Holder's gain or loss on a sale of a Unit pursuant to
the Offer may be treated as ordinary income or loss. Such portion will be
determined by allocating a Unit Holder's amount realized for a Unit between
amounts received in exchange for all or a part of the Unit Holder's interest in
the Partnership attributable to "Section 751 items" and non-Section 751 items.
Section 751 items include "inventory items" and "unrealized receivables"
(including depreciation recapture) as defined in Code Section 751. The
difference between the portion of the Unit Holders amount realized that is
allocable to Section 751 items and the portion of the Unit Holder's adjusted tax
basis in the Units sold that is so allocable will be treated as ordinary income
or loss. The difference between the Unit Holder's remaining amount realized and
adjusted tax basis will be treated as capital gain or loss assuming the Units
were held by the Unit Holder as a capital asset.
Under Code Section 469, a non-corporate taxpayer or personal service
corporation can deduct passive activity losses in any taxable year only to the
extent of such person's passive activity income for such year. Closely held
corporations may offset passive activity losses against passive activity income
and active income, but may not offset such losses against portfolio income. If a
Unit Holder is subject to these restrictions and has unused passive losses from
prior years, such losses will generally become available upon a sale of Units,
provided the Unit Holder sells all of his or her Units. If a Unit Holder does
not sell all of his or her Units, the deductibility of such losses would
continue to be subject to the passive activity loss limitation until the Unit
Holder sells his or her remaining Units.
Gain realized by a foreign Unit Holder on a sale of a Unit pursuant to the
Offer will be subject to federal income tax. Under Code Section 1445 of the
Code, the transferee of a partnership interest held by a foreign person is
generally required to deduct and withhold a tax equal to 10% of the amount
realized on the disposition. The Purchaser will withhold 10% of the amount
realized by a tendering Unit Holder from the Purchase Price payable to such Unit
Holder unless the Unit Holder properly completes and signs the Agreement of Sale
certifying the accuracy of the Unit Holder's TIN and address, and that such Unit
Holder is not a foreign person. Amounts withheld are creditable against a
foreign Unit Holder's federal income tax liability. If amounts withheld are in
excess of such liability, a refund can be obtained.
A Unit Holder who tenders Units must file an information statement with his
or her federal income tax return for the year of the sale which provides the
information specified in Treasury Regulation Section 1.751-1(a)(3).
THE FOREGOING DISCUSSION IS FOR INFORMATIONAL PURPOSES ONLY AND UNIT
HOLDERS SHOULD CONSULT THEIR RESPECTIVE TAX ADVISORS AS TO THE PARTICULAR TAX
CONSEQUENCES TO EACH SUCH UNIT HOLDER OF SELLING UNITS PURSUANT TO THE OFFER.
<PAGE>
May 27, 1999
Page 5
5. The "Determination of Purchase Price" paragraph of Section 7 of the Offer
to Purchase is amended to read as follows:
DETERMINATION OF PURCHASE PRICE
The Purchaser established the Purchase Price of $50,000 per Unit based on a
number of factors, including (i) the remaining assets of the Partnership, (ii)
the illiquid nature of the investment, and (iii) the costs to the Purchaser
associated with acquiring the Units.
The Purchase Price represents the price at which the Purchasers are willing
to purchase Units. No independent person has been retained by the Purchaser to
evaluate or render any opinion with respect to the fairness of the Purchase
Price to the Sellers and no representation is made as to such fairness. The
Purchaser urges those Unit Holders that are considering tendering their Units
pursuant to the Offer to first consult with their own advisors (e.g., tax,
financial) in evaluating the terms of the Offer before deciding whether or not
to tender Units.
The Purchaser is offering to purchase Units which are a relatively illiquid
investment and is not offering to purchase the Partnership's underlying assets.
Consequently, the Purchaser does not believe that the underlying asset value of
the Partnership is determinative in arriving at the Purchase Price.
Nevertheless, using publicly available information concerning the Partnership
contained in the Partnership's Annual Report on Form 10-K for the year ended
September 30, 1998, and the Quarterly Report on Form 10-Q for the period ended
December 31, 1998, the Purchaser used an estimated asset value to derive an
estimated market value for the Units solely for purposes of formulating the
Offer.
In determining the estimated value of the Units, the Purchaser first
analyzed the market value of the common stock (the "Common Stock") of Synthetic
Industries, Inc. (the "Company"), the Partnership's principal asset. On May 4,
1999, the 30 day trading average for the Common Stock was approximately $ 18.21.
Analyzing the financial data of the Company, particularly its current net
operating income and asset value, as set forth in its periodic SEC reports, the
Purchaser determined that the Company's financial data supported its stock
price.
Using this stock price as a basis, the Purchaser determined that the Units
were aggregately worth approximately $104,219,472, as the Partnership owns
approximately 66% of the Common Stock; and determined that each individual Unit
was worth approximately $ 130,274, as each Unit is comprised of approximately
7,155 shares of Common Stock. The Purchaser then calculated a revised asset
value by: (i) deducting from the aggregate Unit value the costs of liquidating
the Partnership, estimated by the Purchaser at approximately $1 million, based
largely upon the costs set forth in the liquidation proposals (see "Section 13.
Certain Legal Matters and Required Regulatory Approvals - Liquidation of the
Partnership); (ii) deducting from the aggregate Unit value the Purchaser's costs
of acquiring the Units, estimated by the Purchaser at approximately $50,000: and
(iii) most importantly, determining a present value for the Units based upon the
illiquid nature of the Units and the cyclical nature of the business of
Synthetic Industries, Inc. In this regard, the Purchaser estimated that the
Partnership would not be liquidated for at least five more years, and that it
would require a rate of return of approximately 14%, after taxes and expenses,
in order to hold the Units for such period. Based upon the foregoing, the
Purchaser determined that, on May 4, 1999, it
<PAGE>
May 27, 1999
Page 6
was only comfortable investing in up to 40 Units at a price of $50,000 per Unit.
Other measures of value may be relevant to a Unit Holder and all Unit
Holders are urged to carefully consider all of the information contained in the
Offer to Purchase, the Agreement of Sale and the Notice of Settlement and to
consult with their own advisors (tax, financial or otherwise) in evaluating the
terms of the Offer before deciding whether to tender Units. The Offer is being
made as a speculative investment by the Purchaser based on its belief that there
is inherent underlying value in the assets of the Partnership; however, it is
important to note that even the Purchaser is uncertain as to the ultimate
liquidation value of the Partnership. As a consequence, the Purchaser has
purchased the Units in three different tender offers at three different prices,
$50,000, $60,000 and $80,000.
The Partnership disclosed in its Annual Report on Form 10-K for the year
ended September 30, 1998 filed with the Commission in December, 1998 (the "1998
10-K"), the following information with regard to restrictions on transfer of
Units:
"There is no established trading market for the Units. In addition, the
limited partnership agreement of the Partnership (the "Limited Partnership
Agreement") places restrictions on the transferability of Units. No
transferee of all or any part of a Unit may be admitted to the Partnership
as a limited partner ("Limited Partner") without the written consent of
Management L.P., which consent may be withheld in the absolute discretion
of Management L.P. The Limited Partnership Agreement also provides that the
transfer of the whole or any portion of a Unit shall not be effective to
entitle the transferee to receive distributions of cash or other property
from the Partnership applicable to the Unit acquired by reason of such
transfer, unless Management L.P. consents in writing to such transfer."
6. The SEC has also requested that we provide you with Mercer's unaudited
balance sheet as of March 31, 1999. A copy is attached to this letter as
Exhibit A.
Please note that on May 13, 1999, Mercer extended the tender offer until
12:00 midnight Eastern Time, June 4, 1999. If you wish to accept the Offer,
please deliver the Agreement of Sale, which was previously delivered to you, to
the Depositary before that time. Should you have any questions regarding the
revisions contained in this letter or the expiration of the Offer, please feel
free to contact Jennifer Sabelhous, Mercer's Manager, at (800) 207-4698.
Sincerely,
MERCER ACQUISITION LLC
<PAGE>
EXHIBIT A
MERCER ACQUISITION, LLC
BALANCE SHEET
MARCH 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current Assets
Cash--Checking/Savings $ 197,805
Other Current Assets:
Due from CPA Investments 300
Total Current Assets 198,105
Fixed Assets
Organization Costs 1,321
Accumulated Amortization (176)
Total Fixed Assets 1,145
Other Assets
LP Investments 6,503,467
-----------
Total Other Assets 6,503,467
-----------
Total Assets $ 6,702,717
-----------
-----------
LIABILITIES AND EQUITY
Equity
Partners Capital $ 5,150,000
Retained Earnings 1,552,717
-----------
Total Liabilities and Equity $ 6,702,717
-----------
-----------
</TABLE>
