SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 3
SCHEDULE 13E-3
Rule 13e-3 Transaction Statement
(Pursuant to Section 13(e) of the Securities
Exchange Act of 1934)
FOAMEX INTERNATIONAL INC.
(Name of the Issuer)
TRACE INTERNATIONAL HOLDINGS, INC.
TRACE MERGER SUB, INC.
FOAMEX INTERNATIONAL INC.
MARSHALL S. COGAN
(Name of Persons Filing Statement)
Common Stock,
$0.01 par value
(Title of Class of Securities)
344123104
(CUSIP Number of Class of Securities)
Philip N. Smith, Jr.
c/o Trace International Holdings, Inc.
375 Park Avenue, 11th Floor
New York, NY 10152
(212) 230-0400
(Name, Address and Telephone Number of Person(s)
Authorized to Receive Notices and Communications on
Behalf of Person(s) Filing Statement)
This statement is filed in connection with
(check the appropriate box):
a. [X] The filing of solicitation materials or an information statement
subject to Regulation 14A [17 CFR 240.14a-1 to 240.14b-1],
Regulation 14C [17 CFR 240.14c-1 to 240.14c-101] or Rule 13e-3(c)
[ss. 240.13e(c)] under the Securities Exchange Act of 1934.
b. [ ] The filing of a registration statement under the Securities Act
of 1933.
c. [ ] A tender offer.
d. [ ] None of the above.
Check the following box if the soliciting materials or information
statement referred to in checking box (a) are preliminary copies: [X].
<PAGE>
Calculation of Filing Fee
Transaction Valuation (1): $165,442,307
Amount of Filing Fee (1): $33,089
(1) Estimated solely for purposes of calculating the filing fee and based
pursuant to Rule 0-11 under the Securities Exchange Act of 1934, as
amended (the "Act"). The transaction applies to an aggregate of
14,666,947 shares of common stock, $0.01 par value (the "Common
Stock"), of Foamex International Inc. calculated as follows: (i)
25,014,823 shares of Common Stock issued and outstanding (less
11,475,000 shares of Common Stock then owned by Trace International
Holdings, Inc. ("Trace") or any subsidiary of Trace) and (ii) 1,127,124
shares of Common Stock to be issued upon the exercise of in-the-money
options and warrants to purchase shares of Common Stock. The proposed
maximum aggregate value of the transaction is $165,442,307 calculated
as follows: the sum of (i) the product of (a) 25,014,823 shares of
Common Stock issued and outstanding (less 11,475,000 shares of Common
Stock then owned by Trace or any subsidiary of Trace) and (b) $12.00,
and (ii) cash consideration of $2,964,431 to be paid for the options
and warrants being surrendered in connection with the transaction. In
accordance with Rule 0-11 under the Act, the filing fee is determined
by multiplying the transaction valuation by one-fiftieth of one
percent.
[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: $55,820
Filing Party: Foamex International Inc.
Form or Registration No.: Proxy Statement File No. 0-22624
Date Filed: July 6, 1998
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<PAGE>
INTRODUCTION
This Rule 13e-3 Transaction Statement (as amended, the
"Statement") is being filed by Trace International Holdings, Inc., a Delaware
corporation ("Trace"), Trace Merger Sub, Inc., a Delaware corporation ("Merger
Sub"), Foamex International Inc., a Delaware corporation ("Foamex
International"), and Marshall S. Cogan in connection with the proposed merger
(the "Merger") of Merger Sub with and into Foamex International, pursuant to the
Agreement and Plan of Merger, dated as of November 5, 1998 (the "Merger
Agreement"), among Trace, Merger Sub and Foamex International. Trace, Merger Sub
and Marshall S. Cogan are each affiliates of Foamex International and its
affiliated entities.
The cross reference sheet below is being supplied pursuant to
General Instruction F to Schedule 13E-3 and shows the location in Foamex
International's preliminary proxy statement (the "Proxy Statement") concurrently
being filed with the Securities and Exchange Commission (the "SEC") in
connection with the proposed Merger, which contains information required to be
included in response to items of this Statement. A copy of the Proxy Statement
is attached hereto as Exhibit (d). The information in the Proxy Statement,
including all exhibits thereto, is hereby expressly incorporated herein by
reference and the responses to each item are qualified in their entirety by the
provisions of the Proxy Statement. All information in, or incorporated by
reference in, the Proxy Statement or this Statement concerning Foamex
International or its advisors, or actions or events with respect to any of them,
was provided by Foamex International, and all information in, or incorporated by
reference in, the Proxy Statement or this Statement concerning Trace or its
affiliates (except for Foamex International or Marshall S. Cogan), or actions or
events with respect to them, was provided by Trace, and all information in, or
incorporated by reference in, the Proxy Statement or this Statement concerning
Marshall S. Cogan or his affiliates (except for Trace or Foamex International),
or actions or events with respect to them, was provided by Marshall S. Cogan.
The Proxy Statement incorporated by reference in this filing is in preliminary
form and is subject to completion or amendment. In addition, the information in
the preliminary Proxy Statement is intended to be solely for the information and
use of the SEC, and should not be relied upon by any other person for any
purpose. Capitalized terms used but not defined in this statement shall have the
respective meanings given them in the Proxy Statement.
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<PAGE>
CROSS REFERENCE SHEET
Item in Schedule 13E-3 Caption in Proxy Statement
- - ---------------------- --------------------------
Item 1(a) Cover Page; SUMMARY - The Parties
Item 1(b) Cover Page; SUMMARY - The Special Meeting - Record Date
and Voting
Item 1(c)-(d) MARKET PRICE AND DIVIDEND INFORMATION
Item 1(e) Not Applicable
Item 1(f) CERTAIN TRANSACTIONS IN THE COMMON STOCK
Item 2(a)-(d), (g) SUMMARY - The Parties; APPENDIX E - Certain Information
Regarding Directors and Executive Officers of Trace,
Merger Sub and the Company
Item 2(e)-(f) Not Applicable
Item 3(a)(1) CERTAIN TRANSACTIONS; CERTAIN TRANSACTIONS IN THE COMMON
STOCK
Item 3(a)(2) - (b) SPECIAL FACTORS - Background of the Merger; SPECIAL
FACTORS - Recommendation of the Board of Directors;
Fairness of the Merger; SPECIAL FACTORS Recommendation
of the Special Committee Against the Merger; Unfairness
of the Merger; SPECIAL FACTORS - Interests of Certain
Persons in the Merger; THE MERGER AGREEMENT; CERTAIN
TRANSACTIONS
Item 4(a)-(b) SUMMARY; SPECIAL FACTORS - Purpose and Structure of the
Merger; SPECIAL FACTORS - Interests of Certain Persons
in the Merger; SPECIAL FACTORS - Certain Effects of the
Merger; SPECIAL FACTORS - Certain Federal Income Tax
Consequences; THE MERGER AGREEMENT; APPENDIX A - The
Merger Agreement
Item 5(a), (b), (d) SPECIAL FACTORS - Plans for the Company After the Merger
and (e)
Item 5(c), (f) and SUMMARY - Special Factors - Certain Effects of the
(g) Merger; SPECIAL FACTORS - Interests of Certain Persons
in the Merger Directors and Officers; SPECIAL FACTORS
-Certain Effects of the Merger
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<PAGE>
Item in Schedule 13E-3 Caption in Proxy Statement
- - ---------------------- --------------------------
Item 6(a) - (b) SPECIAL FACTORS - Sources of Funds; Fees and Expenses;
THE MERGER AGREEMENT - Fees and Expenses
Item 6(c) SPECIAL FACTORS - Sources of Funds; Fees and Expenses
Item 6(d) Not Applicable
Item 7(a) SUMMARY - Special Factors - Purpose and Structure of the
Merger; SUMMARY - Special Factors - Potential
Acceleration of Foamex Debt in the Absence of a Merger;
SPECIAL FACTORS - Purpose and Structure of the Merger;
SPECIAL FACTORS - Potential Acceleration of Foamex Debt
in the Absence of a Merger; SPECIAL FACTORS - Background
of the Merger
Item 7(b) SPECIAL FACTORS - Background of the Merger; SPECIAL
FACTORS - Purpose and Structure of the Merger
Item 7(c) SUMMARY - Special Factors - Potential Acceleration of
Foamex Debt in the Absence of a Merger; SPECIAL FACTORS
- Recommendation of the Board of Directors; Fairness of
the Merger; SPECIAL FACTORS - Recommendation of the
Special Committee Against the Merger; Unfairness of the
Merger; SPECIAL FACTORS - Purpose and Structure of the
Merger; SPECIAL FACTORS - Potential Acceleration of
Foamex Debt in the Absence of a Merger;
Item 7(d) SUMMARY - Special Factors - Potential Acceleration of
Foamex Debt in the Absence of a Merger; SUMMARY -
Special Factors - Certain Effects of the Merger; SUMMARY
- Special Factors - Certain U.S. Federal Income Tax
Consequences; SUMMARY - The Merger; SPECIAL FACTORS -
Purpose and Structure of the Merger; SPECIAL FACTORS -
Plans for the Company After the Merger; SPECIAL FACTORS
- Potential Acceleration of Foamex Debt in the Absence
of a Merger; SPECIAL FACTORS - Certain Effects of the
Merger; SPECIAL FACTORS - Interests of Certain Persons
in the Merger; SPECIAL FACTORS - Certain Federal
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<PAGE>
Item in Schedule 13E-3 Caption in Proxy Statement
- - ---------------------- --------------------------
Income Tax Consequences; THE MERGER AGREEMENT
Item 8(a) - (b) SUMMARY - Special Factors - Recommendation of the Board
of Directors; Fairness of the Merger; SUMMARY - Special
Factors - Recommendation of the Special Committee
Against the Merger; Unfairness of the Merger; SPECIAL
FACTORS - Background of the Merger; SPECIAL FACTORS -
Purpose and Structure of Merger; SPECIAL FACTORS -
Recommendation of the Board of Directors; Fairness of
the Merger; SPECIAL FACTORS - Opinion of Financial
Advisor to the Board of Directors; SPECIAL FACTORS -
Recommendation of the Special Committee Against the
Merger; Unfairness of the Merger; SPECIAL FACTORS -
Opinion of Financial Advisor to the Special Committee;
SPECIAL FACTORS - Interests of Certain Persons in the
Merger; SPECIAL FACTORS - Perspective of Trace and
Merger Sub on the Merger; SPECIAL FACTORS - Perspective
of Marshall S. Cogan on the Merger; THE SPECIAL MEETING
- Matters to Be Considered at the Special Meeting;
CERTAIN TRANSACTIONS IN THE COMMON STOCK; APPENDIX B -
Fairness Opinion of Ramius Capital Group, L.L.C.;
APPENDIX C - Opinion of The Beacon Group Capital
Services, LLC
Item 8(c) SUMMARY - Special Factors - Recommendation of the Board
of Directors; Fairness of the Merger; SUMMARY - Special
Factors - Recommendation of the Special Committee
Against the Merger; Unfairness of the Merger; SUMMARY -
The Special Meeting - Vote Required; Revocability of
Proxies; SPECIAL FACTORS - Recommendation of the Board
of Directors; Fairness of the Merger; SPECIAL FACTORS -
Recommendation of the Special Committee Against the
Merger; Unfairness of the Merger; THE SPECIAL MEETING -
Vote Required; Revocability of Proxies
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<PAGE>
Item in Schedule 13E-3 Caption in Proxy Statement
- - ---------------------- --------------------------
Item 8(d) SUMMARY - Special Factors - Recommendation of the Board
of Directors; Fairness of the Merger; SUMMARY - Special
Factors - Opinion of Financial Advisor to the Board of
Directors; SUMMARY - Special Factors - Recommendation of
the Special Committee Against the Merger; Unfairness of
the Merger; SUMMARY - Special Factors - Opinion of
Financial Advisor to the Special Committee; SPECIAL
FACTORS - Background of the Merger; SPECIAL FACTORS -
Recommendation of the Board of Directors; Fairness of
the Merger; SPECIAL FACTORS - Opinion of Financial
Advisor to the Board of Directors; SPECIAL FACTORS -
Recommendation of the Special Committee Against the
Merger; Unfairness of the Merger; SPECIAL FACTORS -
Opinion of Financial Advisor to the Special Committee;
APPENDIX B - Fairness Opinion of Ramius Capital Group,
L.L.C.; APPENDIX C - Opinion of The Beacon Group Capital
Services, LLC
Item 8(e) SUMMARY - Special Factors - Recommendation of the Board
of Directors; Fairness of the Merger; SUMMARY - Special
Factors - Recommendation of the Special Committee
Against the Merger; Unfairness of the Merger; SPECIAL
FACTORS - Recommendation of the Board of Directors ;
Fairness of the Merger; SPECIAL FACTORS - Recommendation
of the Special Committee Against the Merger; Unfairness
of the Merger
Item 8(f) None
Item 9(a)-(c) SUMMARY - Special Factors - Recommendation of the Board
of Directors; Fairness of the Merger; SUMMARY - Special
Factors - Opinion of Financial Advisor to the Board of
Directors; SUMMARY - Special Factors - Recommendation of
the Special Committee Against the Merger; Unfairness of
the Merger; SUMMARY - Special Factors - Opinion of
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<PAGE>
Item in Schedule 13E-3 Caption in Proxy Statement
- - ---------------------- --------------------------
Financial Advisor to the Special Committee; SPECIAL
FACTORS - Background of the Merger; SPECIAL FACTORS -
Recommendation of the Board of Directors; Fairness of
the Merger; SPECIAL FACTORS - Opinion of Financial
Advisor to the Board of Directors; SPECIAL FACTORS -
Recommendation of the Special Committee Against the
Merger; Unfairness of the Merger; SPECIAL FACTORS -
Opinion of Financial Advisor to the Special Committee;
APPENDIX B - Fairness Opinion of Ramius Capital Group,
L.L.C.; APPENDIX C - Opinion of The Beacon Group Capital
Services, LLC
Item 10(a) SPECIAL FACTORS - Interests of Certain Persons in the
Merger; SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN
BENEFICIAL OWNERS
Item 10(b) CERTAIN TRANSACTIONS IN THE COMMON STOCK
Item 11 Letter to Stockholders; SUMMARY - The Special Meeting -
Record Date and Voting; SUMMARY - The Special Meeting -
Vote Required; Revocability of Proxies; SPECIAL FACTORS
- Background of the Merger; SPECIAL FACTORS - Interests
of Certain Persons in the Merger; SPECIAL FACTORS -
Sources of Funds; Fees and Expenses; THE SPECIAL MEETING
- Matters to be Considered at the Special Meeting; THE
SPECIAL MEETING - Record Date and Voting; THE SPECIAL
MEETING - Vote Required; Revocability of Proxies; THE
MERGER AGREEMENT; CERTAIN TRANSACTIONS IN THE COMMON
STOCK; APPENDIX A--The Merger Agreement
Item 12(a) - (b) SUMMARY - Appraisal Rights; THE SPECIAL MEETING - Vote
Required; Revocability of Proxies; THE SPECIAL MEETING -
Appraisal Rights; SPECIAL FACTORS - Perspective of Trace
and Merger Sub on the Merger; SPECIAL FACTORS -
Perspective of Marshall S. Cogan on the Merger;
Statement of appraisal rights (incorporated by reference
to Appendix D to the Proxy
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<PAGE>
Item in Schedule 13E-3 Caption in Proxy Statement
- - ---------------------- --------------------------
Statement attached hereto as Exhibit 17(d))
Item 13(a) SUMMARY - Appraisal Rights; THE SPECIAL MEETING -
Appraisal Rights; Statement of appraisal rights
(incorporated by reference to Appendix D to the Proxy
Statement attached hereto as Exhibit 17(d))
Item 13(b) - (c) Not Applicable
Item 14(a) SELECTED HISTORICAL FINANCIAL DATA; INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE
Item 14(b) CERTAIN PROJECTED FINANCIAL DATA; UNAUDITED PRO FORMA
COMBINED STATEMENT OF OPERATIONS
Item 15(a) - (b) SUMMARY - Special Factors - Recommendation of the Board
of Directors; Fairness of the Merger; SUMMARY - Special
Factors - Opinion of Financial Advisor to the Board of
Directors; SUMMARY - Special Factors - Recommendation of
the Special Committee Against the Merger; Unfairness of
the Merger; SUMMARY - Special Factors - Opinion of
Financial Advisor to the Special Committee; SUMMARY -
Solicitation of Proxies; SPECIAL FACTORS - Background of
the Merger; SPECIAL FACTORS - Recommendation of the
Board of Directors; Fairness of the Merger; SPECIAL
FACTORS - Opinion of Financial Advisor to the Board of
Directors; SPECIAL FACTORS - Recommendation of the
Special Committee Against the Merger; Unfairness of the
Merger; SPECIAL FACTORS - Opinion of Financial Advisor
to the Special Committee; SPECIAL FACTORS - Sources of
Funds; Fees and Expenses; THE SPECIAL MEETING -
Solicitation of Proxies; THE MERGER AGREEMENT - Fees and
Expenses
Item 16 The information set forth in the Proxy Statement is
incorporated herein by reference
Item 17(a) Not applicable as it is anticipated that such agreements
will not be
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<PAGE>
Item in Schedule 13E-3 Caption in Proxy Statement
- - ---------------------- --------------------------
executed until the closing of the transaction
Item 17(b)(1) Opinion of The Beacon Group Capital Services, LLC, dated
November 2, 1998 (incorporated by reference to Appendix
C to the Proxy Statement attached hereto as Exhibit
17(d))
Item 17(b)(2) Report of The Beacon Group Capital Services, LLC, dated
November 2, 1998
Item 17(b)(3) Opinion of Ramius Capital Group, L.L.C., dated November
5, 1998 (incorporated by reference to Appendix B to the
Proxy Statement attached hereto as Exhibit 17(d))
Item 17(b)(4) Report of Ramius Capital Group, L.L.C., dated November
5, 1998
Item 17(c) Agreement and Plan of Merger, dated as of November 5,
1998, among Trace, Merger Sub and Foamex International
(incorporated by reference to Appendix A to the Proxy
Statement attached hereto as Exhibit 17(d))
Item 17(d) Amended preliminary copy of Letter to Stockholders,
Notice of Special Meeting of Stockholders and form of
proxy, and Amendment No. 3 to Preliminary Proxy
Statement, each relating to the special meeting of
Stockholders of Foamex International
Item 17(e) Statement of appraisal rights set forth in Appendix D
(Section 262 of the Delaware General Corporation Law) to
the Proxy Statement included in Exhibit 17(d) hereto
Item 17(f) Not Applicable
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<PAGE>
ITEM 1. Issuer and Class of Security Subject to the Transaction.
- - ------- --------------------------------------------------------
(a) The information set forth in "Cover Page" and "SUMMARY -
The Parties" in the Proxy Statement is incorporated herein
by reference.
(b) The information set forth in "Cover Page," and SUMMARY - The
Special Meeting - Record Date and Voting" in the Proxy
Statement is incorporated herein by reference.
(c) - (d) The information set forth in "MARKET PRICE AND DIVIDEND
INFORMATION" in the Proxy Statement is incorporated herein by
reference.
(e) Not applicable.
(f) The information set forth in "CERTAIN TRANSACTIONS IN THE
COMMON STOCK" in the Proxy Statement is incorporated herein
by reference.
ITEM 2. Identity and Background.
- - ------- ------------------------
This Statement is being jointly filed by Foamex International (the issuer of the
class of equity securities which is the subject of the transaction), Trace,
Trace Merger Sub, Inc. (a wholly owned subsidiary of Trace) and Marshall S.
Cogan, Chairman and Chief Executive Officer of Trace.
(a) - (d), (g) The information set forth in "SUMMARY - The Parties" and
"APPENDIX E - Certain Information Regarding Directors and
Executive Officers of Trace, Merger Sub and the Company" in
the Proxy Statement is incorporated herein by reference.
(e) and (f) None of Trace, Merger Sub, Foamex International or Marshall S.
Cogan or, to the best of their knowledge, no executive
officer, director or controlling person of Trace, Merger Sub
or Foamex International has during the past five years (i)
been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or (ii) been a party to a
civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was
or is subject to a judgment, decree or final order enjoining
further violations of, or prohibiting activities subject to,
federal or state securities laws or finding any violation with
respect to such laws.
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<PAGE>
ITEM 3. Past Contacts, Transactions or Negotiations.
- - ------- --------------------------------------------
(a)(1) The information set forth in "CERTAIN TRANSACTIONS" and
"CERTAIN TRANSACTIONS IN THE COMMON STOCK" in the Proxy
Statement is incorporated herein by reference.
(a)(2) - (b) The information set forth in "SPECIAL FACTORS - Background of
the Merger," SPECIAL FACTORS - Recommendation of the Board of
Directors; Fairness of the Merger," SPECIAL FACTORS -
Recommendation of the Special Committee Against the Merger;
Unfairness of the Merger," SPECIAL FACTORS - Interests of
Certain Persons in the Merger," "THE MERGER AGREEMENT" and
"CERTAIN TRANSACTIONS" in the Proxy Statement is incorporated
herein by reference.
ITEM 4. Terms of the Transaction.
- - ------- -------------------------
(a) - (b) The information set forth in "SUMMARY," "SPECIAL FACTORS -
Purpose and Structure of the Merger," "SPECIAL FACTORS -
Interests of Certain Persons in the Merger," "SPECIAL FACTORS
- Certain Effects of the Merger," "SPECIAL FACTORS - Certain
Federal Income Tax Consequences," "THE MERGER AGREEMENT," and
"APPENDIX A - The Merger Agreement" in the Proxy Statement is
incorporated herein by reference.
ITEM 5. Plans or Proposals of the Issuer or Affiliate.
- - ------- ----------------------------------------------
(a), (b), (d)
and (e) The information set forth in "SPECIAL FACTORS - Plans for the
Company After the Merger" in the Proxy Statement is
incorporated herein by reference.
(c), (f) and
(g) The information set forth in "SUMMARY - Special Factors -
Certain Effects of the Merger," "SPECIAL FACTORS - Interests
of Certain Persons in the Merger Directors and Officers," and
"SPECIAL FACTORS - Certain Effects of the Merger" in the Proxy
Statement is incorporated herein by reference.
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<PAGE>
ITEM 6. Source and Amounts of Funds or Other Consideration.
- - ------- ---------------------------------------------------
(a) - (b) The information set forth in "SPECIAL FACTORS - Sources of
Funds; Fees and Expenses" and "THE MERGER AGREEMENT - Fees and
Expenses" in the Proxy Statement is incorporated herein by
reference.
(c) The information set forth in "SPECIAL FACTORS - Sources of
Funds; Fees and Expenses" in the Proxy Statement is
incorporated herein by reference.
(d) Not applicable.
ITEM 7. Purpose(s), Alternatives, Reasons and Effects.
- - ------- ----------------------------------------------
(a) The information set forth in "SUMMARY - Special Factors -
Purpose and Structure of the Merger," "SUMMARY - Special
Factors - Potential Acceleration of Foamex Debt in the Absence
of a Merger," "SPECIAL FACTORS - Purpose and Structure of the
Merger," SPECIAL FACTORS - Potential Acceleration of Foamex
Debt in the Absence of a Merger," and "SPECIAL FACTORS -
Background of the Merger," in the Proxy Statement is
incorporated herein by reference.
(b) The information set forth in "SPECIAL FACTORS - Background of
the Merger" and "SPECIAL FACTORS - Purpose and Structure of
the Merger" in the Proxy Statement is incorporated herein by
reference.
(c) The information set forth in "SUMMARY - Special Factors -
Potential Acceleration of Foamex Debt in the Absence of a
Merger," "SPECIAL FACTORS - Purpose and Structure of the
Merger," "SPECIAL FACTORS - Recommendation of the Board of
Directors; Fairness of the Merger," "SPECIAL FACTORS -
Recommendation of the Special Committee Against the Merger;
Unfairness of the Merger," and "SPECIAL FACTORS - Potential
Acceleration of Foamex Debt in the Absence of a Merger" in the
Proxy Statement is incorporated herein by reference.
(d) The information set forth in "SUMMARY - Special Factors -
Potential Acceleration of Foamex Debt in the Absence of a
Merger," "SUMMARY - Special Factors - Certain Effects of the
Merger," "SUMMARY - Special Factors - Certain U.S. Federal
Income Tax Consequences," "SUMMARY - The Merger," "SPECIAL
FACTORS - Purpose and Structure of the Merger," "SPECIAL
FACTORS - Plans for the Company After the Merger," SPECIAL
FACTORS - Potential
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<PAGE>
Acceleration of Foamex Debt in the Absence of a Merger,"
"SPECIAL FACTORS - Certain Effects of the Merger," "SPECIAL
FACTORS - Certain Federal Income Tax Consequences" and "THE
MERGER AGREEMENT" in the Proxy Statement is incorporated
herein by reference.
ITEM 8. Fairness of the Transaction.
- - ------- ----------------------------
(a) - (b) The information set forth in "SUMMARY - Special Factors -
Recommendation of the Board of Directors; Fairness of the
Merger," "SUMMARY - Special Factors - Recommendation of the
Special Committee Against the Merger; Unfairness of the
Merger," "SPECIAL FACTORS - Background of the Merger,"
"SPECIAL FACTORS - Purpose and Structure of Merger," "SPECIAL
FACTORS - Recommendation of the Board of Directors; Fairness
of the Merger," "SPECIAL FACTORS - Opinion of Financial
Advisor to the Board of Directors," "SPECIAL FACTORS -
Recommendation of the Special Committee Against the Merger;
Unfairness of the Merger," "SPECIAL FACTORS - Opinion of
Financial Advisor to the Special Committee," "SPECIAL FACTORS
- Interests of Certain Persons in the Merger," "SPECIAL
FACTORS - Perspective of Trace and Merger Sub on the Merger,"
"SPECIAL FACTORS - Perspective of Marshall S. Cogan on the
Merger," "THE SPECIAL MEETING - Matters to Be Considered at
the Special Meeting," "CERTAIN TRANSACTIONS IN THE COMMON
STOCK," "APPENDIX B - Opinion of Ramius Capital Group, L.L.C."
and "APPENDIX C - Opinion of The Beacon Group Capital
Services, LLC" in the Proxy Statement is incorporated herein
by reference.
(c) The information set forth in "SUMMARY - The Special Meeting -
Vote Required; Revocability of Proxies," "SUMMARY - Special
Factors - Recommendation of the Board of Directors; Fairness
of the Merger," "SUMMARY - Special Factors - Recommendation of
the Special Committee Against the Merger; Unfairness of the
Merger," "SPECIAL FACTORS - Recommendation of the Board of
Directors; Fairness of the Merger," "SPECIAL FACTORS -
Recommendation of the Special Committee Against the Merger;
Unfairness of the Merger," and "THE SPECIAL MEETING - Vote
Required; Revocability of Proxies" in the Proxy Statement is
incorporated herein by reference.
(d) The information set forth in "SUMMARY - Special Factors -
Recommendation of the Board of Directors; Fairness of the
Merger," "SUMMARY -
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<PAGE>
Special Factors - Opinion of Financial Advisor to the Board of
Directors," "SUMMARY - Special Factors - Recommendation of the
Special Committee Against the Merger; Unfairness of the
Merger," "SUMMARY - Special Factors - Opinion of Financial
Advisor to the Special Committee," "SPECIAL FACTORS -
Background of the Merger," "SPECIAL FACTORS - Recommendation
of the Board of Directors; Fairness of the Merger," "SPECIAL
FACTORS - Opinion of Financial Advisor to the Board of
Directors," "SPECIAL FACTORS - Opinion of Financial Advisor to
the Special Committee," "SPECIAL FACTORS - Recommendation of
the Special Committee Against the Merger; Unfairness of the
Merger," "APPENDIX B - Opinion of Ramius Capital Group,
L.L.C." and "APPENDIX C - Opinion of The Beacon Group Capital
Services, LLC" in the Proxy Statement is incorporated herein
by reference.
(e) The information set forth in "SUMMARY - Special Factors -
Recommendation of the Board of Directors; Fairness of the
Merger," "SUMMARY - Special Factors - Recommendation of the
Special Committee Against the Merger; Unfairness of the
Merger," "SPECIAL FACTORS - Recommendation of the Board of
Directors; Fairness of the Merger" and "SPECIAL FACTORS -
Recommendation of the Special Committee Against the Merger;
Unfairness of the Merger" in the Proxy Statement is
incorporated herein by reference.
(f) None.
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<PAGE>
ITEM 9. Reports, Opinions, Appraisals and Certain Negotiations.
- - ------- -------------------------------------------------------
(a) - (c) The information set forth in "SUMMARY - Special Factors -
Recommendation of the Board of Directors; Fairness of the
Merger," "SUMMARY - Special Factors - Opinion of Financial
Advisor to the Board of Directors," "SUMMARY - Special Factors
- Recommendation of the Special Committee Against the Merger;
Unfairness of the Merger," "SUMMARY - Special Factors -
Opinion of Financial Advisor to the Special Committee,"
"SPECIAL FACTORS - Background of the Merger," "SPECIAL FACTORS
- Recommendation of the Board of Directors; Fairness of the
Merger," "SPECIAL FACTORS - Opinion of Financial Advisor to
the Board of Directors," "SPECIAL FACTORS - Recommendation of
the Special Committee Against the Merger; Unfairness of the
Merger," "SPECIAL FACTORS - Opinion of Financial Advisor to
the Special Committee," "APPENDIX B - Opinion of Ramius
Capital Group, L.L.C." and "APPENDIX C - Opinion of The Beacon
Group Capital Services, LLC" in the Proxy Statement is
incorporated herein by reference.
ITEM 10. Interest in Securities of the Issuer.
- - -------- -------------------------------------
(a) The information set forth in "SPECIAL FACTORS -Interests of
Certain Persons in the Merger" and "SECURITY OWNERSHIP OF
MANAGEMENT AND CERTAIN BENEFICIAL OWNERS" in the Proxy
Statement is incorporated herein by reference.
(b) The information set forth in "CERTAIN TRANSACTIONS IN THE
COMMON STOCK" in the Proxy Statement is incorporated herein by
reference.
ITEM 11. Contracts, Arrangements or Understandings with Respect to the
Issuer's Securities.
- - -------- -------------------------------------------------------------
The information set forth in "Letter to Stockholders,"
"SUMMARY - The Special Meeting - Record Date and Voting,"
"SUMMARY - The Special Meeting - Vote Required; Revocability
of Proxies," "SPECIAL FACTORS - Background of the Merger,"
"SPECIAL FACTORS - Interests of Certain Persons in the
Merger," "SPECIAL FACTORS - Sources of Funds; Fees and
Expenses," "THE SPECIAL MEETING - Matters to be Considered at
the Special Meeting," "THE SPECIAL MEETING Record Date and
Voting," "THE SPECIAL MEETING - Vote Required; Revocability of
-16-
<PAGE>
Proxies," "THE MERGER AGREEMENT," "CERTAIN TRANSACTIONS" and
"APPENDIX A--The Merger Agreement" in the Proxy Statement is
incorporated herein by reference.
ITEM 12. Present Intention and Recommendation of Certain Persons with
Regard to the Transaction.
- - -------- -------------------------------------------------------------
(a) - (b) The information set forth in "SUMMARY - Appraisal Rights,"
"SUMMARY - The Special Meeting - Vote Required; Revocability
of Proxies," "THE SPECIAL MEETING - Vote Required;
Revocability of Proxies," "THE SPECIAL MEETING - Appraisal
Rights," "SPECIAL FACTORS - Perspective of Trace and Merger
Sub on the Merger," "SPECIAL FACTORS - Perspective of Marshall
S. Cogan on the Merger," and Statement of appraisal rights
(incorporated by reference to Appendix D to the Proxy
Statement attached hereto as Exhibit 17(d)) in the Proxy
Statement is incorporated herein by reference.
ITEM 13. Other Provisions of the Transaction.
- - -------- ------------------------------------
(a) The information set forth in "SUMMARY - Appraisal Rights,"
"THE SPECIAL MEETING - Appraisal Rights" and Statement of
appraisal rights (incorporated by reference to Appendix D to
the Proxy Statement attached hereto as Exhibit 17(d)) in the
Proxy Statement is incorporated herein by reference.
(b) - (c) Not applicable.
ITEM 14. Financial Information.
- - -------- ----------------------
(a) The information set forth in "SELECTED HISTORICAL FINANCIAL
DATA" in the Proxy Statement is incorporated herein by
reference, as are the audited financial statements contained
in the Company's Annual Report on Form 10-K for the year ended
December 28, 1997 (as amended).
(b) The information set forth in "CERTAIN PROJECTED FINANCIAL
DATA" and "UNAUDITED PRO FORMA COMBINED STATEMENT OF
OPERATIONS" in the Proxy Statement is incorporated herein by
reference.
ITEM 15. Persons and Assets Employed, Retained or Utilized.
- - -------- --------------------------------------------------
(a) - (b) The information set forth "SUMMARY - Special Factors -
Recommendation of the Board of Directors; Fairness of the
Merger," "SUMMARY - Special Factors - Opinion of Financial
Advisor to
-17
<PAGE>
the Board of Directors," "SUMMARY - Special Factors -
Recommendation of the Special Committee Against the Merger;
Unfairness of the Merger," "SUMMARY - Special Factors -
Opinion of Financial Advisor to the Special Committee,"
"SUMMARY - Solicitation of Proxies," "SPECIAL FACTORS -
Background of the Merger," "SPECIAL FACTORS - Recommendation
of the Board of Directors; Fairness of the Merger," "SPECIAL
FACTORS - Opinion of Financial Advisor to the Board of
Directors," "SPECIAL FACTORS - Recommendation of the Special
Committee Against the Merger; Unfairness of the Merger,"
"SPECIAL FACTORS - Opinion of Financial Advisor to the Special
Committee," "SPECIAL FACTORS - Sources of Funds; Fees and
Expenses," "THE SPECIAL MEETING - Solicitation of Proxies,"
and "THE MERGER AGREEMENT - Fees and Expenses" in the Proxy
Statement is incorporated herein by reference.
ITEM 16. Additional Information.
- - -------- -----------------------
The information set forth in the Proxy Statement is
incorporated herein by reference.
ITEM 17. Material to be Filed as Exhibits.
- - -------- ---------------------------------
(a) To be filed by amendment.
(b)(1) Opinion of The Beacon Group Capital Services, LLC, dated
November 2, 1998 (incorporated by reference to Appendix C to
the Proxy Statement attached hereto as Exhibit 17(d)).
(b)(2) Report of The Beacon Group Capital Services, LLC, dated
November 2, 1998.
(b)(3) Opinion of Ramius Capital Group, L.L.C., dated November 5,
1998 (incorporated by reference to Appendix B to the Proxy
Statement attached hereto as Exhibit 17(d)).
(b)(4) Report of Ramius Capital Group, L.L.C., dated November 5,
1998.
(c) Agreement and Plan of Merger, dated as of November 5, 1998,
among Trace, Merger Sub and Foamex International (incorporated
by reference to Appendix A to the Proxy Statement attached
hereto as Exhibit 17(d)).
-18-
<PAGE>
(d) Amended preliminary copy of Letter to Stockholders, Notice of
Special Meeting of Stockholders and form of proxy, and
Amendment No. 3 to Preliminary Proxy Statement, each relating
to the special meeting of Stockholders of Foamex
International.
(e) Statement of appraisal rights (Section 262 of the Delaware
General Corporation Law) (incorporated by reference to
Appendix D to the Proxy Statement attached hereto as Exhibit
17 (d)).
(f) Not Applicable.
-19-
<PAGE>
SIGNATURES
After due inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this statement is true, complete and
correct.
Dated: November 16, 1998
TRACE INTERNATIONAL HOLDINGS, INC.
By: /s/ Philip N. Smith, Jr.
------------------------------
Name: Philip N. Smith, Jr.
Title: Senior Vice President
TRACE MERGER SUB, INC.
By: /s/ Tambra S. King
------------------------------
Name: Tambra S. King
Title: Vice President
FOAMEX INTERNATIONAL INC.
By: /s/ Andrea Farace
------------------------------
Name: Andrea Farace
Title: Chief Executive Officer
/s/ Marshall S. Cogan
------------------------------
Marshall S. Cogan
-20-
<PAGE>
Exhibit Index
-------------
17(a) To be filed by amendment.
17(b)(1) Opinion of The Beacon Group Capital Services, LLC, dated November 2,
1998 (incorporated by reference to Appendix C to the Proxy Statement
attached hereto as Exhibit 17(d)).
17(b)(2) Report of The Beacon Group Capital Services, LLC, dated November 2,
1998.
17(b)(3) Opinion of Ramius Capital Group, L.L.C., dated November 5, 1998
(incorporated by reference to Appendix B to the Proxy Statement
attached hereto as Exhibit 17(d)).
17(b)(4) Report of Ramius Capital Group, L.L.C., dated November 5, 1998.
17(c) Agreement and Plan of Merger, dated as of November 5, 1998, among
Trace, Merger Sub and Foamex International (incorporated by
reference to Appendix A to the Proxy Statement attached hereto as
Exhibit 17(d)).
17(d) Amended preliminary copy of Letter to Stockholders, Notice of
Special Meeting of Stockholders and form of proxy, and Amendment No.
3 to Preliminary Proxy Statement, each relating to the special
meeting of Stockholders of Foamex International.
17(e) Statement of appraisal rights (Section 262 of the Delaware General
Corporation Law) (incorporated by reference to Appendix D to the
Proxy Statement attached hereto as Exhibit 17(d)).
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
Overview Of The Proposed Terms Of The Offer
($ in millions, except per share amounts)
<TABLE>
<S> <C>
Date of Initial Offer: March 16, 1998
Date of Revised Offer: October 16, 1998
Revised Offer Price Per Share: $12.00
Premium (Discount) to:
Closing Price on Last Business Day Before Revised Offer
(10/15/98-$10.50) 14.3%
Closing Price on Last Business Day Before Original $17.00 Offer
(3/13/98-$13.88) (13.5%)
30-Day Average Closing Price through October 15, 1998 ($14.00) (14.3%)
52-Week Closing High (4/13/98-$17.94) (33.1%)
Currently Agreed Transaction Price ($18.75) (36.0%)
All-Time High (2/3/97-$21.00) (42.9%)
% of Shares Outstanding of Suds currently Owned by Trace: 46%(a)(11.5 million)
Form of Transaction: Going-Private transaction involving a Merger
by and among Trace International Holdings,
Inc. ("Trace"), a wholly-owned subsidiary of
Trace and Foamex International Inc. ("Suds")
Total Equity Value:(b) $304.3
Consideration Payable To Shareholders Other Than Trace:(c) $166.2
Enterprise Value (Total Equity Value Plus Net Debt Assumed):(d) $1,086.0
Surviving Entity: Suds
Necessary Approvals: Board of Directors and Stockholders of Suds,
including a majority of the Stockholders other than
Trace and its subsidiaries
</TABLE>
Notes:
(a) Based on total shares outstanding of 25.0 million
(b) Based on 25.3 million shares and share equivalents (as of 9/30/98)
calculated using the Treasury Method (1.5 million options with an average
exercise price of $9.41, 0.6 million warrants with an average exercise price
of $11.52 and 1.2 million warrants with an average exercise price of $12.30
outstanding on 9/30/98)
(c) Includes cost to purchase shares not owned by Trace as well as to redeem all
outstanding "in-the-money" warrants and stock options
(d) Based on September 30, 1998 net debt (total debt less cash and promissory
demand notes due from Trace) of $781.7 million
- - --------------------------------------------------------------------------------
November 2, 1998 1 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
Beacon Has Conducted Due Diligence On Suds And The Revised Trace Offer, Which
Included:
[ ] Multiple meetings and discussions with a broad group of Suds' senior
management as well as Suds' independent public accountants and consultants
o Full review of Suds operations (Most recently discussed at a meeting at
Suds' headquarters on October 28, 1998)
o Discussion of 1998 budget and forecasts, and longer-term projections,
including the five-year "No Contingency" and "Contingency" case
forecasts for the Company prepared by management and delivered to Beacon
on October 22, 1998
o Review of acquisition and divestiture history
o Review of actual and historical financial performance relative to
budgets
o Review of the Crain transaction, including progress on integration plans
and specific cost savings and reduction initiatives
o Review of historical restructuring initiatives and one-time charges
[ ] A review of:
o The October 28, 1998 draft of the Amended and Restated Merger Agreement
o The Prospectus issued by the Company in connection with the initial
public offering of its common stock in December 1993
o Annual Reports to shareholders and Annual Reports on Form 10-K of the
Company for the four years ended December 31, 1997
o Certain interim reports to shareholders and Quarterly Reports on Form
10-Q
- - --------------------------------------------------------------------------------
November 2, 1998 2 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
Beacon Has Conducted Due Diligence On Suds And The Revised Trace Offer, Which
Included (Continued):
o Various other communications from the Company to its shareholders
o Certain internal financial analyses and financial forecasts for the
Company prepared by Suds Management, including those relating to the
Company's December acquisition of Crain Industries, Inc. ("Crain"), the
integration of Crain into the Company and the reorganization of the
Company in 1998 following the acquisition of Crain
[ ] Tour of Company plants in
o Tupelo, Mississippi
o Santa Theresa, New Mexico
o Fairless Hills, Pennsylvania
o Eddystone, Pennsylvania
[ ] Several meetings with Trace (the most recent having taken place on October
27, 1998) and Trace's legal and financial advisors and financing sources
o Discussion of Trace's motivation for making the currently agreed and
revised offer
o Review of Trace's historical affiliation with the Company
o Review of inter-company transactions and arrangements
o Examination of transaction structure and financing
- - --------------------------------------------------------------------------------
November 2, 1998 3 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
Beacon's Due Diligence Included A Review Of Certain Key Areas Related To Suds'
Historical And Prospective Financial Performance
[ ] Suds' historical and current product mix
[ ] Financial performance and position by business unit
[ ] One-time restructuring charges and other non-recurring items
[ ] Crain acquisition and projected and realized synergies
o Major acquisition of key competitor completed in December 1997 for $214
million
o Incremental annual sales and EBITDA of $325 million and $29 million,
respectively, before synergies
o Forecast net cost savings synergies of approximately $26.3 million and
$41.1 million in 1998 and 1999, respectively
[ ] Actual year-over-year earnings and cash flow growth in 1998
[ ] Management financial forecasts for the years 1998-2003 ("Suds Management
Forecast" - see page 12)
o "No Contingency" case projecting EBITDA of $184.5 million in 1998 growing
to $246.2 million in 2003 compared to cumulative pro forma 1997 EBITDA
(excluding non-recurring charges) of $126.8 million for Suds and Crain
combined
o "Contingency Case" reflecting the potential impact of an economic
slowdown, among other potential contingencies, projecting EBITDA of
$182.5 million in 1998 growing to $242.2 million in 2003
- - --------------------------------------------------------------------------------
November 2, 1998 4 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
Beacon's Due Diligence Included A Review Of Certain Key Areas Related To Suds'
Historical And Prospective Financial Performance (Continued)
[ ] Trace relationship with Suds, including the nature and impact of
inter-company transactions
o Management fee of $3 million per year payable to Trace by Suds
o Additional annual expenses for Suds of $4 million related to the New
York office, the operation of which is intertwined with Trace's other
activities
o Total payments of $7 million have potential impact on equity share
valuation in the range of up to $2 per Suds share, depending upon extent
to which the expense would be incurred regardless of affiliation with
Trace (calculated by applying a 7.0x multiple to the expense and
dividing by 25.3 million fully-diluted shares)
o Cost of operating Company-owned aircraft in 1998 budgeted at $3 million.
Aircraft also used extensively by Trace executives
[ ] Suds' historical and current position with respect to chemical raw materials
and key suppliers of such materials
- - --------------------------------------------------------------------------------
November 2, 1998 5 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
The Merger Agreement Was Executed With Trace and Trace's Revised Offer Has Been
Made In The Midst Of A Major Repositioning Of Suds
[ ] The Merger Agreement and revised offer come following a lengthy period
during which Suds' historical record has made it difficult for the equity
market to assess the core earnings and future potential of the Company
o Impact of acquisitions (Crain, Perfect Fit and JPS Automotive) as well as
divestitures (Dalton, Perfect Fit and JPS Automotive - all sold between
1996 and 1997)
o Numerous restructuring and one-time charges in each of the past several
years
o Several major refinancings
o History of disappointing share price and EPS performance
o A number of changes in senior management
[ ] In 1998, the Company has been restructured into four core SBUs to drive
growth and enhance product development in Automotive Products, Technical
Products and International, and drive price realization and cost management
in the mature Carpet Cushion and Foam Products business units
[ ] The acquisition of Crain, a major competitor in certain key product areas,
has provided Suds
o Greater mass in the cushioning (bedding, furniture, fibers and
packaging) and carpet cushioning markets
o Increased presence in the consumer products market
o Increased chemical purchasing power
o Opportunity to capture substantial cost savings o Potentially more
favorable long-term pricing opportunities
- - --------------------------------------------------------------------------------
November 2, 1998 6 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
The Merger Agreement Was Executed With Trace and Trace's Revised Offer Has Been
Made In The Midst Of A Major Repositioning Of Suds (Continued)
[ ] One of the most favorable chemical raw material forward supply/demand
dynamics in several years
o North American TDI capacity is forecast to increase approximately 42%
based on new Dow and BASF plants expected to come on stream in 1998 and
1999
o Suds management's forecast of worldwide supply/demand figures for TDI
and propylene oxide (precursor of polyols) shows significant reductions
in capacity utilization:
<TABLE>
<CAPTION>
(Millions of Pounds)
TDI Propylene Oxide
------------------------------------------ -------------------------------------------
Forecast Forecast Capacity Forecast Forecast Capacity
Capacity Demand Utilization Capacity Demand Utilization
-------- ------ ----------- -------- ------ -----------
<S> <C> <C> <C> <C> <C> <C>
1997 2,752 2,556 93% 10,100 9,500 94%
1998 3,449 2,688 78% 10,800 10,000 93%
1999 3,670 2,825 77% 11,800 10,100 86%
2000 3,766 2,980 79% 12,500 11,000 88%
</TABLE>
[ ] Potential new growth opportunities in the automotive business
o Automotive sales forecast to grow from approximately $215 million in
1997 to $395 million in 1999. Annual sales growth between 1999 and 2002
forecast at 4.5%
- - --------------------------------------------------------------------------------
November 2, 1998 7 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
Suds Operating Results In 1998 Indicate That The Company Has Generally Been
Successful In Executing The Crain Consolidation And Growing Earnings And Cash
Flow
<TABLE>
<CAPTION>
1997 (a) 1998
--------------------------------------------------- --------------------------------------------------
Pro Forma for Crain, SIMCO and Dalton, But Not
Reflecting Any Savings Related To Crain Acquisition Actual Forecast Forecast
--------------------------------------------------- -------------------------- -------- --------
Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4(b) Total
-- -- -- -- ----- -- -- -- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales $296.1 $305.7 $310.1 $309.2 $1,221.1 $313.8 $298.5 $332.7 $342.6 $1,287.6
Gross Profit $47.3 $50.0 $44.8 $43.6 $185.7 $51.2 $56.9 $56.7 $64.3 $229.1
Margin 16.0% 16.4% 14.4% 14.1% 15.2% 16.3% 19.1% 17.1% 18.8% 17.8%
EBITDA $31.6 $34.9 $29.6 $30.8 $126.8 $37.4 $44.9 $46.1 $56.0 $184.5
Margin 10.7% 11.4% 9.5% 10.0% 10.4% 11.9% 15.1% 13.9% 16.3% 14.3%
EBIT $23.6 $26.5 $21.0 $20.2 $91.3 $28.8 $36.0 $36.9 $45.5 $147.2
Margin 8.0% 8.7% 6.8% 6.5% 7.5% 9.2% 12.1% 11.1% 13.3% 11.4%
</TABLE>
Notes:
(a) Based on prior input from Suds management, $15.6 million of costs recognized
in Q4 and characterized as non-recurring in the presentation of 1997
financial results have for the purposes of this analysis been spread evenly
over Q1 - Q3
(b) Numbers under No Contingency case; Contingency case reflects $2 million less
in gross profit, EBITDA and EBIT
- - --------------------------------------------------------------------------------
November 2, 1998 8 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
Suds Management Expects Suds' 1998 Financial Performance To Exceed Original
Budget Expectations And Be In Line With Forecasts Prepared in May
<TABLE>
<CAPTION>
Six Months Ended June 30, 1998 Nine Months Ended September 30, 1998 Forecast Year Ending December 31, 1998
---------------------------------- ------------------------------------ -------------------------------------------
Original May Original May October Original May
Actual Budget Forecast(c) Actual Budget Forecast(c) Estimate(b) Budget Forecast(c)
------ -------- ---------- ------- -------- ----------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales $612.3 $638.9 $646.9 $945.0 $964.8 $990.8 $1,287.6 $1,299.5 $1,353.1
Gross Profit $108.1 $108.9 $108.0 $164.8 $170.6 $172.9 $229.1 $232.8 $229.2 - $239.3(d)
Margin 17.7% 17.0% 16.7% 17.4% 17.7% 17.5% 17.8% 17.9% NA
EBITDA $82.3 $79.6 $80.1 $128.5 $129.0 $134.1 $184.5 $178.8 $180.0 - $190.1(d)
Margin 13.4% 12.5% 12.4% 13.6% 13.4% 13.5% 14.3% 13.8% NA
EBIT $64.8 $63.3 $63.4 $101.7 $104.6 $109.1 $147.2 $144.6 $145.0 - $155.3(d)
Margin 10.6% 9.9% 9.8% 10.8% 10.8% 11.0% 11.4% 11.1% NA
Net Income $17.8(a) $17.6 $16.8 $28.1(a) $32.4 $33.3 $43.5(b) $45.7 $43.2 - $49.2
Margin 2.9% 2.8% 2.6% 3.0% 3.4% 3.4% 3.4% 3.5% NA
</TABLE>
Notes:
(a) Excludes approximately $1 million after-tax costs related to GFI
transaction expenses and extraordinary loss on early extinguishment of debt
of $1.9 million
(b) Numbers under No Contingency case; Contingency Case would reflect $2
million less in gross profit, EBITDA and EBIT and $1.2 million less in net
income; excludes approximately $1 million after-tax costs related to GFI
transaction expenses and extraordinary loss on early extinguishment of debt
of $1.9 million
(c) Reflects numbers provided in forecast delivered to Beacon on May 12, which
correspond to the upper end of a range of forecast financial results
delivered to Beacon orally in June by Suds management; the range was used
by Beacon in developing its June 25, 1998 fairness opinion
(d) Reflects range of Suds management's estimated financial results for
1998 which were used by Beacon in developing its June 25, 1998
fairness opinion
- - --------------------------------------------------------------------------------
November 2, 1998 9 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
Other Considerations With Respect To Valuation
[ ] Based on year-to-date results, Suds Management estimates it is on track to
achieve Crain-related net cost savings synergies of approximately $26.3
million in 1998, and projects these synergies will increase to approximately
$41.1 million in 1999. The Company may face execution risk in realizing the
higher level of synergies
[ ] The markets served by Suds are cyclical and the Company's business likely
would be adversely impacted in an economic downturn. While management has
considered certain contingencies related to a potential economic slowdown
(presented in management's "Contingency Case" financial projections), it has
not constructed a "bottom-up" recession scenario
[ ] Suds operates in competitive market segments, all of which are served by
numerous foam suppliers. This dynamic possibly could lead to pricing
pressures which could adversely impact profitability
[ ] Potential increases in key chemical raw material prices as a result of
changes in the supply/demand balance or other factors could adversely impact
margins and profit/cash flow levels
[ ] While Automotive is expected to be a growth business, the Company's
primary customers in this segment (e.g., Lear and JCI) have demonstrated a
propensity to apply continuous pricing pressure on their suppliers and move
business among suppliers on the basis of minor price differentials
- - --------------------------------------------------------------------------------
November 2, 1998 10 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
Suds Historical Financial Results(a)
($ in millions, except per share amounts)
<TABLE>
<CAPTION>
Fiscal Years Ended December 31, LTM
----------------------------------------------------- 1997 through
1993 1994 1995 1996 1997 (b) Pro Forma(c) 9/30/98
---- ---- ---- ---- -------- ------------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Sales $695.8 $833.7 $862.8 $926.4 $931.1 $1,221.1 $1,254.2
% Growth 38.7% 19.8% 3.5% 7.4% 0.5% 31.8% 34.7%
EBITDA $76.4 $102.3 $54.1 $117.3 $102.6 $126.8 $159.2
% Margin 11.0% 12.3% 6.3% 12.7% 11.0% 10.4% 12.7%
% Growth 32.7% 33.8% (47.1%) 116.6% (12.5%) -- --
EBIT $45.8 $80.2 $30.8 $94.9 $80.6 $91.3 $121.9
% Margin 6.6% 9.6% 3.6% 10.2% 8.7% 7.5% 9.7%
% Growth 14.6% 75.0% (61.5%) 207.8% (15.1%) -- --
Earnings Per Share ($0.17) $0.83 ($1.00) $1.12 $0.73 NA $1.16(d)
% Growth NM NM NM NM (34.5%) -- --
</TABLE>
Notes:
(a) All figures exclude one-time charges and credits and non-recurring items as
identified by Suds' Management. Historical EPS figures are based on weighted
average fully diluted shares outstanding
(b) Excludes "special charges" of $4.4 million ($4.0 million in COGS and $0.4
million in SG&A)
(c) Pro forma to reflect full year of Suds, Crain and Simco (a small company
acquired by Crain in 1997) and exclude Dalton (sold by Suds in October
1997)
(d) Calculated as $121.9 million of LTM EBIT less $72 million assumed interest
expense less $1 million of net other expense (assuming add back of $1.87
million pretax expenses associated with the GF1 transaction); tax rate of
40%; 25.3 million shares and equivalents
- - --------------------------------------------------------------------------------
November 2, 1998 11 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
Suds Management Financial Forecasts(a)
($ in millions, except per share amounts)
<TABLE>
<CAPTION>
NO CONTINGENCY CASE
----------------------------------------------------------------------
Fiscal Years Ending December 31,
1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net Sales $1,287.6 $1,416.4 $1,456.2 $1,524.0 $1,581.4 $1,641.5
% Growth 5.4% 9.1% 2.7% 4.7% 3.8% 3.8%
EBITDA $184.5 $210.8 $216.2 $227.2 $236.3 $246.2
% Margin 14.3% 14.9% 14.8% 14.9% 14.9% 15.0%
% Growth 45.5% 14.3% 2.6% 5.1% 4.0% 4.2%
EBIT $147.2 $174.7 $180.1 $191.2 $200.2 $210.1
% Margin 11.4% 12.3% 12.4% 12.5% 12.7% 12.8%
% Growth 61.2% 18.7% 3.1% 6.2% 4.7% 4.9%
Earnings Per Share $1.72(b) $2.42 $2.68 $3.07 $3.39 $3.74
% Growth -- 40.6% 10.8% 14.7% 10.4% 10.2%
<CAPTION>
CONTINGENCY CASE
----------------------------------------------------------------------
Fiscal Years Ending December 31,
1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net Sales $1,287.6 $1,416.4 $1,456.2 $1,524.0 $1,581.4 $1,641.5
% Growth 5.4% 9.1% 2.7% 4.7% 3.8% 3.8%
EBITDA $182.5 $193.8 $198.2 $217.2 $231.3 $242.2
% Margin 14.2% 13.7% 13.6% 14.3% 14.6% 14.8%
% Growth 43.9% 6.2% 2.3% 9.6% 6.5% 4.7%
EBIT $145.2 $157.7 $162.1 $181.1 $195.2 $210.1
% Margin 11.3% 11.1% 11.1% 11.9% 12.3% 12.8%
% Growth 59.0% 8.6% 2.8% 11.7% 7.8% 7.6%
Earnings Per Share $1.67(b) $1.97 $2.23 $2.81 $3.24 $3.61
% Growth -- 18.1% 12.8% 26.1% 15.3% 11.5%
</TABLE>
Notes:
- - ------
(a) Suds Management five-year forecasts (No Contingency and Contingency cases)
for 1998 through 2003 provided to Beacon on October 22, 1998. Forecast EPS
are fully diluted based on a $12.00 share price
(b) Excludes $1.87 million of pre-tax expenses associated with the GFI
transaction ($0.04 per share after tax) and $1.9 million of extraordinary
net loss on the early extinguishment of debt
- - --------------------------------------------------------------------------------
November 2, 1998 12 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
Beacon Employed Numerous Approaches In Valuing Suds Which Included:
[ ] Common stock comparison with comparable public companies
o Beacon examined groups of home furnishing companies and automotive
interior components companies. These companies serve similar customers
and markets as Suds, in many instances sell products complementary to
those of Suds and have operating and financial characteristics similar
to Suds
o Companies in these industries tend to experience similar supply/demand
dynamics and macroeconomic forces as Suds as a result of serving similar
markets and customers
[ ] Analysis of multiples paid in transactions involving comparable companies
o Suds' acquisition of Crain is the most comparable transaction (purchase
price of $214 million was 7.4x Crain's 1997 annualized EBITDA)
o Other transactions examined were in the home furnishings and automotive
interior components industries
[ ] Discounted cash flow analysis
[ ] Leveraged buy-out analysis
[ ] Discounted future equity value analysis
[ ] Premiums paid analysis for "going private" transactions
- - --------------------------------------------------------------------------------
November 2, 1998 13 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
Beacon Applied The Valuation Parameters From Its Analyses To Suds Management
Contingency And No Contingency Forecasts And Trailing Pro Forma Financial Data
[ ] Suds Management No Contingency and Contingency Forecasts of 1998 EBITDA,
1998 EBIT and 1998 and 1999 Net Income, as well as discounted cash flow and
third-party LBO analysis performed based on Suds Management operating
assumptions as reflected in these Forecasts (blue bars in graph on following
page)
[ ] Latest Twelve Months ("LTM") Pro Forma Results through September 30, 1998
of EBITDA, EBIT and Net Income, including results of Crain and excluding
discontinued operations (yellow bars in graph on following page)
- - --------------------------------------------------------------------------------
November 2, 1998 14 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
TAPE ON LAST PAGE!!!
Comparable Transaction Multiples Applied To
LTM Pro Forma and 1998F EBITDA
Automotive:(a) 7.5 x 7.9 x
Home:(b) 7.0 7.4
LTM Pro Forma and 1998F EBIT
Automotive:(a) 11.0 x 11.5 x
Home:(b) 8.7 10.0
Future Equity Value Methodology
Discounted Cash Flow
Leveraged Buyout Analysis(d)
Notes:
(a) See pages 30 and 31 for analyses of automotive interior component companies
and transactions
(b) See pages 27 and 28 for analyses of home furnishings companies and
transactions
(c) Based on applying one-week mean going private transaction premium of 36%,
derived from analysis of eighteen going private transactions which have been
announced since 1994. See page 40
(d) LBO from the perspective of a third-party investor
(e) Suds Management forecasts for 1998 are based on an EBITDA range of $182.5 to
$184.5 million, an EBIT range of $145.2 to $147.2 million and a Net Income
range of $42.3 to $43.5 million
- - --------------------------------------------------------------------------------
November 2, 1998 15 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
Analysis At Various Prices For Suds
($ in millions, except per share amounts)
<TABLE>
<CAPTION>
Memo
Day Prior to --------------
Most Recent Current Current Price Under
Announcement Price Trace Current Merger
10/15/98 10/30/98 Offer Price Agreement
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Share Price: $10.50 $10.94 $12.00 $18.75
Equity Value:(a) 264.3 275.8 304.3 495.0
Aggregate Value:(b) 1,045.9 1,057.5 1,086.0 1,276.7
Financial Results:
Aggregate Value As a Multiple of:
Sales
LTM Pro Forma $1,254.2 0.8 X 0.8 X 0.9 X 1.0 X
Suds 1998F 1,287.6 0.8 0.8 0.8 1.0
EBITDA(c)
LTM Pro Forma $159.2 6.6 x 6.6 x 6.8 x 8.0 X
No Contingency Suds 1998F 184.5 5.7 5.7 5.9 6.9
Contingency Suds 1998F 182.5 5.7 5.8 6.0 7.0
EBIT(c)
LTM Pro Forma $121.9 8.6 x 8.7 x 8.9 X 10.5 x
No Contingency Suds 1998F 147.2 7.1 7.2 7.4 8.7
Contingency Suds 1998F 145.2 7.2 7.3 7.5 8.8
Net Book Capital (d)
September 30, 1998 $691.4 1.5 x 1.5 x 1.6 x 1.8 x
Net Income Equity Value As a Multiple of:
LTM Pro Forma(e) $29.3 9.0 X 9.4 x 10.4 x 16.9 x
No Contingency Suds 1998F(f) 43.5 6.1 6.3 7.0 11.4
Contingency Suds 1998F(f) 42.3 6.2 6.5 7.2 11.7
No Contingency Suds 1999F 61.2 4.3 4.5 5.0 8.1
Contingency Suds 1999F 50.0 5.3 5.5 6.1 9.9
</TABLE>
See notes on following page
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November 2, 1998 16 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
Notes To The Analysis At Various Prices For Suds On The Previous Page
(a) Based on 25.0 million shares, 1.5 million net options with an average
exercise price of $9.41, 0.6 million warrants with an average exercise price
of $11.52 and 1.2 million warrants with an average exercise price of $12.30
outstanding on 9/30/98 and calculated using the treasury method
(b) Total Equity Value plus Net Debt of $781.7 as of 9/30/98
(c) EBITDA is earnings before interest, taxes, depreciation and amortization.
EBIT is defined as earnings before interest and taxes
(d) Based on book equity of ($90.3) million and total net debt of $781.7 million
as of September 30, 1998
(e) Calculated as $121.9 million of LTM EBIT less $72 million assumed interest
expense less $1 million of net other expense (assuming add back of $1.87
million pre-tax expenses associated with the GFI transaction); tax rate of
40%
(f) Excludes $1.87 million pre-tax expense associated with GFI transaction
expenses and $1.9 million extraordinary net loss on early extinguishment of
debt
- - --------------------------------------------------------------------------------
November 2, 1998 17 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
Suds Has Undertaken A Series Of Acquisitions, Divestitures, and Restructurings
Over The Past Decade...
Date Development
- - ---- ------------------------------------------------------------------------
1990 21 Holdings and Recticel contribute respective foam assets into Suds,
L.P. to achieve greater scale in the North American flexible foam
market. Recticel owns 51% of Suds, L.P. following transaction and has
call rights on 21 Holdings' partnership interest. 21 Holdings ultimately
reverses course and buys out Recticel's majority interest in a series of
transactions between 1991 and 1993 after Recticel reportedly reneges on
a definitive agreement to buy out 21 Holdings
1993 Purchases General Felt Industries, Inc. from Merrill Lynch for
approximately $96 million. Significantly expands Suds presence in the
foam carpet cushioning market
1993 Acquires Great Western Foam Products Corp. for approximately $38
million, expanding the Company's geographic presence in California and
carpet cushioning business, and providing entry into the specialty foam
packaging business
1993 Acquires Perfect Fit Industries, Inc., a leading producer of home
comfort and furnishings products, for $69 million. Transaction
undertaken to expand product offerings and distribution to retail
channels
1993 Sells 11 million shares of common stock at $15.00 per share through an
initial public offering. Suds International is organized as a holding
company and successor to Suds L.P.
1994 Acquires the Industrial Fabrics Business of JPS Textile ("JPS") from
Odyssey Partners for $280 million. Transaction undertaken based on view
that significant product line and customer synergies existed between
Suds and JPS
1995 Announces an operational plan to improve profitability by downsizing
management, consolidating plants, reducing expenses and inventory, and
selling Perfect Fit and JPS. In December, the Company records
restructuring charges of $41 million
1995 Lazard hired to sell the Company. Numerous potential buyers approached.
Process concluded unsuccessfully
- - --------------------------------------------------------------------------------
November 2, 1998 18 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
Suds Has Undertaken A Series Of Acquisitions, Divestitures, and Restructurings
Over The Past Decade. . .(Continued)
Date Development
- - ---- ------------------------------------------------------------------------
1996 Sells Perfect Fit Industries to the original founder for approximately
$50 million
1996 Sells JPS to Collins & Aikman for $220 million
1997 Completes a $490 million refinancing plan designed to reduce the
Company's interest expense and increase its financing flexibility
1997 Andrea Farace succeeds Marshall Cogan as Chairman, CEO and President of
Suds
1997 Acquires Crain Industries, Inc., a fully-integrated manufacturer of foam
and polyurethane foam products, for $214 million. Expands scale in two
largest foam market segments, general cushioning (e.g., bedding and
furniture) and carpet cushioning
1998 Completes a series of transactions designed to simplify the Company's
structure and to provide future operational flexibility. Results in the
elimination of Trace's 1% general partnership interest in Suds L.P.
- - --------------------------------------------------------------------------------
November 2, 1998 19 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
. . .Which Culminated In Early-1998 With A Reorganization Aimed At Focusing On
Four Principal Business Units With Two Strategic Orientations
($ in millions)
<TABLE>
<CAPTION>
% of Representative
Strategic Orientation & 1998F Total Major
Business Unit Sales(a) Sales Business Description Customers
- - ------------------------ -------- ----- -------------------- ---------
<S> <C> <C> <C> <C>
Price Realization &
Cost Management
Foam Products $573.5 47% Manufactures and sells flexible polyurethane foam and Sealy, Simmons, Serta
polyester fiber to bedding, furniture, packaging and other and Spring Air
cushioned products manufacturers. These foams are used by Company
the bedding furniture industry in quilts, toppers, cores
and border rolls for mattresses
Carpet Cushion $306.2 24% One of the largest manufacturers and distributors of prime Sears, Shaw Industries
and bonded foam, sponge rubber and felt carpet cushion in and Home Depot
North America
- - ------------------------------------------------------------------------------------------------------------------------------------
Growth & Product
Development
Automotive Foams $271.3 19% Supplier of roll foam and foam/fabric laminates for the Lear, JCI/Prince,
North American operations of automotive manufacturers Magna and Chrysler
Technical Foams $79.3 7% Manufactures reticulated foams and other custom foams. Rogers Foam Corp.,
Reticulated foams are used in applications which include Advanced Materials,
filtration, reservoiring, sound absorption and sound Inc. and Reilly Foam
transmission Corp.
</TABLE>
Note:
(a) Suds Management sales forecast for 1998 as of October 30, 1998. Does not
include $57.3 million of sales from Suds Mexico, which is primarily
concentrated in the automotive market
- - --------------------------------------------------------------------------------
November 2, 1998 20 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
Overview Of Selected Polyurethane Foam Suppliers
($ in millions)
<TABLE>
<CAPTION>
Annual Number of
Foam Year of Manufacturing
Company Sales(c) Sales Major Products/End-Markets Plants
- - ------- -------- ----- -------------------------- ------
<S> <C> <C> <C> <C>
Suds(b) $1,221(a) 1997 PU foams for furniture, bedding, carpet underlay, 67
automotive, technical and packaging
Carpenter Co. 700-800 1996 Polyurethane foam 6
Woodbridge Holdings Inc. 700 1997 PU foams for automotive (primarily molded) NA
Leggett & Platt Inc.(b) 180 1996 Flexible PU foams for carpet underlay 11
Future Foam, Inc. 100 1996 PU foams for furniture, bed, packaging, carpet padding 16
Vitafoam Inc. 40 1994 PU foams for furniture & bedding, auto NA
William T. Burnett & Co. 32 1994 Plastics foam products - technical NA
General Foam Division, PMC Inc. 125 1997 Plastics foam products NA
Hickory Springs Manufacturing Co. 23 1994 PU foams for furniture, bedding, packaging, carpet underlay 30
Burkart Foam Inc. 30 1997 Foam cushion & padding NA
Nu-Foam Products Inc. 13 1996 Foam rubber NA
</TABLE>
Notes:
NA = Not Available
Source: J.P. Morgan estimates, Company data and industry sources
(a) Combined pro forma sales for Suds and Crain
(b) Publicly-held companies
(c) All sales for private companies assumed to be foam. There are many small
producers of foam not reflected on table above
- - --------------------------------------------------------------------------------
November 2, 1998 21 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
Suds' Historical Stock Price Performance Since Its IPO Has Been Volatile
Price and Volume
Daily from December 7, 1993 - October 30, 1998
GRAPH: PAGE 22
Price and Volume
CURRENCY: LOCAL
from December 7, 1993 - October 30, 1998
Date Volume Price Close
12/7/93 2867.40 15.25
12/8/93 339.00 15.38
12/9/93 415.70 15.50
12/10/93 309.40 15.50
12/13/93 88.10 15.50
12/14/93 339.20 16.00
12/15/93 208.20 15.75
12/16/93 161.50 15.75
12/17/93 26.10 16.25
12/20/93 27.90 16.25
12/21/93 217.10 16.50
12/22/93 126.20 16.25
12/23/93 196.60 15.75
12/27/93 6.40 16.25
12/28/93 62.10 16.25
12/29/93 180.70 16.38
12/30/93 39.90 16.50
12/31/93 90.80 17.00
1/3/94 181.10 16.75
1/4/94 300.80 18.25
1/5/94 527.50 18.50
1/6/94 410.60 18.75
1/7/94 137.30 18.50
1/10/94 170.60 18.75
1/11/94 230.40 19.63
1/12/94 241.40 19.75
1/13/94 350.10 18.50
1/14/94 139.20 18.75
1/17/94 1.80 19.00
1/18/94 113.00 18.75
1/19/94 324.60 19.75
1/20/94 183.30 20.00
1/21/94 822.70 20.00
1/24/94 176.30 19.50
1/25/94 295.80 19.00
1/26/94 212.80 19.25
1/27/94 42.10 19.50
1/28/94 35.40 19.25
1/31/94 198.50 20.25
2/1/94 166.40 20.00
2/2/94 23.80 20.25
2/3/94 22.00 19.25
2/4/94 78.40 18.00
2/7/94 93.50 18.75
2/8/94 254.60 18.75
2/9/94 38.90 19.00
2/10/94 16.60 18.75
2/11/94 0.00 19.00
2/14/94 99.70 19.00
2/15/94 24.00 18.75
2/16/94 3.00 18.75
2/17/94 54.90 18.00
2/18/94 3.60 17.50
2/22/94 313.70 17.50
2/23/94 89.80 17.50
2/24/94 11.80 17.75
2/25/94 978.10 16.25
2/28/94 681.40 18.75
3/1/94 112.80 17.75
3/2/94 220.80 17.25
3/3/94 2.90 17.50
3/4/94 66.50 18.00
3/7/94 64.00 18.00
3/8/94 92.20 18.00
3/9/94 29.30 17.63
3/10/94 84.90 18.00
3/11/94 36.60 17.63
3/14/94 162.80 17.50
3/15/94 100.90 17.38
3/16/94 39.40 17.00
3/17/94 34.20 17.13
3/18/94 25.30 16.88
3/21/94 4.70 16.75
3/22/94 0.90 17.25
3/23/94 52.20 17.25
3/24/94 8.90 17.13
3/25/94 18.70 17.00
3/28/94 72.80 16.50
3/29/94 228.20 15.25
3/30/94 183.50 14.50
3/31/94 691.70 14.00
4/4/94 120.80 12.75
4/5/94 327.30 13.75
4/6/94 328.50 14.13
4/7/94 24.30 14.38
4/8/94 123.70 15.00
4/11/94 2.00 15.00
4/12/94 30.50 14.75
4/13/94 43.30 13.50
4/14/94 30.70 13.63
4/15/94 19.50 14.00
4/18/94 72.00 13.75
4/19/94 326.00 13.50
4/20/94 47.30 12.50
4/21/94 210.70 13.00
4/22/94 149.60 13.75
4/25/94 17.20 14.25
4/26/94 91.60 14.25
4/28/94 31.30 14.25
4/29/94 22.60 13.88
5/2/94 47.90 14.00
5/3/94 66.80 14.31
5/4/94 112.00 14.63
5/5/94 258.20 14.75
5/6/94 11.20 14.38
5/9/94 11.20 14.13
5/10/94 10.70 14.13
5/11/94 32.20 14.25
5/12/94 1.20 14.00
5/13/94 12.50 14.00
5/16/94 62.80 14.50
5/17/94 115.20 13.50
5/18/94 73.10 13.25
5/19/94 2.80 13.25
5/20/94 1657.00 12.88
5/23/94 1.20 13.00
5/24/94 2.50 13.00
5/25/94 36.60 12.75
5/26/94 8.70 12.75
5/27/94 2.70 12.75
5/31/94 3.00 13.00
6/1/94 2.00 13.00
6/2/94 237.90 12.75
6/3/94 1.60 12.75
6/6/94 5.40 13.25
6/7/94 11.30 13.00
6/8/94 12.60 12.75
6/9/94 46.30 12.50
6/10/94 17.90 12.50
6/13/94 33.30 12.50
6/14/94 11.10 12.38
6/15/94 18.20 12.75
6/16/94 3.30 12.25
6/17/94 132.70 11.50
6/20/94 101.00 10.25
6/21/94 172.30 10.50
6/22/94 15.20 10.25
6/23/94 81.90 10.50
6/24/94 8.80 10.25
6/27/94 601.00 10.25
6/28/94 14.10 10.50
6/29/94 506.20 10.75
6/30/94 123.90 10.75
7/1/94 21.80 10.38
7/5/94 102.90 10.38
7/6/94 150.70 10.38
7/7/94 41.30 10.13
7/8/94 91.30 9.88
7/11/94 190.20 9.75
7/12/94 73.50 9.63
7/13/94 46.90 9.50
7/14/94 9.60 9.75
7/15/94 14.50 9.38
7/18/94 25.10 9.63
7/19/94 52.00 10.38
7/20/94 44.10 10.25
7/21/94 12.10 10.50
7/22/94 3.00 10.25
7/25/94 143.30 10.50
7/26/94 4.20 10.50
7/27/94 89.80 10.38
7/28/94 335.20 11.06
7/29/94 214.10 11.63
8/1/94 66.50 11.50
8/2/94 250.30 11.88
8/3/94 135.10 12.00
8/4/94 153.10 11.50
8/5/94 74.90 11.75
8/8/94 14.10 11.56
8/9/94 36.50 11.63
8/10/94 10.30 11.63
8/11/94 13.10 11.63
8/12/94 17.00 11.25
8/15/94 17.60 11.50
8/16/94 18.40 11.00
8/17/94 609.90 11.00
8/18/94 86.10 11.25
8/19/94 129.60 11.25
8/22/94 383.00 11.25
8/23/94 14.90 11.25
8/24/94 244.20 11.25
8/25/94 459.40 11.25
8/26/94 593.40 11.13
8/29/94 72.80 10.94
8/30/94 502.90 10.75
8/31/94 20.10 10.75
9/1/94 263.40 10.63
9/2/94 17.70 10.63
9/6/94 2.50 10.75
9/7/94 156.80 11.63
9/8/94 58.70 11.25
9/9/94 32.30 10.75
9/12/94 69.00 11.00
9/13/94 15.30 11.00
9/14/94 22.50 10.44
9/15/94 174.10 10.75
9/16/94 425.20 11.75
9/19/94 129.30 12.13
9/20/94 158.50 11.63
9/21/94 79.70 11.88
9/22/94 118.10 11.88
9/23/94 53.20 11.75
9/26/94 99.20 11.00
9/27/94 415.40 10.25
9/28/94 449.80 10.50
9/29/94 425.60 10.50
9/30/94 111.20 10.88
10/3/94 109.70 10.50
10/4/94 19.60 10.25
10/5/94 987.60 10.00
10/6/94 25.50 10.00
10/7/94 53.00 9.88
10/10/94 79.40 9.75
10/11/94 287.70 10.13
10/12/94 35.60 10.25
10/13/94 172.80 9.88
10/14/94 36.70 9.75
10/17/94 10.30 9.75
10/18/94 32.80 9.63
10/19/94 100.20 9.50
10/20/94 85.40 9.50
10/21/94 235.10 9.06
10/24/94 129.20 8.75
10/25/94 69.80 8.88
10/26/94 176.60 9.19
10/27/94 145.30 9.63
10/28/94 107.50 9.75
10/31/94 258.30 9.00
11/1/94 192.40 9.00
11/2/94 76.10 9.00
11/3/94 190.50 9.13
11/4/94 68.00 9.13
11/7/94 97.90 8.75
11/8/94 126.30 8.50
11/9/94 561.70 9.00
11/10/94 82.70 8.75
11/11/94 77.30 9.00
11/14/94 35.40 9.00
11/15/94 25.90 9.00
11/16/94 186.80 9.25
11/17/94 109.80 9.00
11/18/94 56.00 9.00
11/21/94 47.10 8.94
11/22/94 88.10 8.50
11/23/94 40.00 8.50
11/25/94 4.60 8.75
11/28/94 189.20 8.75
11/29/94 13.80 8.75
11/30/94 31.20 8.13
12/1/94 71.40 8.25
12/2/94 65.90 8.25
12/5/94 33.10 7.75
12/6/94 274.20 7.75
12/7/94 92.70 7.50
12/8/94 115.90 7.63
12/9/94 72.30 8.00
12/12/94 81.70 7.88
12/13/94 216.40 7.38
12/14/94 181.40 7.63
12/15/94 153.70 8.00
12/16/94 155.70 8.13
12/19/94 225.90 9.00
12/20/94 235.10 9.25
12/21/94 104.10 9.25
12/22/94 169.00 9.38
12/23/94 27.30 9.50
12/27/94 113.10 9.38
12/28/94 112.70 9.25
12/29/94 50.70 9.75
12/30/94 52.30 10.00
1/3/95 81.10 9.63
1/4/95 46.50 9.25
1/5/95 242.40 9.38
1/6/95 121.30 9.38
1/9/95 228.80 9.50
1/10/95 32.90 9.56
1/11/95 85.90 9.50
1/12/95 55.70 9.25
1/13/95 95.00 9.63
1/16/95 49.60 9.63
1/17/95 67.70 9.38
1/18/95 62.10 9.75
1/19/95 333.30 10.00
1/20/95 315.40 10.25
1/23/95 500.20 10.63
1/24/95 144.20 10.88
1/25/95 139.20 10.88
1/26/95 98.80 10.38
1/27/95 61.90 10.25
1/30/95 129.60 10.25
1/31/95 43.70 9.63
2/1/95 165.50 9.88
2/2/95 14.40 10.00
2/3/95 86.50 10.13
2/6/95 78.10 9.88
2/7/95 103.60 9.19
2/8/95 101.90 9.13
2/9/95 104.10 9.75
2/10/95 63.50 9.94
2/13/95 32.90 10.00
2/14/95 95.30 10.13
2/15/95 33.00 10.13
2/16/95 24.30 9.75
2/17/95 53.30 9.75
2/21/95 37.10 9.13
2/22/95 21.70 9.50
2/23/95 620.00 8.81
2/24/95 116.70 8.75
2/27/95 237.60 8.50
2/28/95 172.40 8.13
3/1/95 203.20 7.88
3/2/95 55.40 7.94
3/3/95 403.80 8.00
3/6/95 161.80 8.17
3/7/95 44.90 8.06
3/8/95 70.30 8.06
3/9/95 81.10 8.00
3/10/95 32.60 8.00
3/13/95 86.80 8.00
3/14/95 59.60 8.13
3/15/95 20.90 8.00
3/16/95 49.60 8.00
3/17/95 32.10 8.13
3/20/95 54.40 7.88
3/21/95 71.10 7.63
3/22/95 142.50 7.88
3/23/95 322.00 8.38
3/24/95 342.30 8.06
3/27/95 35.20 8.06
3/28/95 114.50 8.00
3/29/95 16.90 8.00
3/30/95 136.50 7.88
3/31/95 88.10 8.00
4/3/95 68.00 8.00
4/4/95 121.60 8.00
4/5/95 115.00 8.00
4/6/95 33.00 7.88
4/7/95 125.40 8.00
4/10/95 104.60 7.69
4/11/95 100.20 7.88
4/12/95 98.50 8.00
4/13/95 82.30 8.00
4/17/95 40.40 7.88
4/18/95 96.60 8.00
4/19/95 204.80 8.13
4/20/95 77.60 8.00
4/21/95 104.50 7.88
4/24/95 161.80 8.00
4/25/95 45.40 8.13
4/26/95 471.00 8.13
4/27/95 64.70 8.13
4/28/95 224.60 8.13
5/1/95 337.40 8.50
5/2/95 106.40 8.31
5/3/95 221.50 8.00
5/4/95 32.50 7.75
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5/26/95 27.60 7.63
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5/31/95 52.60 7.50
6/1/95 39.20 7.25
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6/5/95 143.00 6.50
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6/22/95 131.90 7.00
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7/3/95 225.10 7.50
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7/6/95 192.50 7.50
7/7/95 235.10 7.75
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7/11/95 328.00 8.06
7/12/95 384.10 8.63
7/13/95 323.70 8.50
7/14/95 141.70 8.88
7/17/95 500.20 9.38
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8/2/95 40.90 8.75
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11/13/95 51.00 7.00
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12/1/95 61.20 7.13
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12/14/95 33.30 7.25
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1/2/96 17.00 7.50
1/3/96 25.70 7.50
1/4/96 35.90 7.63
1/5/96 27.40 7.88
1/8/96 33.90 8.00
1/9/96 67.20 7.88
1/10/96 1456.60 7.63
1/11/96 59.00 7.88
1/12/96 21.50 7.88
1/15/96 36.20 7.63
1/16/96 24.50 7.38
1/17/96 49.70 7.44
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1/25/96 70.10 7.19
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1/30/96 80.60 6.75
1/31/96 118.70 6.63
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2/6/96 6.60 7.00
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2/14/96 11.90 7.00
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3/8/96 264.50 7.94
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3/12/96 70.80 8.00
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3/18/96 356.30 8.63
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3/20/96 110.60 9.00
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3/26/96 117.60 8.25
3/27/96 125.10 9.00
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3/29/96 150.00 9.50
4/1/96 101.20 9.50
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4/3/96 116.90 9.75
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5/6/96 249.40 11.75
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5/8/96 292.30 11.75
5/9/96 81.40 11.75
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5/14/96 66.70 12.00
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5/30/96 157.20 12.25
5/31/96 288.00 12.25
6/3/96 195.20 12.13
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6/5/96 65.40 11.88
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6/10/96 114.80 10.88
6/11/96 71.80 11.00
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6/13/96 80.60 11.75
6/14/96 77.10 12.13
6/17/96 424.40 12.38
6/18/96 303.30 11.75
6/19/96 72.80 11.75
6/20/96 177.70 11.50
6/21/96 161.70 11.88
6/24/96 372.40 12.25
6/25/96 265.10 12.25
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6/27/96 86.20 12.31
6/28/96 73.10 12.25
7/1/96 197.10 12.00
7/2/96 75.80 12.25
7/3/96 96.50 12.13
7/5/96 143.50 12.00
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7/9/96 62.90 11.75
7/10/96 177.20 11.75
7/11/96 107.70 12.13
7/12/96 54.00 12.00
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7/16/96 94.20 12.13
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7/18/96 692.70 12.13
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7/22/96 404.40 12.13
7/23/96 80.40 11.88
7/24/96 113.20 11.38
7/25/96 328.80 11.63
7/26/96 37.30 12.00
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7/30/96 165.30 11.88
7/31/96 426.90 12.00
8/1/96 26.20 12.25
8/2/96 112.50 12.25
8/5/96 511.20 13.19
8/6/96 331.10 14.00
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8/8/96 135.80 13.88
8/9/96 69.30 13.94
8/12/96 88.10 14.06
8/13/96 70.60 14.25
8/14/96 801.20 14.94
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8/16/96 130.60 15.75
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8/21/96 49.90 15.19
8/22/96 91.30 15.63
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8/26/96 152.40 15.00
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8/29/96 147.90 15.63
8/30/96 148.90 15.56
9/3/96 197.60 15.38
9/4/96 24.20 15.50
9/5/96 43.90 15.38
9/6/96 226.20 15.25
9/9/96 207.70 15.50
9/10/96 121.80 15.50
9/11/96 76.00 15.63
9/12/96 93.10 15.13
9/13/96 78.90 15.19
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9/18/96 183.60 16.50
9/19/96 239.60 16.63
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9/24/96 165.40 15.50
9/25/96 25.70 15.38
9/26/96 117.50 15.00
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9/30/96 158.00 16.25
10/1/96 218.00 15.88
10/2/96 134.40 16.50
10/3/96 71.50 16.13
10/4/96 40.90 16.25
10/7/96 10.40 16.38
10/8/96 70.10 15.50
10/9/96 36.70 15.63
10/10/96 351.00 17.50
10/11/96 138.70 17.00
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10/15/96 88.30 17.00
10/16/96 74.80 17.25
10/17/96 69.70 17.25
10/18/96 8.70 17.25
10/21/96 60.20 17.13
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10/30/96 43.30 16.25
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11/1/96 525.50 15.38
11/4/96 133.40 15.38
11/5/96 187.40 15.13
11/6/96 171.00 15.31
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11/8/96 254.90 14.38
11/11/96 153.90 13.63
11/12/96 380.40 13.25
11/13/96 214.60 13.75
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11/15/96 60.80 14.50
11/18/96 32.40 14.38
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11/20/96 89.50 15.50
11/21/96 87.60 15.25
11/22/96 61.50 15.50
11/25/96 62.20 15.50
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11/27/96 129.40 16.63
11/29/96 111.40 16.63
12/2/96 31.20 16.38
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12/4/96 59.10 14.00
12/5/96 61.80 14.25
12/6/96 144.10 15.50
12/9/96 131.40 15.88
12/10/96 69.70 15.38
12/11/96 43.80 15.88
12/12/96 43.00 15.50
12/13/96 18.90 15.38
12/16/96 46.40 15.38
12/17/96 37.10 15.00
12/18/96 72.00 15.38
12/19/96 12.10 15.50
12/20/96 21.90 15.31
12/23/96 12.20 15.38
12/24/96 2.00 15.38
12/26/96 2.80 15.25
12/27/96 33.60 16.13
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1/2/97 44.30 15.75
1/3/97 55.30 15.13
1/6/97 52.30 15.25
1/7/97 100.50 15.25
1/8/97 242.00 16.88
1/9/97 262.30 17.13
1/10/97 144.00 17.00
1/13/97 223.00 16.88
1/14/97 27.00 16.31
1/15/97 50.40 16.50
1/16/97 7.30 16.13
1/17/97 30.90 15.75
1/20/97 20.90 16.00
1/21/97 464.20 17.00
1/22/97 440.90 17.88
1/23/97 125.70 17.75
1/24/97 80.30 16.63
1/27/97 34.00 16.38
1/28/97 90.60 17.13
1/29/97 60.80 17.13
1/30/97 22.80 17.38
1/31/97 265.80 19.88
2/3/97 415.90 21.00
2/4/97 260.70 20.00
2/5/97 52.30 20.00
2/6/97 50.50 20.38
2/7/97 130.40 20.63
2/10/97 80.20 20.00
2/11/97 73.40 18.88
2/12/97 70.30 19.63
2/13/97 139.20 20.00
2/14/97 100.50 19.75
2/18/97 146.60 20.00
2/19/97 128.30 20.13
2/20/97 35.30 20.13
2/21/97 157.20 18.75
2/24/97 119.30 18.00
2/25/97 25.90 18.00
2/26/97 9.90 17.63
2/27/97 51.80 18.13
2/28/97 38.70 18.63
3/3/97 116.00 19.75
3/4/97 47.30 19.00
3/5/97 34.00 19.00
3/6/97 25.40 19.00
3/7/97 55.90 18.25
3/10/97 197.80 18.25
3/11/97 33.50 18.13
3/12/97 124.60 17.50
3/13/97 260.80 16.38
3/14/97 29.80 17.13
3/17/97 35.00 16.88
3/18/97 28.50 16.31
3/19/97 30.90 16.63
3/20/97 29.10 16.38
3/21/97 55.80 17.13
3/24/97 13.50 17.25
3/25/97 32.40 16.63
3/26/97 23.90 16.63
3/27/97 48.00 16.38
3/31/97 57.60 15.63
4/1/97 39.30 14.94
4/2/97 45.60 14.38
4/3/97 45.80 13.50
4/4/97 311.20 12.25
4/7/97 168.50 14.00
4/8/97 32.90 13.88
4/9/97 54.50 13.75
4/10/97 69.30 12.38
4/11/97 19.50 12.13
4/14/97 36.50 12.25
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4/16/97 79.40 13.13
4/17/97 23.00 13.63
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4/21/97 3.20 13.13
4/22/97 156.90 14.25
4/23/97 30.30 14.63
4/24/97 53.80 14.00
4/25/97 15.60 14.25
4/28/97 26.40 14.00
4/29/97 38.90 14.13
4/30/97 63.70 14.38
5/1/97 184.40 15.00
5/2/97 102.40 15.38
5/5/97 31.70 13.75
5/6/97 24.40 14.25
5/7/97 10.20 14.25
5/8/97 114.10 14.00
5/9/97 6.30 14.00
5/12/97 19.50 14.13
5/13/97 46.70 14.38
5/14/97 45.90 14.38
5/15/97 42.20 13.50
5/16/97 13.60 13.25
5/19/97 27.80 13.00
5/20/97 19.80 13.13
5/21/97 52.40 12.88
5/22/97 62.60 13.19
5/23/97 28.80 13.25
5/27/97 20.30 13.75
5/28/97 48.10 14.13
5/29/97 16.70 14.13
5/30/97 69.80 15.13
6/2/97 44.50 15.13
6/3/97 14.90 14.50
6/4/97 31.30 14.25
6/5/97 39.50 13.63
6/6/97 102.40 13.13
6/9/97 75.10 13.00
6/10/97 8.70 13.00
6/11/97 208.70 14.25
6/12/97 73.90 14.00
6/13/97 106.50 14.00
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6/17/97 41.30 13.75
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6/19/97 52.80 13.75
6/20/97 20.00 13.50
6/23/97 53.30 12.88
6/24/97 179.70 13.25
6/25/97 953.00 13.13
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6/27/97 50.80 13.00
6/30/97 91.00 13.13
7/1/97 82.60 12.63
7/2/97 39.50 13.38
7/3/97 140.50 13.25
7/7/97 68.40 13.00
7/8/97 217.70 13.38
7/9/97 210.10 14.00
7/10/97 38.30 13.75
7/11/97 26.50 14.00
7/14/97 35.20 14.00
7/15/97 22.90 14.00
7/16/97 42.00 13.38
7/17/97 61.20 13.75
7/18/97 16.50 13.63
7/21/97 23.30 12.25
7/22/97 25.20 13.00
7/23/97 23.70 12.38
7/24/97 69.60 13.25
7/25/97 54.00 12.75
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7/29/97 238.10 11.38
7/30/97 141.90 11.13
7/31/97 28.80 11.50
8/1/97 132.00 12.00
8/4/97 95.30 11.38
8/5/97 240.20 10.38
8/6/97 91.50 10.13
8/7/97 68.80 10.25
8/8/97 130.20 10.13
8/11/97 57.90 9.63
8/12/97 129.50 9.50
8/13/97 112.50 10.56
8/14/97 66.50 10.50
8/15/97 122.60 11.00
8/18/97 50.20 10.50
8/19/97 53.60 10.75
8/20/97 7.60 10.25
8/21/97 59.20 9.75
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8/25/97 105.60 10.88
8/26/97 13.20 11.00
8/27/97 137.10 11.13
8/28/97 94.50 10.88
8/29/97 254.80 11.25
9/2/97 780.40 11.13
9/3/97 130.90 11.25
9/4/97 477.80 12.00
9/5/97 119.10 11.63
9/8/97 136.70 11.88
9/9/97 381.80 11.38
9/10/97 95.40 11.63
9/11/97 708.90 12.13
9/12/97 234.60 12.50
9/15/97 102.30 13.00
9/16/97 316.30 13.00
9/17/97 144.60 13.00
9/18/97 90.30 13.00
9/19/97 135.80 13.25
9/22/97 116.90 13.25
9/23/97 167.30 13.69
9/24/97 194.50 13.88
9/25/97 401.80 14.38
9/26/97 138.20 14.50
9/29/97 43.90 14.25
9/30/97 132.40 14.13
10/1/97 85.40 13.88
10/2/97 65.90 14.25
10/3/97 47.00 14.13
10/6/97 59.90 14.25
10/7/97 95.10 14.13
10/8/97 58.40 13.88
10/9/97 298.00 13.00
10/10/97 77.30 13.19
10/13/97 81.70 13.00
10/14/97 22.00 12.81
10/15/97 49.30 13.13
10/16/97 44.50 12.94
10/17/97 25.20 13.00
10/20/97 30.70 13.00
10/21/97 25.70 12.88
10/22/97 27.30 12.81
10/23/97 58.40 12.13
10/24/97 43.90 12.25
10/27/97 28.00 11.63
10/28/97 83.90 11.88
10/29/97 57.40 11.88
10/30/97 30.30 11.63
10/31/97 16.30 11.56
11/3/97 83.10 12.50
11/4/97 130.80 11.38
11/5/97 42.90 12.00
11/6/97 47.70 11.88
11/7/97 62.10 11.25
11/10/97 11.20 11.63
11/11/97 40.40 11.38
11/12/97 50.00 10.75
11/13/97 36.20 11.25
11/14/97 14.00 11.00
11/17/97 49.80 10.75
11/18/97 38.70 10.88
11/19/97 48.20 11.00
11/20/97 106.10 11.00
11/21/97 57.20 10.94
11/24/97 35.10 11.00
11/25/97 29.20 11.00
11/26/97 22.30 11.00
11/28/97 20.50 11.00
12/1/97 14.00 10.81
12/2/97 50.90 10.25
12/3/97 113.50 10.13
12/4/97 149.70 10.00
12/5/97 365.80 9.63
12/8/97 59.10 10.44
12/9/97 169.90 10.38
12/10/97 195.70 10.00
12/11/97 92.80 9.63
12/12/97 107.20 10.00
12/15/97 67.80 9.75
12/16/97 203.70 10.44
12/17/97 193.70 10.63
12/18/97 59.20 10.00
12/19/97 86.00 9.88
12/22/97 61.80 9.75
12/23/97 60.90 9.69
12/24/97 135.60 10.50
12/26/97 52.10 11.13
12/29/97 110.90 11.38
12/30/97 122.30 10.88
12/31/97 67.40 10.88
1/2/98 22.80 11.13
1/5/98 163.90 11.25
1/6/98 56.90 11.44
1/7/98 71.30 12.06
1/8/98 46.50 12.13
1/9/98 47.10 12.00
1/12/98 103.00 12.50
1/13/98 39.30 12.50
1/14/98 46.90 12.13
1/15/98 43.90 12.38
1/16/98 38.50 12.63
1/20/98 44.30 12.13
1/21/98 33.20 11.77
1/22/98 65.30 12.25
1/23/98 39.80 12.50
1/26/98 44.60 12.25
1/27/98 52.70 12.50
1/28/98 22.40 12.53
1/29/98 94.90 13.13
1/30/98 82.40 12.88
2/2/98 51.30 12.75
2/3/98 97.20 13.19
2/4/98 37.10 13.00
2/5/98 26.70 13.50
2/6/98 62.10 13.25
2/9/98 49.60 13.00
2/10/98 50.00 13.00
2/11/98 89.40 12.94
2/12/98 25.60 13.25
2/13/98 62.60 13.25
2/17/98 50.00 13.50
2/18/98 341.30 14.00
2/19/98 80.80 13.88
2/20/98 78.00 14.13
2/23/98 160.60 13.50
2/24/98 77.30 13.75
2/25/98 46.60 13.63
2/26/98 222.00 14.31
2/27/98 117.90 14.38
3/2/98 45.10 14.06
3/3/98 27.80 14.00
3/4/98 82.60 13.50
3/5/98 161.30 13.75
3/6/98 75.60 13.81
3/9/98 84.70 14.06
3/10/98 16.30 13.63
3/11/98 57.40 14.19
3/12/98 51.00 14.00
3/13/98 33.00 13.88
3/16/98 95.70 14.75
3/17/98 3029.40 17.38
3/18/98 835.70 17.44
3/19/98 314.00 17.44
3/20/98 236.10 17.44
3/23/98 320.50 17.44
3/24/98 198.60 17.81
3/25/98 1408.90 17.56
3/26/98 89.70 17.50
3/27/98 79.20 17.56
3/30/98 75.90 17.59
3/31/98 95.90 17.56
4/1/98 91.80 17.63
4/2/98 86.90 17.69
4/3/98 70.50 17.69
4/6/98 103.20 17.75
4/7/98 57.10 17.75
4/8/98 62.80 17.75
4/9/98 74.80 17.88
4/13/98 22.30 17.94
4/14/98 18.40 17.94
4/15/98 40.10 17.88
4/16/98 116.90 17.50
4/17/98 31.80 17.50
4/20/98 57.90 17.63
4/21/98 44.60 17.75
4/22/98 146.50 17.63
4/23/98 26.60 17.63
4/24/98 57.60 17.56
4/27/98 35.50 17.63
4/28/98 22.90 17.44
4/29/98 54.70 17.50
4/30/98 29.10 17.50
5/1/98 56.10 17.50
5/4/98 77.40 17.38
5/5/98 126.60 17.00
5/6/98 163.50 17.19
5/7/98 576.20 16.63
5/8/98 80.60 16.50
5/11/98 56.50 16.56
5/12/98 156.90 16.50
5/13/98 44.70 16.25
5/14/98 74.60 16.31
5/15/98 69.40 16.38
5/18/98 45.20 16.38
5/19/98 11.10 16.44
5/20/98 27.40 16.38
5/21/98 30.10 16.44
5/22/98 69.30 16.38
5/26/98 86.00 16.25
5/27/98 318.10 15.97
5/28/98 42.90 15.50
5/29/98 103.10 15.50
6/1/98 55.60 15.38
6/2/98 51.60 15.50
6/3/98 61.00 15.31
6/4/98 103.00 15.38
6/5/98 35.40 15.69
6/8/98 17.10 15.69
6/9/98 11.40 15.81
6/10/98 39.10 15.66
6/11/98 44.70 15.63
6/12/98 61.50 15.44
6/15/98 106.40 15.00
6/16/98 25.80 15.25
6/17/98 85.70 15.50
6/18/98 56.80 15.38
6/19/98 26.20 15.31
6/22/98 25.70 15.38
6/23/98 105.10 16.00
6/24/98 93.80 16.19
6/25/98 37.40 16.25
6/26/98 717.50 17.77
6/29/98 217.40 17.31
6/30/98 141.00 17.44
7/1/98 128.40 17.38
7/2/98 124.00 17.38
7/6/98 174.50 17.56
7/7/98 42.20 17.50
7/8/98 129.00 17.56
7/9/98 131.50 17.63
7/10/98 90.50 17.50
7/13/98 262.50 17.56
7/14/98 130.90 17.47
7/15/98 126.70 17.50
7/16/98 6.70 17.50
7/17/98 23.40 17.56
7/20/98 50.50 17.50
7/21/98 16.10 17.50
7/22/98 247.20 17.50
7/23/98 17.80 17.31
7/24/98 27.60 17.34
7/27/98 118.40 17.50
7/28/98 59.30 16.94
7/29/98 44.30 17.38
7/30/98 61.80 17.25
7/31/98 179.90 17.25
8/3/98 214.60 17.25
8/4/98 152.70 17.31
8/5/98 244.20 17.16
8/6/98 32.90 17.00
8/7/98 239.40 17.63
8/10/98 74.10 17.31
8/11/98 207.20 17.06
8/12/98 53.50 17.38
8/13/98 3.80 17.31
8/14/98 75.90 17.44
8/17/98 97.20 17.44
8/18/98 122.00 17.53
8/19/98 30.50 17.38
8/20/98 11.70 17.38
8/21/98 178.80 17.25
8/24/98 121.80 17.25
8/25/98 143.00 17.25
8/26/98 231.00 16.56
8/27/98 172.60 16.00
8/28/98 102.70 15.88
8/31/98 272.50 15.00
9/1/98 333.00 14.13
9/2/98 175.60 15.34
9/3/98 146.20 15.00
9/4/98 32.90 15.13
9/8/98 96.70 14.75
9/9/98 84.40 14.00
9/10/98 89.60 14.13
9/11/98 84.30 14.25
9/14/98 182.60 16.06
9/15/98 27.30 16.50
9/16/98 136.30 16.00
9/17/98 228.50 16.00
9/18/98 191.10 15.94
9/21/98 246.90 15.06
9/22/98 140.90 16.00
9/23/98 227.00 16.06
9/24/98 168.10 14.50
9/25/98 48.90 14.25
9/28/98 108.90 14.75
9/29/98 147.10 14.63
9/30/98 104.10 14.56
10/1/98 100.30 14.06
10/2/98 60.30 14.00
10/5/98 68.20 13.69
10/6/98 293.00 12.50
10/7/98 429.10 11.38
10/8/98 80.70 11.00
10/9/98 64.90 11.50
10/12/98 82.20 12.00
10/13/98 23.20 11.00
10/14/98 65.00 10.88
10/15/98 37.50 10.50
10/16/98 35.10 10.75
10/19/98 207.80 10.19
10/20/98 19.20 10.25
10/21/98 51.30 10.50
10/22/98 47.70 10.75
10/23/98 67.80 10.88
10/26/98 47.20 10.81
10/27/98 45.60 11.00
10/28/98 66.10 11.00
10/29/98 31.00 10.97
10/30/98 72.70 10.94
Closing Prices:
---------------
Low Price on 2/09/96 - $6.38
High Price on 2/03/97 - $21.00
- - --------------------------------------------------------------------------------
November 2, 1998 22 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
Suds Has Under-Performed The Market And Relevant Industrial Indices Since Its
IPO In December Of 1993
Suds-Indexed Stock Price Performance
Since The Date Of IPO Versus The S&P MidCap Industrials
And Other Relevant Industrial Peer Groups
Daily from December 7, 1993 - October 30, 1998
GRAPH PAGE 23 - BEACON PRESENTATION
Indexed Prices (Market Cap Weighted)
CURRENCY: LOCAL
from December 7, 1993 - October 30, 1998
Date SPBIK FMXI AUTO2 HOME3
12/7/93 100.00 100.00 100.00 100.00
12/8/93 100.00 100.82 99.38 99.62
12/9/93 100.82 101.64 99.38 98.87
12/10/93 100.82 101.64 99.69 99.64
12/13/93 100.82 101.64 99.62 99.99
12/14/93 100.82 104.92 98.62 101.23
12/15/93 100.82 103.28 98.04 102.87
12/16/93 99.56 103.28 98.54 104.50
12/17/93 99.56 106.56 99.52 106.36
12/20/93 99.56 106.56 100.59 107.61
12/21/93 99.56 108.20 101.23 108.45
12/22/93 99.56 106.56 102.11 111.37
12/23/93 100.14 103.28 102.96 111.06
12/27/93 100.14 106.56 103.55 112.74
12/28/93 100.14 106.56 103.23 114.15
12/29/93 100.14 107.38 104.23 115.22
12/30/93 103.15 108.20 104.21 114.71
12/31/93 103.15 111.48 105.28 114.00
1/3/94 103.91 109.84 104.46 112.38
1/4/94 103.91 119.67 103.75 111.43
1/5/94 103.91 121.31 103.35 110.52
1/6/94 103.90 122.95 103.30 112.06
1/7/94 103.90 121.31 102.33 112.41
1/10/94 103.90 122.95 103.96 114.00
1/11/94 103.90 128.69 105.46 114.49
1/12/94 103.90 129.51 105.57 116.94
1/13/94 104.63 121.31 106.50 115.71
1/14/94 104.63 122.95 107.73 114.07
1/17/94 104.63 124.59 107.88 113.90
1/18/94 104.63 122.95 111.88 113.00
1/19/94 104.63 129.51 111.42 116.74
1/20/94 105.61 131.15 110.80 114.39
1/21/94 105.61 131.15 110.31 114.87
1/24/94 105.61 127.87 108.98 116.12
1/25/94 105.61 124.59 108.45 115.35
1/26/94 105.61 126.23 107.36 111.26
1/27/94 105.00 127.87 110.18 112.48
1/28/94 105.00 126.23 108.84 114.80
1/31/94 105.00 132.79 109.89 116.74
2/1/94 107.11 131.15 110.32 116.50
2/2/94 107.11 132.79 110.17 114.84
2/3/94 107.99 126.23 112.58 115.65
2/4/94 107.99 118.03 111.04 111.12
2/7/94 107.99 122.95 110.26 109.50
2/8/94 107.99 122.95 110.69 110.93
2/9/94 107.99 124.59 110.17 112.28
2/10/94 106.83 122.95 109.17 111.54
2/11/94 106.83 124.59 107.60 112.08
2/14/94 106.83 124.59 107.01 113.26
2/15/94 106.83 122.95 106.86 112.17
2/16/94 106.83 122.95 109.21 110.43
2/17/94 107.21 118.03 109.66 109.65
2/18/94 107.21 114.75 109.82 106.85
2/22/94 107.21 114.75 111.31 108.51
2/23/94 107.21 114.75 110.25 109.60
2/24/94 107.17 116.39 107.96 107.31
2/25/94 107.17 106.56 108.44 107.51
2/28/94 107.17 122.95 108.35 106.67
3/1/94 106.94 116.39 108.92 104.22
3/2/94 106.94 113.11 108.65 104.36
3/3/94 106.28 114.75 108.39 104.48
3/4/94 106.28 118.03 109.07 104.97
3/7/94 106.28 118.03 110.50 106.10
3/8/94 106.28 118.03 111.58 104.86
3/9/94 106.28 115.57 112.82 105.26
3/10/94 107.59 118.03 113.25 104.25
3/11/94 107.59 115.57 113.67 105.55
3/14/94 107.59 114.75 114.45 105.29
3/15/94 107.59 113.93 114.30 106.04
3/16/94 107.59 111.48 114.33 107.24
3/17/94 108.53 112.30 116.06 108.42
3/18/94 108.53 110.66 115.56 108.25
3/21/94 108.53 109.84 114.71 108.00
3/22/94 108.53 113.11 114.51 109.55
3/23/94 108.53 113.11 114.98 112.91
3/24/94 108.74 112.30 112.54 110.91
3/25/94 108.74 111.48 112.35 108.26
3/28/94 108.74 108.20 111.85 107.56
3/29/94 108.74 100.00 107.71 104.30
3/30/94 108.74 95.08 103.37 103.81
3/31/94 100.75 91.80 102.98 105.15
4/4/94 100.79 83.61 101.26 105.50
4/5/94 100.79 90.16 104.88 107.46
4/6/94 100.79 92.62 105.66 107.99
4/7/94 102.68 94.26 105.66 107.77
4/8/94 102.68 98.36 103.58 107.38
4/11/94 102.68 98.36 104.30 106.89
4/12/94 102.68 96.72 102.86 106.38
4/13/94 102.68 88.52 101.96 104.46
4/14/94 99.26 89.34 100.94 104.56
4/15/94 99.26 91.80 98.14 107.13
4/18/94 99.26 90.16 97.36 105.88
4/19/94 99.26 88.52 94.96 104.48
4/20/94 99.26 81.97 91.77 104.06
4/21/94 95.83 85.25 93.39 104.22
4/22/94 95.83 90.16 94.72 103.98
4/25/94 95.83 93.44 95.98 103.54
4/26/94 95.83 93.44 96.55 105.32
4/28/94 100.25 93.44 96.28 104.93
4/29/94 100.25 90.98 99.60 108.13
5/2/94 100.68 91.80 99.85 107.92
5/3/94 100.68 93.85 99.71 107.57
5/4/94 100.68 95.90 98.31 107.40
5/5/94 101.54 96.72 97.79 106.09
5/6/94 101.54 94.26 95.76 103.80
5/9/94 101.54 92.62 92.85 101.95
5/10/94 101.54 92.62 92.63 100.30
5/11/94 101.54 93.44 91.18 101.07
5/12/94 97.59 91.80 92.50 100.44
5/13/94 97.59 91.80 92.97 101.37
5/16/94 97.59 95.08 93.48 100.56
5/17/94 97.59 88.52 96.28 98.55
5/18/94 97.59 86.89 94.95 97.84
5/19/94 98.66 86.89 95.85 96.59
5/20/94 98.66 84.43 95.21 96.53
5/23/94 98.66 85.25 96.65 93.73
5/24/94 98.66 85.25 98.37 94.13
5/25/94 98.66 83.61 98.11 94.89
5/26/94 99.42 83.61 98.19 95.12
5/27/94 99.42 83.61 98.20 94.19
5/31/94 99.42 85.25 98.16 91.91
6/1/94 99.34 85.25 99.13 91.24
6/2/94 99.71 83.61 99.02 90.92
6/3/94 99.71 83.61 98.32 91.24
6/6/94 99.71 86.89 97.21 90.39
6/7/94 99.71 85.25 95.39 89.83
6/8/94 99.71 83.61 93.94 90.10
6/9/94 98.83 81.97 94.64 90.41
6/10/94 98.83 81.97 95.90 89.87
6/13/94 98.83 81.97 97.36 86.14
6/14/94 98.83 81.15 100.54 87.92
6/15/94 98.83 83.61 100.30 88.45
6/16/94 99.16 80.33 100.24 88.68
6/17/94 99.16 75.41 97.57 87.86
6/20/94 99.16 67.21 96.49 85.86
6/21/94 99.16 68.85 94.31 84.43
6/22/94 99.16 67.21 95.29 85.12
6/23/94 96.60 68.85 93.80 83.99
6/24/94 96.60 67.21 92.40 83.24
6/27/94 96.60 67.21 92.55 83.03
6/28/94 96.60 68.85 92.12 82.48
6/29/94 96.60 70.49 93.63 83.14
6/30/94 95.99 70.49 92.61 83.55
7/1/94 95.64 68.03 93.73 85.77
7/5/94 95.64 68.03 93.55 86.55
7/6/94 95.64 68.03 91.94 87.50
7/7/94 95.89 66.39 91.94 87.63
7/8/94 95.89 64.75 93.09 89.35
7/11/94 95.89 63.93 94.11 89.31
7/12/94 95.89 63.11 94.98 90.61
7/13/94 95.89 62.30 95.39 88.97
7/14/94 98.70 63.93 96.55 87.85
7/15/94 98.70 61.48 97.21 90.99
7/18/94 98.70 63.11 96.91 90.62
7/19/94 98.70 68.03 95.85 87.51
7/20/94 98.70 67.21 95.10 88.83
7/21/94 98.13 68.85 94.79 87.93
7/22/94 98.13 67.21 95.04 84.77
7/25/94 98.13 68.85 95.03 85.26
7/26/94 98.13 68.85 94.55 85.57
7/27/94 98.13 68.03 94.59 84.70
7/28/94 96.98 72.54 94.82 83.92
7/29/94 96.98 76.23 95.16 83.99
8/1/94 98.42 75.41 95.36 85.34
8/2/94 98.42 77.87 96.30 84.75
8/3/94 98.42 78.69 95.09 86.75
8/4/94 99.00 75.41 92.30 87.67
8/5/94 99.00 77.05 90.26 85.47
8/8/94 99.00 75.82 89.41 84.61
8/9/94 99.00 76.23 88.69 83.24
8/10/94 99.00 76.23 91.03 84.16
8/11/94 100.37 76.23 89.80 83.39
8/12/94 100.37 73.77 90.31 84.60
8/15/94 100.37 75.41 89.48 82.75
8/16/94 100.37 72.13 90.21 83.36
8/17/94 100.37 72.13 90.10 83.44
8/18/94 101.95 73.77 89.82 86.06
8/19/94 101.95 73.77 90.52 84.31
8/22/94 101.95 73.77 90.62 84.62
8/23/94 101.95 73.77 91.77 85.79
8/24/94 101.95 73.77 91.94 86.11
8/25/94 102.94 73.77 91.94 86.56
8/26/94 102.94 72.95 93.16 88.38
8/29/94 102.94 71.72 93.73 87.00
8/30/94 102.94 70.49 94.64 87.45
8/31/94 102.94 70.49 93.26 86.36
9/1/94 104.89 69.67 92.64 85.65
9/2/94 104.89 69.67 92.75 85.26
9/6/94 104.89 70.49 92.75 84.58
9/7/94 104.89 76.23 92.62 87.14
9/8/94 104.54 73.77 92.17 85.95
9/9/94 104.54 70.49 91.79 86.32
9/12/94 104.54 72.13 90.78 85.65
9/13/94 104.54 72.13 90.78 86.16
9/14/94 104.54 68.44 90.96 85.04
9/15/94 104.55 70.49 91.60 85.49
9/16/94 104.55 77.05 92.63 85.98
9/19/94 104.55 79.51 92.53 84.11
9/20/94 104.55 76.23 91.18 82.90
9/21/94 104.55 77.87 89.84 79.47
9/22/94 103.43 77.87 88.13 78.89
9/23/94 103.43 77.05 86.01 78.96
9/26/94 103.43 72.13 85.46 78.75
9/27/94 103.43 67.21 87.24 78.55
9/28/94 103.43 68.85 87.68 77.39
9/29/94 103.85 68.85 87.39 76.51
9/30/94 103.85 71.31 89.05 76.53
10/3/94 104.13 68.85 88.58 74.91
10/4/94 104.13 67.21 86.90 73.66
10/5/94 104.13 65.57 85.57 74.34
10/6/94 101.62 65.57 85.17 74.05
10/7/94 101.62 64.75 85.65 74.62
10/10/94 101.62 63.93 86.50 74.38
10/11/94 101.62 66.39 89.03 75.81
10/12/94 101.62 67.21 89.98 75.31
10/13/94 104.27 64.75 89.30 77.71
10/14/94 104.27 63.93 89.40 79.72
10/17/94 104.27 63.93 89.82 75.58
10/18/94 104.27 63.11 89.03 75.82
10/19/94 104.27 62.30 88.42 75.91
10/20/94 104.76 62.30 86.78 74.92
10/21/94 104.76 59.43 87.23 75.05
10/24/94 104.76 57.38 86.46 73.47
10/25/94 104.76 58.20 86.54 72.06
10/26/94 104.76 60.25 87.38 73.45
10/27/94 103.06 63.11 86.56 73.78
10/28/94 103.06 63.93 87.82 76.03
10/31/94 103.06 59.02 88.35 75.20
11/1/94 105.25 59.02 87.69 75.94
11/2/94 105.25 59.02 88.89 76.01
11/3/94 104.49 59.84 89.95 78.10
11/4/94 104.49 59.84 89.24 77.21
11/7/94 104.49 57.38 89.97 76.52
11/8/94 104.49 55.74 90.31 77.01
11/9/94 104.49 59.02 89.88 77.03
11/10/94 103.67 57.38 89.13 76.48
11/11/94 103.67 59.02 87.80 76.20
11/14/94 103.67 59.02 88.62 76.82
11/15/94 103.67 59.02 89.02 77.13
11/16/94 103.67 60.66 88.37 76.75
11/17/94 103.70 59.02 86.98 75.77
11/18/94 103.70 59.02 85.19 76.02
11/21/94 103.70 58.61 84.88 74.65
11/22/94 103.70 55.74 83.52 73.84
11/23/94 103.70 55.74 82.19 73.07
11/25/94 98.55 57.38 83.44 72.31
11/28/94 98.55 57.38 83.37 74.79
11/29/94 98.55 57.38 83.90 74.29
11/30/94 98.55 53.28 85.57 74.88
12/1/94 100.26 54.10 84.80 75.90
12/2/94 100.26 54.10 85.26 74.64
12/5/94 100.26 50.82 86.30 74.67
12/6/94 100.26 50.82 85.15 73.34
12/7/94 100.26 49.18 85.04 72.36
12/8/94 98.42 50.00 83.46 71.34
12/9/94 98.42 52.46 83.44 69.80
12/12/94 98.42 51.64 82.76 69.15
12/13/94 98.42 48.36 82.11 68.64
12/14/94 98.42 50.00 81.88 70.27
12/15/94 97.85 52.46 83.49 70.79
12/16/94 97.85 53.28 85.27 71.55
12/19/94 97.85 59.02 86.76 67.45
12/20/94 97.85 60.66 87.03 66.51
12/21/94 97.85 60.66 85.96 66.86
12/22/94 99.48 61.48 86.96 66.65
12/23/94 99.48 62.30 88.09 67.48
12/27/94 99.48 61.48 90.09 69.39
12/28/94 99.48 60.66 88.78 67.88
12/29/94 100.36 63.93 89.47 67.58
12/30/94 100.36 65.57 90.31 68.07
1/3/95 101.37 63.11 91.31 68.42
1/4/95 101.37 60.66 91.08 68.42
1/5/95 100.56 61.48 90.61 69.10
1/6/95 100.56 61.48 92.21 71.23
1/9/95 100.56 62.30 92.90 72.44
1/10/95 100.56 62.70 92.52 76.25
1/11/95 100.56 62.30 92.00 73.22
1/12/95 101.54 60.66 91.40 74.14
1/13/95 101.54 63.11 90.44 73.85
1/16/95 101.54 63.11 92.35 76.15
1/17/95 101.54 61.48 92.63 74.91
1/18/95 101.54 63.93 92.02 74.62
1/19/95 103.39 65.57 91.19 74.03
1/20/95 103.39 67.21 89.73 74.51
1/23/95 103.39 69.67 90.00 74.90
1/24/95 103.39 71.31 89.88 76.15
1/25/95 103.39 71.31 89.11 77.11
1/26/95 101.75 68.03 87.23 78.51
1/27/95 101.75 67.21 87.01 77.43
1/30/95 101.75 67.21 86.15 76.42
1/31/95 101.75 63.11 85.56 75.26
2/1/95 100.78 64.75 85.29 75.10
2/2/95 101.15 65.57 85.77 75.74
2/3/95 101.15 66.39 85.35 76.27
2/6/95 101.15 64.75 85.81 77.55
2/7/95 101.15 60.25 85.29 78.62
2/8/95 101.15 59.84 85.05 79.52
2/9/95 104.22 63.93 86.11 80.04
2/10/95 104.22 65.16 87.49 79.94
2/13/95 104.22 65.57 87.05 80.45
2/14/95 104.22 66.39 88.38 80.12
2/15/95 104.22 66.39 88.11 80.37
2/16/95 105.57 63.93 87.72 80.05
2/17/95 105.57 63.93 88.49 78.36
2/21/95 105.57 59.84 88.30 77.71
2/22/95 105.57 62.30 88.54 77.46
2/23/95 105.01 57.79 89.67 77.87
2/24/95 105.01 57.38 89.92 77.53
2/27/95 105.01 55.74 88.38 76.87
2/28/95 105.01 53.28 91.31 78.04
3/1/95 106.13 51.64 89.79 77.71
3/2/95 105.81 52.05 88.13 77.75
3/3/95 105.81 52.46 86.86 76.62
3/6/95 105.81 53.59 87.01 78.24
3/7/95 105.81 52.87 85.89 77.73
3/8/95 105.81 52.87 85.98 77.81
3/9/95 105.81 52.46 85.89 76.56
3/10/95 105.81 52.46 86.45 77.95
3/13/95 105.81 52.46 86.65 77.55
3/14/95 105.81 53.28 86.10 77.87
3/15/95 105.81 52.46 85.65 78.13
3/16/95 107.59 52.46 86.67 78.01
3/17/95 107.59 53.28 86.77 75.73
3/20/95 107.59 51.64 85.73 75.45
3/21/95 107.59 50.00 86.42 75.37
3/22/95 107.59 51.64 86.82 75.02
3/23/95 107.34 54.92 85.65 75.05
3/24/95 107.34 52.87 86.07 76.47
3/27/95 107.34 52.87 87.30 76.53
3/28/95 107.34 52.46 87.40 77.07
3/29/95 107.34 52.46 87.28 76.85
3/30/95 109.00 51.64 89.77 76.18
3/31/95 109.00 52.46 89.14 75.91
4/3/95 109.03 52.46 88.87 75.82
4/4/95 109.03 52.46 87.37 75.26
4/5/95 109.03 52.46 87.28 75.46
4/6/95 109.27 51.64 87.72 75.57
4/7/95 109.27 52.46 87.16 74.78
4/10/95 109.27 50.41 86.48 74.78
4/11/95 109.27 51.64 86.11 75.04
4/12/95 109.27 52.46 88.68 75.19
4/13/95 110.28 52.46 87.29 75.79
4/17/95 110.28 51.64 87.28 75.91
4/18/95 110.28 52.46 87.37 75.40
4/19/95 110.28 53.28 86.68 74.77
4/20/95 108.06 52.46 86.89 76.45
4/21/95 108.06 51.64 86.99 76.14
4/24/95 110.16 52.46 88.31 76.45
4/25/95 110.18 53.28 88.50 76.20
4/26/95 110.37 53.28 87.58 77.16
4/27/95 110.97 53.28 87.57 77.53
4/28/95 111.28 53.28 88.15 78.10
5/1/95 110.97 55.74 88.12 77.45
5/2/95 110.91 54.51 87.88 76.39
5/3/95 111.73 52.46 88.66 77.20
5/4/95 111.03 50.82 87.26 77.59
5/5/95 110.36 53.28 85.50 79.63
5/8/95 110.79 51.64 87.20 82.68
5/9/95 111.03 52.46 87.06 85.09
5/10/95 111.25 51.64 88.74 85.45
5/11/95 112.00 52.46 88.64 84.69
5/12/95 112.56 50.82 89.71 84.74
5/15/95 113.44 50.00 90.85 86.59
5/16/95 113.88 50.00 92.87 87.95
5/17/95 113.97 50.00 93.15 86.67
5/18/95 112.70 52.46 91.95 84.02
5/19/95 112.37 51.23 91.65 84.61
5/22/95 113.19 50.82 91.53 86.27
5/23/95 114.38 50.82 92.15 86.62
5/24/95 113.71 50.82 92.06 86.78
5/25/95 113.75 49.18 92.27 87.08
5/26/95 112.92 50.00 92.24 86.40
5/30/95 111.93 50.82 92.39 85.66
5/31/95 112.58 49.18 94.01 87.18
6/1/95 113.21 47.54 94.31 87.10
6/2/95 113.18 47.54 94.61 86.63
6/5/95 114.02 42.62 95.93 85.24
6/6/95 114.02 46.72 97.75 87.20
6/7/95 114.07 47.13 97.14 87.07
6/8/95 114.68 50.00 97.16 86.67
6/9/95 114.44 47.54 96.47 85.35
6/12/95 115.10 46.72 97.61 85.37
6/13/95 116.06 45.08 98.22 85.27
6/14/95 116.27 44.26 97.45 84.43
6/15/95 116.90 46.72 98.70 85.13
6/16/95 117.63 46.31 100.19 84.92
6/19/95 118.64 48.36 100.52 84.34
6/20/95 118.96 46.31 100.24 82.99
6/21/95 118.61 46.72 100.21 83.81
6/22/95 119.84 45.90 100.03 84.17
6/23/95 119.53 46.72 99.97 81.97
6/26/95 117.75 46.72 100.16 82.64
6/27/95 116.99 47.54 98.70 83.09
6/28/95 117.09 46.72 100.00 82.42
6/29/95 117.75 45.90 100.77 84.38
6/30/95 118.19 47.95 103.43 84.34
7/3/95 118.59 49.18 103.69 85.47
7/5/95 119.23 50.00 103.69 86.12
7/6/95 120.45 49.18 106.67 88.75
7/7/95 122.18 50.82 108.39 92.82
7/10/95 122.60 50.00 109.83 93.79
7/11/95 122.14 52.87 109.96 93.50
7/12/95 123.96 56.56 110.00 94.39
7/13/95 124.14 55.74 108.80 93.97
7/14/95 124.09 58.20 108.22 93.28
7/17/95 124.41 61.48 109.88 94.02
7/18/95 122.87 59.84 109.91 93.51
7/19/95 119.41 55.74 107.50 93.98
7/20/95 120.52 56.56 109.93 93.00
7/21/95 120.95 59.02 109.47 92.13
7/24/95 122.42 60.66 110.17 93.75
7/25/95 123.45 59.84 110.42 94.16
7/26/95 124.16 59.84 110.12 94.47
7/27/95 125.85 59.84 110.15 96.03
7/28/95 125.47 59.84 109.93 95.72
7/31/95 125.65 58.20 110.60 94.83
8/1/95 124.57 58.20 110.19 95.38
8/2/95 123.73 57.38 110.62 95.50
8/3/95 123.18 54.92 111.05 95.74
8/4/95 123.71 55.74 111.51 95.60
8/7/95 124.20 55.74 112.83 96.17
8/8/95 124.17 56.56 112.77 95.26
8/9/95 124.87 63.11 112.93 96.19
8/10/95 124.67 60.66 114.22 95.36
8/11/95 124.65 62.30 113.97 95.28
8/14/95 125.59 61.48 113.19 94.38
8/15/95 125.49 61.48 113.27 94.12
8/16/95 127.13 62.30 112.92 94.82
8/17/95 128.05 64.75 112.56 95.85
8/18/95 127.98 64.75 112.35 96.72
8/21/95 127.05 63.11 111.68 96.89
8/22/95 127.49 62.30 111.87 96.12
8/23/95 127.79 62.30 112.61 94.83
8/24/95 127.07 61.48 112.66 95.06
8/25/95 126.95 60.66 113.14 96.34
8/28/95 125.78 62.30 111.44 97.23
8/29/95 125.35 60.66 111.62 98.96
8/30/95 126.04 61.48 110.89 100.10
8/31/95 126.85 62.30 111.21 98.58
9/1/95 127.05 62.30 112.91 99.06
9/5/95 129.09 63.11 115.04 100.76
9/6/95 130.00 62.30 116.35 102.00
9/7/95 130.26 60.66 115.58 101.53
9/8/95 131.28 65.57 115.26 102.20
9/11/95 131.84 64.75 115.42 103.05
9/12/95 131.51 63.11 115.37 102.98
9/13/95 131.72 61.07 115.27 101.61
9/14/95 131.48 64.75 115.93 102.34
9/15/95 130.30 65.57 114.54 101.96
9/18/95 130.41 68.85 113.92 101.25
9/19/95 131.27 68.03 113.52 101.18
9/20/95 131.70 71.31 114.37 100.30
9/21/95 130.72 71.31 113.36 98.60
9/22/95 130.14 70.49 113.09 98.63
9/25/95 128.62 70.08 112.98 96.88
9/26/95 127.91 66.39 113.32 95.86
9/27/95 127.19 69.67 112.89 95.80
9/28/95 129.23 72.13 113.38 96.01
9/29/95 128.84 68.03 113.58 95.61
10/2/95 127.51 68.85 113.42 94.24
10/3/95 126.17 67.21 113.13 92.24
10/4/95 123.83 65.57 112.30 93.49
10/5/95 124.96 64.75 112.37 92.69
10/6/95 124.97 65.57 111.94 92.78
10/9/95 121.89 63.93 111.40 91.56
10/10/95 121.50 60.66 110.03 91.09
10/11/95 123.58 64.34 110.15 90.07
10/12/95 125.10 65.57 111.26 91.01
10/13/95 125.59 63.93 113.47 92.47
10/16/95 125.18 61.48 113.15 97.10
10/17/95 127.15 56.56 112.33 96.14
10/18/95 127.46 55.74 112.55 95.18
10/19/95 127.31 54.92 111.80 95.77
10/20/95 125.96 54.10 111.80 95.68
10/23/95 125.85 52.46 111.55 95.42
10/24/95 125.37 50.00 111.81 94.32
10/25/95 123.76 48.36 110.52 93.36
10/26/95 122.66 48.36 108.81 94.09
10/27/95 123.11 48.36 109.03 95.26
10/30/95 124.61 50.00 108.37 97.09
10/31/95 123.96 49.18 106.95 97.53
11/1/95 124.77 46.72 107.50 96.55
11/2/95 127.01 46.72 108.94 97.99
11/3/95 128.27 47.54 109.00 98.44
11/6/95 128.16 48.36 109.23 99.36
11/7/95 126.35 48.36 108.24 99.15
11/8/95 126.50 47.13 107.73 99.06
11/9/95 127.97 46.72 106.26 102.43
11/10/95 128.17 48.36 106.98 102.79
11/13/95 127.73 45.90 107.63 101.25
11/14/95 126.08 45.90 107.47 103.28
11/15/95 126.02 45.90 108.23 101.79
11/16/95 126.93 46.31 108.25 101.83
11/17/95 127.22 46.72 109.82 102.22
11/20/95 125.42 46.72 108.94 103.61
11/21/95 125.00 45.90 110.67 103.07
11/22/95 125.08 47.54 112.65 102.82
11/24/95 127.12 46.72 112.35 102.91
11/27/95 126.19 45.90 112.96 102.11
11/28/95 127.40 46.72 112.35 100.52
11/29/95 128.47 46.72 112.49 100.33
11/30/95 129.08 46.72 112.15 101.31
12/1/95 128.17 46.72 112.82 101.30
12/4/95 129.56 47.13 112.87 102.81
12/5/95 129.29 45.90 113.66 104.48
12/6/95 128.41 45.08 114.61 103.90
12/7/95 127.61 43.44 113.32 103.90
12/8/95 128.22 43.44 113.64 104.92
12/11/95 128.03 45.08 114.83 105.18
12/12/95 126.66 45.90 113.53 104.70
12/13/95 127.25 47.54 113.13 105.21
12/14/95 124.85 47.54 112.28 104.71
12/15/95 124.09 50.00 112.28 104.33
12/18/95 121.24 50.00 111.43 103.85
12/19/95 123.55 48.36 112.31 103.37
12/20/95 123.79 46.72 112.86 103.52
12/21/95 125.31 46.72 112.31 103.12
12/22/95 125.96 46.72 111.60 103.26
12/26/95 126.52 46.72 112.65 101.54
12/27/95 126.64 47.54 112.68 100.31
12/28/95 126.42 47.54 112.33 100.81
12/29/95 127.47 48.36 112.71 102.02
1/2/96 128.12 49.18 112.95 102.61
1/3/96 127.23 49.18 114.44 105.07
1/4/96 125.37 50.00 113.05 104.91
1/5/96 125.25 51.64 112.65 103.97
1/8/96 125.29 52.46 113.17 103.73
1/9/96 122.21 51.64 111.94 103.31
1/10/96 120.64 50.00 109.22 100.40
1/11/96 122.85 51.64 108.60 101.61
1/12/96 122.31 51.64 110.03 101.74
1/15/96 120.30 50.00 109.18 100.36
1/16/96 120.54 48.36 110.79 101.76
1/17/96 121.58 48.77 110.72 101.12
1/18/96 122.25 49.18 109.86 99.92
1/19/96 123.50 48.36 109.31 98.90
1/22/96 124.63 49.18 112.16 96.14
1/23/96 124.66 50.00 111.00 96.30
1/24/96 126.65 48.36 111.15 95.84
1/25/96 125.68 47.13 109.92 94.95
1/26/96 126.30 46.72 110.48 93.43
1/29/96 126.42 45.08 112.10 93.99
1/30/96 128.07 44.26 112.68 93.51
1/31/96 128.95 43.44 113.62 95.12
2/1/96 129.93 43.44 114.46 96.80
2/2/96 129.52 45.90 113.99 96.27
2/5/96 130.86 45.49 114.28 98.08
2/6/96 131.59 45.90 115.02 97.34
2/7/96 131.40 45.08 114.80 97.02
2/8/96 132.46 43.44 112.94 97.30
2/9/96 132.73 41.80 113.42 96.63
2/12/96 133.23 45.08 114.12 96.65
2/13/96 132.49 45.08 114.55 96.95
2/14/96 132.64 45.90 116.20 97.04
2/15/96 133.35 45.08 115.63 96.80
2/16/96 133.48 45.90 114.51 96.79
2/20/96 132.54 48.36 112.86 96.20
2/21/96 133.98 49.18 112.59 96.70
2/22/96 136.37 51.64 114.46 97.25
2/23/96 136.17 51.64 114.46 96.40
2/26/96 135.76 52.46 112.95 96.33
2/27/96 135.49 54.10 113.86 95.39
2/28/96 135.72 54.92 112.93 95.17
2/29/96 134.73 53.69 113.23 96.12
3/1/96 132.87 53.28 112.66 96.03
3/4/96 134.23 53.28 114.55 96.71
3/5/96 135.25 53.28 114.07 100.63
3/6/96 135.59 52.46 113.30 100.26
3/7/96 135.82 52.05 113.03 99.45
3/8/96 132.30 52.05 110.27 96.48
3/11/96 134.03 52.05 113.28 98.25
3/12/96 133.40 52.46 115.65 98.92
3/13/96 135.27 52.46 117.16 98.38
3/14/96 136.07 53.28 117.33 101.13
3/15/96 136.65 54.10 116.68 101.49
3/18/96 138.44 56.56 118.68 101.28
3/19/96 137.98 58.20 118.69 101.78
3/20/96 136.71 59.02 118.77 102.05
3/21/96 136.48 60.66 120.28 102.31
3/22/96 136.58 57.38 121.14 102.90
3/25/96 135.32 54.10 120.72 102.56
3/26/96 135.16 54.10 121.36 103.34
3/27/96 135.75 59.02 121.50 101.99
3/28/96 135.89 60.66 121.15 101.99
3/29/96 136.41 62.30 121.73 101.38
4/1/96 137.07 62.30 123.47 99.92
4/2/96 137.41 61.48 122.67 97.64
4/3/96 137.54 63.93 121.59 97.91
4/4/96 137.48 64.75 120.52 97.17
4/8/96 135.52 62.30 119.67 96.07
4/9/96 136.81 63.93 119.07 95.75
4/10/96 135.85 63.11 119.49 93.45
4/11/96 134.33 60.66 118.18 91.58
4/12/96 135.58 64.75 117.89 92.23
4/15/96 136.34 67.21 118.42 93.73
4/16/96 138.18 67.21 117.51 93.18
4/17/96 136.84 69.67 116.79 92.24
4/18/96 137.59 70.49 117.93 91.32
4/19/96 138.14 72.13 118.28 92.23
4/22/96 139.57 70.49 118.34 93.49
4/23/96 140.81 71.31 118.84 94.51
4/24/96 141.76 73.77 119.55 94.27
4/25/96 142.65 70.49 119.64 94.36
4/26/96 142.92 80.33 119.43 94.55
4/29/96 142.99 80.33 120.56 94.69
4/30/96 142.73 81.15 121.21 95.20
5/1/96 143.35 77.87 122.06 97.16
5/2/96 141.30 77.05 121.24 95.37
5/3/96 141.81 77.05 120.21 97.12
5/6/96 141.62 77.05 120.27 97.41
5/7/96 140.76 77.87 120.13 97.52
5/8/96 140.25 77.05 119.53 95.51
5/9/96 141.23 77.05 118.89 96.71
5/10/96 142.43 77.05 120.63 96.17
5/13/96 143.72 77.87 121.42 95.96
5/14/96 145.07 78.69 123.31 97.70
5/15/96 145.24 77.05 124.42 98.20
5/16/96 145.86 79.51 123.96 98.37
5/17/96 145.75 79.51 124.82 99.85
5/20/96 146.50 80.33 124.67 99.38
5/21/96 146.26 81.97 125.64 100.20
5/22/96 146.21 81.97 126.40 100.73
5/23/96 145.85 77.87 127.18 100.96
5/24/96 145.59 77.87 128.48 100.55
5/28/96 144.56 77.87 128.01 99.29
5/29/96 143.52 80.33 127.06 97.97
5/30/96 144.90 80.33 126.74 99.50
5/31/96 144.94 80.33 126.86 100.26
6/3/96 144.70 79.51 126.50 100.43
6/4/96 146.18 77.87 126.94 99.98
6/5/96 146.33 77.87 126.00 100.50
6/6/96 144.98 75.41 126.47 100.68
6/7/96 144.73 75.41 126.27 99.26
6/10/96 145.01 71.31 125.37 98.31
6/11/96 145.14 72.13 125.70 97.98
6/12/96 145.80 77.87 125.71 98.51
6/13/96 144.74 77.05 125.09 98.46
6/14/96 143.81 79.51 124.91 97.88
6/17/96 143.16 81.15 124.31 98.22
6/18/96 142.00 77.05 123.42 98.29
6/19/96 141.99 77.05 123.06 98.44
6/20/96 141.00 75.41 123.75 96.88
6/21/96 140.81 77.87 124.73 97.33
6/24/96 140.84 80.33 124.75 98.40
6/25/96 139.84 80.33 124.01 98.50
6/26/96 137.66 80.33 122.64 97.63
6/27/96 138.47 80.74 122.97 99.27
6/28/96 140.48 80.33 120.86 99.77
7/1/96 141.51 78.69 122.00 99.46
7/2/96 140.96 80.33 123.56 99.96
7/3/96 139.82 79.51 122.47 102.47
7/5/96 137.83 78.69 121.00 101.24
7/8/96 136.42 76.23 118.32 99.95
7/9/96 137.27 77.05 118.69 100.54
7/10/96 135.88 77.05 117.91 100.49
7/11/96 132.72 79.51 116.34 100.35
7/12/96 132.49 78.69 115.15 100.64
7/15/96 128.14 80.33 112.23 98.71
7/16/96 126.52 79.51 110.91 95.45
7/17/96 129.38 77.87 112.70 96.96
7/18/96 131.74 79.51 114.20 98.13
7/19/96 130.24 77.87 115.72 97.37
7/22/96 128.51 79.51 115.15 95.95
7/23/96 125.90 77.87 114.87 93.82
7/24/96 125.16 74.59 113.60 92.93
7/25/96 126.95 76.23 116.08 94.82
7/26/96 129.01 78.69 117.61 93.67
7/29/96 127.56 78.69 117.65 94.97
7/30/96 128.29 77.87 118.12 95.07
7/31/96 128.91 78.69 120.16 96.51
8/1/96 130.99 80.33 121.63 98.33
8/2/96 133.12 80.33 123.41 99.37
8/5/96 132.40 86.48 122.31 100.97
8/6/96 133.34 91.80 122.11 101.13
8/7/96 134.54 92.62 122.88 101.74
8/8/96 134.19 90.98 123.88 103.70
8/9/96 134.18 91.39 124.35 104.64
8/12/96 134.61 92.21 124.45 104.35
8/13/96 133.41 93.44 124.41 103.26
8/14/96 134.79 97.95 124.44 104.02
8/15/96 135.08 100.82 124.33 107.88
8/16/96 135.43 103.28 124.69 108.11
8/19/96 135.23 102.46 124.24 109.49
8/20/96 135.32 100.82 125.63 111.39
8/21/96 135.72 99.59 126.07 109.42
8/22/96 136.92 102.46 126.11 111.16
8/23/96 136.74 100.82 126.39 111.54
8/26/96 136.11 98.36 126.53 114.21
8/27/96 137.00 104.92 126.84 113.66
8/28/96 137.91 107.38 128.03 113.85
8/29/96 137.01 102.46 126.58 111.58
8/30/96 136.56 102.05 126.95 110.86
9/3/96 136.06 100.82 126.28 110.50
9/4/96 136.74 101.64 126.01 111.94
9/5/96 135.18 100.82 124.94 111.86
9/6/96 136.37 100.00 125.59 111.85
9/9/96 136.76 101.64 124.93 113.20
9/10/96 136.88 101.64 123.92 112.67
9/11/96 137.78 102.46 125.07 115.01
9/12/96 138.84 99.18 126.07 115.46
9/13/96 140.20 99.59 126.73 113.60
9/16/96 141.01 100.00 127.70 113.75
9/17/96 141.58 104.10 127.77 113.65
9/18/96 140.89 108.20 125.54 112.92
9/19/96 141.31 109.02 125.40 111.41
9/20/96 142.00 109.84 125.07 112.90
9/23/96 141.44 103.28 126.32 114.19
9/24/96 142.13 101.64 125.78 115.54
9/25/96 142.80 100.82 126.49 114.60
9/26/96 143.83 98.36 125.92 115.78
9/27/96 143.77 99.18 125.61 115.30
9/30/96 143.74 106.56 124.73 114.94
10/1/96 142.92 104.10 125.95 115.58
10/2/96 144.01 108.20 126.82 116.85
10/3/96 143.74 105.74 126.84 117.21
10/4/96 145.15 106.56 126.67 118.44
10/7/96 145.22 107.38 124.77 118.20
10/8/96 144.13 101.64 125.78 117.75
10/9/96 143.76 102.46 124.93 116.95
10/10/96 143.72 114.75 126.96 117.28
10/11/96 144.42 111.48 127.27 119.49
10/14/96 145.29 110.66 127.40 122.01
10/15/96 145.13 111.48 128.71 121.25
10/16/96 144.73 113.11 128.83 121.37
10/17/96 145.03 113.11 129.14 120.78
10/18/96 145.31 113.11 129.56 122.18
10/21/96 144.35 112.30 129.59 122.80
10/22/96 142.96 108.20 129.02 120.98
10/23/96 143.60 102.46 128.62 120.37
10/24/96 143.61 100.00 128.68 118.75
10/25/96 143.37 100.00 129.63 118.05
10/28/96 142.11 100.82 128.74 116.59
10/29/96 140.78 109.02 129.03 119.51
10/30/96 141.30 106.56 128.76 119.13
10/31/96 141.84 102.46 128.29 118.93
11/1/96 141.73 100.82 128.03 118.93
11/4/96 141.51 100.82 128.03 120.41
11/5/96 142.45 99.18 129.55 120.25
11/6/96 144.43 100.41 130.32 121.94
11/7/96 144.76 99.18 129.59 120.55
11/8/96 145.20 94.26 130.08 122.36
11/11/96 146.21 89.34 130.07 122.04
11/12/96 146.21 86.89 129.66 121.74
11/13/96 146.76 90.16 130.93 122.41
11/14/96 147.92 92.62 131.92 122.87
11/15/96 147.93 95.08 131.92 124.91
11/18/96 147.71 94.26 131.33 123.30
11/19/96 147.52 100.00 131.72 123.27
11/20/96 148.26 101.64 133.57 124.19
11/21/96 147.38 100.00 133.25 125.71
11/22/96 149.39 101.64 132.82 125.58
11/25/96 149.91 101.64 133.24 127.57
11/26/96 149.55 104.10 134.44 128.01
11/27/96 149.70 109.02 134.42 128.30
11/29/96 149.68 109.02 134.80 129.91
12/2/96 151.17 107.38 134.04 127.04
12/3/96 151.06 94.26 134.30 127.89
12/4/96 150.45 91.80 133.21 129.27
12/5/96 150.52 93.44 133.57 129.00
12/6/96 149.00 101.64 132.91 128.48
12/9/96 151.12 104.10 136.89 128.79
12/10/96 150.56 100.82 139.61 127.98
12/11/96 148.90 104.10 138.35 126.84
12/12/96 147.83 101.64 138.00 126.54
12/13/96 146.69 100.82 137.66 124.35
12/16/96 144.82 100.82 136.99 121.13
12/17/96 144.96 98.36 135.53 123.05
12/18/96 146.75 100.82 136.44 120.85
12/19/96 148.17 101.64 134.79 121.02
12/20/96 147.93 100.41 135.55 122.79
12/23/96 146.80 100.82 136.22 121.74
12/24/96 147.31 100.82 136.34 122.53
12/26/96 148.13 100.00 136.30 122.06
12/27/96 148.53 105.74 136.76 122.78
12/30/96 148.74 104.92 136.30 122.35
12/31/96 149.29 108.20 137.33 121.25
1/2/97 147.50 103.28 138.35 119.50
1/3/97 149.77 99.18 137.43 120.28
1/6/97 150.58 100.00 137.02 120.08
1/7/97 151.77 100.00 137.87 120.00
1/8/97 151.18 110.66 137.56 120.01
1/9/97 152.30 112.30 137.52 120.73
1/10/97 153.49 111.48 139.71 122.00
1/13/97 152.54 110.66 141.31 122.75
1/14/97 153.82 106.97 145.11 124.32
1/15/97 153.26 108.20 144.24 124.65
1/16/97 154.65 105.74 146.54 124.12
1/17/97 155.11 103.28 148.55 122.81
1/20/97 155.70 104.92 146.52 122.84
1/21/97 155.94 111.48 145.14 122.63
1/22/97 155.97 117.21 144.71 124.14
1/23/97 155.22 116.39 143.99 124.40
1/24/97 153.27 109.02 143.28 124.75
1/27/97 152.04 107.38 143.31 126.51
1/28/97 152.31 112.30 143.57 127.65
1/29/97 152.01 112.30 143.27 127.64
1/30/97 153.77 113.93 142.90 128.62
1/31/97 154.56 130.33 143.04 128.27
2/3/97 154.06 137.71 142.39 128.45
2/4/97 153.45 131.15 141.90 130.25
2/5/97 151.91 131.15 140.38 128.16
2/6/97 152.46 133.61 140.59 126.61
2/7/97 153.03 135.25 141.58 128.11
2/10/97 151.45 131.15 141.71 128.14
2/11/97 151.15 123.77 140.59 128.17
2/12/97 153.59 128.69 140.28 127.96
2/13/97 154.96 131.15 141.04 127.68
2/14/97 155.32 129.51 142.71 125.98
2/18/97 154.75 131.15 141.23 126.98
2/19/97 154.83 131.97 140.65 127.07
2/20/97 153.21 131.97 141.57 128.23
2/21/97 152.37 122.95 141.07 128.97
2/24/97 152.81 118.03 142.09 129.01
2/25/97 154.01 118.03 141.85 128.18
2/26/97 153.23 115.57 139.88 126.74
2/27/97 151.27 118.85 140.91 127.14
2/28/97 151.09 122.13 140.45 127.50
3/3/97 150.98 129.51 141.44 127.72
3/4/97 152.26 124.59 140.88 128.67
3/5/97 153.36 124.59 140.06 130.30
3/6/97 153.26 124.59 141.00 129.32
3/7/97 153.22 119.67 141.94 130.41
3/10/97 154.03 119.67 141.12 131.43
3/11/97 154.07 118.85 140.78 131.15
3/12/97 153.37 114.75 139.96 129.94
3/13/97 152.19 107.38 138.84 127.54
3/14/97 152.96 112.30 139.59 128.96
3/17/97 151.97 110.66 138.63 130.01
3/18/97 150.99 106.97 138.61 128.73
3/19/97 149.71 109.02 136.67 128.64
3/20/97 150.55 107.38 135.94 127.54
3/21/97 150.37 112.30 135.79 125.38
3/24/97 149.72 113.11 134.60 125.56
3/25/97 150.24 109.02 134.24 124.04
3/26/97 151.67 109.02 133.89 122.28
3/27/97 149.68 107.38 133.38 118.90
3/31/97 145.81 102.46 131.16 115.31
4/1/97 145.19 97.95 131.84 110.65
4/2/97 144.10 94.26 132.16 113.19
4/3/97 144.15 88.52 131.41 113.08
4/4/97 146.31 80.33 133.13 113.30
4/7/97 147.87 91.80 134.29 113.54
4/8/97 148.43 90.98 134.93 113.43
4/9/97 148.00 90.16 133.55 114.17
4/10/97 146.83 81.15 131.81 113.08
4/11/97 143.92 79.51 128.81 111.80
4/14/97 144.16 80.33 127.86 111.02
4/15/97 145.16 81.56 130.30 112.86
4/16/97 145.33 86.07 130.93 114.84
4/17/97 145.50 89.34 131.42 113.92
4/18/97 145.28 89.34 132.78 115.56
4/21/97 142.84 86.07 130.76 114.04
4/22/97 143.87 93.44 131.31 114.33
4/23/97 144.64 95.90 132.11 115.98
4/24/97 144.84 91.80 130.79 115.21
4/25/97 142.19 93.44 130.47 114.37
4/28/97 142.72 91.80 130.75 115.90
4/29/97 145.76 92.62 132.36 117.62
4/30/97 147.38 94.26 134.43 118.80
5/1/97 148.20 98.36 134.91 118.15
5/2/97 151.69 100.82 137.22 120.98
5/5/97 155.24 90.16 140.04 123.51
5/6/97 153.97 93.44 141.30 121.09
5/7/97 153.29 93.44 140.10 118.68
5/8/97 154.16 91.80 141.09 118.63
5/9/97 154.48 91.80 140.76 118.02
5/12/97 155.98 92.62 141.74 118.67
5/13/97 155.35 94.26 140.91 116.91
5/14/97 155.79 94.26 142.36 116.89
5/15/97 156.75 88.52 143.69 117.11
5/16/97 155.60 86.89 142.31 116.82
5/19/97 155.64 85.25 143.77 117.52
5/20/97 156.92 86.07 144.84 119.52
5/21/97 157.84 84.43 142.88 118.63
5/22/97 157.82 86.48 141.52 118.42
5/23/97 160.03 86.89 143.69 120.84
5/27/97 161.13 90.16 143.67 118.78
5/28/97 161.60 92.62 143.99 119.19
5/29/97 161.38 92.62 143.73 119.72
5/30/97 162.29 99.18 144.47 120.20
6/2/97 163.65 99.18 143.60 120.15
6/3/97 162.73 95.08 144.83 120.37
6/4/97 162.26 93.44 143.70 119.71
6/5/97 163.23 89.34 143.38 121.73
6/6/97 163.65 86.07 143.48 121.22
6/9/97 164.20 85.25 143.80 123.08
6/10/97 163.84 85.25 141.81 125.48
6/11/97 163.88 93.44 144.08 125.40
6/12/97 165.21 91.80 148.29 125.91
6/13/97 166.28 91.80 150.84 126.40
6/16/97 166.97 90.98 150.97 128.71
6/17/97 167.71 90.16 150.71 128.87
6/18/97 167.50 90.98 152.29 128.86
6/19/97 168.72 90.16 153.20 130.94
6/20/97 167.57 88.52 153.40 131.62
6/23/97 165.95 84.43 151.55 130.23
6/24/97 166.62 86.89 151.04 131.95
6/25/97 165.55 86.07 151.61 130.80
6/26/97 164.72 86.07 152.40 129.37
6/27/97 166.04 85.25 152.49 129.44
6/30/97 166.11 86.07 153.53 129.38
7/1/97 167.22 82.79 152.12 132.09
7/2/97 168.73 87.71 155.84 130.67
7/3/97 169.52 86.89 157.71 131.12
7/7/97 169.82 85.25 156.72 129.85
7/8/97 171.42 87.71 158.58 128.44
7/9/97 170.98 91.80 158.03 125.77
7/10/97 172.15 90.16 157.34 127.16
7/11/97 174.22 91.80 159.15 124.60
7/14/97 175.13 91.80 158.80 123.08
7/15/97 176.32 91.80 157.51 126.54
7/16/97 178.68 87.71 160.87 127.57
7/17/97 177.91 90.16 161.62 126.65
7/18/97 176.88 89.34 159.86 126.71
7/21/97 175.17 80.33 158.61 128.11
7/22/97 177.56 85.25 162.66 129.27
7/23/97 178.55 81.15 166.13 129.13
7/24/97 178.73 86.89 164.87 130.59
7/25/97 178.82 83.61 164.56 130.47
7/28/97 178.05 80.33 163.92 131.17
7/29/97 178.88 74.59 164.54 132.90
7/30/97 182.08 72.95 166.68 133.58
7/31/97 182.43 75.41 168.11 134.33
8/1/97 182.35 78.69 168.23 134.26
8/4/97 183.51 74.59 170.08 135.15
8/5/97 185.00 68.03 169.38 135.50
8/6/97 186.09 66.39 169.17 135.38
8/7/97 184.61 67.21 166.91 134.85
8/8/97 182.26 66.39 163.22 134.05
8/11/97 181.03 63.11 164.74 134.36
8/12/97 180.91 62.30 164.35 134.43
8/13/97 181.18 69.26 163.81 133.41
8/14/97 180.97 68.85 163.56 134.52
8/15/97 179.26 72.13 163.34 132.88
8/18/97 178.87 68.85 163.68 132.30
8/19/97 181.93 70.49 165.30 132.39
8/20/97 183.92 67.21 168.31 132.45
8/21/97 182.46 63.93 166.93 131.60
8/22/97 182.16 65.57 166.83 132.16
8/25/97 183.57 71.31 168.65 130.85
8/26/97 183.87 72.13 167.68 131.26
8/27/97 184.44 72.95 167.90 129.46
8/28/97 183.61 71.31 167.97 128.08
8/29/97 183.73 73.77 169.13 128.72
9/2/97 186.37 72.95 170.73 130.15
9/3/97 187.01 73.77 171.72 130.31
9/4/97 187.44 78.69 171.12 131.17
9/5/97 188.38 76.23 172.13 129.45
9/8/97 189.40 77.87 173.54 130.11
9/9/97 189.78 74.59 174.81 130.01
9/10/97 188.66 76.23 173.15 128.62
9/11/97 187.89 79.51 171.15 127.48
9/12/97 190.52 81.97 171.56 128.85
9/15/97 190.44 85.25 172.51 128.14
9/16/97 192.01 85.25 173.54 128.89
9/17/97 192.65 85.25 173.74 129.68
9/18/97 193.25 85.25 174.80 129.33
9/19/97 193.54 86.89 174.34 128.54
9/22/97 193.68 86.89 175.30 128.36
9/23/97 192.74 89.75 173.07 127.05
9/24/97 191.28 90.98 171.35 127.18
9/25/97 190.76 94.26 173.88 127.35
9/26/97 191.09 95.08 174.75 128.16
9/29/97 192.57 93.44 175.59 128.32
9/30/97 192.53 92.62 177.07 129.74
10/1/97 192.63 90.98 177.87 129.39
10/2/97 192.96 93.44 178.83 131.02
10/3/97 193.71 92.62 179.63 131.56
10/6/97 194.91 93.44 179.90 131.67
10/7/97 195.90 92.62 180.88 131.70
10/8/97 195.79 90.98 180.20 131.31
10/9/97 196.72 85.25 181.32 130.96
10/10/97 196.45 86.48 181.35 132.78
10/13/97 196.70 85.25 182.42 135.12
10/14/97 196.05 84.02 181.70 135.21
10/15/97 196.17 86.07 181.47 135.55
10/16/97 193.86 84.84 180.09 134.39
10/17/97 190.54 85.25 177.26 132.93
10/20/97 193.17 85.25 178.08 136.11
10/21/97 195.90 84.43 181.40 134.79
10/22/97 194.76 84.02 180.32 134.65
10/23/97 190.76 79.51 178.72 132.36
10/24/97 189.19 80.33 176.98 132.04
10/27/97 176.07 76.23 168.57 128.41
10/28/97 181.35 77.87 168.21 128.66
10/29/97 181.99 77.87 171.30 130.34
10/30/97 179.46 76.23 167.51 131.03
10/31/97 181.62 75.82 166.46 131.81
11/3/97 185.87 81.97 170.04 133.01
11/4/97 186.60 74.59 170.50 135.36
11/5/97 188.13 78.69 169.51 134.26
11/6/97 186.82 77.87 167.03 132.61
11/7/97 183.46 73.77 163.44 130.60
11/10/97 183.16 76.23 162.89 131.04
11/11/97 182.18 74.59 163.49 132.09
11/12/97 178.19 70.49 161.75 128.71
11/13/97 178.83 73.77 161.50 130.12
11/14/97 181.66 72.13 162.06 131.07
11/17/97 184.77 70.49 162.47 133.43
11/18/97 182.91 71.31 160.64 132.85
11/19/97 182.03 72.13 159.91 132.48
11/20/97 184.53 72.13 162.51 133.16
11/21/97 184.31 71.72 162.16 133.78
11/24/97 181.17 72.13 161.02 133.80
11/25/97 181.34 72.13 162.15 134.31
11/26/97 182.12 72.13 161.17 134.76
11/28/97 182.00 72.13 162.95 134.34
12/1/97 183.76 70.90 162.99 136.63
12/2/97 183.57 67.21 164.70 137.07
12/3/97 185.07 66.39 163.53 138.36
12/4/97 185.09 65.57 165.26 138.67
12/5/97 187.46 63.11 166.30 139.70
12/8/97 188.20 68.44 167.69 140.21
12/9/97 186.11 68.03 168.43 139.36
12/10/97 183.51 65.57 166.89 140.65
12/11/97 179.97 63.11 164.82 139.24
12/12/97 177.77 65.57 164.38 140.26
12/15/97 177.24 63.93 164.88 141.84
12/16/97 179.41 68.44 165.70 141.92
12/17/97 179.75 69.67 167.09 140.89
12/18/97 177.50 65.57 165.85 139.70
12/19/97 176.88 64.75 162.51 139.40
12/22/97 177.37 63.93 162.00 140.00
12/23/97 175.97 63.52 160.87 137.63
12/24/97 176.13 68.85 160.15 139.04
12/26/97 176.67 72.95 160.31 137.88
12/29/97 179.23 74.59 160.35 139.49
12/30/97 182.79 71.31 162.10 142.04
12/31/97 184.29 71.31 165.17 143.90
1/2/98 184.09 72.95 165.70 143.39
1/5/98 184.91 73.77 165.80 143.83
1/6/98 182.07 75.00 165.92 143.81
1/7/98 181.35 79.10 164.35 142.11
1/8/98 179.94 79.51 164.39 140.45
1/9/98 173.86 78.69 160.16 135.67
1/12/98 172.93 81.97 161.73 136.18
1/13/98 176.44 81.97 162.98 139.07
1/14/98 177.90 79.51 163.45 140.14
1/15/98 177.58 81.15 163.20 140.30
1/16/98 179.80 82.79 166.04 142.84
1/20/98 182.69 79.51 165.32 144.45
1/21/98 181.76 77.15 162.53 143.01
1/22/98 180.09 80.33 163.01 142.25
1/23/98 179.51 81.97 161.88 140.68
1/26/98 178.09 80.33 162.97 141.73
1/27/98 178.88 81.97 164.96 142.02
1/28/98 182.19 82.17 163.67 142.56
1/29/98 183.37 86.07 165.44 142.91
1/30/98 182.82 84.43 165.95 142.93
2/2/98 186.70 83.61 169.52 143.26
2/3/98 187.52 86.48 172.89 144.41
2/4/98 189.08 85.25 174.06 145.21
2/5/98 189.27 88.52 174.16 145.45
2/6/98 190.16 86.89 175.02 146.06
2/9/98 190.07 85.25 175.74 147.63
2/10/98 191.94 85.25 175.90 149.37
2/11/98 192.65 84.84 175.60 148.95
2/12/98 193.41 86.89 173.38 149.65
2/13/98 193.72 86.89 172.54 150.01
2/17/98 193.03 88.52 173.34 151.27
2/18/98 195.08 91.80 174.02 152.15
2/19/98 195.72 90.98 173.82 151.77
2/20/98 195.47 92.62 174.84 151.57
2/23/98 195.95 88.52 174.10 151.08
2/24/98 194.27 90.16 172.95 149.20
2/25/98 197.25 89.34 173.97 149.66
2/26/98 200.22 93.85 173.75 151.13
2/27/98 199.74 94.26 175.57 155.97
3/2/98 199.55 92.21 176.68 154.83
3/3/98 200.30 91.80 177.99 156.28
3/4/98 200.15 88.52 178.10 158.17
3/5/98 197.58 90.16 176.11 156.69
3/6/98 200.50 90.57 180.85 159.30
3/9/98 199.19 92.21 181.42 158.70
3/10/98 201.48 89.34 182.67 160.26
3/11/98 202.88 93.03 185.27 161.65
3/12/98 203.70 91.80 192.14 162.79
3/13/98 203.85 90.98 190.80 163.35
3/16/98 204.44 96.72 190.34 165.15
3/17/98 203.86 113.93 190.42 167.43
3/18/98 205.15 114.34 191.81 166.63
3/19/98 205.47 114.34 191.86 168.81
3/20/98 204.61 114.34 193.74 171.21
3/23/98 205.32 114.34 192.99 172.13
3/24/98 206.61 116.80 194.88 176.24
3/25/98 206.87 115.16 196.58 175.94
3/26/98 207.26 114.75 196.46 173.85
3/27/98 206.60 115.16 197.82 176.10
3/30/98 206.06 115.37 199.91 174.37
3/31/98 207.69 115.16 202.97 174.53
4/1/98 209.96 115.57 201.25 174.36
4/2/98 210.53 115.98 201.30 174.05
4/3/98 210.08 115.98 199.87 173.19
4/6/98 208.19 116.39 200.81 172.47
4/7/98 205.54 116.39 198.62 170.70
4/8/98 205.46 116.39 195.19 168.34
4/9/98 206.46 117.21 197.12 170.38
4/13/98 206.60 117.62 196.46 169.42
4/14/98 209.44 117.62 197.41 173.65
4/15/98 211.58 117.21 198.19 178.30
4/16/98 209.75 114.75 196.29 178.11
4/17/98 211.73 114.75 196.27 181.37
4/20/98 213.05 115.57 194.89 181.34
4/21/98 214.18 116.39 195.70 179.01
4/22/98 214.18 115.57 195.42 176.78
4/23/98 211.57 115.57 193.26 174.65
4/24/98 209.52 115.16 192.11 172.37
4/27/98 204.40 115.57 187.19 167.89
4/28/98 206.54 114.34 189.35 165.36
4/29/98 209.25 114.75 191.41 166.24
4/30/98 211.89 114.75 194.86 171.31
5/1/98 213.50 114.75 196.50 171.66
5/4/98 213.76 113.93 195.53 172.13
5/5/98 212.86 111.48 193.84 173.69
5/6/98 211.51 112.71 194.63 171.62
5/7/98 209.98 109.02 197.63 172.15
5/8/98 212.35 108.20 197.26 172.79
5/11/98 210.96 108.61 196.95 172.77
5/12/98 211.20 108.20 196.47 171.64
5/13/98 211.38 106.56 197.60 170.77
5/14/98 210.96 106.97 196.81 171.63
5/15/98 208.51 107.38 194.33 172.01
5/18/98 207.05 107.38 195.67 168.47
5/19/98 208.50 107.79 195.59 173.26
5/20/98 206.97 107.38 195.79 174.68
5/21/98 206.43 107.79 195.06 172.66
5/22/98 204.33 107.38 193.60 171.88
5/26/98 201.08 106.56 190.20 168.89
5/27/98 199.81 104.71 187.96 164.72
5/28/98 201.96 101.64 188.07 165.50
5/29/98 201.29 101.64 189.74 167.26
6/1/98 198.33 100.82 186.73 166.68
6/2/98 198.80 101.64 188.02 166.36
6/3/98 197.87 100.41 188.28 165.64
6/4/98 200.04 100.82 187.24 166.77
6/5/98 201.57 102.87 189.31 167.48
6/8/98 202.24 102.87 190.08 167.89
6/9/98 203.17 103.69 188.73 166.17
6/10/98 200.05 102.66 183.73 167.21
6/11/98 197.48 102.46 182.23 164.06
6/12/98 196.54 101.23 180.10 161.97
6/15/98 192.69 98.36 178.04 159.14
6/16/98 195.17 100.00 178.92 158.67
6/17/98 197.49 101.64 180.99 158.43
6/18/98 195.97 100.82 180.38 157.79
6/19/98 195.20 100.41 179.90 156.38
6/22/98 197.75 100.82 179.64 156.07
6/23/98 200.10 104.92 181.63 156.62
6/24/98 201.02 106.15 181.97 153.80
6/25/98 200.57 106.56 181.89 146.68
6/26/98 200.58 116.50 181.18 143.43
6/29/98 201.81 113.52 181.48 145.14
6/30/98 201.54 114.34 183.84 145.00
7/1/98 204.05 113.93 187.44 146.40
7/2/98 203.88 113.93 186.80 146.97
7/6/98 204.59 115.16 188.86 148.78
7/7/98 204.47 114.75 188.67 144.54
7/8/98 206.38 115.16 188.52 145.30
7/9/98 206.26 115.57 190.57 146.67
7/10/98 205.61 114.75 188.01 146.64
7/13/98 205.59 115.16 186.62 145.46
7/14/98 206.49 114.55 188.27 146.25
7/15/98 208.28 114.75 186.81 145.89
7/16/98 209.79 114.75 187.46 146.29
7/17/98 210.01 115.16 186.19 146.91
7/20/98 209.91 114.75 187.51 147.25
7/21/98 206.06 114.75 182.75 147.58
7/22/98 203.93 114.75 181.83 146.06
7/23/98 199.46 113.52 180.28 143.93
7/24/98 197.80 113.73 178.54 143.03
7/27/98 197.01 114.75 178.61 141.18
7/28/98 193.20 111.07 178.06 140.32
7/29/98 192.12 113.93 180.95 140.98
7/30/98 196.41 113.12 181.29 138.83
7/31/98 192.28 113.12 178.61 135.54
8/3/98 190.59 113.12 179.22 133.16
8/4/98 184.25 113.52 177.18 130.49
8/5/98 182.31 112.50 176.70 130.05
8/6/98 186.26 111.48 176.00 130.70
8/7/98 189.95 115.57 178.50 130.98
8/10/98 187.78 113.52 175.89 131.29
8/11/98 182.60 111.89 171.97 128.75
8/12/98 186.37 113.93 174.51 132.27
8/13/98 184.68 113.52 173.50 132.11
8/14/98 183.15 114.34 172.42 130.87
8/17/98 184.31 114.34 173.41 133.40
8/18/98 188.43 114.96 175.63 133.48
8/19/98 186.95 113.93 174.67 131.83
8/20/98 185.00 113.93 173.65 129.45
8/21/98 181.47 113.12 170.48 127.12
8/24/98 180.54 113.12 167.08 126.61
8/25/98 180.40 113.12 168.08 127.07
8/26/98 176.20 108.61 164.07 123.49
8/27/98 167.95 104.92 159.75 119.38
8/28/98 164.76 104.10 158.22 114.11
8/31/98 153.44 98.36 148.94 111.32
9/1/98 158.84 92.62 152.48 114.12
9/2/98 160.79 100.62 152.72 113.34
9/3/98 159.04 98.36 150.70 112.28
9/4/98 160.09 99.18 149.64 112.38
9/8/98 168.41 96.72 151.05 113.57
9/9/98 165.06 91.80 146.70 110.29
9/10/98 161.98 92.62 143.86 107.65
9/11/98 165.71 93.44 146.10 109.17
9/14/98 168.94 105.33 149.15 112.02
9/15/98 169.17 108.20 150.02 111.99
9/16/98 171.18 104.92 151.49 113.28
9/17/98 167.69 104.92 148.29 108.92
9/18/98 168.89 104.51 148.96 112.00
9/21/98 168.86 98.77 147.86 114.02
9/22/98 170.37 104.92 150.65 116.71
9/23/98 175.60 105.33 155.30 120.59
9/24/98 172.21 95.08 154.70 121.10
9/25/98 172.29 93.44 154.15 120.44
9/28/98 173.11 96.72 154.29 119.86
9/29/98 171.37 95.90 154.96 119.81
9/30/98 168.08 95.49 154.30 119.08
10/1/98 160.65 92.21 149.03 116.25
10/2/98 162.21 91.80 150.70 119.20
10/5/98 155.99 89.75 147.52 115.94
10/6/98 156.07 81.97 146.27 115.53
10/7/98 153.68 74.59 145.63 114.53
10/8/98 147.83 72.13 141.57 108.83
10/9/98 152.68 75.41 144.09 110.80
10/12/98 157.66 78.69 146.58 114.82
10/13/98 155.28 72.13 146.34 112.16
10/14/98 158.40 71.31 148.81 113.02
10/15/98 165.24 68.85 151.87 119.10
10/16/98 168.49 70.49 154.54 126.85
10/19/98 171.99 66.80 146.71 130.80
10/20/98 173.22 67.21 146.53 133.37
10/21/98 174.06 68.85 143.71 131.57
10/22/98 176.34 70.49 147.06 134.22
10/23/98 175.79 71.31 148.50 132.32
10/26/98 178.15 70.90 151.93 132.06
10/27/98 177.92 72.13 153.48 131.36
10/28/98 178.92 72.13 152.40 131.20
10/29/98 181.73 71.93 152.19 135.51
10/30/98 185.17 71.72 159.14 133.42
Notes:
(a) Index consisting of domestic companies chosen by Standard & Poors for market
size, liquidity and industry group representation and generally ranging in
market capitalization between $200 million and $15 billion
(b) "Automotive Peer Group" is composed of Collins & Aikman Corporation, Johnson
Controls Inc., Lear Corporation, and Magna International
(c) "Home Furnishings Peer Group" is composed of Armstrong World Industries
Inc., Culp, Inc., Mohawk Industries Inc. and Synthetic Industries L.P.
- - --------------------------------------------------------------------------------
November 2, 1998 23 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
Summary Description of Suds Valuation Methodologies
Comparable Company Analysis
[ ] Analysis of valuation parameters for two groups of public companies Beacon
considers relevant to Suds from the standpoint that they serve similar
customers and markets and in many instances sell products complementary to
those of Suds. (See Appendix for additional detail on comparable companies)
o Home Furnishings: Armstrong World Industries Inc., Culp, Inc., Mohawk
Industries Inc., Synthetic Industries L.P.
o Automotive Interior Components: Collins & Aikman Corporation, Johnson
Controls Inc., Lear Corporation, Magna International
[ ] Comparable companies' Aggregate Values (market equity plus net debt) were
compared to trailing 12 month results excluding one-time items, including
Sales, EBITDA, EBIT and Net Book Capital, to derive valuation multiples.
Equity values for the comparable companies were compared to trailing 12
month and analyst consensus forecast Earnings per Share to derive valuation
multiples. Beacon believes equity market investors focus most closely on
Aggregate Value to EBITDA and EBIT multiples and Equity Value to Earnings
per Share multiples in forming views on appropriate valuation levels for
specific companies, and these parameters were applied to Suds Management
forecast results
[ ] Extensive historical Aggregate Value to trailing twelve month EBITDA
multiple data for the Home Furnishings and Automotive Interior Components
comparable companies were also evaluated
- - --------------------------------------------------------------------------------
November 2, 1998 24 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
Summary Description of Suds Valuation Methodologies (Continued)
Comparable Transactions Analysis
[ ] Analysis of valuation parameters for transactions involving home
furnishings companies and automotive interior components companies (See
pages 28 and 31 for transactions reviewed)
[ ] Aggregate Consideration paid (price paid for equity plus net debt assumed)
for each comparable transaction target was compared to trailing 12 month
(prior to the transaction announcement) results excluding one-time items,
including Sales, EBITDA, EBIT and Net Book Capital, to derive valuation
multiples. Equity values for the comparable transaction targets were
compared to trailing 12 month Net Income to derive valuation multiples. As
with the Comparable Company Analysis, Aggregate Value to EBITDA and EBIT
multiples and Equity Value to Net Income were applied to Suds Management
forecast 1998 results
Discounted Value Of Potential Future Equity Market Prices
[ ] Estimate of potential Suds equity market prices at the beginning of 1999
and 2000 assuming the Company were to trade in a range of Aggregate Value to
trailing EBITDA multiples determined by reviewing historical valuation
multiple data for comparable companies and Suds. Forecast future values were
discounted to the present using a 14% equity discount rate. Beacon utilized
Suds Management 1998 and 1999 forecast EBITDA and year-end net debt figures
in its analysis
Premiums Paid Analysis
[ ] Premiums paid in "going private" transactions announced since 1994 were
analyzed by examining offer prices compared to prior day and one-month prior
closing prices. Beacon applied these premiums to implied Suds equity values
derived from 1998 and 1999 forecast EPS-based valuations for the comparable
companies
- - --------------------------------------------------------------------------------
November 2, 1998 25 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
Summary Description of Valuation Methodologies (Continued)
Discounted Cash Flow ("DCF") Analysis
[ ] Calculates the present value of i) Suds' free cash flows between 1999 and
2003 and ii) a terminal value which is estimated as a multiple of year 2003
EBITDA. Beacon used both the Contingency and No Contingency Suds Management
forecasts in its analysis. The rate of return, or the discount rate, used to
discount the unlevered free cash flows is determined by using a weighted
average cost of capital analysis. Beacon considered weighted average cost of
capital analyses for the comparable companies and Suds' current equity beta
in estimating an appropriate cost of capital range
o Key DCF valuation parameters used include: Weighted average cost of
capital discount rates of 10% to 12% and EBITDA terminal multiples of
5.5x to 7.5x
Leveraged Buyout Analysis ("LBO")
[ ] Analyzes forecasts of income statements, balance sheets and cash flows in
order to determine the price a third-party financial buyer could potentially
afford to pay based on assumptions regarding capital structure, interest
rates, debt repayment requirements and required equity rates of return. LBO
analyses were performed using Suds Management projections and do not
contemplate the impact of Trace-specific financing structures or management
fees
o Key LBO valuation parameters include: Target equity return of
approximately 25% to 30% and EBITDA exit multiples of 6.0x to 7.0x,
examining both the Contingency and No Contingency Cases
- - --------------------------------------------------------------------------------
November 2, 1998 26 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
Comparable Companies Analysis - Home Furnishings Industry
($ in millions, except per share amounts)
<TABLE>
Equity Value
Share Price As a Multiple of:
-----------------------------------------
LTM as of Equity Aggregate Net Income Book
Company Ended 10/30/98 Value Value(a) LTM 1998E(b) 1999E(b) Value
- - ------- ----- -------- ----- ---------- ------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Armstrong World Industries Inc.(d) 9/30/98 $62.00 $2,492 $2,834 11.9x 11.6x 10.7x 2.90x
Culp, Inc. 8/2/98 7.25 96 252 9.4 10.2 9.3 0.75
Mohawk Industries Inc. 9/26/98 30.19 1,604 1,904 16.5 15.1 13.6 3.29
Synthetic Industries, Inc. 6/30/98 14.13 128 414 NM 6.8 6.0 1.70
Offer
Memo: Price
Suds Pro Forma LTM(e) 9/30/98 $12.00 $304 $1,086 10.4x 7.0x 5.0x NM
Suds Management 1998F(f) -- 12.00 304 1,086 10.4 7.0x 5.0x NM
Statistics:
Mean: 12.6x 10.9x 9.9x 2.16x
Median: 11.9 10.9 10.0 2.30
High: 16.5 15.1 13.6 3.29
Low: 9.4 6.8 6.0 0.75
</TABLE>
<TABLE>
Aggregate Value Capital.
As a Multiple of: LTM Margin Comparisons: Data:
-------------------------------------- ---------------------- ----------
LTM LTM LTM Net Book Net Debt/
Company Sales EBITDA EBIT Capital(c) Gross EBITDA EBIT Agg. Value
- - ------- ------- ------ ----- ---------- ----- ------ ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Armstrong World Industries Inc.(d) 1.16x 5.7x 7.7x 2.36x 33.4% 20.3% 15.0% 12.1%
Culp, Inc. 0.52 6.1 10.5 0.89 16.5% 8.5% 4.9% 62.0%
Mohawk Industries Inc. 0.91 7.7 10.3 2.42 24.3% 11.8% 8.8% 15.8%
Synthetic Industries, Inc. 1.15 6.1 8.7 1.15 32.8% 18.8% 13.1% 69.0%
Memo:
Suds Pro Forma LTM(e) 0.87x 6.8x 8.9x 1.57x 16.6% 12.7% 9.7% 72.0%
Suds Management 1998F(f) 0.84 5.9 7.4 1.60 17.8% 14.3% 11.4% --
Statistics
Mean: 0.93x 6.4x 9.3x 1.70x 26.7% 14.8% 10.4% 39.7%
Median: 1.03 6.1 9.5 1.75 28.5% 15.3% 11.0% 38.9%
High: 1.16 7.7 10.5 2.42 33.4% 20.3% 15.0% 69.0%
Low: 0.52 5.7 7.7 0.89 16.5% 8.5% 4.9% 12.1%
</TABLE>
- - --------------------------------------------------------------------------------
November 2, 1998 27 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
Comparable Transactions Analysis - Home Furnishings Industry
($ in millions, except per share amounts)
<TABLE>
<CAPTION>
Equity Consideration
as a Multiple of LTM:
Consideration ---------------------
Effective ----------------- Net Book
Date Target/Acquiror Equity Aggregate Income Value
---- --------------- ------ --------- ------ -----
<S> <C> <C> <C> <C> <C>
Pending World Carpets Inc. / Mohawk Industries Inc. $150 $150 NA NA
(Manufacturer of Carpets)
Oct-98 Simmons Co. / Fenway Partners Inc. (b) $400 $596 61.3x* 4.42x*
(Manufacturer of bedding products)
Oct-98 Queen Carpet Corp. / Shaw Industries Inc. $470 $690 NA NA
(Manufacturer of carpets)
Dec-97 Crain Industries, Inc. / Foamex International Inc.(c) $115 $214 NM 3.15
(Manufactures flexible polyurethane foam and foam products)
Jul-97 Mastercraft Group (Collins & Aikman Corp.) / Joan Fabrics Corp. 310 310 NA NA
(Manufacturer of flat-woven upholstery fabrics)
Feb-97 Floorcoverings Division (Collins & Aikman Corp.) / Investor Group 196 196 NA NA
(Manufacturer of various floorcoverings)
Aug-96 Home Furnishings Group (Masco) / Furnishings International Inc. 765 1,050 NA NA
(Manufacturer of residential furniture and decorative fabrics)
Apr-96 Graniteville Company (Triarc Co.) / Avondale Mills Inc. 255 255 NA NA
(Manufacturer of various textiles)
Dec-95 Thomasville Furniture Industries, Inc.(d) / INTERCO 331 339 14.3x 10.54*
(Manufacturer of various home furnishings)
Nov-95 Syroco Inc. (Syratceh Corp.) / Marley PLC 140 140 NA NA
(Manufacturer of household furniture and accessories)
Jan-95 Corsair Inc. / La-Z-Boy Chair Company 73 73 NA NA
(Manufacturer of upholstered furniture)
Jan-95 Galaxy Carpet Mills, Inc. (Peerless Carpet Corp.) / Mohawk Industries, Inc. 43 92 NM 1.32
(Manufactures tufted carpets primarily for residential use)
Dec-94 Raylex Division (Golding Industries, Inc.) / Cone Mills Corp. 58 64 NA NA
(Manufacturer of fabrics used in home furnishings)
Fcb-94 Aladdin Mills, Inc. / Mohawk Industries, Inc. 310 397 16.0 4.12
(Manufactures carpets and rugs for residential and commercial use)
Nov-93 Perfect Fit / Foamex International Inc. 21 69 NA NA
(Manufacturer of home comfort and furnishings products)
Sep-93 Hanes Holding Company(e) / Legget & Platt 63 116 14.8 3.67
(Manufacturer of woven fabrics and dies mainly for the furniture industry)
Jul-93 Carpet Division (Fieldcrest Cannon, Inc.) / Mohawk Industries, Inc. 140 140 NA 0.93
(Manufacturer of carpets and rugs)
May-93 Great Western Foam Products Corp. / Foamex International Inc. 28 38 NA NA
(Manufacturer and distributor of foam and foam products in the western U.S.)
Apr-93 Vintage Yarns, Inc. / Unifi. Inc.(f) 275 342 4.9* 3.74
(Manufacturer of yarns)
Mar-93 General Felt Industries, Inc. / Foamex International Inc. 30 96 NA NA
(Distributor and manufacturer of carpet cushion)
Oct-92 Horizon Industries, Inc. / Mohawk Industries, Inc. 87 130 24.9* 1.53
(Manufacturer of residential carpets and rugs)
Statistics
- - ----------
Mean: 15.0x 2.37x
Median: 14.8 3.15
High: 16.0 4.12
Low: 14.3 0.93
</TABLE>
<TABLE>
<CAPTION>
Aggregate Consideration
as a Multiple of LTM:
------------------------------------ LTM
Effective Net Book EBITDA
Date Target/Acquiror Sales EBITDA EBIT Capital(d) Margin
---- --------------- ----- ------ ---- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
Pending World Carpets Inc. / Mohawk Industries Inc. 0.35x NA NA NA NA
(Manufacturer of Carpets)
Oct-98 Simmons Co. / Fenway Partners Inc. (b) 1.04* 12.1x* 17.6x* 2.01x* 8.6%*
(Manufacturer of bedding products)
Oct-98 Queen Carpet Corp. / Shaw Industries Inc. 0.86 NA NA NA NA
(Manufacturer of carpets)
Dec-97 Crain Industries, Inc. / Foamex International Inc.(c) 0.66 7.4 14.3 1.58 8.9%
(Manufactures flexible polyurethane foam and foam products)
Jul-97 Mastercraft Group (Collins & Aikman Corp.) / Joan Fabrics Corp. 1.08 NA NA NA NA
(Manufacturer of flat-woven upholstery fabrics)
Feb-97 Floorcoverings Division (Collins & Aikman Corp.) / Investor Group 1.43 NA NA NA NA
(Manufacturer of various floorcoverings)
Aug-96 Home Furnishings Group (Masco) / Furnishings International Inc. 1.88 NA NA NA NA
(Manufacturer of residential furniture and decorative fabrics)
Apr-96 Graniteville Company (Triarc Co.) / Avondale Mills Inc. 0.51 NA NA NA NA
(Manufacturer of various textiles)
Dec-95 Thomasville Furniture Industries, Inc.(d) / INTERCO 0.64 NA 8.7 8.60* NA
(Manufacturer of various home furnishings)
Nov-95 Syroco Inc. (Syratceh Corp.) / Marley PLC 1.47 NA l0.9 NA NA
(Manufacturer of household furniture and accessories)
Jan-95 Corsair Inc. / La-Z-Boy Chair Company 0.73 NA NA NA NA
(Manufacturer of upholstered furniture)
Jan-95 Galaxy Carpet Mills, Inc. (Peerless Carpet Corp.) / Mohawk Industries, Inc. 0.46 12.5* NM 1.13 3.7%*
(Manufactures tufted carpets primarily for residential use)
Dec-94 Raylex Division (Golding Industries, Inc.) / Cone Mills Corp. NA NA NA NA NA
(Manufacturer of fabrics used in home furnishings)
Fcb-94 Aladdin Mills, Inc. / Mohawk Industries, Inc. 0.84 7.7 10.1 2.54 10.8%
(Manufactures carpets and rugs for residential and commercial use)
Nov-93 Perfect Fit / Foamex International Inc. 0.79 10.3 17.3 1.43 7.7%
(Manufacturer of home comfort and furnishings products)
Sep-93 Hanes Holding Company(e) / Legget & Platt 0.75 6.0 7.2 1.66 12.5%
(Manufacturer of woven fabrics and dies mainly for the furniture industry)
Jul-93 Carpet Division (Fieldcrest Cannon, Inc.) / Mohawk Industries, Inc. 0.59 NA 6.1 0.93 9.7%
(Manufacturer of carpets and rugs)
May-93 Great Western Foam Products Corp. / Foamex International Inc. 0.42 5.2 6.9 3.73 8.1%
(Manufacturer and distributor of foam and foam products in the western U.S.)
Apr-93 Vintage Yarns, Inc. / Unifi. Inc.(f) 2.01 NA 5.4 2.44 37.1%
(Manufacturer of yarns)
Mar-93 General Felt Industries, Inc. / Foamex International Inc. 0.50 4.7 7.4 1.46 10.6%
(Distributor and manufacturer of carpet cushion)
Oct-92 Horizon Industries, Inc. / Mohawk Industries, Inc. 0.42 7.5 15.4 1.30 5.6%
(Manufacturer of residential carpets and rugs)
Statistics
- - ----------
Mean: 0.86x 7.0x 10.0x 1.82x 12.3%
Median: 0.73 7.4 8.7 1.52 9.7%
High: 2.01 10.3 17.3 3.73 37.1%
Low: 0.35 4.7 5.4 0.93 5.6%
</TABLE>
See notes on following page
- - --------------------------------------------------------------------------------
November 2, 1998 28 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
Notes To Comparable Transactions Analysis - Home Furnishings Industry (Previous
Page)
* Multiples excluded from calculation of the mean and the median. LTM = Latest
Twelve Months. Aggregate Consideration is Equity Consideration plus Net Debt
(Total Debt less Cash) assumed by the acquiror
(a) Net Book Capital is book value plus net debt
(b) Results as of June 27, 1998. Assumes purchase price of $483.5 million
included refinancing of $195 million of debt plus the acquisition of 72% of
the Company's capital stock
(c) Based on audited results for January 1 through December 23, 1997 annualized
(d) Results calculated by annualizing nine months ended September 30, 1995
(e) Results calculated by annualizing six months ended July 3, 1993
(f) Results calculated by annualizing six months ended March 31, 1993
- - --------------------------------------------------------------------------------
November 2, 1998 29 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
Comparable Companies Analysis - Automotive Interior Components Industry
($ in millions, except per share amounts)
<TABLE>
<CAPTION>
Equity Value
As a Multiple of:
--------------------------------
Share Price Net Income
LTM as of Equity Aggregate ------------------------ Book
Company Ended 10/30/98 Value Value(a) LTM 1998E(b) 1999E(b) Value
- - ---------------------------- ------- ----- ----- ------ ----- -------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Collins & Aikman Corporation 6/27/98 $6.94 $444 $1,224 NM 53.4 x* 9.5 x NM
Johnson Controls Inc. (d) 9/30/98 56.25 4,764 6,041 17.0 16.4 13.6 2.58 x
Lear Corporation 9/26/98 32.38 2,173 3,663 10.6 10.7 9.0 1.66
Magna International Inc. (e) 7/31/98 62.06 5,410 5,201 23.3 13.4 11.5 2.00
Statistics
- - ----------
Mean: 17.0 x 13.5 x 10.9 x 2.08 x
Median: 17.0 13.4 10.5 2.00
High: 23.3 16.4 13.6 2.58
Low: 10.6 10.7 9.0 1.66
<CAPTION>
Aggregate Value Capital.
As a Multiple of: LTM Margin Comparisons: Data:
---------------------------------- ---------------------- ----------
LTM LTM LTM Net Book Net Debt/
Company Sales EBITDA EBIT Capital (c) Gross EBITDA EBIT Agg. Value
- - ------- ----- ------ ---- ----------- ----- -------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Collins & Aikman Corporation 0.70 x 7.8 x 13.9 x 1.72 x 13.2% 9.0% 5.1% 63.7%
Johnson Controls Inc. (d) 0.48 5.8 9.1 1.93 14.4% 8.2% 5.3% 21.1%
Lear Corporation 0.44 5.4 7.8 1.31 10.1% 8.2% 5.6% 40.7%
Magna International Inc. (e) 0.87 8.1 11.7 2.08 17.5% 10.8% 7.4% -4.0%
Statistics
- - ----------
Mean: 0.62 x 6.8 x 10.6 x 1.76 x 13.8% 9.1% 5.9% 30.4%
Median: 0.59 6.8 10.4 1.82 13.8% 8.6% 5.5% 30.9%
High: 0.87 8.1 13.9 2.08 17.5% 10.8% 7.4% 63.7%
Low: 0.44 5.4 7.8 1.31 10.1% 8.2% 5.1% -4.0%
</TABLE>
<TABLE>
<CAPTION>
Offer
Memo: Price
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Suds Pro Forma LTM (f) 9/30/98 $12.00 $304 $1,086 10.4 x 7.0 x 5.0 x NM 0.87 x 6.8 x 8.9 x
Suds Management 1998F (g) -- 12.00 304 1,086 10.4 7.0 5.0 NM 0.84 5.9 7.4
<S> <C> <C> <C> <C> <C>
Suds Pro Forma LTM (f) 1.57 x 16.6% 12.7% 9.7% 72.0%
Suds Management 1998F (g) 1.60 17.8% 14.3% 11.4% --
</TABLE>
Notes: * Multiples excluded from the calculation of the mean and median. LTM =
Latest Twelve Months
(a) Aggregate Value = Equity Value plus Net Debt, where Net Debt equals Debt,
Preferred Stock, and Minority Interest, less Cash
(b) Source: I/B/E/S Mean Earnings Estimates
(c) Net Book Capital = Book Value plus Net Debt
(d) In July 1998, the Company completed the acquisition of Becker Group, Inc.
for approximately $548 million plus the assumption of debt. Pro forma results
are not yet available
(e) Includes the effect of various transactions from the time of the
acquisitions. Also includes the conversion of $435.0 million of convertible
subordinated debentures which became convertible in July and October 1998
(f) Pro forma for the acquisition of Crain and sale of Dalton
(g) Multiples of Net Income are based on LTM, 1998E and 1999E. All other
multiples are based on Suds Management 1998 No Contingency forecast. EPS based
on fully diluted estimates
- - --------------------------------------------------------------------------------
November 2, 1998 30 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
Comparable Transactions Analysis - Automotive Interior Components Industry
($ in millions, except per share amounts)
<TABLE>
<CAPTION>
Equity Consideration
As a Multiple of:
Consideration --------------------
Effective Target/Acquirer -------------------------- Net Book
Date (Target's Major Products) Equity Aggregate(a) Income Value
----------- ------------ ------ -----
<S> <C> <C> <C> <C> <C>
Jul-98 Becker Group / Johnson Controls Inc. $ 548 $ 848 NA NA
(Automotive interior supplier)
Nov-97 AlliedSignal's Safety Restraint Systems Division/Breed
Technologies Inc. 710 688 21.8x 3.1x
(Manufactures seat-belts and airbags)
Jul-97 JPS Automotive L.P. (Collins & Aikman)/Safety 56 57 13.3 1.0
Components International, Inc.
(Manufacturer and supplier of fabric to the airbag industry)
May-97 Keiper Car Seating Gmbh / Lear Corporation NA 237 NA NA
(Manufactures seating systems for Mercedes, Audi & VW)
Dec-96 JPS Automotive L.P. / Collins & Aikman Corporation(a) 28 220 NM 0.3
(Manufactures automotive carpets and synthetic industrial
fabrics)
Aug-96 Douglas & Lomason/Magna International 139 222 12.5 1.5
(Automotive seating systems, frames, covers and mechanisms)
Aug-96 Foamex(JPS Automotive)/Collins & Aikman 22 220 2.5* 0.2*
(Automotive interior textile and plastic interior trim)
Jul-96 Prince Automotive/Johnson Control Inc. 1,269 1,350 18.6 10.1
(Automotive interior floor and ceiling consoles, door panels and
arm rests)
May-96 Masland Corp./Lear Corp. 385 483 21.3 3.9
(Automotive interior components)
Jan-96 Larizza Industries/Collins & Aikman Corporation 144 178 10.3 6.6*
(Door panels, headrests, floor console and instrument panel
components)
Jul-95 Automotive Industries/Lear Corp. 644 926 17.0 2.7
(Automotive interiors)
Jan-95 Bostrom Seating Inc./Johnstown America Industries 19 32 9.0 NM
(Seating for trucks)
</TABLE>
<TABLE>
<CAPTION>
Aggregate Consideration
As a Multiple of:
----------------------------------------------------
Net Net Book
Sales EBITDA EBIT Capital(b)
----- ------ ---- ----------
<S> <C> <C> <C> <C> <C>
Jul-98 Becker Group / Johnson Controls Inc. 0.65x NA NA NA
(Automotive interior supplier)
Nov-97 AlliedSignal's Safety Restraint Systems Division/Breed
Technologies Inc. 0.75 9.2x 14.9x 3.3x
(Manufactures seat-belts and airbags)
Jul-97 JPS Automotive L.P. (Collins & Aikman)/Safety 0.76 7.2 11.0 1.0
Components International, Inc.
(Manufacturer and supplier of fabric to the airbag industry)
May-97 Keiper Car Seating Gmbh / Lear Corporation 0.44 NA NA NA
(Manufactures seating systems for Mercedes, Audi & VW)
Dec-96 JPS Automotive L.P. / Collins & Aikman Corporation(a) 0.75 5.6 9.6 0.7
(Manufactures automotive carpets and synthetic industrial fabrics)
Aug-96 Douglas & Lomason/Magna International 0.39 8.5 16.6 NA
(Automotive seating systems, frames, covers and mechanisms)
Aug-96 Foamex(JPS Automotive)/Collins & Aikman 1.03 5.0 7.1 NA
(Automotive interior textile and plastic interior trim)
Jul-96 Prince Automotive/Johnson Control Inc. 1.63 10.1 12.3 9.8*
(Automotive interior floor and ceiling consoles, door panels and
arm rests)
May-96 Masland Corp./Lear Corp. 1.04 8.6 12.3 2.5
(Automotive interior components)
Jan-96 Larizza Industries/Collins & Aikman Corporation 0.90 6.9 8.5 3.2
(Door panels, headrests, floor console and instrument panel
components)
Jul-95 Automotive Industries/Lear Corp. 1.42 8.9 11.9 1.8
(Automotive interiors)
Jan-95 Bostrom Seating Inc./Johnstown America Industries 0.57 5.3 6.3 2.4
(Seating for trucks)
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Mean: 15.5x 2.1x 0.86x 7.5x 11.0x 2.1
Median: 15.1 2.1 0.76 7.9 11.5 2.4
High: 21.8 3.9 1.63 10.1 16.6 3.3
Low: 9.0 0.3 0.39 5.0 6.3 0.7
</TABLE>
Notes:
- - ------
* Excludes from the calculation of the mean and median
(a) Results calculated by annualizing nine months ended September 29, 1996
(6) Net Book Capital = Book Value plus Net Debt
- - --------------------------------------------------------------------------------
November 2, 1998 31 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
Suds' Five-Year Growth Rates, Average Margins And Returns Appear To Be In In The
Range Of Or Higher Than Those Of Comparable Home Furnishings Companies
<TABLE>
<CAPTION>
Average Average
Sales EBITDA EBITDA EBIT Average Average
Company: Growth Growth Margin Margin ROE(a) ROIC(b)
- - -------------------------------------- ------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Armstrong World Industries Inc.(c) (3.4%) 6.9% 18.2% 12.5% 24.1% 24.2%
Culp, Inc. (d) 18.7% 28.7% 9.7% 61% 12.1% 13.5%
Mohawk Industries Inc.(c) 12.5% 14.1% 9.5% 6.4% 15.7% 17.0%
Synthetic Industries Inc.(c) 13.2% 13.5% 19.2% 14.0% 13.5% 15.2%
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Mean: 10.2% 15.8% 14.1% 9.7% 16.4% 17.5%
Median: 12.8% 13.8% 13.9% 9.5% 14.6% 16.1%
Memo 1:
Suds(e) 15.8% 17.7% 11.1% 8.0% NM 14.5%
Memo 2:
Crain(f) 9.9% 7.7% 8.7% 5.6% 4.3% 9.2%
</TABLE>
Notes:
NM = Not Meaningful
All data excludes one-time charges but does not give pro forma effect to all
transactions
(a) Return on Equity is Net Income divided by average Shareholders' Equity
(b) Return on Invested Capital is EBIT divided by average Invested Capital
(Total Debt plus Shareholders' Equity)
(c) Five-year results based on FY December 31, 1993 - December 31, 1997
(d) Five-year results based on FY ended late April or early May, 1993 - 1997
(e) Four-year results ending December 31, 1997
(f) Three and one-third-year results for the years ended August 24, 1994 and
1995 and December 31, 1996 and 1997
- - --------------------------------------------------------------------------------
November 2, 1998 32 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
Relative To Comparable Automotive Interior Component Companies, Suds' Five-Year
Growth Rates And Returns Are Lower, Though Its Margins Are In Line
<TABLE>
<CAPTION>
Average Average
Sales EBITDA EBITDA EBIT Average Average
Company: Growth Growth Margin Margin ROE(a) ROIC(b)
- - -------------------------------------- ------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Collins & Aikman Corporation(c) 5.7% 4.4% 13.4% 9.5% NM 37.4%
Johnson Controls Inc.(d) 15.9% 15.4% 8.7% 5.2% 14.8% 20.2%
Lear Corporation(c) 39.3% 47.6% 7.8% 5.6% 25.3% 21.0%
Magna International Inc.(e) 31.1% 27.1% 12.1% 8.7% 20.2% 22.7%
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Mean: 23.0% 23.6% 10.5% 7.3% 20.1% 25.3%
Median: 23.5% 21.3% 10.4% 7.2% 20.2% 21.8%
Memo 1:
Suds(f) 15.8% 17.7% 11.1% 8.0% NM 14.5%
Memo 2:
Crain(g) 9.9% 7.7% 8.7% 5.6% 4.3% 9.2%
</TABLE>
Notes:
NM = Not meaningful
All data excludes one-time charges but does not give pro forma effect to all
transactions
(a) Return on Equity is Net Income divided by average Shareholders' Equity
(b) Return on Invested Capital is EBIT divided by average Invested Capital
(Total Debt plus Shareholders' Equity)
(c) Five-year results based on FY December 31, 1993 - December 31, 1997
(d) Five-year results based on FY September 30, 1993 - September 30, 1997
(e) Five-year results based on FY July 31, 1993 - July 31, 1997
(f) Four-year results ending December 31, 1997
(g) Three and one-third-year results for the years ended August 24, 1995 and
1996 and December 31, 1996 and 1997
- - --------------------------------------------------------------------------------
November 2, 1998 33 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
Discounted Future Equity Values Analysis
($ in millions, except per share amounts)
<TABLE>
<CAPTION>
Suds Management Forecasts
------------------------------------------------------------------
Equity Value as a Function of
1998 Forecast EBITDA
Contingency No Contingency
---------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
EBITDA Multiple: 5.5x 6.5x 7.5x 5.5x 6.5x 7.5x
Forecast EBITDA $ 182.5 $ 182.5 $ 182.5 $ 184.5 $ 184.5 $ 184.5
-------- -------- -------- -------- -------- --------
Aggregate Value (a) $1,003.8 $1,186.3 $1,368.8 $1,014.8 $1,199.3 $1,383.8
Less: Forecast Net Debt (h) 751.9 751.9 751.9 751.9 751.9 751.9
-------- -------- -------- -------- -------- --------
Implied Equity Valuation $ 251.9 $ 434.4 $ 616.9 $ 262.9 $ 447.4 $ 631.9
Shares & Equivalents (MM) 25.11 26.16 26.76 25.16 26.21 26.79
Future Per Share Equity Value $ 10.03 $ 16.61 $ 23.05 $ 10.45 $ 17.07 $ 23.58
Present Value of Future Per Share Equity
Value At a Discount Rate of 14.0%:(c) $ 9.71 $ 16.07 $ 22.31 $ 10.11 $ 16.52 $ 22.82
As a Multiple of: (d)
Suds 1998F Net Income 5.8x 9.6x 13.3x 5.9x 9.6x 13.3x
Suds 1999F Net Income 4.9 8.1 11.3 4.2 6.8 9.4
</TABLE>
<TABLE>
<CAPTION>
Suds Management Forecasts
------------------------------------------------------------------
Equity Value as a Function of
1999 Forecast EBITDA
Contingency No Contingency
---------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
EBITDA Multiple: 5.5x 6.5x 7.5x 5.5x 6.5x 7.5x
Forecast EBITDA $ 193.8 $ 193.8 $ 193.8 $ 210.8 $ 210.8 $ 210.8
-------- -------- -------- -------- -------- --------
Aggregate Value (a) $1,065.9 $1,259.7 $1,453.5 $1,159.4 $1,370.2 $1,581.0
Less: Forecast Net Debt (h) 655.0 655.0 655.0 655.0 655.0 655.0
-------- -------- -------- -------- -------- --------
Implied Equity Valuation $ 410.9 $ 604.7 $ 798.5 $ 504.4 $ 715.2 $ 926.0
Shares & Equivalents (MM) 26.04 26.73 27.10 26.44 26.96 27.26
Future Per Share Equity Value $ 15.78 $ 22.62 $ 29.47 $ 19.08 $ 26.52 $ 33.97
Present Value of Future Per Share Equity
Value At a Discount Rate of 14.0%:(c) $ 13.39 $ 19.20 $ 25.02 $ 16.20 $ 22.52 $ 28.84
As a Multiple of: (d)
Suds 1998F Net Income 8.0x 11.5x 15.0x 9.4x 13.1x 16.8x
Suds 1999F Net Income 6.8 9.7 12.7 6.7 9.3 11.9
</TABLE>
Notes:
(a) Aggregate Value is the total enterprise value and is calculated by
multiplying the indicated multiple by Suds Management's estimated EBITDA for
1998 and 1999
(b) Net Debt is forecast to be $751.9 million and $655.0 million at the end of
1998 and 1999
(c) Per share equity values discounted back approximately three months (for 1998
EBITDA-based valuation) and fifteen months (for 1999 EBITDA-based valuation)
to the present using an equity discount rate determined by a cost of equity
capital analysis for the comparable companies adjusted for Suds' current
debt level
(d) Calculated by dividing total equity valuation by Suds Management's forecast
fully diluted EPS (Contingency and No Contingency cases) for 1998 and 1999,
respectively
- - --------------------------------------------------------------------------------
November 2, 1998 34 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
Review Of Discounted Cash Flow Analysis Based On Suds Management Projections
[ ] Discount rates were assumed to be 10% to 12%
o Risk free rate assumed to be approximately 4.8%, the current yield on
10-year Treasury notes
o Unlevered beta of approximately 0.7, the mean beta for the home
furnishings and automotive interior components comparable companies
o Market risk premium (defined as the average premium of the overall U.S.
equity market to the risk-free rate of return, which in turn is defined
as the current rate of return on a 10-year U.S. Treasury Bond) of 7.5%
per Ibbotson & Associates
o Equity value as 28% of Suds aggregate value based on current company
capitalization
[ ] The analysis employed a terminal EBITDA multiple range of 5.5x to 7.5x,
based on historical and current mean EBITDA multiples for the home
furnishings and automotive interior components comparable companies and Suds
[ ] Based on estimated December 31, 1998 balance sheet prepared by Management;
"Year One" cash flow is based on operating forecasts for 1999
[ ] Current Suds tax NOL of $120 million consumed in shielding year-one
operating income
- - --------------------------------------------------------------------------------
November 2, 1998 35 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
Discounted Cash Flow Analysis: Implied Per Share Valuations(a)
<TABLE>
<CAPTION>
($in millions, except per share amounts)
CONTINGENCY CASE Terminal EBITDA Multiple
5.5x 6.0x 6.5x 7.0x 7.5x
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
10.0% $21.50 $24.28 $27.07 $29.86 $32.64
Discount
Rate 11.0% 19.95 22.62 25.30 27.97 30.65
12.0% 18.47 21.04 23.61 26.18 28.75
NO CONTINGENCY CASE Terminal EBITDA Multiple
5.5x 6.0x 6.5x 7.0x 7.5x
------ ------ ------ ------ ------
10.0% $22.97 $25.80 $28.63 $31.47 $34.30
Discount
Rate 11.0% 21.39 24.11 26.83 29.54 32.26
12.0% 19.88 22.49 25.10 27.71 30.32
</TABLE>
Note:
(a) Fully Diluted Per Share Equity Values equal Aggregate Value less estimated
December 31, 1998 net debt of $751.9
- - --------------------------------------------------------------------------------
November 2, 1998 36 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
Third Party Leveraged Buyout Analysis Assumptions
($ in millions)
[ ] Analysis assumes that a transaction is financed with a capital structure
deemed to be available to third party private equity investors and excludes
certain Trace-specific aspects of the Trace proposed financing structure
o $75 million in cash payments to Trace eliminated completely; no benefit
associated with the Trace $185 million NOL is included
o Holding company LBO discount notes (and associated warrants) eliminated
from capital structure completely
o Transaction assumed to be financed with a new senior debt facility
(capped at 3.5x 1998 pro forma EBITDA and priced identical to the
Scotiabank facility negotiated by Trace) and with the existing $248
million of notes that Trace offered to exchange in a consent
solicitation; consent and transaction fees were assumed to be equivalent
to those estimated by Trace; all incremental funds invested by LBO
investor as equity
[ ] LBO investor management fee assumed to be $3 million annually, which is
included in calculation of equity returns
[ ] Required amount of financing based on debt levels estimated by Suds
management for December 31, 1998
- - --------------------------------------------------------------------------------
November 2, 1998 37 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
Third Party Equity Internal Rate Of Return Assuming Various Per Share Purchase
Prices and Various Terminal EBITDA Multiples(a)
<TABLE>
<CAPTION>
CONTINGENCY CASE Terminal EBITDA Multiple
5.5x 6.0x 6.5x 7.0x 7.5x
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
$12.00 37.4% 42.0% 46.1% 49.8% 53.1%
Purchase 14.00 28.6% 32.9% 36.7% 40.1% 43.2%
Price 16.00 22.3% 26.4% 30.0% 33.2% 36.1%
17.00 19.7% 23.7% 27.2% 30.4% 33.3%
18.75 15.9% 19.7% 23.1% 26.2% 29.0%
NO CONTINGENCY CASE Terminal EBITDA Multiple
5.5x 6.0x 6.5x 7.0x 7.5x
------ ------ ------ ------ ------
$12.00 40.9% 45.4% 49.4% 53.0% 56.3%
Purchase 14.00 31.4% 35.6% 39.3% 42.6% 45.7%
Price 16.00 24.8% 28.7% 32.2% 35.4% 38.3%
17.00 22.1% 25.9% 29.4% 32.5% 35.3%
18.75 18.1% 21.8% 25.1% 28.1% 30.8%
</TABLE>
Note:
(a) Assumes that transaction is financed with senior debt equivalent to 3.5x
1998 pro forma EBITDA and that $248 million of the Crain 13 1/2% and the
9 7/8% notes are refinanced in an exchange offer and consent solicitation
- - --------------------------------------------------------------------------------
November 2, 1998 38 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
Leveraged Buyout Analysis Assuming A Per Share Price Of $12.00(a)
($ in millions)
<TABLE>
<S> <C> <C> <C>
Contingency Case
Terminal Year EBITDA (2003E) $242.3 $242.3 $242.3
Terminal Multiple 6.0x 6.5x 7.0x
Five-Year Internal Rate of Return 42.0% 46.1% 49.8
No Contingency Case
Terminal Year EBITDA (2003E) $246.3 $246.3 $246.3
Terminal Multiple 6.0x 6.5x 7.0x
Five-Year Internal Rate of Return 45.4% 49.4% 53.0%
</TABLE>
Note:
(a) Assumes that transaction is financed with senior debt equivalent to 3.5x
1998 pro forma EBITDA and that $248 million of the Crain 13 1/2% and the
9 7/8% notes are refinanced in an exchange offer and consent solicitation
- - --------------------------------------------------------------------------------
November 2, 1998 39 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
Premiums Paid Analysis - Going Private Transactions Between
$0.2 and $1.5 Billion(a)
($ in millions, except per share amounts)
<TABLE>
<CAPTION>
% Held
Date Prior to Aggregate Initial Bid Per Share
Announced Target Acquiror Acquisition Value Per Share Price Paid
- - ---------- ----------------------------- ------------------------------ ----------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
11/17/97 Shared Technologies Fairchild Intermedia Communications Inc. 20.1% $503.6 $11.25 $15.00
9/12/97 Western National Corp. American General Corp. 44.7% 1,215.0 28.75 29.75
7/30/97 Amdahl Corp. Fujitsu Ltd. 42.0% 924.8 10.57 12.40
1/30/97 AST Research Inc. Samsung Electronics Co. Ltd. 49.0% 495.8 5.10 5.40
10/30/96 Vons Cos Inc. Safeway Inc. 32.3% 2,251.6 58.12 61.81
7/17/96 New World Commun Grp (Mafco) News Corp. Ltd. 18.4% 2,173.0 23.00 26.83
6/3/96 Univar Corp Pakhoed Holding NV 28.1% 425.0 17.00 19.45
5/10/96 Transnational Re Corp. PXRE Corp. 22.0% 133.1 23.52 25.91
10/26/95 Maxtor Corp. Hyundai Electronics Industries 33.1% 228.2 5.15 6.70
8/29/95 Turner Broadcasting System Inc. Time Warner 17.8% 6,880.7 29.81 31.78
7/24/95 AMFED Financial Inc. Norwest Corp., Minneapolis, MN 21.4% 156.9 30.00 32.00
4/24/95 Viagene Inc. Chiron Corp. 17.0% 118.8 7.50 9.00
2/27/95 CCP Insurance Inc. Conseco Inc. 48.1% 273.7 22.50 23.25
1/18/95 Arcadian Partners LP Arcadian Corp 45.0% 428.4 26.00 29.00
11/16/94 National Gypsum Co. Detect Inc. (Golden Eagle Ind.) 19.5% 937.6 43.50 54.00
9/12/94 Borden Inc. Kohlberg Kravis Roberts & Co. 16.5% 4,643.4 13.50 14.25
6/29/94 Santa Fe Pacific Corp Burlington Northern Inc. 36.6% 3,747.5 22.57 28.56
3/9/94 Dr Pepper/Seven-Up Cos. Inc Cadbury Schweppes PLC 22.7% 2,366.5 29.00 33.00
Mean 29.7%
Median 25.4%
<CAPTION>
Premiums Paid
$ Difference/ Premium of -------------------
Date Unaffected Final Price/ One-Week One-Month
Announced Target Acquiror Share Price(b) Initial Bid Prior Prior
- - ---------- ----------------------------- ------------------------------ -------------- ----------- -------- ---------
11/17/97 Shared Technologies Fairchild Intermedia Communications Inc. 32.6% 33.3% 30.4% 22.4%
9/12/97 Western National Corp. American General Corp. 3.4% 3.5% 2.4% 1.5%
7/30/97 Amdahl Corp. Fujitsu Ltd. 18.1% 17.3% 22.5% 40.7%
1/30/97 AST Research Inc. Samsung Electronics Co. Ltd. 6.0% 5.9% 8.0% 29.0%
10/30/96 Vons Cos Inc. Safeway Inc. 8.2% 6.3% 37.4% 44.2%
7/17/96 New World Commun Grp (Mafco) News Corp. Ltd. 25.0% 16.7% 75.2% 65.1%
6/3/96 Univar Corp Pakhoed Holding NV 19.4% 14.4% 54.1% 65.5%
5/10/96 Transnational Re Corp. PXRE Corp. 11.4% 10.2% 24.1% 15.8%
10/26/95 Maxtor Corp. Hyundai Electronics Industries 38.2% 30.1% 64.9% 46.8%
8/29/95 Turner Broadcasting System Inc. Time Warner 8.8% 6.6% 41.2% 51.3%
7/24/95 AMFED Financial Inc. Norwest Corp., Minneapolis, MN 7.9% 6.7% 26.7% 32.6%
4/24/95 Viagene Inc. Chiron Corp. 26.1% 20.0% 56.5% 45.5%
2/27/95 CCP Insurance Inc. Conseco Inc. 4.2% 3.3% 29.2% 21.6%
1/18/95 Arcadian Partners LP Arcadian Corp 12.6% 11.5% 21.5% 26.1%
11/16/94 National Gypsum Co. Detect Inc. (Golden Eagle Ind.) 30.9% 24.1% 58.8% 59.4%
9/12/94 Borden Inc. Kohlberg Kravis Roberts & Co. 6.2% 5.6% 17.5% 14.0%
6/29/94 Santa Fe Pacific Corp Burlington Northern Inc. 29.4% 26.5% 40.2% NA
3/9/94 Dr Pepper/Seven-Up Cos. Inc Cadbury Schweppes PLC 16.7% 13.8% 37.5% 36.8%
Mean 16.9% 14.2% 36.0% 36.4%
Median 14.6% 12.7% 33.9% 36.8%
</TABLE>
Notes:
(a) A going private transaction in this analysis is defined as one in which the
pre-transaction ownership stake held by the acquirer is at least 15% and the
post-transaction ownership stake held by the acquiror is 80% or more of the
target company. Source of transactions is Securities Data Corporation
(b) Dollar difference divided by the share price prior to any announcement of
the transaction
- - --------------------------------------------------------------------------------
November 2, 1998 40 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
Overview Of Financing For The Proposed Transaction
[ ] Letters signed on October 16, 1998 by The Bank of Nova Scotia ("TBNS")
outline the following proposed debt structure
o Bank Debt
- $800 million of borrowings under a term loan facility
- $150 million revolving credit facility, primarily for post-closing
general corporate and working capital purposes of Suds and Suds
Carpet Cushion; up to $25 million permitted to be drawn down to
finance various fees and expenses associated with the Transaction
o Operating Company Notes
- $150 million of the 9 7/8% notes exchanged for new notes in a
consent solicitation
- $98 million of the Crain 13 1/2% notes exchanges for new notes in a
consent solicitation
o Holding Company Notes
- $135 million in initial accreted value of senior discount notes
(non-cash paying securities) with warrants attached to purchase up
to 19.9% of the Company's stock
[ ] TBNS has committed to providing 50% of the credit facilities and pledged
its best efforts to arrange syndication of the remaining amount
[ ] Equity to be composed of rollover of Trace's existing shareholdings in Suds
(11.5 million shares)
- - --------------------------------------------------------------------------------
November 2, 1998 41 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
Overview Of Financing For The Proposed Transaction (Continued)
[ ] Interest Coverage Ratios based on Suds Management Forecast and Trace's
Proposed Capital Structure
<TABLE>
<CAPTION>
No Contingency Case Contingency Case
------------------------------------ ----------------------------------
Actual Pro Forma Actual Pro Forma
Forecast Forecast Forecast Forecast
1998 1998(a) 1999 1998 1998(a) 1999
-------- --------- ---- -------- --------- ----
<S> <C> <C> <C> <C> <C> <C>
EBITDA/Pro Forma Total Interest 1.7x 1.8x 1.9x 1.7x 1.8x 1.8x
EBITDA - Cap. Exp./Pro Forman Total Int. 1.3 1.5 1.7 1.3 1.5 1.5
Memo ($MM)
- - ----------
EBITDA $184.5 $203.3 $210.8 $182.5 $201.3 $193.8
Pro Forma Total Interest 110.2 110.2 110.2 110.2 110.2 110.2
</TABLE>
[ ] Capitalization Ratio based on Suds Management Forecast and Trace's Proposed
Capital Structure
<TABLE>
<CAPTION>
Net Senior Net Total
Debt (b) Debt(c)
----------- ---------
<S> <C> <C>
No Contingency Case
Forecast Actual EBITDA 4.3x 5.7x
Pro Forma Forecast EBITDA 3.9 5.2
Contingency Case
Forecast Actual EBITDA 4.4x 5.8x
Pro Forma Forecast EBITDA 4.0 5.2
</TABLE>
Notes:
(a) Pro forma Forecast EBITDA for 1998 includes credit for annualizing current
run rate savings associated with the Crain acquisition
(b) Does not reflect certain changes to Suds' estimated year-end balance sheet
developed following Trace's October 16, 1998 offer; net senior debt includes
$800 million of term loans, $17 million drawn against the $150 million
revolver, $21.2 million of assumed debt less $36.5 million of
post-transaction estimated cash balance
(c) Net total debt is net senior debt plus $248 million of subordinated notes
- - --------------------------------------------------------------------------------
November 2, 1998 42 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
Sources And Uses Of Incremental Funds In Trace's Contemplated Transaction
Structure(a)
<TABLE>
<CAPTION>
USES SOURCES
- - ------------------------------------------------------ -------------------------------------
<S> <C> <C> <C>
Payment to non-Trace Shareholders $162.5 Excess cash in Company $13.7
Payment to option/warrant holders 4.1 Senior credit facility 800.0
Refinance Suds 9 7/8% notes 150.0 Revolver draw down 17.0
Refinance Crain 13.5% notes 98.0 Subordinated notes 248.0
Refinance senior credit facility 406.2 Assume other debt 21.2
Refinance GFI related party debt 104.2
Transaction fees 45.2
Pre-payment penalties/consent fees 23.8
Assume other debt 21.2
Accrued interest and other 9.8
Tax sharing payment to Trace 75.0
-------- --------
Total Uses $1,100.0 Total Sources $1,100.0
-------- --------
</TABLE>
Notes:
(a) Does not reflect certain changes to Suds' estimated year-end balance sheet
developed following Trace's October 16, 1998 offer
- - --------------------------------------------------------------------------------
November 2, 1998 43 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
Financing Considerations Concerning The Proposed Transaction
[ ] The syndication of the bank debt by TBNS is subject to conditions which
include the following:
o the Purchase Price and other terms and conditions of the Transaction
must be substantially the same as originally presented by Trace to TBNS
o no material adverse change in the business conditions, results of
operations or prospects of Trace or Suds
o satisfactory completion of due diligence
o satisfactory market conditions for bank syndication
[ ] $75 million of cash raised in the debt financing is being paid to Trace o
o Payment as compensation for the present value of tax savings benefits to
be derived from the future utilization of Trace's $185 million tax NOL
as a result of Trace consolidating Suds for tax filing purposes
[ ] Much of the transaction's complexity results from past actions of Trace
and Suds and a desire to achieve favorable tax treatment
- - --------------------------------------------------------------------------------
November 2, 1998 44 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
Appendix
A. Comparable Company Summary Descriptions
- - --------------------------------------------------------------------------------
November 2, 1998 45 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
Review Of Comparable Home Furnishings Companies
[ ] Armstrong World Industries Inc.
[ ] Culp, Inc.
[ ] Mohawk Industries Inc.
[ ] Synthetic Industries, Inc.
- - --------------------------------------------------------------------------------
November 2, 1998 46 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
Armstrong World Industries Inc.
($ in millions, except per share amounts)
Business Description
[ ] Armstrong is a manufacturer of interior furnishings, including floor
coverings and building products which are sold primarily for use in the
furnishings, refurbishing, repair, modernization and construction of
residential, commercial and institutional buildings
<TABLE>
<CAPTION>
($ in millions, except per share amounts) Market Information
<S> <C> <C>
Current Trading Price $62.00
Market Cap. 2,492.4
52-Week Stock Price Change (4.4%)
Current Aggregate Value/EBITDA 5.7x
FY 1997 Segment Information
Sales % of Total
Floor Coverings $1,116.0 50.8%
Building Products 754.5 34.3%
Industry Products 328.2 14.9%
Ceramic Tile 0.0 0.0%
-------- ------
Total $2,198.7 100.0%
======== ======
</TABLE>
<TABLE>
<CAPTION>
Summary Financial Information
Fiscal Years Ended December 31, LTM
------------------------------------------------------------ Ended
1993 1994 1995 1996 1997 9/30/98 CAGR(d) Average(d)
-------- -------- -------- -------- -------- -------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $2,525.4 $2,752.7 $2,084.9 $2,156.4 $2,198.7 $2,447.7 (3.4%)
% Growth (1.0%) 9.0% (24.3%) 3.4% 2.0% 11.3%
EBITDA $ 348.1 $ 466.6 $ 429.2 $ 407.0 $ 454.7 $ 497.6 6.9%
% Margin 13.8% 17.0% 20.6% 18.9% 20.7% 20.3% 18.2%
EBIT $ 218.1 $ 333.2 $ 293.1 $ 283.3 $ 322.0 $ 366.1 10.2%
% Margin 8.6% 12.1% 14.1% 13.1% 14.6% 15.0% 12.5%
Earnings Per Share $ 2.33 $ 4.64 $ 3.53 $ 4.37 $ 4.50 $ 5.33 17.9%
% Growth 107.5% 99.1% (23.9%) 23.7% 3.1% 18.4%
Return on Equity(a) 20.6% 32.3% 21.6% 23.2% 23.1% 25.2% 24.1%
Return on Invested Capital(b) 17.2% 27.0% 22.9% 24.4% 29.7% 30.5% 24.2%
Net Debt/Total Capitalization(c) 52.2% 41.6% 24.6% 18.7% 24.6% 28.4% 32.3%
</TABLE>
Notes:
(a) Return on Equity is Net Income divided by average Shareholders' Equity
(b) Return on Invested Capital is EBIT divided by average Shareholders' Equity
(c) Net Debt is total debt less cash and Total Capitalization is Net Debt plus
Shareholders' Equity
(d) CAGR = Compound Annual Growth Rate. Average is the average of the margins
over the stated period
- - --------------------------------------------------------------------------------
November 2, 1998 47 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
Culp, Inc.
Business Description
[ ] Culp manufactures and markets upholstery fabrics and mattress tickings
primarily for use in the furniture (residential, commercial and juvenile)
and bedding industries on a worldwide basis
<TABLE>
<CAPTION>
($ in millions, except per share amounts) Market Information
<S> <C> <C>
Current Trading Price $7.25
Market Cap. 95.7
52-Week Share Price Change (61.4%)
Current Aggregate Value/EBITDA 6.1x
Segment Information
Sales % of Total
Textures $88.2 22.1%
Rossville/Chromatex 79.5 19.9%
Velvets/Prints 156.5 39.2%
Home Fashions 74.7 18.7%
------ ----
Total $398.9 100.0%
====== =====
</TABLE>
<TABLE>
<CAPTION>
Summary Financial Information
Fiscal Years Ended April or May, LTM
------------------------------------------------------------ Ended
1993 1994 1995 1996 1997 8/2/98 CAGR(d) Average(d)
-------- -------- -------- -------- -------- ------ ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $ 200.8 $ 245.0 $ 308.0 $ 351.7 $ 476.7 $ 487.9 24.1%
% Growth 5.0% 22.0% 25.7% 14.2% 35.6% 2.3%
EBITDA $ 14.9 $ 23.6 $ 33.1 $ 36.6 $ 44.1 $ 41.4 31.1%
% Margin 7.4% 9.6% 10.8% 10.4% 9.2% 8.5% 9.5%
EBIT $ 8.0 $ 14.8 $ 21.2 $ 23.5 $ 30.6 $ 23.9 39.9%
% Margin 4.0% 6.0% 6.9% 6.7% 6.4% 4.9% 6.0%
Earnings Per Share $ 0.62 $ 0.69 $ 0.87 $ 0.98 $ 1.18 $ 0.77 17.5%
% Growth 51.2% 11.3% 26.1% 12.6% 20.4% (34.8%)
Return on Equity (a) 8.6% 13.1% 14.6% 14.4% 16.1% 8.4% 12.5%
Return on Invested Capital(b) 10.7% 14.4% 15.8% 15.2% 17.4% 10.1% 13.9%
Net Debt/Total Capitalization(c) 26.2% 48.4% 50.3% 50.0% 40.6% 54.9% 45.1%
</TABLE>
Notes:
(a) Return on Equity is Net Income divided by average Shareholders' Equity
(b) Return on Invested Capital is EBIT divided by average Shareholders' Equity
(c) Net Debt is total debt less cash and Total Capitalization is Net Debt plus
Shareholders' Equity
(d) CAGR = Compound Annual Growth Rate. Average is the average of the margins
over the stated period
- - --------------------------------------------------------------------------------
November 2, 1998 48 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
Mohawk Industries Inc.
($ in millions, except per share amounts)
Business Description
[ ] Mohawk designs, manufactures and markets carpet and rugs in a broad range
of colors, textures and patterns
[ ] Mohawk's operations are vertically integrated from the extrusion of resin
into fiber, to the conversion of fiber into yarn and to the manufacture and
shipment of finished carpet and rugs
Market Information
Current Trading Price $30.19
Market Cap. 1,603.6
52-Week Stock Price Change 47.3%
Current Aggregate Value/EBITDA 7.7x
Summary Financial Information
<TABLE>
<CAPTION>
Fiscal Years Ended December 31, LTM
-------------------------------------------------------- Ended
1993 1994 1995 1996 1997 9/26/98 CAGR(d) Average(d)
-------- -------- -------- -------- -------- -------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $1,188.2 $1,437.4 $1,648.6 $1,795.1 $1,901.4 $2,098.6 12.5%
% Growth 56.1% 21.0% 14.7% 8.9% 5.9% 10.4%
EBITDA $120.0 $148.0 $112.9 $175.5 $200.8 $247.4 13.7%
% Margin 10.1% 10.3% 6.8% 9.8% 10.6% 11.8% 9.5%
EBIT $85.2 $98.5 $60.3 $120.4 $141.6 $184.0 13.5%
% Margin 7.2% 6.9% 3.7% 6.7% 7.4% 8.8% 6.4%
Earnings Per Share $0.80 $0.66 $0.26 $0.95 $1.30 $1.83 13.0%
% Growth 12.4% (17.1%) (59.8%) 260.3% 36.1% 41.3%
Return on Equity(a) 25.0% 13.4% 5.1% 16.3% 18.4% 21.8% 15.6%
Return on Invested Capital(b) 22.4% 16.1% 9.0% 17.2% 19.9% 24.7% 16.9%
Net Debt/Total Capitalization(c) 58.6% 60.2% 59.5% 53.8% 41.9% 38.2% 54.8%
</TABLE>
Notes:
(a) Return on Equity is Net Income divided by average Shareholders' Equity
(b) Return on Invested Capital is EBIT divided by average Shareholders' Equity
(c) Net Debt is total debt less cash and Total Capitalization is Net Debt plus
Shareholders' Equity
(d) CAGR = Compound Annual Growth Rate. Average is the average of the margins
over the stated period
- - --------------------------------------------------------------------------------
November 2, 1998 49 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
Synthetic Industries, Inc.
($ in millions, except per share amounts)
Business Description
[ ] Synthetic Industries manufactures and markets a wide range of primarily
polypropylene-based materials designed for support, strength and
stabilization applications
[ ] The company's products replace commonly used materials in diverse
applications including: floor coverings, geotextiles, erosion control,
concrete reinforcement and furniture construction fabrics
Market Information
Current Trading Price $14.13
Market Cap. 128.3
52-Week Stock Price Change (49.6%)
Current Aggregate Value/EBITDA 6.1x
Segment Inforamtion
Sales % of Total
----- ----------
Carpet Backing $166.2 48.1%
Construction/Engineering 114.6 33.2%
Technical Textiles 64.7 18.7%
------ -----
Total $345.6 100.0%
====== =====
Summary Financial Information
<TABLE>
<CAPTION>
Fiscal Years Ended December 31, LTM
-------------------------------------------------------- Ended
1993 1994 1995 1996 1997 6/30/98 CAGR(d) Average(d)
-------- -------- -------- -------- -------- -------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $210.5 $235.0 $271.4 $299.5 $345.6 $360.6 13.2%
% Growth 7.5% 11.6% 15.5% 10.4% 15.4% 4.4%
EBITDA $42.0 $53.2 $40.3 $54.8 $68.5 $67.7 13.0%
% Margin 19.9% 22.6% 14.9% 18.3% 19.8% 18.8% 19.1%
EBIT $29.9 $40.8 $28.7 $38.5 $50.3 $47.4 13.9%
% Margin 14.2% 17.4% 10.6% 12.8% 14.6% 13.1% 13.9%
Earnings Per Share NA NA NA $0.94 $1.75 ($3.11) NM
% Growth -- -- -- -- 87.0% NM
Return on Equity(a) 7.2% 22.8% 3.4% 13.1% 17.6% 11.5% 12.8%
Return on Invested Capital(b) 13.6% 18.1% 11.8% 15.1% 17.1% 13.8% 15.1%
Net Debt/Total Capitalization (c) 79.3% 76.2% 76.9% 74.7% 67.6% 79.1% 74.9%
</TABLE>
Notes:
(a) Return on Equity is Net Income divided by average Shareholders' Equity
(b) Return on Invested Capital is EBIT divided by average Shareholders' Equity
(c) Net Debt is total debt less cash and Total Capitalization is Net Debt plus
Shareholders' Equity
(d) CAGR = Compound Annual Growth Rate. Average is the average of the margins
over the stated period
- - --------------------------------------------------------------------------------
November 2, 1998 50 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
Review Of Comparable Automotive Interior Components Companies
[ ] Collins & Aikman Corporation
[ ] Johnson Controls Inc.
[ ] Lear Corporation
[ ] Magna International Inc.
- - --------------------------------------------------------------------------------
November 2, 1998 51 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
Collins & Aikman Corporation
($ in millions, except per share amounts)
Business Description
[ ] Collins & Aikman is a global supplier of automotive interior systems,
including textile and plastic trim, acoustics and convertible top systems
[ ] The company operates in five principal automotive product groups: carpet
and acoustics, automotive fabrics, accessory floor mats, convertible top
systems and plastic-based interior systems
Market Information
Current Trading Price $6.94
Market Cap. 443.9
52-Week Stock Price Change (28.4%)
Current Aggregate Value/EBITDA 7.8x
Segment Information
Sales % of Total
----- ----------
Carpet & Acoustics $633.6 38.9%
Automotive Fabrics 283.7 17.4%
Accessory Floor Mats 134.6 8.3%
Convertible Top Systems 86.6 5.3%
Plastic Interior Systems 294.3 18.1%
Other 196.5 12.1%
-------- ------
Total $1,629.3 100.0%
======== ======
Summary Financial Information
<TABLE>
<CAPTION>
Fiscal Years Ended
Fiscal Years Ended January 28, December 28, LTM
-------------------------------- -------------------- Ended
1993 1994 1995 1996 1997 6/27/98 CAGR(d) Average(d)
-------- -------- -------- -------- -------- -------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $1,305.5 $1,536.0 $1,291.5 $1,055.9 $1,629.3 $1,739.2 5.7%
% Growth 2.2% 17.7% (15.9%) (18.2%) 54.3% 6.7%
EBITDA $168.4 $216.7 $191.4 $138.1 $199.9 $156.7 4.4%
% Margin 12.9% 14.1% 14.8% 13.1% 12.3% 9.0% 13.4%
EBIT $110.4 $172.8 $147.8 $102.0 $107.1 $88.1 (0.7%)
% Margin 8.5% 11.3% 11.4% 9.7% 6.6% 5.1% 9.5%
Earnings Per Share ($1.18) $1.13 $3.22 $0.68 $0.05 ($0.16) NM
% Growth NM NM 185.3% (79.0%) (92.3%) NM
Return on Equity(a) 14.1% (13.6%) (71.7%) (22.5%) (2.7%) 16.8% (19.3%)
Return on Invested Capital(b) 27.8% 90.9% 42.6% 13.4% 12.6% 12.1% 37.4%
Net Debt/Total Capitalization(c) NM 371.7% 142.3% 120.1% 109.6% 109.3% 185.9%
</TABLE>
Notes:
(a) Return on Equity is Net Income divided by average Shareholders' Equity
(b) Return on Invested Capital is EBIT divided by average Shareholders' Equity
(c) Net Debt is total debt less cash and Total Capitalization is Net Debt plus
Shareholders' Equity
(d) CAGR = Compound Annual Growth Rate. Average is the average of the margins
over the stated period
- - --------------------------------------------------------------------------------
November 2, 1998 52 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
Johnson Controls Inc.
($ in millions, except per share amounts)
Business Description
[ ] Johnson has two primary business segments:
o Automotive - primary operations consist of its seating and interior
systems business
o Controls - primarily involved in the installation and service of control
systems to existing worldwide commercial building market
Market Information
Current Trading Price $56.25
Market Cap. 4,763.7
52-Week Stock Price Change 27.7%
Current Aggregate Value/EBITDA 5.8x
Segment Information
Sales % of Total
----- ----------
Automotive $8,022.1 72.0%
Controls 3,123.3 28.0%
--------- -----
Total $11,145.4 100.0%
========= =====
Summary Financial Information
<TABLE>
<CAPTION>
Fiscal Years Ended September 30,
---------------------------------------------------------------------
1993 1994 1995 1996 1997 1998 CAGR(d) Average(d)
-------- -------- -------- -------- -------- -------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $6,181.7 $6,870.5 $8,330.3 $10,009.4 $11,145.4 $12,586.8 15.9%
% Growth 19.9% 11.1% 21.2% 20.2% 11.3% 12.9%
EBITDA $536.6 $623.5 $737.3 $829.7 $952.0 $1,036.0 15.4%
% Margin 8.7% 9.1% 8.9% 8.3% 8.5% 8.2% 8.7%
EBIT $298.3 $365.2 $448.8 $500.0 $597.1 $664.0 18.9%
% Margin 4.8% 5.3% 5.4% 5.0% 5.4% 5.3% 5.2%
Earnings Per Share $1.49 $1.80 $2.14 $2.55 $2.82 $3.30 17.3%
% Growth 10.1% 20.8% 18.6% 19.4% 10.6% 17.1%
Return on Equity(a) 12.1% 14.5% 15.4% 16.5% 16.4% 17.1% 15.3%
Return on Invested Capital(b) 17.0% 20.6% 22.0% 21.2% 20.9% 20.7% 20.4%
Net Debt/Total Capitalization(c) 30.1% 32.6% 35.1% 36.8% 44.5% 40.9% 36.7%
</TABLE>
Notes:
(a) Return on Equity is Net Income divided by average Shareholders' Equity
(b) Return on Invested Capital is EBIT divided by average Shareholders' Equity
(c) Net Debt is total debt less cash and Total Capitalization is Net Debt plus
Shareholders' Equity
(d) CAGR = Compound Annual Growth Rate. Average is the average of the margins
over the stated period
- - --------------------------------------------------------------------------------
November 2, 1998 53 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
Lear Corporation
($ in millions, except per share amounts)
Business Description
[ ] Lear is the largest supplier of automotive interior systems in the
estimated $48 billion global automotive interior systems market and one of
the ten largest independent automotive suppliers in the world
[ ] Among the company's various products are door panels, seat systems, dash
insulator, instrument panels, headliners, seat covers and a variety of
interior trim products
Market Information
Current Trading Price $32.38
Market Cap. 2,172.8
52-Week Share Price Change (32.6%)
Current Aggregate Value/EBITDA 5.4x
Summary Financial Information
<TABLE>
<CAPTION>
Fiscal Years Ended December 31, LTM
-------------------------------------------------------- Ended
1993 1994 1995 1996 1997 9/26/98 CAGR(d) Average(d)
-------- -------- -------- -------- -------- -------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $1,950.3 $3,147.5 $4,714.4 $6,249.1 $7,342.9 $8,297.3 39.3%
% Growth 37.1% 61.4% 49.8% 32.6% 17.5% 13.0%
EBITDA $140.1 $228.1 $339.5 $521.5 $665.5 $683.1 47.6%
% Margin 7.2% 7.2% 7.2% 8.3% 9.1% 8.2% 7.8%
EBIT $97.6 $169.6 $244.8 $375.8 $481.1 $468.0 49.0%
% Margin 5.0% 5.4% 5.2% 6.0% 6.6% 5.6% 5.6%
Earnings Per Share $0.14 $0.96 $1.52 $2.38 $3.05 $3.05 116.2%
% Growth NM 590.3% 57.5% 56.6% 28.2% (0.0%)
Return on Equity(a) 18.7% 46.6% 23.7% 19.0% 18.7% 16.2% 25.3%
Return on Invested Capital(b) 18.5% 25.0% 20.0% 19.8% 21.8% 18.2% 21.0%
Net Debt/Total Capitalization(c) 92.2% 70.1% 65.3% 50.7% 47.6% 53.2% 65.2%
</TABLE>
Notes:
(a) Return on Equity is Net Income divided by average Shareholders' Equity
(b) Return on Invested Capital is EBIT divided by average Shareholders' Equity
(c) Net Debt is total debt less cash and Total Capitalization is Net Debt plus
Shareholders' Equity
(d) CAGR = Compound Annual Growth Rate. Average is the average of the margins
over the stated period
- - --------------------------------------------------------------------------------
November 2, 1998 54 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
Magna International Inc.
Business Description
[ ] Magna is a full service supplier of interior and exterior body and chassis
systems to every major auto-maker in North America and Europe
[ ] The company employs more than 36,000 people at 128 manufacturing divisions
and 26 product development and engineering centers throughout the world
($ in millions, except per share amounts)
Market Information(e)
Current Trading Price $62.06
Market Cap. 5,409.6
52-Week Stock Price Change (4.5%)
Current Aggregate Value/EBITDA 8.1x
(Canadian $ in millions, except per share amounts)
Summary Financial Information
<TABLE>
<CAPTION>
Fiscal Years Ended July 31, LTM
-------------------------------------------------------- Ended
1993 1994 1995 1996 1997 7/31/98 CAGR(d) Average(d)
-------- -------- -------- -------- -------- -------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $2,606.7 $3,568.5 $4,512.7 $5,856.2 $7,691.8 $9,190.8 31.1%
% Growth 10.5% 36.9% 26.5% 29.8% 31.3% 19.5%
EBITDA $323.3 $472.7 $562.8 $667.2 $843.9 $990.2 27.1%
% Margin 12.4% 13.2% 12.5% 11.4% 11.0% 10.8% 12.1%
EBIT $218.8 $353.6 $414.4 $476.9 $611.8 $684.0 29.3%
% Margin 8.4% 9.9% 9.2% 8.1% 8.0% 7.4% 8.7%
Earnings Per Share $2.40 $3.81 $5.15 $4.59 $4.36 $4.12 16.1%
% Growth 28.1% 58.8% 35.2% (10.9%) (5.0%) (5.6%)
Return on Equity(a) 19.6% 21.7% 21.8% 16.3% 12.4% 8.5% 18.3%
Return on Invested Capital(b) 23.5% 28.2% 24.1% 19.2% 18.4% 15.1% 22.7%
Net Debt/Total Capitalization(c) (0.3%) 2.4% (7.4%) (16.4%) (21.8%) (7.1%) (8.7%)
</TABLE>
Notes:
(a) Return on Equity is Net Income divided by average Shareholders' Equity
(b) Return on Invested Capital is EBIT divided by average Shareholders' Equity
(c) Net Debt is total debt less cash and Total Capitalization is Net Debt plus
Shareholders' Equity
(d) CAGR = Compound Annual Growth Rate. Average is the average of the margins
over the stated period
(e) Market information is in US dollars
- - --------------------------------------------------------------------------------
November 2, 1998 55 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
Highly Confidential
PROJECTS SUDS
- - --------------------------------------------------------------------------------
Presentation To The Special Committee Of The Board Of Directors
- - --------------------------------------------------------------------------------
November 2, 1998 56 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
Discussion Agenda
I. Executive Summary
II. Overview Of Foamex International Inc. ("Suds" or the "Company")
III. Valuation Analysis
IV. Overview Of The Proposed Financing For The Transaction
Appendices
A. Comparable Company Descriptions
- - --------------------------------------------------------------------------------
November 2, 1998 57 THE BEACON GROUP CAPITAL SERVICES, LLC
<PAGE>
PROJECT SUDS Confidential
- - --------------------------------------------------------------------------------
Summary Of Suds Implied Per Share Equity Values Based on Suds Management
Forecasts(e)
($ in millions, except per share amounts)
- - ------------------------------------------
Comparable Companies Multiples Applied To:
- - ------------------------------------------
LTM Pro Forma and 1998F EBITDA
- - ------------------------------------------
Automotive: (a) 6.8 x 6.8 x
Home: (b) 6.1 6.4
- - ------------------------------------------
LTM Pro Forma and 1998F EBIT
- - ------------------------------------------
Automotive: (a) 10.4 x 10.6 x
Home: (b) 9.3 9.5
- - ------------------------------------------
1998F Multiples Applied to Suds 1998F
Net Income
- - ------------------------------------------
Automotive: (a) 13.4 x 13.5 x
Home: (b) 10.9 10.9
- - ------------------------------------------
1998F Multiples Applied to Suds 1998F
Net Income + 36%(c)
- - ------------------------------------------
Automotive: (a) 13.4 x 13.5 x
Home: (b) 10.9 10.9
- - ------------------------------------------
1999F Multiples Applied to Suds 1999F
Net Income
- - ------------------------------------------
Automotive: (a) 10.5 x 10.9 X
Home: (b) 9.9 10.0
- - ------------------------------------------
1999F Multiples Applied to Suds 1999F
Net Income + 36%(c)
- - ------------------------------------------
Automotive: (a) 10.5 x 10.9 X
Home: (b) 9.9 10.0
- - ------------------------------------------
insert graphic plot points (page 58)
- - --------------------------------------------------------------------------------
November 2, 1998 58 THE BEACON GROUP CAPITAL SERVICES, LLC
Highly Confidential
Foamex International Inc.
----------------------------------
Presentation to
The Board of Directors
November 5, 1998
RAMIUS CAPITAL GROUP, LLC
<PAGE>
Table of Contents
-----------------------------
Foamex International Inc.
I. Executive Summary
II. Factors Affecting Valuation
A. Overview of Economic Climate
B. Overview of Core Businesses
C. Overview of Company's Financials
D. Overview of Financing Marketplace
III. Company Valuation
A. Valuation Summary
B. Market Multiples Analysis
C. Business Segment Analysis
D. Adjusted Acquisition Multiples Analysis
E. Projected Comparable EBITDA Multiple Analysis
F. Discounted Cash Flow Analysis
G. LBO Analysis
H. Historical Stock Price Analysis
RAMIUS CAPITAL GROUP, LLC Page 2
<PAGE>
Executive Summary
-----------------------------
Foamex International Inc.
Ramius Capital Group, L.L.C. ("Ramius") has been engaged by the Board of
Directors of Foamex International Inc. (the "Company") to render an Opinion (the
"Opinion") as to whether the consideration to be received by the shareholders of
the Company in connection with the merger by and among Trace International
Holdings, Inc., Trace Merger Sub, Inc. (collectively "Trace"), and the Company
(the "Transaction") is fair, from a financial point of view, to the shareholders
of the Company (other than Trace or its subsidiaries). In the Transaction,
holders of shares of common stock of the Company (the "Common Stock"), which are
not owned by Trace or its subsidiaries, will receive $12.00 per share in cash
without interest thereon (the "Cash Per Share Price").
In conducting our analysis, we reviewed and considered such information as
we deemed necessary or appropriate for the purposes of stating our opinion
including:
o Financial Information
o certain business and financial information
relating to the Company, provided by the Company,
including the current financial condition and
operating results of the Company
o the Company's historical financial performance and
operating performance by business unit, including
its historical performance versus budgets
o the Company's Pro Forma operating history after
giving effect to the acquisition and sale of
various "non-core" businesses from 1992-1998
o Management's Ten Year Financial Projections--
Contingency Case and No Contingency Case
o Assessment of non-recurring charges and one time
expenses
o Pro Forma LBO analyses giving effect to the
proposed Transaction prepared by Trace
RAMIUS CAPITAL GROUP, LLC Page 3
<PAGE>
Executive Summary
-----------------------------
Foamex International Inc.
o Document Review
o drafts, in the forms furnished to us by representatives of the
Company, of the Agreement and Plan of Merger (the "Merger
Agreement")
o financing commitment letters
o certain public filings made by the Company with the Securities and
Exchange Commission
o Certain market trading data and historical trading performance for
securities of the Company
o Presentation to the Special Committee of the Board of Directors, dated
November 2, 1998 by The Beacon Group Capital Services, LLC
o We also met with members of senior management of the Company and Trace to
discuss, among other things:
o the historical and prospective industry environment including the
Company's current position with respect to key raw material
suppliers and major customers
o the financial condition and operating results of the Company
o the acquisition and divestiture history and specific planned cost
savings relating to the acquisition of Crain Industries, Inc.
("Crain")
o the revised Trace offer, the Trace historical affiliation and
inter-company arrangements, and the financing sources and terms
o We met with and discussed various aspects of the proposed financing with
the financial institutions involved in the transaction.
RAMIUS CAPITAL GROUP, LLC Page 4
<PAGE>
Executive Summary
-----------------------------
Foamex International Inc.
In conducting our analysis, we have assumed and relied upon the accuracy
and completeness of all financial and other material furnished to us by the
Company regarding the Company, the Transaction, the industry in which the
Company operates and its respective competition in that industry. We have not
attempted to independently verify the information provided by the Company. We
have not made or been provided with an independent evaluation or appraisal of
the assets or liabilities (contingent or otherwise) of the Company. We were not
authorized to, and did not, solicit third party indications of interest in
acquiring all or part of the Company, and we were not asked to consider, and our
opinions do not address, the consideration the Company might receive from
another third-party purchaser, the relative merits of the Transaction as
compared to any alternative business strategies that might exist for the Company
or the effect of any other transaction in which the Company might engage. We
were not requested to, and did not, analyze or give any effect to the impact of
any federal, state, or local income taxes to the Company's shareholders arising
out of the Transaction. Although we evaluated the consideration to be received
by the shareholders of the Company, we were not requested to, and did not,
participate in the negotiation of the Merger Agreement and were not requested
to, and did not recommend the specific consideration payable in the Transaction.
In our analyses, we made numerous assumptions with respect to industry
performance, general business, economic, market and financial conditions, and
other matters, based on, among other things, financial projections and
information provided to us by the Company, many of which are beyond the control
of the Company. Any estimates contained in our analyses are not necessarily
indicative of actual values, which may be significantly more or less favorable
than as set forth therein. Our opinion is necessarily based upon information
available to us, and financial, stock market, and other conditions and
circumstances existing and disclosed to us, as of the date hereof.
RAMIUS CAPITAL GROUP, LLC Page 5
<PAGE>
Executive Summary
-----------------------------
Foamex International Inc.
o In developing our opinion, we calculated a range of values for the Company
using six separate valuation analyses:
o Market Multiples Analysis based upon comparable publicly traded
companies;
o Business Segment Analysis;
o Adjusted Acquisition Multiples Analysis based upon the Company's
acquisitions adjusted for synergies;
o Projected Comparable EBITDA Multiple Analysis;
o Discounted Cash Flow Analysis; and
o Leveraged Buyout Analysis.
RAMIUS CAPITAL GROUP, LLC Page 6
<PAGE>
Factors Affecting Valuation
-----------------------------
Introduction
o The Company's historical operating performance is a more reliable
benchmark for establishing value than its projected operating results for
the next five years.
o We have primarily utilized EBITDA multiples in our historical and
projected valuation methodologies because we believe it is a more accurate
reflection of the Company's true operating results versus comparable
companies.
o The Company does not appear to be a likely takeover candidate for
strategic buyers or other financial buyers.
RAMIUS CAPITAL GROUP, LLC Page 7
<PAGE>
Factors Affecting Valuation
-----------------------------
Overview of Economic Climate
o General economic indicators used by the Company to monitor trends indicate
a higher possibility of an economic slowdown than previously thought.
o Record levels of consumer debt in the U.S. may limit continued
growth in consumer spending.
o Record levels of U.S. households are investing their wealth in
financial assets. This may make consumers less likely to spend in
the face of increased market volatility - "The Wealth Effect".
o As a result of the economic expansion over the past decade, any slow
down will likely result in over capacity in many industries. This
will likely result in increased pricing pressure, which will have
the greatest adverse effect on producers of intermediate goods like
the Company.
RAMIUS CAPITAL GROUP, LLC Page 8
<PAGE>
Factors Affecting Valuation
-----------------------------
Overview of Core Businesses
o In its Automotive and Foam Products businesses, the Company has
historically had little pricing power leaving margins under periodic
pressure.
o Potential price increases in chemical raw materials would adversely
impact margins.
o Because the Company is essentially a commodity manufacturer, the
Company has never enjoyed prolonged periods where it can pass on raw
material price increases to its customers.
o Despite its market share, the Company's competitors primarily
utilize price to compete, particularly in an economic slowdown. The
effect of this competition has historically offset any lower input
price advantages.
o The Company's primary customers (JCI and Lear) have increased
pressure on their vendors to compete on price and have shown a
willingness to move business to the low cost provider.
o The Company's Carpet Cushion business has recently performed well, but may
be affected by a slowdown in consumer demand as new home sales and
re-sales of homes decrease.
o The Company's higher margin Technical Products business has come under
pressure due to the worldwide slowdown in the sale of printers and other
high tech products.
o The Company's new initiatives in Asia and Latin America have been hampered
by global economic turmoil.
RAMIUS CAPITAL GROUP, LLC Page 9
<PAGE>
Factors Affecting Valuation
--------------------------------
Overview of Company's Financials
Pro Forma Actual Results
(dollars in millions)
<TABLE>
<CAPTION>
1997(a) 1998
------------------------------------------------------ ------------------------------------------------------
LTM
Q1 Q2 Q3 Q4(b) FYE(b) Q1 Q2 Q3 Q4 E 9/30/98(b)
------ ------ ------ ------ -------- ------ ------ ------ ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $296.1 $305.7 $310.1 $309.2 $1,221.1 $313.8 $298.5 $332.7 $342.6 $1,254.2
Gross Profit $52.5 $55.2 $50.0 $43.6 $201.3 $51.2 $56.9 $56.7 $64.3 $208.4
Margin 17.7% 18.1% 16.1% 14.1% 16.5% 16.3% 19.1% 17.0% 18.8% 16.6%
EBIT $29.2 $32.1 $26.6 $20.2 $108.1 $28.8 $36.0 $36.9 $43.6 $121.9
Margin 9.9% 10.5% 8.6% 6.5% 8.9% 9.2% 12.1% 11.1% 12.7% 9.7%
EBITDA $36.8 $40.1 $34.8 $30.8 $142.5 $37.4 $44.9 $46.1 $54.1 $159.2
Margin 12.4% 13.1% 11.2% 10.0% 11.7% 11.9% 15.0% 13.9% 15.8% 12.7%
</TABLE>
- - ----------
(a) Pro Forma for Crain, SIMCO and Dalton, but not reflecting any savings
related to the Crain Acquisition.
(b) Includes $20 million addback to EBIT as a result of management identified
non-recurring expenses which occurred in the fourth quarter 1997.
E indicates estimated.
RAMIUS CAPITAL GROUP, LLC Page 10
<PAGE>
Factors Affecting Valuation
--------------------------------
Overview of Company's Financials
Company Projections
- - -------------------
o The Company's projections, even in the contingency case, indicate that
the Company will sustain operating margins in excess of those achieved
historically.
(dollars in millions)
<TABLE>
<CAPTION>
1998 1999 2000 2001 2002 2003
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Sales $1,287.6 $1,416.4 $1,456.2 $1,524.0 $1,581.4 $1,641.5
Cost of Goods Sold $1,058.5 $1,158.3 $1,191.5 $1,246.2 $1,292.8 $1,341.2
-------- -------- -------- -------- -------- --------
Gross Profit $229.1 $258.1 $264.8 $277.9 $288.7 $300.3
Margin 17.8% 18.2% 18.2% 18.2% 18.3% 18.3%
Selling, General, & Administrative $81.9 $83.4 $84.7 $86.8 $88.4 $90.2
Contingency $2.0 $17.0 $18.0 $10.0 $5.0 $4.0
-------- -------- -------- -------- -------- --------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Contingency EBIT $145.2 $157.7 $162.1 $181.1 $195.2 $206.1
Margin 11.3% 11.1% 11.1% 11.9% 12.3% 12.6%
EBITDA $182.5 $193.8 $198.2 $217.2 $231.3 $242.2
Margin 14.2% 13.7% 13.6% 14.3% 14.6% 14.8%
No Contingency EBIT $147.2 $174.7 $180.1 $191.1 $200.2 $210.1
Margin 11.4% 12.3% 12.4% 12.5% 12.7% 12.8%
EBITDA $184.4 $210.8 $216.2 $227.2 $236.3 $246.2
Margin 14.3% 14.9% 14.8% 14.9% 14.9% 15.0%
</TABLE>
RAMIUS CAPITAL GROUP, LLC Page 11
<PAGE>
Factors Affecting Valuation
--------------------------------
Overview of Company's Financials
EBITDA Margins of Comparable Companies
<TABLE>
<CAPTION>
Average Average FMXI Pro Forma
EBITDA Margin Historical EBITDA Margin
------------------------------------------------------
<S> <C> <C>
Home Furnishings:
Armstrong World Industries 20.5%
Culp 9.7%
Synthetic Industries 18.4%
Springs Industries 11.1%
Mohawk Industries 9.6%
British Vita 8.8%
Recticel 6.8%
------------------------------------------------------
Average 12.1% 11.5%
------------------------------------------------------
Auto Interior Components:
Collins & Aikman 11.5%
Johnson Controls 8.3%
Lear 8.3%
Magna 11.0%
British Vita 8.8%
Recticel 6.8%
------------------------------------------------------
Average 9.1% 11.5%
------------------------------------------------------
</TABLE>
RAMIUS CAPITAL GROUP, LLC Page 12
<PAGE>
Factors Affecting Valuation
--------------------------------
Overview of Company's Financials
FMXI Pro Forma Historical Financial Summary
(Dollars in millions)
<TABLE>
<CAPTION>
Pro Forma
1997 1997 1998 as
1992 1993(a) 1994 1995 1996 1997(d) Combined Pro Forma Adjusted
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SALES $501.7 $684.3 $833.7 $862.8 $926.4 $931.1 $1,250.1(j) $1,250.1(k) $1,290.9
Less: Contribution by General Felt
and Great Western(b) (153.1)
Plus: General Felt for
fiscal year ended
January 3, 1993 190.8
Plus: Great Western for
fiscal year ended
January 3, 1993 90.5
Plus: General Felt for
period prior to acquisition
on March 23, 1993 37.8
Plus: Great Western for period
prior to acquisition on
May 1, 1993 31.6
Plus: Contributions after
acquisition 153.1
Less: Contributions of the
Dalton Facility sold on
October 6, 1997 (29.4) 31.7 (33.3) (36.9) (40.5) (35.6) (35.6) (35.6)
Plus: Adjustments for SIMCO
acquisition 6.6 6.6
---------------------------------------------------------------------------------
753.6 785.4 800.4 825.9 885.9 895.5 1,221.1 1,221.1
---------------------------------------------------------------------------------
GROSS PROFIT
Plus: Recticel for 9 months prior
to acquisition in 1990 69.9 $93.7(i) 142.4 100.7 153.2 143.3 212.8 212.8
Plus: General Felt for fiscal year
ended January 3, 1993 23.0
Plus: Great Western for fiscal year
ended January 3, 1993 17.1
Plus: General Felt for period prior
to acquisition on March 23, 1993 3.5
Plus: Great Western for period prior
to acquisition on May 1, 1993(c) 4.7
Less: Dalton Facility(e) (3.2) (3.5) (6.3) (5.8) (7.3) (6.4) (6.4) (6.4)
Plus: Adjustments for SIMCO acquisition(f) 1.3 1.3
Pro Forma COGS Acquisition
adjustments(g) (22.0)
---------------------------------------------------------------------------------
106.8 98.4 136.1 94.9 145.9 136.9 185.7 $207.7(k)
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
Margin 14.2% 12.5% 17.0% 11.5% 16.5% 15.3% 15.2% 17.0%
---------------------------------------------------------------------------------
EBDAIT
Actual EBDAIT 58.2 66.8 107.4 77.6 117.6 118.3 $146.8(j) 146.8
Estimated EBDAIT
Plus: General Felt for fiscal year
ended January 3, 1993 14.0
Plus: Great Western for fiscal year
ended January 3, 1993 6.3
Plus: General Felt for period
prior to acquisition on
March 23, 1993 1.5
Plus: Great Western for period
prior to acquisition on
May 1, 1993 2.9
Less: Dalton Facility(e) (3.3) (3.6) (5.3) (4.9) (6.0) (5.1) (5.1) (5.1)
Plus: Adjustments for SIMCO
acquisition(f) 0.7 0.7
Adjustments for Cost Savings,
Synergies, and Incremental
Management Fee(h) 65.6
----------------------------------------------------------------------------------------------
Adjusted EBDAIT 75.2 67.6 102.1 72.7 111.6 113.2 142.4 $208.0(k) 200.3
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
Adjusted EBDAIT margin 10.0% 8.6% 12.8% 8.8% 12.6% 12.6% 11.7% 17.0% 15.5%
----------------------------------------------------------------------------------------------
</TABLE>
a: Actual data includes the results of operations of General Felt and Great
Western from March 23 and May 1, 1993, respectively.
b: Represents contributions from General Felt and Great Western from March 23
and May 1, 1993, respectively.
c: Results for Great Western do not include the period from April 4 - May 1,
1993, which was prior to the acquisition.
d: Does not include Crain acquisition completed on December 23, 1997.
e: 1992 financials based on 1993 fiscal year, with the average growth from
1993-94 and 1994-95 backed out. The profit and EBDAIT margins are assumed to be
the same as in 1993 (10.95% and 11.38%, respectively).
f: SIMCO's financials prior to acquisition by Crain in May 1997.
g: Consists of reclassifications to COGS.
h: Includes $60.1 million in savings for going forward synergies, $12.131 in
corporate overhead and pricing savings, and $7.5 million in incremental
management fee and amortization.
i: Gross Profit represents reported $96.0 million less $2.263 million for
Perfect Fit for period from November 19, 1993 to January 4, 1994.
j: Includes Foamex and Crain historical financials.
k: Pro Forma for Crain Acquisition, Crain's acquisition of SIMCO, Foamex's sale
of Dalton Facility, management fees, and synergies.
RAMIUS CAPITAL GROUP, LLC Page 13
<PAGE>
Factors Affecting Valuation
-----------------------------
Overview of Company's Financials
Observations:
o While the Company's projected margins are between 14% and 15%, its
historical margins and those of comparable companies average between 9%
and 12%.
o Sales growth in the projections continues in an upward trend indefinitely.
o Projections assume that the expansion in EBITDA margins currently being
enjoyed by the Company will continue indefinitely.
o Furthermore, the Company has a history of not meeting its financial
expectations on a consistent basis.
Conclusions:
o The valuation results based on management's projections are highly
sensitive to growth and margin assumptions.
o As a result, we applied less weight to the Projected Performance Valuation
Methodologies that utilize these projections than to the Historical Based
Valuation Methodologies which rely primarily on the Company's actual
financial results.
RAMIUS CAPITAL GROUP, LLC Page 14
<PAGE>
Factors Affecting Valuation
---------------------------------
Overview of Financing Marketplace
o The High Yield financing market has changed dramatically.
[Graphic performance chart]
DLJ High Yield Index
Yield to Worst Spread to Worst
1/8/98 9.16% +380bp
1/15/98 9.10% +376bp
1/22/98 9.10% +369bp
1/29/98 9.07% +365bp
2/5/98 8.99% +352bp
2/12/98 8.96% +353bp
2/19/98 8.97% +353bp
2/26/98 9.06% +346bp
3/5/98 9.16% +349bp
3/12/98 9.13% +362bp
3/19/98 9.07% +354bp
3/26/98 9.05% +341bp
4/2/98 9.04% +352bp
4/9/98 9.02% +351bp
4/16/98 9.05% +352bp
4/23/98 9.07% +342bp
4/30/98 9.19% +357bp
5/7/98 9.17% +357bp
5/14/98 9.32% +367bp
5/20/98 9.36% +378bp
5/28/98 9.39% +383bp
6/4/98 9.38% +381bp
6/11/98 9.39% +395bp
6/18/98 9.54% +403bp
6/25/98 9.55% +408bp
6/30/98 9.55% +409bp
7/9/98 9.48% +408bp
7/16/98 9.42% +395bp
7/23/98 9.39% +396bp
7/30/98 9.43% +395bp
8/6/98 9.63% +422bp
8/13/98 9.90% +453bp
8/20/98 10.08% +476bp
8/27/98 10.72% +573bp
9/2/98 11.22% +622bp
9/10/98 11.28% +659bp
9/17/98 11.35% +660bp
9/24/98 11.23% +670bp
10/1/98 11.25% +705bp
10/7/98 11.53% +725bp
10/14/98 11.99% +779bp
10/21/98 11.92% +753bp
10/28/98 11.81% +751bp
RAMIUS CAPITAL GROUP, LLC Page 15
<PAGE>
Factors Affecting Valuation
-----------------------------
Overview of Financing Marketplace
o A High Yield financing with respect to the current transaction is most
likely not feasible in the current marketplace.
o Bond inventories at many firms, which turn over more quickly in
better markets, are now being liquidated, often at losses, over a
longer duration. It is now more difficult to sell a highly regarded
new issue and virtually impossible to sell lower grade issues.
o Trace approached a number of institutions that continued to look at
financing the original offer as recently as the end of September,
but none of them were willing to make a commitment on a bridge loan
to a high yield offering.
o Traditional senior lenders have become more stringent due to a worldwide
credit crunch as well as their perception that the Company will have a
more difficult time meeting its projections in a cyclical downturn.
o Senior lenders involved in the Transaction indicated that they will lend
up to an aggregate 4X pro forma 1998 EBITDA in this environment,
effectively capping the senior bank debt availability at $800 million.
RAMIUS CAPITAL GROUP, LLC Page 16
<PAGE>
Valuation Summary
-----------------
Historical Performance Valuation Analyses(a)
<TABLE>
<CAPTION>
Contingency No Contingency
--------------- ---------------
Low High Low High
------ ------ ------ ------
<S> <C> <C> <C> <C>
Market Multiples Analysis $11.65 - $14.91 $11.65 - $14.91
Business Segment Analysis $ 8.77 - $16.16 $ 8.77 - $16.16
Adjusted Acquisition Multiples Analysis $ 9.13 - $13.02 $ 9.13 - $13.02
<CAPTION>
Projected Performance Valuation Analyses
Contingency No Contingency
--------------- ---------------
Low High Low High
------ ------ ------ ------
Projected Comparable EBITDA
Multiples Analysis $ 8.08 - $12.86 $11.57 - $13.35
Discounted Cash Flow Analysis $11.28 - $19.96 $12.65 - $21.50
LBO Analysis $11.54 - $13.53 $12.03 - $14.03
</TABLE>
(a) Includes $20 million addback to EBIT as a result of management identified
non-recurring expenses which occurred fourth quarter 1997.
RAMIUS CAPITAL GROUP, LLC Page 17
<PAGE>
Valuation
-----------------------------
Market Multiples Analysis
o The multiples used for the Market Multiple Analysis are derived by
dividing the public valuations of comparable companies by certain measures
of operating performance such as revenue, earnings before interest, taxes,
depreciation and amortization ("EBITDA"), earnings before interest and
taxes ("EBIT"), and net income. Revenue, EBITDA, and EBIT multiples are
based on total enterprise value divided by each financial measure,
respectively. Total enterprise value is defined as the market value of
common stock, plus total debt, less cash and cash equivalents. Total
enterprise value is essentially the value of a company assuming an
un-leveraged capital structure. The net income multiples are derived by
dividing the market value of the common stock in aggregate by net income.
o We used these multiples to calculate a range of public market values for
the Company to develop an implied market multiple valuation of the
Company. Total enterprise multiples were developed using revenue, EBITDA,
and EBIT multiplies. We generated the market value of the Company's equity
by utilizing latest twelve months ending 9/30/98, subtracting outstanding
debt and adding excess cash and cash equivalents, if any, on a pro forma
basis to reflect the Crain acquisition. In addition, we added $20 million
in non-recurring expenses identified by management back to EBIT.
RAMIUS CAPITAL GROUP, LLC Page 18
<PAGE>
Valuation
-----------------------------
Market Multiples Analysis
o We examined six companies in the automotive interior components industry
including:
o Collins & Aikman Corporation, Johnson Controls, Inc., Lear
Corporation, Magna International, Inc., British Vita PLC, and
Recticel S.A.
o We examined seven companies in the home furnishings industry including:
o Armstrong World Industries, Inc., Culp, Inc., Synthetic Industries,
Inc., Springs Industries, Inc., Mohawk Industries, Inc., British
Vita PLC, and Recticel S.A.
o We examined three companies in the technical products industry including:
o Chemfab Corporation, Furon Company, and British Vita PLC
RAMIUS CAPITAL GROUP, LLC Page 19
<PAGE>
Valuation
-----------------------------
Market Multiples Analysis
o The following factors must be considered when analyzing a Market Multiples
Analysis of the Company.
o We primarily considered EBITDA multiples because the Company's
historical acquisitions cause an understatement of depreciation.
o There are no exact comparable public companies for the Company.
o Automotive Products, Home Furnishings, and Technical Products were
the three industries that we selected as most comparable to the
Company's business.
o The Company operates in more of a commodity business with fewer
value added products than the industries selected.
RAMIUS CAPITAL GROUP, LLC Page 20
<PAGE>
Valuation
-------------------------
Market Multiples Analysis
Pro forma for Crain Acquisition and $20 million in non-recurring expenses (a)
<TABLE>
<CAPTION>
Price Update Date 11/4/98 11/4/98 11/4/98
------------------------------- --------------------------- ------------------------------
Revenue EBITDA EBIT
------------------------------- --------------------------- ------------------------------
Market Multiples Analysis Auto Home Technical Auto Home Technical Auto Home Technical
Interiors Furn. Products Interiors Furn. Products Interiors Furn. Products
-------- -------- -------- -------- ------ -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Median multiples 0.6x 0.7x 0.9x 6.4x 6.2x 7.2x 10.0x 9.9x 9.9x
FMXI Pro forma LTM 9/30/98 $1,254.2 $1,254.2 $1,254.2 $159.2 $159.2 $159.2 $121.9 $121.9 $121.9
Unlevered Market Value $770.8 $905.2 $1,182.4 $1,022.3 $982.8 $1,148.0 $1,212.7 $1,209.7 $1,209.7
FMXI Net Debt 9/30/98 $801.5 $801.5 $801.5 $801.5 $801.5 $801.5 $801.5 $801.5 $801.5
-------- -------- -------- -------- ------ -------- -------- -------- --------
Market Value ($30.7) $103.6 $380.9 $220.8 $181.3 $346.5 $411.1 $408.2 $408.2
f.d. Shares Outstanding 25.3 25.3 25.3 25.3 25.3 25.3 25.3 25.3 25.3
-------- -------- -------- -------- ------ -------- -------- -------- --------
Value per Share Auto Interiors NM $8.73 $16.25
Value per Share Home Furnishings $4.10 $7.17 $16.13
Value per Share Technical Products $15.06 $13.70 $16.13
</TABLE>
---------------------------------
EBIT/EBITDA Mean
------
Auto Interiors $12.49
Home Furnishings $11.65
Technical Products $14.91
---------------------------------
(a) Includes $20 million addback to EBIT as a result of management identified
non-recurring expenses which occurred in the fourth quarter 1997.
RAMIUS CAPITAL GROUP, LLC Page 21
<PAGE>
Valuation
-------------------------
Market Multiples Analysis
Automotive Interior Components
(000's)
<TABLE>
<CAPTION>
11/4/98 CKC JCI LEA MGA* BVIT** GECH*** Mean Median
---------- ----------- ---------- --------- ------- ----------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Latest Financial 6/27/98 6/30/98 6/27/98 7/31/98 6/30/98 6/30/98
10-K Date 12/27/97 9/30/97 12/31/97 7/31/98 12/31/97 12/31/97
Stock Price $7.31 $57.50 $35.19 100.35 2.55 420.00
Shares Out. 63,990 84,688 67,115 73,071 223,600 15,268
Market Value (MV) $467,925 $4,869,575 $2,361,600 7,332,675 570,180 6,412,560
Unlevered Market Value (UMV) $1,248,052 $6,146,675 $3,676,400 6,823,375 587,680 15,218,612
LTM Revenue $1,739,229 $12,014,300 $7,986,700 9,190,800 814,300 39,469,216
LTM EBITDA $151,765 $1,020,200 $694,600 990,200 86,200 2,875,520
LTM EBIT $88,106 $649,700 $492,700 684,000 59,200 1,163,669
LTM Net Income ($11,200) $294,566 $218,200 506,200 47,100 445,373
Book Value ($66,417) $1,846,100 $1,318,200 4,945,400 300,400 9,861,854
Tangible Book Value ($337,730) $313,500 ($471,300) 4,480,800 270,400 9,591,862
Gross Margin 13.2% 14.7% 10.6% 17.5% 24.8% 38.2% 19.8% 16.1%
EBIT Margin 5.1% 5.4% 6.2% 7.4% 7.3% 2.9% 5.7% 5.8%
EBITDA Margin 8.7% 8.5% 8.7% 10.8% 10.6% 7.3% 9.1% 8.7%
Net Income Margin -0.6% 2.5% 2.7% 5.5% 5.8% 1.1% 2.8% 2.6%
Current Ratio 1.5x 0.9x 0.9x 1.4x NM 2.3x 1.4x 1.4x
Quick Ratio 0.7x 0.6x 0.6x 1.0x NM 0.2x 0.6x 0.6x
Debt/Total Cap. 109.0% 43.4% 50.5% 9.4% 16.3% 50.2% 46.5% 46.8%
UMV/LTM Revenue 0.7x 0.5x 0.5x 0.7x 0.7x 0.4x 0.6x 0.6x
UMV/LTM EBITDA 8.2x 6.0x 5.3x 6.9x 6.8x 5.3x 6.4x 6.4x
UMV/LTM EBIT 14.2x 9.5x 7.5x 10.0x 9.9x 13.1x 10.7x 10.0x
MV/LTM Net Income NM 16.5x 10.8x 14.5x 12.1x 14.4x 13.7x 14.4x
MV/Book Value NM 2.6x 1.8x 1.5x 1.9x 0.7x 1.7x 1.8x
Earnings Estimate (Mean) $0.40 $3.31 $3.04 7.10 0.22 22.25
P/EE 18.3x 17.4x 11.6x 14.1x 11.8x 18.9x 15.3x 15.8x
<CAPTION>
<S> <C> <C> <C>
Collins & Aikman Corp. CKC British Vita BVIT**
Johnson Controls Inc. JCI Recticel GECH***
Lear Corp. LEA
Magna Intl MGA*
</TABLE>
*Stated in Canadian Dollars
**Stated in British Pounds
***Stated in Belgian Francs
RAMIUS CAPITAL GROUP, LLC Page 22
<PAGE>
Valuation
-------------------------
Market Multiples Analysis
Home Furnishings
(000's)
<TABLE>
<CAPTION>
11/4/98 ACK CFI SIND SMI MHK BVIT** GECH*** Mean Median
---------- -------- -------- ---------- --------- -------- ---------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Latest Financial 6/30/98 8/2/98 6/30/98 7/4/98 6/27/98 6/30/98 6/30/98
10-K Date 12/31/97 5/3/98 9/30/97 1/3/98 12/31/97 12/31/97 12/31/97
Stock Price $65.63 $7.88 $14.75 $38.19 $32.31 2.55 420.00
Shares Out. 40,015 12,995 8,669 18,460 52,375 223,600 15,268
Market Value (MV) $2,625,982 $102,336 $127,864 $704,935 $1,692,367 570,180 6,412,560
Unlevered Market Value (UMV) $2,953,882 $258,449 $375,055 $1,039,390 $1,941,382 587,680 15,218,612
LTM Revenue $2,201,700 $487,884 $360,628 $2,247,953 $2,023,102 814,300 39,469,216
LTM EBITDA $478,500 $41,411 $69,158 $207,937 $228,457 86,200 2,875,520
LTM EBIT $346,600 $23,895 $48,874 $122,954 $166,445 59,200 1,163,669
LTM Net Income $200,913 $10,023 $17,749 $67,297 $85,538 47,100 445,373
Book Value $860,400 $128,272 $114,452 $732,766 $454,058 300,400 9,861,854
Tangible Book Value $860,400 $73,474 $114,452 $732,766 $454,058 270,400 9,591,862
Gross Margin 33.6% 16.5% 32.8% 18.1% 23.8% 24.8% 38.2% 26.8% 24.8%
EBIT Margin 15.7% 4.9% 13.6% 5.5% 8.2% 7.3% 2.9% 8.3% 7.3%
EBITDA Margin 21.7% 8.5% 19.2% 9.3% 11.3% 10.6% 7.3% 12.5% 10.6%
Net Income Margin 9.1% 2.1% 4.9% 3.0% 4.2% 5.8% 1.1% 4.3% 4.2%
Current Ratio 1.2x 3.1x 2.5x 3.2x 2.0x NM 2.3x 2.4x 2.4x
Quick Ratio 0.6x 1.3x 1.1x 1.3x 0.9x NM 0.2x 0.9x 1.0x
Debt/Total Cap. 31.2% 55.1% 68.4% 31.4% 35.4% 16.3% 50.2% 41.1% 35.4%
UMV/LTM Revenue 1.3x 0.5x 1.0x 0.5x 1.0x 0.7x 0.4x 0.8x 0.7x
UMV/LTM EBITDA 6.2x 6.2x 5.4x 5.0x 8.5x 6.8x 5.3x 6.2x 6.2x
UMV/LTM EBIT 8.5x 10.8x 7.7x 8.5x 11.7x 9.9x 13.1x 10.0x 9.9x
MV/LTM Net Income 13.1x 10.2x 7.2x 10.5x 19.8x 12.1x 14.4x 12.5x 12.1x
MV/Book Value 3.1x 0.8x 1.1x 1.0x 3.7x 1.9x 0.7x 1.7x 1.1x
Earnings Estimate (Mean) $5.30 $0.45 $2.03 $2.69 $1.96 0.22 22.25
P/EE 12.4x 17.5x 7.3x 14.2x 16.5x 11.8x 18.9x 14.1x 14.2x
<CAPTION>
<S> <C> <C> <C>
Armstrong World Industries, Inc. ACK Mohawk Industries, Inc. MHK
Culp, Inc. CFI British Vita BVIT**
Synthetic Industries, Inc. SIND Recticel GECH***
Springs Industries, Inc SMI
</TABLE>
**Stated in British Pounds
***Stated in Belgian Francs
RAMIUS CAPITAL GROUP, LLC Page 23
<PAGE>
Valuation
-------------------------
Market Multiples Analysis
Technical Products
(O00's)
<TABLE>
<CAPTION>
11/4/98 CFA FCY BVIT** Mean Median
-------- -------- ------- ---- ------
<S> <C> <C> <C> <C> <C>
Latest Financial 6/30/98 8/1/98 6/30/98
10-K Date 6/30/98 1/31/98 12/31/97
Stock Price $20.88 $16.81 2.55
Shares Out. 7,818 18,298 223,600
Market Value (MV) $163,201 $307,635 570,180
Unlevered Market Value (UVM) $152,102 $463,975 587,680
LTM Revenue $104,460 $492,137 814,300
LTM EBITDA $20,663 $64,344 86,200
LTM EBIT $15,880 $41,345 59,200
LTM Net Income $10,932 $22,231 47,100
Book Value $72,354 $91,186 300,400
Tangible Book Value $62,428 ($2,041) 270,400
Gross Margin 34.3% 31.9% 24.8% 30.4% 31.9%
EBIT Margin 15.2% 8.4% 7.3% 10.3% 8.4%
EBITDA Margin 19.8% 13.1% 10.6% 14.5% 13.1%
Net Income Margin 10.5% 4.5% 5.8% 6.9% 5.8%
Current Ratio 3.5x 2.1x NM 2.8x 2.8x
Quick Ratio 2.1x 1.1x NM 1.6x 1.6x
Debt/Total Cap. 0.00% 63.7% 16.3% 0.3x 0.2x
UMV/LTM Revenue 1.5x 0.9x 0.7x 1.0x 0.9x
UMV/LTM EBITDA 7.4x 7.2x 6.8x 7.1x 7.2x
UMV/LTM EBIT 9.6x 11.2x 9.9x 10.2x 9.9x
MV/LTM Net Income 14.9x 13.8x 12.1x 13.6x 13.8x
MV/Book Value 2.3x 3.4x 1.9x 2.5x 2.3x
Earnings Estimate (Mean) $1.58 $1.29 0.22
P/EE 13.2x 13.0x 11.8x 12.7x 13.0x
Chemfab Corp CFA
Furon Co. FCY
British Vita BVIT**
</TABLE>
**Stated in British Pounds
RAMIUS CAPITAL GROUP, LLC Page 24
<PAGE>
Valuation
-----------------------------
Business Segment Analysis
o The Company currently operates in five business units. The business units
include:
o Carpet Cushion, Foam Products, Automotive, Technical, and
International
o We allocated Selling, General, and Administrative to each unit pro rata by
sales to determine EBIT by operating unit. Depreciation and amortization
were then allocated to each unit pro rata by sales in order to determine
EBITDA by operating unit.
o Industry multiples were applied to each unit according to the median
market multiples analysis of each unit's industry specialty.
o Carpet Cushion and Foam Products were classified as Home
Furnishings.
o Automotive was classified as Automotive Interior Components.
o Technical was classified as Technical Products.
o International was assigned an average of the Automotive Parts and
Home Furnishings multiples.
o The sum of each business unit's enterprise value was considered the
enterprise value of the Company. We then subtracted net debt to realize an
equity value for the business.
o Each of the three business segments in which the Company operates trades
at a different value. Since each comparable industry represents specific
business units of the Company, we applied the corresponding industry
multiples to the representative business unit.
RAMIUS CAPITAL GROUP, LLC Page 25
<PAGE>
Valuation
-------------------------
Business Segment Analysis
Pro forma for Crain Acquisition and $20 million in non-recurring expenses (a)
<TABLE>
<CAPTION>
------------------------------ -------------------------------
LTM LTM
9/30/98 EBITDA Enterprise 9/30/98 EBIT Enterprise
Business Segment Applicable Industry Multiple EBITDA Multiple Value EBIT Multiple Value
<S> <C> <C> <C> <C> <C> <C> <C>
Carpet Cushion Home Furnishings $35.27 6.2x $217.7 $26.34 9.9x $261.5
Foam Products Home Furnishings $58.56 6.2x $361.5 $41.06 9.9x $407.6
Automotive Auto Interior Comp. $29.17 6.4x $187.3 $22.18 10.0x $220.7
Technical Technical Products $31.63 7.2x $228.1 $29.22 9.9x $290.1
International: Mexico/Asia Auto/Home $4.59 6.3x $28.9 $3.06 9.9x 30.4
----- ----
Total Company $1,023.5 Total Company $1,210.3
Net Debt 9/30/98 $801.5 Net Debt 9/30/98 $801.5
------ ------
Equity Value $221.9 Equity Value $408.8
f.d. Shares $25.3 f.d. Shares $25.3
----- -----
Value per Share $8.77 Value per Share $16.16
------------------------------ -------------------------------
</TABLE>
(a) Includes $20 million addback to EBIT as a result of management identified
non-recurring expenses which occurred in the fourth quarter 1997.
RAMIUS CAPITAL GROUP, LLC Page 26
<PAGE>
Valuation
-----------------------------
Acquisition Multiples Analysis
o This analysis applies a similar methodology as the Market Multiples
Analysis, but relies upon multiples derived from merger and acquisition
transactions involving target companies similar to the Company. For
purposes of this analysis we analyzed comparable mergers and acquisitions
in both the automotive interior components industry and the home
furnishings industry completed between 1995 and today.
o For all of the comparable merger and acquisition transactions, we derived
mean and median multiples using various financial measures, including
revenue, EBITDA and EBIT multiples. For each of the transactions
considered, purchase price equals the amount paid for the target's equity,
and total enterprise value equals purchase price, plus the target's
outstanding interest-bearing debt, less cash and cash equivalents
purchased.
o Like the Market Multiples Analysis, we calculated an acquisition multiple
valuation for the Company by utilizing median acquisition multiples to
develop a valuation range. We used the Company's latest twelve months
ending September 30, 1998 financials on a pro forma basis to reflect the
Crain acquisition and added back $20 million in non-recurring expenses
identified by management. Equity valuations for the Company based on
revenues, EBITDA and EBIT are calculated by multiplying its revenues,
EBITDA, and EBIT by the respective multiples, then subtracting total debt
and adding cash and cash equivalents, if any.
RAMIUS CAPITAL GROUP, LLC Page 27
<PAGE>
Valuation
------------------------------
Acquisition Multiples Analysis
Pro forma for Crain Acquisition and $20 million in non-recurring expenses (a)
<TABLE>
<CAPTION>
Revenue EBITDA EBIT
----------------------- ----------------------- -----------------------
Acquisition Multiples Analysis Auto Home Auto Home Auto Home
Interiors Furnishings Interiors Furnishings Interiors Furnishings
--------- ----------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Median multiples 0.8x 0.7x 7.9x 7.4x 11.5x 8.7x
FMXI Pro forma LTM 9/30/98 $1,254.2 $1,254.2 $159.2 $159.2 $121.9 $121.9
Unlevered Market Value $946.9 $928.1 $1,249.8 $1,178.2 $1,395.3 $1,060.2
FMXI Net Debt 9/30/98 $801.5 $801.5 $801.5 $801.5 $801.5 $801.5
------ ------ ------ ------ ------ ------
Market Value $145.4 $126.6 $448.3 $376.6 $593.8 $258.7
Shares Outstanding 25.3 25.3 25.3 25.3 25.3 25.3
---- ---- ---- ---- ---- ----
Value per Share Auto Interiors $5.75 $17.72 $23.47
Value per Share Home Furnishings $5.00 $14.89 $10.22
</TABLE>
(a) Includes $20 million addback to EBIT as a result of management identified
non-recurring expenses which occurred in the fourth quarter 1997.
RAMIUS CAPITAL GROUP, LLC Page 28
<PAGE>
Valuation
----------------
Acquisition Multiples Analysis
Automotive Interior Components Industry
($ in Millions except per share data)
<TABLE>
<CAPTION>
Equity
Consideration as
----------------
Target/Acquirer Consideration Net Book
Effective Date (Target's Major Products) Equity Aggregate Income Value
- - -------------- ------------------------ ------ --------- ------ -----
<S> <C> <C> <C> <C> <C>
Pending Becker Group/Johnson Controls Inc. $550 $550 NA NA
(Automotive interior supplier)
Nov-97 AlliedSignal's Safety Restraint Systems Division/Breed
Tech. Inc. 710 688 21.8x 3.lx
(Manufactures seat-belts and airbags)
Jul-97 JPS Automotive L.P. (Collins & Aikman)/Safety
Components Intl, Inc. 56 57 13.3 1.0
(Manufacturer and supplier of fabric to the airbag industry)
May-97 Keiper Car Seating Gmbh/Lear Corporation NA 237 NA NA
(Manufactures seating systems for Mercedes, Audi & VW)
Dec-96 JPS Automotive L.P./Collins & Aikman Corp.* 28 220 NM 0.3
(Manufactures automotive carpets and synthetic industrial fabrics)
Aug-96 Douglas & Lomason/Magna Intl 139 222 12.5 1.5
(Automotive seating systems, frames, covers and mechanisms)
Aug-96 Foamex (JPS Automotive)/Collins & Aikman 22 220 2.5a 0.2a
(Automotive interior textile and plastic interior trim)
Jul-96 Prince Automotive/Johnson Control Inc. 1,269 1,350 18.6 10.1a
(Automotive interior floor and ceiling consoles,
door panels and arm rests)
May-96 Masland Corp./Lear Corp. 385 483 21.3 3.9
(Automotive interior components)
Jan-96 Larizza Industries/Collins & Aikman Corp. 144 178 10.3 6.6a
(Door panels, headrests, floor console and instrument
panel components)
Jul-95 Automotive Industries/Lear Corp. 644 926 17.0 2.7
(Automotive interiors)
Jan-95 Bostrom Seating Inc./Johnstown America Industries 19 32 9.0 NM
(Seating for trucks) ------------------------------------------
Mean: 15.5x 2.lx 0.8x 7.5x
* = results calculated by annualizing nine months ended Sep. 29, 1996 Median: 15.2x 2.lx 0.8x 7.9x
a = Excluded from the calculation of the mean and median High: 21.8x 3.9x 1.6x 10.1x
Low: 9.0x 0.3x 0.4x 5.0x
------------------------------------------
<CAPTION>
Aggregate Consideration
as a
Multiple of:
-----------------------
Target/Acquirer Net
Effective Date (Target's Major Products) Sales EBITDA EBIT
- - -------------- ------------------------ ----- ------ ----
<S> <C> <C> <C> <C>
Pending Becker Group/Johnson Controls Inc. 0.4x NA NA
(Automotive interior supplier)
Nov-97 AlliedSignal's Safety Restraint Systems Division/Breed
Tech. Inc. 0.8 9.2x 14.9x
(Manufactures seat-belts and airbags)
Jul-97 JPS Automotive L.P. (Collins & Aikman)/Safety
Components Intl, Inc. 0.8 7.2 11.0
(Manufacturer and supplier of fabric to the airbag industry)
May-97 Keiper Car Seating Gmbh/Lear Corporation 0.4 NA NA
(Manufactures seating systems for Mercedes, Audi & VW)
Dec-96 JPS Automotive L.P./Collins & Aikman Corp.* 0.8 5.6 9.6
(Manufactures automotive carpets and synthetic industrial fabrics)
Aug-96 Douglas & Lomason/Magna Intl 0.4 8.5 16.6
(Automotive seating systems, frames, covers and mechanisms)
Aug-96 Foamex (JPS Automotive)/Collins & Aikman 1.0 5.0 7.1
(Automotive interior textile and plastic interior trim)
Jul-96 Prince Automotive/Johnson Control Inc. 1.6 10.1 12.3
(Automotive interior floor and ceiling consoles,
door panels and arm rests)
May-96 Masland Corp./Lear Corp. 1.0 8.6 12.3
(Automotive interior components)
Jan-96 Larizza Industries/Collins & Aikman Corp. 0.9 6.9 8.5
(Door panels, headrests, floor console and instrument
panel components)
Jul-95 Automotive Industries/Lear Corp. 1.4 8.9 11.9
(Automotive interiors)
Jan-95 Bostrom Seating Inc./Johnstown America Industries 0.6 5.3 6.3
(Seating for trucks) ------------------
Mean: 11.1x
* = results calculated by annualizing nine months ended Sep. 29, 1996 Median: 11.5x
a = Excluded from the calculation of the mean and median High: 16.6x
Low: 6.3x
------------------
</TABLE>
RAMIUS CAPITAL GROUP, LLC Page 29
<PAGE>
Valuation
----------------
Acquisition Multiples Analysis
<TABLE>
<CAPTION>
Home Furnishings Industry
($ in Millions except per share data)
Effective Target/Acquirer Consideration
Date (Target's Major Products) Equity Aggregate
- - -------------- ------------------------ ------ --------
<S> <C> <C> <C>
Oct-98 Bibb Co. Inc/Dan River Inc. (a) $ 258 $ 258
(Manufactures and markets textile products,
principally bedroom accessories)
Oct-98 Queen Carpet Corp./Shaw Industries Inc. 470 690
(Manufacturer of carpets)
Jan-98 Pillowtex Corp-Finishing Division/Color-Tex International 13 NA
(Designs, manufactures and markets bedroom
textile furnishings)
Dec-97 Crain Industries, Inc./Foamex International Inc.(b) 115 214
(Manufactures flexible polyurethane foam and foam products)
Jul-97 Mastercraft Group (Collins & Aikman Corp.)/
Joan Fabrics Corp. 310 310
(Manufacturer of flat-woven upholstery fabrics)
Feb-97 Floorcoverings Division (Collins & Aikman Corp.)/
Investor Group 196 196
(Manufacturer of various floorcoverings)
Aug-96 Home Furnishings Group (Masco)/Furnishings
International Inc. 765 1050
(Manufacturer of residential furniture and
decorative fabrics)
Apr-96 Graniteville Company (Triarc Co.)/Avondale Mills Inc. 255 255
(Manufacturer of various textiles)
Dec-95 Thomasville Furniture Industries, Inc. (c)/INTERCO 331 339
(Manufacturer of various home furnishings)
Nov-95 Syroco Inc. (Syratech Corp.)/Marley PLC 140 140
(Manufacturer of household furniture and accessories)
Jan-95 Corsair Inc./La-Z-Boy Chair Company 73 73
(Manufacturer of upholstered furniture)
<CAPTION>
Equity Consideration as Aggregate Consideration as a
a multiple of: Multiple of:
Effective Target/Acquirer Net Book
Date (Target's Major Products) Income Value Sales EBITDA EBIT
- - -------------- ------------------------ ------ ----- ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Oct-98 Bibb Co. Inc/Dan River Inc.(a) NM 60.1 1.0 26.8 151.6
(Manufactures and markets textile products,
principally bedroom accessories)
Oct-98 Queen Carpet Corp./Shaw Industries Inc. NA NA 0.9 NA NA
(Manufacturer of carpets)
Jan-98 Pillowtex Corp-Finishing Division/Color-Tex International NA NA NA NA NA
(Designs, manufactures and markets bedroom
textile furnishings)
Dec-97 Crain Industries, Inc./Foamex International Inc.)(b) NM 3.2 0.7 7.4 14.3
(Manufactures flexible polyurethane foam and foam products)
Jul-97 Mastercraft Group (Collins & Aikman Corp.)
/Joan Fabrics Corp. NA NA 1.1 NA NA
(Manufacturer of flat-woven upholstery fabrics)
Feb-97 Floorcoverings Division (Collins & Aikman Corp.)/
Investor Group NA NA 1.4 NA NA
(Manufacturer of various floorcoverings)
Aug-96 Home Furnishings Group (Masco)/Furnishings
International Inc. NA NA 1.9 NA NA
(Manufacturer of residential furniture and
decorative fabrics)
Apr-96 Graniteville Company (Triarc Co.)/Avondale Mills Inc. NA NA 0.5 NA NA
(Manufacturer of various textiles)
Dec-95 Thomasville Furniture Industries, Inc. (c)/ANTERCO 14.3 10.5 0.6 NA 8.7
(Manufacturer of various home furnishings)
Nov-95 Syroco Inc. (Syratech Corp.)/Marley PLC NA NA 1.5 NA 10.9
(Manufacturer of household furniture and accessories)
Jan-95 Corsair Inc./La-Z-Boy Chair Company NA NA 0.7 NA NA
(Manufacturer of upholstered furniture)
</TABLE>
RAMIUS CAPITAL GROUP, LLC Page 30
<PAGE>
Valuation
----------------
Acquisition Multiples Analysis
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jan-95 Galaxy Carpet Mills, Inc. (Peerless Carpet Corp.)/Mohawk Industries, Inc. 43 92 NM 1.3 0.5 12.5 NM
(Manufacturers tufted carpets primarily for residential use)
Dec-94 Raytex Division (Golding Industries, Inc.)/Cone Mills Corp. 58 64 NA NA NA NA NA
(Manufacturer of fabrics used in home furnishings)
Feb-94 Aladdin Mills/Mohawk Industries, Inc. 310 387 16.0 4.1 0.8 7.7 10.1
(Manufactures carpets and rugs for residential and commercial use)
Nov-93 Perfect Fit/Foamex International Inc. 21 69 NA NA 0.8 10.3 17.3
(Manufacturer of home comfort and furnishings products)
Sep-93 Hanes Holding Company (d)/Legget & Platt 63 116 14.8 3.7 0.8 6.0 7.2
(Manufacturer of woven fabrics and dies mainly for the furniture industry)
Jul-93 Carpet Division (Fieldcrest Cannon, Inc.)/Mohawk Industries, Inc. 140 140 NA 0.9 0.6 NA 6.1
(Manufacturer of carpets and rugs)
May-93 Great Western Foam Products Corp./Foamex International Inc. 28 38 NA NA 0.4 5.2 6.9
(Manufacturer and distributor of foam and foam products in
the western U.S.)
Apr-93 Vintage Yarns, Inc./Unifi. Inc. (e) 275 342 4.9 3.7 2.0 NA 5.4
(Manufacturer of yarns)
Mar-93 General Felt Industries, Inc./Foamex International Inc. 30 96 NA NA 0.5 4.7 7.4
(Distributor and manufacturer of carpet cushion)
Oct-92 Horizon Industries, Inc./Mohawk Industries, Inc. 87 130 24.9 1.5 0.4 7.5 15.4
(Manufacturer of residential carpets and rugs)
---------------------------------------------
Mean: 15.0x 2.6x 0.9x 7.0x 10.0x
a = Excluded from the calculation of the mean and median Median: 14.8x 3.2x 0.7x 7.4x 8.7x
(b) = Based on audited results for 1/1/97-12/23/97 annualized High: 16.0x 4.lx 2.0x 10.3x 17.3x
(c) = Based on nine months ended 9/30/95 annualized Low: 14.3x 0.9x 0.4x 4.7x 5.4x
(d) = Based on six months ended 7/3/93 annualized ----------------------------------------------
(e) = Based on six months ended 3/31/93 annualized
</TABLE>
RAMIUS CAPITAL GROUP, LLC Page 31
<PAGE>
Valuation
-----------------------------
Adjusted Acquisition Multiples Analysis
o A pure Acquisition Multiples Analysis has limited use in valuing the
Company.
o The majority of the deals in similar industries were strategic in
nature and were completed more than twelve months ago.
o A strategic buyer with the financial capability to acquire the
Company would have difficulty acquiring the Company due to
Hart-Scott-Rodino issues.
o Trace's significant minority interest is a deterrent to a buyer
looking to gain control of the Company.
o In order to mitigate the limitations of a pure Acquisition Multiples
Analysis, we calculated an Adjusted Acquisition Multiples Analysis.
o In a strategic acquisition, a certain amount of EBITDA synergies are
realized, partially as a result of eliminated expenses at the target
company.
o We added back 20% of the actual synergies achieved in the Company's
acquisitions of Great Western, General Felt, and Crain to those
target companies in order to determine the synergy adjusted
financials of such companies. These adjusted financials were
compared to the deal value to determine an adjusted multiple for
each company.
RAMIUS CAPITAL GROUP, LLC Page 32
<PAGE>
Valuation
----------------
Adjusted Acquisition Multiples Analysis
Adjusted Acquisitions Multiples Analysis
($ values in millions)
<TABLE>
<CAPTION>
Equity Consideration as a
Consideration multiple of Aggregate Consideration as a multiple of
Companies with no Synergy add-back Equity Aggregate LTM Income Book Value LTM Sales LTM EBITDA LTM EBIT
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
General Felt Industries $ 93.8 $95.8 NM 10.8x 0.5x 7.2x 14.7x
Crain $112.7 $213.7 NM 3.lx 0.7x 7.3x 14.lx
Great Western $ 37.8 $38.0 17.2x 3.3x 0.4x 5.8x 7.8x
20% Equity Consideration as a Aggreate Consideration
Proforma LTM Consideration multiple of as a multiple of
Companies with 20% syngery add-back Synergy Savings Equity Aggregate LTM Income Book value LTM Sales LTM EBITDA LTM EBIT
--------------------------------------------------------------------------------------------
General Felt Industries $1.40 $93.8 $95.8 NM NM 0.5x 6.5x 12.lx
Crain $14.62 $112.7 $213.7 19.2x NM 0.7x 4.9x 7.2x
Great Western $0.68 $37.8 $38.0 14.5x NM 0.4x 5.2x 6.8x
--------------------------------------------------------------------------------------------
Mean 16.8x NM 0.5x 5.5x 8.7x
--------------------------------------------------------------------------------------------
1998E Pro Forma as
EBITDA adjusted 1998 EBITDA
------ --------------------
FMXI $182.5 $200.3
Mean Multiple 5.5x 5.5x
------ ------
Aggregate Value $1,010.7 $1,109.2
Net Debt $779.7 $779.7
------ ------
Equity Value $231.0 $329.5
Fully Diluted Shares 25.3 25.3
Implied Price per Share $9.13 $13.02
</TABLE>
RAMIUS CAPITAL GROUP, LLC Page 33
<PAGE>
Valuation
-----------------------------
Projected Comparable EBITDA Multiple Analysis
o We identified nine of the Company's comparables in the Automotive
Components and Home Furnishings industries where estimated EBIT and/or
EBITDA figures for 1998 and projected EBIT and/or EBITDA figures for 1999
were available in research reports. Where we could only find EBIT
information for 1999, we added the 1998 depreciation and amortization to
the EBIT figures to arrive at an estimated EBITDA projection for 1999.
o We then divided the total enterprise value by the estimated and projected
EBITDA for each comparable company and determined a mean and median
multiple for the entire group. We applied the mean and median multiples to
the Company's estimated 1998 EBITDA and projected 1999 EBITDA for both the
Contingency Case and the No Contingency Case.
RAMIUS CAPITAL GROUP, LLC Page 34
<PAGE>
Valuation
----------------------------------------------
Projected Comparable EBITDA Multiple Analysis
(all amounts in millions)
<TABLE>
<CAPTION>
Current Current
Current Market Total Current Estimated Enterprise Estimated Enterprise
Value as of Debt minus FY1998 Value as a FY1999 Value as a
11/4/98 Current Cash EBITDA multiple of EBITDA multiple of
------------- ------------ --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Company Ticker
- - ------- ------
Johnson Controls JCI $4,864.3 $1,277.1 $1,026.6 6.0x $1,169.8 5.2x
Lear LEA $2,361.6 $1,314.8 $634.1 5.8x $701.1 5.2x
Magna MGA* 7,931.6 (509.3) 1,007.9 7.4x 1,431.0 5.2x
Synthetic SIND $127.9 $247.2 $70.2 5.3x $75.7 5.0x
Furon FCY $307.6 $156.3 $66.0 7.0x $74.0 6.3x
Culp CFI $102.3 $156.1 $34.2 7.6x NM NM
Armstrong ACK $2,626.0 $327.9 $565.0 5.2x $703.0 4.2x
Mohawk MHK $1,695.6 $249.0 $262.1 7.4x $280.9 6.9x
Springs SMI $430.1 $334.5 $l99.1 3.8x $218.8 3.5x
*stated in Canadian Dollars
</TABLE>
<TABLE>
<CAPTION>
Companies and their estimate sources
- - ------------------------------------
<S> <C>
JCI Morgan Stanley
LEA Morgan Stanley & DLJ
MGA CIBC Oppenheimer
SIND Furman Selz
FCY Furman Selz & Wheat First Union
CFI Furman Selz
ACK CIBC Oppenheimer
MHK CS First Boston
SMI CS First Boston
</TABLE>
<TABLE>
<CAPTION>
Mean 6.2x Mean 5.2x
Median 6.0x Median 5.2x
Mean Median Mean Median
---- ------ ---- ------
<S> <C> <C> <C> <C> <C>
FMXI FYE Projected EBITDA $182.5 $182.5 $193.8 $193.8
FYE Estimated EBITDA multiple 6.2x 6.0x 5.2x 5.2x
Enterprise Value $1,126.8 $1,091.8 $1,005.9 $1,010.7
Contingency Net Debt $801.5 $801.5 $801.5 $801.5
Equity Value $325.3 $290.3 $204.4 $209.2
Fully Diluted Shares 25.3 25.3 25.3 25.3
Value/Share $12.86 $11.47 $8.08 $8.27
Mean Median Mean Median
FMXI FYE Projected EBITDA $184.5 $184.5 $210.8 $210.8
FYE Estimated EBITDA multiple 6.2x 6.0x 5.2x 5.2x
Enterprise Value $1,139.2 $1,103.8 $1,094.1 $1,099.4
No Contingency Net Debt $801.5 $801.5 $801.5 $801.5
Equity Value $337.7 $302.3 $292.6 $297.9
Fully Diluted Shares 25.3 25.3 25.3 25.3
Value/Share $13.35 $11.95 $11.57 $11.78
</TABLE>
RAMIUS CAPITAL GROUP, LLC Page 35
<PAGE>
Valuation
-----------------------------
Discounted Cash Flow Analysis
o A Discounted Cash Flow Analysis ("DCF Analysis") derives enterprise values
based on the present value of a company's unleveraged cash flows over a
five year period, plus the present value of a company's terminal value
determined by applying a terminal value multiple to the fifth year EBITDA.
o The unleveraged free cash flows we used for purposes of completing the DCF
Analysis are derived from projections provided by management of the
Company for both Contingency and No Contingency cases. For purposes of
this analysis, unleveraged free cash flow equals after tax EBIT, plus
depreciation, less capital expenditures, plus any decreases or minus any
increases in working capital. A company's unleveraged free cash flow
provides a measure of how much cash it produces, irrespective of how it
finances its operations (i.e., before interest income and expense).
o On a stand alone basis, we developed the range of discount rates between
12% and 14% used to calculate the present value of the Company's future
net cash flows and Terminal Value by estimating the Company's weighted
average cost of capital ("WACC").
o We applied a terminal value multiple range of 5.5x to 6.5x to the fifth
year EBITDA based on an analysis of the Market Multiples. The resulting
value was then discounted to present value. By adding the present value of
(i) the Company's unleveraged free cash flows over the next five years and
(ii) its Terminal Value, we arrived at a total enterprise valuation for
the Company. We adjusted this total enterprise value by subtracting total
debt and adding cash and cash equivalents, if any, to arrive at a
valuation of the Company's equity.
RAMIUS CAPITAL GROUP, LLC Page 36
<PAGE>
Valuation
-----------------------------
Discounted Cash Flow Analysis
<TABLE>
<CAPTION>
Value Per Share Value Per Share
Contingency No Contingency
EBITDA Terminal Value EBITDA Terminal Value
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5.5 x 6.0 x 6.5 x 5.5 x 6.0 x 6.5 x
Discount 12.0% $14.53 $17.24 $19.96 Discount 12.0% $15.98 $18.74 $21.50
Rate 13.0% $12.86 $15.46 $18.06 Rate 13.0% $14.27 $16.91 $19.55
14.0% $11.28 $13.77 $16.25 14.0% $12.65 $15.18 $17.71
</TABLE>
RAMIUS CAPITAL GROUP, LLC Page 37
<PAGE>
Valuation
-----------------------------
Leveraged Buyout Analysis
o A Leveraged Buyout Analysis ("LBO Analysis") derives enterprise values
based on the value a third-party financial buyer would be willing to pay
for the business given its hurdle rate of return requirement. In
calculating an LBO Analysis of the Company, we used management's
projections for both the Contingency and No Contingency cases. We assumed
the financial buyer would only receive the terminal value in the fifth
year and that excess cash would be used to pay down debt.
o We did not consider the Holding Company Discount Notes or the $75 million
tax sharing payment to Trace.
o We applied a terminal value multiple range of 5.5x to 6.5x to the fifth
year EBITDA based on an analysis of Market Multiples. We subtracted the
net debt estimated in the fifth year from the terminal value to determine
the equity exit value in the fifth year.
o The initial investment was determined by the difference between the cost
to buy out the Company and the debt of 3.5x EBITDA to determine an
internal rate of return on equity.
o Lastly, we imputed the range of values that a financial buyer would be
willing to pay by solving for an internal rate of return range centered
around 35%.
RAMIUS CAPITAL GROUP, LLC Page 38
<PAGE>
Valuation
-----------------------------
Leveraged Buyout Analysis
o The following should be taken into account when reviewing the LBO
Analysis:
o Even with an increase in capital in LBO and private equity funds,
and a decrease in the Trace offer, to the best of our knowledge, no
other bidder has emerged to buy the Company.
o Since the Company's projections are significantly different that its
historical margins, an LBO buyer would likely compensate for such
discrepancy and expect higher returns than the average 30 to 35%.
RAMIUS CAPITAL GROUP, LLC Page 39
<PAGE>
Valuation
-------------------------
Leveraged Buyout Analysis
<TABLE>
Value Per Share Value Per Share
Contingency No Contingency
Hurdle Rate of Return Hurdle Rate of Return
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$11.54 $12.55 $13.53 $12.03 $13.04 $14.03
------------------------ ---------------------------
EBITDA 5.5 x 35.0% 30.5% 26.8% EBITDA 5.5 x 35.0% 30.8% 27.3%
Terminal Terminal
Value 6.0 x 39.7% 35.0% 31.2% Value 6.0 x 39.4% 35.0% 31.4%
Multiple 6.5 x 43.8% 39.0% 35.0% Multiple 6.5 x 43.2% 38.8% 35.0%
</TABLE>
RAMIUS CAPITAL GROUP, LLC Page 40
<PAGE>
Valuation
-------------------------------
Historical Stock Price Analysis
{Graphic Chart showing historic stock price
analysis from 23-Oct-1997 through 23-Oct-1998
RAMIUS CAPITAL GROUP,LLC Page 41
<PAGE>
APPENDIX
<PAGE>
<TABLE>
<CAPTION>
Comparable Company Synopsis
Collins & Aikman Business Description:
Corp. - CKC
<S> <C>
($ in millions except per share amounts) Collins & Aikman supplies automotive interior systems, including textile
Market Information and plastic trim, acoustics, and convertible top systems. The Company's
products include carpets, fabrics, accessory floor mats, acoustics, and
Trading Price as of 11/4/98 $7.31 other automotive and non-automotive products.
Market Capitalization $467.9
Collins operates 58 manufacturing, warehouse, and other facilities
52 week stock price change (28.7%) located throughout the world.
Current Aggregate Value/EBITDA 8.2x
<CAPTION>
Financial Information Summary
-----------------------------------------------------------------------------------------
FYE FYE FYE LTM
1995 1996 1997 6/27/98 CAGR(c)
---------------------------------------------------- -------
<S> <C> <C> <C> <C> <C>
Sales $ 902.0 $ 1,053.8 $ 1,629.3 $1,739.2 34.4%
% Growth 16.8% 54.6% 6.7%
EBITDA $ 395.8 $ 137.8 $ 164.1 $ 151.8 (35.6%)
% Margin 43.9% 13.1% 10.1% 8.7%
EBIT $ 95.7 $ 101.9 $ 107.1 $ 88.1 5.8%
% Margin 10.6% 9.7% 6.6% 5.1%
Earnings Per Share $ 0.58 $ 0.49 $ 0.24 $ (0.23) (36.2%)
% Growth (16.5%) (51.2%) (198.0%)
Return on Equity (a) (12.6%) (15.6%) (11.7%) (43.2%)
Net Debt/Total
Capitalization (b) 77.1% 120.1% 109.6% 109.3%
(a): Return on Equity = Net Income divided by Average Shareholders' Equity
(b): Net Debt = Total Debt less Cash, Total Capitalization = Net Debt plus Shareholders' Equity
(c): CAGR = Compound Annual Growth Rate
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Comparable Company Synopsis
Johnson Controls, Business Description:
Inc. - JCI
<S> <C>
($ in millions except per share amounts) Johnson Controls markets automotive systems and building controls. The
Market Information Company, through its automotive systems group, supplies seating systems,
interior systems, and batteries. The building controls group serves the
Trading Price as of 11/4/98 $57.50 nonresidential buildings market with control systems and services and
integrated facility management. Johnson Controls operates worldwide.
Market Capitalization $4,869.6
52 week stock price change 24.3%
Current Aggregate Value/EBITDA 6.0x
<CAPTION>
Financial Information Summary
-----------------------------------------------------------------------------------------
FYE FYE FYE LTM
1995 1996 1997 6/30/98 CAGR(c)
---------------------------------------------------- -------
<S> <C> <C> <C> <C> <C>
Sales $7,400.7 $9,210.0 $11,145.4 $12,014.3 22.7%
% Growth 24.4% 21.0% 7.8%
EBITDA $ 614.2 $ 741.4 $ 952.0 $ 1,020.2 24.5%
% Margin 8.3% 8.0% 8.5% 8.5%
EBIT $ 395.1 $ 478.9 $ 597.1 $ 649.7 22.9%
% Margin 5.3% 5.2% 5.4% 5.4%
Earnings Per Share $ 4.09 $ 2.38 $ 2.21 $ 3.19 -26.4%
% Growth (42%) (7%) 45%
Return on Equity (a) 13.2% 14.7% 11.5% 17.9%
Net Debt/Total
Capitalization (b) 35.1% 36.5% 42.6% 40.9%
(a): Return on Equity = Net Income divided by Average Shareholders' Equity
(b): Net Debt = Total Debt less Cash, Total Capitalization = Net Debt plus Shareholders' Equity
(c): CAGR = Compound Annual Growth Rate
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Comparable Company Synopsis
Lear Corp. - LEA Business Description:
<S> <C>
($ in millions except per share amounts) Lear manufactures and distributes automotive interior systems. The
Market Information Company sells seat systems, floor and acoustic systems, door panels,
instrument panels, and headliners. Lear sells its products to customers
Trading Price as of 11/4/98 $35.19 worldwide.
Market Capitalization $2,361.6
52 week stock price change (28.2%)
Current Aggregate Value/EBITDA 5.3x
<CAPTION>
Financial Information Summary
-----------------------------------------------------------------------------------------
FYE FYE FYE LTM
1995 1996 1997 6/27/98 CAGR(a)
---------------------------------------------------- -------
<S> <C> <C> <C> <C> <C>
Sales $ 4,714.4 $6,249.1 $ 7,342.9 $ 7,986.7 24.8%
% Growth 32.6% 17.5% 8.8%
EBITDA $ 336.8 $ 518.1 $ 665.5 $ 694.6 40.6%
% Margin 7.1% 8.3% 9.1% 8.7%
EBIT $ 244.8 $ 375.8 $ 481.1 $ 492.7 40.2%
% Margin 5.2% 6.0% 6.6% 6.2%
Earnings Per Share $1.62 $ 2.15 $ 2.98 $ 3.26 35.7%
% Growth 32.6% 38.9% 9.2%
Return on Equity (a) 23.1% 19.0% 18.7% 17.5%
Net Debt/Total
Capitalization (b) 64.0% 50.7% 47.6% 49.9%
(a): Return an Equity = Net Income divided by Average Shareholders' Equity
(b): Net Debt = Total Debt less Cash, Total Capitalization = Net Debt plus Shareholders' Equity
(c): CAGR = Compound Annual Growth Rate
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Comparable Company Synopsis
Magna International Business Description:
Inc. - MGA
<S> <C>
(Canadian $ in millions except per share amounts) Magna supplies original equipment components, assemblies, modules and
Market Information systems, and related tooling for cars and light trucks. The Company designs,
develops and manufactures a diversified range of these products, primarily for
Trading Price as of 11/4/98 CN$100.35 North America and European original equipment manufacturers.
Market Capitalization CN$7,332.7
52 week stock price change 10.0%
Current Aggregate Value/EBITDA 6.9x
<CAPTION>
Financial Information Summary
-----------------------------------------------------------------------------------------
FYE FYE FYE
7/31/96 7/31/97 7/31/98 CAGR(c)
---------------------------------------------------- -------
<S> <C> <C> <C> <C>
Sales CN$5,856.20 CN$7,691.80 CN$9,190.80 25.3%
% Growth 31.3% 19.5%
EBITDA CN$667.20 CN$843.96 CN$990.20 19.8%
% Margin 11.4% 11.0 % 10.8%
EBIT CN$476.90 CN$611.86 CN$684.00 11.9%
% Margin 8.1% 8.0% 7.4%
Earnings Per Share CN$ 4.97 CN$7.74 CN$6.22 11.9%
% Growth 55.7% (19.6%)
Return on Equity (a) 14.6% 21.0% 12.3%
Net Debt/Total
Capitalization (b) NM NM NM
(a): Return on Equity = Net Income divided by Average Shareholders' Equity
(b): Net Debt = Total Debt less Cash, Total Capitalization = Net Debt plus Shareholders' Equity
(c): CAGR = Compound Annual Growth Rate
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Comparable Company Synopsis
British Vita PLC - Business Description:
BVIT
<S> <C>
(British Pounds in millions except per share amounts) British Vita is the holding company for a group of companies which
Market Information manufacture and process specialized polymer, fiber and fabric
components for the furnishing, transportation, apparel, packaging
Trading Price as of 11/4/98 pound2.55 and engineering industries worldwide.
Market Capitalization pound570.2
52 week stock price change 5.2%
Current Aggregate Value/EBITDA 6.8x
<CAPTION>
Financial Information Summary
-----------------------------------------------------------------------------------------
FYE FYE FYE LTM
1995 1996 1997 6/30/98 CAGR(c)
---------------------------------------------------- -------
<S> <C> <C> <C> <C> <C>
Sales pound817.80 pound895.80 pound808.40 pound814.30 (0.6%)
% Growth 9.5% (9.8%) 0.7%
EBITDA pound79.10 pound88.40 pound82.80 pound86.20 2.3%
% Margin 9.7% 9.9% 10.2% 10.6%
EBIT pound45.50 pound57.30 pound55.50 pound59.20 10.4%
% Margin 5.6% 6.4% 6.9% 7.3%
Earnings Per Share pound0.13 pound0.17 pound0.20 pound0.21 24.7%
% Growth 34.4% 15.6% 6.7%
Return on Equity (a) 9.4% 12.2% 15.0% 15.7%
Net Debt/Total
Capitalization (b) NM (5.8%) (2.9%) 5.5%
(a): Return on Equity = Net Income divided by Average Shareholders' Equity
(b): Net Debt = Total Debt less Cash, Total Capitalization = Net Debt plus Shareholders' Equity
(c): CAGR = Compound Annual Growth Rate
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Comparable Company Synopsis
Recticel - GECH Business Description:
<S> <C>
(Belgian Francs in millions except per share amounts) Recticel develops, manufactures and purchases plastics, polymers,
polyurethanes and other synthetic compounds. The products are for use in
Market Information furnishings, bedding and insulation which are sold to the building,
automobile, chemistry and petrochemical industries.
Trading Price as of 11/4/98 420.00BF
Market Capitalization 6,412.6BF
52 week stock price change 7.7%
Current Aggregate Value/EBITDA 4.7x
<CAPTION>
Financial Information Summary
-----------------------------------------------------------------------------------------
FYE FYE FYE LTM
1995 1996 1997 6/30/98 CAGR(c)
---------------------------------------------------- -------
<S> <C> <C> <C> <C> <C>
Sales 32,317.9BF 35,060.6BF 36,678.9BF 39,469.2BF 6.5%
% Growth 8.5% 4.6% 7.6%
EBITDA 3,574.7BF 4,746.5BF 2,875.5BF 32.8%
% Margin 10.2% 12.9% 7.3%
EBIT 2,042.2BF 3,120.4BF 1,163.7BF 52.8%
% Margin 5.8% 8.5% 2.9%
Earnings Per Share -24.85BF -1.38BF 10.87BF 29.17BF NM
% Growth -0.94BF -8.88BF 1.68BF
Return on Equity (a) (3.9%) (0.8%) 5.8% 4.2%
Net Debt/Total
Capitalization (b) 45.96% 45.13% 46.30%
(a): Return on Equity = Net Income divided by Average Shareholders' Equity
(b): Net Debt = Total Debt less Cash, Total Capitalization = Net Debt plus Shareholders' Equity
(c): CAGR = Compound Annual Growth Rate
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Comparable Company Synopsis
Armstrong World Business Description:
Industries, Inc. - ACK
<S> <C>
($ in millions except per share amounts) Armstrong manufactures interior furnishings, including floor coverings and
Market Information building products. The Company's furnishings are primarily used in the
furnishing, repair, refurbishing, modernization, and construction of
Trading Price as of 11/4/98 $65.63 residential, commercial, and industrial buildings. Armstrong also
manufactures various industrial and other products, including ceramic tile.
Market Capitalization $2,626.0
52 week stock price change (0.9%)
Current Aggregate Value/EBITDA 8.7x
<CAPTION>
Financial Information Summary
-----------------------------------------------------------------------------------------
FYE FYE FYE LTM
1995 1996 1997 6/30/98 CAGR(c)
---------------------------------------------------- -------
<S> <C> <C> <C> <C> <C>
Sales $2,325.0 $2,156.4 $ 2,198.7 $ 2,447.7 (2.8%)
% Growth (7.3%) 2.0% 11.3%
EBITDA $ 410.0 $ 407.0 $ 484.4 $ 341.0 8.7%
% Margin 17.6% 18.9% 22.0% 13.9%
EBIT $ 286.9 $ 283.3 $ 351.7 $ 242.3 10.7%
% Margin 12.3% 13.1% 16.0% 9.9%
Earnings Per Share $ 3.30 $ 4.44 $ 5.05 $ 4.28 23.7%
% Growth 34.7% 13.5% (15.2%)
Return on Equity (a) 10.7% 5.9% 25.2% 20.1%
Net Debt/Total
Capitalization (b) 37.8% 24.6% 27.3%
(a): Return on Equity = Net Income divided by Average Shareholders' Equity
(b): Net Debt = Total Debt less Cash, Total Capitalization = Net Debt plus Shareholders' Equity
(c): CAGR = Compound Annual Growth Rate
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Comparable Company Synopsis
Culp, Inc. - CFI Business Description:
<S> <C>
($ in millions except per share amounts) Culp manufactures and markets upholstery fabrics and mattress tickings
Market Information for use in furniture and bedding industries. The Company's fabrics are
used in the production of residential and commercial furniture and
Trading Price as of 11/4/98 $7.88 bedding products, including sofas, recliners, chairs, loveseats, sectionals,
sofa-beds, panel systems, mattress sets, and office seating.
Market Capitalization $102.3
52 week stock price change (62.1%)
Current Aggregate Value/EBITDA 5.5x
<CAPTION>
Financial Information Summary
-----------------------------------------------------------------------------------------
FYE FYE FYE LTM
4/28/96 4/27/97 5/3/98 8/2/98 CAGR(c)
---------------------------------------------------- -------
<S> <C> <C> <C> <C> <C>
Sales $ 351.7 $ 398.9 $ 476.7 $ 487.88 16.4%
% Growth 13.4% 19.5% 2.3%
EBITDA $ 36.6 $ 40.9 $ 46.8 $ 41.4 13.1%
% Margin 10.4% 10.3% 9.8% 8.5%
EBIT $ 23.5 $ 27.4 $ 30.6 $ 23.9 14.1%
% Margin 6.7% 6.9% 6.4% 4.9%
Earnings Per Share $ 0.98 $ 1.11 $ 1.18 $ 0.77 9.7%
% Growth 13.8% 5.7% (34.4%)
Return on Equity (a) 14.4% 14.3% 12.8% 8.3%
Net Debt/Total
Capitalization (b) 40.6% 53.8% 54.9%
(a): Return on Equity = Net Income divided by Average Shareholders' Equity
(b): Net Debt = Total Debt less Cash, Total Capitalization = Net Debt plus Shareholders' Equity
(c): CAGR = Compound Annual Growth Rate
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Comparable Company Synopsis
Synthetic Industries, Business Description:
Inc. - SIND
<S> <C>
($ in millions except per share amounts) Synthetic manufactures polypropylene fabrics and fibers. The
Market Information Company's diverse mix of products is sold worldwide for end
Trading Price as of 11/4/98 $14.75 uses such as carpet backing, erosion control, concrete
reinforcement, geotextiles, and furniture construction fabrics.
Market Capitalization $127.9
52 week stock price change (46.4%)
Current Aggregate Value/EBITDA 5.4x
<CAPTION>
Financial Information Summary
-----------------------------------------------------------------------------------------
FYE FYE FYE LTM
1995 1996 1997 6/30/98 CAGR(c)
---------------------------------------------------- -------
<S> <C> <C> <C> <C> <C>
Sales $ 271.4 $ 299.5 $ 345.6 $ 360.6 12.8%
% Growth 10.4% 15.4% 4.3%
EBITDA $ 43.6 $ 54.8 $ 69.7 $ 69.2 26.4%
% Margin 16.1% 18.3% 20.2% 19.2%
EBIT $ 28.7 $ 38.5 $ 51.4 $ 48.9 33.9%
% Margin 10.6% 12.8% 14.9% 13.6%
Earnings Per Share $ 0.04 $ 0.94 $ 2.01 $ 2.07 619.7%
% Growth 2314.9% 114.5% 3.1%
Return on Equity (a) 3.4% 13.1% 21.1% 16.2%
Net Debt/Total
Capitalization (b) 76.9% 97.1% 67.6% 68.3%
(a): Return on Equity = Net Income divided by Average Shareholders' Equity
(b): Net Debt = Total Debt less Cash, Total Capitalization = Net Debt plus Shareholders' Equity
(c): CAGR = Compound Annual Growth Rate
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Comparable Company Synopsis
Springs Industries, Business Description:
Inc. - SMI
<S> <C>
($ in millions except per share amounts) Springs manufactures and markets home furnishings and specialty fabrics.
Market Information The Company operates facilities in 10 states, and owns marketing and
distribution subsidiaries in Canada and Mexico.
Trading Price as of 11/4/98 $38.19
Market Capitalization $704.9
52 week stock price change (15.5%)
Current Aggregate Value/EBITDA 5.0x
<CAPTION>
Financial Information Summary
-----------------------------------------------------------------------------------------
FYE FYE FYE LTM
1995 1996 1997 7/4/98 CAGR(c)
---------------------------------------------------- -------
<S> <C> <C> <C> <C> <C>
Sales $2,223.2 $2,221.0 $2,226.1 $ 2,248.0 0.1%
% Growth (0.1%) 0.2% 1.0%
EBITDA $ 232.0 $ 203.2 $ 210.8 $ 207.9 (4.7%)
% Margin 10.4% 9.1% 9.5% 9.2%
EBIT $ 133.5 $ 113.8 $ 126.3 $ 123.0 (2.8%)
% Margin 6.0% 5.1% 5.7% 5.5%
Earnings Per Share $ 3.56 $ 5.78 $ 3.81 $ 3.54 3.6%
% Growth 62.7% (34.1%) (7.1%)
Return on Equity (a) 10.9% 15.5% 9.6% 5.9%
Net Debt/Total
Capitalization (b) 32.8% 16.5% 18.8% 31.3%
(a): Return on Equity = Net Income divided by Average Shareholders' Equity
(b): Net Debt = Total Debt less Cash, Total Capitalization = Net Debt plus Shareholders' Equity
(c): CAGR = Compound Annual Growth Rate
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Comparable Company Synopsis
Mohawk Industries, Business Description:
Inc. - MHK
<S> <C>
($ in millions except per share amounts) Mohawk is a producer of woven and tufted broadloom carpet and rugs for
Market Information residential and commercial applications. The Company designs,
manufactures and markets carpet and rugs in a broad range of colors,
Trading Price as of 11/4/98 $32.31 textures and patterns. Products are marketed primarily through carpet
retailers, home centers, mass merchandisers, department stores,
Market Capitalization $1,692.4 commercial dealers and commercial end users.
52 week stock price change 52.7%
Current Aggregate Value/EBITDA 8.5x
<CAPTION>
Financial Information Summary
-----------------------------------------------------------------------------------------
FYE FYE FYE LTM
1995 1996 1997 6/27/98 CAGR(c)
---------------------------------------------------- -------
<S> <C> <C> <C> <C> <C>
Sales $1,648.52 $1,779.39 $1,901.35 $2,023.10 7.4%
% Growth 7.9% 6.9% 6.4%
EBITDA $ 109.03 $ 175.27 $ 200.85 $ 228.46 35.7%
% Margin 6.6% 9.8% 10.6% 11.3%
EBIT $ 56.47 $ 120.11 $ 141.56 $ 166.45 58.3%
% Margin 3.4% 6.8% 7.4% 8.2%
Earnings Per Share NM $ 1.43 $ 1.30 $ 1.63 (9.1%)
% Growth (9.1%) 25.5%
Return on Equity (a) 4.3% 16.3% 18.4% 21.0%
Net Debt/Total
Capitalization (b) 59.5% 53.8% 41.9% 35.4%
(a): Return on Equity = Net Income divided by Average Shareholders' Equity
(b): Net Debt = Total Debt less Cash, Total Capitalization = Net Debt plus Shareholders' Equity
(c): CAGR = Compound Annual Growth Rate
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Comparable Company Synopsis
Chemfab Corp. - CFA Business Description:
<S> <C>
($ in millions except per share amounts) Chemfab manufactures and markets engineered products based on its
Market Information technology in polymeric composite materials. Polymer-based
composite materials are used in electronics, environmental, food
Trading Price as of 11/4/98 $20.88 processing, architectural, aerospace, communications, chemical
processing, and protective clothing applications. The Company also
Market Capitalization $163.2 produces and sells fluoropolymer films and silicone elastomers.
52 week stock price change (1.2%)
Current Aggregate Value/EBITDA 7.3x
Financial Information Summary
<CAPTION>
Financial Information Summary
---------------------------------------------------------------------------
FYE FYE FYE
6/30/96 6/30/97 6/30/98 CAGR(c)
----------------------------------------- --------
<S> <C> <C> <C> <C>
Sales $ 83.9 $ 90.8 $ 104.5 11.6%
% Growth 8.2% 15.1%
EBITDA $ 15.6 $ 4.7 $ 20.7 15.1%
% Margin 18.6% 5.1% 19.8%
EBIT $ 11.7 $ 12.9 $ 15.9 16.7%
% Margin 13.9% 14.2% 15.2%
Earnings Per Share $ 0.96 $ 1.11 $ 1.38 20.1%
% Growth 15.9% 24.5%
Return on Equity (a) 14.2% 14.6% 15.1%
Net Debt/Total
Capitalization (b) NM NM NM
(a): Return on Equity = Net Income divided by Average Shareholders' Equity
(b): Net Debt = Total Debt less Cash, Total Capitalization = Net Debt plus Shareholders' Equity
(c): CAGR = Compound Annual Growth Rate
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Comparable Company Synopsis
Furon Company - Business Description:
FCY
<S> <C>
($ in millions except per share amounts) Furon designs, develops, and manufactures components made
Market Information primarily from high performance polymer materials. The Company's
products are used in a variety of industrial markets and by end-users
Trading price as of 11/4/98 $16.81 in healthcare markets. Furon operates in the United States and Europe.
Market Capitalization $307.6
52 week stock price change (12.2%)
Current Aggregate Value/EBITDA 7.2x
<CAPTION>
Financial Information Summary
-----------------------------------------------------------------------------------------
FYE FYE FYE LTM
1995 1996 1997 8/1/98 CAGR(c)
---------------------------------------------------- -------
<S> <C> <C> <C> <C> <C>
Sales $ 344.9 $ 390.1 $ 485.6 $ 492.2 18.7%
% Growth 13.1% 24.5% 1.4%
EIBITDA $ 32.5 $ 41.4 $ 63.1 $ 64.3 39.3%
% Margin 9.4% 10.6% 13.0% 13.1%
EBIT $ 17.4 $ 24.2 $ 40.8 $ 41.4 52.8%
% Margin 5.1% 6.2% 8.4% 8.4%
Earnings Per Share $ 1.48 $ 0.87 $ 1.28 $ 1.24 (6.7%)
% Growth (41.3%) 48.1% (3.5%)
Return on Equity (a) 13.5% 18.8% 28.8% 26.6%
Net Debt/Total
Capitalization (b) 27.0% 52.5% 64.8% 63.2%
(a): Return on Equity = Net Income divided by Average Shareholders' Equity
(b): Net Debt = Total Debt less Cash, Total Capitalization = Net Debt plus Shareholders' Equity
(c): CAGR = Compound Annual Growth Rate
</TABLE>
AMENDMENT NO. 3
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
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 Rule 14a-11(c) or Rule 14a-12
FOAMEX INTERNATIONAL INC.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock, par value $.01 per share
- - --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
14,666,947 shares of Common Stock(1)
- - --------------------------------------------------------------------------------
(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):
$12.00
- - --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
$165,442,307(2)
- - --------------------------------------------------------------------------------
(5) Total fee paid:
$33,089(3)
- - --------------------------------------------------------------------------------
[X] 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 and 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.
<PAGE>
(1) Amount Previously Paid:
- - --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- - --------------------------------------------------------------------------------
(3) Filing Party:
- - --------------------------------------------------------------------------------
(4) Date Filed:
- - --------------------------------------------------------------------------------
- - ----------------
(1) The transaction applies to an aggregate of 14,666,947 shares of Common
Stock calculated as follows: the sum of (i) 25,014,823 shares of Common
Stock issued and outstanding (less 11,475,000 shares of Common Stock then
owned by Trace International Holdings, Inc. ("Trace") or any subsidiary of
Trace) and (ii) 1,127,124 shares of Common Stock to be issued upon the
exercise of in-the-money options and warrants to purchase shares of Common
Stock.
(2) The proposed maximum aggregate value of the transaction is $165,442,307
calculated as follows: the sum of (i) the product of (a) 25,014,823
shares of Common Stock issued and outstanding (less 11,475,000 shares of
Common Stock then owned by Trace or any subsidiary of Trace) and (b)
$12.00, and (ii) cash consideration of $2,964,431 to be paid for the
options and warrants being surrendered in connection with the transaction.
(3) The Company has previously paid $55,820 to the Securities and Exchange
Commission based on a previously calculated proposed maximum aggregate
value of the transaction of $279,097,394 which in turn was based on a per
share price of $18.75 and aggregate securities of 16,757,201 shares
affected by the transaction.
<PAGE>
- - --------------------------------------------------------------------------------
PRELIMINARY COPY
FOAMEX INTERNATIONAL INC.
1000 Columbia Avenue
Linwood, PA 19061
_______ __, 1998
To the Stockholders of FOAMEX INTERNATIONAL INC.:
You are cordially invited to attend a Special Meeting of Stockholders (the
"Special Meeting") of Foamex International Inc. (the "Company") to be held at
10:00 a.m. on December __, 1998, at 1000 Columbia Avenue, Linwood, Pennsylvania
19061.
As described in the accompanying Proxy Statement, at the Special Meeting
you will be asked to consider and vote upon a proposal to approve and adopt an
Agreement and Plan of Merger, dated as of November 5, 1998 (the "Merger
Agreement"), among Trace International Holdings, Inc. ("Trace"), Trace Merger
Sub, Inc., a wholly owned subsidiary of Trace ("Merger Sub"), and the Company.
Pursuant to the terms of the Merger Agreement, Merger Sub will be merged with
and into the Company (the "Merger") and each outstanding share of common stock
of the Company ("Common Stock"), except for (x) shares owned by Trace or any
subsidiary of Trace (the "Trace Stockholders"), (y) shares owned by the
Company, and (z) shares owned by stockholders who perfect their appraisal
rights in accordance with Delaware law, will be converted into the right to
receive $12.00 in cash, without interest.
Your Board of Directors by a vote of five in favor and two opposed has
determined that the terms of the Merger are fair to, and in the best interests
of, the Company and the holders of shares of Common Stock other than the Trace
Stockholders (the "Public Stockholders") and has approved the Merger Agreement
and the Merger. In arriving at its decision, the Board of Directors gave
careful consideration to a number of factors described in the accompanying
Proxy Statement, including the opinion of Ramius Capital Group, L.L.C. (the
"Board Financial Advisor"), financial advisor to the Board of Directors, to the
effect that, as of the date of such opinion and based upon and subject to
certain matters stated therein, the consideration to be received in the Merger
by the Public Stockholders was fair to the Public Stockholders from a financial
point of view. A copy of the written opinion of the Board Financial Advisor is
included as Appendix B to the accompanying Proxy Statement and should be read
in its entirety. THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" APPROVAL
AND ADOPTION OF THE MERGER AGREEMENT.
In considering the recommendations of the Board of Directors with respect
to the Merger, the Public Stockholders should be aware that (1) the Beacon
Group Capital Services, LLC, financial advisor to the Special Committee of the
Board of Directors of the Company (the "Special Committee Financial Advisor"),
determined on November 2, 1998 that as of such date, a price of $12.00 per
share was NOT fair to the Public Stockholders from a financial point of view,
(2) the Special Committee of the Board of Directors has determined that the
terms of the Merger are NOT fair to the Public Stockholders and recommended
that the Board of Directors reject the proposal of $12.00 per share, and (3)
certain officers and directors of the Company have certain interests that may
be in addition to, or different from, the interests of the Public Stockholders.
A copy of the written opinion of the Special Committee Financial Advisor is
included as Appendix C to the accompanying Proxy Statement and should be read
in its entirety. In light of the conflicting recommendations of the Board of
Directors and the Board Financial Advisor on the one hand and the Special
Committee and the Special Committee Financial Advisor on the other hand, the
Public Stockholders are urged not to place undue reliance on the recommendation
of the Board of Directors, and are encouraged to review the enclosed Proxy
Statement in its entirety, especially the sections captioned "Special
Factors--Recommendation of the Special Committee Against the Merger; Unfairness
of the Merger," "--Opinion of Financial Advisor to the Special Committee" and
"--Interests of Certain Persons in the Merger."
Consummation of the Merger is subject to certain conditions, including the
adoption of the Merger Agreement by the affirmative vote of the holders of a
majority of the outstanding shares of Common Stock entitled to vote with
respect to the Merger and a majority of the Independent Shares (as defined in
the Proxy Statement) voting with respect to the Merger, the receipt of certain
approvals from regulatory authorities and the obtaining of necessary financing,
as well as certain other conditions, which may be waived by the parties,
including that there exists no pending litigation affecting the Merger. Only
holders of Common Stock of record at the close of business on November 13, 1998
are entitled to notice of, and to vote at, the Special Meeting or any
adjournments or postponements thereof.
As of November 13, 1998, (i) the Trace Stockholders owned, in the
aggregate, 11,475,000 shares of Common Stock, representing approximately 45.8%
of such shares outstanding, (ii) the directors and executive officers of
<PAGE>
Trace and Merger Sub owned an additional 427,612 shares of Common Stock,
representing approximately 1.7% of such shares outstanding and (iii) the
directors and executive officers of the Company (excluding such persons who are
also directors or officers of Trace) owned an additional 117,500 shares of
Common Stock, representing less than one percent of such shares outstanding. To
the knowledge of the Company, Trace, Merger Sub and Marshall S. Cogan, the
directors (except for the members of the Special Committee, who are expected to
vote against approval and adoption of the Merger Agreement) and executive
officers of the Company, Trace and Merger Sub intend to vote their shares in
favor of the approval and adoption of the Merger Agreement.
You are urged to read the accompanying Proxy Statement, which provides you
with a description of the terms of the proposed Merger and the Merger
Agreement. A copy of the Merger Agreement is included as Appendix A to the
accompanying Proxy Statement. If the Merger is consummated, holders of Common
Stock who properly demand appraisal prior to the stockholder vote on the Merger
Agreement, do not vote in favor of approval of the Merger Agreement and
otherwise comply with the requirements of Section 262 of the Delaware General
Corporation Law will be entitled to statutory appraisal rights.
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, YOU ARE REQUESTED TO
COMPLETE, DATE, SIGN AND RETURN THE PROXY CARD. EXECUTED PROXIES WITH NO
INSTRUCTIONS INDICATED THEREON WILL BE VOTED "FOR" APPROVAL AND ADOPTION OF THE
MERGER AGREEMENT.
Please do not send in any stock certificates at this time. If the Merger
is consummated, you will be sent instructions concerning the surrender of your
shares.
Thank you for your interest and participation.
Sincerely,
/s/ ANDREA FARACE
ANDREA FARACE
Chairman
<PAGE>
PRELIMINARY COPY
FOAMEX INTERNATIONAL INC.
1000 Columbia Avenue
Linwood, PA 19061
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER __, 1998
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders (the
"Special Meeting") of FOAMEX INTERNATIONAL INC. (the "Company") will be held on
December __, 1998, at 10:00 a.m., at 1000 Columbia Avenue, Linwood,
Pennsylvania 19061, for the following purposes:
(i) To consider and vote upon a proposal to approve and adopt an Agreement
and Plan of Merger, dated as of November 5, 1998 (the "Merger
Agreement"), among Trace International Holdings, Inc. ("Trace"), Trace
Merger Sub, Inc., a wholly owned subsidiary of Trace ("Merger Sub"),
and the Company. A copy of the Merger Agreement is attached to the
accompanying Proxy Statement as Appendix A. As more fully described in
the Proxy Statement, the Merger Agreement provides that: (A) Merger
Sub would be merged with and into the Company (the "Merger"), with the
Company continuing as the surviving corporation; (B) the Company would
thereupon become a wholly owned subsidiary of Trace; and (C) each
outstanding share of common stock, par value $0.01 per share (the
"Common Stock"), of the Company, except for (x) shares owned by Trace
or any subsidiary of Trace, (y) shares owned by the Company and (z)
shares held by stockholders who perfect their appraisal rights in
accordance with Delaware law, would be converted into the right to
receive $12.00 in cash; and
(ii) To transact such other business as may properly come before the
Special Meeting or any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on November 13,
1998 as the record date for the determination of stockholders entitled to
notice of, and to vote at, the Special Meeting. Only holders of Common Stock of
record at the close of business on that date will be entitled to notice of and
to vote at the Special Meeting or any adjournments or postponements thereof.
The accompanying Proxy Statement describes the Merger Agreement, the
proposed Merger and the actions to be taken in connection with the Merger. To
ensure that your vote will be counted, please complete, date, sign and return
the enclosed proxy card, whether or not you plan to attend the Special Meeting.
You may revoke your proxy in the manner described in the accompanying Proxy
Statement at any time before it is voted at the Special Meeting.
If the Merger is consummated, holders of Common Stock who properly demand
appraisal prior to the stockholder vote on the Merger Agreement, do not vote in
favor of approval of the Merger Agreement and otherwise comply with the
requirements of Section 262 of the Delaware General Corporation Law will be
entitled to statutory appraisal rights. See "The Special Meeting--Appraisal
Rights" in the accompanying Proxy Statement for a statement of the rights of
dissenting stockholders and a description of the procedures required to be
followed.
Philip N. Smith, Jr.
Secretary
----------------
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL
AND ADOPTION OF THE MERGER AGREEMENT. IN CONSIDERING THE RECOMMENDATIONS OF THE
BOARD OF DIRECTORS WITH RESPECT TO THE MERGER, THE PUBLIC STOCKHOLDERS SHOULD
BE AWARE THAT (1) THE BEACON GROUP CAPITAL SERVICES, LLC, FINANCIAL ADVISOR TO
THE SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS OF THE COMPANY (THE "SPECIAL
COMMITTEE FINANCIAL ADVISOR"), DETERMINED, ON NOVEMBER 2, 1998, THAT AS OF SUCH
DATE, A PRICE OF $12.00 PER SHARE WAS NOT FAIR TO THE PUBLIC STOCKHOLDERS FROM
A FINANCIAL POINT OF VIEW, (2) THE SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS
HAS DETERMINED THAT THE TERMS OF THE MERGER ARE NOT FAIR TO THE PUBLIC
STOCKHOLDERS AND RECOMMENDED THAT THE BOARD OF DIRECTORS REJECT THE PROPOSAL OF
$12.00 PER SHARE, AND (3) CERTAIN
<PAGE>
OFFICERS AND DIRECTORS OF THE COMPANY HAVE CERTAIN INTERESTS THAT MAY BE IN
ADDITION TO, OR DIFFERENT FROM, THE INTERESTS OF THE PUBLIC STOCKHOLDERS. IN
LIGHT OF THE CONFLICTING RECOMMENDATIONS OF THE BOARD OF DIRECTORS AND THE
BOARD FINANCIAL ADVISOR ON THE ONE HAND AND THE SPECIAL COMMITTEE AND THE
SPECIAL COMMITTEE FINANCIAL ADVISOR ON THE OTHER HAND, THE PUBLIC STOCKHOLDERS
ARE URGED NOT TO PLACE UNDUE RELIANCE ON THE RECOMMENDATION OF THE BOARD OF
DIRECTORS, AND ARE ENCOURAGED TO REVIEW THE ENCLOSED PROXY STATEMENT IN ITS
ENTIRETY, ESPECIALLY THE SECTIONS CAPTIONED "SPECIAL FACTORS--RECOMMENDATION OF
THE SPECIAL COMMITTEE AGAINST THE MERGER; UNFAIRNESS OF THE MERGER," "--OPINION
OF FINANCIAL ADVISOR TO THE SPECIAL COMMITTEE" AND "--INTERESTS OF CERTAIN
PERSONS IN THE MERGER."
THE AFFIRMATIVE VOTE OF HOLDERS OF A MAJORITY OF THE OUTSTANDING SHARES
ENTITLED TO VOTE THEREON AND A MAJORITY OF THE INDEPENDENT SHARES (AS DEFINED
IN THE PROXY STATEMENT) VOTING THEREON IS REQUIRED TO APPROVE AND ADOPT THE
MERGER AGREEMENT. WE URGE YOU TO SIGN AND RETURN THE ENCLOSED PROXY CARD AS
PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON.
YOU MAY REVOKE THE PROXY AT ANY TIME PRIOR TO ITS EXERCISE IN THE MANNER
DESCRIBED IN THE ATTACHED PROXY STATEMENT. ANY STOCKHOLDER PRESENT AT THE
SPECIAL MEETING, INCLUDING ANY ADJOURNMENT OR POSTPONEMENT THEREOF, MAY REVOKE
SUCH HOLDER'S PROXY AND VOTE PERSONALLY ON THE MERGER AGREEMENT AT THE SPECIAL
MEETING. EXECUTED PROXIES WITH NO INSTRUCTIONS INDICATED THEREON WILL BE VOTED
"FOR" APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
PLEASE DO NOT SEND YOUR COMMON STOCK CERTIFICATES AT THIS TIME.
<PAGE>
PRELIMINARY COPY
FOAMEX INTERNATIONAL INC.
1000 Columbia Avenue
Linwood, PA 19061
----------------
PROXY STATEMENT
----------------
SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON DECEMBER __, 1998
----------------
This Proxy Statement is being furnished to the holders of outstanding
shares of common stock, par value $0.01 per share (the "Common Stock"), of
Foamex International Inc., a Delaware corporation (the "Company"), in
connection with the solicitation of proxies by the Board of Directors of the
Company for use at the Special Meeting of Stockholders to be held on December
__, 1998, at 10:00 a.m. at 1000 Columbia Avenue, Linwood, Pennsylvania 19061,
and at any adjournments or postponements thereof (the "Special Meeting"). The
Board of Directors has fixed the close of business on November 13, 1998 as the
record date (the "Record Date") for the determination of stockholders entitled
to notice of, and to vote at, the Special Meeting.
At the Special Meeting, the holders of outstanding shares of Common Stock
(the "Stockholders") will consider and vote upon a proposal to approve and
adopt an Agreement and Plan of Merger dated as of November 5, 1998 (the "Merger
Agreement"), among Trace International Holdings, Inc. ("Trace"), Trace Merger
Sub, Inc., a wholly owned subsidiary of Trace ("Merger Sub"), and the Company.
A copy of the Merger Agreement is attached to this Proxy Statement as Appendix
A. Pursuant to the Merger Agreement and subject to satisfaction of the
conditions set forth therein, (i) Merger Sub would be merged with and into the
Company (the "Merger"), with the Company continuing as the surviving
corporation (the "Surviving Corporation"), (ii) the Company would thereupon
become a wholly owned subsidiary of Trace and (iii) each outstanding share of
Common Stock, except for (x) shares owned by Trace or any subsidiaries of Trace
(the "Trace Stockholders"), (y) shares owned by the Company, and (z) shares
("Dissenting Shares") held by stockholders who properly perfect their appraisal
rights pursuant to Section 262 of the Delaware General Corporation Law (the
"DGCL") would be converted into the right to receive $12.00 in cash.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL
AND ADOPTION OF THE MERGER AGREEMENT. STOCKHOLDERS SHOULD BE AWARE, HOWEVER,
THAT (1) THE BEACON GROUP CAPITAL SERVICES, LLC, FINANCIAL ADVISOR TO THE
SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS OF THE COMPANY (THE "SPECIAL
COMMITTEE FINANCIAL ADVISOR"), DETERMINED, ON NOVEMBER 2, 1998, THAT AS OF SUCH
DATE, A PRICE OF $12 PER SHARE WAS NOT FAIR TO THE PUBLIC STOCKHOLDERS FROM A
FINANCIAL POINT OF VIEW, (2) THE SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS
HAS DETERMINED THAT THE TERMS OF THE MERGER ARE NOT FAIR TO THE PUBLIC
STOCKHOLDERS AND RECOMMENDED THAT THE BOARD OF DIRECTORS REJECT THE PROPOSAL OF
$12.00 PER SHARE, AND (3) CERTAIN OFFICERS AND DIRECTORS OF THE COMPANY HAVE
CERTAIN INTERESTS THAT MAY BE IN ADDITION TO, OR DIFFERENT FROM, THE INTERESTS
OF THE PUBLIC STOCKHOLDERS. IN LIGHT OF THE CONFLICTING RECOMMENDATIONS OF THE
BOARD OF DIRECTORS AND THE BOARD FINANCIAL ADVISOR ON THE ONE HAND AND THE
SPECIAL COMMITTEE AND THE SPECIAL COMMITTEE FINANCIAL ADVISOR ON THE OTHER
HAND, THE PUBLIC STOCKHOLDERS ARE URGED NOT TO PLACE UNDUE RELIANCE ON THE
RECOMMENDATION OF THE BOARD OF DIRECTORS, and are encouraged to review the
enclosed Proxy Statement in its entirety, especially the sections captioned
"Special Factors--Recommendation of the Special Committee Against the Merger;
Unfairness of the Merger," "--Opinion of Financial Advisor to the Special
Committee" and "--Interests of Certain Persons in the Merger."
Stockholders are urged to read and consider carefully the information
contained in this Proxy Statement.
This Proxy Statement, the accompanying Notice of Special Meeting and the
accompanying proxy are first being mailed to Stockholders on or about _______
__, 1998.
----------------
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER OR
NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE PROXY CARD.
----------------
<PAGE>
NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT IN
CONNECTION WITH THE SOLICITATION OF PROXIES THEREBY AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ANY OTHER PERSON.
----------------
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR
MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION
CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
----------------
The date of this Proxy Statement is _______ __, 1998.
ii
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
-----
<S> <C>
SUMMARY .................................................................................. 1
The Special Meeting ..................................................................... 1
Special Factors ......................................................................... 2
The Merger .............................................................................. 7
Appraisal Rights ........................................................................ 12
Solicitation of Proxies ................................................................. 12
The Parties ............................................................................. 12
Market Price and Dividend Information ................................................... 12
Selected Historical Financial Data ...................................................... 12
SPECIAL FACTORS .......................................................................... 13
Background of the Merger ................................................................ 13
Purpose and Structure of the Merger ..................................................... 25
Recommendation of the Board of Directors; Fairness of the Merger ........................ 25
Opinion of Financial Advisor to the Board of Directors .................................. 28
Recommendation of the Special Committee Against the Merger; Unfairness of the Merger .... 35
Opinion of Financial Advisor to the Special Committee ................................... 40
Plans for the Company After the Merger .................................................. 46
Potential Acceleration of Foamex Debt in the Absence of a Merger ........................ 46
Interests of Certain Persons in the Merger .............................................. 47
Perspective of Trace and Merger Sub on the Merger ....................................... 47
Perspective of Marshall S. Cogan on the Merger .......................................... 47
Certain Effects of the Merger ........................................................... 47
Material Federal Income Tax Consequences ................................................ 48
Risk of Fraudulent Conveyance ........................................................... 48
Anticipated Accounting Treatment ........................................................ 49
Regulatory Approvals .................................................................... 49
Sources of Funds; Fees and Expenses ..................................................... 49
THE SPECIAL MEETING ...................................................................... 52
Matters to Be Considered at the Special Meeting ......................................... 52
Record Date and Voting .................................................................. 52
Vote Required; Revocability of Proxies .................................................. 53
Appraisal Rights ........................................................................ 54
Solicitation of Proxies ................................................................. 55
THE MERGER AGREEMENT ..................................................................... 56
General ................................................................................. 56
Representations and Warranties .......................................................... 58
Conduct of the Business Pending the Merger .............................................. 58
Superior Proposal ....................................................................... 59
Conditions to the Merger ................................................................ 60
Termination ............................................................................. 60
Fees and Expenses ....................................................................... 61
Indemnification of Directors and Officers ............................................... 61
Access to Information ................................................................... 61
Legal Compliance ........................................................................ 61
Amendment ............................................................................... 62
CERTAIN PROJECTED FINANCIAL DATA ......................................................... 62
SELECTED HISTORICAL FINANCIAL DATA ....................................................... 66
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS ..................................... 67
CERTAIN TRANSACTIONS ..................................................................... 70
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS ........................... 73
Directors and Executive Officers of the Company, Trace and Merger Sub ................... 74
PAYMENTS RELATING TO THE IPO ............................................................. 76
MARKET PRICE AND DIVIDEND INFORMATION .................................................... 77
</TABLE>
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<TABLE>
<CAPTION>
Page
-----
<S> <C>
CERTAIN TRANSACTIONS IN THE COMMON STOCK ................................................. 78
STOCKHOLDER LITIGATION ................................................................... 78
INDEPENDENT PUBLIC ACCOUNTANTS ........................................................... 79
STOCKHOLDER PROPOSALS .................................................................... 79
ADDITIONAL INFORMATION ................................................................... 79
AVAILABLE INFORMATION .................................................................... 80
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE .......................................... 81
FORWARD-LOOKING STATEMENTS ............................................................... 82
APPENDIX A -- THE MERGER AGREEMENT ....................................................... A-1
APPENDIX B -- FAIRNESS OPINION OF RAMIUS CAPITAL GROUP, L.L.C. ........................... B-1
APPENDIX C -- OPINION OF THE BEACON GROUP CAPITAL SERVICES, LLC .......................... C-1
APPENDIX D -- SECTION 262 OF THE DGCL .................................................... D-1
APPENDIX E -- CERTAIN INFORMATION REGARDING DIRECTORS AND EXECUTIVE
OFFICERS OF TRACE, MERGER SUB AND THE COMPANY .............................. E-1
</TABLE>
iv
<PAGE>
SUMMARY
The following is a brief summary of certain information contained
elsewhere in this Proxy Statement. This summary is not intended to be a
complete description of the matters covered in this Proxy Statement and is
qualified in its entirety by reference to the more detailed information
contained in or incorporated by reference in this Proxy Statement or in the
documents attached as Appendices hereto. Capitalized terms used but not defined
in this Summary shall have the meanings ascribed to them elsewhere in this
Proxy Statement. Stockholders are urged to read this Proxy Statement and the
Appendices hereto in their entirety.
The Special Meeting
Matters to Be Considered at
the Special Meeting.......... The Special Meeting is scheduled to be held
at 10:00 a.m. on December __, 1998 at 1000
Columbia Avenue, Linwood, Pennsylvania 19061.
At the Special Meeting, Stockholders will
consider and vote upon (i) a proposal to
approve and adopt the Merger Agreement and (ii)
such other matters as may properly be brought
before the Special Meeting. See "The Special
Meeting--Matters to Be Considered at the
Special Meeting."
Record Date and Voting........ The Record Date for the Special Meeting is
the close of business on November 13, 1998. At
the close of business on the Record Date, there
were shares of Common Stock
outstanding and entitled to vote, held by
approximately Stockholders of record. Each
holder of Common Stock on the Record Date will
be entitled to one vote for each share held of
record. The presence, either in person or by
proxy, of a majority of the outstanding shares
of Common Stock entitled to be voted is
necessary to constitute a quorum at the Special
Meeting. See "The Special Meeting--Record Date
and Voting."
Vote Required; Revocability
of Proxies.................... Approval and adoption of the Merger Agreement
will require the affirmative vote of (i) the
holders of a majority of the outstanding shares
of Common Stock entitled to vote thereon and
(ii) the affirmative vote of a majority of the
Independent Shares voting thereon. For purposes
of the vote on the Merger, "Independent Shares"
are all shares of Common Stock of the Company
not owned by Trace or any of its subsidiaries
or by an executive officer or director of Trace
or by an affiliate of Marshall S. Cogan or by a
member of the Immediate Family (as defined in
NASD Rule IM-2110-1(l)(3)) of any of the
foregoing. As of November 13, 1998, the
Company believes that 13,112,211 of the
outstanding shares of Common Stock were
Independent Shares, representing approximately
52% of the shares outstanding. As of November
13, 1998, (i) the Trace Stockholders owned, in
the aggregate, 11,475,000 shares of Common
Stock, representing approximately 45.8% of
such shares outstanding, (ii) the directors
and executive officers of Trace and Merger Sub
owned an additional 427,612 shares of Common
Stock, representing approximately 1.7% of such
shares outstanding and (iii) the directors and
executive officers of the Company (excluding
such persons who are also directors or
officers of Trace) owned an additional 117,500
shares of Common Stock, representing less than
one percent of such shares outstanding. Trace
has agreed to vote, or cause to be voted, all
of the shares then owned by the Trace
Stockholders in favor of the approval of the
Merger and the authorization and adoption of
the Merger Agreement to the extent permitted
pursuant to the terms of certain
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<PAGE>
agreements discussed herein under "The Special
Meeting--Vote Required; Revocability of
Proxies." To the knowledge of the Company,
Trace, Merger Sub and Marshall S. Cogan, the
directors (except for the members of the
Special Committee, who are expected to vote
against approval and adoption of the Merger
Agreement) and executive officers of the
Company, Trace and Merger Sub intend to vote
their shares in favor of the approval and
adoption of the Merger Agreement. Accordingly,
assuming that all such persons vote in favor
of the Merger, the affirmative vote of only
approximately 4% of the Public Shares will be
required to approve and adopt the Merger
Agreement by a majority of the outstanding
shares of Common Stock. If all Independent
Shares are represented at the Special Meeting,
the Company believes the affirmative vote of
the holders of at least 6,556,106 Independent
Shares will be required to approve and adopt
the Merger Agreement. To the knowledge of the
Company, Trace, Merger Sub and Marshall S.
Cogan, except as set forth in this Proxy
Statement, no executive officer, director or
affiliate of the Company, Trace or Merger Sub
has made a recommendation in support of or
opposed to the Merger.
Approval and adoption of the Merger Agreement
is conditioned, in part, on the affirmative
vote of the holders of a majority of the
outstanding shares of Common Stock entitled to
vote thereon. As to this condition, the
failure to submit a proxy card (or vote in
person at the Special Meeting) or the
abstention from voting by a Stockholder
(including broker non-votes) will have the
same effect as a vote against the Merger
Agreement. A failure to submit a proxy card
or the abstention from voting by a
Stockholder, however, will not be counted as a
vote for or against the Merger Agreement for
purposes of meeting the condition that a
majority of the Independent Shares voting with
respect to the Merger vote in favor of the
Merger. Brokers who hold shares of Common
Stock as nominees will not have discretionary
authority to vote such shares in the absence
of instructions from the beneficial owners
thereof. See "The Special Meeting--Vote
Required; Revocability of Proxies."
A Stockholder may revoke a proxy at any time
prior to its exercise by (i) delivering to
Philip N. Smith, Jr., Corporate Secretary,
Foamex International Inc., 1000 Columbia
Avenue, Linwood, Pennsylvania 19061, a written
notice of revocation prior to the Special
Meeting, (ii) delivering prior to the Special
Meeting a duly executed proxy bearing a later
date or (iii) attending the Special Meeting
and voting in person. The presence of a
Stockholder at the Special Meeting will not in
and of itself automatically revoke such
Stockholder's proxy. If no instructions are
indicated on a properly executed proxy, such
proxy will be voted "FOR" approval and
adoption of the Merger Agreement.
Special Factors
Background of the Merger...... For a description of the events leading to
the approval and adoption of the Merger
Agreement by the Company's Board of Directors,
see "Special Factors--Background of the
Merger."
Purpose and Structure of
the Merger.................... Trace's purpose for the Merger is to acquire
all the remaining equity interests in the
Company not currently owned by the Trace
Stockholders for the reasons described in
"Special Factors--Purpose and Structure of the
Merger." The acquisition of those equity
interests, represented by the shares of Common
Stock
2
<PAGE>
outstanding as of the Effective Time (as
hereinafter defined) and not currently owned
by the Trace Stockholders (the "Public
Shares"), from the holders of such shares (the
"Public Stockholders"), is structured as a
cash merger in order to transfer ownership of
those equity interests to Trace in a single
transaction and in order to facilitate
financing. See "Special Factors--Purpose and
Structure of the Merger" and "--Potential
Acceleration of Foamex Debt in the Absence of
a Merger."
Recommendation of Board of Directors;
Fairness of the Merger....... On November 5, 1998, by a 5 to 2 vote of the
directors (Mr. Gutfreund and Mr. Hay, the
members of the Special Committee, voting
against), based in part on the fairness opinion
of Ramius Capital Group, L.L.C. ("Ramius" or
the "Board Financial Advisor"), the Company's
Board of Directors (i) determined that the
Merger and the transactions contemplated by the
Merger Agreement are fair and in the best
interests of the Company and the Public
Stockholders, (ii) approved and adopted the
Merger Agreement and declared its advisability
and (iii) resolved to recommend that the Public
Stockholders vote in favor of the Merger.
Accordingly, the Board of Directors recommends
a vote FOR approval and adoption of the Merger
Agreement. See "Special Factors--Recommendation
of the Board of Directors; Fairness of the
Merger." In considering the recommendations of
the Board of Directors with respect to the
Merger, the Public Stockholders should be aware
that (1) The Beacon Group Capital Services, LLC
("Beacon" or the "Special Committee Financial
Advisor") determined, on November 2, 1998, that
as of such date, a price of $12.00 per share
was NOT fair to the Public Stockholders from a
financial point of view, (2) the Special
Committee of the Board of Directors has
determined that the terms of the Merger are NOT
fair to the Public Stockholders and recommended
that the Board of Directors reject the proposal
of $12.00 per share, and (3) certain officers
and directors of the Company have certain
interests that may be in addition to, or
different from, the interests of the Public
Stockholders. In light of the conflicting
recommendations of the Board of Directors and
the Board Financial Advisor on the one hand and
the Special Committee and the Special Committee
Financial Advisor on the other hand, the Public
Stockholders are urged not to place undue
reliance on the recommendation of the Board of
Directors, and are encouraged to review this
Proxy Statement in its entirety, especially the
sections captioned "Special
Factors--Recommendation of the Special
Committee Against the Merger; Unfairness of the
Merger," "--Opinion of Financial Advisor to
the Special Committee" and "--
Interests of Certain Persons in the Merger."
Opinion of Financial Advisor
to the Board of Directors.... On November 5, 1998, Ramius delivered its
written opinion to the Board of Directors that
as of such date the consideration to be
received by the Public Stockholders is fair to
the Public Stockholders from a financial point
of view. The full text of the written opinion
of Ramius, which sets forth assumptions made,
matters considered and limitations on the
review undertaken in connection with the
opinion, is attached hereto as Appendix B and
is incorporated herein by reference. Holders of
Public Shares are urged to, and should, read
such opinion in its entirety. See "Special
Factors--Opinion of Financial Advisor to the
Board of Directors."
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<PAGE>
Recommendation of the Special
Committee.................... A special committee (the "Special Committee")
of two directors of the Company who, except in
their capacity as directors of the Company, are
not directors, officers or employees of Trace
or any other affiliate of Trace (the "Trace
Group") concluded that the terms of the Merger
are NOT fair to the Public Stockholders and
recommended that the Board of Directors reject
the proposal of $12.00 per share. For a
discussion of the factors considered by the
Special Committee in making its recommendation,
see "Special Factors--Recommendation of the
Special Committee Against the Merger;
Unfairness of the Merger."
Opinion of Financial Advisor
to the Special Committee..... On November 2, 1998, the Special Committee
Financial Advisor delivered its written opinion
to the Special Committee that as of such date
the consideration to be received by the Public
Stockholders in the Merger is NOT fair to the
Public Stockholders from a financial point of
view. The full text of the written opinion of
Beacon, which sets forth assumptions made,
matters considered and limitations on the
review undertaken in connection with the
opinion, is attached hereto as Appendix C and
is incorporated herein by reference. Holders of
Public Shares are urged to, and should, read
such opinion in its entirety. See "Special
Factors--Opinion of Financial Advisor to the
Special Committee."
Potential Acceleration of
Foamex Debt in the Absence
of a Merger.................. Certain credit agreements and promissory
notes of Foamex L.P. and/or Foamex Carpet
Cushion, Inc. ("Foamex Carpet") pursuant to
which approximately $500 million of debt has
been issued, contain provisions that would
result in the acceleration of such indebtedness
if Trace were to cease to own at least 30% of
the outstanding Common Stock. Similarly,
certain indentures of Foamex L.P. and Foamex
Capital Corporation relating to approximately
$248 million of Senior Subordinated Notes
contain provisions that provide the holders of
such Senior Subordinated Notes with the right
to require the issuers thereof to repurchase
such Senior Subordinated Notes at a price in
cash equal to 101% of the aggregate principal
amount thereof, plus accrued and unpaid
interest thereon, if Trace falls below certain
specified ownership levels of Common Stock and
another person or group owns a greater
percentage of Common Stock than Trace. Trace
has substantial debt obligations due at the end
of December 1998 and has informed the Company
that it currently does not have the financial
resources to pay these obligations. Trace has
informed the Company that it intends to seek
waivers and/or modifications of such
indebtedness; however, there can be no
assurance that such waivers and/or
modifications will be achieved. In addition,
Trace is in default with respect to its
obligation to repurchase 308,813 shares of
Common Stock pursuant to a put option agreement
with John Rallis, a former President of the
Company. See "Security Ownership of Management
and Certain Beneficial Owners." If Trace were
to default on its indebtedness or other Trace
creditors, such as Mr. Rallis, were to take
steps constituting a default under such
indebtedness, and if the holders of such
indebtedness were to foreclose on the Common
Stock held by Trace, such event could trigger
the acceleration and put rights described
above. Although management believes that all
such debt obligations would be refinanced under
such circumstances, there can be no assurance
that the Company or its subsidiaries would be
able
4
<PAGE>
to do so. Trace has informed the Company that
it anticipates that if the Merger is
consummated it will be able to satisfy or
restructure its outstanding obligations.
Interest of Certain Persons in
the Merger................... In considering the recommendation of the
Board of Directors with respect to the Merger,
the Public Stockholders should be aware that
certain officers and directors have certain
interests that present actual or potential
conflicts of interest in connection with the
Merger. For a more detailed discussion of such
interests, see "Special Factors--Interests of
Certain Persons in the Merger." The Board of
Directors was aware of potential or actual
conflicts of interest and considered them along
with other matters described under "Special
Factors--Recommendation of the Board of
Directors; Fairness of the Merger." As of
November 13, 1998, (i) the Trace Stockholders
owned, in the aggregate, 11,475,000 shares of
Common Stock, representing approximately 45.8%
of such shares outstanding, (ii) the directors
and executive officers of Trace and Merger Sub
owned an additional 427,612 shares of Common
Stock, representing approximately 1.7% of such
shares outstanding and (iii) the directors and
executive officers of the Company (excluding
such persons who are also directors or officers
of Trace) owned an additional 117,500 shares of
Common Stock, representing less than one
percent of such shares outstanding.
For a description of current relationships and
certain transactions between Trace and the
Company, see "Special Factors--Interests of
Certain Persons in the Merger." For a
discussion of certain agreements by Trace with
respect to indemnification of directors and
officers of the Company, see "The Merger
Agreement--Indemnification of Directors and
Officers."
Certain Effects of
the Merger.................... Upon consummation of the Merger, each Public
Share, other than shares held by Public
Stockholders who properly exercise their
appraisal rights (the "Dissenting Shares")
under the Delaware General Corporation Law (the
"DGCL") will be converted into the right to
receive $12.00 in cash. The Public Stockholders
will cease to have any ownership interest in
the Company or rights as stockholders. The
Public Stockholders will no longer benefit from
any increases in the value of the Company and
will no longer bear the risk of any decreases
in the value of the Company.
Following the Merger, Trace, which currently
owns, together with the other Trace
Stockholders, approximately 45.8% of the
outstanding shares of Common Stock, will own
all of the Surviving Corporation's outstanding
shares of common stock. Trace will have
complete control over the management and
conduct of the Company's business, all income
generated by the Company and any future
increase in the Company's value. Similarly,
Trace will also bear the risk of any losses
incurred in the operation of the Company and
any decrease in the value of the Company.
As a result of the Merger, the Company will be
privately held and there will be no public
market for the Common Stock. Upon consummation
of the Merger, the Common Stock will cease to
be listed on the Nasdaq Stock Market
("Nasdaq") and the registration of the Common
Stock under the Exchange Act will be
terminated. Moreover, the Company will be
relieved of the obligation to
5
<PAGE>
comply with the proxy rules of Regulation 14A
under Section 14 of the Exchange Act and its
officers, directors and 10% shareholders will
be relieved of the reporting requirements and
restrictions on insider trading under Section
16 of the Exchange Act. Accordingly, less
information will be required to be made
publicly available than presently is the case.
See "Special Factors--Certain Effects of the
Merger."
Stockholder Litigation........ On or about March 17, 1998, various
litigation was commenced against the Company by
Stockholders of the Company in Delaware state
court. These actions, purportedly brought as
class actions on behalf of all Public
Stockholders, varyingly named the Company,
certain of its directors, certain of its
officers and Trace as defendants. In these
actions, plaintiffs alleged that the defendants
breached their fiduciary duties to plaintiffs
and the Company's other Public Stockholders in
connection with the original proposal of Trace
to acquire the Public Shares for $17.00 per
share. The parties to these actions entered
into a Stipulation of Settlement on September
9, 1998, providing for the settlement of such
actions upon terms and conditions described
herein under "Stockholder Litigation." On
November 10, 1998, counsel for certain of the
defendants in the Stockholder Litigation gave
notice to the plaintiffs' counsel that as a
result of the inability to satisfy the
conditions to the Stipulation of Settlement,
they withdrew from and terminated the
Stipulation of Settlement.
On November 12, 1998, the plaintiffs in the
Stockholder Litigation filed an Amended Class
Action Complaint (the "Amended Complaint"). The
Amended Complaint named the Company, Trace,
Merger Sub, Mr. Cogan, Mr. Farace, Dr. Hershon,
Mr. Tunney and Mr. Davignon as defendants,
alleging that they breached their fiduciary
duties to plaintiffs and the other Public
Stockholders in connection with the Current
Proposed Transaction (as defined under the
caption "Special Factors; Background of the
Merger"), that the proposal to acquire the
Public Shares for $12.00 per share lacked
entire fairness, that the individual defendants
violated 8 Del. Code [sec]251 in approving the
Merger Agreement, and that Trace and Merger Sub
breached the Stipulation of Settlement.
The defendants have denied, and continue to
deny, that they have committed or have
threatened to commit any violation of law or
breaches of duty to the plaintiffs or the
purported class or that they have breached the
Stipulation of Settlement. The defendants
intend to vigorously defend the Stockholder
Litigation. See "Stockholder Litigation."
Material U.S. Federal Income
Tax Consequences............. The receipt of cash in exchange for Common
Stock pursuant to the Merger will be a taxable
transaction for United States federal income
tax purposes and may also be a taxable
transaction under applicable state, local and
foreign tax laws. Public Stockholders should
consult their own tax advisors regarding the
U.S. federal income tax consequences of the
Merger, as well as any tax consequences under
the laws of any state or other jurisdiction.
See "Special Factors--Material Federal Income
Tax Consequences."
6
<PAGE>
Risk of
Fraudulent Conveyance......... If a court in a lawsuit brought by an unpaid
creditor or representative of creditors, such
as a trustee in bankruptcy, or by the Surviving
Corporation, were to find that the Merger, the
Merger Consideration and the financing thereof
constituted fraudulent transfers or
conveyances, such court could void the
distribution of the Merger Consideration to the
Public Stockholders and require that the Public
Stockholders return the same to the Surviving
Corporation or a fund for the benefit of its
creditors. The voiding of the Merger
Consideration as described above could result
in the Public Stockholders losing the entire
value of their equity investment in the Company
and the Merger Consideration. See "Special
Factors--Background of the Merger" and "Special
Factors--Risk of Fraudulent Conveyance."
The Merger
Old Merger Agreement.......... On June 25, 1998, Trace, Merger Sub and the
Company entered into an Agreement and Plan of
Merger, which was subsequently amended on July
6, 1998 (as amended, the "Old Merger
Agreement"). Pursuant to the terms of the Old
Merger Agreement, Merger Sub would have been
merged with and into the Company (the "Old
Merger") and each outstanding share of Common
Stock (except for shares owned by the Trace
Stockholders, shares owned by the Company and
shares owned by stockholders who perfected
their appraisal rights in accordance with
Delaware law) would have been converted into
the right to receive $18.75 in cash, without
interest. On November 5, 1998, Trace terminated
the Old Merger Agreement by delivering a Notice
of Termination to the Company. Trace terminated
the Old Merger Agreement because the financing
condition contained in the Old Merger Agreement
was incapable of being satisfied on or prior to
December 31, 1998. See "Special
Factors--Background of the Merger."
General....................... On November 5, 1998, Trace, Merger Sub and
the Company entered into the Merger Agreement.
Upon consummation of the Merger, Merger Sub
will be merged with and into the Company and
the Company will be the Surviving Corporation.
The Surviving Corporation will succeed to all
the rights and obligations of the Company and
Merger Sub.
Treatment of Shares in
the Merger.................... Subject to the provisions of the Merger
Agreement, at the Effective Time (i) each share
of Common Stock outstanding immediately prior
to the Effective Time, except for (A) Common
Stock then owned by the Trace Stockholders, (B)
Common Stock then owned by the Company and (C)
Dissenting Shares shall, by virtue of the
Merger and without any action on the part of
the holder thereof, be converted into the right
to receive (subject to any applicable
withholding tax) $12.00 in cash, without
interest (the "Merger Consideration"), upon
surrender of the certificate representing such
Common Stock; (ii) each share of Common Stock
outstanding immediately prior to the Effective
Time which is then owned by the Trace
Stockholders shall remain outstanding and from
and after the Effective Time shall constitute
shares of the Surviving Corporation; (iii) each
share of Common Stock outstanding immediately
prior to the Effective Time which is then owned
by the Company shall, by virtue of the Merger
and without any action
7
<PAGE>
on the part of the holder thereof, be canceled
and retired and cease to exist, without any
conversion thereof; and (iv) each share of
common stock of Merger Sub outstanding
immediately prior to the Effective Time shall
be canceled without any consideration payable
therefor. See "The Merger Agreement--General."
Stock Options................. At the Effective Time, each holder of a then
outstanding option (each, a "Company Option")
to purchase shares of Common Stock which is
vested at such time and for which the Merger
Consideration exceeds the per share exercise
price of such vested option (each a "Vested In
The Money Company Option") will, in settlement
thereof, receive from the Company for each
share of Common Stock subject to such Vested In
The Money Company Option an amount (subject to
any applicable withholding tax) in cash equal
to the amount by which the Merger Consideration
exceeds the per share exercise price of such
Vested In The Money Company Option (the "Option
Consideration").
Each Company Option, immediately before the
effective time, that is not vested and for
which the Merger Consideration exceeds the per
Share exercise price of the Company Option
("Unvested In The Money Company Options")
shall not be canceled, and shall remain
outstanding after the Effective Time. No
payment shall be made at the Effective Time
with respect to any Unvested In The Money
Company Options; provided, however, that each
holder of an Unvested In The Money Company
Option shall be entitled to receive from the
Surviving Corporation, upon the vesting of
such Unvested In The Money Company Option on
the terms and conditions in effect on the date
of the Merger Agreement, an amount (subject to
any applicable withholding tax), equal to the
product of (i) the amount by which the Merger
Consideration exceeds the per Share exercise
price of the Unvested In The Money Company
Option at the Effective Time and (ii) the
number of Shares subject thereto.
No payment shall be made with respect to any
Company Option, whether vested or unvested,
having a per share exercise price, as in
effect immediately prior to the Effective
Time, equal to or greater than the Merger
Consideration and any and all such Company
Options shall be canceled and the Company
shall have no further liability with respect
to such Company Options. See "The Merger
Agreement--General."
Warrants...................... At the Effective Time, each holder of a then
outstanding warrant (each, a "Company Warrant")
to purchase shares of Common Stock for which
the Merger Consideration exceeds the per share
exercise price of such warrant (each, an "In
The Money Company Warrant") will, in settlement
thereof, receive from the Company for each
share of Common Stock subject to such warrant
an amount (subject to any applicable
withholding tax) in cash equal to the amount by
which the Merger Consideration exceeds the per
share exercise price of the warrant (the
"Warrant Consideration"). No payment shall be
made with respect to any Company Warrant having
a per share exercise price, as in effect
immediately prior to the Effective Time, equal
to or greater than the Merger Consideration and
any and all such Company Warrants shall be
canceled and the Company
8
<PAGE>
shall have no further liability with respect
to such Company Warrants. See "The Merger
Agreement--General."
Effective Time................ Pursuant to the Merger Agreement, the
"Effective Time" of the Merger will occur upon
the filing of a certificate of merger with the
Secretary of State of the State of Delaware or
at such time thereafter as is agreed to between
Trace and the Company and provided in the
Certificate of Merger. See "The Merger
Agreement--General."
Exchange of
Share Certificates............ As soon as reasonably practicable after the
Effective Time, Trace shall cause The Bank of
Nova Scotia, or another bank or trust company
reasonably acceptable to the Company, as paying
agent (the "Paying Agent"), to mail to each
holder of record as of the Effective Time
(other than the Company and the Trace
Stockholders) of an outstanding certificate or
certificates for shares of Common Stock, a
letter of transmittal and instructions for use
in effecting the surrender of such certificate
for payment in accordance with the Merger
Agreement. Upon surrender to the Paying Agent
of a certificate, together with a duly executed
letter of transmittal, the holder thereof shall
be entitled to receive an amount equal to the
product of the number of shares of Common Stock
represented by such certificate and the Merger
Consideration in cash, without interest
thereon, less any applicable withholding tax,
and such certificate shall then be canceled.
Until surrendered pursuant to the procedures
described above, each certificate (other than
certificates representing shares of Common
Stock owned by the Company or the Trace
Stockholders and certificates representing
Dissenting Shares), shall represent for all
purposes solely the right to receive the
Merger Consideration multiplied by the number
of shares of Common Stock evidenced by such
certificate, without any interest thereon,
subject to any applicable withholding
obligation. See "The Merger Agreement--
General." STOCKHOLDERS SHOULD NOT SEND ANY
SHARE CERTIFICATES WITH THEIR PROXY CARDS.
Conditions to the Merger...... Consummation of the Merger is subject to
various conditions, including, among others:
(i) the approval and adoption of the Merger
Agreement by (A) the affirmative vote of
holders of a majority of the outstanding shares
of Common Stock entitled to vote thereon, and
(B) the affirmative vote of a majority of the
Independent Shares voting with respect to the
Merger, (ii) the absence of any injunction
preventing consummation of the Merger, (iii)
the obtaining of financing for the transactions
contemplated by the Merger Agreement on terms
and conditions and in amounts reasonably
satisfactory to Trace, and (iv) other
conditions that may be waived by the parties,
including: the absence of any action, suit,
claim or legal, administrative or arbitral
proceeding or investigation pending before any
governmental entity seeking to restrain or
prohibit, or to obtain damages in respect of,
the Merger Agreement or the consummation of the
transactions contemplated thereby. See "The
Merger Agreement--Conditions to the Merger."
Superior Proposal............. Pursuant to the Merger Agreement, except for
certain limitations described below, the
Company is not limited in its ability to
negotiate a Takeover Proposal (as defined
below) with any third
9
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party. However, the Board of Directors of the
Company may not (i) withdraw or modify, or
propose to withdraw or modify, in a manner
adverse to Trace, the approval or
recommendation by the Board of Directors of
the Merger Agreement or the Merger, (ii)
approve or recommend, or propose to approve or
recommend, any Takeover Proposal or (iii)
cause the Company to enter into any agreement
with respect to any Takeover Proposal, except
in each case in connection with a Superior
Proposal (as defined below), and only at a
time that is after the first business day
following Trace's receipt of written notice
advising Trace that the Board of Directors of
the Company has received a Superior Proposal,
specifying the material terms and conditions
of such Superior Proposal and identifying the
person making such Superior Proposal.
For purposes of the Merger Agreement,
"Takeover Proposal" means any inquiry,
proposal or offer from any person relating to
any: (A) merger, consolidation or similar
transaction involving the Company, (B) sale,
lease or other disposition directly or
indirectly by merger, consolidation, share
exchange or otherwise of assets of the Company
or its subsidiaries representing 15% or more
of the consolidated assets of the Company and
its subsidiaries, (C) issue, sale, or other
disposition of (including by way of merger,
consolidation, share exchange or any similar
transaction) securities (or options, rights or
warrants to purchase, or securities
convertible into, such securities)
representing 15% or more of the voting power
of the Company, or (D) transaction in which
any person or "group" (as such terms are used
in the Exchange Act) shall acquire beneficial
ownership of 25% or more of the outstanding
Common Stock, in each case, other than the
transactions with Trace contemplated by the
Merger Agreement.
For purposes of the Merger Agreement,
"Superior Proposal" means any bona fide
Takeover Proposal which the Board of Directors
of the Company determines in its good faith
judgment (based on the advice of either (x)
Ramius or (y) a financial advisor of
nationally recognized reputation) to be more
favorable to the Public Stockholders than the
Merger. See "The Merger Agreement--Superior
Proposal."
Termination................... The Merger Agreement may be terminated at any
time prior to the Effective Time, whether
before or after approval by the Stockholders,
as follows: (i) by the mutual written consent
of the Company and Trace; (ii) by either the
Company or Trace if the Merger Agreement shall
have been voted on by the stockholders of the
Company at the Special Meeting and the vote
shall not have been sufficient to approve the
Merger; (iii) by either the Company or Trace if
any governmental entity has issued an order,
decree or ruling prohibiting the Merger and
such ruling has become final and
non-appealable; (iv) by either the Company or
Trace in the event the Merger is not
consummated by January 29, 1999; (v) by either
the Company or Trace if any of the respective
conditions described above under "The Merger
Agreement--Conditions to the Merger " that (A)
are required to occur prior to the Effective
Time shall have become incapable of occurring,
or (B) are not permitted to occur prior to the
Effective Time, shall have occurred prior to
such time and are incapable of being cured or
reversed, and, in either case, shall not have
been, on or before the date of such
termination, permanently waived by such party;
(vi) by Trace if the Company's Board of
Directors has withdrawn,
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modified or amended its recommendation of the
Merger Agreement or the Merger; (vii) under
certain circumstances, by the Company if its
Board of Directors has withdrawn its
recommendation of the Merger Agreement; (viii)
by Trace or the Company if the other party
thereto shall have materially breached any of
its representations, warranties or other
agreements contained in the Merger Agreement
which breach is incapable of being cured or
has not been cured within 30 days after
notice; and (ix) by the Company or Trace under
certain circumstances in connection with a
Takeover Proposal. See "The Merger
Agreement--Termination."
Sources of Funds; Fees
and Expenses.................. It is currently expected that approximately
$162.5 million will be required to pay the
Merger Consideration to the Public Stockholders
(assuming no such holder exercises appraisal
rights), approximately $3.0 million will be
required to pay the Option Consideration and
the Warrant Consideration to the holders of
Company Options and Company Warrants and
approximately $45.2 million will be required to
pay the expenses of the Company, Trace and
Merger Sub in connection with the Merger and
the related financings. It is currently
anticipated that such funds will be furnished
from the proceeds of new debt financing by
Foamex L.P. and Foamex Carpet. See "Special
Factors--Sources of Funds; Fees and Expenses."
Anticipated Accounting
Treatment..................... Trace will account for the purchase of the
approximately 54% of the common stock of the
Company not owned by Trace, using purchase
accounting. Presentation of the separate
financial statements of the Company after the
Merger will be on a push down basis of
accounting in accordance with Securities and
Exchange Commission ("SEC") Staff Accounting
Bulletin 5.J.
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Appraisal Rights
Under the DGCL, Stockholders who properly demand appraisal prior to the
Stockholder vote on the Merger Agreement, do not vote in favor of approval of
the Merger Agreement and otherwise comply with the requirements of DGCL Section
262 will be entitled to statutory appraisal rights. Any deviation from the
requirements of Section 262 may result in a forfeiture of statutory appraisal
rights. See "The Special Meeting--Appraisal Rights" and DGCL Section 262, a
copy of which is attached hereto as Appendix D.
Solicitation of Proxies
The Company will bear the costs of soliciting proxies from Stockholders,
including the fees and expenses of , its proxy solicitation firm.
In addition to soliciting proxies by mail, directors, officers and employees of
the Company, without receiving additional compensation therefor, may solicit
proxies by telephone, by telegram or in person. Arrangements may also be made
with brokerage firms and other custodians, nominees and fiduciaries to forward
solicitation materials to the beneficial owners of shares held of record by
such persons, and the Company will reimburse such brokerage firms, custodians,
nominees and fiduciaries for reasonable out-of-pocket expenses incurred by them
in connection therewith. See "The Special Meeting--Solicitation of Proxies."
The Parties
The Company................... The Company, a Delaware corporation, is a
holding company which does not conduct any
business of its own. The Company's executive
offices are located at 1000 Columbia Avenue,
Linwood, Pennsylvania 19061 and its telephone
number is (610) 859-3000.
Trace......................... Trace, a Delaware corporation, is a holding
company which does not conduct any business of
its own. Trace's executive offices are located
at 375 Park Avenue, 11th Floor, New York, New
York 10152 and its telephone number is (212)
230-0400.
Merger Sub.................... Merger Sub is a Delaware corporation recently
organized by Trace for the purpose of effecting
the Merger. It has no material assets and has
not engaged in any activities except in
connection with the Merger. The sole
stockholder of Merger Sub is Trace. Merger
Sub's address is c/o Trace International
Holdings, Inc., 375 Park Avenue, 11th Floor,
New York, New York 10152 and its telephone
number is (212) 230-0400.
Market Price and Dividend Information
The Common Stock is listed on Nasdaq under the symbol "FMXI." On March 13,
1998, the last trading day before the public announcement of Trace's Initial
Proposed Transaction (as defined) to acquire all the shares of Common Stock
held by the Public Stockholders, the reported closing price per share of the
Common Stock was $13 7/8. On June 24, 1998, the last trading day before the
public announcement of the execution of the Old Merger Agreement, the reported
closing sale price per share of the Common Stock was $16 3/16. On October 15,
1998, the last trading day before the public announcement of Trace's Current
Proposed Transaction to acquire all the shares of Common Stock held by the
Public Stockholders, the reported closing price per share of the Common Stock
was $10 1/2. On November 5, 1998, the last trading day before the public
announcement of the execution of the Merger Agreement, the reported closing
price per share of the Common Stock was $12 3/8. On ________ __, 1998, the last
full trading day prior to the date of this Proxy Statement, the
reported closing sale price per share of the Common Stock was $ . For
additional information concerning historical market prices of the Common Stock
and the dividends paid thereon, see "Market Price and Dividend Information."
Selected Historical Financial Data
Certain selected historical financial data of the Company are set forth
under "Selected Historical Financial Data." That data should be read in
conjunction with the consolidated financial statements and related notes
incorporated by reference in this Proxy Statement. See "Incorporation of
Certain Documents by Reference."
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SPECIAL FACTORS
Background of the Merger
Trace from time to time has considered the possibility of (i) acquiring
all of the Public Shares in order to, among other reasons, realize increased
value for the shares of Common Stock owned by the Trace Stockholders (the
"Trace Shares") or (ii) realizing value for the Trace Shares by obtaining
margin loans or selling the Trace Shares, either alone or in connection with a
sale of all of the equity in the Company. See "--Purpose and Structure of the
Merger." In 1995, Trace introduced to the Company, and the Company entered into
talks with, two separate companies regarding a potential acquisition of all of
the equity in the Company. The first potential acquiror broke off negotiations,
and the offer of the second potential acquiror was rejected, in part, because
the parties were unable to agree on price.
In 1995, Foamex L.P. announced an operational plan designed to improve
profitability. In conjunction with the such plan, the Company made the decision
to sell its non-polyurethane foam businesses. The Company sold its home comfort
products business in August 1996, its automotive and specialty industrial
textiles business in December 1996 and its needlepunch carpet and synthetic
yarn business in October 1997.
In August 1997, officers of Trace had several meetings with
representatives from J.P. Morgan & Co., Inc. to discuss the possible sale of
the Trace Shares to a third party as part of the sale of all of the equity in
the Company. During these meetings, the possible form, structure and process
for such a transaction were investigated. These investigations, however, were
postponed pending the acquisition by the Company of Crain Holdings Corp.
("Crain Holdings").
On December 23, 1997, the Company acquired Crain Holdings (the "Crain
Acquisition"), the parent company of Crain Industries, Inc., a producer of
flexible polyurethane foam and foam products ("Crain Industries"), for
aggregate consideration of approximately $213.7 million. The acquisition was
made pursuant to the terms of an Agreement and Plan of Merger, dated December
8, 1997, among the Company, Merger Acquisition Corp., a Delaware corporation
and wholly owned subsidiary of the Company, Crain Holdings and certain other
parties signatory thereto (the "Crain Merger Agreement"). Pursuant to the terms
of the Crain Merger Agreement, on December 23, 1997, Merger Acquisition Corp.
was merged with and into Crain Holdings, and as a result, Crain Holdings became
a wholly owned subsidiary of the Company.
In the first full week of January 1998, the Company and certain of its
affiliates (including Trace) commenced working on a series of transactions
designed to simplify the Company's corporate structure and to provide future
operational flexibility; these transactions (referred to collectively as the
"GFI Transaction") were consummated on February 27, 1998. See "Certain
Transactions."
In early January 1998, after failing to identify a likely buyer, Trace
decided to cease its investigation of the sale of the Trace Shares as part of
the sale of all of the equity in the Company; instead, Trace chose to
investigate the possibility of acquiring all of the Public Shares (the "Going
Private Transaction") in the belief that it could realize value from managing
the Company as a private company for the reasons discussed herein under
"--Purpose and Structure of the Merger." During the first full week of January
1998, members of Trace's senior management met with Donaldson, Lufkin &
Jenrette Securities Corporation ("DLJ"), J.P. Morgan Securities Inc. ("JP
Morgan") and one other investment bank regarding the Going Private Transaction.
On January 5, 1998, Trace entered into a letter agreement with JP Morgan
pursuant to which JP Morgan agreed to act as a financial advisor to Trace in
connection with the Going Private Transaction. On January 13, 1998, Trace
received a letter from DLJ expressing interest in assisting Trace in the Going
Private Transaction. During January and February 1998, members of Trace's
senior management investigated the possible form, structure and timing of a
possible Going Private Transaction with Trace's counsel, Willkie Farr &
Gallagher ("Willkie Farr").
On February 11, 1998, Mr. John H. Gutfreund was appointed to the Company's
Board of Directors pursuant to a unanimous written consent of the Board of
Directors.
On March 2, 1998, members of Trace's senior management met with The Bank
of Nova Scotia ("ScotiaBank") and DLJ regarding the Going Private Transaction.
On March 4, 1998, Trace delivered a letter to the Board of Directors of
the Company regarding Trace's intention to evaluate the Company in connection
with possible purchase or sale of additional shares of Common Stock. In
connection with this evaluation, Trace requested that the Company provide
ScotiaBank, DLJ and Trace with reasonable access to information (the "Company
Information") relating to the business operations of the Company which was
either non-public, confidential or proprietary in nature. Although Trace
previously had access to such Company Information pursuant to the terms of the
Management Agreement with Foamex L.P. (see "Certain
13
<PAGE>
Transactions--Management Agreement"), Trace submitted the letter to authorize
its use of the Company Information for purposes other than fulfilling its
obligation under the Management Agreement.
On this same date, the Executive Committee of the Company's Board of
Directors met to discuss Trace's letter. At this meeting, the Executive
Committee authorized the Company to grant Trace and its advisors reasonable
access to the Company Information, subject to the confidentiality provisions in
Trace's March 4, 1998 letter. The material Company Information provided to
Trace's advisors included budgets for fiscal 1998, revised forecasts for fiscal
1998, analyses of historical profitability and analyses of potential synergies
relating to the Crain Acquisition, which are reflected in the Company
Projections included in this Proxy Statement under the caption "Certain
Projected Financial Data."
From March 4, 1998 to March 16, 1998, ScotiaBank and DLJ reviewed certain
public and non-public information with respect to the Company which had
previously been provided to Trace and also discussed with certain members of
the Company's management the business and financial condition and prospects of
the Company.
On March 9, 1998, Trace's Board of Directors adopted resolutions by
unanimous written consent authorizing the executive officers of Trace (i) to
undertake an investigation of the Company and certain economic and market
factors in order to determine whether the Going Private Transaction was in the
best interest of Trace and (ii) based on their investigation of the Company and
certain market and economic factors, to make a proposal to the Company in order
to effect the Going Private Transaction.
After discussions with representatives from ScotiaBank, DLJ, Willkie Farr
and certain senior officers of Trace during the first two weeks of March 1998
relating to the possible form, structure, timing and price of the Going Private
Transaction, Trace's senior management determined to offer to acquire all the
Public Shares in a cash merger. Trace's senior management determined that a
cash merger was the most efficient structure as it would ensure that Trace
acquired all the Public Shares in a single step.
After discussing these matters, Trace's senior management approved the
making of a proposal (the "Initial Proposed Transaction") to acquire all the
Public Shares at $17.00 per share. Trace selected the $17.00 per share price
based principally on historical trading prices for the Common Stock.
On March 16, 1998, Trace received, in connection with financing of the
Initial Proposed Transaction, (i) a commitment letter (the "First Commitment
Letter") from ScotiaBank, DLJ Capital Funding, Inc. and DLJ to provide $850
million of loans and (ii) a highly confident letter (the "Highly Confident
Letter") from DLJ and Scotia Capital Markets (U.S.A.) Inc. ("SCM") to raise
$410 million of debt financing and from DLJ to raise an additional $75 million
of debt financing. Pursuant to an engagement letter, dated March 16, 1998,
Trace retained DLJ to act as a financial advisor to Trace in connection with
the Initial Proposed Transaction.
On March 16, 1998, Trace delivered a letter to the Company's Board of
Directors setting forth its proposal to purchase the Public Shares for $17.00
per share, along with copies of the First Commitment Letter and the Highly
Confident Letter and, after the close of business, issued a press release
announcing the Initial Proposed Transaction.
On March 16, 1998, the Company's Board of Directors met to discuss Trace's
offer. At this meeting, Mr. Marshall S. Cogan, a director of the Company and
Chairman of the Board and CEO of Trace, discussed the Initial Proposed
Transaction with the Board of Directors. In order to address actual and
perceived conflicts of interest, the Board of Directors appointed two
independent directors, Messrs. John H. Gutfreund (who was attending his first
Board of Directors meeting) and Robert J. Hay, as the Special Committee. Mr.
Hay has been Chairman Emeritus and a director of the Company since September
1993, was Chairman and Chief Executive Officer of Foamex L.P. from January 1993
to January 1994 and was President of Foamex L.P. and its predecessor from 1972
through 1992. The Special Committee was directed to determine the advisability
and fairness to the stockholders of the Company of the Initial Proposed
Transaction and authorized to retain such financial and legal advisors as the
Special Committee deemed appropriate, to negotiate with Trace and its
representatives on behalf of the Company with respect to the Initial Proposed
Transaction, to obtain such information regarding the Company and assistance
from the officers, employees and agents of the Company and to take such other
actions to carry out its responsibilities as the Special Committee deemed
appropriate. The Board of Directors appointed Mr. Gutfreund as Chairman of the
Special Committee. The Board of Directors also authorized the Company to pay
the members of the Special Committee a fee of $20,000 per month for serving on
such committee, and to pay all expenses incurred by the Special Committee,
including the fees and expenses of its financial and legal advisors.
Beginning on or about March 17, 1998, six lawsuits (the "Stockholder
Litigation") were commenced variously naming the Company, certain of its
directors, certain of its officers and Trace, as defendants. Those actions,
purportedly brought by several Public Stockholders (the "Plaintiffs") as class
actions on behalf of all Public
14
<PAGE>
Stockholders, alleged that the defendants had breached their fiduciary duties
to the Plaintiffs and the other Public Stockholders in connection with the
Initial Proposed Transaction. See "Stockholder Litigation."
On March 17, 1998, the Special Committee held its initial meeting by
teleconference. At that meeting, the Special Committee resolved that it would
begin interviewing law firms and investment banks for the purpose of retaining
independent legal and financial advisors to the Special Committee.
Over the following week, the Special Committee interviewed representatives
of three law firms with regard to their experience with transactions similar to
the Initial Proposed Transaction, potential conflicts of interest, proposed
fees in connection with the assignment and other relevant matters. Following
such interviews, the Special Committee retained Cleary, Gottlieb, Steen &
Hamilton ("Cleary, Gottlieb") to serve as legal advisor to the Special
Committee. Following the retention of Cleary, Gottlieb, representatives of that
firm discussed with the Special Committee the role and duties of the Special
Committee under applicable law and the resolution of the Board of Directors
pursuant to which the Special Committee was constituted. The members of the
Special Committee also discussed with representatives of Cleary, Gottlieb the
process of selecting a financial advisor to the Special Committee.
On March 31, April 1, and April 3, 1998, the Special Committee, along with
a representative of Cleary, Gottlieb, interviewed and received and reviewed
written presentations from six investment banks with regard to their experience
with transactions similar to the Initial Proposed Transaction, potential
conflicts of interest, knowledge of the foam industry and related businesses,
the personnel that would be involved in assisting the Special Committee,
proposed fees in connection with the assignment and other relevant matters. On
April 3, 1998, Beacon representatives presented to the Special Committee
preliminary valuation analyses of the Company in connection with its overall
presentation of how it would execute its assignment as the Special Committee's
advisor. On April 6, 1998, Mr. Gutfreund, after consultation with Mr. Hay,
retained Beacon to act as financial advisor to the Special Committee, and on
behalf of the Special Committee, Mr. Gutfreund, with Cleary, Gottlieb's
assistance, negotiated and entered into a written agreement with Beacon with
respect to Beacon's engagement. Beacon was selected by the Special Committee
because of its expertise and reputation in the areas of mergers and
acquisitions, "going private" transactions and special committee procedures,
Beacon's proposed fee in connection with the assignment and the commitment of
senior personnel of that firm to work on the assignment. For a description of
the terms of Beacon's engagement see "--Opinion of Financial Advisor to the
Special Committee." Shortly after their retention by the Special Committee,
each of Beacon and Cleary, Gottlieb commenced a due diligence review of the
Company and the Initial Proposed Transaction.
At a meeting held on April 21, 1998, the Special Committee unanimously
ratified the retention of Beacon and Cleary, Gottlieb to serve as advisors to
the Special Committee. At the meeting, Beacon reported on the progress of its
due diligence investigation. Beacon's report included a summary of Beacon's
tours of certain of the Company's facilities and meetings held with Mr. Andrea
Farace, Chairman and Chief Executive Officer of the Company, members of the
Company's executive operating committee, and representatives of the consulting
firm that assisted the Company in connection with the Crain Acquisition and the
subsequent integration process. Beacon also reviewed information it had
received concerning, among other things, the background and history of the
Company, certain operating results, budgets and projections for the Company
obtained from management of the Company, the reorganization of the Company's
business units effected after the Crain Acquisition, the Company's management
information systems and accounting and control policies, the Company's
relationship with its primary suppliers of raw materials, various fees paid by
the Company to Trace and its affiliates, issues arising in connection with
certain past acquisitions and dispositions of businesses by the Company,
potential synergies and costs resulting from the Crain Acquisition, and the
Company's reported progress with respect to the integration of the Crain
businesses with those of the Company. Representatives of Beacon also reported
that in order to conduct the analyses necessary to determine the fairness from
a financial point of view of the Initial Proposed Transaction, an updated
financial forecast for the Company would be necessary, and the Special
Committee authorized Beacon to request such forecast from management of the
Company. Cleary, Gottlieb then reported on the progress of its legal due
diligence review and certain legal and structuring issues raised by the draft
of the Old Merger Agreement that had been provided to Cleary, Gottlieb by
Willkie Farr. The Special Committee, Cleary, Gottlieb and Beacon also discussed
the conduct of further legal and financial due diligence.
On April 21, 1998, each member of the Special Committee, based in part on
advice received from Cleary, Gottlieb, entered into an indemnification
agreement with the Company, pursuant to which the Company agreed to indemnify
and hold such member harmless with respect to certain acts and omissions taken
by such member as a director of the Company or member of the Special Committee.
On May 11, 1998, Trace retained Rhone Group LLC ("Rhone") to act, together
with DLJ and JP Morgan, as its financial advisor in connection with the Going
Private Transaction.
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On May 4, May 11, May 14 and May 18, 1998, representatives of Beacon met
with various representatives of Trace, including Mr. Cogan, and representatives
of Willkie Farr and Rhone, to review a variety of matters related to the
Initial Proposed Transaction and Beacon's financial due diligence review,
including the structure of the Proposed Transaction and the related financing,
the history of the Company, Trace's exploration of a possible sale of the Trace
Shares in 1995 discussed above and Trace's forecast for the Surviving
Corporation. During this period, Mr. Cogan expressed his confidence that the
financing for the Initial Proposed Transaction on the terms set forth in the
First Commitment Letter and the Highly Confident Letter would be completed. Mr.
Cogan also reiterated that Trace's interest in the Company was not for sale.
On May 13, 1998, representatives of Beacon met with Mr. Farace, during
which meeting Mr. Farace provided and explained the five-year forecast
requested by Beacon following the April 21, 1998 meeting of the Special
Committee.
On May 21, 1998, the members of the Special Committee, along with
representatives of Beacon and Cleary, Gottlieb, met with representatives of
Willkie Farr and financial officers of Trace to further review the structure of
the Initial Proposed Transaction, including the proposed financing thereof.
On May 27, 1998, representatives of Beacon and Cleary, Gottlieb along with
representatives of Trace and Willkie Farr, met with representatives of DLJ,
ScotiaBank and SCM to discuss the structure and feasibility of the financing
described in the First Commitment Letter and the Highly Confident Letter. At
such meeting representatives of each of DLJ, ScotiaBank and SCM expressed
confidence that the financing would be completed on the terms set forth in the
First Commitment Letter and the Highly Confident Letter.
At a May 29, 1998 meeting of the Special Committee attended by
representatives of Beacon and Cleary, Gottlieb, representatives of Beacon
reported to the Special Committee on the status of Beacon's financial due
diligence investigation to date. Representatives of Beacon also mentioned as a
factor considered in Beacon's continuing analyses, the Company's history of
failing to meet forecasts and budgets prepared by management. In particular,
Beacon noted that the Company failed to meet its forecasts for net sales, gross
profit and earnings by substantial margins in each of fiscal 1995 and 1997 and
failed to meet its forecasts for gross profits and earnings in fiscal 1996. In
addition, Beacon cited the Trace Stockholders' ownership of 45.8% of the
Company's common stock, Mr. Cogan's control of Trace and his expressed
unwillingness to sell his interest as factors which serve to inhibit third
party interest in an acquisition of the Company. Beacon noted that as a result
of these factors, and with the Special Committee's approval, it had not
contacted third parties to ascertain their interest in a combination with the
Company. Representatives of Beacon then reviewed the preliminary results of
certain valuation analyses conducted to such date including analyses based on
Trace's forecasts (the "Trace Forecasts") for the Company. The Special
Committee discussed the Trace Forecasts with Beacon, and noted in particular
that such forecasts were prepared by Trace for the purpose of arranging
financing for the Old Merger and although based on information provided by the
Company, were not prepared with any direct involvement by the Company. Beacon
indicated that although they were not yet prepared to render a formal opinion
regarding the Initial Proposed Transaction, and that additional analyses were
required before they would be in a position to do so, they had reached a
preliminary conclusion, based on the valuation analyses performed to date, that
Trace's offer to pay $17.00 per Public Share was not fair to the Public
Stockholders from a financial point of view. Beacon reported to the Special
Committee that it would perform additional analyses over the next few days and
shortly thereafter would be in a position to make a definitive report to the
Special Committee. Beacon did not indicate a minimum price per Public Share at
which it would be prepared to opine that an offer from Trace would be fair from
a financial point of view to the Public Stockholders. Following the report by
Beacon, Cleary, Gottlieb reported on the progress of its due diligence
investigation and certain legal and structuring issues raised by the draft Old
Merger Agreement were discussed. The Special Committee decided not to begin
negotiations with respect to the draft Old Merger Agreement until further
progress was made with respect to the financial terms of the Initial Proposed
Transaction.
On June 2, 1998, the members of the Special Committee conferred by
telephone with representatives of Beacon and Cleary, Gottlieb, and the Special
Committee decided to inform Trace that, if the Special Committee were to
request an opinion, Beacon would opine that Trace's offer was not fair to the
Public Stockholders from a financial point of view.
On June 3, 1998, the Special Committee met with Mr. Cogan and informed him
of that determination. Also on June 3, 1998, representatives of Beacon and
Cleary, Gottlieb met with Mr. Karl Winters, Vice President--Finance of Trace,
Mr. Robert Agostinelli of Rhone, and representatives of Willkie Farr, during
which meeting Beacon reported its position that Trace's offer was not fair to
the Public Stockholders. Without indicating a minimum price per Public Share
that would be acceptable to the Special Committee or at which Beacon would be
prepared to opine that an offer from
16
<PAGE>
Trace would be fair from a financial point of view to the Public Stockholders,
Beacon presented certain of its valuation analyses and indicated that, based on
such analyses and certain other factors, the Special Committee would consider
favorably an offer significantly in excess of $20.00 per Public Share. Mr.
Agostinelli indicated that he believed that a price in excess of $17.00 per
Public Share was not justified, noting, among other things, that no third party
buyer for the Company had come forward since the Initial Proposed Transaction
was publicly announced on March 16, Trace's exploration of a possible sale of
the Trace Shares in 1995 discussed above did not result in a successful
transaction, no third party would be willing to purchase the Public Shares so
long as Trace held 45.8% of the Common Stock, the Common Stock currently was
trading at a level below the offer price and the proposed offer price
constituted a substantial premium over the pre-offer trading price of the
Common Stock.
Later on June 3, 1998, Mr. Agostinelli contacted representatives of Beacon
and suggested that if the Special Committee believed the Company was worth
significantly in excess of $20.00 per share of Common Stock, Trace may be
willing to suspend the negotiation process for two weeks in order to allow the
Special Committee, acting through Beacon, to attempt to locate a buyer willing
to pay that price for all outstanding shares of Common Stock. Following such
conversation, the members of the Special Committee conferred with
representatives of Beacon and Cleary, Gottlieb, and representatives of Cleary,
Gottlieb discussed the matter with representatives of Willkie Farr. After
consultation with Beacon and Cleary, Gottlieb, the Special Committee rejected
the proposal because in the judgment of the Special Committee two weeks was too
short a period to locate and negotiate with potential buyers and because Trace
indicated to the Special Committee that although it would suspend negotiations
with respect to the Initial Proposed Transaction it was unwilling to commit in
advance to a sale of the Trace Shares, and as a result, in the judgment of the
Special Committee, potential buyers would be unwilling to incur the expense
necessary to make a bona fide offer to purchase the Common Stock.
On June 4, 1998, representatives of Beacon contacted Mr. Agostinelli by
telephone and requested to meet the following day to further discuss the
valuation issues raised at the meeting held on June 3. On June 5, 1998, Mr.
Agostinelli contacted representatives of Beacon by telephone, deferred the
meeting scheduled for that day, and suggested that instead representatives of
Cleary, Gottlieb and Willkie Farr meet to discuss the terms of the draft of the
Old Merger Agreement previously provided to the Special Committee during which
time Rhone would conduct additional valuation analyses. Later that day,
representatives of Cleary, Gottlieb conferred with Mr. Gutfreund and
representatives of Beacon by telephone regarding certain issues raised by the
draft Old Merger Agreement.
On June 6, and June 7, 1998, representatives of Cleary, Gottlieb and
Willkie Farr commenced negotiations with respect to the terms of the draft Old
Merger Agreement. Substantial changes were made to the draft Old Merger
Agreement as a result of such negotiations, including the elimination of
certain representations and warranties of the Company and the elimination of
certain conditions to Trace's obligation to consummate the Old Merger. On
behalf of the Special Committee, Cleary, Gottlieb requested, among other
things, to (i) condition consummation of the Old Merger on the affirmative vote
of holders of a majority of the Public Shares, (ii) condition consummation of
the Old Merger on the receipt by the Board of Directors of an opinion (a
"Solvency Opinion"), rendered by a firm experienced in such matters,
substantially to the effect that the Surviving Corporation would be solvent
following consummation of the Old Merger, would have sufficient capital to
conduct its ongoing business and would be able to pay its debts as they came
due, (iii) eliminate provisions in the draft providing for a $45 million
termination fee to be paid by the Company to Trace under certain circumstances
in the event that the Old Merger is not consummated, and (iv) provide that
Trace bear the expenses of the Company in the event the Old Merger is not
consummated. On behalf of Trace, Willkie Farr refused these requests.
On June 11, 1998, representatives of Beacon met with Mr. Agostinelli and
Mr. Winters. After further discussions regarding the appropriate valuation of
the Company, Mr. Agostinelli stated that Trace would consider making two
alternative offers. Under the first alternative: (i) Trace would pay $17.00 per
Public Share, (ii) consummation of the Old Merger would be conditioned on the
affirmative vote of holders of a majority of the Public Shares, and (iii) the
Old Merger Agreement would provide for a $15 million termination fee payable to
Trace under certain circumstances in the event the Old Merger is not
consummated. Under the second alternative: (i) Trace would pay $17.50 per
Public Share, (ii) consummation of the transaction would not be conditioned on
the affirmative vote of holders of a majority of the Public Shares, and (iii)
the Old Merger Agreement would provide for a $30 million termination fee
payable to Trace under certain circumstances in the event the Old Merger is not
consummated. In either case, in the event the Old Merger is not consummated,
Trace would be responsible for all of its and the Company's expenses, unless
the Company materially breached the Old Merger Agreement or a material adverse
effect on the Company had occurred, in which case, the Company would be
responsible for all such expenses. Following the meeting, Beacon conferred with
Mr. Gutfreund and representatives of Cleary, Gottlieb regarding its
conversation with Messrs. Agostinelli and Winters, and Mr. Gutfreund conferred
with Mr. Hay.
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On June 12, 1998, a representative of Trace contacted Mr. Gutfreund and
indicated that Trace was under timing pressure with respect to the proposed
financing for the Old Merger and unless an agreement was reached with respect
to a transaction shortly, Trace would be forced to withdraw its offer. Such
representative also indicated that Trace might be willing to pay up to $17.75
per Public Share.
On June 16, 1998, representatives of Beacon contacted Mr. Farace by
telephone for the purpose of updating their financial due diligence
investigation. During such conversation, Mr. Farace discussed the Company's
recent performance and reaffirmed his confidence in the forecast previously
provided to Beacon by the Company.
At a June 16, 1998 meeting of the Special Committee, attended by
representatives of Beacon and Cleary, Gottlieb, representatives of Beacon
reported on the telephone conversation earlier that day with Mr. Farace and
further reported that Beacon had updated its analyses to take into account Mr.
Farace's report and the recent stock price performance of certain companies
comparable to the Company and the impact that performance had on such
companies' valuation multiples. Representatives of Beacon indicated that, based
on their updated analyses, if asked by the Special Committee, Beacon would
opine that an offer to pay the Public Stockholders $17.75 per Public Share, if
made, would not be fair to the Public Stockholders from a financial point of
view. Beacon did not indicate a minimum price per Public Share at which it
would be prepared to opine that an offer from Trace would be fair from a
financial point of view to the Public Stockholders. Representatives of Beacon
then discussed various alternatives that the Special Committee might consider
proposing to Trace. Representatives of Beacon suggested that Trace could
increase the value of its offer without having to raise additional funds by
including zero-coupon debt securities in the package of consideration offered
to the Public Stockholders. The Special Committee decided that Beacon should
study that alternative and report back to the Special Committee within the next
two days.
On June 18, 1998, the Special Committee held a meeting by teleconference,
in which representatives of Cleary, Gottlieb and Beacon participated. Beacon
explained a structure pursuant to which Trace would use zero-coupon debt
securities to increase the consideration offered to the Public Stockholders.
Later that day, at the request of the Special Committee, representatives of
Beacon discussed that possibility with Mr. Agostinelli.
On June 19, 1998, representatives of Willkie Farr advised the Special
Committee that the use of zero-coupon debt securities would be unacceptable to
Trace. Such representatives further indicated that Trace was considering
increasing its offer to $18.00 per Public Share; however, they also indicated
that such offer would not be so increased unless all the open Old Merger
Agreement issues, including the termination fee, were resolved in favor of
Trace. Willkie Farr requested that the Special Committee advise Trace with
respect to its views on such potential increase in Trace's offer by noon on
Monday, June 22, 1998, and that after that time, Mr. Cogan intended to call a
special meeting of the Board of Directors. The Special Committee then conferred
with representatives of Cleary, Gottlieb and Beacon, and it was decided that
Beacon would conduct further discussions with Mr. Agostinelli and Trace in an
attempt to reach an agreement with respect to the offer price and the open Old
Merger Agreement issues.
On June 20 and June 21, 1998, representatives of Beacon and Mr.
Agostinelli had several conversations regarding the valuation of the Company.
During those conversations representatives of Beacon communicated the position
of the Special Committee that an offer of $18.00, if made, would not be
recommended by the Special Committee in light of Beacon's and the Special
Committee's views regarding the Company. Beacon did not indicate a minimum
price per Public Share that would be acceptable to the Special Committee or at
which Beacon would be prepared to opine that an offer from Trace would be fair
from a financial point of view to the Public Stockholders.
On June 22, 1998, a representative of Willkie Farr informed Cleary,
Gottlieb that the noon deadline previously set by Trace would be extended for
an indefinite period of time to permit further negotiation. That same day,
Richards, Layton & Finger and Willkie Farr, as counsel for certain of the
defendants in the Stockholder Litigation, spoke to counsel for the Plaintiffs
in the Stockholder Litigation (see "Summary--Special Factors--Stockholder
Litigation" and "Stockholder Litigation") to determine if the Stockholder
Litigation could be resolved. In conjunction with such settlement negotiations,
Plaintiffs' counsel requested and were provided with and reviewed extensive
documents relating to the Company and the Initial Proposed Transaction that had
previously been provided to the Special Committee, which documents consisted
primarily of closing documents relating to the GFI Transaction and the Crain
Acquisition. The following day a meeting was held concerning the Company and
the Initial Proposed Transaction, at which meeting a representative from Trace
discussed the Company's forecasts and the Trace Forecasts for the Company with
Plaintiff's counsel and their expert. See "--Preliminary Valuation Analyses
Performed By Beacon" and "Certain Projected Financial Data." In conjunction
with this meeting, Plaintiffs' counsel and their expert also made a
presentation to the representatives of the defendants who were present
concerning their view of the Company and the Initial Proposed Transaction.
Plaintiffs' counsel also made
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certain proposals relating to the possible settlement of the Stockholder
Litigation, including the demand that the price to be paid by Trace per Public
Share of the Company's common stock should be increased to $18.75. Later that
day, settlement negotiations among representatives of Willkie Farr and
Plaintiffs' counsel followed which resulted in an agreement in principle to
settle the Stockholder Litigation in accordance with certain terms and
conditions which were thereafter memorialized in a written Memorandum of
Understanding, dated June 25, 1998. See "Stockholder Litigation" for further
discussion.
On June 22, 1998, Mr. Winters informed representatives of Beacon and
Cleary, Gottlieb that Trace would consider making an offer of $18.50 per Public
Share if all the open issues discussed above with respect to the Old Merger
Agreement, including the termination fee, were resolved in favor of Trace.
Subsequently, a meeting of the Special Committee was held at the offices of
Beacon during which Mr. Winters' proposal was considered. It was decided that
the Special Committee, through Beacon, would indicate that an offer of at least
$18.75 per Public Share would be acceptable to the Special Committee, but that
with respect to the open Old Merger Agreement issues, any termination fee
provision would have to be limited to $30 million and structured so that the
circumstances under which such fee would be paid to Trace would be limited to
circumstances under which it is likely that the Public Stockholders would
receive payments (other than from Trace) in respect of the Public Shares. That
proposal subsequently was communicated to Mr. Agostinelli by representatives of
Beacon. Later that same day, Mr. Winters reported to Beacon that Trace would be
prepared to make an offer of $18.75 per Public Share and would be prepared to
agree to certain of the Special Committee's requests with respect to the open
Old Merger Agreement issues, including circumstances under which the
termination fee would be payable. Mr. Winters also reported that Trace's
willingness to pay the increased consideration took into account the
expectation that the Stockholder Litigation would be resolved satisfactorily.
Further discussions were held between Cleary, Gottlieb and Willkie Farr
regarding the Old Merger Agreement on June 23, 1998.
At a June 24, 1998 meeting of the Special Committee, attended by
representatives of Beacon and Cleary, Gottlieb, the potential offer of $18.75
per Public Share was discussed. Representatives of Beacon indicated that based
on the negotiations to date and certain other factors, they believed it was
unlikely that Trace would agree to pay more than $18.75 per Public Share, and
that subject to the updating of certain of its analyses, Beacon explained that
it would be prepared to deliver an opinion to the effect that an offer of
$18.75 per Public Share was fair to the Public Stockholders from a financial
point of view. Following the meeting, at the request of the Special Committee,
a representative of Cleary, Gottlieb advised Willkie Farr that, subject to the
resolution of the other aspects of the Old Merger Agreement, the Special
Committee planned to hold a meeting the next day to consider recommending
adoption of the Old Merger Agreement and the Old Merger based on Mr. Winters'
last proposal, but that given Trace's position that consummation of the Old
Merger would not be conditioned on delivery of a Solvency Opinion, the Special
Committee would not address issues relating to the solvency of the Surviving
Corporation and would condition the effectiveness of any recommendation of the
Special Committee on the Board of Directors as a whole determining (the "First
Solvency Determination") that consummation of the transactions contemplated by
the Old Merger Agreement (including any financing transactions contemplated
therein) would not cause the Company to become insolvent, would not result in
the assets, property or capital of the Company being unreasonably small in
relation to the ongoing business of the Company and would not result in the
inability of the Company to pay its debts as such debts became due or matured.
On June 24, 1998, representatives of Cleary, Gottlieb and Willkie Farr
conducted further negotiations with respect to, and resolved, the remaining
open Old Merger Agreement issues.
On June 25, 1998, the Special Committee held a meeting attended by
representatives of Beacon and Cleary, Gottlieb. Beacon presented its analyses
which were updated to take into account the latest proposal made by Trace and
the completion of its financial due diligence investigation of the Company.
Beacon then rendered its written opinion to the effect that a price of $18.75
per Public Share to be received by the Public Stockholders in the Initial
Proposed Transaction was fair to the Public Stockholders from a financial point
of view. Cleary, Gottlieb reviewed the principal terms and conditions of the
proposed Old Merger Agreement and reported to the Special Committee that a
tentative settlement of the Stockholder Litigation had been reached on the
assumption that the Old Merger Agreement would provide for the payment of
$18.75 per Public Share. After a full discussion, the Special Committee
unanimously determined that the Old Merger as set forth in the Old Merger
Agreement is fair to the Public Stockholders, and unanimously resolved to
recommend that the Board of Directors approve the Old Merger Agreement and the
Old Merger; however, such determination and recommendation was made subject to
and was conditioned upon the Solvency Determination being made by the Board of
Directors.
At a meeting of the Board of Directors held later in the afternoon of June
25, a representative of Beacon presented a summary of Beacon's analyses, and a
representative of Cleary, Gottlieb reviewed the principal terms
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and conditions of the proposed Old Merger Agreement. Mr. Gutfreund then
presented the determination and recommendation of the Special Committee.
Presentations followed by Mr. Farace, regarding the recent financial and
operating performance of the Company, and Mr. Cogan, regarding the Old Merger
and the projected financial position of the Surviving Corporation following
consummation of the Old Merger. After a full discussion, those members of the
Board of Directors present at the meeting (Mr. Davignon being absent),
including the members of the Special Committee, unanimously made the requisite
First Solvency Determination, and the determination and recommendation of the
Special Committee with respect to the Old Merger and the Old Merger Agreement
thereby became effective. Following further discussion, those members of the
Board of Directors present at the meeting unanimously determined that the Old
Merger was fair to, and in the best interests of, the Company and the Public
Stockholders, and adopted resolutions to approve the Old Merger and approve and
adopt the Old Merger Agreement and to recommend that the holders of Common
Stock vote to approve the Old Merger and approve and adopt the Old Merger
Agreement. The Old Merger Agreement was then executed and delivered by
authorized representatives of the Company, Trace and Merger Sub.
Later on June 25, 1998, following the close of trading of the Common Stock
on Nasdaq, the Company and Trace issued separate press releases disclosing that
the Company and Trace had executed the definitive Merger Agreement pursuant to
which Trace would acquire all the Public Shares at the price of $18.75 per
Public Share in cash.
Commencing in June after the execution of the Old Merger Agreement, Trace
and the Company took steps to consummate the Old Merger, including the
preparation of a proxy statement, the commencement of a tender offer for the
Foamex L.P. public debt, the negotiation of documentation relating to the
proposed bank financing, and the preparation of offering documents for the
proposed "high-yield" financing. On August 15, 1998, the First Commitment
Letter for the bank financing expired, and Trace signed a new commitment letter
terminating October 15, 1998.
Following the completion of confirmatory discovery, which was provided for
in the Memorandum of Understanding, on September 9, 1998, the parties to the
Stockholder Litigation entered into a definitive Stipulation of Settlement and
the court set a hearing to consider whether the settlement should be approved
for October 27, 1998. In connection with the proposed settlement, the
plaintiffs intended to apply for an award of attorneys' fees and litigation
expenses in an amount not to exceed $925,000, and the defendants agreed not to
oppose this application. Additionally, the Company agreed to pay the cost, if
any, of sending notice of the settlement to the Public Stockholders. On
September 24, 1998, a Notice of Pendency of Class Action, Proposed Settlement
of Class Action and Settlement Hearing was mailed to the members of the
settlement class.
Commencing in September, Trace was informed by its financing sources of
potential difficulties in consummating the necessary financing due to changes
in the capital markets. Trace began exploring with its then existing financing
sources ways in which it could restructure the transaction to facilitate the
financing. In addition, Trace held discussions with other investment and
commercial banks seeking to obtain financing, and was told that due to the
state of the capital markets that such financing was not available. In
connection with the expiration of the then existing bank commitment letter on
October 15, 1998, Trace negotiated a new commitment letter relating to the
financing of a transaction at $12.00 per share, which was finalized and signed
on October 16, 1998.
On October 16, 1998, Trace sent the Company a letter notifying the Company
of Trace's inability to obtain financing and setting forth a revised proposal
(the "Current Proposed Transaction"). In the October 16 letter, Trace notified
the Company that due to changes in market conditions, the financing
contemplated by the Old Merger Agreement would not be available, and that based
on then current market conditions and discussions with investment and
commercial banks, Trace believed that it would not be able to obtain financing
for a transaction at a price of $18.75 per share.
The October 16 letter also set forth Trace's revised proposal to acquire,
subject to certain conditions, all of the outstanding Common Stock not owned by
Trace or any of its subsidiaries at a price of $12.00 per share in cash. Trace
further indicated that it would arrange for the $800 million of financing
necessary for the proposal through ScotiaBank, although ScotiaBank had
committed to provide only one-half of the financing and had agreed to use its
reasonable best efforts to obtain the balance of the financing. During the
weekend of October 17 and 18, 1998, representatives of Trace discussed the
revised proposal with representatives of the Company and the Special Committee.
On the morning of October 19, 1998, the Special Committee held a meeting,
attended by representatives of Beacon and Cleary, Gottlieb, to review recent
developments, including the terms of the transaction proposed in Trace's
October 16 letter. The Special Committee noted in particular that the $12.00
price per Public Share referred to in Trace's letter would represent a 36%
decrease in the price contemplated by the Old Merger Agreement. It also noted
that the proposed transaction was subject to a number of conditions, including
a financing condition, which would subject the proposed transaction to the same
type of financing risk as the Old Merger, and a condition
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that a definitive merger agreement be executed prior to November 5, 1998, which
would limit the time available for diligence, analysis and negotiation. The
Special Committee further noted that Trace had not terminated the Old Merger
Agreement, and that prior to December 31, 1998, the Old Merger Agreement could
be terminated by the Company only with the Special Committee's consent or by
Trace under certain circumstances including if it determined that the financing
condition in the Old Merger Agreement was incapable of occurring.
On October 19, 1998, the Company's Board of Directors met to discuss
Trace's offer. At that meeting, Mr. Cogan, a director of the Company and
Chairman of the Board and CEO of Trace, discussed the revised proposal with the
Board of Directors. Mr. Cogan informed the Board that due to the decrease in
the per share price contained in the Trace proposal, that Trace was willing to
have its proposal be subject to the approval of a majority of the non-Trace
shares voting on the proposal and to waive its break-up fee, and that in order
to obtain the financing, Trace had also agreed to waive the $17.5 million
transaction fee to Trace that was part of the original proposal. In light of
the time constraints imposed by Trace's financing, the Board of Directors on
October 19 also determined to retain legal and financial advisors separate from
those of the Special Committee and, upon the recommendation of Mr. Farace,
unanimously voted to retain the law firm of Paul, Weiss, Rifkind, Wharton &
Garrison ("Paul Weiss") and the investment banking firm of Ramius Capital
Group, L.L.C. to advise the Board, as a whole, in connection with the revised
proposal. The availability of these firms to assist the Board of Directors had
been suggested to Mr. Farace by a representative of Trace prior to the October
19 Board of Directors meeting. Mr. Farace advised the Board that he was
familiar with, and thought well of, Paul Weiss and Ramius. He further reported
that Paul Weiss had provided tax advice from time to time to the Company and
that he was familiar with the corporate finance and business valuation
capabilities of the principals of Ramius, certain of whom had been associated
with Mr. Farace in his prior employment. The Board of Directors then referred
the Current Proposed Transaction to the Special Committee to determine the
advisability and fairness of the revised proposal to the Public Stockholders.
At the Board of Directors meeting Trace delivered to the directors a copy of
the commitment letter from ScotiaBank, which provided, among other things, for
the financing of approximately 50 percent of the amounts necessary to finance
the Merger and for termination of the commitment if a new merger agreement was
not executed by November 5, 1998 (the "New Agreement Financing Expiration
Date"). A meeting of the Board of Directors was scheduled for November 2, 1998
to consider Trace's revised proposal. The Company issued a press release on
October 19, 1998, describing these actions by the Board of Directors.
On October 20, 1998, Trace delivered a draft Merger Agreement reflecting
the Current Proposed Transaction to the Company, the Special Committee and
their respective counsel.
On October 20, 1998, the parties to the Stockholder Litigation requested
that the Court (as defined under "Stockholder Litigation") cancel the
Settlement Hearing in light of the announcement made by Trace on October 16,
1998, that it had been unable to obtain the necessary financing for the
contemplated acquisition by Trace of the Public Shares at a price of $18.75 per
share which was the subject matter of the proposed settlement. This request was
approved by the Court on October 21, 1998, and the Company issued a press
release on October 21, 1998, providing notice that the Court had canceled the
settlement hearing.
On October 20, 1998, the Special Committee held a meeting attended by
representatives of Beacon and Cleary, Gottlieb. Representatives of Beacon
reported that a senior officer of an industrial company told a representative
of Beacon that, in light of the substantial reduction in the price offered by
Trace in its October 16 letter, his company might be prepared to consider an
alternative transaction in which it would acquire all or a portion of the
equity of the Company, including the Public Shares. After receiving advice from
Cleary, Gottlieb regarding restrictions on its ability to respond to such
inquiries under the Old Merger Agreement and its fiduciary duties to the Public
Stockholders under applicable law, the Special Committee determined that for
several reasons, including the substantial reduction in the price offered by
Trace, it was required under applicable law to respond to such inquiry (as
permitted under the Old Merger Agreement only on such a determination). The
next day, however, the Special Committee was informed that such company no
longer was interested in exploring an alternative transaction.
On October 23, 1998, the Company delivered to representatives of the Board
of Directors and the Special Committee projections prepared in connection with
the Current Proposed Transaction. These projections are summarized under the
caption "Certain Projected Financial Data."
From October 23 through October 28, 1998, representatives of Trace, the
Company and the Special Committee discussed the terms of the proposed Merger
Agreement.
On October 27, 1998, representatives of Beacon met with representatives of
Trace to discuss the terms of the transaction proposed in Trace's October 16
letter and the proposed financing package for that transaction. In response to
Beacon's request for an increase in the $12.00 price per Public Share to be
offered in the proposed transaction,
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the Trace representatives stated that such price was based on the maximum
amount of financing available to Trace, and constituted Trace's best and final
offer. The Trace representatives also informed Beacon that, unless the proposed
transaction is completed by the end of December, 1998, Trace would not have the
financial resources to meet substantial debt obligations due at that time, and
that any foreclosure on the Trace Shares by Trace's secured lenders following a
default by Trace on such obligations could cause the acceleration of certain
debt of the Company. See "--Potential Acceleration of Foamex Debt in the
Absence of a Merger." Later that day, representatives of Cleary, Gottlieb
received similar information regarding Trace's financial situation from
representatives of Willkie Farr.
On October 28, 1998, representatives of Beacon met with Mr. Farace and
other senior officers of the Company to discuss the Current Projections and the
Company's financial and operating performance since the execution of the Old
Merger Agreement. Mr. Farace stated that the Company's fiscal 1998 results to
date were substantially consistent with the Initial Projections for fiscal 1998
that were used by Beacon and the Special Committee in evaluating the Old Merger
Agreement, including with respect to EBITDA for fiscal 1998 and the realization
of cost savings and efficiencies from the Crain Acquisition and the
reorganization of the Company's business units. Among other topics discussed
were the assumptions and methodologies used in preparing the Current
Projections.
On October 28, 1998, representatives of the Special Committee informed
representatives of Trace that they were suspending discussions regarding the
Merger Agreement pending satisfactory resolution of the price to be paid for
the shares in the proposed Merger.
On October 29, 1998, the Special Committee held a meeting attended by
representatives of Beacon and Cleary, Gottlieb. At that meeting,
representatives of Beacon presented a preliminary analysis with respect to the
Company and the transaction proposed in Trace's October 16, 1998 letter, and
stated that, although Beacon had not yet completed its analysis and was not yet
in a position to render a formal opinion, it was Beacon's preliminary view that
the offered price of $12.00 per Public Share was not fair to the Public
Stockholders from a financial point of view. Beacon did not indicate a minimum
price per Public Share at which it would be prepared to opine that an offer
from Trace would be fair to the Public Stockholders from a financial point of
view. The Special Committee requested that representatives of Cleary, Gottlieb
contact representatives of Willkie Farr to communicate Beacon's preliminary
view, explore the possibility of increasing the $12.00 per Public Share price
(including the possibility of Trace offering Public Stockholders a package of
cash and securities) and attempt to learn more about Trace's financial
situation and its potential impact on the Company.
Later on October 29, 1998, representatives of Cleary, Gottlieb contacted
representatives of Willkie Farr. The Willkie Farr representatives indicated
that the $12.00 price per Public Share offered in Trace's letter of October 16,
1998 was Trace's best and final offer and that it would not be productive to
consider the issuance of securities as a method for increasing the price. The
Willkie Farr representatives further stated that Trace believed that meetings
between representatives of the Special Committee and representatives of Trace
to discuss Trace's financial situation were unnecessary, unless it was clear
that such discussions would have an impact on Beacon's view regarding the
financial fairness of the $12.00 price, and that if assuming the worst about
Trace's financial condition would not impact Beacon's view regarding the
fairness of the $12.00 price, then Trace would not permit Beacon to examine
Trace's financial condition.
On October 29, 1998, Mr. Farace met with representatives of Ramius,
Ramius's counsel and Paul Weiss to discuss the status of Ramius's work in
evaluating the fairness, from a financial point of view, of the Current
Proposed Transaction. Mr. Farace also met with representatives of Ramius and
Paul Weiss on November 1, 1998 to discuss the status of Ramius's work.
On November 2, 1998, the Special Committee held a meeting attended by
representatives of Beacon and Cleary, Gottlieb. Beacon presented its analyses
with respect to the Company and the proposed Merger, including a review of the
due diligence conducted and a description of the valuation methodologies used.
Beacon then rendered its written opinion to the effect that, as of such date,
the price of $12.00 per Public Share to be received by the Public Stockholders
in the proposed Merger was not fair to the Public Stockholders from a financial
point of view. See "--Opinion of Financial Advisor to the Special Committee."
Following the Beacon presentation, representatives of Cleary, Gottlieb
described certain provisions in the proposed Merger Agreement, and
representatives of Beacon and Cleary, Gottlieb discussed the potential impact
on the Company of a default by Trace on its indebtedness. After a full
discussion, the Special Committee unanimously determined that the Merger
Agreement and the Merger were not fair to the Public Stockholders, and
unanimously resolved to recommend that the Board of Directors not approve the
Merger Agreement and the Merger. See "--Recommendation of the Special Committee
Against the Merger; Unfairness of the Merger."
At a meeting of the Board of Directors held later in the afternoon of
November 2, a representative of Beacon presented a summary of Beacon's analyses
and responded to questions from directors. Mr. Gutfreund then presented
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the determination and recommendation of the Special Committee. Following
Beacon's and the Special Committee's presentation, Paul Weiss briefed the Board
of Directors on its fiduciary duties, taking into account the recommendation of
the Special Committee. Mr. Cogan then recused himself from the meeting while
the remaining directors discussed several proposed courses of action. The Board
was then updated by Mr. Farace on his discussions with Ramius. Mr. Farace said
that Ramius viewed the likelihood of Trace obtaining financing for the Old
Merger by the end of 1998 as extremely remote given the state of the capital
markets. Mr. Farace also advised the Board that Ramius had substantially
completed its financial analyses of the Current Proposed Transaction, and that
it was likely that the Current Proposed Transaction would fall within a number
of valuation ranges derived therefrom. At the meeting, Paul Weiss summarized
the principal issues that had yet to be resolved in the Merger Agreement in
addition to the Merger Consideration. A Paul Weiss representative reported that
the Company had made the following proposals to Trace, all of which had been
rejected: (1) that the affirmative vote of a majority of the Public Shares
entitled to vote be required to approve the Merger rather than a majority of
the Public Shares actually voting at the Special Meeting and that only
Independent Shares be counted in such vote; (2) the deletion of provisions that
would permit Trace not to consummate the Merger if a material adverse event
affecting the Company occurred after a specified date; (3) the addition of a
condition that the Board receive an opinion from an independent valuation firm
as to the solvency of the Company after giving effect to the Merger prior to
the closing thereof; (4) a provision requiring that all fees and expenses of
the Company in connection with the Merger be paid by Trace whether or not the
Merger was consummated; and (5) the addition of a representation by Trace
regarding the financing for the transaction. Paul Weiss also discussed matters
relating to the termination of the Old Merger Agreement and the Stockholder
Litigation. Mr. Cogan then rejoined the meeting and the Board of Directors
unanimously determined to authorize Mr. Farace, together with representatives
of Ramius and, to the extent either of them deemed it advisable, with the
advice of the Special Committee, to (a) negotiate with Trace to seek to obtain
a more favorable price and otherwise improve the terms of the Trace proposal
and (b) report back to the Board on the status of its negotiations. A
subsequent Board of Directors meeting was scheduled for November 4, 1998.
Immediately following the adjournment of the November 2 Board of Directors
meeting, representatives of Ramius met with the directors (other than Mr. Cogan
and Mr. Gutfreund) on an informal basis to discuss the work they had performed
to date, and to respond to questions from directors. A press release describing
the Board's actions was issued following the meeting.
Commencing November 2, 1998, representatives of the Company and
representatives of Trace further negotiated the terms of the proposed Merger
Agreement. During the course of the negotiations, the representatives of the
Company obtained the following concessions from Trace: (1) Trace agreed to
eliminate provisions in the Old Merger Agreement that would have permitted
Trace not to consummate the Merger if certain material adverse changes had
occurred to the Company after a specified date and (2) Trace agreed that shares
held by executive officers and directors of Trace and by affiliates of Mr.
Cogan or members of the immediate families of the foregoing would not be
regarded as Public Shares in determining whether the Merger Agreement had been
approved by the holders of a majority of the Public Shares. Trace
representatives also agreed to withdraw their demand for a provision in the
Merger Agreement that would have required the Company to put the Current
Proposed Transaction to a stockholder vote even if the Board of Directors were
to withdraw its recommendation. During these discussions, the Company rejected
Trace's request to consent to, or otherwise expressly acquiesce in, the
termination of the Old Merger Agreement.
On November 3, 1998, Paul Weiss informed Trace that the Board of Directors
intended to postpone the next scheduled Board of Directors meeting from
November 4 to November 5, in order to provide the Board and its representatives
with additional time to evaluate the Current Proposed Transaction and to
facilitate a meeting with plantiffs in the Stockholder Litigation. Paul Weiss
also requested that Trace obtain an extension of the New Agreement Financing
Expiration Date from November 5 to November 6. On November 3, Trace obtained a
new commitment letter from ScotiaBank, CIBC Oppenheimer Corp., Canadian
Imperial Bank of Commerce and First Dominion Capital, LLC for all of the
financing necessary to consummate the Current Proposed Transaction. In
connection with such commitment letter, Trace obtained an extension of the New
Agreement Financing Expiration Date to November 6. The Company issued a press
release as to the new Board meeting date.
From November 3 through November 5, 1998, Paul Weiss and Willkie Farr
discussed the open issues in the proposed Merger Agreement. Paul Weiss dropped
the request that closing of the Merger be subject to the receipt of a solvency
opinion with respect to the Company, after being assured that Trace would
present its analysis to the Board of Directors (the "Second Solvency
Determination") similar to the analysis presented in connection with the
Initial Proposed Transaction. Paul Weiss also requested a condition to the
closing of the Current Proposed Transaction that there be no outstanding
litigation with respect to the Current Proposed Transaction, which request was
refused. Paul Weiss also attempted to obtain price concessions, but Willkie
Farr, on behalf of Trace, rejected all overtures. Paul Weiss kept counsel to
the Special Committee advised of these developments.
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Separately, representatives of Ramius spoke with Mr. Cogan and Willkie
Farr on November 3 and 4 regarding price and other terms, but Trace rejected
all demands for an increase in the price.
During the period from November 3 through November 5, 1998, Mr. Farace
attempted to negotiate the price to be paid to the Public Stockholders in the
Current Proposed Transaction with representatives of Trace, all of whom
indicated that Trace was unwilling to increase the price to be paid to the
Public Stockholders. On November 5, 1998, Mr. Farace met on two occasions with
Mr. Winters of Trace in an attempt to obtain an increase in price. On each
occasion, Mr. Winters denied Mr. Farace's request for a price increase. During
the course of these negotiations, Mr. Farace kept certain other members of the
Board apprised of the status of the price negotiations.
During the evening of November 4, Trace was informed by its financing
sources that First Dominion Capital, LLC was requesting additional conditions
to its commitment set forth in the commitment letter dated November 3, 1998.
Trace determined not to agree to such additional conditions, and on November 5,
1998, Trace entered into a new commitment letter with ScotiaBank, CIBC
Oppenheimer Corp. and Canadian Imperial Bank of Commerce for the financing
necessary to fund the Current Proposed Transaction.
On November 5, 1998, the Board of Directors of the Company met to review
the terms of the Current Proposed Transaction. At the meeting, Mr. Farace
updated the Board as to the lack of progress on the negotiation of the price to
be paid to the Public Stockholders in the Current Proposed Transaction, and
representatives of Paul Weiss briefed the Board of Directors on the open issues
in the Merger Agreement, which consisted primarily of: (1) whether the vote
required to approve the Merger Agreement would be a majority of the Independent
Shares voting on the matter or a majority of the Independent Shares eligible to
vote thereon , (2) whether if the Current Proposed Transaction did not close,
Trace would pay the Company's fees and expenses, (3) whether the Company would
consent to the termination of the Old Merger Agreement by Trace, and (4)
whether the closing of the Current Proposed Transaction would be conditioned on
the absence of any litigation relating to the Current Proposed Transaction. Mr.
Cogan then provided the Board of Directors with an update on the status of the
financing for the Current Proposed Transaction. Following such update, Ramius
made a presentation to the Board of Directors regarding its analysis and
valuation of the Company, reviewing the diligence conducted, the valuation
methodologies used, and the valuations resulting from such methodologies.
Following such presentation, Ramius delivered its opinion that the price of
$12.00 per share was fair to the Public Stockholders from a financial point of
view. Mr. Cogan then recused himself from further discussion, and the Board,
without Mr. Cogan present, reviewed the reports and opinions they had received
that evening.
Later that evening, representatives of Paul Weiss informed Willkie Farr
that the Board would not be willing to enter into the Merger Agreement unless
the closing of the Merger were conditioned on the settlement of all litigation
relating to the Merger Agreement and the Merger. The Board insisted on this
condition in order to place maximum pressure on Trace to settle with the
plaintiffs in the Stockholder Litigation, which could lead to an increase in
the amount of the Merger Consideration. The Board believed that such condition
would help to insure that the Public Stockholders would receive the highest
price for their Common Stock, a safeguard the Board viewed as particularly
appropriate in view of the Special Committee's conclusion as to fairness and
the refusal of Trace to increase the Merger Consideration above $12.00 in the
course of its negotiations with the Company. Representatives of Willkie Farr,
on behalf of Trace, accepted such demand on the condition that the condition be
capable of being waived by the Board of Directors of the Company both before
and after the required vote of the stockholders, that all other open Merger
Agreement items (other than the consent to the termination of the Old Merger
Agreement) be resolved in Trace's favor and that at least five directors would
vote in favor of the Merger. Paul Weiss agreed to discuss Trace's response with
the Board of Directors.
Mr. Cogan was then invited back to the Board of Directors meeting, and
delivered a notice of termination terminating the Old Merger Agreement on the
grounds that the financing condition was incapable of being satisfied. The
Board of Directors then voted on the Current Proposed Transaction with Trace's
proposed resolution of the open items to the Merger Agreement. By a vote of
five in favor and two opposed (Messrs. Gutfreund and Hay, the members of the
Special Committee), the Board (1) made the requisite Second Solvency
Determination based upon presentations of Messrs. Cogan and Farace and (2)
determined that the Merger is fair to the Public Stockholders from a financial
point of view, declared its advisability, and recommended that the Public
Stockholders vote "for" the Merger Agreement and the Merger.
Following such vote, duly authorized representatives of Trace, Merger Sub
and the Company signed the Merger Agreement, and a press release was released
prior to the opening of the market on November 6, 1998.
On November 10, 1998, counsel for certain of the defendants in the
Stockholder Litigation gave notice pursuant to the Stipulation of Settlement
that such defendants were withdrawing from the Stipulation of Settlement in
light of the notice given by Trace to the Company and the Special Committee on
November 5, 1998 whereby Trace
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terminated the Old Merger Agreement on the grounds that the financing condition
in the Old Merger Agreement was incapable of being satisfied.
On November 12, 1998, the plaintiffs in the Stockholder Litigation filed
the Amended Complaint. The Amended Complaint named the Company, Trace, Merger
Sub, Mr. Cogan, Mr. Farace, Dr. Hershon, Mr. Tunney and Mr. Davignon as
defendants, alleging that they breached their fiduciary duties to plaintiffs
and the other Public Stockholders in connection with the Current Proposed
Transaction, that the proposal to acquire the Public Shares for $12.00 per
share lacked entire fairness, that the individual defendants violated 8 Del.
Code [sec] 251 in approving the Merger Agreement, and that Trace and Merger Sub
breached the Stipulation of Settlement.
Purpose and Structure of the Merger
Trace's purpose for the Merger is to acquire all the equity interests of
the Company represented by the Public Shares for the reasons described below.
Trace has advised the Company that, in connection with its proposal of the
Merger, Trace did not consider any alternatives that would have allowed the
Public Stockholders to maintain an equity interest in the Company. In the
Merger, each Public Share will be converted into the right to receive an amount
in cash equal to the Merger Consideration, without interest. In determining to
acquire the Public Shares at this time, Trace focused on a number of factors,
including that the transaction would (i) create a deeper, more diverse
management group with a more efficient capital structure, (ii) provide for a
simpler management reporting process, (iii) allow Trace to capture all of the
Company's earnings and cash flow, (iv) reduce public equity compliance costs
and (v) yield potential overhead savings.
The Company's purpose for the Merger is to provide to the Company's Public
Stockholders the opportunity to receive cash for their shares at a price that
the Board of Directors determined is fair from a financial point of view. See
"--Recommendation of Board of Directors; Fairness of the Merger."
The acquisition of the Public Shares has been structured as a cash merger
in order to provide a prompt and orderly transfer to Trace of ownership of the
equity interests represented by the Public Shares and in order to facilitate
financing of the Merger and the transactions contemplated thereby. The
structure of the Merger also (i) ensures the acquisition by Trace and its
affiliates of all the outstanding Public Shares and (ii) provides a cash
payment to all holders of outstanding Public Shares.
Following the Merger, it is anticipated that the Common Stock will be
delisted from Nasdaq and the registration of such securities under the Exchange
Act will be terminated, thereby allowing the Company to eliminate certain
overhead costs (including the time devoted by its employees and the fees and
expenses of various professional advisors and service providers of the Company)
which relate exclusively to the Company being a public company. See "--Plans
for the Company after the Merger" and "--Certain Effects of the Merger."
Recommendation of the Board of Directors; Fairness of the Merger
On November 5, 1998, by a vote of five in favor and two opposed, the
Company's Board of Directors (i) determined that the Merger and the
transactions contemplated by the Merger Agreement are fair and in the best
interests of the Company and the Public Stockholders, (ii) adopted a resolution
approving the Merger Agreement and declaring its advisability and (iii)
recommended that the Public Stockholders vote in favor of the Merger. Messrs.
Cogan, Davignon, Farace, and Tunney and Dr. Hershon voted in favor of the
Merger Agreement, and Messrs. Gutfreund and Hay, the members of the Special
Committee, voted against these proposals. Each of the directors who voted in
favor of the Merger Agreement have interests in or relationships with the
Company that may be in addition to, or different from, the interests of the
Public Stockholders. See "--Interests of Certain Persons in the Merger."
In making its determination to approve the Merger Agreement and the
Merger, the Board of Directors (other than Messrs. Gutfreund and Hay who voted
against such approval, whose considerations as members of the Special Committee
are described in "--Recommendation of the Special Committee Against the Merger;
Unfairness of the Merger") considered the following material factors:
(i) The Board considered the fact that the Special Committee had
determined that the terms of the Merger are not fair to the Public
Stockholders and had recommended, on the basis of the report of Beacon, its
financial advisor (attached as Appendix C hereto), that the Board reject
Trace's $12.00 per share proposal. This factor was the most significant
negative factor with respect to the Board's consideration of the Merger
Agreement and the Merger.
(ii) The opinion of Ramius (attached as Appendix B hereto), the
financial advisor to the Board, to the effect that, as of the date of such
opinion, a price of $12.00 per Public Share was fair to the Public
Stockholders
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from a financial point of view. The Board placed emphasis on the analyses
performed by Ramius with respect to the Company's results of operations for
the 12 months ended September 30, 1998, computed on a pro forma basis to
include the businesses acquired in the Crain Acquisition. The Board noted
the fact that the Merger Consideration was within each valuation range
computed by Ramius based on such pro forma results. In evaluating the
analyses performed by Ramius based on the Current Projections (as defined
in "Certain Projected Financial Data") provided by management, the Board
noted that the Merger Consideration was within valuation ranges under all
analyses other than those derived from Ramius's discounted cash flow and
leveraged buy-out analyses, utilizing in both cases the Non Contingency
Projection (as defined in "Certain Projected Financial Data") financial
forecast presented by management. See "--Opinion of Financial Advisor to
the Board of Directors" for a detailed description of certain of the
analyses performed by Ramius, as well as a description of the opinion and
the terms of Ramius's engagement.
(iii) The Board considered the different approaches taken by Ramius,
its financial advisor, and Beacon, the Special Committee's financial
advisor, in developing ranges of value that resulted in their differing
views as to the fairness of the Merger. Specifically, the Board considered
that (a) Ramius believed that the Company's historical operating
performance was a more reliable indicator of the Company's future profit
potential over the long term than the Current Projecitons (although Ramius'
analyses did utilize both the Contingency Projections (as defined in
"Certain Projected Financial Data") and the Non Contingency Projections);
(b) Ramius' analyses applied last twelve month ("LTM") market multiples of
comparable companies against LTM earnings rather than against Current
Projections, which, as discussed below, the Board noted were subject to
considerable uncertainties, and applied projected future multiples of
future earnings (derived from its analysis of comparable companies) against
the Current Projections; (c) Ramius' market multiples analysis relied
principally on EBITDA multiples rather than on EBIT or net income value
multiples, because Ramius found in its analysis of market valuations of
comparable companies that EBITDA multiples were a more appropriate
valuation benchmark; (d) in its analysis of multiples obtained in other
acquisition transactions, Ramius discounted the comparability of a number
of transactions that had been consummated under different market conditions
or that offered potential acquirors greater advantages than an acquisition
of the Company due, in part, to limitations described in Ramius' analysis;
and (e) Ramius' acquisition analysis relied, in part, on the comparability
of actual acquisitions that had been made by the Company, after eliminating
the effect of synergistic savings realized thereby. The Board's
consideration of the valuation methodologies utilized by Ramius supported
its approval of the Merger Agreement and the Merger.
(iv) The Board considered the deterioration in United States capital
markets since August 1998, particularly in the markets for high-yield debt.
The Board considered the view of Ramius (which it had requested), based on
its discussions with DLJ, that given the current virtual standstill in the
high-yield debt markets, as well as a general tightening in the bank
lending markets, the likelihood of financing the Old Merger with high yield
debt as contemplated by the Old Merger by the end of 1998 was extremely
remote. Ramius advised the Board that its view of the current market for
high yield debt did not, however, affect its valuation analyses. The Board
also considered Ramius' report of discussions with Trace's financing
sources that certain financial ratios derived from pro forma financial data
giving effect to the Merger appeared to be on the outer limits of
acceptability under such financing sources' current lending practices.
These factors supported the Board's approval of the Merger and the Merger
Agreement.
(v) The Board considered the uncertainty of a continued favorable
economic climate in the United States generally, and in particular in the
automotive and home building markets served by the Company. The Board
considered that record levels of household wealth in financial assets and
record levels of consumer debt may limit continued growth in consumer
spending. The Board noted that overcapacity in many industries could lead
to additional pricing pressures upon manufacturers of intermediate
commodity goods, such as those produced by the Company. The Board also
considered the highly competitive nature of the foam market, the fact that
the Company's businesses were essentially commodity rather than branded
businesses, and the inelastic nature of demand for the Company's products
in light of recent pricing pressure exerted by customers in the automotive
sector. These factors supported the Board's approval of the Merger and the
Merger Agreement.
(vi) The Board considered the historical results of operations of the
Company for the period from January 1, 1993 through September 30, 1998
(including pro forma results for the Crain Acquisition for fiscal 1997 and
the results achieved in the third quarter of 1998). In considering these
results, the Board placed particular emphasis on the volatility of the
Company's results of operations over such period, the decline in annual
operating earnings as compared to those of the previous year experienced in
each of 1995 and 1997, and the Company's failure to meet the net income
expectations of securities analysts during the past several years. The
Board concluded that these factors supported its approval of the Merger
Agreement and the Merger.
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(vii) The Board noted that the Current Projections with respect to the
Company's operating and financial performance, the opportunities and
potential synergies presented by the Crain Acquisition, and the recent
restructuring of the Company's business units may have supported a higher
value per Public Share than that offered by Trace and therefore was a
negative factor in connection with its consideration of the Merger
Agreement and the Merger. The Board, however, considered the Company's
prospects in light of the execution risks involved in the integration of
the businesses acquired in the Crain Acquisition with the existing
businesses of the Company and the Company's substantial under-performance
relative to the budgets and forecasts prepared by management in two of the
three preceding fiscal years, as well as the inherent uncertainties in any
projections. The Board also considered the Company's historical margins
compared with those contained in the Current Projections, as well as those
of comparable companies. The Board concluded, after balancing the potential
opportunities and risks faced by the Company as well as the Company's past
performance relative to its forecasts, that these factors supported its
approval of the Merger Agreement and the Merger.
(viii) The Board considered the fact that, in the letter to the Board
of Directors making its initial offer to purchase the Public Shares on
March 16, 1998, Trace expressly stated its unwillingness to sell the Trace
shares to a third party, thereby effectively precluding a sale of control
of the Company. Since the date of such letter, Trace had continued to
reserve all of its rights with respect to a potential sale of its shares.
In the judgment of the Board, it was highly unlikely that a third party
would offer to purchase all of the Public Shares at a price comparable to,
or in excess of, the Merger Consideration or attempt to enter into any
other alternative transaction with the Company or the Public Stockholders,
so long as Trace and its affiliates continued to hold an effective control
stake in the Company. The Board concluded that this factor supported its
approval of the Merger Agreement and the Merger.
(ix) The Board considered the fact that since Trace's initial offer
was made on March 16, 1998 until October 16, 1998, when Trace made its
revised $12.00 per Public Share offer, no third party had approached the
Company or its advisors with respect to a potential acquisition of the
Company or the Public Shares, and that despite the substantial reduction in
the proposed Merger Consideration, only one party had indicated a possible
interest in such an acquisition (which was withdrawn the following day)
since the announcement of the Current Proposed Transaction. The Board
concluded that this factor supported its approval of the Merger Agreement
and the Merger.
(x) The Board considered the fact that Trace's exploration of a
possible sale of the Trace Shares in 1995 and 1997 did not result in any
transaction. The Board concluded that this factor supported its approval of
the Merger Agreement and the Merger.
(xi) The Board considered the trading history of the Common Stock
since the Company's initial public offering in December 1993, with
particular emphasis on (a) the high volatility of the market price for the
Common Stock since the Company's initial public offering, (b) the Common
Stock's consistent under-performance relative to the stock market as a
whole, (c) the relatively low trading volume in the Common Stock, and (d)
as discussed below, the possibility that the price of the Common Stock had
been, and would likely continue to be, adversely affected by Trace's
ownership of the Trace Shares. The Board concluded that these factors
supported its approval of the Merger Agreement and the Merger. The Board
did not take into account current market prices of the Common Stock in
light of the effects thereon of the various Trace proposals under
consideration since March 1998.
(xii) The Board considered the short-term and long-term implications
to the Company, its business and prospects, of Trace's ownership of
approximately 46% of the Common Stock. Such implications included the fact
that Trace has pledged the Trace Common Stock to secure indebtedness of
Trace and, in the event Trace is unable to meet certain debt of its
obligations, Trace's creditors may foreclose on the Trace Common Stock
pledged to secure such indebtedness. As a consequence of such a
foreclosure, a substantial amount of bank indebtedness of the Company could
be accelerated through the operation of "change-in-control" covenants, and
similar covenants in the Company's outstanding public indebtedness would
give the holders thereof the right to require the Company to repurchase
such public debt at a premium. Such acceleration events could occur as
early as the end of December, 1998. See "--Potential Acceleration of Foamex
Debt in the Absence of a Merger." Although management advised the Board
that the Company would be able to refinance the debt obligations
accelerated by operation of such "change of control" covenants, disclosure
of the existence of such an acceleration event could cause confusion among
the Company's customers and suppliers, thereby potentially adversely
affecting its business and the price of its Common Stock. The uncertainties
associated with the fact that the Company's prospects are linked to the
financial prospects of Trace supported the Board's approval of the Merger
Agreement and the Merger.
(xiii) The Board considered the terms of the Merger Agreement (in
addition to the amount of the Merger Consideration), and concluded that
they supported the Board's approval of the Merger Agreement and the
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Merger. First, approval of the Merger Agreement will require a vote of the
majority of the shares held by Public Stockholders voting on the matter at
the Special Meeting, and that for purposes of determining such vote, shares
held by executive officers and directors of Trace, affiliates of Mr. Cogan
and members of their immediate families will be excluded. Although
representatives of the Board sought to require a vote of the majority of
such Independent Shares eligible to vote, it believed that the "majority of
the minority" voting provision is a significant safeguard of the rights of
the Public Stockholders, providing assurance that the Public Stockholders,
rather than Trace, will determine the outcome of the Stockholder vote on
the Merger. Trace also agreed to the elimination of certain provisions that
might have discouraged alternative acquisition proposals from third
parties, including the elimination of any break-up fee in the event the
Merger is not consummated, and of provisions that would have limited the
Company from responding to inquiries from, and providing information to,
third parties who might be interested in making a more favorable
acquisition proposal. Trace also agreed to eliminate the representation and
closing condition in the Old Merger Agreement as to the lack of a material
adverse effect on the Company and its subsidiaries since a specified date,
and agreed to withdraw its request for a provision requiring the Trace
proposal to be placed before the Company's stockholders even if the Board
were to subsequently withdraw its recommendation. Finally, as discussed
below, Trace agreed to a closing condition that there be no pending
litigation relating to the Merger Agreement or the Merger. These factors
supported the Board's approval of the Merger Agreement and the Merger.
(xiv) The Board considered the benefit to the Public Stockholders of a
condition to the consummation of the Merger provision in the Merger
Agreement that it had insisted upon in its negotiations with Trace, which
conditions consummation of the Merger Agreement upon the absence of pending
litigation to restrain or obtain damages in respect of the Merger Agreement
or the transactions contemplated thereby. The Board believed that such a
condition would place substantial pressure upon Trace to settle the
Stockholder Litigation challenging the Merger, which could lead to an
increase in Merger Consideration. This factor supported the Board's
approval of the Merger and the Merger Agreement.
(xv) The Board considered certain other potential effects of rejecting
the Trace offer on the future market price of the Common Stock, including
the fact that the security analysts that had followed the Common Stock
prior to the Initial Proposed Transaction had ceased coverage of the
Company, the likelihood that much of the Public Stock was now held by
short-term investors, and the potential adverse effect on the market price
of the Common Stock in the event these investors determined to dispose of
their shares quickly. In addition, the Board considered the fact that
detailed disclosure of matters pertaining to the businesses conducted by
the Company required by securities laws in the event its Common Stock
continued to be publicly traded could have an adverse effect on the
Company's competitive position in the marketplace with both customers and
suppliers. Finally, as discussed above, the Board considered the potential
effects that Trace's financial condition could have on the Company and its
share price in the public market. These factors supported the Board's
approval of the Merger and the Merger Agreement.
(xvi) The Board considered the fact that despite repeated attempts by
its representatives to obtain an increase in the Merger Consideration from
$12.00 per Public Share, Trace had refused to yield on price. This was a
negative factor in the Board's consideration of the Merger and Merger
Agreement.
(xvii) The Board considered the fact that Trace's obligation to
consummate the Merger is contingent on its ability to obtain adequate
financing. In view of the commitment letters from Trace's financing sources
covering all of the amounts necessary to finance the Merger, the Board
concluded that, on balance, the related financing risk was a neutral factor
with respect to its consideration of the Merger Agreement and the Merger.
In view of the circumstances and the wide variety of factors considered in
connection with its evaluation of the Merger and the Merger Agreement, the
Board did not find it practicable to quantify or assign relative weights to the
factors considered in its assessment of the Merger and the Merger Agreement,
and accordingly, the Board did not do so.
Opinion of Financial Advisor to the Board of Directors
The Board of Directors retained Ramius on October 29, 1998 to act as its
financial advisor in connection with the Merger and to render an opinion to the
Board of Directors as to the fairness of the Merger, from a financial point of
view, to the Public Stockholders. Ramius was selected by the Board of Directors
because of the expertise of its senior professionals in the area of mergers and
acquisitions. Ramius, as part of its investment banking business, is engaged in
the valuation of businesses and their securities in connection with mergers and
acquisitions, private placements and valuations for corporate or other
purposes.
On November 5, 1998, Ramius rendered an opinion to the Board of Directors
that, as of such date and based upon and subject to the matters set forth
therein, the Merger Consideration was fair from a financial point of view to
the Public Stockholders (the "Ramius Opinion").
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The full text of the Ramius Opinion, which sets forth the procedures
followed, the assumptions made, matters considered and limitations on the
review undertaken by Ramius, is attached as Appendix B to this proxy statement
and is incorporated herein by reference. Public Stockholders are urged to read
the Ramius Opinion in its entirety. The Ramius Opinion is directed to the Board
of Directors and relates only to the fairness of the Merger Consideration from
a financial point of view to the Public Stockholders. The Ramius Opinion does
not address any other aspect of the Merger and does not constitute a
recommendation to any of the Public Stockholders as to how such Public
Stockholders should vote with respect to the Merger. The summary of the Ramius
Opinion is qualified in its entirety by reference to the full text thereof.
In arriving at its opinion, Ramius informed itself of aspects of the
Company's business, operations, financial condition, prospects and management
that it deemed appropriate and material. Ramius reviewed, among other things, a
draft of the Merger Agreement that the Company advised was substantially in the
form executed by the parties; certain publicly available business and
historical financial information relating to the Company; and certain internal
financial analyses and financial forecasts for the Company prepared by its
management, including those relating to the Company's December 1997 acquisition
of Crain, the integration of Crain into the Company and the reorganization of
the Company in 1998 following the acquisition of Crain. Ramius discussed the
Company's operations, financial condition, history and prospects with the
Company's senior management and with others it deemed appropriate, including
senior management and other representatives of Trace. Ramius also discussed
with such individuals the relationship of the Company and Trace, as well as
inter-company transactions between the Company and Trace, including certain
transactions in connection with the financing of the Merger and post-Merger
operations. Ramius reviewed in outline form the proposed terms, conditions and
structure of the financing for the proposed purchase of the Public Shares and
had discussions with representatives of the principal sources of financing
concerning their confidence in completing that financing. In addition, Ramius
reviewed the reported price and trading activity for the Common Stock; compared
financial and stock market information for the Company with similar information
for selected other companies whose securities are publicly traded and which
Ramius deemed to be comparable to the Company in certain respects; reviewed the
financial terms of certain recent business combinations in industries and
markets in which the Company participates; and performed such other financial
studies and investigations, and considered such other information as Ramius
deemed necessary or appropriate. Ramius did not contact third parties to
ascertain their interest in a business combination with the Company or in
making a proposal competitive with the Merger.
In rendering its opinion, Ramius relied upon and assumed, without any
obligation for independent verification, the accuracy and completeness of all
of the financial and other information that was available to it from public
sources, that was provided to it by the Company or that was otherwise reviewed
by it for purposes of the opinion. With respect to the Contingency Projections
and the Non Contingency Projections furnished to Ramius by the Company, Ramius
assumed that they had been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the senior management of the
Company as to the expected future operating and financial performance of the
Company. Ramius did not assume any responsibility for the information or
forecasts provided to it and Ramius further relied on the assurances of senior
management of the Company that they were unaware of any facts that would make
the information, forecasts and projections provided to Ramius incomplete or
misleading. Ramius did not make an independent evaluation or appraisal of the
assets and liabilities of the Company or of any of its subsidiaries, and Ramius
has not been furnished with any such evaluation or appraisal. The Ramius
Opinion is necessarily based on economic, market, financial and other
conditions, and the information made available to Ramius, as they existed and
as they were able to be evaluated as of the date of the Ramius Opinion. Ramius
was not asked to and did not express an opinion as to the relative merits of
the Merger as compared to any alternative business strategies that might exist
for the Company or the effect of any other transaction in which the Company
might engage. The Company did not provide specific instructions to, or place
any limitations upon, Ramius with respect to the procedures to be followed or
factors to be considered by it in performing its analyses or rendering the
Ramius Opinion. The Ramius Opinion does not constitute an opinion with respect
to, and does not address, the effect which consummation of the Merger or the
financing thereof would have on the solvency of the Company or any of its
affiliates, including Trace.
In preparing its opinion, Ramius performed a variety of financial and
comparative analyses. The summary of Ramius' analyses set forth below does not
purport to be a complete description of the analyses underlying the Ramius
Opinion. The preparation of a fairness opinion is a complex analytic process
involving various determinations as to the most appropriate and relevant
methods of financial analysis and the application of those methods to the
particular circumstances, and, therefore, such an opinion is not readily
susceptible to partial analysis or summary description. Each of the analyses
conducted by Ramius was carried out in order to provide a different perspective
on the transaction and add to the total mix of information available. Ramius
did not form a conclusion as to whether
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any individual analysis, considered in isolation, supported or failed to
support an opinion as to fairness from a financial point of view. Rather, in
reaching its conclusion, Ramius considered the results of the analyses in light
of each of the other analyses and the other information available and
ultimately reached its opinion based on the results of the analyses and other
information taken as a whole. In arriving at its opinion, Ramius concluded
that, taken as a whole, the analyses and other information supported its
determination. Accordingly, Ramius believes that, notwithstanding the separate
factors and analyses summarized below, its analyses must be considered as a
whole and that selecting portions of the analyses and factors considered by
Ramius, without considering all analyses and factors, could create a misleading
or incomplete view of the processes underlying such analyses, factors and the
Ramius Opinion.
In performing its analyses, Ramius made numerous assumptions with respect
to the Company, industry performance, general business, economic, market and
financial conditions and other matters, many of which are beyond the control of
the Company. No company, transaction or business used in such analyses as a
comparison is identical to the Company or the Merger, nor is an evaluation of
the results of such analyses entirely mathematical (such as determining the
mean or median); rather, such analyses involve complex considerations and
judgments concerning differences in financial and operating characteristics and
other factors that could affect the acquisition, public trading, or other
values of the companies, business segments, or transactions being analyzed. The
estimates contained in such analyses and the ranges resulting from any
particular analysis are not necessarily indicative of actual values or
predictive of future results or values, which may be significantly more or less
favorable than those suggested by such analyses. In addition, analyses relating
to the value of businesses or securities do not purport to be appraisals or to
reflect the prices at which businesses or securities actually may be sold.
Accordingly, such analyses and estimates are inherently subject to substantial
uncertainty.
In connection with its opinion, Ramius performed and considered the
following analyses: (i) an analysis based on comparisons with the market
multiples of certain publicly traded companies deemed similar to the Company in
certain respects (the "Market Multiples Analysis"); (ii) an analysis based on
comparisons of the profitability of certain publicly traded companies deemed
similar to the Company in certain respects to the profitability of the
Company's various business units (the "Business Segments Analysis"); (iii) an
analysis based on comparisons with acquisitions of certain publicly traded
companies deemed similar to the Company in certain respects, adjusted to
reflect certain synergies realized in such acquisitions (the "Adjusted
Acquisitions Multiples Analysis"); (iv) an analysis based on estimated and
projected EBITDA (as defined below) for fiscal years 1998 and 1999 of certain
publicly traded companies deemed similar to the Company in certain respects
(the "Projected Comparable EBITDA Multiple Analysis"); (v) a discounted cash
flow analysis (the "Discounted Cash Flow Analysis"); and (vi) a leveraged
buy-out analysis (the "Leveraged Buy-Out Analysis"). Ramius noted in its oral
presentation to the Board of Directors that it did not consider relevant an
analysis based on premiums paid in transactions in which the acquiror
previously owned a significant, but not majority, stake in the acquired company
because (i) the Company's stock had been trading at a premium since the
announcement of the Old Merger and therefore, any premium calculation
pertaining to the Common Stock market price would not be comparable to such
other transactions, (ii) a significant number of such transactions in the
universe reviewed by Ramius were stock-for-stock transactions as opposed to
all-cash transactions and (iii) a number of such transactions in the universe
reviewed by Ramius were strategic in nature, in which the buyer may have been
willing to pay a higher premium in anticipation of realizing post-acquisition
synergies.
While Ramius considered all of its analyses in arriving at its opinion,
Ramius believed that the Company's historical operating performance was a more
reliable indicator of the Company's consistent profit potential over the long
term than the Contingency Projections and the Non Contingency Projections.
Ramius recognized that (i) the Company's core operating businesses are highly
competitive, cyclical and commodity in nature, (ii) the Company's primary
customers have increased pressure on their vendors to compete on price in order
to increase their own operating margins and (iii) according to management, the
Company has not historically enjoyed prolonged periods where it has been able
to pass along raw material price increases to its customers. The Contingency
Projections and the Non Contingency Projections, however, indicate that (i)
sales growth will continue in an upward trend indefinitely and (ii) the
expansion in EBITDA margins currently being realized by the Company will
increase to between 14% and 15% in each of the next five years, despite the
fact that the Company's historical EBITDA margins and those of comparable
companies average between 9% and 12%. In addition, in considering the
Contingency Projections and the Non Contingency Projections, Ramius noted (i)
the execution risks involved in the integration of the business acquired in the
Crain acquisition with the existing business of the Company, (ii) the Company's
substantial underperformance relative to the budgets and forecasts prepared by
management of the Company in two of the three preceding fiscal years and (iii)
the inherent uncertainties in any projections. Nevertheless, Ramius utilized
the Contingency Projections and the Non Contingency Projections as prepared by
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management without alteration in the preparation of each of the Projected
Comparable EBITDA Multiples Analysis, the Discounted Cash Flow Analysis and the
Leveraged Buy-Out Analysis.
In preparing the Market Multiples Analysis, Ramius considered that certain
potential synergies relating to the Crain Acquisition were implemented during
the first nine months of 1998 and therefore, would not be recognized in the
Company's LTM Results (as hereinafter defined). As a result, Ramius utilized
the Projected EBITDA Multiple Analysis in order to give adequate consideration
to the potential synergies from the Crain Acquisition reflected in the
Contingency Projections and the Non Contingency Projections for the full year
of fiscal 1998, as well as for fiscal 1999. Ramius believed that it was more
appropriate to compare LTM multiples to LTM operating performance and projected
multiples to projected operating performance. Ramius also realized that minor
decreases in the Company's growth rate assumptions or projected operating
margins included in the Contingency Projections and the Non Contingency
Projections would most likely have a material impact on valuation, particularly
as it related to the determination of terminal values in the year 2003. As a
result, Ramius believed that the Market Multiples Analysis, the Business
Segment Analysis, the Adjusted Acquisitions Multiples Analysis and the
Projected Comparable EBITDA Multiple Analysis created a more accurate valuation
barometer than the Discounted Cash Flow Analysis and the Leveraged Buy-Out
Analysis.
In connection with delivering its opinion, Ramius made a written and oral
presentation with respect to its analyses to the Board of Directors. A copy of
the written presentation has been filed as an exhibit to the Schedule 13E-3
filed with the SEC and can be inspected and obtained from the SEC as set forth
below under "Available Information." The following is a summary of the material
valuation, financial and comparative analyses Ramius presented to the Board of
Directors on November 5, 1998 and which provided the basis for the preparation
of the Ramius Opinion.
Market Multiples Analysis. To provide contextual data and comparative
market information, Ramius analyzed the pro forma historical operating
performance of the Company relative to the historical operating performance of
certain publicly traded automotive interior components companies, publicly
traded home furnishings companies and publicly traded technical products
companies deemed by Ramius, based on publicly available information, industry
research reports and discussions with senior management of the Company, to be
comparable to the Company in certain respects. These companies serve similar
customers and markets as the Company, in many instances sell products
complementary to those of the Company and have operating and financial
characteristics similar to the comparable business segment of the Company.
Also, companies in these industries tend to experience similar supply/demand
dynamics and macroeconomic forces as the Company as a result of serving similar
markets and customers. Although these companies were considered comparable to
the Company in certain respects, none of them possessed the same make-up,
combination of businesses or other characteristics identical to those of the
Company. The automotive interior components companies reviewed by Ramius were
Collins & Aikman Corporation, Johnson Controls, Inc., Lear Corporation, Magna
International Inc., British Vita PLC and Recticel S.A. (collectively, the
"Automotive Comparable Companies"); the home furnishings companies reviewed by
Ramius were Armstrong World Industries Inc., Culp, Inc., Synthetic Industries,
Inc., Springs Industries, Inc., Mohawk Industries, Inc., British Vita PLC and
Recticel S.A. (collectively, the "Home Furnishings Comparable Companies"); and
the technical products companies reviewed by Ramius were Chemfab Corporation,
Furon Company and British Vita PLC (collectively, the "Technical Products
Comparable Companies" and collectively with the Automotive Comparable Companies
and the Home Furnishings Comparable Companies, the "Comparable Companies").
For each of the Comparable Companies, Ramius compared, among other things,
total enterprise values (equity market value of common stock, plus total debt,
less excess cash and cash equivalents) ("Total Enterprise Value") as multiples
of LTM reported earnings before interest, tax, depreciation and amortization
("EBITDA") and earnings before interest and tax ("EBIT"), adjusted to exclude
certain non-recurring items. Ramius then calculated imputed enterprise and
equity values of the Company by applying latest available LTM EBITDA and EBIT
median multiples derived from its analysis of each of the Comparable Companies
to the Company's LTM financial results through September 30, 1998, on a pro
forma basis for the inclusion of the LTM financial results of Crain and an
addition of $20 million to EBIT and EBITDA reflecting non-recurring expenses
identified by management which occurred in the fourth quarter of 1997 ("LTM
Results").
The Market Multiples Analysis generated a range of mean implied equity
values per share of Common Stock from $11.65 to $14.91.
Ramius determined that the median multiples for the Automotive Comparable
Companies were: (i) with respect to EBITDA, 6.4x; and (ii) with respect to
EBIT, 10.0x. Applying these multiples to LTM Results generated the
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following implied equity values per share of Common Stock: (i) with respect to
EBITDA, $8.73; and (ii) with respect to EBIT, $16.25. This analysis generated a
mean implied equity value per share of Common Stock of $12.49.
Ramius determined that the median multiples for the Home Furnishings
Comparable Companies were: (i) with respect to EBITDA, 6.2x; and (ii) with
respect to EBIT, 9.9x. Applying these multiples to LTM Results generated the
following implied equity values per share of Common Stock: (i) with respect to
EBITDA, $7.17; and (ii) with respect to EBIT, $16.13. This analysis generated a
mean of an implied equity value per share of Common Stock of $11.65.
Ramius determined that the median multiples for the Technical Products
Comparable Companies were: (i) with respect to EBITDA, 7.2x; and (ii) with
respect to EBIT, 9.9x. Applying these multiples to LTM Results generated the
following implied equity values per share of Common Stock: (i) with respect to
EBITDA, $13.70; and (ii) with respect to EBIT, $16.13. This analysis generated
a mean of an implied equity value per share of Common Stock of $14.91.
Ramius noted that its analyses generated mean implied equity valuations
per share of Common Stock greater than the Merger Consideration for both the
Automotive Comparable Companies and the Technical Products Comparable
Companies. Ramius focused primarily on multiples of EBITDA as a measure of the
Company's financial performance because (i) when compared to the trading
history of the Comparable Companies, the Common Stock has historically traded
at large discounts to EBIT and net income multiples, (ii) the Company's history
of acquisitions and divestitures make its depreciation and amortization
expenses less like the Comparable Companies, most of whom have expanded
internally through capital expenditures, thereby making the EBIT multiples less
meaningful, (iii) the Company's leverage is greater than that of many of the
Comparable Companies, thereby making the net income multiples less meaningful
and (iv) the Company's products are less value-added and at the lower end of
the supply chain than the products of most of the Comparable Companies.
Business Segment Analysis. In this analysis, Ramius analyzed the
profitability of each of the Company's five business units, Carpet Cushion,
Foam Products, Automotive, Technical and International, in an attempt to apply
value to each product line relative to the way in which the Comparable
Companies in that business segment were valued. Selling, general and
administrative expenses of the Company included in the LTM Results were
allocated to each business unit pro rata by sales to determine EBIT by business
unit. Depreciation and amortization of the Company included in the LTM Results
were then allocated to each business unit pro rata by sales included in the LTM
Results to determine EBITDA by business unit. Ramius then applied the industry
multiples for EBITDA and EBIT described above under "--Market Multiples
Analysis" to each business unit according to the median market multiples
analysis of each business unit's industry specialty: Carpet Cushion and Foam
Products were classified as home furnishings and assigned the multiples of the
Home Furnishings Comparable Companies; Automotive was classified as automotive
interior components and assigned the multiples of the Automotive Comparable
Companies; Technical was classified as technical products and assigned the
multiples of the Technical Products Comparable Companies; and International was
assigned an average of the multiples of the Automotive Comparable Companies and
the Home Furnishings Comparable Companies. The sum of each business unit's
enterprise value was considered the enterprise value of the Company. This
analysis generated the following implied equity values per share of Common
Stock: (i) with respect to EBITDA, $8.77 and (ii) with respect to EBIT, $16.16.
Ramius focused primarily on multiples of EBITDA as a measure of the
Company's financial performance because (i) when compared to the trading
history of the Comparable Companies, the Common Stock has historically traded
at large discounts to EBIT and net income multiples, (ii) the Company's history
of acquisitions and divestitures make its depreciation and amortization
expenses less like the Comparable Companies, most of whom have expanded
internally through capital expenditures, thereby making the EBIT multiples less
meaningful, (iii) the Company's leverage is greater than that of many of the
Comparable Companies, thereby making the net income multiples less meaningful
and (iv) the Company's products are less value-added and at the lower end of
the supply chain that the products of most of the Comparable Companies.
Adjusted Acquisitions Multiples Analysis. Ramius determined that an
acquisition multiples analysis analyzing the implied transaction multiples paid
in what would otherwise be a representative group of publicly announced merger
and acquisition transactions involving companies in the automotive interior
components, home furnishings and technical products industries had limited use
in valuing the Company. Ramius noted that (i) a majority of the merger and
acquisition transactions involving companies in industries comparable to those
of the Company were completed more than a year ago, reflecting different market
and economic conditions, (ii) such transactions were strategic in nature with
the acquirors most likely willing to pay higher multiples based on expected
post-acquisition synergies, (iii) a number of the transactions analyzed did not
contemplate the fact that a strategic
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buyer with the financial capability to acquire the Company may have difficulty
completing such acquisition due to potential antitrust scrutiny and (iv) none
of the transactions had an acquiror with a significant minority interest in the
acquired company, which might have acted as a deterrent to a third party
seeking to gain control of the acquired company. Accordingly, in conducting an
analysis of the Company, Ramius selected the three most comparable merger and
acquisition transactions in the composite lists, which included the acquisition
of Great Western Foam Products Corporation by the Company, the acquisition of
General Felt Industries, Inc. by the Company and the acquisition of Crain by
the Company (the "Selected Comparable Transactions").
At Ramius' request, management of the Company determined the actual amount
of EBITDA synergies realized in each of the Selected Comparable Transactions in
the year following completion of each acquisition. Ramius then added 20% of the
realized synergies achieved in each of the Selected Comparable Transactions
back to the EBITDA of each of the acquired companies for the LTM ending
immediately before completion of the Selected Comparable Transaction in order
to arrive at an adjusted pro forma EBITDA ("Adjusted Pro Forma EBITDA"). By
dividing the aggregate transaction values (defined as cash paid plus debt
assumed minus post-acquisition excess cash) for all of the Selected Comparable
Transactions by Adjusted Pro Forma EBITDA, Ramius determined an EBITDA multiple
for the Selected Comparable Transactions of 5.5x.
Applying this multiple to the estimated fiscal year 1998 EBITDA for the
Company generated an implied equity value per share of Common Stock of $9.13.
Applying this multiple to the pro forma fiscal year 1998 EBITDA for the
Company, adjusted by management of the Company to reflect a full year of
synergies as a result of the Crain acquisition, generated an implied equity
value per share of Common Stock of $13.02.
Projected Comparable EBITDA Multiple Analysis. Notwithstanding Ramius'
view that the Company's historical operating performance is a more reliable
indicator of the Company's consistent profit potential over the long term than
the Contingency Projections and the Non Contingency Projections, Ramius
believed there is a higher probability that the Contingency Projections and the
Non Contingency Projections for fiscal years 1998 and 1999 will be achieved
than the Contingency Projections and the Non Contingency Projections for fiscal
years 2000 through 2003. Accordingly, in this analysis Ramius compared the
EBITDA estimates and projections of the Company for fiscal 1998 and 1999 as
prepared by the Company with the EBITDA estimates and projections for fiscal
1998 and 1999 of selected Comparable Companies with publicly available research
reports containing such information. Ramius reviewed the EBITDA estimates and
projections for fiscal 1998 and 1999 of the following Comparable Companies:
Johnson Controls, Inc., Lear Corporation, Magna International Inc., Synthetic
Industries, Inc., Furon Company, Culp, Inc., Armstrong World Industries Inc.,
Mohawk Industries, Inc. and Springs Industries, Inc. (collectively, the
"Projected EBITDA Comparable Companies"). With respect to those Projected
EBITDA Comparable Companies with only projected EBIT information available for
1999, estimated depreciation and amortization for fiscal year 1998 was added to
the EBIT figures to arrive at an estimated EBITDA projection for fiscal year
1999.
For each Projected EBITDA Comparable Company, Ramius divided the Total
Enterprise Value on November 4, 1998 by the estimated fiscal year 1998 and
projected fiscal year 1999 EBITDA. Ramius determined that the relevant ranges
between the median and mean multiples for the Projected EBITDA Comparable
Companies were: (i) with respect to estimated fiscal year 1998 EBITDA, 6.0x to
6.2x; and (ii) with respect to projected fiscal year 1999 EBITDA, 5.2x. Ramius
then calculated the imputed enterprise value of the Company by applying the
estimated fiscal year 1998 and projected fiscal year 1999 EBITDA multiples
derived from its analysis of the Projected EBITDA Comparable Companies to
estimated fiscal year 1998 and projected fiscal year 1999 EBITDA for the
Company based on the Contingency Projections and the Non Contingency
Projections and subtracting the projected net debt (defined as total debt less
cash) ("Net Debt") for the Company as of December 31, 1998 in order to arrive
at the equity value. Based on this analysis, the Contingency Projections
generated the following ranges of implied equity value per share of the Common
Stock: (i) with respect to estimated fiscal year 1998 EBITDA, $11.47 to $12.86;
and (ii) with respect to projected fiscal year 1999 EBITDA, $8.08 to $8.27.
Based on this analysis, the Non Contingency Projections generated the following
ranges of implied equity value per share of the Common Stock: (i) with respect
to estimated fiscal year 1998 EBITDA, $11.95 to $13.35; and (ii) with respect
to projected fiscal year 1999 EBITDA, $11.57 to $11.78.
Discounted Cash Flow Analysis. Ramius performed a discounted cash flow
analysis for fiscal years 1998 through 2003 for the Company to estimate the
present value of the unlevered free cash flows of the Company if it were to
remain a public company based upon the Contingency Projections and the Non
Contingency Projections. For purposes of this analysis, unlevered free cash
flows were defined as after-tax operating earnings plus depreciation and
amortization and other non-cash items, less projected capital expenditures and
investment in working capital. Ramius calculated terminal values by applying a
range of estimated EBITDA multiples of 5.5x
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to 6.5x to the projected EBITDA of the Company in fiscal year 2003. The
unlevered free cash flows and terminal values were then discounted to the
present using a range of discount rates of 12.0% to 14.0%, which represents an
estimated range just above the weighted average cost of capital of the Company.
In light of (i) the execution risks involved in the integration of the business
acquired in the Crain acquisition with the existing business of the Company,
(ii) the Company's substantial underperformance relative to the budgets and
forecasts prepared by management of the Company in two of the three preceding
fiscal years and (iii) the inherent uncertainties in any projections, Ramius
believed that the 12.0% to 14.0% range of discount rates was appropriate based
on a number of factors, including the fact that investors need to be adequately
compensated for the risk associated with the uncertainty of the Company being
able to meet its projections. From the derived present value of the unlevered
free cash flows, Ramius then subtracted the value of the Company's Net Debt at
September 30, 1998 to obtain the implied equity value. Ramius believed that the
5.5x to 6.5x EBITDA multiple range was appropriate in light of a variety of
factors, including (i) the Adjusted Acquisition Multiples Analysis; (ii) the
likelihood that a strategic buyer would not appear due to potential antitrust
scrutiny; and (iii) the fact that no financial buyer has emerged to make a bid
despite the lower offer price and the large amount of capital available for
leveraged buy-outs that has been raised over the past 12 to 24 months that
needs to be invested. As previously noted, the Contingency Projections and the
Non Contingency Projections assume that the Company will be able to
consistently operate at levels of profitability that it historically has not
been able to maintain. Ramius realized that minor decreases in the Company's
growth rate assumptions or projected operating margins included in the
Contingency Projections and the Non Contingency Projections would most likely
have a material impact on valuation, particularly as it related to the
determination of terminal values in the year 2003. Based on this analysis, the
Contingency Projections generated an implied equity value range of $11.28 to
$19.96 per share of Common Stock and the Non Contingency Projections generated
an implied equity value range of $12.65 to $21.50 per share of Common Stock.
Inherent in any discounted cash flow valuation are the use of a number of
assumptions, including the accuracy of projections, and the subjective
determination of an appropriate terminal value and discount rate to apply to
the projected cash flows of the entity under examination. Variations in any of
these assumptions or judgments could significantly alter the results of a
discounted cash flow analysis.
Leveraged Buy-Out Analysis. Based on the Contingency Projections and the
Non Contingency Projections, Ramius performed analyses of the equity internal
rates of return that could be achieved in a leveraged buyout of the Company by
a third party financial buyer. The Leveraged Buy-Out Analysis determines a
range of per share equity valuations that would yield the third party investor
an equity rate of return centered around 35%, generally considered to be the
minimum rate of return acceptable to such investors, particularly in light of
(i) the execution risks involved in the integration of the business acquired in
the Crain acquisition with the existing business of the Company, (ii) the
Company's substantial underperformance relative to the budgets and forecasts
prepared by management of the Company in two of the three preceding fiscal
years and (iii) the inherent uncertainties in any projections, Ramius believed
that the 12.0% to 14.0% range of discount rates was appropriate based on a
number of factors, including the fact that investors need to be adequately
compensated for the risk associated with the Company being able to meet its
projections. These returns are calculated from a forecast of equity cash flows,
including a terminal value calculation by applying a range of estimated EBITDA
multiples of 5.5x to 6.5x to the projected EBITDA of the Company in fiscal year
2003. Ramius believed that the 5.5x to 6.5x EBITDA multiple range was
appropriate due to the factors discussed above under the discussion of the
Discounted Cash Flow Analysis. Ramius realized that minor decreases in the
Company's growth rate assumptions or projected operating margins included in
the Contingency Projections and the Non Contingency Projections would most
likely have a material impact on valuation, particularly as it related to the
determination of terminal values in the year 2003. Ramius made a number of
assumptions regarding the amount, terms and structure of financing that would
be available to third party equity investors. Based on this analysis, the
Contingency Projections generated an implied equity value range of $11.54 to
$13.53 per share of Common Stock and the Non Contingency Projections generated
an implied equity value range of $12.03 to $14.03 per share of Common Stock.
Subsequent Notice. Ramius has advised the Board of Directors and the
Special Committee that it disagrees with certain of the Special Committee's
interpretations of the written and oral presentation made by Ramius to the
Board of Directors on November 5, 1998, which interpretations are set forth
below under "Recommendation of the Special Committee Against the Merger;
Unfairness of the Merger."
Miscellaneous. Pursuant to a letter agreement dated October 29, 1998
between the Company and Ramius, the Company agreed to pay Ramius $250,000 upon
execution of the letter agreement and an additional $750,000 upon Ramius'
rendering an opinion to the Board of Directors. The Company also agreed to
reimburse Ramius for all reasonable out-of-pocket expenses, including the
reasonable fees and expenses of its legal counsel and any other advisor
retained by Ramius, resulting from or arising out of the engagement. The
Company further agreed to indemnify Ramius and certain related persons and
entities for certain losses, claims, damages or liabilities (including actions
or proceedings in respect thereof) related to or arising out of, among other
things, its engagement as financial advisor.
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In the ordinary course of Ramius' business, Ramius and/or its affiliates
may actively trade the securities of the Company for its own account and for
the accounts of customers and, accordingly, may at any time hold a long or
short position in such securities.
Recommendation of the Special Committee Against the Merger;
Unfairness of the Merger
On November 2, 1998, the Special Committee of the Board of Directors
determined that the Merger Agreement and the Merger were NOT fair to the Public
Stockholders and recommended that the Board of Directors NOT approve the Merger
Agreement and the Merger. The Special Committee, which consisted of two
directors of the Company who are not otherwise employees or affiliates of Trace
or the Company, was charged by the Board of Directors with determining the
advisability and fairness to the Public Stockholders of the Merger Agreement
and the Merger. In a vote of five in favor and two opposed, the Board of
Directors approved the Merger Agreement and the Merger, despite the negative
recommendation of the Special Committee. In the vote of the Board of Directors,
the two members of the Special Committee voted against the approval of the
Merger Agreement and the Merger.
The primary factor considered by the Special Committee in making its
recommendation to the Board of Directors, and by the members of the Special
Committee in subsequently voting against the Merger Agreement and Merger as
directors, was the opinion of Beacon, the independent financial advisor to the
Special Committee, to the effect that, as of the date of such opinion, the
$12.00 price per Public Share that would be paid to the Public Stockholders
pursuant to the Merger was not fair to the Public Stockholders from a financial
point of view. Public Stockholders are urged to read Beacon's opinion in its
entirety (the opinion is attached as Appendix C to this Proxy Statement). In
connection with Beacon's opinion, the Special Committee carefully considered
the supporting financial analyses presented by Beacon at the meetings of the
Special Committee and the Board of Directors held on November 2, 1998, see
"--Opinion of Financial Advisor to the Special Committee" for a detailed
description of certain of the analyses performed by Beacon, as well as a
description of the terms of Beacon's engagement.
Based on Beacon's analysis and opinion as well as the other factors
described below, the Special Committee concluded that although the $12.00 price
per Public Share (sometimes referred to in this Proxy Statement as the "Merger
Consideration") may have represented the maximum amount which Trace could
finance in connection with its offer, see "--Background of the Merger," it was
less than the fair value of the Public Shares. The Special Committee,
therefore, determined that it was not advisable to approve a transaction with
Trace at such price, and recommended that the Board of Directors not do so in
favor of continuing the Company as a publicly-held corporation for the benefit
of all stockholders. In its consideration of the Merger Agreement and the
Merger, the Special Committee did not establish a price that it believed fair
or at which it would recommend that the Board of Directors approve a
transaction with Trace.
In the course of its analysis, Beacon computed valuation ranges based on
the Company's results of operations for the twelve months ended September 30,
1998 on a pro forma basis to include the results of the Crain businesses
(referred to below as "LTM" results) and based on the Current Projections using
both the "contingency" and "no contingency" cases. See "Certain Projected
Financial Data." In evaluating these analyses, the Special Committee noted that
the Merger Consideration was below the lower limit of the valuation range in
the vast majority of these analyses, including most of the analyses based on
historical results. The Merger Consideration was above or within the valuation
range with respect to only four of the twenty-seven ranges computed by Beacon:
(i) it was within the range computed by applying multiples for certain publicly
traded automotive interior components companies selected by Beacon for
comparison (defined below as the "Automotive Comparable Companies") to LTM
EBITDA; (ii) it was above the range computed by applying multiples for certain
publicly traded home furnishings companies selected by Beacon for comparison
(defined below as the "Home Furnishings Comparable Companies") to LTM EBITDA;
(iii) it was within the range computed by applying multiples for certain merger
and acquisition transactions involving companies in the home furnishings
industry selected by Beacon for comparison (defined below as the "Home
Furnishings Comparable Transactions") to LTM EBIT, and (iv) it was within the
range computed based on Beacon's Future Equity Value methodology. In all of the
following 23 cases, the Merger Consideration was below the lower end of
Beacon's computed valuation range: (i) the application of multiples for the
Automotive Comparable Companies to 1998 forecasted EBITDA; (ii) the application
of multiples for the Home Furnishings Comparable Companies to 1998 forecasted
EBITDA, (iii) the application of multiples for the Automotive Comparable
Companies to LTM EBIT, (iv) the application of multiples for the Automotive
Comparable Companies to 1998 forecasted EBIT, (v) the application of multiples
for the Home Furnishings Comparable Companies to LTM EBIT, (vi) the application
of multiples for the Home Furnishings Comparable Companies to forecasted 1998
EBIT, (vii) the application of multiples for the Automotive Comparable
Companies to forecasted
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1998 Net Income, (viii) the application of multiples for the Home Furnishings
Comparable Companies to forecasted 1998 Net Income, (ix) the application of
multiples for the Automotive Comparable Companies to forecasted 1998 Net
Income, including an average premium for going private transactions, (x) the
application of multiples for the Home Furnishings Comparable Companies to
forecasted 1998 Net Income, including an average premium for going private
transactions, (xi) the application of 1999 forecasted multiples for Automotive
Comparable Companies to forecasted 1999 Net Income, (xii) the application of
1999 forecasted multiples for Home Furnishings Comparable Companies to
forecasted 1999 Net Income, (xiii) the application of 1999 forecasted multiples
for Automotive Comparable Companies to forecasted 1999 Net Income, including an
average premium for going private transactions, (xiv) the application of 1999
forecasted multiples for Home Furnishings Comparable Companies to forecasted
1999 Net Income, including an average premium for going private transactions,
(xv) the application of multiples for certain merger and acquisition
transactions involving companies in the automotive interior components business
selected by Beacon for comparison (defined below as the "Automotive Comparable
Transactions") to LTM EBITDA, (xvi) the application of multiples for Automotive
Comparable Transactions to forecasted 1998 EBITDA, (xvii) the application of
multiples for Home Furnishings Comparable Transactions to LTM EBITDA, (xviii)
the application of multiples for Home Furnishings Comparable Transactions to
forecasted 1998 EBITDA, (xix) the application of multiples for Automotive
Comparable Transactions to LTM EBIT, (xx) the application of multiples for
Automotive Comparable Transactions to forecasted 1998 EBIT, (xxi) the
application of multiples for Automotive Comparable Transactions to forecasted
1998 EBIT, (xxii) the application of Beacon's Discounted Cash Flow methodology
and (xxiii) the application of Beacon's Leveraged Buy-Out Analysis.
In considering these analyses, the Special Committee noted in particular
that the forecasts for the 1998 fiscal year were based on nine months of actual
results (January 1, 1998 through September 30, 1998) and three months of
forecasted results (October 1, 1998 through December 31, 1998). In this regard,
the Special Committee noted the advice of Beacon that the forecasts for 1998,
given that they were based primarily on historical results and recent
consultation with management of the Company regarding expected results for the
last three months of the year, were more likely to be accurate than typically
is the case for annual forecasts. The Special Committee also noted that Beacon
placed more emphasis on forecasted results for 1998 rather than LTM results.
The LTM results included the pro forma results for the fourth quarter of 1997
which did not reflect the impact of synergies and efficiencies in connection
with the Crain Acquisition and the Company's reorganization of its business
units. By contrast, the forecasted results for 1998, which like the LTM results
included nine months of historical results through September 30, 1998, included
management's projections for the fourth quarter of 1998 instead of pro forma
results for the fourth quarter of 1997. The Special Committee and Beacon
believed that this was the more relevant set of results because the projected
results for the fourth quarter of 1998 included synergies and efficiencies
realized through September 30, 1998 from the Crain Acquisition and the
reorganization of the Company's business units and such additional synergies
and efficiencies expected to be realized by management in the fourth quarter of
1998 based on its experience over the preceding nine months. In addition, the
Special Committee noted that in computing their valuation ranges, Beacon
considered both the "contingency" and "non contingency" cases provided in the
Current Projections, and therefore, the lower limit of each such range
reflected management's less optimistic "contingency" case. This was done
despite the fact that, as Beacon pointed out to the Special Committee, the
"contingency" case was computed by management simply by reducing projected
EBITDA for each year by a constant percentage number, and was not based on
assumptions or methodologies that Beacon believed would accurately reflect the
potential effect of certain contingencies on the Company's various costs and
sources of revenue. In addition, Beacon pointed out to the Special Committee
that the Company's projections were particularly relevant in analyzing the
Merger Agreement and the Merger given the recent fundamental changes in the
Company, including the Crain Acquisition and the reorganization of the
Company's business units. Beacon noted also that in any event the Merger
Consideration was below the lower limit of most of the valuation ranges
calculated based on historical results. Based on these considerations taken
together with Beacon's opinion, the Special Committee concluded that the Merger
was not fair to the Public Stockholders from a financial point of view.
As noted above, the primary factor considered by the Special Committee in
making its determination and recommendation was the opinion and analyses of
Beacon. In addition, the Special Committee considered the following material
factors:
(i) The Special Committee noted that the Merger Consideration
represented a 36% discount to the price Trace was obligated to pay to
acquire the Public Shares pursuant to the Old Merger Agreement. In
addition, although the Merger Consideration represented a 14.3% premium to
the closing price of the Common Stock on October 15, 1998 ($10.50), the
last trading day prior to the announcement of Trace's revised offer, it
represented a 13.5% discount to the closing price of the Common Stock on
March 15, 1998 ($13.88), the last trading day prior to the announcement of
Trace's original offer, a 33.1% discount to the average closing price
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of the Common Stock for the thirty trading day period ended October 15,
1998 ($14.00), and a 42.9% discount to the all-time high price of the
Common Stock, achieved on February 3, 1997 ($21.00). With respect to the
premium to the October 15, 1998 closing price, the Special Committee noted
that in the weeks preceding that date, the price of the Common Stock
generally had declined due to uncertainty concerning Trace's ability to
complete the transactions contemplated by the Old Merger Agreement. The
Special Committee concluded that the lack of a significant premium lent
substantial support to a determination that the Merger Agreement and the
Merger were not fair to the Public Stockholders.
(ii) The Special Committee considered the fact that the Company's
financial and operating results through the third quarter of fiscal 1998
("1998 YTD") were substantially consistent with the Initial Projections for
fiscal 1998 used by Beacon and the Special Committee in evaluating the
$18.75 price per Public Share set forth in the Old Merger Agreement. For
instance, (A) 1998 YTD EBITDA plus forecasted EBITDA for the fourth quarter
of 1998 under the "no contingency case" in the Company's Current
Projections ("Q4 Projected Amount") was $184.5 million, as compared to a
range of $180 million to $190.1 million for 1998 in the Initial
Projections, (B) 1998 YTD EBIT plus the Q4 Projected Amount of EBIT was
$147.2 million, as compared to a range of $145 million to $155.3 million
for 1998 in the Initial Projections, and (C) 1998 YTD Gross Profit plus the
Q4 Projected Amount of Gross Profit was $229.1 million, as compared to a
range of $229.2 million to $239.3 million for 1998 in the Initial
Projections. In connection with these results, the Special Committee
considered the Company's history of volatile results of operations and
under-performance of its projections over the preceding five years. The
Special Committee noted in this respect, however, that since Mr. Farace
became Chief Executive Officer, the Company has performed substantially in
line with its projections and has achieved predicted cost savings and
efficiencies in connection with the Crain Acquisition and the
reorganization of its business units. In the judgment of the Special
Committee, the fact that the Company was performing substantially in line
with projections that supported a value of $18.75 per Public Share in
connection with the Old Merger Agreement together with the fact that no
event or contingency had occurred with respect to the Company that
undermined that value, lent substantial support to a determination that the
Merger and the Merger Agreement providing for a price of $12.00 per Public
Share were not fair to the Public Stockholders.
(iii) The Special Committee considered Trace's statement that it would
be unable to obtain the financing required to fulfill its obligation under
the Old Merger Agreement to acquire the Public Shares at a price of $18.75
per share and that the proposed $12.00 price per Public Share was derived
from the maximum amount of financing available to Trace. In this regard,
the Special Committee noted that the price per Public Share financeable by
Trace was not necessarily related to and did not necessarily reflect the
intrinsic value of the Public Shares. Accordingly, the Special Committee
concluded that the fact that Trace could not finance the acquisition of the
Public Shares at a price in excess of $12.00 per share did not imply that
an offer at that price was fair to the Public Stockholders.
(iv) The Special Committee considered Trace's willingness to eliminate
from the Merger Agreement provisions restricting the Company from
soliciting alternative transactions and requiring payment of a termination
fee by the Company in the event it enters into an alternative transaction.
See "--Background of the Merger." However, after consulting with its
independent financial and legal advisors, it was the judgment of the
Special Committee that it was unlikely that any third party would offer to
purchase all of the Public Shares or attempt to enter any alternative
transaction with the Company or the Public Stockholders, so long as Trace
and its affiliates continue to hold an effective control stake in the
Company. In this regard, the Special Committee noted that since making its
original offer on March 16, 1998, Trace did not publicly announce a
willingness to consider a sale of the Trace Shares, did not commit to
participate in any transaction in which the consideration offered exceeds
the Merger Consideration and had publicly stated that it would reserve all
rights with respect to any sale of the Trace Shares. The Special Committee
therefore concluded that under such circumstances it was unlikely that any
third party would propose an alternative transaction. In addition, given
that representatives of Trace stated that the only method by which Trace
could avoid significant financial difficulty was to complete its purchase
of the Public Shares prior to the end of 1998, the Special Committee
concluded that, even if an alternative transaction were proposed, given
Trace's timing and financial constraints, it was unlikely that such a
transaction would be acceptable to Trace. Because of these factors, the
Special Committee concluded that the lack of third-party interest in an
alternative transaction and the elimination of the "no-solicitation" and
termination fee provisions from the Merger Agreement did not support a
determination that the Merger Agreement and the Merger were fair to the
Public Stockholders.
(v) The Special Committee considered statements made by
representatives of Trace to the effect that unless the Merger was completed
by the end of December, 1998, Trace would not have the financial resources
necessary
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to satisfy substantial debt obligations due at that time, and that a
default by Trace may result in the acceleration of certain indebtedness of
the Company (a "Company Acceleration"). See "--Potential Acceleration of
Foamex Debt in the Absence of a Merger." As more fully set forth below, the
Special Committee concluded that Trace's financial difficulties, and the
potential impact of those difficulties on the Company, did not support a
determination that the Merger Agreement and the Merger were fair to the
Public Stockholders.
(vi) The Special Committee considered the fact that completion of the
Merger would be conditioned on the affirmative vote of holders of a
majority of the Public Shares voted with respect to the Merger Agreement.
The Special Committee concluded that given the substantial decrease in the
price per Public Share offered to the Public Stockholders, a more
appropriate standard would have been to require the affirmative vote of
holders of a majority of the outstanding Public Shares as opposed to a
majority of the Public Shares voted. In any event, although the Special
Committee noted that requiring the affirmative vote of holders of a
majority of the Public Shares would provide some measure of comfort that
the Public Stockholders would not be coerced into approving the Merger
Agreement and the Merger, the Special Committee concluded that such factor
on its own would not justify a determination by the Special Committee that
the Merger Agreement and the Merger were fair to the Public Stockholders.
In this regard, the Special Committee noted the advice of Cleary, Gottlieb
to the effect that under the corporate law of the State of Delaware a board
of directors cannot merely delegate to a corporation's stockholders the
entire decision regarding a merger and is required to find a merger
advisable before submitting it to a vote of stockholders.
(vii) The Special Committee considered Trace's refusal to agree to pay
the Company's fees and expenses in the event the Merger is not completed.
In this regard, the Special Committee noted that Trace's obligation to
consummate the Merger under the Merger Agreement, like Trace's obligation
to consummate the Old Merger under the Old Merger Agreement, would be
subject to a number of conditions, including Trace's ability to obtain
adequate financing. The Special Committee also noted that Trace had failed
to obtain adequate financing to complete the Old Merger and that its
financial situation and market conditions may impede its ability to obtain
the financing required to complete the Merger. In light of the risk that
the conditions to Trace's obligation to complete the Merger, including the
financing condition, would not be satisfied, and the fact that the Company
would incur substantial expenses in connection with the Merger Agreement
and the Merger (in addition to those expenses already incurred with respect
to the Old Merger Agreement), the Special Committee concluded that this
factor supported a determination that the Merger Agreement and Merger were
not fair to the Public Stockholders.
Other than the opinion and analysis of Beacon which was the primary factor
considered, in view of the circumstances and the variety of other factors
considered in connection with its evaluation of the Merger and the Merger
Agreement, the Special Committee did not find it practicable to quantify or
assign relative weights to the other factors considered in its assessment of
the Merger and the Merger Agreement, and accordingly, the Special Committee did
not do so.
As noted above, the Special Committee considered statements made by
representatives of Trace to the effect that, unless the Merger were completed
by December 31, 1998, Trace would not have the financial resources necessary to
satisfy substantial debt obligations due at that time, and that a default by
Trace on such obligations could result in a Company Acceleration. Certain
indebtedness of Trace is secured by a pledge of the Trace Shares, and if Trace
were to default on such indebtedness, the holders likely would have the right
to foreclose on, and thereby succeed to ownership of, such shares. The Foamex
L.P. Credit Agreement, dated June 12, 1997, as amended and restated as of
February 27, 1998, the Foamex Carpet Cushion, Inc. Credit Agreement, dated as
of February 27, 1998, the Promissory Note of Foamex, L.P. in the aggregate
principal amount of $34,000,000, dated February 27, 1998, and the Promissory
Note of Foamex Carpet in the aggregate principal amount of $70,200,000, dated
February 27, 1998, contain provisions which would result in the acceleration of
such indebtedness if Trace were to cease to own at least 30% of the outstanding
Common Stock. Similarly, the indentures relating to the $150,000,000 aggregate
principal amount of 9 7/8% Senior Subordinated Notes due 2007 and the
$98,000,000 aggregate principal amount of 13 1/2% Senior Subordinated Notes due
2005 of Foamex L.P. and Foamex Capital Corporation contain provisions which
provide the holders of such Senior Subordinated Notes with the right to require
the issuers thereof to repurchase such Senior Subordinated Notes at a price in
cash equal to 101% of the aggregate principal amount thereof, plus accrued and
unpaid interest thereon, if Trace falls below certain specified ownership
levels of Common Stock and another person or group owns a greater percentage of
Common Stock than Trace. Based on several factors, however, the Special
Committee, after consultation with its legal advisors, concluded that it was
uncertain whether a foreclosure on the Trace Shares would occur or, if such
foreclosure did occur, whether the above-described debt of the Company would be
accelerated. In this regard, the Special Committee noted that Trace's creditors
would likely be hesitant to foreclose on the Trace Shares and thereby
potentially threaten the financial viability of the Company, given that the
Company's continuing ability to generate positive cash flow would represent an
opportunity for such creditors
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to realize substantial value in respect of the Trace indebtedness. The Special
Committee also noted that in the event a foreclosure was threatened by its
creditors, Trace would most likely file a petition for reorganization under
Chapter 11 of the Bankruptcy Code, thereby forestalling any foreclosure until
approval of a bankruptcy court was obtained. Another factor considered by the
Special Committee was that in the event a foreclosure on the Trace Shares was
imminent, the Company could seek to refinance or amend its existing
indebtedness so that such foreclosure would not have a substantial adverse
impact on the Company. In this regard, Beacon indicated to the Special
Committee that, although it had not had any conversations with the Company's
existing financing sources on this topic, because of a variety of factors,
including the fact the Company is current on all its obligations and has
favorable coverage ratios with respect to its existing indebtedness, the
Company appeared capable of refinancing or amending its existing indebtedness
from a financial standpoint based on then current conditions. Based on these
factors, the Special Committee concluded that the fact that Trace may be unable
to satisfy its obligations when due does not support a determination that the
Merger Agreement and the Merger are fair to the Public Stockholders.
It should be noted that there was certain additional information that was
available to the members of the Special Committee on November 5, 1998, when
they voted as directors with respect to the Merger Agreement and the Merger,
that was not available to them on November 2, 1998, when the Special Committee
made its recommendation to the Board of Directors. In particular, prior to the
vote of the Board of Directors on November 5, 1998, the members of the Special
Committee, along with the other directors, received the Ramius' fairness
opinion and supporting analyses. In the limited time available, nothing came to
the attention of the members of the Special Committee that would cause them to
believe that the opinion and analyses of Ramius were more reliable and relevant
in connection with the evaluation of the Merger Agreement and the Merger than
those of Beacon. In particular, the members of the Special Committee noted,
among other factors, that Ramius (i) with respect to projections, emphasized in
their oral presentations the management "contingency" case projections, which
the Special Committee believed were less relevant than the "non contingency"
projections given the assumptions and methodologies used in their preparation,
(ii) emphasized LTM results as compared to forecasted results for fiscal 1998
(as described above), (iii) did not perform analyses which considered premiums
paid in other "going private" transactions, (iv) emphasized macroeconomic
predictions which are inherently uncertain and in any event would not
necessarily affect the Company's results of operations, and (v) emphasized the
state of the high-yield financing markets despite the fact that availability of
financing for a leveraged acquisition of the Company is not necessarily related
to and does not necessarily reflect the value of the Public Shares.
On June 25, 1998, the Special Committee determined that the Old Merger
Agreement and the Old Merger, pursuant to which Public Stockholders would have
received $18.75 per Public Share, were fair to the Public Stockholders, and the
Special Committee recommended that the Board of Directors approve the Old
Merger Agreement and the Old Merger. The Special Committee's analyses and
conclusions in connection with its June 25, 1998 determination and
recommendation were substantially different than the analyses and conclusions
discussed above with respect to the Merger Agreement and the Merger due to,
among other factors, the substantial differences in the price per Public Share
offered in the two transactions, the differences in the non-financial terms of
the Old Merger Agreement and the Merger Agreement, the difference in the
negotiation process with respect to the two transactions, and the fact that the
analysis with respect to the Old Merger Agreement and the Old Merger was
performed five months prior to the analysis with respect to the Merger
Agreement and the Merger. Moreover, in connection with its consideration of the
Merger Agreement and the Merger, the Special Committee had substantial
additional information concerning the performance of the Company under its
relatively new management team, the Company's performance relative to its
projections for 1998, the Company's realization of synergies and efficiencies
in connection with the Crain Acquisition and the reorganization of the
Company's business units, Trace's financial situation and its potential impact
on the Company, supply/demand dynamics in the markets for raw materials used by
the Company, and the impact of several recent events on the Company's business,
including the General Motors strike and the fire at the Company's Orlando,
Florida facility. Accordingly, although the Special Committee's analysis of the
Old Merger Agreement and the Old Merger served as the starting point for its
analysis of the Merger Agreement and the Merger, and in the course of both
analyses certain similar factors were considered, the Special Committee
believes that because of the substantial differences between the two analyses,
its analysis of the Old Merger Agreement and the Old Merger and the results
thereof would not be particularly relevant to a stockholder considering the
Merger Agreement and the Merger.
The Special Committee was created by resolution of the Board of Directors
on March 16, 1998 for the purpose of determining the fairness and advisability
of the Old Merger Agreement and the Old Merger to the Public Stockholders. On
October 19, 1998, the Board of Directors referred the Current Proposed
Transaction to the Special
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Committee. Pursuant to the March 16 resolution, the members of the Special
Committee are entitled to a fee from the Company of $20,000 per month for
serving on the Special Committee. Robert J. Hay, one of the two members of the
Special Committee, owns 4,944 shares of Common Stock which will be exchanged
for the Merger Consideration if the Merger is consummated.
Opinion of Financial Advisor to the Special Committee
Beacon has acted as financial advisor to the Special Committee in
connection with Trace's original proposed transaction and the Merger. Beacon
was selected by the Special Committee because of its expertise and the
reputation of its senior professionals in the areas of mergers and
acquisitions, "going private" transactions and special committee procedures,
Beacon's proposed fee in connection with the assignment and the commitment of
senior personnel of the firm to work on the assignment. Beacon, as part of its
strategic advisory business, is engaged in the valuation of businesses and
their securities in connection with mergers and acquisitions, private
placements and valuations for estate, corporate or other purposes.
ON NOVEMBER 2, 1998, BEACON DELIVERED TO THE SPECIAL COMMITTEE AN ORAL AND
WRITTEN OPINION THAT, AS OF THAT DATE AND BASED UPON AND SUBJECT TO THE MATTERS
SET FORTH THEREIN, THE MERGER CONSIDERATION WAS NOT FAIR FROM A FINANCIAL POINT
OF VIEW TO THE PUBLIC STOCKHOLDERS.
THE FULL TEXT OF THE BEACON OPINION, WHICH SETS FORTH THE PROCEDURES
FOLLOWED, THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE
REVIEW UNDERTAKEN BY BEACON, IS ATTACHED AS APPENDIX C TO THIS PROXY STATEMENT
AND IS INCORPORATED HEREIN BY REFERENCE. PUBLIC STOCKHOLDERS ARE URGED TO READ
THE BEACON OPINION IN ITS ENTIRETY. THE BEACON OPINION IS DIRECTED TO THE
SPECIAL COMMITTEE AND RELATES ONLY TO THE FAIRNESS OF THE MERGER CONSIDERATION
FROM A FINANCIAL POINT OF VIEW TO THE PUBLIC STOCKHOLDERS AND DOES NOT ADDRESS
ANY OTHER ASPECT OF THE MERGER. THE SUMMARY OF THE BEACON OPINION IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT THEREOF.
In arriving at its opinion, Beacon informed itself of aspects of the
Company's business, operations, financial condition, prospects and management
which it deemed appropriate and material. Beacon reviewed, among other things,
the Merger Agreement; the Prospectus issued by the Company in connection with
the initial public offering of its common stock in December 1993; Annual
Reports to stockholders and Annual Reports on Form 10-K of the Company for each
of the four fiscal years ended December 28, 1997; certain interim reports to
stockholders and Quarterly Reports on Form 10-Q; various other communications
from the Company to its stockholders; and certain internal financial analyses
and financial forecasts for the Company prepared by its management, including
those relating to the Company's December 1997 acquisition of Crain, the
integration of Crain into the Company and the reorganization of the Company in
1998 following the acquisition of Crain. Beacon discussed the Company's
business and prospects with the Company's senior management and with others it
deemed appropriate, including senior management and other representatives of
Trace. Beacon also discussed with those individuals the relationship of the
Company and Trace, as well as inter-company transactions between the Company
and Trace, including certain transactions in connection with the financing of
the Merger pursuant to which it is anticipated that Trace would receive
payments of approximately $75 million as an advance against future payments
under tax sharing agreements. Beacon reviewed in outline form the proposed
terms, conditions and structure of the financing for the proposed purchase of
the Public Shares and had discussions with representatives of the principal
sources of financing concerning their confidence in completing that financing.
In addition, Beacon reviewed the reported price and trading activity for the
Company's common stock; compared financial and stock market information for the
Company with similar information for selected other companies whose securities
are publicly traded and which Beacon deemed to be comparable to the Company in
certain material respects; reviewed the financial terms of certain recent
business combinations in industries and markets in which the Company
participates; and performed such other studies and analyses as Beacon
considered appropriate. Since Trace was unwilling to indicate whether the Trace
Shares were for sale, and due to restrictions in the Old Merger Agreement,
Beacon, with the approval of the Special Committee, did not contact third
parties formally to ascertain their interest in a combination with the Company
or in making a proposal which is competitive with the Merger.
Beacon assumed and relied without independent verification on the accuracy
and completeness of all of the financial and other information reviewed by it
for purposes of the opinion. With respect to the Current Projections (as
hereinafter defined) furnished to Beacon by the Company, Beacon assumed that
they had been reasonably prepared on a basis which reflects the best current
estimates and judgments of the management of the Company
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as to the future operating and financial performance of the Company and
relevant economic conditions. With respect to its analyses that utilized
forecast 1998 and 1999 financial results for the Company, Beacon used a range
for earnings before interest and tax ("EBIT"), earnings before interest, tax,
depreciation and amortization ("EBITDA") and Net Income based on two sets of
financial projections (collectively, the "Current Projections") prepared by the
Company's management and delivered to Beacon. The first set of financial
projections were characterized by management as "Contingency Projections" which
was intended to reflect the Company's projected financial results giving effect
to an economic slowdown, among other possible adverse circumstances. The second
set of financial projections were characterized by management as the "Non
Contingency Projections" which were intended to reflect the Company's projected
financial results without giving effect to those adverse circumstances. The
relevant ranges of 1998 forecast financial results in the Current Projections
and utilized by Beacon were: (i) for EBITDA, $182.5 million to $184.5 million;
(ii) for EBIT, $145.2 million to $147.2 million; and (iii) for Net Income,
$42.3 million to $43.5 million (in each case, the "1998 Projection Range"). The
relevant ranges of 1999 forecast financial results in the projections and
utilized by Beacon were: (i) for EBITDA, $193.8 million to $210.8 million; (ii)
for EBIT, $157.7 million to $174.7 million; and (iii) for Net Income, $51.0
million to $61.2 million (in each case, the "1999 Projection Range"). Beacon
did not make an independent evaluation or appraisal of the assets and
liabilities of the Company or of any of its subsidiaries, and Beacon has not
been furnished with any such evaluation or appraisal. The Beacon opinion does
not constitute an opinion with respect to, and does not address, the effect
which consummation of the Merger or the financing thereof would have on the
solvency of the Company or any of its affiliates, including Trace, or the
effect which Trace's present or future financial condition, or any changes
therein, might have on the Company, its present or future financial condition
or the value of the Public Shares. In addition, Beacon did not address the
advisability of the Company entering into the Merger or express an opinion as
to the consequences to the Company of determining not to proceed with the
Merger.
In preparing its opinion, Beacon performed a variety of financial and
comparative analyses. The summary of Beacon's analyses set forth below does not
purport to be a complete description of the analyses underlying the Beacon
opinion. The preparation of a fairness opinion is a complex analytic process
involving various determinations as to the most appropriate and relevant
methods of financial analyses and the application of those methods to the
particular circumstances, and, therefore, such an opinion is not readily
susceptible to partial analysis or summary description. In arriving at its
opinion, Beacon made qualitative judgments as to the significance and relevance
of each analysis and factor. Accordingly, Beacon believes that its analyses
must be considered as a whole and that selecting portions of its analyses,
without considering all analyses, could create a misleading or incomplete view
of the processes underlying such analyses and the Beacon opinion. In performing
its analyses, Beacon made numerous assumptions with respect to the Company,
industry performance, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of the
Company. No company, transaction, or business used in such analyses as a
comparison is identical to the Company or the Merger, nor is an evaluation of
the results of such analyses entirely mathematical; rather, such analyses
involve complex considerations and judgments concerning financial and operating
characteristics and other factors that could affect the acquisition, public
trading or other values of the companies, business segments or transactions
being analyzed. The estimates contained in such analyses and the ranges
resulting from any particular analysis are not necessarily indicative of actual
values or predictive of future results or values, which may be significantly
more or less favorable than those suggested by such analyses. In addition,
analyses relating to the value of businesses or securities do not purport to be
appraisals or to reflect the prices at which businesses or securities actually
may be sold. Accordingly, such analyses and estimates are inherently subject to
substantial uncertainty.
In connection with delivering its opinion, Beacon made a written and oral
presentation with respect to its analyses to the Special Committee and, at the
Special Committee's request, to the Board of Directors (a copy of the written
presentation has been filed as an exhibit to the Schedule 13E-3 filed with the
SEC and can be inspected and obtained from the SEC as set forth below under
"Available Information."). In this presentation, Beacon noted the positive
impact of the Crain Acquisition, the integration of Crain into the Company and
the reorganization of the Company in 1998 following the Crain Acquisition on
the Company's reported operating results for the nine months ended September
30, 1998 and its future prospects. In this regard, Beacon concluded that those
operating results and improved future prospects, coupled with the views
expressed to Beacon by the Company's senior management concerning their
expectations for the Company's operating results for the last quarter of 1998
and the year 1999, supported the likelihood that the Company's operating
results for the last quarter of 1998, together with its actual operating
results for the nine months ended September 30, 1998, would enable the Company
to achieve operating results for the year ended December 31, 1998 that would be
within the 1998 Projection Range. The following is a summary of the analyses
performed by Beacon in connection with the preparation of the Beacon opinion.
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Comparative Stock Price Performance Analysis. Beacon reviewed the per
share daily closing prices of the Company's Common Stock over the period since
its public offering on December 7, 1993 through October 30, 1998 compared with
the performance of the Standard & Poor's MidCap Industrials Index as well as
indices comprised of stocks of publicly traded automotive interior components
companies and publicly traded home furnishings companies deemed by Beacon to be
similar to the Company in material respects. These companies serve similar
customers and markets as the Company, in many instances sell products
complementary to those of the Company and have operating and financial
characteristics similar to the comparable business segment of the Company.
Also, companies in these industries tend to experience similar supply/demand
dynamics and macroeconomic forces as the Company as a result of serving similar
markets and customers. The automotive interior components companies reviewed by
Beacon were Collins & Aikman Corporation, Johnson Controls, Inc., Lear
Corporation and Magna International Inc. (collectively, the "Automotive
Comparable Companies"); and the home furnishings companies reviewed by Beacon
were Armstrong World Industries Inc., Culp, Inc., Mohawk Industries, Inc. and
Synthetic Industries, Inc. (collectively, the "Home Furnishings Comparable
Companies"). Beacon noted that since its initial public offering the Company's
stock has under-performed the Standard & Poor's MidCap Industrials Index and
the indices based on the Automotive Comparable Companies and the Home
Furnishings Comparable Companies.
Comparable Companies Analysis. To provide contextual data and comparative
market information, Beacon analyzed the operating performance of the Company
relative to the Automotive Comparable Companies and the Home Furnishings
Comparable Companies.
For the Automotive Comparable Companies, Beacon compared, among other
things, current stock prices as multiples of fiscal year 1998 and 1999 earnings
per share based on equity analyst research, and adjusted market values (equity
market value, plus total debt, preferred stock and minority interests, less
cash and cash equivalents) as multiples of latest twelve months reported EBIT
and EBITDA adjusted to exclude certain non-recurring items. Beacon determined
that the relevant ranges between the mean and median multiples for the
Automotive Comparable Companies were: (i) with respect to EBIT, 10.4x to 10.6x;
(ii) with respect to EBITDA, 6.8x; (iii) with respect to 1998 fiscal year
estimated earnings per share, 13.4x to 13.5x; and (iv) with respect to 1999
fiscal year estimated earnings per share, 10.5x to 10.9x. Beacon then
calculated imputed enterprise and equity values of the Company by applying
latest available twelve-month EBIT and EBITDA multiples derived from its
analysis of the Automotive Comparable Companies to the Company's latest twelve
month financial results through September 30, 1998, pro forma effected for the
inclusion of a full year's results of Crain and exclusion of Dalton, a business
sold by the Company in 1997 ("LTM Results"). This analysis generated the
following ranges of implied equity value per share of Common Stock: (i) with
respect to LTM Results for EBIT, $18.53 to $19.47; and (ii) with respect to LTM
Results for EBITDA, $11.76 to $12.00. Beacon also applied the Automotive
Comparable Companies' latest twelve months EBIT and EBITDA multiples, as well
as the 1998 fiscal year estimated earnings per share multiple, to the Company's
EBIT, EBITDA and earnings per share based on the 1998 Projection Range. This
analysis generated the following ranges of implied equity value per share of
Common Stock: (i) with respect to projected 1998 EBIT, $27.11 to $28.98; (ii)
with respect to projected 1998 EBITDA, $17.36 to $18.11; and (iii) with respect
to 1998 estimated earnings per share, $21.37 to $22.01. Beacon also applied the
Automotive Comparable Companies price as a multiple of 1999 estimated earnings
per share to the estimated earnings per share of the Company based on the 1999
Projection Range. This analysis generated a range of implied equity value per
share of Common Stock of $19.82 to $24.84.
For the Home Furnishings Comparable Companies, Beacon compared, among
other things, current stock prices as multiples of fiscal year 1998 and 1999
earnings per share based on equity analyst research, and adjusted market values
(equity market value, plus total debt, preferred stock and minority interests,
less cash and cash equivalents) as multiples of latest twelve months reported
EBIT and EBITDA adjusted to exclude certain non-recurring items. Beacon
determined that the relevant ranges between the mean and median multiples for
the Home Furnishings Comparable Companies were: (i) with respect to EBIT, 9.3x
to 9.5x; (ii) with respect to EBITDA, 6.1x to 6.4x; (iii) with respect to 1998
fiscal year estimated earnings per share, 10.9x; and (iv) with respect to 1999
fiscal year estimated earnings per share, 9.9x to 10.0x. Beacon then calculated
imputed enterprise and equity values of the Company by applying latest
available twelve-month EBIT and EBITDA multiples derived from its analysis of
the Home Furnishings Comparable Companies to the Company's LTM Results. This
analysis generated the following ranges of implied equity value per share of
Common Stock: (i) with respect to LTM Results for EBIT, $13.88 to $14.74; and
(ii) with respect to LTM Results for EBITDA, $7.57 to $9.47. Beacon also
applied the Home Furnishings Comparable Companies' latest twelve months EBIT
and EBITDA multiples, as well as the 1998 fiscal year estimated earnings per
share multiple, to the Company's EBIT, EBITDA and earnings per share based on
the 1998 Projection Range. This analysis generated the following ranges of
implied equity value per share of the Common Stock: (i) with respect to
projected 1998 EBIT, $21.56 to $23.27; (ii) with respect to projected 1998
EBITDA, $12.97 to $15.35; and (iii) with respect to 1998 estimated earnings per
share, $17.59 to $18.05. Beacon also applied the Home
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Furnishings Comparable Companies price as a multiple of 1999 estimated earnings
per share to the estimated earnings per share of the Company based on the 1999
Projection Range. This analysis generated a range of implied equity value per
share of Common Stock of $18.76 to $22.95. Beacon noted that the implied equity
valuations per share of Common Stock were greater than the Merger Consideration
for both the Automotive Comparable Companies and the Home Furnishings
Comparable Companies in Beacon's analyses using the LTM Results, except in the
case of Home Furnishing Comparable Companies EBITDA multiples, for which the
implied equity valuations per share of Common Stock were less than the Merger
Consideration, and in the case of Automotive Comparable Companies EBITDA
multiples, for which the Merger Consideration was in the range of implied
equity valuations per share of Common Stock. For all analyses using the 1998
Projection Range or 1999 Projection Range, the Merger Consideration was below
the implied equity valuations per share of Common Stock. In Beacon's view, the
results of the Comparable Companies Analysis support its conclusion that the
Merger Consideration was not fair from a financial point of view to the Public
Stockholders.
Comparable Transactions Analysis. In conducting its analysis of the
Company, Beacon analyzed, among other things, the implied transaction multiples
paid in selected merger and acquisition transactions involving companies in the
automotive interior components and home furnishings industries.
For automotive interior components companies, these transactions included
the acquisition of Bostrom Seating Inc. by Johnstown America Industries, Inc.,
the acquisition of Automotive Industries by Lear Corporation, the acquisition
of Larizza Industries, Inc. by Collins & Aikman Corporation, the acquisition of
Masland Corporation by Lear Corporation, the acquisition of Prince Automotive
by Johnson Controls, Inc., the acquisition of the Company's wholly-owned
subsidiary JPS Automotive L.P. by Collins & Aikman Corporation, the acquisition
of Douglas & Lomason Company by Magna International Inc., the acquisition of
Keiper Car Seating Gmbh & Co. by Lear Corporation, the acquisition of the
Collins & Aikman Corporation's wholly-owned subsidiary JPS Automotive L.P. by
Safety Components International, Inc., the acquisition of AlliedSignal Inc.'s
Safety Restraint Systems Division by BREED Technologies, Inc. and the
acquisition of the Becker Group Limited by Johnson Controls, Inc.
(collectively, the "Automotive Comparable Transactions").
For home furnishings companies, these transactions included the
acquisition of Horizon Industries, Inc. by Mohawk Industries, Inc., the
acquisition of General Felt Industries, Inc. by the Company, the acquisition of
Vintage Yarns, Inc. by Unifi, Inc., the acquisition of Great Western Foam
Products Corporation by the Company, the acquisition of the Carpet Division of
Fieldcrest Cannon, Inc. by Mohawk Industries, Inc., the acquisition of the
Hanes Holding Company by Leggett & Platt, Incorporated, the acquisition of
Perfect Fit Industries, Inc. by the Company, the acquisition of Aladdin Mills,
Inc. by Mohawk Industries, Inc., the acquisition of the Raytex Division of
Golding Industries, Inc. by Cone Mills Corporation, the acquisition of Galaxy
Carpet Mills, Inc. by Mohawk Industries, Inc., the acquisition of
England/Corsair, Inc. by La-Z-Boy Chair Company, the acquisition of Syroco Inc.
by Marley PLC, the acquisition of Thomasville Furniture Industries, Inc. by
INTERCO Incorporated, the acquisition of Graniteville Company by Avondale
Mills, Inc., the acquisition of Masco Corporation's Home Furnishings Group by
Furnishings International Inc., the acquisition of Collins & Aikman
Corporation's Floorcoverings Division by an investor group, the acquisition of
the Mastercraft Group of Collins & Aikman Corporation by Joan Fabrics
Corporation, the acquisition of Crain by the Company, the acquisition of Queen
Carpet Corporation by Shaw Industries Inc., the acquisition of Simmons Company
by Fenway Partners Inc. and the acquisition of World Carpets Inc. by Mohawk
Industries, Inc. (collectively, the "Home Furnishings Comparable
Transactions").
Beacon compared transaction values in Automotive Comparable Transactions
as multiples of EBIT and EBITDA, adjusted to exclude certain non-recurring
items, of each acquired company or business for the latest available
twelve-month period immediately preceding the announcement of the acquisition
of such company or business. Beacon determined that the relevant ranges between
the mean and median multiples for the acquired companies and businesses were:
(i) with respect to EBIT, 11.0x to 11.5x; and (ii) with respect to EBITDA, 7.5x
to 7.9x. Beacon then calculated imputed enterprise and equity values of the
Company by applying the multiples derived from its analysis of the Automotive
Comparable Transactions to the Company's LTM Results. This analysis generated
ranges of implied equity value per share of Common Stock of: (i) with respect
to LTM Results for EBIT, $21.22 to $23.05; and (ii) with respect to LTM Results
for EBITDA, $16.04 to $17.82. Beacon also applied the multiples derived from
its analysis of the Automotive Comparable Transactions to the Company's EBIT
and EBITDA based on the 1998 Projection Range. This analysis generated ranges
of implied equity value per share of Common Stock of: (i) with respect to
projected 1998 EBIT, $30.31 to $33.31; and (ii) with respect to projected 1998
EBITDA, $22.25 to $24.83.
Beacon also compared transaction values in Home Furnishings Comparable
Transactions as multiples of EBIT and EBITDA, adjusted to exclude certain
non-recurring items, of each acquired company or business for the latest
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available twelve-month period immediately preceding the announcement of the
acquisition of such company or business. Beacon determined that the relevant
ranges between the mean and median multiples for the acquired companies and
businesses were: (i) with respect to EBIT, 8.7x to 10.0x; and (ii) with respect
to EBITDA, 7.0x to 7.4x. Beacon then calculated imputed enterprise and equity
values of the Company by applying the multiples derived from its analysis of
the Home Furnishings Comparable Transactions to the Company's LTM Results. This
analysis generated ranges of implied equity value per share of Common Stock of:
(i) with respect to LTM Results for EBIT, $11.02 to $16.61; and (ii) with
respect to LTM Results for EBITDA, $12.81 to $15.05. Beacon also applied the
multiples derived from its analysis of the Home Furnishings Comparable
Transactions to the Company's EBIT and EBITDA based on the 1998 Projection
Range. This analysis generated ranges of implied equity value per share of
Common Stock of: (i) with respect to projected 1998 EBIT, $18.23 to $25.52; and
(ii) with respect to projected 1998 EBITDA, $18.54 to $21.63.
Beacon noted that the implied equity valuations per share of Common Stock
were greater than the Merger Consideration for both the Automotive Comparable
Transactions and the Home Furnishings Comparable Transactions in Beacon's
analyses using the LTM Results, except in the case of the Home Furnishings
Comparable Transactions EBIT multiples, for which the Merger Consideration was
in the range of implied equity valuations per share of Common Stock. For
analyses using the 1998 Projection Range, the Merger Consideration was below
the implied equity valuations per share of Common Stock in all cases. In
Beacon's view, the results of the Comparable Transactions Analysis support its
conclusion that the Merger Consideration was not fair from a financial point of
view to the Public Stockholders.
Discounted Cash Flow Analysis. Beacon performed a discounted cash flow
analysis for fiscal years 1999 through 2003 for the Company to estimate the
present value of the stand-alone, unlevered free cash flows of the Company
based upon both the Contingency Projections and Non Contingency Projections.
For purposes of this analysis, unlevered free cash flows were defined as
after-tax operating earnings plus depreciation and amortization and other
non-cash items, less projected capital expenditures and investment in working
capital. Beacon calculated terminal values by applying a range of estimated
EBITDA multiples of 5.5x to 7.5x to the projected EBITDA of the Company in
fiscal year 2003. The unlevered free cash flows and terminal values were then
discounted to the present using a range of discount rates of 10.0% to 12.0% ,
representing an estimated range of the weighted average cost of capital of the
Company. From the derived present value of the unlevered free cash flows,
Beacon then subtracted the value of the Company's net debt (defined as
estimated total debt less cash at December 31, 1998) to obtain the implied
equity value. Based on this analysis, the Current Projections generated an
implied equity value range of $18.47 to $34.30 per share of Common Stock. In
Beacon's view, the results of the Discounted Cash Flow Analysis support its
conclusion that the Merger Consideration was not fair from a financial point of
view to the Public Stockholders.
Inherent in any discounted cash flow valuation is the use of a number of
assumptions, including the accuracy of projections, and the subjective
determination of an appropriate terminal value and discount rate to apply to
the projected cash flows of the entity under examination. Variations in any of
these assumptions or judgments could significantly alter the results of a
discounted cash flow analysis.
Leveraged Buy-Out Analysis. Based on the Projections, Beacon analyzed the
equity internal rates of return that could be achieved by a third party
leveraged buyout of the Company. Leveraged Buy-Out Analysis determines a range
of per share equity valuations that would yield the third party investor an
equity rate of return of between 25% and 30%, generally considered to be the
minimum rate of return acceptable to such investors. These returns are
calculated from a forecast of equity cash flows, including a terminal value
calculation based upon an assumed 6.5x multiple of EBITDA. Beacon made a number
of assumptions regarding the amount, terms and structure of financing that
would be available to third party equity investors. This analysis generated an
implied equity value range of $14.80 to $17.35 per share of Common Stock. In
Beacon's view, the results of the Leveraged Buy-Out Analysis support its
conclusion that the Merger Consideration was not fair from a financial point of
view to the Public Stockholders.
Discounted Future Equity Value Analysis. Beacon also conducted an
evaluation of the future per share equity valuations resulting from applying a
range of EBIT and EBITDA multiples to the 1998 Projection Range and 1999
Projection Range as of the beginning of years 1999 and 2000, respectively,
deducting the estimated net debt of the Company at that time, and discounting
the resulting per share equity valuations to the present by applying a 14%
discount rate, which Beacon deemed to be representative of the Company's cost
of equity capital. This analysis generated an implied equity value range of
$9.71 to $28.84 per share of Common Stock. In Beacon's view, the results of the
Discounted Future Equity Value Analysis support its conclusion that the Merger
Consideration was not fair from a financial point of view to the Public
Stockholders.
Analysis of Premiums Paid. Beacon reviewed the acquisition premiums paid
in public transactions after January 1, 1994 ranging in total equity value
between $200 million and $1.5 billion in which the acquiror had
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previously owned a significant, but not majority, stake in the company. The
premiums paid were measured based on the offer price, in case of stock
consideration measured using exchange rates applied to day prior to the
announcement closing prices, and the prices of the acquired company one week
and one month prior to announcement. This group consisted of 18 transactions,
for which the mean and median premiums paid in the transactions as compared to
one week prior to the announcement of the transactions were 36.0% and 33.9%,
respectively, as compared to a premium of approximately 4.3% to be paid in the
Merger relative to the price of the Common Stock on October 9, 1998, one week
prior to the announcement of the Current Proposed Transaction, and, therefore,
in Beacon's view, supported Beacon's conclusion that the Merger Consideration
was not fair from a financial point of view to the Public Stockholders.
Beacon applied the mean premium to the stock price of the Company
resulting from applying the mean and median multiples of the Automotive
Comparable Companies based on 1998 and 1999 estimated earnings per share to the
Company's earnings per share based on the 1998 Projection Range and 1999
Projection Range. This analysis generated an implied equity value range per
share of Common Stock of: (i) with respect to 1998 estimated earnings per
share, $29.06 to $29.93; and (ii) with respect to 1999 estimated earnings per
share, $26.96 to $33.78.
Beacon also applied the mean premium to the stock price of the Company
resulting from applying the mean and median multiples of the Home Furnishings
Comparable Companies based on 1998 and 1999 estimated earnings per share to the
Company's earnings per share based on the 1998 Projection Range and 1999
Projection Range. This analysis generated an implied equity value range per
share of the Common Stock of: (i) with respect to 1998 estimated earnings per
share, $23.92 to $24.55; and (ii) with respect to 1999 estimated earnings per
share, $25.52 to $31.21.
Beacon noted that in the all cases the Merger Consideration was less than
the implied equity valuations per share of Common Stock based on the Analysis
of Premiums Paid, and, therefore, in Beacon's view, the results of the Analysis
of Premiums Paid supported its conclusion that the Merger Consideration was not
fair from a financial point of view to the Public Stockholders.
Miscellaneous. Pursuant to a letter agreement dated October 28, 1998
between the Company and Beacon, the Company agreed to pay Beacon $300,000 upon
signing the letter agreement and $300,000 upon Beacon rendering an opinion to
the Special Committee concerning the Merger. The Company also agreed to
reimburse Beacon for all reasonable out-of-pocket expenses, including the
reasonable fees and expenses of its legal counsel and any other advisor
retained by Beacon, resulting from or arising out of the engagement. The
Company further agreed to indemnify Beacon and certain related persons and
entities for certain losses, claims, damages or liabilities (including actions
or proceedings in respect thereto) related to or arising out of, among other
things, its engagement as financial advisor. The compensation to be paid to
Beacon pursuant to the October 28, 1998 letter agreement is in addition to the
compensation to be paid to Beacon pursuant to the letter agreement dated April
6, 1998 described below.
Pursuant to a letter agreement dated April 6, 1998 between the Company and
Beacon relating to Beacon's services performed in connection with the Old
Merger, the Company agreed to pay Beacon $750,000 upon Beacon's rendering an
opinion to the Special Committee, and additional compensation in the event a
transaction occured in an amount equal to the sum of (i) $250,000 and (ii) 5%
of the consideration in excess of $17.75 per Public Share received by the
Public Stockholders in the Merger or in certain other transactions should the
Merger not be consummated. The Company also agreed to reimburse Beacon for all
reasonable out-of-pocket expenses, including the reasonable fees and expenses
of its legal counsel and any other advisor retained by Beacon, resulting from
or arising out of the engagement. The Company further agreed to indemnify
Beacon and certain related persons and entities for certain losses, claims,
damages or liabilities (including actions or proceedings in respect thereto)
related to or arising out of, among other things, its engagement as financial
advisor. Following Beacon's presentation of its opinion on June 25, 1998 in
connection with the fairness of the merger consideration to be paid in the Old
Merger on June 25, 1998, the Company paid Beacon $750,000 pursuant to that
letter agreement.
Plans for the Company After the Merger
Except as indicated in this Proxy Statement, neither Trace, Merger Sub or
Marshall S. Cogan has any present plans or proposals which relate to, or would
result in, an extraordinary corporate transaction, such as a merger,
reorganization or liquidation involving the Company or any of its subsidiaries,
a sale or transfer of a material amount of assets of the Company or any other
material changes in the Company's corporate structure or business or the
composition of the Board of Directors or management of the Company.
Upon consummation of the Merger, Trace intends to retain the Company as a
wholly owned subsidiary of Trace. However, Trace anticipates that an
approximately 19.9% economic interest in the Company's subsidiaries will be
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issued to one of Trace's creditors in partial satisfaction of certain of
Trace's debt obligations. Trace anticipates that the assets, business and
operations of the Company will be continued substantially as they are currently
being conducted. Management of Trace may, however, cause the Company to make
such changes as are deemed appropriate and intends to continue to review the
Company and its assets, businesses, operations, properties, policies, corporate
structure, capitalization and management and consider if any changes would be
desirable in light of the circumstances then existing. In addition, Trace
intends to continue to review the business of the Company and identify
synergies and potential cost savings.
Potential Acceleration of Foamex Debt in the Absence of a Merger
The Foamex L.P. Credit Agreement, dated June 12, 1997, as amended and
restated as of February 27, 1998, the Foamex Carpet Cushion, Inc. ("Foamex
Carpet") Credit Agreement, dated as of February 27, 1998, the Promissory Note
of Foamex L.P. in the aggregate principal amount of $34,000,000, dated February
27, 1998, and the Promissory Note of Foamex Carpet in the aggregate principal
amount of $70,200,000, dated February 27, 1998 (collectively, approximately
$500 million of debt), contain provisions that would result in the acceleration
of such indebtedness if Trace were to cease to own at least 30% of the
outstanding Common Stock. Similarly, the indentures relating to the
$150,000,000 aggregate principal amount of 9 7/8% Senior Subordinated Notes due
2007, and the $98,000,000 aggregate principal amount of 13 1/2% Senior
Subordinated Notes due 2005 of Foamex L.P. and Foamex Capital Corporation
contain provisions that provide the holders of such Senior Subordinated Notes
with the right to require the issuers thereof to repurchase such Senior
Subordinated Notes at a price in cash equal to 101% of the aggregate principal
amount thereof, plus accrued and unpaid interest thereon, if Trace falls below
certain specified ownership levels of Common Stock and another person or group
owns a greater percentage of Common Stock than Trace. Trace has substantial
debt obligations due the end of December 1998 and has informed the Company that
it currently does not have the financial resources to pay these obligations.
Trace has informed the Company that it intends to seek waivers and/or
modifications of such indebtedness; however, there can be no assurance that
such waivers and/or modifications will be achieved. In addition, Trace is in
default on its obligation to repurchase 308,813 shares of its Common Stock
pursuant to a put option agreement with John Rallis, the former President of
the Company. See "Security Ownership of Management and Certain Beneficial
Owners." If Trace were to default on its indebtedness or other Trace creditors,
such as Mr. Rallis, were to take steps constituting a default under such
indebtedness and the holders of such indebtedness were to foreclose on the
Trace Common Stock, such event could trigger the acceleration and put rights
described above. Although management believes that all such debt obligations
would be refinanced under these circumstances, there can be no assurance that
the Company or its subsidiaries would be able to do so. Trace has informed the
Company that it anticipates that if the Merger is consummated it will be able
to satisfy or restructure its outstanding obligations.
Interests of Certain Persons in the Merger
In considering the recommendations of the Board of Directors with respect
to the Merger, the Public Stockholders should be aware that certain officers
and directors of the Company have certain interests summarized below that may
be in addition to, or different from, the interests of the Public Stockholders.
The Board of Directors and the Special Committee were aware of these interests
and considered them along with other matters described under "--Recommendation
of the Board of Directors; Fairness of the Merger" and "--Recommendation of the
Special Committee Against the Merger; Unfairness of the Merger."
Common Stock, Option and Warrant Ownership. As of November 5, 1998, the
executive officers and directors of the Company owned an aggregate of 1,524,024
shares of Common Stock (excluding the Trace Shares which may be deemed to be
beneficially owned by Marshall S. Cogan, constituting approximately 45.8% of
the total number of shares of Common Stock then outstanding). If the Merger is
consummated, such persons will receive, in the aggregate, approximately $18.3
million for their shares of Common Stock and Company Options. See "Security
Ownership of Management and Certain Beneficial Owners."
Ownership of Common Stock of Trace and Other Trace Relationships. The
following directors and executive officers either own equity securities in, or
otherwise have engaged in transactions with, Trace:
Marshall S. Cogan - Mr. Cogan beneficially owns in excess of 50% of
the common equity of Trace and controls in excess of 75% of the voting
power in Trace. Mr. Cogan is also Chairman and Chief Executive Officer of
Trace.
Andrea Farace - From April 1991 until December 1997, Mr. Farace served
in a variety of capacities with Trace, most recently as President.
Effective December, 1997, Mr. Farace resigned from all positions with
Trace. If the Merger is consummated, Mr. Farace will receive approximately
$355,267 for his shares of Common Stock and Company Options.
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John Tunney - Mr. Tunney provides consulting services to both Trace
and the Company. In 1997, Mr. Tunney received fees and expense
reimbursement of approximately $167,717 from Trace and fees of
approximately $56,667 from the Company.
Etienne Davignon - Mr. Davignon is the Chairman of Societe Generale de
Belgique. Trace has issued a note in favor of Societe Generale de Belgique
in the aggregate principal amount of approximately $21,718,236. Trace has also
issued a note in favor of a company in which Societe Generale de Belgique owns a
minority interest in the aggregate principal amount of approximately
$36,612,310. The entire aggregate principal amount of each of these notes is
currently outstanding.
Stuart Hershon - Dr. Hershon's wife is employed as an Assistant
General Counsel of Trace. Dr. Hershon owns 25 shares of Trace's Class A
Common Stock.
Philip N. Smith, Jr. and Barry Zimmerman are the only executive
officers or directors of the Company (excluding Mr. Cogan and Dr. Hershon)
to own common stock of Trace. Mr. Smith owns 25 shares of Class A Common
Stock of Trace and Mr. Zimmerman owns 101 shares of Class A Common Stock of
Trace; each of such amounts represent less than one percent of the
outstanding Class A Common Stock of Trace.
Directors and Officers. The Merger Agreement provides that after the
Merger, the officers and directors of Merger Sub will become the officers and
directors of the Surviving Corporation.
Indemnification of Officers and Directors. Trace has agreed in the Merger
Agreement, subject to certain limitations, that all rights to indemnification
with respect to matters occurring through the Effective Time, existing in favor
of directors, officers or employees of the Company as provided in the Company's
Certificate of Incorporation or By-Laws shall survive the Merger and shall
continue in full force and effect for a period of not less than six years from
the Effective Time. The Company's Certificate of Incorporation and By-Laws
provided for indemnification of the Company's directors and officers under
certain circumstances for actions taken on behalf of the Company.
On April 21, 1998, the Company entered into an indemnification agreement
with each member of the Special Committee pursuant to which the Company agreed
to indemnify and hold such member harmless with respect to certain acts and
omissions taken by such member as a director of the Company or member of the
Special Committee.
Special Committee. Robert J. Hay, one of the two members of the Special
Committee, beneficially owns 4,944 shares of Common Stock which will be
exchanged for the Merger Consideration if the Merger is consummated. Mr. Hay
has been Chairman Emeritus and a director of the Company since September 1993,
was Chairman and Chief Executive Officer of Foamex L.P. from January 1993 to
January 1994 and was President of Foamex L.P. and its predecessor from 1972
through 1992. Pursuant to the resolution creating the Special Committee, each
member of the Special Committee is entitled to a fee of $20,000 per month for
serving on the Special Committee.
See "Certain Transactions" for disclosure of other transactions occurring
in connection with the Merger and other relationships considered by the Board
of Directors.
Perspective of Trace and Merger Sub on the Merger
Trace and Merger Sub note that the Company's Board retained its own legal
counsel and financial advisor for the purpose of negotiating the Current
Proposed Transaction. Based upon the opinion of Ramius, the financial advisor
to the Board of Directors, as to the fairness of the Merger Consideration to
the Public Stockholders from a financial point of view and the determination by
the Board of Directors that the Merger is fair to, and in the best interests of
the Public Stockholders, each of Trace and Merger Sub believe that the Merger
Consideration is fair to the Public Stockholders from a financial point of view
and adopt the conclusions of Ramius contained in its opinion. Neither Trace nor
Merger Sub attached specific weights to any factors in reaching its belief as
to fairness.
Perspective of Marshall S. Cogan on the Merger
Marshall S. Cogan is Vice Chairman of the Board of Directors and, as such,
voted in favor of (i) determining that the Merger and the transactions
contemplated by the Merger Agreement are fair and in the best interests of the
Company and the Public Stockholders, (ii) approving and adopting the Merger
Agreement and (iii) recommending that the Public Stockholders vote in favor of
the Merger. Due to Mr. Cogan's position as both the principal stockholder of
Trace and a director of the Company, Mr. Cogan relied on the analysis of the
other members of the Board of Directors in reaching such conclusions as to the
fairness of the Merger to the Public Stockholders and adopted their analysis as
his own. See "--Recommendation of the Board of Directors."
Certain Effects of the Merger
As a result of the Merger, the entire equity interest of the Surviving
Corporation will be owned directly by Trace. Therefore, following the Merger,
the Public Stockholders will no longer benefit from any increases in the value
of the Company and will no longer bear the risk of any decreases in the value
of the Company. In addition,
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following the Merger, the interest of Trace in the Company's net book value and
net income will increase to 100% from a current level of approximately 45.8%.
Following the Merger, Trace will benefit from any increases in the value
of the Company and also bear the risk of any decreases in the value of the
Company.
The Public Stockholders will have no continuing interest in the Company
following the Merger. As a result, the shares of Common Stock will no longer
meet the requirements of Nasdaq for continued listing and will, therefore, be
delisted from Nasdaq.
The Common Stock is currently registered under the Exchange Act.
Registration under the Exchange Act may be terminated upon application of the
Company to the SEC if such securities are not listed on a national securities
exchange or quoted on Nasdaq and there are fewer than 300 record holders of
such securities. Termination of registration of the Common Stock under the
Exchange Act would mean certain provisions of the Exchange Act, such as the
short-swing trading provisions of Section 16(b), the requirement to file
periodic reports, the requirement of furnishing a proxy statement in connection
with stockholders' meetings pursuant to Section 14(a), and the requirements of
Rule 13e-3 under the Exchange Act with respect to "going private" transactions,
would no longer be applicable to the Company. If registration of the shares of
Common Stock under the Exchange Act is terminated, the Common Stock would no
longer be eligible for Nasdaq listing. In addition, "affiliates" of the Company
and persons holding "restricted securities" of the Company might as a result be
deprived of the ability to dispose of such securities pursuant to Rule 144
promulgated under the Securities Act of 1933, as amended. It is the present
intention of Trace to seek to cause the Company to make an application for the
termination of the registration of the Common Stock under the Exchange Act as
soon as practicable after the Effective Time of the Merger.
Material Federal Income Tax Consequences
The receipt of cash in exchange for Common Stock pursuant to the Merger
will be a taxable transaction for United States federal income tax purposes and
may also be a taxable transaction under applicable state, local and foreign tax
laws. A Public Stockholder will generally recognize gain or loss for U.S.
federal income tax purposes in an amount equal to the difference between such
Public Stockholder's adjusted tax basis in such Public Stockholder's Common
Stock and the consideration received by such Public Stockholder in the Merger.
Such gain or loss will be calculated separately for each block of Common Stock
exchanged by a Public Stockholder. Such gain or loss shall be treated as
long-term capital gain or loss if, at the Effective Time, the Common Stock was
held for more than one year. In the case of individuals, such gain or loss will
be subject to U.S. federal income tax at a maximum rate of 20% if a block of
Common Stock has been held, at the Effective Time, for more than one year.
The aggregate amount of Merger Consideration paid for a Public
Stockholder's Common Stock will be reported to the Internal Revenue Service
(the "IRS"). A "backup" withholding at a rate of 31% will apply to payments
made to a Public Stockholder (other than corporations and certain other exempt
Public Stockholders) unless the Public Stockholder furnishes its taxpayer
identification number in the manner prescribed in applicable Treasury
regulations, certifies that such number is correct, certifies as to no loss of
exemption from backup withholding and meets certain other conditions.
Any amounts withheld from a Public Stockholder under the "backup"
withholding rules will be allowed as a refund or credit against such Public
Stockholder's U.S. federal income tax liability, provided that the required
information is furnished to the IRS.
The foregoing discussion may not apply to Public Stockholders who acquired
their Common Stock pursuant to the exercise of employee stock options or other
compensation arrangements with the Company, who are not citizens or residents
of the United States or who are otherwise subject to special tax treatment.
EACH PUBLIC STOCKHOLDER IS URGED TO CONSULT HIS, HER OR ITS OWN TAX ADVISOR
WITH RESPECT TO THE TAX CONSEQUENCES OF THE MERGER, INCLUDING THE EFFECTS OF
APPLICABLE STATE, LOCAL OR OTHER TAX LAWS.
Risk of Fraudulent Conveyance
If a court in a lawsuit brought by an unpaid creditor or representative of
creditors, such as a trustee in bankruptcy, or by the Surviving Corporation, as
debtor in possession, were to find that at the Effective Time or at the time
the Surviving Corporation distributed the Merger Consideration to the Public
Stockholders, the Surviving Corporation (a) made such payment with fraudulent
intent or (b) received less than a reasonably equivalent value or consideration
in exchange for the Merger Consideration, and the Surviving Corporation (i) was
insolvent, (ii) had unreasonably small assets, property or capital in relation
to its ongoing business, or (iii) would be unable to
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<PAGE>
pay its debts as they came due or matured, such court could, among other
things, void the distribution of the Merger Consideration to the Public
Stockholders and require that the Public Stockholders return the same to the
Surviving Corporation or a fund for the benefit of its creditors.
The measure of insolvency for the purposes of the foregoing will vary
depending upon the law of the jurisdiction which is being applied. Generally,
however, the Surviving Corporation would be considered insolvent if the sum of
the Surviving Corporation's assets is less than the amount that it will be
required to pay its probable liability on its debts as they become due. No
assurance can be given as to the method a court would use to determine whether
the Surviving Corporation was insolvent at the Effective Time or at the time
the Surviving Corporation distributed the Merger Consideration, nor can
assurance be given that a court would not find that the Surviving Corporation
was insolvent at the Effective Time. The voiding of the Merger Consideration as
described above could result in the Public Stockholders losing the entire value
of their equity investment in the Company and the Merger Consideration.
Management of the Company believes that the payments to be made in
connection with the Merger will be made for proper purposes and in good faith,
and that, based on present forecasts and other financial information, the
Company is, and the Surviving Corporation will be, solvent, and will have
sufficient assets, property and capital to conduct its ongoing business and pay
its debts as they come due and mature. In addition, the Board of Directors in
approving and recommending the Merger and the Merger Agreement made the Second
Solvency Determination after hearing presentations from the management of the
Company and Trace with respect to the solvency of the Company and the Surviving
Corporation. However, no investigation was conducted by, or opinion received
from, any independent third party, with respect to the solvency of the Company
or the Surviving Corporation. There can be no assurance that if such an
opinion were sought that it could be obtained.
Anticipated Accounting Treatment
Trace will account for the purchase of the approximately 54% of the common
stock of the Company not owned by Trace, using purchase accounting.
Presentation of the separate financial statements of the Company after the
Merger will be on a push down basis of accounting in accordance with SEC Staff
Accounting Bulletin 5.J.
Regulatory Approvals
No federal or state regulatory approvals are required to be obtained, nor
any regulatory requirements complied with, in connection with the consummation
of the Merger by any party to the Merger Agreement, except for (i) the filing
by the Company and Trace of a Premerger Notification and Report Form pursuant
to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), which has been filed, and the waiting period with respect thereto
has been terminated, (ii) the requirements of the DGCL in connection with
stockholder approvals and consummation of the Merger and (iii) the requirements
of federal securities laws.
Sources of Funds; Fees and Expenses
Trace intends to fund the payment of the Merger Consideration principally
with the proceeds of additional indebtedness incurred by the Company and its
subsidiaries in connection with the Merger. The following discussion summarizes
Trace's current proposed plan for the financing of the payment of the
consideration to the Public Stockholders in the Merger and for certain related
transactions. The commitment from the lenders under the New Credit Facility (as
defined below) expires on January 29, 1999, and there can be no assurance that
if this commitment expires Trace will be able to obtain any extension from the
lenders. In the event such financing is not obtained, Trace intends, and is
required pursuant to the terms of the Merger Agreement, to seek alternative
financing, which may have terms that are different from those described below.
The following table summarizes the currently contemplated sources and uses
of funds in connection with the Merger by the Company and its subsidiaries,
assuming that all of Foamex L.P.'s outstanding 9 7/8% Senior Subordinated Notes
due 2007 and 13 1/2% Senior Subordinated Notes due 2005 are exchanged in the
proposed exchange offer described below, and as if the transaction occurred on
September 30, 1998:
<TABLE>
<CAPTION>
Sources of Funds $s in 1,000s
- - ---------------- ------------
<S> <C>
Cash on hand of the Company and its subsidiaries .................... $ 10,044
Foamex L.P., Foamex Carpet and Foamex Funding Credit Facility(a) .... 813,926
Foamex Holdings Senior Discount Notes and Warrants(b)(c) ............ 135,000
Foamex Corp. Senior Subordinated Notes(d)(e) ........................ 248,000
----------
Total ............................................................. $1,206,970
==========
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Uses of Funds $s in 1,000s
- - ------------- ------------
<S> <C>
Merger Consideration ................................................ $ 162,478
Option Consideration ................................................ 2,683
Warrant Consideration ............................................... 281
Pay-Off of Existing Credit Agreement ................................ 404,437
Exchange for Foamex L.P. Senior Subordinated Notes(e) ............... 248,000
Prepayment penalties on Existing Credit Facility and exchange and
consent fees on Foamex L.P. Senior Subordinated Notes(f) ........... 23,783
Purchase of indebtedness of Foam Funding LLC(a) ..................... 100,690
Purchase of Trace Zero Coupon Note(b) ............................... 135,000
Advance against future tax sharing payments(g) ...................... 75,000
Transaction fees and expenses(h) .................................... 45,218
Accrued interest and other .......................................... 9,400
----------
Total ............................................................. $1,206,970
==========
</TABLE>
(a) At the Effective Time, Foamex L.P., Foamex Carpet, and Foamex Funding,
Inc., a wholly owned subsidiary of the Company ("Foamex Funding"),
will enter into a new Credit Agreement (the "New Credit Facility")
with ScotiaBank, Canadian Imperial Bank of Commerce, and the
Institutions from time to time party thereto as Lenders and Issuing
Banks. It is anticipated that the New Credit Facility will consist of
(i) a $150.0 million revolving credit facility and (ii) an $800.0
million term facility, and the New Credit Facility will be secured by
substantially all of the assets of Foamex L.P., Foamex Carpet and
Foamex Funding. The term, the interest rate and other material terms
of the New Credit Facility have not yet been determined. At the
Effective Time, Foamex Funding will borrow $100.7 million in term
loans which it will use to purchase from ScotiaBank and Citicorp USA,
Inc. $100.7 million aggregate principal amount of indebtedness of Foam
Funding LLC. See "Certain Transactions." Foamex Funding will not be
able to make any additional borrowings, and Foamex Carpet will be
limited to $20.0 million of revolving credit borrowings.
(b) Foamex Holdings is a wholly owned subsidiary of the Company, to which
the Company will contribute all of its direct and indirect equity in
Foamex L.P. and Foamex Carpet. Immediately after its capitalization,
Foamex Holdings will distribute to the Company: (i) an amount in cash
sufficient to fund the payment of the merger consideration and the
repayment of promissory notes, accrued interest thereon and certain
other amounts owed by the Company to Foamex L.P., which amount is
estimated to be approximately $185 million (the "Special
Distribution"), and (ii) $9.9 million principal amount of pre-existing
promissory notes of Trace payable to Foamex L.P., (the "Old Trace
Notes").
(c) At the Effective Time, Foamex Holdings will issue to Trace $135.0
million initial accreted value of Senior Discount Notes (the "Senior
Discount Notes"), together with warrants (the "Warrants") to purchase
up to 19.9% of the common stock of Foamex Holdings, in exchange for a
zero coupon promissory note due 2009 (the "Trace-Holdings Note"). The
term, the interest rate, the security (if any) and other material
terms of the Senior Discount Notes and Trace-Holdings Note have not
yet been determined. The exercise price, the expiration date and other
material terms of the Warrants have not yet been determined. The
Trace-Holdings Note will subsequently be distributed by Foamex
Holdings to the Company. The Company and Trace will restructure the
Old Trace Notes and the Trace-Holdings Note into a single $144.9
million zero coupon promissory note of Trace with a maturity beyond
2009.
(d) Foamex Corporation ("Foamex Corp.") is a wholly owned subsidiary of
Foamex Holdings, to which Foamex Holdings will contribute all of its
direct and indirect equity in Foamex L.P. and Foamex Carpet.
Immediately after such transaction, Foamex Corp. will distribute to
Foamex Holdings: (i) an amount in cash equal to the Special
Distribution, and (ii) the Old Trace Notes.
(e) Represents a new issue of Senior Subordinated Notes that will be
issued in a private exchange offer in exchange for the existing Foamex
L.P. Senior Subordinated Notes. It is anticipated that the Senior
Subordinated Notes will be unsecured obligations of Foamex Corp. The
term, the interest rate, the security (if any) and other material
terms of the Senior Subordinated Notes have not yet been determined.
The Senior Subordinated Notes will be issued in exchange for the
existing Senior Subordinated Notes of Foamex L.P. and Foamex Capital
Corporation.
(f) Represents prepayment penalties to repay the Existing Credit Facility
and consent and exchange fees to exchange all outstanding 9 7/8%
Senior Subordinated Notes due 2007 and all outstanding 13 1/2% Senior
Subordinated Notes due 2005.
(g) Trace,the Company and certain of their respective subsidiaries will
enter into a tax sharing agreement pursuant to which such entities
will agree to pay to Trace the amount which they would be obligated to
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pay were they not included in Trace's consolidated return. Immediately
after the Merger, Foamex Corp., FMXI, Inc. ("FMXI") and Foamex Carpet
will make an aggregate advance to Trace of $75.0 million against
future payment obligations under the tax sharing agreement. Any tax
payments to Trace that are attributable to partnership interests in
Foamex L.P. will be funded by pro rata distributions from Foamex L.P.
to its partners in proportion to their respective partnership
interests. See "Certain Transactions."
(h) Estimated fees and expenses incurred or to be incurred by Trace, the
Company and their affiliates in connection with the Merger are
underwriting and investment banking fees and expenses of approximately
$35.3 million, legal and accounting fees and expenses of approximately
$5.9 million and miscellaneous fees and expenses of approximately $4.0
million.
The Merger Agreement provides that all costs and expenses incurred in
connection with the Merger Agreement and the Merger will be paid by the party
incurring the expense. See "The Merger Agreement--Fees and Expenses."
Neither Trace nor the Company will pay any fees or commissions to any
broker or dealer or any other person (other than , Rhone, DLJ, and the
Paying Agent) for soliciting Public Shares pursuant to the Merger. Brokers,
dealers, commercial banks and trust companies will, upon request, be reimbursed
by the Company for reasonable and necessary costs and expenses incurred by them
in forwarding materials to their customers.
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THE SPECIAL MEETING
Matters to Be Considered at the Special Meeting
Each copy of this Proxy Statement mailed to Stockholders is accompanied by
a proxy card furnished in connection with the solicitation of proxies by the
Board of Directors for use at the Special Meeting. The Special Meeting is
scheduled to be held at 10:00 a.m., on December __, 1998, at 1000 Columbia
Avenue, Linwood, Pennsylvania 19061. At the Special Meeting, Stockholders will
consider and vote upon (i) a proposal to approve and adopt the Merger Agreement
and (ii) such other matters as may properly be brought before the Special
Meeting.
The Board of Directors, at a meeting at which all seven directors were
present, has determined that the Merger and the Merger Agreement are fair to,
and in the best interests of, the Company and its Public Stockholders and has
approved the Merger and the Merger Agreement by a 5 to 2 vote of the directors
(Mr. Gutfreund and Mr. Hay, the members of the Special Committee voted in the
negative). ACCORDINGLY, THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS
VOTE "FOR" APPROVAL AND ADOPTION OF THE MERGER AGREEMENT. STOCKHOLDERS SHOULD
BE AWARE, HOWEVER, THAT (1) THE BEACON GROUP CAPITAL SERVICES, LLC, FINANCIAL
ADVISOR TO THE SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS OF THE COMPANY,
DETERMINED, ON NOVEMBER 2, 1998, THAT AS OF SUCH DATE, A PRICE OF $12.00 PER
SHARE WAS NOT FAIR TO THE PUBLIC STOCKHOLDERS FROM A FINANCIAL POINT OF VIEW,
(2) THE SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS HAS DETERMINED THAT THE
TERMS OF THE MERGER ARE NOT FAIR TO THE PUBLIC STOCKHOLDERS AND RECOMMENDED
THAT THE BOARD OF DIRECTORS REJECT THE PROPOSAL OF $12.00 PER SHARE, AND (3)
CERTAIN OFFICERS AND DIRECTORS OF THE COMPANY HAVE CERTAIN INTERESTS THAT MAY
BE IN ADDITION TO, OR DIFFERENT FROM, THE INTERESTS OF THE PUBLIC STOCKHOLDERS.
IN LIGHT OF THE CONFLICTING RECOMMENDATIONS OF THE BOARD OF DIRECTORS AND THE
BOARD FINANCIAL ADVISOR ON THE ONE HAND AND THE SPECIAL COMMITTEE AND THE
SPECIAL COMMITTEE FINANCIAL ADVISOR ON THE OTHER HAND, THE PUBLIC STOCKHOLDERS
ARE URGED NOT TO PLACE UNDUE RELIANCE ON THE RECOMMENDATION OF THE BOARD OF
DIRECTORS, and are encouraged to review the enclosed Proxy Statement in its
entirety, especially the sections captioned "Special Factors--Background of the
Merger," "--Purpose and Structure of the Merger" and "--Recommendations of the
Board of Directors; Fairness of the Merger," "Special Factors--Recommendation
of the Special Committee Against the Merger; Unfairness of the Merger,"
"--Opinion of Financial Advisor to the Special Committee" and "--Interests of
Certain Persons in the Merger." Trace has agreed to vote, or cause to be
voted, all of the Shares then owned by the Trace Stockholders in favor of the
approval of the Merger and the authorization and adoption of the Merger
Agreement to the extent permitted pursuant to the terms of the agreements filed
as exhibits to Trace's Schedule 13D with respect to the Company. To the
knowledge of the Company, the directors and executive officers of Trace and
Merger Sub intend to vote their shares in favor of the approval and adoption of
the Merger Agreement.
STOCKHOLDERS ARE REQUESTED PROMPTLY TO COMPLETE, DATE, SIGN AND RETURN THE
ACCOMPANYING PROXY CARD.
Record Date and Voting
The Board of Directors has fixed the close of business on November 13,
1998, as the Record Date for the determination of the holders of Common Stock
entitled to notice of, and to vote at, the Special Meeting. Only stockholders
of record at the close of business on that date will be entitled to receive
notice of, or to vote at, the Special Meeting. At the close of business on the
Record Date, there were _____ shares of Common Stock outstanding and entitled
to vote at the Special Meeting, held by approximately _____ stockholders of
record.
Each holder of Common Stock on the Record Date will be entitled to one
vote for each share held of record. The presence, in person or by proxy, of a
majority of the outstanding shares of Common Stock entitled to be voted at the
Special Meeting is necessary to constitute a quorum for the transaction of
business. Abstentions (including broker non-votes) will be included in the
calculation of the number of votes represented at the Special Meeting for
purposes of determining whether a quorum has been achieved.
If the enclosed proxy card is properly executed and received by the
Company in time to be voted at the Special Meeting, the shares represented
thereby will be voted in accordance with the instructions marked thereon.
Properly executed proxies with no instructions indicated thereon will be voted
"FOR" approval and adoption of the Merger Agreement.
The Board of Directors is not aware of any matters other than that set
forth in the Notice of Special Meeting of Stockholders that may be brought
before the Special Meeting. If any other matters properly come before the
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<PAGE>
Special Meeting, including a motion to adjourn the meeting for the purpose of
soliciting additional proxies, the persons named in the accompanying proxy will
vote the shares represented by all properly executed proxies on such matters in
their discretion, except that shares represented by proxies which have been
voted "against" the Merger Agreement will not be used to vote "for" adjournment
of the Special Meeting for the purpose of allowing additional time for
soliciting additional votes "for" the Merger Agreement. See "--Vote Required;
Revocability of Proxies."
STOCKHOLDERS SHOULD NOT FORWARD ANY COMMON STOCK CERTIFICATES WITH THEIR
PROXY CARDS. IN THE EVENT THE MERGER IS CONSUMMATED, STOCK CERTIFICATES SHOULD
BE DELIVERED IN ACCORDANCE WITH INSTRUCTIONS SET FORTH IN A LETTER OF
TRANSMITTAL, WHICH WILL BE SENT TO STOCKHOLDERS BY THE PAYING AGENT, PROMPTLY
AFTER THE EFFECTIVE TIME.
Vote Required; Revocability of Proxies
The affirmative vote of holders of a majority of the outstanding shares of
Common Stock entitled to vote thereon is required to approve and adopt the
Merger Agreement, and the approval of the Merger Agreement is also conditioned
upon the affirmative vote of a majority of the Independent Shares voting
thereon. As of the Record Date, (i) the Trace Stockholders owned, in the
aggregate, 11,475,000 shares of Common Stock, representing approximately 45.8%
of such shares outstanding, (ii) the directors and executive officers of Trace
and Merger Sub owned an additional 427,612 shares of Common Stock, representing
approximately 1.7% of such shares outstanding and (iii) the directors and
executive officers of the Company (excluding such persons who are also
directors or officers of Trace) owned an additional 117,500 shares of Common
Stock, representing less than one percent of such shares outstanding. Trace has
agreed to vote, or cause to be voted, all of the shares then owned by the Trace
Stockholders in favor of the approval of the Merger and the authorization and
adoption of the Merger Agreement; provided, however, that (x) the right of
Trace to vote 2,684,903 shares of Common Stock is limited by the Pledge
Agreement, dated as of December 14, 1993 (the "RFC Pledge Agreement"), made by
Trace in favor of Recticel Foam Corporation, (y) the right of Trace to vote
1,592,671 shares of Common Stock is limited by the Pledge Agreement, dated as
of December 14, 1993 (together with the RFC Pledge Agreement, the "RFC/GB
Pledge Agreements"), made by Trace in favor of Generale Bank and (z) the right
of Trace to vote 175,100 shares of Common Stock is limited by the pledge
agreement, dated as of August 15, 1997 (the "ScotiaBank Pledge Agreement"),
made by Trace in favor of The Bank of Nova Scotia. Pursuant to the RFC/GB
Pledge Agreements, Trace may not exercise any voting rights with respect to the
pledged shares after an event of default or if such action would have a
material adverse effect on the value of the pledged collateral. Pursuant to the
ScotiaBank Pledge Agreement, Trace may not exercise any voting rights with
respect to the pledged shares after an event of default or if such action would
impair any pledged collateral.
To the knowledge of the Company, Trace, Merger Sub and Marshall S. Cogan,
the directors (except for the members of the Special Committee, who are
expected to vote against approval and adoption of the Merger Agreement) and
executive officers of the Company, Trace and Merger Sub intend to vote their
shares in favor of the approval and adoption of the Merger Agreement.
Accordingly, assuming that all such persons vote in favor of the Merger, the
affirmative vote of only approximately 4% of the Public Shares will be required
to approve and adopt the Merger Agreement by a majority of the outstanding
shares of Common Stock. If all Independent Shares are represented at the
Special Meeting. The Company believes the affirmative vote of at least
6,556,106 Independent Shares will be required to approve and adopt the Merger
Agreement. To the knowledge of the Company, Trace, Merger Sub and Marshall S.
Cogan, except as set forth in this Proxy Statement, no executive officer,
director or affiliate of the Company, Trace or Merger Sub has made a
recommendation in support of or opposed to the Merger.
Approval and adoption of the Merger Agreement is conditioned, in part, on
the affirmative vote of the holders of a majority of the outstanding shares of
Common Stock entitled to vote thereon. As to this condition, the failure to
submit a proxy card (or to vote in person at the Special Meeting) or the
abstention from voting by a Stockholder will have the same effect as a vote
against approval and adoption of the Merger Agreement. A failure to submit a
proxy card or the abstention from voting by a Stockholder, however, will not be
counted as a vote for or against the Merger Agreement for purposes of meeting
the condition that a majority of the Independent Shares voting with respect to
the Merger vote in favor of the Merger. Brokers holding shares of Common Stock
as nominees will not have discretionary authority to vote such shares in the
absence of instructions from the beneficial owners thereof.
A Stockholder may revoke a proxy at any time prior to its exercise by (i)
delivering to Philip N. Smith, Jr., Corporate Secretary, Foamex International
Inc., 1000 Columbia Avenue, Linwood, Pennsylvania 19061, a written notice of
revocation prior to the Special Meeting, (ii) delivering prior to the Special
Meeting a duly executed proxy
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<PAGE>
bearing a later date or (iii) attending the Special Meeting and voting in
person. The presence of a Stockholder at the Special Meeting will not in and of
itself automatically revoke such Stockholder's proxy.
If for any reason the Special Meeting is adjourned, at any subsequent
reconvening of the Special Meeting, all proxies will be voted in the same
manner as such proxies would have been voted at the original convening of the
Special Meeting, except for any proxies which have theretofore effectively been
revoked or withdrawn.
The obligations of the Company and Trace to consummate the Merger are
subject, among other things, to the condition that the Stockholders approve and
adopt the Merger Agreement. See "The Merger Agreement--Conditions to the
Merger."
Appraisal Rights
Under the DGCL, record holders of shares of Common Stock who follow the
procedures set forth in Section 262 and who have not voted in favor of the
Merger Agreement will be entitled to have their shares of Common Stock
appraised by the Delaware Court of Chancery and to receive payment of the "fair
value" of such shares, exclusive of any element of value arising from the
accomplishment or expectation of the Merger, together with a fair rate of
interest, if any, as determined by such court. The following is a summary of
certain of the provisions of Section 262 of the DGCL and is qualified in its
entirety by reference to the full text of such Section, a copy of which is
attached hereto as Appendix D.
Under Section 262, where a merger agreement is to be submitted for
approval and adoption at a meeting of stockholders, as in the case of the
Special Meeting, not less than 20 calendar days prior to the meeting, the
Company must notify each of the holders of Common Stock at the close of
business on the Record Date that such appraisal rights are available and
include in each such notice a copy of Section 262. This Proxy Statement
constitutes such notice. Any Stockholder wishing to exercise appraisal rights
should review the following discussion and Appendix D carefully because failure
to timely and properly comply with the procedures specified in Section 262 will
result in the loss of appraisal rights under the DGCL.
A holder of shares of Common Stock wishing to exercise appraisal rights
must deliver to the Company, before the vote on the approval and adoption of
the Merger Agreement at the Special Meeting, a written demand for appraisal of
such holder's shares of Common Stock. Such demand will be sufficient if it
reasonably informs the Company of the identity of the Stockholder and that the
Stockholder intends thereby to demand the appraisal of his shares. A proxy or
vote against the Merger Agreement will not constitute such a demand. In
addition, a holder of shares of Common Stock wishing to exercise appraisal
rights must hold of record such shares on the date the written demand for
appraisal is made and must continue to hold such shares through the Effective
Time.
Only a holder of record of shares of Common Stock is entitled to assert
appraisal rights for the shares of Common Stock registered in that holder's
name. A demand for appraisal should be executed by or on behalf of the holder
of record fully and correctly, as the holder's name appears on the stock
certificates. Holders of Common Stock who hold their shares in brokerage
accounts or other nominee forms and wish to exercise appraisal rights are urged
to consult with their brokers to determine the appropriate procedures for the
making of a demand for appraisal by such nominee. All written demands for
appraisal of Common Stock should be sent or delivered to Philip N. Smith, Jr.,
Corporate Secretary, Foamex International Inc., 1000 Columbia Avenue, Linwood,
Pennsylvania 19061, so as to be received before the vote on the approval and
adoption of the Merger Agreement at the Special Meeting.
If the shares of Common Stock are owned of record in a fiduciary capacity,
such as by a trustee, guardian or custodian, execution of the demand should be
made in that capacity, and if the shares of Common Stock are owned of record by
more than one person, as in a joint tenancy or tenancy in common, the demand
should be executed by or on behalf of all joint owners. An authorized agent,
including one or more joint owners, may execute a demand for appraisal on
behalf of a holder of record; however, the agent must identify the record owner
or owners and expressly disclose the fact that, in executing the demand, the
agent is agent for such owner or owners. A record holder such as a broker
holding Common Stock as nominee for several beneficial owners may exercise
appraisal rights with respect to the Common Stock held for one or more
beneficial owners while not exercising such rights with respect to the Common
Stock held for other beneficial owners; in such case, the written demand should
set forth the number of shares as to which appraisal is sought and where no
number of shares is expressly mentioned the demand will be presumed to cover
all Common Stock held in the name of the record owner.
Within 10 calendar days after the Effective Time, the Company, as the
surviving corporation in the Merger, must send a notice as to the effectiveness
of the Merger to each person who has satisfied the appropriate provisions
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of Section 262 and who has not voted in favor of the Merger Agreement. Within
120 calendar days after the Effective Time, the Company, or any Stockholder
entitled to appraisal rights under Section 262 and who has complied with the
foregoing procedures, may file a petition in the Delaware Court of Chancery
demanding a determination of the fair value of the shares of all such
Stockholders. The Company is not under any obligation, and has no present
intention, to file a petition with respect to the appraisal of the fair value
of the shares of Common Stock. Accordingly, it is the obligation of the
Stockholders to initiate all necessary action to perfect their appraisal rights
within the time prescribed in Section 262.
Within 120 calendar days after the Effective Time, any Stockholder of
record who has complied with the requirements for exercise of appraisal rights
will be entitled, upon written request, to receive from the Company a statement
setting forth the aggregate number of shares of Common Stock with respect to
which demands for appraisal have been received and the aggregate number of
holders of such shares. Such statement must be mailed within 10 calendar days
after a written request therefor has been received by the Company.
If a petition for an appraisal is timely filed, after a hearing on such
petition, the Delaware Court of Chancery will determine the Stockholders
entitled to appraisal rights and will appraise the "fair value" of the shares
of Common Stock, exclusive of any element of value arising from the
accomplishment or expectation of the Merger, together with a fair rate of
interest, if any, to be paid upon the amount determined to be the fair value.
Holders considering seeking appraisal should be aware that the fair value of
their shares of Common Stock as determined under Section 262 could be more
than, the same as or less than the amount per share that they would otherwise
receive if they did not seek appraisal of their shares of Common Stock. The
Delaware Supreme Court has stated that "proof of value by any techniques or
methods which are generally considered acceptable in the financial community
and otherwise admissible in court" should be considered in the appraisal
proceedings. In addition, Delaware courts have decided that the statutory
appraisal remedy, depending on factual circumstances, may or may not be a
dissenter's exclusive remedy. The Court will also determine the amount of
interest, if any, to be paid upon the amounts to be received by persons whose
shares of Common Stock have been appraised. The costs of the action may be
determined by the Court and taxed upon the parties as the Court deems
equitable. The Court may also order that all or a portion of the expenses
incurred by any holder of shares of Common Stock in connection with an
appraisal, including, without limitation, reasonable attorneys' fees and the
fees and expenses of experts utilized in the appraisal proceeding, be charged
pro rata against the value of all the shares of Common Stock entitled to
appraisal.
The Court may require Stockholders who have demanded an appraisal and who
hold Common Stock represented by certificates to submit their certificates of
Common Stock to the Court for notation thereon of the pendency of the appraisal
proceedings. If any Stockholder fails to comply with such direction, the Court
may dismiss the proceedings as to such Stockholder.
Any Stockholder who has duly demanded an appraisal in compliance with
Section 262 will not, after the Effective Time, be entitled to vote the shares
of Common Stock subject to such demand for any purpose or be entitled to the
payment of dividends or other distributions on those shares (except dividends
or other distributions payable to holders of record of shares of Common Stock
as of a date prior to the Effective Time).
If any Stockholder who demands appraisal of shares under Section 262 fails
to perfect, or effectively withdraws or loses, the right to appraisal, as
provided in the DGCL, the shares of Common Stock of such holder will be
converted into the right to receive the Merger Consideration in accordance with
the Merger Agreement, without interest. A Stockholder will fail to perfect, or
effectively lose, the right to appraisal if no petition for appraisal is filed
within 120 calendar days after the Effective Time. A Stockholder may withdraw a
demand for appraisal by delivering to the Company a written withdrawal of the
demand for appraisal and acceptance of the Merger, except that any such attempt
to withdraw made more than 60 calendar days after the Effective Time will
require the written approval of the Company. Once a petition for appraisal has
been filed, such appraisal proceeding may not be dismissed as to any
Stockholder without the approval of the Court.
Solicitation of Proxies
The Company will bear the costs of soliciting proxies from Stockholders,
including the fees and expenses of , its proxy solicitation firm.
In addition to soliciting proxies by mail, directors, officers and employees
of the Company, without receiving additional compensation therefor, may solicit
proxies by telephone, by facsimile or in person. Arrangements may also be made
with brokerage firms and other custodians, nominees and fiduciaries to forward
solicitation materials to the beneficial owners of shares held of record by
such persons, and the Company will reimburse such brokerage firms, custodians,
nominees and fiduciaries for reasonable out-of-pocket expenses incurred by them
in connection therewith.
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THE MERGER AGREEMENT
The following is a summary of certain provisions of the Merger Agreement,
a copy of which is attached hereto as Appendix A and incorporated by reference
herein. All references to and summaries of the Merger Agreement in this Proxy
Statement are qualified in their entirety by reference to the Merger Agreement.
Stockholders are urged to read the Merger Agreement carefully and in its
entirety.
General
Old Merger Agreement. On June 25, 1998, Trace, Merger Sub and the Company
entered into an Agreement and Plan of Merger, which was subsequently amended on
July 6, 1998 (as amended, the "Old Merger Agreement"). Pursuant to the terms of
the Old Merger Agreement, Merger Sub would have been merged with and into the
Company (the "Old Merger") and each outstanding share of Common Stock (except
for shares owned by the Trace Stockholders, shares owned by the Company and
shares owned by stockholders who perfected their appraisal rights in accordance
with Delaware law) would have been converted into the right to receive $18.75
in cash, without interest. On November 5, 1998, Trace terminated the Old Merger
Agreement by delivering a Notice of Termination to the Company. Trace
terminated the Old Merger Agreement because the financing condition contained
in the Old Merger Agreement was incapable of being satisfied on or prior to
December 31, 1998.
The Merger. On November 5, 1998, Trace, Merger Sub and the Company entered
into the Merger Agreement. The Merger Agreement provides for the merger of
Merger Sub with and into the Company. The Company will be the Surviving
Corporation and it will continue its corporate existence under the laws of the
State of Delaware. At the Effective Time, the separate corporate existence of
Merger Sub shall cease. The Surviving Corporation shall possess all the
property, rights, privileges, immunities, powers and franchises of Merger Sub
and the Surviving Corporation shall assume and become liable for all
liabilities, obligations and penalties of the Company and Merger Sub.
Notwithstanding the foregoing, Trace, at its sole election, may substitute any
direct or indirect wholly owned subsidiary of Trace for Merger Sub.
Effective Time of Merger. The Effective Time will occur upon the filing of
the Certificate of Merger with the Delaware Secretary of State or at such time
thereafter as is agreed to between Trace and the Company and provided in the
Certificate of Merger. See "--Conditions to the Merger."
Treatment of Shares in the Merger. At the Effective Time: (a) each share
of Common Stock outstanding immediately prior to the Effective Time, except for
(i) Common Stock then owned by the Trace Stockholders, (ii) Common Stock then
owned by the Company and (iii) Dissenting Shares, shall by virtue of the Merger
and without any action on the part of the holder thereof, be converted into the
right to receive $12.00 in cash, without interest, upon surrender of the
certificate representing such Common Stock; (b) each share of Common Stock
outstanding immediately prior to the Effective Time which is then owned by the
Trace Stockholders shall, by virtue of the Merger and without any action on the
part of the holder thereof, remain outstanding and from and after the Effective
Time shall constitute shares of the Surviving Corporation; and (c) each share
of Common Stock outstanding immediately prior to the Effective Time which is
then owned by the Company or any subsidiary of the Company shall, by virtue of
the Merger and without any action on the part of the holder thereof, be
canceled and retired and cease to exist, without any conversion thereof.
Under the DGCL, record holders of shares of Common Stock who follow the
procedures set forth in Section 262 and who have not voted in favor of the
Merger Agreement will be entitled to have their shares of Common Stock
appraised by the Delaware Court of Chancery and to receive payment of the "fair
value" of such shares, exclusive of any element of value arising from the
accomplishment or expectation of the Merger, together with a fair rate of
interest, if any, as determined by such court. See "The Special
Meeting--Appraisal Rights."
Each share of common stock of Merger Sub issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of the holder thereof, be canceled and retired
and cease to exist, without any conversion thereof.
Certificate of Incorporation and By-Laws. The Certificate of Incorporation
and By-Laws of the Company in effect at the Effective Time shall be Certificate
of Incorporation and By-Laws of the Surviving Corporation until amended in
accordance with applicable law.
Cancellation of Options. As of the Effective Time, the Company shall use
its reasonable best efforts to take such actions to provide that by virtue of
the Merger and without any action on the part of the holders thereof, each
Company Option that is vested and outstanding immediately before the Effective
Time shall be canceled, and in exchange for such cancelation, each holder of a
Company Option shall receive at the Effective Time an amount
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(subject to any applicable withholding tax) equal to the product of: (A) the
amount, if any, by which the Merger Consideration exceeds the per Share
exercise price of the Company Option and (B) the number of Shares subject
thereto. Each Company Option outstanding immediately before the Effective Time
that is not vested and for which the Merger Consideration exceeds the per Share
exercise price of the Company Option ("Unvested In The Money Company Options")
shall not be canceled, and shall remain outstanding after the Effective Time.
No payment shall be made at the Effective Time with respect to any Unvested In
The Money Company Options; provided, however, that each holder of an Unvested
In The Money Company Option shall be entitled to receive from the Surviving
Corporation, upon the vesting of such Unvested In The Money Company Option on
the terms and conditions in effect on the date of the Merger Agreement, an
amount, subject to any applicable withholding tax, equal to the product of (i)
the amount, if any, by which the Merger Consideration exceeds the per Share
exercise price of the Unvested In the Money Company Option and (B) the number
of Shares subject thereto. No payment shall be made with respect to any Company
Option, whether vested or unvested, having a per share exercise price, as in
effect immediately prior to the Effective Time, equal or greater than the
Merger Consideration and any and all such Company Options shall be canceled and
the Company shall have no further liability with respect to such Company
Options. Any consideration due either at the Effective Time or upon the vesting
of an Unvested In The Money Company Option shall be paid without interest after
(a) verification by the Paying Agent (or the Surviving Corporation, in the case
of Unvested In The Money Company Options) of the ownership and terms of the
particular Company Option by reference to the Company's records or such other
evidence reasonably acceptable to the Surviving Corporation as the holder may
provide, and (b) delivery of a written instrument duly executed by the owner of
the applicable Company Options, in a form provided by the Paying Agent and
setting forth (i) the aggregate number of Company Options owned by that person,
(ii) a representation by the person that such person is the owner of all
Company Options described pursuant to clause (i), and that none of those
Company Options has expired or ceased to be exercisable (except as a result of
transactions contemplated hereby); and (iii) a confirmation of and consent to
the cancellation of all of the Company Options described pursuant to clause
(i).
Cancellation of Warrants. As of the Effective Time, the Company shall use
its reasonable best efforts to take such actions to provide that by virtue of
the Merger and without any action on the part of the holders thereof, each
Company Warrant that is outstanding immediately before the Effective Time,
whether or not then exercisable, shall be canceled and, in consideration of
such cancellation, each holder of a Company Warrant shall receive at the
Effective Time an amount (subject to any applicable withholding tax) equal to
the product of: (A) the number of shares of Common Stock subject thereto and
(B) the Warrant Consideration. The Warrant Consideration equals the amount, if
any, by which the Merger Consideration exceeds the per share exercise price of
the particular Warrant. No payment shall be made with respect to any Company
Warrant having a per share exercise price, as in effect immediately prior to
the Effective Time, equal or greater than the Merger Consideration and any and
all such Company Warrants shall be canceled and the Company shall have no
further liability with respect to such Company Warrants.The Warrant
Consideration shall be paid without interest after (a) verification by the
Paying Agent of the ownership and terms of the particular Company Warrant by
reference to the Company's records or such other evidence reasonably acceptable
to the Surviving Corporation as the holder may provide, and (b) delivery of a
written instrument duly executed by the owner of the applicable Company
Warrants, in a form provided by the Paying Agent and setting forth (i) the
aggregate number of Company Warrants owned by that person, (ii) a
representation by the person that such person is the owner of all Company
Warrants described pursuant to clause (i), and that none of those Company
Warrants has expired or ceased to be exercisable; and (iii) a confirmation of
and consent to the cancellation of all of the Company Warrants described
pursuant to clause (i).
Surrender of Stock Certificates. Trace will designate ScotiaBank or
another bank or trust company reasonably acceptable to the Company to act as
the Paying Agent under the Merger Agreement. Prior to the Effective Time, Trace
shall deposit with the Paying Agent cash in an aggregate amount equal to the
sum of (i) the product of: (A) the number of shares of Common Stock outstanding
immediately prior to the Effective Time (other than Common Stock owned by the
Trace Stockholders or the Company or Dissenting Shares) (the "Total Shares");
and (B) the Merger Consideration, (ii) the aggregate amount payable to holders
of Vested In The Money Company Options and (iii) the aggregate amount payable
to holders of Vested In The Money Company Warrants (such sum being hereinafter
referred to as the "Exchange Fund"). The Paying Agent shall, pursuant to
irrevocable instructions, make the payments provided for under the Merger
Agreement out of the Exchange Fund.
As soon as reasonably practicable after the Effective Time, the Paying
Agent shall mail to each holder of record as of the Effective Time (other than
the Company and the Trace Stockholders) of an outstanding certificate or
certificates for Common Stock (the "Certificates"), a letter of transmittal and
instructions for use in effecting the surrender of such certificates for
payment in accordance with the Merger Agreement. Upon the surrender to the
Paying Agent of a Certificate, together with a duly executed letter of
transmittal, the holder thereof shall be entitled
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to receive cash in an amount equal to the product of the number of shares of
Common Stock represented by such Certificate and the Merger Consideration, less
any applicable withholding tax, and such Certificate shall then be canceled.
Until surrendered pursuant to the procedures described above, each
Certificate (other than Certificates representing Common Stock owned by the
Company or the Trace Stockholders and Certificates representing Dissenting
Shares) shall represent for all purposes the right to receive the Merger
Consideration in cash multiplied by the number of shares of Common Stock
evidenced by such Certificate, without any interest thereon, subject to any
applicable withholding obligation.
After the Effective Time, there shall be no transfers on the stock
transfer books of the Surviving Corporation of shares of Common Stock which
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation, they
shall be canceled and exchanged for an amount in cash equal to the Merger
Consideration multiplied by the number of shares of Common Stock evidenced by
such Certificate, without any interest thereon, subject to any withholding
obligation.
Any portion of the Exchange Fund which remains unclaimed by the
shareholders of the Company or holders of options or warrants for one year
after the Effective Time (including any interest received with respect thereto)
shall be repaid to the Surviving Corporation, upon demand. Any stockholders or
holders of options or warrants of the Company who have not theretofore complied
with the procedures set forth above shall thereafter look only to the Surviving
Corporation for payment of their claim for the Merger Consideration per share
of Common Stock, without any interest thereon, but shall have no greater rights
against the Surviving Corporation than may be accorded to general creditors of
the Surviving Corporation under Delaware law. Notwithstanding the foregoing,
neither the Paying Agent nor any party to the Merger Agreement shall be liable
to any holder of certificates formerly representing Common Stock for any amount
to be paid to a public official in good faith pursuant to any applicable
abandoned property, escheat or similar law.
Representations and Warranties
The Merger Agreement contains various representations and warranties of
the Company to Trace and Merger Sub, including with respect to the following
matters: (i) the due organization and valid existence of the Company and its
subsidiaries and similar corporate matters; (ii) the capitalization of the
Company and its subsidiaries; (iii) the due authorization, execution and
delivery of the Merger Agreement, its binding effect on the Company, and the
Board of Directors' recommendation of the Merger to the Public Stockholders;
(iv) regulatory filings and approvals, and the lack of conflicts between the
Merger Agreement and the transactions contemplated thereby with the Company's
Certificate of Incorporation or By-Laws or any contract to which it or its
subsidiaries are parties; (v) the accuracy of the Company's SEC filings, its
financial statements and the absence of undisclosed liabilities; (vi) the
absence of undisclosed liabilities; (vii) the absence of undisclosed pending or
threatened litigation; (viii) the absence of defaults or violations of the
Company's Certificate of Incorporation or By-Laws or applicable law; and (ix)
various other matters. Such representations and warranties are subject, in
certain cases, to specified exceptions and qualifications, including without
limitation, those exceptions that are disclosed to Trace in the written
disclosure schedule delivered by the Company to Trace pursuant to the Merger
Agreement (the "Company Disclosure Schedule"). In many instances the
representations and warranties given by the Company are subject to the
qualification that the applicable representation or warranty would not fail to
be true and correct unless it would have a Material Adverse Effect. For
purposes of the Merger Agreement, "Material Adverse Effect" means any material
adverse effect on the business, operations, properties (including intangible
properties) or condition (financial or otherwise) of the Company and its
subsidiaries, taken as a whole.
The Merger Agreement also includes certain representations and warranties
by Trace and Merger Sub, including representations and warranties regarding:
the due organization, good standing and authority to conduct business and own,
lease and operate the properties of Trace and Merger Sub; the authority to
enter into the Merger Agreement; the absence of conflict between the
transactions contemplated by the Merger Agreement with other agreements and
documents; consents and approvals; and the conduct of business by Merger Sub.
Conduct of the Business Pending the Merger
The Company has agreed that, except as expressly contemplated in the
Merger Agreement, as set forth in the Company Disclosure Schedule, or as agreed
to by Trace, during the period from the date of the Merger Agreement and
continuing until the earlier of termination of the Merger Agreement or the
Effective Time, the business of the Company and its subsidiaries will be
conducted only in the ordinary and usual course and in all material respects
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in compliance with all applicable legal requirements, and to the extent
consistent therewith, each of the Company and its subsidiaries will use its
commercially reasonable efforts to preserve its business organization intact
and maintain its existing relationships with customers, suppliers, employees,
creditors, and business partners and to maintain customary levels of insurance
coverage with respect to its assets and operations. The Company has further
agreed that during such period, and subject to the same exceptions, the Company
will not, and will not permit its subsidiaries to, among other things: (i)
amend its or its subsidiaries' certificate of incorporation or bylaws or
similar organizational documents; (ii) declare, set aside, or pay any dividend
or other distribution in respect of any of its capital stock or that of its
subsidiaries, other than those dividends or other distributions payable solely
to the Company or one of its wholly-owned subsidiaries; (iii) redeem, purchase
or otherwise acquire any shares of capital stock (or options, warrants, calls,
commitments or rights of any kind to acquire any shares of capital stock) of
the Company or its subsidiaries; (iv) issue, sell, pledge, dispose of or
encumber any additional shares of, or securities convertible into or
exchangeable for, or options, warrants, calls, commitments or rights of any
kind to acquire, any shares of capital stock of any class of the Company or its
subsidiaries (other than the issuance of Common Stock upon the exercise of
outstanding Company stock options or warrants); (v) split, combine, or
reclassify the outstanding capital stock of the Company or its subsidiaries;
(vi) acquire or agree to acquire, transfer, lease, license, sell, mortgage,
pledge, encumber, dispose of or agree to dispose of any material assets either
by purchase, merger, consolidation, sale of shares in its subsidiaries or
otherwise, subject to certain exceptions; (vii) transfer, lease, license, sell,
mortgage, pledge, dispose of or encumber any intellectual property, subject to
certain exceptions; (viii) grant any increase in the compensation payable by
the Company or its subsidiaries to any of its executive officers or directors
(other than regularly scheduled pay increases of not more than 10% per annum)
or to any of its key employees other than in the ordinary course of business
consistent with past practice; (ix) adopt, amend, increase or accelerate the
payment or vesting of the amounts payable under any existing bonus, incentive
compensation, deferred compensation, severance, profit sharing, stock option,
stock purchase, insurance, pension, retirement or other employee benefit plan,
agreement or arrangement, except as expressly contemplated by the Merger
Agreement or as required by any obligation existing as of the date hereof to do
so or any applicable legal requirement, subject to certain exceptions; (x)
enter into or modify or amend any employment agreement or arrangement with any
officer or director of the Company or any of its subsidiaries, other than in
the ordinary course of business consistent with past practice, or enter into or
modify or amend any severance agreement or arrangement with, or grant any
severance or termination pay to, any officer or director of the Company or any
of its subsidiaries, except in the ordinary course of business consistent with
past practice or as required by any applicable legal requirement or any
contracts, agreements or other instruments to which the Company or any of its
subsidiaries is bound and which was in effect on the date of the Merger
Agreement, or enter into any collective bargaining agreement; (xi) modify,
amend or terminate any of its material contracts or waive, release or assign
any material rights or claims, other than in the ordinary course of business
consistent with past practice, subject to certain other exceptions; (xii) incur
or assume any indebtedness other than for working capital in amounts consistent
with past practice or enter into capital leases other than in the ordinary
course of business, or materially modify any material indebtedness; (xiii)
assume, guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for any material obligations of any other
person (other than a subsidiary of the Company or subject to certain other
exceptions); (xiv) make any loans, advances or capital contributions to, or
investments in, any other person (other than to a subsidiary of the Company or
pursuant to the terms of the Merger Agreement (provided the ownership structure
of any such subsidiary has not changed since the date of the Merger Agreement)
or customary advances to employees), subject to certain other exceptions; (xv)
enter into any material contract or transaction other than in the ordinary
course of business consistent with past practice; (xvi) materially change any
of the accounting methods used by it unless required by GAAP, other than
changing its fiscal year to a calendar year; (xvii) make any material tax
election (unless required by law) or settle or compromise any material income
tax liability; (xviii) except in the ordinary course of business consistent
with past practice, pay, discharge or satisfy any actions, suits, proceedings
or claims, other than the payment, discharge or satisfaction, in each case in
complete satisfaction, and with a complete release, of such matter with respect
to all parties to such matter, of actions, suits, proceedings or claims that do
not result in, individually or in the aggregate, a Material Adverse Effect;
(xix) waive the benefits of, or agree to modify in any material manner, any
confidentiality, standstill or similar agreement to which the Company or any of
its subsidiaries is a party, except as contemplated by the Merger Agreement;
(xx) commence a lawsuit except as provided for in the Merger Agreement; (xxi)
enter into an agreement, contract, commitment or arrangement to do any of the
foregoing, or authorize, recommend, propose or announce an intention to do any
of the foregoing.
Superior Proposal
Pursuant to the Merger Agreement, except for certain limitations described
below, the Company is not limited in its ability to negotiate a Takeover
Proposal with any third party. However, the Board of Directors of the Company
may not (i) withdraw or modify, or propose to withdraw or modify, in a manner
adverse to Trace, the approval or recommendation by such Board of Directors of
the Merger Agreement or the Merger, (ii) approve or recommend,
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or propose to approve or recommend, any Takeover Proposal or (iii) cause the
Company to enter into any agreement with respect to any Takeover Proposal,
except in connection with a Superior Proposal and only at a time that is after
the first business day following Trace's receipt of written notice advising
Trace that the Board of Directors of the Company has received a Superior
Proposal, specifying the material terms and conditions of such Superior
Proposal and identifying the person making such Superior Proposal.
The Company is required to promptly advise Trace orally and in writing of
any request for information in connection with a potential Takeover Proposal,
or of any Takeover Proposal, or any inquiry with respect to or which reasonably
could lead to any Takeover Proposal, the material terms and conditions of such
request, Takeover Proposal or inquiry and the identity of the person making
such request, Takeover Proposal or inquiry.
Pursuant to the Merger Agreement, Trace and Merger Sub will together
prepare and file the Schedule 13E-3 under the Exchange Act. The Company, Trace
and Merger Sub will each furnish all information concerning it, its affiliates
and certain other persons required to be included in the Proxy Statement and
the Schedule 13E-3.
Conditions to the Merger
All Parties. Pursuant to the Merger Agreement, the respective obligations
of each party to effect the Merger are subject to the satisfaction on or prior
to the Effective Time of each of the following conditions: (i) (A) the adoption
and approval of the Merger Agreement by the requisite vote of the shareholders
of the Company as required by applicable law, in order to consummate the Merger
and (B) the affirmative vote of a majority of the Independent Shares voting
with respect to the Merger; (ii) no statute, rule, order, decree, regulation,
or other legal requirement has been enacted or promulgated by any governmental
entity which prohibits the consummation of the Merger or the transactions
contemplated hereby; and (iii) no order or injunction of a court or other
governmental authority of competent jurisdiction has precluded, restrained,
enjoined or prohibited the consummation of the Merger.
Trace and Merger Sub. Pursuant to the Merger Agreement, the obligations of
Trace and Merger Sub to effect the Merger are also subject to the following
conditions, any and all of which may be waived in whole or in part by Trace:
(i) the representations and warranties of the Company, without regard to any
Material Adverse Effect qualification or any other materiality qualification
contained in any such representation and warranty, shall be true and correct in
all respects on and as of the Effective Time, with the same force and effect as
if made on and as of the Effective Time, unless the failure of such
representations and warranties to be true and correct would not reasonably be
expected to result in, individually or in the aggregate, a Material Adverse
Effect; (ii) the Company has performed or complied in all material respects
with all agreements, conditions and covenants required by the Agreement to be
performed or complied with by it on or before the Effective Time; (iii)
financing for the transactions contemplated in the Merger Agreement has been
obtained on terms, conditions and in amounts reasonably satisfactory to Trace;
and (iv) the absence of any action, suit, claim or legal, administrative or
arbitral proceeding or investigation pending before any governmental entity
seeking to restrain or prohibit, or to obtain damages in respect of, the Merger
Agreement or the consummation of the transactions contemplated thereby.
The Company. Pursuant to the Merger Agreement, the obligation of the
Company to effect the Merger is also subject to the fulfillment of the
following conditions, any and all of which may be waived in whole or in part by
the Company (before or after the vote of the Stockholders): (i) the
representations and warranties of Trace and Merger Sub, without regard to any
material adverse effect or any other materiality qualification contained in any
such representation or warranty, shall be true and correct on and as of the
Effective Time, with the same force and effect as if made on and as of the
Effective Time, unless the failure of such representations and warranties to be
true and correct would not reasonably be expected to result in, individually or
in the aggregate, a material adverse effect on the ability of Trace and Merger
Sub to consummate the transactions contemplated by the Merger Agreement,
including the Merger; (ii) Trace and Merger Sub shall have performed or
complied in all material respects with all agreements, conditions and covenants
required by the Merger Agreement to be performed or complied with by them on or
before the Effective Time; and (iii) the absence of any action, suit, claim or
legal, administrative or arbitral proceeding or investigation pending before
any governmental entity seeking to restrain or prohibit, or to obtain damages
in respect of, the Merger Agreement or the consummation of the transactions
contemplated thereby.
Termination
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after Stockholder approval of the terms of the Merger
Agreement: (i) by mutual written consent of the Boards of Directors of Trace
and the Company; (ii) by either Trace or the Company, if the Merger Agreement
shall have been voted
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on by the Stockholders at the Special Meeting and the vote shall not have been
sufficient to satisfy the conditions set forth above under the caption
"Conditions to the Merger"; (iii) by either Trace or the Company, if any
governmental entity shall have issued an order, decree or ruling or taken any
other action permanently enjoining, restraining or otherwise prohibiting the
acceptance for payment of, or payment for, Public Shares pursuant to the Merger
and such order, decree or ruling or other action shall have become final and
nonappealable; (iv) by either Trace or the Company, if the Merger shall not
have been consummated by January 29, 1999; provided, however, that the right to
terminate the Merger Agreement shall not be available to any party whose
failure to perform any of its obligations under the Merger Agreement has been
the cause of, or resulted in, the failure of the Merger to occur on or before
such date; (v) by Trace or Merger Sub, if the Company shall have breached in
any material respect any representation, warranty, covenant or other agreement
contained in the Merger Agreement which breach is incapable of being cured or
has not been cured within 30 days after the giving of written notice to the
Company; (vi) by the Company, if Trace or Merger Sub shall have breached any of
their respective representations, warranties, covenants or other agreements
contained in the Merger Agreement which breach is incapable of being cured or
has not been cured within 30 days after the giving of written notice to Trace
or Merger Sub, as applicable; (vii) by Trace or Merger Sub, if the Company's
Board of Directors (A) has withdrawn or modified or amended in any respect its
recommendation of the Merger Agreement or the Merger, (B) has caused the
Company to enter into an agreement with a third party with respect to any
Takeover Proposal, or (C) the Board of Directors of the Company shall have
resolved to take any of the foregoing actions; (viii) by the Company, (x) if
the Company's Board of Directors shall have withdrawn its recommendation of the
Merger Agreement or the Merger or shall have approved or recommended a Takeover
Proposal, (y) in connection with entering into an agreement with a third party
with respect to any Takeover Proposal, or (z) if the Board of Directors of the
Company shall have resolved to take any of the foregoing actions, provided that
in any case the Company and the Board of Directors of the Company shall have
complied with certain obligations provided in the Merger Agreement; or (ix) by
Trace, Merger Sub or the Company if any of the respective conditions described
above under "--Conditions to the Merger" that (A) are required to occur prior
to the Effective Time shall have become incapable of occurring, or (B) are not
permitted to occur prior to the Effective Time, shall have occurred prior to
such time and are incapable of being cured or reserved, and, in either case,
shall not have been, on or before the date of such termination, permanently
waived by such party. The Merger Agreement provides that in the event of its
termination, no party thereto will have any liability or further obligation to
any other party to the Merger Agreement, provided that certain obligations
under the Merger Agreement shall survive any termination.
Fees and Expenses
The Merger Agreement provides that all fees and expenses incurred in
connection with the Merger Agreement and the transactions contemplated thereby
will be paid by the party incurring such expenses.
Indemnification of Directors and Officers
Trace has agreed in the Merger Agreement, subject to certain limitations,
that all rights to indemnification with respect to matters occurring through
the Effective Time, existing in favor of directors, officers or employees of
the Company as provided in the Company's Certificate of Incorporation, By-Laws
or certain existing indemnification agreements between the Company and such
parties, shall survive the Merger and shall continue in full force and effect
for a period of not less than six years from the Effective Time. In furtherance
of such, the Company will purchase and pay all premiums with respect to a
six-year extension of the current policies of such directors and officers'
liability insurance maintained by the Company with respect to matters arising
before and acts or omissions occurring or existing at or prior to the Effective
Time, including the transactions contemplated by the Merger Agreement. The
Company's Certificate of Incorporation, Bylaws and such existing
indemnification agreements provide for indemnification of the Company's
directors and officers under certain circumstances for actions taken on behalf
of the Company.
Access to Information
The Company has agreed to afford Trace and its representatives, upon
reasonable advance notice, access during normal business hours prior to the
Effective Time to the properties, books, contracts, insurance policies,
commitments and records of the Company and its subsidiaries, and during such
period promptly to furnish Trace with such other information concerning its
business, properties and personnel as Trace may reasonably request.
Legal Compliance
Subject to the terms and conditions in the Merger Agreement, each of the
parties to the Merger Agreement has agreed to use its reasonable best efforts
to take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective
61
<PAGE>
the Merger and the other transactions contemplated by the Merger Agreement.
Pursuant to the Merger Agreement, each of the Company, Trace and Merger Sub has
agreed to use its reasonable best efforts to comply promptly with all legal
requirements that may be imposed on it with respect to the Merger Agreement and
the transactions contemplated thereby and to cooperate with, and furnish
information to, each other in connection with any such requirements imposed
upon any of them or any of the subsidiaries in connection with the Merger
Agreement and the transactions contemplated thereby.
Amendment
The Merger Agreement provides that it may be amended, modified and
supplemented in any and all respects, whether before or after any approval of
the Merger Agreement by the Stockholders of the Company, by written agreement
of the Company, Trace and Merger Sub, at any time prior to the Effective Time;
provided, however, that after the approval of the Merger Agreement by the
Stockholders of the Company, no such amendment, modification or supplement
shall reduce the amount or change the form of the Merger Consideration without
further approval by the holders of such number of shares of Common Stock that
are required to approve the Merger Agreement pursuant to the DGCL.
CERTAIN PROJECTED FINANCIAL DATA
The Company does not, as a matter of course, make public forecasts or
projections as to future sales, earnings or other income statement data, cash
flows or balance sheet and financial position information. However, in order to
aid the evaluation of the Company in connection with the Initial Proposed
Transaction by the Special Committee and Beacon, and Beacon's assessment of the
fairness, from a financial point of view, of the merger consideration relating
to the Old Merger, the Company in May 1998 furnished the Special Committee and
Beacon with certain projections (the "Initial Projections") prepared by the
Company's management and, therefore, the Initial Projections are included
herein. In addition, in order to aid the evaluation of the Company in
connection with the Current Proposed Transaction by the Board of Directors,
Ramius, the Special Committee and Beacon and Ramius' and Beacon's assessment of
the fairness, from a financial point of view, of the Merger Consideration, the
Company in October 1998 furnished the Board of Directors, Ramius, the Special
Committee and Beacon with certain projections (the "Current Projections" and
together with the Initial Projections, the "Projections") prepared by the
Company's management and, therefore, the Current Projections are included
herein. The following summary of the Projections is included in this Proxy
Statement solely because such was made available to such parties. The
Projections do not reflect any of the effects of the Merger or other changes
that may in the future be deemed appropriate concerning the Company and its
assets, business, operations, properties, policies, corporate structure,
capitalization and management in light of the circumstances then existing.
Accordingly, the Projections do not reflect the Company's or management's view
of the Company's expected results following the Merger. The Company has not
updated the Projections to reflect changes that have occurred since their
preparation.
The Projections were not prepared with a view toward public disclosure or
compliance with published guidelines of the SEC or the American Institute of
Certified Public Accountants regarding forward-looking information or generally
accepted accounting principles. Neither the Company's independent auditors, nor
any other independent accountants, have compiled, examined, or performed any
procedures with respect to the prospective financial information contained
herein, nor have they expressed any opinion or given any form of assurance on
such information or its achievability, and assume no responsibility for, and
disclaim any association with, the prospective financial information.
Furthermore, the Projections necessarily make numerous assumptions, some (but
not all) of which are set forth below and many of which are beyond the control
of the Company and may prove not to have been, or may no longer be, accurate.
Additionally, this information, except as otherwise indicated, does not reflect
revised prospects for the Company's businesses, changes in general business and
economic conditions, or any other transaction or event that has occurred or
that may occur and that was not anticipated at the time such information was
prepared. Accordingly, such information is not necessarily indicative of
current values or future performance, which may be significantly more favorable
or less favorable than as set forth below, and should not be regarded as a
representation that they will be achieved.
The Company has also made certain forward-looking statements in this Proxy
Statement and the documents incorporated by reference herein. These statements
are based on the Company's management's beliefs and assumptions, based on
information available to it at the time such statements were prepared. FORWARD-
LOOKING STATEMENTS ARE NOT GUARANTEES OF PERFORMANCE. THEY INVOLVE RISKS,
UNCERTAINTIES AND ASSUMPTIONS. THE FUTURE RESULTS AND STOCKHOLDER VALUES OF THE
COMPANY MAY MATERIALLY DIFFER FROM THOSE EXPRESSED IN THESE FORWARD-LOOKING
62
<PAGE>
STATEMENTS. MANY OF THE FACTORS THAT WILL DETERMINE THESE RESULTS AND VALUES
ARE BEYOND THE COMPANY'S ABILITY TO CONTROL OR PREDICT. PUBLIC STOCKHOLDERS ARE
CAUTIONED NOT TO PUT UNDUE RELIANCE ON ANY FORWARD-LOOKING STATEMENTS.
Public Stockholders should understand that the following important
factors, in addition to those discussed elsewhere in the Proxy Statement and in
the documents which are incorporated by reference into this Proxy Statement,
could affect the future results of the Company and could cause results to
differ materially from those expressed in such forward-looking statements and
the Projections: (i) the effect of general economic conditions, both domestic
and international; (ii) the Company's outstanding indebtedness and leverage;
(iii) restrictions imposed by the terms of the Company's indebtedness; (iv) the
impact of raw material costs; (v) future capital requirements; (vi) the impact
of competition, including its impact on market share and prospects in each of
the Company's business units; (vii) the loss of key employees; (viii) the
impact of litigation; (ix) the impact of current or pending legislation and
regulations, and (x) other factors that may be described from time to time in
filings of the Company with the SEC. It is likely that there will be
differences between the Projections and actual results because events and
circumstances frequently do not occur as expected, and such differences may be
material. Internal financial forecasts were prepared in connection with the
acquisition of the Company's automotive and specialty industrial textile
business in 1994 and certain other material transactions since 1994. The
Company failed to achieve the results forecasted therein. Operating management
of the Company has changed since the date of such forecasts.
THE PROJECTIONS ARE NOT GUARANTEES OF PERFORMANCE. THEY INVOLVE RISKS,
UNCERTAINTIES AND ASSUMPTIONS. THE FUTURE RESULTS AND STOCKHOLDER VALUE OF THE
COMPANY MAY MATERIALLY DIFFER FROM THOSE EXPRESSED IN THE PROJECTIONS. MANY OF
THE FACTORS THAT WILL DETERMINE THESE RESULTS AND VALUES ARE BEYOND THE
COMPANY'S ABILITY TO CONTROL OR PREDICT. STOCKHOLDERS ARE CAUTIONED NOT TO
PLACE UNDUE RELIANCE ON THE PROJECTIONS. THERE CAN BE NO ASSURANCE THAT THE
PROJECTIONS WILL BE REALIZED OR THAT THE COMPANY'S FUTURE FINANCIAL RESULTS
WILL NOT MATERIALLY VARY FROM THE PROJECTIONS. THE COMPANY DOES NOT INTEND TO
UPDATE OR REVISE THE PROJECTIONS.
63
<PAGE>
THE INITIAL PROJECTIONS
FOAMEX INTERNATIONAL INC.
(in millions except percentages)
The Initial Projections included herein were prepared by the Company based
upon management's estimates of the total market for polyurethane foam products
and the Company's own performance through 2002, as well as cost reductions of
in excess of $20 million in 1998 and $35 million in 1999 reflected in Cost of
Sales and SG&A Expense related to the integration of the Crain Acquisition. The
projected results for fiscal 1998 were based upon actual results through March
1998 and management forecasts for the remainder of the year. In the Initial
Projections, (i) the increase in net sales for 1998 over pro forma 1997 of
approximately 7.7% , reflected new business captured by the Company in all of
its business areas, (ii) the increase in net sales for 1999 of approximately
9.9% reflected new business captured by the Company, particularly in automotive
lamination, (iii) the increase in net sales in each of 2000, 2001, 2002 of
approximately 4.5% per annum reflected reduced general economic growth,
partially offset by increased growth of the Company's international divisions
in Mexico and Asia, (iv) gross margins in 1998 were forecasted to be 17.7%,
decreasing to 17.0% in 1999 and then increasing only slightly due to business
mix, (v) selling, general and administrative expenses were forecasted to be
6.2% of sales in 1998 decreasing to 6.0% in 1999 as a full year of cost
reductions related to the Crain Acquisition would have been realized, (vi)
interest expense reflected the anticipated expense related to the Company's
various pieces of public and non-public debt, as well as the amortization of
deferred financing costs and the amortization of the premium on the Company's
13.50% Senior Subordinated Notes, and (vii) income taxes reflect all state and
federal income taxes, both domestic and foreign.
<TABLE>
<CAPTION>
Projected For Fiscal Years
-----------------------------------------------------------------------------
1998 1999 2000 2001 2002
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net Sales ...................... $ 1,353.1 $ 1,487.6 $ 1,554.5 $ 1,625.3 $ 1,698.3
Growth Rate ................... 7.7% 9.9% 4.5% 4.5% 4.5%
Cost of Sales .................. 1,113.8 1,234.1 1,289.0 1,348.2 1,409.0
---------- ---------- ---------- ---------- ----------
Gross Profit .................. 239.3 253.5 265.5 277.1 289.2
Gross Margin .................. 17.7% 17.0% 17.1% 17.1% 17.0%
SG&A Expense ................... 84.0 89.7 94.1 98.8 103.7
---------- ---------- ---------- ---------- ----------
Operating income .............. 155.3 163.8 171.4 178.3 185.6
Interest Expense (net) ......... 73.2 69.7 66.8 62.6 58.1
---------- ---------- ---------- ---------- ----------
Pre-tax Income ................ 82.1 94.1 104.6 115.8 127.4
Income Tax Expense ............. 32.8 37.7 41.8 46.3 51.0
---------- ---------- ---------- ---------- ----------
Net Income ..................... $ 49.2 $ 56.5 $ 62.7 $ 69.5 $ 76.5
========== ========== ========== ========== ==========
</TABLE>
(figures may not add due to rounding)
THE CURRENT PROJECTIONS
The Current Projections included herein have been prepared by the Company
based upon management's revised estimates of the total market for polyurethane
foam products and the Company's own performance through 2002, as well as cost
reductions of in excess of $20 million in 1998 and $35 million in 1999
reflected in Cost of Sales and SG&A Expense related to the integration of the
Crain Acquisition. In the first Current Projection (the "Non Contingency
Projection"), the Company's revised estimates do not take into account the
possible effects of a broad economic downturn in the United States possibly
including, but not limited to, a reduction in the gross national product and
deflation. The second Current Projection (the "Contingency Projection") takes
into account the effect of such an economic downturn on the profitability of
the Company and its subsidiaries on a separate line-item marked Contingency.
The projected results for fiscal 1998 were based upon actual results
through September 1998 and management forecasts for the remainder of the year.
In the projections, (i) the increase in net sales for 1998 over pro forma 1997
of approximately 5.4% reflects new business captured by the Company in all of
its business areas, (ii) the increase in net sales for 1999 of approximately
10.0% reflects new business captured by the Company, particularly in automotive
lamination, (iii) the increase in net sales in each of 2000, 2001, 2002 of
approximately 2.8%, 4.7% and 3.8% per annum respectively reflects reduced
general economic growth, partially offset by increased growth of the Company's
international divisions in Mexico and Asia, (iv) gross margins in 1998 are
forecasted to be 17.8% and
64
<PAGE>
to increase to 18.2% in 1999 and increase only slightly thereafter due to
business mix, (v) selling, general and administrative expenses are forecasted
to be 6.4% of sales in 1998 and decrease to 5.9% in 1999 as a full year of cost
reductions related to the Crain Acquisition are realized, (vi) interest expense
reflects the anticipated expense related to the Company's various pieces of
public and non-public debt, as well as the amortization of deferred financing
costs and the amortization of the premium on the Company's 13 1/2% Senior
Subordinated Notes, and (vii) income taxes reflect all state and federal income
taxes, both domestic and foreign.
Non Contingency Projections
<TABLE>
<CAPTION>
Projected For Fiscal Years
-------------------------------------------------------------------------------
1998 1999 2000 2001 2002
------------- --------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net Sales ...................... $ 1,287.6 $ 1,416.4 $ 1,456.2 $ 1,524.0 $ 1,581.4
Growth Rate ................... 5.4% 10.096 2.8% 4.7% 3.8%
Cost of Sales .................. 1,058.4 1,158.3 1,191.5 1,246.2 1,292.8
---------- ----------- ---------- ---------- ----------
Gross Profit .................. 229.1 258.1 264.8 277.9 288.7
Gross Margin .................. 17.8% 18.2% 18.2% 18.2% 18.3%
SG&A Expense ................... 81.9 83.4 84.7 86.7 88.4
Contingency .................... 0.0 0.0 0.0 0.0 0.0
---------- ----------- ---------- ---------- ----------
Operating Income .............. 147.2 174.7 180.1 191.2 200.2
Interest Expense (net) ......... 74.1 68.5 67.1 62.8 60.9
Other Income (Expense) ......... (2.5) 0.3 4.5 5.8 8.4
---------- ----------- ---------- ---------- ----------
Pretax Income ................. 70.6 106.5 117.5 134.2 147.8
Income Tax Expense ............. 28.2 45.3 49.8 56.4 61.9
---------- ----------- ---------- ---------- ----------
Net Income .................... $ 42.4 $ 61.2 $ 67.8 $ 77.8 $ 85.9
</TABLE>
(figures may not add due to rounding)
Contingency Projections
<TABLE>
<CAPTION>
Projected For Fiscal Years
-----------------------------------------------------------------------------
1998 1999 2000 2001 2002
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net Sales ...................... $ 1,287.6 $ 1,416.4 $ 1,456.2 $ 1,524.0 $ 1,581.4
Growth Rate ................... 5.4% 10.0% 2.8% 4.7% 3.6%
Cost of Sales .................. 1,058.4 1,158.3 1,191.5 1,246.2 1,292.8
---------- ---------- ---------- ---------- ----------
Gross Profit .................. 229.1 258.1 264.8 277.9 288.7
Gross Margin .................. 17.8% 18.2% 18.2% 18.2% 18.3%
SG&A Expense ................... 81.9 83.4 84.7 86.7 88.4
Contingency .................... (2.0) (17.0) (18.0) (10.0) (5.0)
---------- ---------- ---------- ---------- ----------
Operating Income .............. 145.2 157.7 162.1 181.2 195.2
Interest Expense (net) ......... 74.1 68.5 67.1 62.8 60.9
Other Income (Expense) ......... (2.5) 0.3 3.6 4.7 7.0
---------- ---------- ---------- ---------- ----------
Pretax Income ................. 68.6 89.5 98.7 123.1 141.4
Income Tax Expense ............. 27.4 38.5 42.2 52.0 59.3
---------- ---------- ---------- ---------- ----------
Net Income .................... $ 41.2 $ 51.0 $ 56.5 $ 71.1 $ 82.1
</TABLE>
(figures may not add due to rounding)
65
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
Set forth below is certain historical consolidated financial information
of the Company. The selected financial information for, and as of the end of,
each of the years in the five year period ended December 28, 1997 is derived
from, and should be read in conjunction with, the historical consolidated
financial statements of the Company and its subsidiaries, which consolidated
financial statements have been audited by PricewaterhouseCoopers LLP,
independent accountants. The selected financial information for, and as of the
end of, the six month periods ended June 28, 1998 and June 29, 1997 is derived
from, and should be read in conjunction with, the Company's unaudited financial
statements. Operating results for the six months ended June 28, 1998 are not
necessarily indicative of results for the full year. The financial information
that follows is qualified by reference to the financial statements and related
notes incorporated by reference herein.
<TABLE>
<CAPTION>
Six Months Ended Fiscal Year(1)(2)
--------------------------- -----------------------------------------------------------------
June 28, June 29,
1998(3) 1997 1997(4) 1996(5) 1995(6) 1994 1993(7)
------------- ------------- ------------- ------------- ----------- ------------- -----------
(unaudited) (thousands except for earnings per share)
<S> <C> <C> <C> <C> <C> <C> <C>
Statements of Operations Data:
Net Sales ...................... $612,269 $469,007 $931,095 $926,351 $862,834 $833,660 $684,310
Income (loss) from continuing
operations ................... 16,699 17,606 4,131 32,492 (50,750) 22,211 (5,440)
Basic earnings per share from
continuing operations(8)(9) .. 0.67 0.70 0.16 1.28 1.92 0.83 --
Diluted earnings per share from
continuing operations(8)(9) .. 0.64 0.67 0.16 1.26 1.92 0.83 --
Balance Sheet Data (at period end):
Total assets ................... $922,597 $647,425 $893,623 $619,846 $748,242 $786,895 $612,124
Long-term debt ................. 789,658 547,348 735,724 483,344 514,954 502,980 414,445
Stockholders' equity (deficit) . (99,435) (87,045) (113,419) (58,103) 29,383 92,145 64,306
</TABLE>
(1) The Company had a 52 or 53 week fiscal year ending on the Sunday closest to
the end of the calendar year. Each fiscal year presented was comprised of
52 weeks. Foamex International, Foamex L.P. and Foamex Capital Corporation
have changed their year-end from a fifty-two or fifty-three week fiscal
year ending on the Sunday closest to the end of a calendar year to a
calendar year ended December 31, which change is not effective until the
third fiscal quarter of the 1998 fiscal year.
(2) Fiscal years 1993 through 1995 were restated for discontinued operations.
(3) Includes the results of operations of Crain Industries from the date of
acquisition on December 23, 1997.
(4) The Statements of Operations Data includes restructuring and other charges
of $21.1 million (see Note 4 to the consolidated financial statements
incorporated by reference herein), but does not include the results of
operations of Crain Holdings which was acquired December 23, 1997 since
the effect is insignificant. The Balance Sheet Data includes the estimated
fair value of the net assets acquired in the Crain Acquisition.
(5) Includes restructuring credits of $6.5 million (see Note 4 to the
consolidated financial statement incorporated by reference herein).
(6) Includes restructuring and other charges of $41.4 million (see Note 4 to
the consolidated financial statements incorporated by reference herein).
(7) Includes the results of operations of General Felt and Great Western Foam
Products Corporation from March 23, 1993 and May 1, 1993, respectively,
and thus may not be comparable to other periods.
(8) In December 1993, the Company completed an initial public offering of
common stock; therefore, earnings (loss) per share for 1993 is not
applicable.
(9) As of December 28, 1997, the Company adopted SFAS 128 "Earnings Per Share"
and has restated all prior periods presented.
66
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
The following presents the Company's unaudited pro forma combined
Statement of Operations for the year ended December 28, 1997 which is derived
from the historical Statements of Operations of the Company, Crain Industries
and SIMCO Corporation ("SIMCO").
The unaudited pro forma combined Statement of Operations for the year
ended December 28, 1997 gives effect to the Crain Acquisition and Crain
Industries' acquisition of SIMCO in May 1997, as though each such transaction
had occurred at the beginning of the period presented. No pro forma financial
statements are provided for the six months ended June 28, 1998, as all of such
transactions took place prior to the commencement of such period. The pro forma
adjustments are based upon available information and certain assumptions that
the Company believes are reasonable. The unaudited pro forma combined Statement
of Operations is presented for illustrative purposes only, and is, however, not
necessarily indicative of the Company's results of operations that might have
occurred had such transactions been completed at the beginning of the period
presented, and does not purport to indicate the Company's combined results of
operations for any future period.
Upon consummation of the Crain Acquisition, the Company initiated a plan
(the "Integration Plan") to integrate the Company's and Crain Industries'
businesses. Certain of the estimated cost savings expected to result from the
Integration Plan have not been included in the unaudited pro forma combined
Statement of Operations because, among other things, such cost savings
constitute forward-looking statements. Of the approximately $73.1 million of
aggregate expected annualized cost savings which are not reflected in the
unaudited pro forma combined Statement of Operations, approximately $63.7
million of annualized cost savings are expected to be realized as a result of
actions already completed by the Company since initiating the Integration Plan,
and a further approximately $9.4 million of annualized cost savings are
expected to be realized as a result of further actions that the Company intends
to take over the next nine months. Although such forward-looking statements
with respect to cost savings represent the reasonable estimate of the Company,
such cost savings are based on estimates and assumptions about circumstances
and events, many of which have not yet taken place. In addition, the
realization of such cost savings are subject to uncertainties and
contingencies, many of which are difficult to predict and beyond the Company's
ability to control. As a result, there can be no assurance that (i) the
estimated cost savings or the assumptions underlying such cost savings will
prove to be accurate or (ii) the actual results achieved would not have varied
or will not in the future vary from those presented, or that such variances
will not be material. In light of the uncertainties inherent in estimates of
this nature, the inclusion in this Proxy Statement of such estimated cost
savings should not be regarded as a representation by the Company or any other
person that such cost savings would have been or will be achieved. See
"Forward-Looking Statements."
The accompanying unaudited pro forma combined Statement of Operations
should be read in conjunction with the "Selected Historical Financial Data" and
the related notes thereto set forth above. The unaudited pro forma combined
Statement of Operations that follows is qualified by reference to the financial
statements and related notes incorporated by reference herein.
67
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
For the year ended December 28, 1997
(thousands except for earnings per share)
<TABLE>
<CAPTION>
Pro Forma
Foamex Crain Acquisition
International(1) Industries(2) SIMCO(2) Adjustments(3) Pro Forma
------------------ --------------- ---------- ------------------ -------------
<S> <C> <C> <C> <C> <C>
Net sales ............................. $ 931,095 $319,021 $ 6,596 $ -- $1,256,712
Cost of goods sold .................... 787,756 249,516 5,301 22,015(4) 1,064,588
--------- -------- -------- ------------ ----------
Gross profit .......................... 143,339 69,505 1,295 (22,015) 192,124
Selling, general and administrative
expenses ............................. 67,139 40,992 565 (7,446)(5) 101,250
Depreciation and amortization ......... -- 13,849 180 (14,029)(6) --
Restructuring and other charges ....... 21,100 -- -- -- 21,100
--------- -------- -------- ------------ ----------
Income from operations ................ 55,100 14,664 550 (540) 69,774
Interest and debt issuance expense..... 50,570 17,670 132 4,155(7) 72,527
Other income (expense), net ........... 2,126 (285) 8 -- 1,849
--------- -------- -------- ------------ ----------
Income (loss) from continuing
operations before provision for
income taxes ......................... 6,656 (3,291) 426 (4,695) (904)
Provision (benefit) for income
taxes ................................ 2,525 -- -- (1,853)(8) (362)
--------- -------- -------- ------------ ----------
Income (loss) from continuing
operations ........................... $ 4,131 $ (3,291) $ 426 $ (2,842) $ (542)
========= ======== ======== ============ ==========
Basic earnings (loss) per share ....... $ .16 $ (.13) $ .02 $ (.11) $ (.02)
========= ======== ======== ============ ==========
Basic weighted average shares
outstanding .......................... 25,189 25,189 25,189 25,189 25,189
========= ======== ======== ============ ==========
Diluted earnings (loss) per share ..... $ .16 $ (.13) $ .02 $ (.11) $ (.02)
========= ======== ======== ============ ==========
Diluted weighted average shares
outstanding .......................... 25,700 25,700 25,700 25,700 25,700
========= ======== ======== ============ ==========
</TABLE>
The accompanying notes are an integral part of the unaudited
pro forma combined Statement of Operations.
68
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED
STATEMENT OF OPERATIONS
(1) The Company's consolidated Statement of Operations represents the
historical consolidated results of operations for the Company for the
fiscal year ended December 28, 1997.
(2) Crain Industries' Statement of Operations includes the results of SIMCO
from its acquisition in May 1997. The Statement of Operations for SIMCO
includes its pre-acquisition results.
(3) Pro Forma Acquisition Adjustments represents the Company's acquisition of
Crain Industries and Crain Industries' acquisition and related financing
of SIMCO. The unaudited pro forma combined Statement of Operations does
not give effect to the GFI Transaction because such transaction was not
material. See note 22 to the Company's consolidated financial statements
for the fiscal year ended December 28, 1997 incorporated herein by
reference.
<TABLE>
<CAPTION>
Year Ended
December 28, 1997
------------------
<S> <C> <C>
(4) Reclassification of depreciation expense to cost of goods sold ........................... $ 10,852
Reclassification of transportation costs from selling, general and administrative
expenses ................................................................................. 12,963
Reduction of depreciation expense ........................................................ (1,800)
---------
Total ................................................................................... $ 22,015
=========
(5) Reclassification of amortization and depreciation expense to selling, general and
administrative expenses .................................................................. $ 3,177
Reclassification to transportation costs and cost of goods sold .......................... (12,963)
Increase in goodwill amortization ........................................................ (2,340)
---------
Total ................................................................................... $ (7,446)
=========
(6) Reclassification to cost of goods sold ................................................... $ (10,852)
Reclassification to selling, general and administrative expenses ......................... (3,177)
---------
Total ................................................................................... $ (14,029)
=========
(7) Elimination of historical Crain Industries' interest and debt issuance expenses .......... $ (18,264)
Interest and debt issuance costs on financings associated with the Crain Acquisition ..... 21,957
Interest and debt issuance costs associated with SIMCO acquisition ....................... 462
---------
Total ................................................................................... $ 4,155
=========
</TABLE>
(8) Assumes an effective income tax rate of 40.0%.
69
<PAGE>
CERTAIN TRANSACTIONS
The Company regularly enters into transactions with its affiliates on
terms it believes to be no less favorable than those that could be obtained in
third party transactions. Payments to affiliates by Foamex L.P. and its
subsidiaries in connection with any such transactions are governed by the
provisions of the indentures for their public debt securities which generally
provide that such transactions be on terms comparable to those generally
available in equivalent transactions with third parties.
Merger. In connection with the Merger, the Company and its subsidiaries
intend to engage in certain transactions with Trace and its subsidiaries
described below.
In connection with the Merger, the management agreement and tax sharing
agreements will be amended as described below under "Tax Sharing Agreement" and
"Management Agreement." In addition, Foamex Corp., FMXI and Foamex Carpet will
make an aggregate advance to Trace of $75.0 million against future payment
obligations under the tax sharing agreement.
Also, in connection with the Merger, Foamex Funding, a wholly owned
subsidiary of the Company, will borrow approximately $100.7 million of term
loans under the New Credit Facility to purchase from Citicorp USA, Inc. and
ScotiaBank approximately $100.7 million principal amount of obligations of Foam
Funding LLC (the "FLCC Notes"). Foam Funding LLC ("Foam Funding") is an
indirect, wholly owned subsidiary of Trace. The FLLC Notes are secured by a
pledge of a $34 million principal amount note of Foamex L.P. payable to Foam
Funding, and the Foamex Carpet Note (as defined below).
Finally, in connection with the Merger, Foamex Holdings will issue $135
million initial accreted value Senior Discount Notes and Warrants for 19.9% of
its outstanding common stock to Trace in exchange for a $135 million zero
coupon obligation of Trace. Trace will transfer the Senior Discount Notes and
Warrants to ScotiaBank in satisfaction of certain of its indebtedness. Foamex
Holdings will distribute the Trace-Holdings Note to the Company, which will
restructure such note together with the Old Trace Notes into a single zero
coupon obligation of Trace payable in 2009.
GFI Transaction. On February 27, 1998, the Company and certain of its
affiliates engaged in a series of transactions (collectively, the "GFI
Transaction") designed to simplify the Company's corporate structure and to
provide future operational flexibility.
Pursuant to a Transfer Agreement, dated as of February 27, 1998, by and
between Foamex L.P. and Foam Funding, Foamex L.P. transferred (the "GFI
Transfer") to Foam Funding all of the outstanding common stock of General Felt
Industries, Inc. ("General Felt"), in exchange for (i) the assumption by Foam
Funding of $129 million of Foamex L.P.'s indebtedness, and (ii) the transfer by
Foam Funding to Foamex L.P. of a 1% non-managing general partnership interest
in Foamex L.P. The amount of consideration was arrived at based on an
independent, third party appraisal of General Felt. As a result of the GFI
Transfer, General Felt ceased being a subsidiary of Foamex L.P. and was
released from all obligations under Foamex L.P.'s Senior Subordinated Notes.
Upon consummation of the GFI Transfer, (i) pursuant to an Asset Purchase
Agreement, dated as of February 27, 1998, by and among Foamex Carpet, the
Company, Foam Funding and General Felt, General Felt sold substantially all of
its assets (other than approximately $4.8 million cash on hand that was used to
repay outstanding indebtedness and its owned real estate and a certain
promissory note) to Foamex Carpet in exchange for (A) $20 million in cash and
(B) a promissory note issued by Foamex Carpet in favor of Foam Funding in the
amount of $70.2 million (the "Foamex Carpet Note"), and (ii) pursuant to a
Lease Agreement, dated as of February 27, 1998, by and between Foamex Carpet
and Foam Funding, Foamex Carpet leased all of the real estate of General Felt
(the "Pico Rivera Lease") as described below under "--Pico Rivera Lease."
Pursuant to the Foamex International Guaranty, dated as of February 27, 1998,
the Company guaranteed Foamex Carpet's obligations under the Foamex Carpet Note
and the Pico Rivera Lease, which guarantee is secured by a pledge of the
Company's partnership interests in Foamex L.P.
Pico Rivera Lease. Foam Funding and Foamex Carpet entered into a lease,
dated as of February 27, 1998, for the premises located in Pico Rivera,
California for an initial term ending on December 31, 2004, which term may be
extended for consecutive one-year periods commencing on January 1, 2005 and
expiring on December 31, 2007. The lease is a net lease and Foamex Carpet has
no right to terminate for any reason during the term and all expenses and
impositions in connection with the premises are the obligation of Foamex
Carpet. The basic, or fixed, rent is $380,239 per year ($31,686.58 per month).
If Foam Funding shall desire to sell or convey all or any part of the leased
premises, and Foam Funding obtains from a third party a bona fide arms' length,
written purchase offer (the "Offer"), Foamex Carpet may elect to purchase the
portion of the leased premises which is the subject of the Offer on the precise
terms and conditions of the Offer. Foamex Carpet shall also have the right (the
"Option")
70
<PAGE>
at any time during the term to purchase all of the leased premises from Foam
Funding for a purchase price which is determined to be fair market value on the
date of the exercise of the Option as determined by an appraisal made by two
independent qualified appraisers, one selected by Foam Funding and one selected
by Foamex Carpet.
Accounting Treatment of GFI Transaction. No gain has been recognized on
the General Felt net assets transferred to Foam Funding and repurchased by the
Company. The Company will continue to account for these net assets using the
carryover basis of Foamex L.P. The $129.0 million of debt assumed by Foam
Funding in the GFI Transaction was accounted for as an extinguishment of debt
which resulted in an extraordinary loss of approximately $2.0 million. The 1%
non-managing general partnership interest acquired in connection with the GFI
Transaction was accounted for as a redemption of equity. By virtue of the
transfer of General Felt stock and the subsequent merger of General Felt into
Foam Funding, the Pico Riveria facility was transferred to Foam Funding; no
gain was recognized on the transfer since the Company leased-back the facility.
Tax Sharing Agreement. In 1992, Foamex L.P. and its partners entered into
a tax sharing agreement, as amended (the "Foamex L.P. Tax Sharing Agreement"),
pursuant to which Foamex L.P. agreed to make quarterly distributions to its
partners which, in the aggregate, will equal the tax liability that Foamex L.P.
would have paid if it had been a Delaware corporation filing separate tax
returns rather than a Delaware partnership. In 1997, Foamex L.P. made payments
to its partners pursuant to the terms of the Foamex L.P. Tax Sharing Agreement
of approximately (i) $8.7 million to the Company and its subsidiaries and (ii)
$0.1 million to Trace Foam Company, Inc., a wholly owned subsidiary of Trace
("TFC"). In 1996, Foamex L.P. made payments pursuant to the terms of the Foamex
L.P. Tax Sharing Agreement of approximately (i) $3.4 million to the Company and
its subsidiaries and (ii) $45,000 to TFC.
In connection with the Merger, Trace, the Company, and certain of their
respective subsidiaries (collectively, the "Tax Sharing Entities") will enter
into a new tax sharing agreement, and the existing tax sharing agreements of
the Tax Sharing Entities which were in effect will be modified or terminated.
The new tax sharing agreement will generally provide that the Tax Sharing
Entities will distribute to Trace the amount that they would be required to pay
in taxes were they not a member of Trace's consolidated group. The agreement
will also provide that any tax payments to Trace that are attributable to
partnership interests in Foamex L.P. will be funded by pro rata distributions
from Foamex L.P. to its partners in proportion to their respective partnership
interests. In addition, following consummation of the Merger, Foamex Corp.,
FMXI and Foamex Carpet intend to make an aggregate advance of $75.0 million to
Trace to be credited against future payments due under such new tax sharing
agreement.
Management Agreement. Foamex L.P. and TFC have entered into a management
services agreement pursuant to which TFC provides Foamex L.P. with general
managerial services of a financial, technical, legal, commercial,
administrative and/or advisory nature for an annual fee of $3.0 million, and
reimbursement of expenses incurred. For the fiscal year ended December 28,
1997, Foamex L.P. made payments of approximately $2.4 million pursuant to the
terms of the Management Agreement to Trace and its subsidiaries.
Following consummation of the Merger, Foamex L.P., Foamex Carpet, FMXI,
Foamex Corp. and Trace will enter into a management services agreement, which
is expected to increase the aggregate annual fee payable by Foamex Carpet,
Foamex Corp., and FMXI to the greater of $10.0 million or 1% of net sales. The
New Credit Facility will restrict the ability of Foamex L.P. to make the
distributions described above to Foamex Corp. and FMXI in connection with the
management services agreement. Foamex L.P. has informed Foamex Holdings that it
intends to declare annual pro rata distributions to Foamex Corp. and FMXI in
the amount of their aggregate payments under the management services agreement.
Indemnification Regarding Environmental Matters. Pursuant to the Asset
Transfer Agreement, dated as of October 2, 1990, as amended, between Trace and
Foamex L.P. (the "Trace Asset Transfer Agreement"), Foamex L.P. is indemnified
by Trace for any liabilities incurred by Foamex L.P. arising out of or
resulting from, among other things, the ownership or use of any of the assets
transferred pursuant to the Trace Asset Transfer Agreement or the conduct of
the transferred business on or prior to October 2, 1990, including, without
limitation, any loss actually arising out of or resulting from any events,
occurrences, acts or activities occurring after October 2, 1990, to the extent
resulting from conditions existing on or prior to October 2, 1990, relating to
(i) injuries to or the contraction of any diseases by any person resulting from
exposure to Hazardous Substances (as defined in the Trace Asset Transfer
Agreement) without regard to when such injuries or diseases are first
manifested, (ii) the generation, processing, handling, storage or disposition
of or contamination by any waste or Hazardous Substance, whether on or off the
premises from which the transferred business has been conducted or (iii) any
pollution or other damage or injury to the environment, whether on or off the
premises from which the transferred business has been conducted. Foamex L.P. is
also indemnified by Trace for any liabilities arising under Environmental Laws
(as defined in the Trace Asset Transfer Agreement) relating to current or
former Trace assets and for any liability relating to products of the
transferred business shipped on or prior to October 2, 1990.
71
<PAGE>
Certain Transactions Relating to the Acquisition of General Felt. In
connection with the Company's acquisition of General Felt Industries, Inc.
("General Felt") in March 1993, Trace and General Felt entered into the General
Felt Reimbursement Agreement pursuant to which Trace has agreed to reimburse
General Felt on a pro rata basis reflecting the period of time each has
occupied the facility for costs relating to a cleanup plan for a facility in
Trenton, New Jersey formerly owned by General Felt. In fiscal 1997 and 1996,
such pro rata amounts attributable to Trace were approximately $149,000 and
$97,000, respectively. In connection with the GFI Transaction, the General Felt
Reimbursement Agreement was assigned by General Felt to Foamex Carpet.
Other Transactions. The Company made charitable contributions to the Trace
International Holdings, Inc. Foundation (the "Foundation") in the amount of
$200,000 in each of fiscal 1997 and fiscal 1996. The Foundation is a Delaware
tax-exempt private foundation. Marshall S. Cogan is the sole director of the
Foundation.
On July 7, 1996, Trace issued to Foamex L.P. a promissory note for
approximately $4.4 million plus accrued interest of approximately $0.4 million,
which is an extension of an earlier note. As part of the 1997 refinancing, the
Note was amended and restated, with accrued interest being added to principal,
the maturity was extended to July 7, 2001, and the interest rate was changed to
the sum of 2-3/8% plus Three Month LIBOR. In connection with the 1997
refinancing, on July 1, 1997 Trace borrowed an additional $5.0 million on terms
and conditions substantially similar to the existing promissory note.
In connection with the June 1997 refinancing, Foamex L.P. made a cash
distribution of approximately $1.5 million to TFC.
Trace rents approximately 5,900 square feet of general, executive and
administrative office space in New York, New York from Foamex L.P. on
substantially the same terms as Foamex L.P. leases such space from a third
party lessor. The lease commenced October 1, 1993 and the occupancy and rent
payments commenced on October 1, 1994. The lease provides for an initial term
of 11 years and expires on September 30, 2004. The lease provides for two
optional five-year renewal periods at the fair market rental value of the
property on the first day of such renewal term. The annual rental for the
period October 1, 1994 through September 30, 1999 is $679,868 and for the
period October 1, 1999 through September 30, 2004 is $735,652. Under the lease,
Foamex L.P. is required to pay certain excess real estate taxes and operating
expenses incurred by lessor relating to the property for which it will be
proportionally reimbursed by Trace. The rental terms were the result of
arm-length negotiations between Foamex L.P. and the third party lessor. Trace
will reimburse, through increased rent, Foamex L.P. for the cost of any
leasehold improvements applicable to the space occupied for the benefit of
Trace.
72
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information, as of November 13,
1998, regarding the beneficial ownership of Common Stock by (i) each
stockholder who is known by the Company to own more than 5% of the outstanding
shares of Common Stock, (ii) each director of the Company, (iii) each executive
officer of the Company, (iv) all directors and executive officers of the
Company as a group and (v) each director and executive officer of Trace. Except
as otherwise indicated, each stockholder has (i) sole voting and investment
power with respect to such stockholder's shares of stock, except to the extent
that authority is shared by spouses under applicable law and (ii) record and
beneficial ownership with respect to such stockholder's shares of stock.
<TABLE>
<CAPTION>
Beneficial Ownership (1)
-------------------------------------------------
Number of Shares
Consisting of
Options and % of Class
Name and Address of Beneficial Owners Number of Shares Warrants (2) Outstanding
- - ------------------------------------- ---------------- ------------ -----------
<S> <C> <C> <C>
Trace International Holdings, Inc.(3) 11,525,000 -- 46.1
375 Park Avenue, 11th Floor
New York, New York 10152
Trace Foam Sub, Inc.(3) 7,000,247 -- 27.9
375 Park Avenue, 11th Floor
New York, New York 10152
Lion Advisors, L.P.(4) 3,347,421 1,062,349 13.4
1301 Avenue of the Americas
New York, New York 10019
Apollo Advisors, L.P.(4) 3,347,421 1,062,349 13.4
2 Manhattanville Road
Purchase, New York 10577
Andrea Farace 105,296 86,296 *
Marshall S. Cogan(3)(5) 12,228,334 303,334 48.8
Robert J. Hay 4,944 -- *
Rolf E. Christensen 13,939 13,211 *
John H. Gutfreund -- -- *
Stuart J. Hershon(6) 18,666 -- *
Etienne Davignon 20,836 -- *
John V. Tunney(7) 15,200 -- *
Barry Zimmerman(8) 22,569 17,569 *
Philip N. Smith, Jr.(5)(8) 19,125 7,028 *
Phil Allen 12,310 10,186 *
Gregory M. Barbe 4,324 314 *
Gregory W. Brown 7,165 2,000 *
Christine A. Henisee 1,355 -- *
Stephen Drap 4,798 1,826 *
Darrell Nance 2,000 2,000 *
Pratt Wallace -- -- *
All executive officers and directors of the Company as a 12,498,361 443,764 49.62
group (17 persons)(3)(5)(6)(7)
Saul S. Sherman(9) -- -- *
Fredrick Marcus(9)(10) 33,298 23,298 *
Robert H. Nelson(11) 4,257 4,257 *
Karl H. Winters(11) 4,836 4,836 *
Tambra S. King(11) 749 234 *
</TABLE>
- - ----------
* Less than 1%
73
<PAGE>
(1) Each named person is deemed to be the beneficial owner of securities
which may be acquired within sixty days through the exercise of
options, warrants and rights, if any, and such securities are deemed to
be outstanding for the purpose of computing the percentage of the class
beneficially owned by such person. However, any such shares are not
deemed to be outstanding for the purpose of computing the percentage of
the class beneficially owned by any other person, except as noted.
(2) Represents the number of shares of Common Stock which may be acquired
within sixty days through the exercise of options or warrants included
in the "Number of Shares" beneficially owned by each person.
(3) Trace Foam Sub is wholly-owned by Trace. The number of shares
beneficially owned by Trace includes the shares beneficially owned by
Trace Foam Sub. Additionally, 50,000 shares of the Common Stock
reported herein are held in trust for the exclusive benefit of
participants under the Trace International Holdings, Inc. Retirement
Plan for Salaried Employees (the "Retirement Plan"); such shares are
not deemed to be held by the Trace Stockholders for purposes of the
Merger Agreement and upon consummation of the Merger will be converted
into the right to receive the Merger Consideration. Marshall S. Cogan,
Chairman of the Board and President of Trace Foam Sub, is the Chairman
of the Board, Chief Executive Officer and majority stockholder of
Trace. Mr. Cogan disclaims beneficial ownership of the Common Stock
owned by Trace Foam Sub, Trace or the Retirement Plan.
(4) Lion Advisors, L.P. ("Lion") beneficially holds the indicated number of
securities on behalf of an investment management account over which
Lion possesses sole voting, investment and dispositive power. Lion is
affiliated with Apollo Advisors, L.P. ("Apollo") which serves as
managing general partner of, and may be deemed the beneficial holder of
securities owned by, AIF II, L.P., a private securities investment
fund. The securities indicated for Lion and Apollo, respectively,
includes 531,175 and 531,174 shares issuable upon the exercise of
warrants exercisable at any time on or before October 12, 1999 at an
exercise price of approximately $12.30 per share.
(5) Mr. Cogan, Mr. Zimmerman and Mr. Smith are also officers of Trace.
(6) Includes 17,591 shares of Common Stock held in the name of his wife and
1,075 shares of Common Stock held by a trust of which Dr. Hershon is
the sole trustee.
(7) Includes 9,000 shares of Common Stock held in a trust of which
Mr. Tunney serves as a co-trustee.
(8) Includes shares of the Company's Common Stock held by officers and
directors under the Company's 401(k) Plan. In the above table 12,151 of
such shares have been included for All Executive Officers and Directors
as a Group under the Company's 401(k) Plan. Includes 2,450 shares of
Common Stock held by the immediate family members of an executive
officer, as to which such executive officer disclaims beneficial
ownership.
(9) Mr. Sherman is a director and Vice Chairman of the Board of Trace and
Mr. Marcus is a director, Vice Chairman of the Board and Senior
Managing Director of Trace.
(10) Additionally, Mr. Marcus' deceased father's estate owns 6,000 shares of
Common Stock. Such shares have not been included in the table since Mr.
Marcus only manages the portfolio and thus disclaims beneficial
ownership of the shares.
(11) Mr. Nelson is Senior Vice President, Chief Operating Officer and Chief
Financial Officer of Trace, Mr. Winters is Vice President--Finance and
Controller of Trace and Ms. King is Vice President and Secretary of
Trace.
Directors and Executive Officers of the Company, Trace and Merger Sub
As set forth in Appendix E, certain directors and executive officers of
the Company are also directors or executive officers of Trace or Merger Sub.
With the exception of the ownership of shares of Common Stock by certain of
such persons set forth in "Security Ownership of Management and Certain
Beneficial Owners," no director or executive officer of the Company, Trace or
Merger Sub owns any shares of Common Stock.
In connection with the Company's acquisition of Great Western, Trace
entered into a put option agreement (the "Put Option") with John Rallis, a
former President of the Company and the former owner of Great Western Foam
Products Corporation. Pursuant to the Put Option, Mr. Rallis has the right and
option to sell to Trace 308,813 shares of the Company's Common Stock for
approximately $7.5 million, or $24.29 per share, at any time during
74
<PAGE>
the period commencing May 6, 1998 through August 4, 1998, which expiration date
was extended to November 6, 1998. On November 6, 1998, Mr. Rallis exercised the
Put Option and Trace is currently in default in its obligation to repurchase
the 308,813 shares of Common Stock. It is anticipated that in connection with
the consummation of the Merger, Trace will pay to Mr. Rallis the difference
between the amount payable to Mr. Rallis upon exercise of the Put Option and
the Merger Consideration with respect to the underlying shares of Common Stock.
75
<PAGE>
PAYMENTS RELATING TO THE IPO
In connection with the Company's initial public offering in 1993, Trace
agreed to grant shares (the "Granted Shares") of Common Stock to certain
individuals who were officers of Trace at such time. Fifty percent of the
Granted Shares were scheduled to be issued on December 15, 1995 and 50% are
scheduled to be issued on December 15, 1998; however, to date, no Granted
Shares have been issued. Trace currently does not plan to make cash payments to
these individuals upon the closing of the Merger; provided, however, that Trace
may elect to make cash payments to such individuals at such time in an amount
equal to a percentage of the number of Granted Shares to be issued to such
persons multiplied by $12.00 per Granted Share. Set forth below is a table
listing the current officers or directors of Trace or the Company who may
receive cash payments relating to the Granted Shares, the number of Granted
Shares issued to such persons and the cash payments that may be made to such
persons by Trace upon the closing of the Merger (assuming Trace elects to make
the maximum cash payment).
<TABLE>
<CAPTION>
Number of Granted
Shares Cash Payment
------------------ -------------
<S> <C> <C>
Andrea Farace ................ 23,333 $279,996
Philip N. Smith, Jr. ......... 10,000 $120,000
Barry Zimmerman .............. 15,000 $180,000
Fredrick Marcus .............. 18,333 $219,996
Robert H. Nelson ............. 18,333 $219,996
</TABLE>
76
<PAGE>
MARKET PRICE AND DIVIDEND INFORMATION
The Common Stock is listed on Nasdaq under the symbol "FMXI." On March 13,
1998, the last trading day before the public announcement of Trace's proposal to
acquire all the shares of Common Stock held by the Public Stockholders, the
reported closing price per share of the Common Stock was $13 7/8. On June 24,
1998, the last trading day before the public announcement of the execution of
the Merger Agreement, the reported closing sale price per share of the Common
Stock was $16 3/16. On October 15, 1998, the last trading day before the public
announcement of Trace's Current Proposed Transaction to acquire all the shares
of Common Stock held by the Public Stockholders, the reported closing price per
share of the Common Stock was $10 1/2. On November 5, 1998, the last trading day
before the public announcement of the execution of the Merger Agreement, the
reported closing price per share of the Common Stock was $12 3/8. On __, 1998,
the last full trading day prior to the date of this Proxy Statement, the
reported closing sale price per share of the Common Stock was $ .
PUBLIC STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT PRICE QUOTATION FOR THE
COMMON STOCK.
In December 1997, the Board of Directors declared a regular $0.05 per
share cash dividend, payable in January 1998. Prior to that time, the Company
did not declare or pay any cash dividends. The declaration and payment of
dividends by the Company are subject to the discretion of the Board of
Directors. The payment of any future dividends will be determined by the Board
of Directors in light of conditions then existing, including the Company's
earnings, financial condition and requirements, restrictions in financing
agreements, business conditions and other factors. The Company is a holding
company whose assets consist primarily of its indirect ownership of a 2%
managing general partnership interest and its direct ownership of a 98% limited
partnership interest in Foamex L.P. and its direct ownership of all of the
capital stock of Foamex Carpet. Consequently, the Company's ability to pay
dividends is dependent upon the earnings of Foamex L.P., Foamex Carpet and any
future subsidiaries of the Company and the distribution of those earnings to
the Company and loans or advances by Foamex L.P., Foamex Carpet and any such
future subsidiaries of the Company. The ability of Foamex L.P. and Foamex
Carpet to make distributions is restricted by the terms of their financing
agreements.
The following table sets forth, for the fiscal quarters indicated, the
high and low prices per share of the Common Stock, based on information
supplied by Nasdaq.
<TABLE>
<CAPTION>
LOW HIGH
-------- -------
<S> <C> <C>
1996
First Quarter ................................. 6 3/8 9 7/8
Second Quarter ................................ 9 12 7/8
Third Quarter ................................. 11 1/4 17
Fourth Quarter ................................ 12 5/8 17 5/8
1997
First Quarter ................................. 15 22 1/8
Second Quarter ................................ 12 15 7/8
Third Quarter ................................. 9 1/2 15 1/4
Fourth Quarter ................................ 9 3/8 14 1/2
1998
First Quarter ................................. 10 7/8 18 3/8
Second Quarter ................................ 14 3/4 18 1/8
Third Quarter ................................. 14 17 5/8
Fourth Quarter (through , 1998) ......... [ ] [ ]
</TABLE>
77
<PAGE>
CERTAIN TRANSACTIONS IN THE COMMON STOCK
There were no transactions in the Common Stock of the Company that were
effected during the past 60 days (excluding transactions pursuant to the
Company's 401(k) Plan) by (i) the Company, (ii) any director or executive
officer of the Company, (iii) any person controlling the Company or (iv) any
director or executive officer of the person ultimately in control of the
Company, Trace or Merger Sub, except for the sale of 5,000 shares of Common
Stock on October 6, 1998 by Robert J. Hay.
The following table sets forth for each fiscal quarter of the Company
since December 31, 1995 (i) the amount of Common Stock purchased by the
Company, (ii) the average purchase price paid for such Common Stock and (iii)
the high and the low prices paid for such Common Stock. No purchases were made
by the Company during the fourth quarter of fiscal 1997 or in fiscal 1998.
<TABLE>
<CAPTION>
Low High
Number of Shares Average Price Price Price
------------------ --------------- --------- ---------
<S> <C> <C> <C> <C>
1996
First Quarter .......... 351,500 8.11 6.63 9.42
Second Quarter ......... 171,500 11.71 10.25 12.47
Third Quarter .......... 69,200 13.42 11.69 15.68
Fourth Quarter ......... 32,500 15.58 13.89 16.46
1997
First Quarter .......... 11,000 15.97 15.95 16.03
Second Quarter ......... 245,000 13.41 12.25 14.05
Third Quarter .......... 178,600 12.76 11.08 13.38
</TABLE>
Trace purchased 175,100 shares of Common Stock in the fourth fiscal
quarter of 1997 at an average price of $11.96 per share, at a low price of
$9.74 per share and at a high price of $13.08 per share. Trace has made no
other purchases of Common Stock since December 31, 1995. Marshall S. Cogan has
made no purchases of Common Stock since December 31, 1995.
STOCKHOLDER LITIGATION
Beginning on or about March 17, 1998, six actions were filed in the Court
of Chancery of the State of Delaware (the "Court"), by stockholders of the
Company. The Stockholder Litigation, purportedly brought as class actions on
behalf of all Public Stockholders, named the Company, certain of its directors,
certain of its officers and Trace as defendants, alleging that they breached
their fiduciary duties to plaintiffs and the other Public Stockholders in
connection with the original proposal of Trace to acquire the Public Shares for
$17.00 per share. A stipulation and order consolidating these six actions under
the caption In re Foamex International Inc. Shareholders Litigation
Consolidated Action No 16259NC was entered by the Court on May 28, 1998.
The parties to the Stockholder Litigation entered into a Memorandum of
Understanding, dated June 25, 1998 (the "Memorandum of Understanding"), to
settle the Stockholder Litigation, subject to, inter alia, execution of a
definitive Stipulation of Settlement and approval by the Court following notice
to the Public Stockholders and a hearing. The Memorandum of Understanding
provided that as a result of, among other things, the Stockholder Litigation
and negotiations among counsel for the parties to the Memorandum of
Understanding, a Special Meeting of stockholders would be held to vote upon and
adopt the Old Merger Agreement which provided, among other things, for the
Public Shares of Foamex stock to be converted into the right to receive $18.75
in cash, without interest. The Memorandum of Understanding also acknowledged
that the terms of the Old Merger had been significantly improved over the terms
originally proposed by Trace on March 16, 1996, and the Company and the
individual director and officer defendants acknowledged that the filing and
prosecution of the Stockholder Litigation was a factor they took into account
in giving fair consideration to and entering into the Old Merger and Trace
acknowledged that it took into account the desirability of satisfactorily
addressing the claims asserted in the Stockholder Litigation in agreeing to the
increased consideration to be paid to the Public Stockholders pursuant to the
Old Merger Agreement.
The Memorandum of Understanding also provided for certification of a
class, for settlement purposes only, consisting of the Public Stockholders, the
dismissal of the Stockholder Litigation with prejudice and the release by
Plaintiffs and all members of the class of all claims and causes of action that
were or could have been asserted against Trace, the Company and the individual
defendants in the Stockholder Litigation or that arise out of the matters
alleged by Plaintiffs. Following the completion of the confirmatory discovery
which was provided for in
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the Memorandum of Understanding, on September 9, 1998, the parties entered into
a definitive Stipulation of Settlement and the Court set a hearing to consider
whether the settlement should be approved for October 27, 1998 (the "Settlement
Hearing"). In connection with the proposed settlement, the plaintiffs intended
to apply for an award of attorneys' fees and litigation expenses in an amount
not to exceed $925,000, and the defendants agreed not to oppose this
application. Additionally, the Company agreed to pay the cost, if any, of
sending notice of the settlement to the Public Stockholders. On September 24,
1998, a Notice of Pendency of Class Action, Proposed Settlement of Class Action
and Settlement Hearing was mailed to the members of the settlement class. On
October 20, 1998, the parties to the Stockholder Litigation requested that the
Court cancel the Settlement Hearing in light of the announcement made by Trace
on October 16, 1998, that it had been unable to obtain the necessary financing
for the contemplated acquisition by Trace of Foamex Public Shares at a price of
$18.75 per share which was the subject matter of the proposed settlement. This
request was approved by the Court on October 21, 1998, and Foamex issued a
press release on October 21, 1998, providing notice that the Court had canceled
the settlement hearing.
On November 10, 1998, counsel for certain of the defendants in the
Stockholder Litigation gave notice pursuant to the Stipulation of Settlement
that such defendants were withdrawing from the Stipulation of Settlement in
light of the notice given by Trace to Foamex and the Special Committee on
November 5, 1998 whereby Trace terminated the Old Merger Agreement on the
grounds that the financing condition in the Old Merger Agreement was incapable
of being satisfied.
On November 12, 1998, the plaintiffs in the Stockholder Litigation filed
the Amended Complaint. The Amended Complaint named the Company, Trace, Merger
Sub, Mr. Cogan, Mr. Farace, Dr. Hershon, Mr. Tunney and Mr. Davignon as
defendants, alleging that they breached their fiduciary duties to plaintiffs
and the other Public Stockholders in connection with the Current Proposed
Transaction, that the proposal to acquire the Public Shares for $12.00 per
share lacked entire fairness, that the individual defendants violated 8 Del.
Code [sec] 251 in approving the Merger Agreement, and that Trace and Merger Sub
breached the Stipulation of Settlement.
The defendants have denied, and continue to deny, that they have committed
or have threatened to commit any violation of law or breaches of duty to
Plaintiffs or the purported class or that they have breached the Stipulation of
Settlement. The defendants intend to vigorously defend the Stockholder
Litigation.
INDEPENDENT PUBLIC ACCOUNTANTS
PricewaterhouseCoopers LLP serves as the Company's independent certified
public accountants. A representative of PricewaterhouseCoopers LLP will be at
the Special Meeting to answer questions by Stockholders and will have the
opportunity to make a statement, if so desired.
STOCKHOLDER PROPOSALS
Any proposals intended to be presented to Stockholders at the Company's
1998 Annual Meeting of Stockholders (which will only be held if the Merger has
not been consummated prior thereto) must be received by the Company for
inclusion in the proxy statement for such annual meeting by December 31, 1998.
Such proposals must also meet other requirements of the rules of the Securities
and Exchange Commission (the "SEC") relating to stockholders' proposals and the
requirements set forth in the Company's By-Laws.
Pursuant to the By-Laws, Stockholders proposing business to be brought
before the Annual Meeting must deliver written notice thereof to the Secretary
of the Company not later than the close of business on the tenth day following
the date on which the Company first makes public disclosure of the date of the
annual meeting. The Stockholder's notice must contain a brief description of
the business and reasons for conducting the business at an annual meeting, the
name and address of the Stockholder making the proposal, and any material
interest of the Stockholder in the business. The Stockholder is also required
to furnish a representation that the Stockholder is a holder of record of stock
of the Company entitled to vote at such meeting and intends to appear in person
or by proxy at such meeting to propose such business.
ADDITIONAL INFORMATION
Pursuant to the requirements of Section 13(e) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and Rule 13e-3 promulgated
thereunder, the Company, as issuer of the class of equity securities that are
the subject of the Rule 13e-3 transaction, together with Trace and Merger Sub,
have filed with the SEC a Transaction Statement on Schedule 13E-3 (the
"Schedule 13E-3") relating to the transactions contemplated by the Merger
Agreement. As permitted by the rules and regulations of the SEC, this Proxy
Statement omits certain
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<PAGE>
information, exhibits and undertakings contained in the Schedule 13E-3. Such
additional information can be inspected at and obtained from the SEC in the
manner set forth below under "Available Information."
Statements contained herein concerning any documents are not necessarily
complete and, in each instance, reference is made to the copy of such document
filed as an exhibit to the Schedule 13E-3. Each such statement is qualified in
its entirety by such reference.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and the rules and regulations thereunder, and in accordance therewith
files reports, proxy statements and other information with the SEC. Such
reports, proxy statements and other information filed by the Company may be
inspected and copied at the public reference facilities maintained by the SEC
at Room 1024, 450 Fifth Street, N.W., Washington, DC 20549, and at the SEC's
regional offices located at Suite 1400, Citicorp Center, 500 West Madison
Street, Chicago, IL 60661, and Suite 1300, Seven World Trade Center, New York,
NY 10048. Copies of such material can be obtained at prescribed rates from the
Public Reference Section of the SEC, 450 Fifth Street, N.W., Washington, DC
20549. Certain reports, proxy statements and other information concerning the
Company also can be inspected on the SEC's site on the Internet at
http://www.sec.gov. See "Incorporation Of Certain Documents By Reference."
A notice has been filed with the Pennsylvania Securities Commission which
contains substantial additional information about the Merger, which notice is
available for inspection at the Pennsylvania Securities Commission's principal
office during business hours.
This Proxy Statement incorporates by reference documents that are not
presented herein or delivered herewith. Copies of such documents (other than
exhibits thereto which are not specifically incorporated by reference herein)
are available, without charge, to any person, including any beneficial owner of
Common Stock, to whom this Proxy Statement is delivered, upon oral or written
request to Philip N. Smith, Jr., Corporate Secretary, Foamex International
Inc., 1000 Columbia Avenue, Linwood, Pennsylvania 19061, telephone (610)
859-3000. In order to ensure delivery of documents prior to the Special
Meeting, requests therefor should be made no later than , 1998.
THE DELIVERY OF THIS PROXY STATEMENT SHALL NOT IMPLY THAT THERE HAS BEEN
NO CHANGE IN THE AFFAIRS OF THE COMPANY OR TRACE SINCE THE DATE HEREOF OR THAT
THE INFORMATION IN THIS PROXY STATEMENT OR IN THE DOCUMENTS INCORPORATED BY
REFERENCE HEREIN IS CURRENT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR
THEREOF.
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<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by the Company (file number
0-22624) or Crain Industries (file number 33-96808) with the SEC pursuant to
the Exchange Act are incorporated herein by this reference:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
December 28, 1997;
2. The Company's Annual Report on Form 10-K/A for the fiscal year ended
December 28, 1997, filed April 27, 1998;
3. The Company's Annual Report on Form 10-K/A2 for the fiscal year ended
December 28, 1997, filed September 22, 1998;
4. The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 29, 1998;
5. The Company's Quarterly Report on Form 10-Q/A for the fiscal quarter
ended March 29, 1998, filed July 1, 1998;
6. The Company's Quarterly Report on Form 10-Q/A2 for the fiscal quarter
ended March 29, 1998, filed September 22, 1998;
7. The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended June 28, 1998 filed August 17, 1998;
8. The Company's Quarterly Report on Form 10-Q/A for the fiscal quarter
ended June 28, 1998, filed September 22, 1998;
9. The Company's Annual Report on Form 11-K for the fiscal year ended
December 28, 1997 filed June 30, 1998;
10. The Company's Current Report on Form 8-K filed January 7, 1998;
11. The Company's Current Report on Form 8-K/A filed March 9, 1998;
12. The Company's Current Report on Form 8-K filed March 13, 1998;
13. The Company's Current Report on Form 8-K filed March 17, 1998;
14. The Company's Current Report on Form 8-K/A filed May 13, 1998;
15. The Company's Current Report on Form 8-K filed June 26, 1998;
16. The Company's Current Report on Form 8-K/A filed September 9, 1998;
17. The Company's Current Report on Form 8-K filed October 5, 1998.
18. The Company's Current Report on Form 8-K filed October 19, 1998.
19. The Company's Current Report on Form 8-K filed November 4, 1998.
20. The Company's Current Report on Form 8-K filed November 6, 1998.
21. The Company's Current Report on Form 8-K/A filed November 9, 1998.
22. The Annual Report on Form 10-K of Crain Industries for the fiscal year
ended December 31, 1996;
23. The Quarterly Report on Form 10-Q of Crain Industries for the fiscal
quarter ended March 31, 1997;
24. The Quarterly Report on Form 10-Q of Crain Industries for the fiscal
quarter ended June 30, 1997;
25. The Quarterly Report on Form 10-Q of Crain Industries for the fiscal
quarter ended September 30, 1997; and
26. The Form 15 of Crain Industries, filed January 8, 1998.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
and 15(d) of the Exchange Act subsequent to the date hereof and prior to the
date of the Special Meeting shall be deemed to be incorporated by reference
herein and to be a part hereof from the date any such document is filed.
Any statements contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes hereof to the extent that a statement contained herein (or in any
other subsequently filed document which also is incorporated by reference
herein) modifies or supersedes
81
<PAGE>
such statement. Any statement so modified or superseded shall not be deemed to
constitute a part hereof except as so modified or superseded. All information
appearing in this Proxy Statement is qualified in its entirety by the
information and financial statements (including notes thereto) appearing in the
documents incorporated herein by reference, except to the extent set forth in
the immediately preceding statement.
Even though liability for certain statements contained in the documents
listed above may be limited by the terms of the Private Securities Litigation
Reform Act of 1995, liability for statements contained in this Proxy Statement
or incorporated herein by reference are not subject to any such limitation.
However, see "Forward- Looking Statements" below.
FORWARD-LOOKING STATEMENTS
In connection with certain forward-looking statements contained in, or
incorporated by reference into, this Proxy Statement, the Company notes that
there are various factors that could cause actual results to differ materially
from those set forth in any such forward-looking statements, such as raw
material price increases, general economic conditions, the implementation and
estimated annualized savings of the Integration Plan and changes in
environmental legislation and environmental conditions. All discussion
contained in, or incorporated by reference into, this Proxy Statement relating
to the Merger, the related financings, and their consummation constitutes
forward looking statements. The forward-looking statements contained in, or
incorporated by reference into, this Proxy Statement were prepared by the
Company and are qualified by, and subject to, significant business, economic,
competitive, regulatory and other uncertainties and contingencies, all of which
are difficult or impossible to predict and many of which are beyond the control
of the Company. Accordingly, there can be no assurance that the forward-looking
statements contained in, or incorporated by reference into, this Proxy
Statement will be realized or that actual results will not be significantly
higher or lower. The forward-looking statements have not been audited by,
examined by, compiled by or subjected to agreed-upon procedures by independent
accountants, and no third-party has independently verified or reviewed such
statements. Readers of this Proxy Statement should consider these facts in
evaluating the information contained or incorporated by reference herein. In
addition, the business and operations of the Company are subject to substantial
risks which increase the uncertainty inherent in the forward-looking statements
contained in this Proxy Statement. The inclusion of forward-looking statements
contained in, or incorporated by reference into, this Proxy Statement should
not be regarded as a representation by the Company or any other person that the
forward-looking statements contained or incorporated by reference herein will
be achieved. In light of the foregoing, readers of this Proxy Statement are
cautioned not to place undue reliance on the forward-looking statements
contained or incorporated by reference herein.
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APPENDIX A
==============================================================================
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
TRACE INTERNATIONAL HOLDINGS, INC.,
TRACE MERGER SUB, INC.
AND
FOAMEX INTERNATIONAL INC.
Dated as of November 5, 1998
==============================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C> <C>
ARTICLE I. THE MERGER.......................................................1
Section 1.1. The Merger.................................................1
Section 1.2. Effective Time.............................................2
Section 1.3. Closing....................................................2
Section 1.4. Directors and Officers of the Surviving Corporation........2
Section 1.5. Certificate of Incorporation...............................2
Section 1.6. Bylaws.....................................................2
Section 1.7. Effect of the Merger.......................................3
Section 1.8. Special Meeting; Certain Voting Matters....................3
Section 1.9. Company Action Regarding the Proxy Statement...............3
Section 1.10. Parent Action Regarding the Proxy Statement................4
ARTICLE II. CONVERSION OF SECURITIES........................................5
Section 2.1. Conversion of Capital Stock................................5
Section 2.2. Surrender of Certificates..................................6
Section 2.3. Dissenting Shares..........................................8
Section 2.4. Termination of Company Stock Plans.........................9
Section 2.5. Termination of Warrants...................................10
Section 2.6. Withholding Taxes.........................................11
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................12
Section 3.1. Organization..............................................12
Section 3.2. Capitalization............................................12
Section 3.3. Authorization; Validity of Agreement; Company Action......13
Section 3.4. Consents and Approvals; No Violations.....................14
Section 3.5. SEC Reports and Financial Statements......................15
Section 3.6. Reserved..................................................15
Section 3.7. No Undisclosed Liabilities................................15
Section 3.8. Litigation................................................15
Section 3.9. No Default; Compliance with Applicable Laws...............16
Section 3.10. Brokers...................................................16
Section 3.11. Opinion of Financial Advisor..............................16
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB...............17
Section 4.1. Organization..............................................17
Section 4.2. Authorization; Validity of Agreement; Necessary Action....17
Section 4.3. Consents and Approvals; No Violations.....................17
Section 4.4. Financing Arrangements....................................18
Section 4.5. No Prior Activities.......................................18
Section 4.6. Litigation................................................18
Section 4.7. Other Arrangements........................................19
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE V. COVENANTS.......................................................19
Section 5.1. Interim Operations of the Company.........................19
Section 5.2. Access; Confidentiality...................................22
Section 5.3. Additional Agreements.....................................22
Section 5.4. Consents and Approvals; HSR Act...........................22
Section 5.5. Board Recommendation......................................23
Section 5.6. Publicity.................................................24
Section 5.7. Notification of Certain Matters...........................24
Section 5.8. Fair Price Statute........................................25
Section 5.9. Indemnification...........................................25
Section 5.10. Financing.................................................28
Section 5.11. Conduct of Business of Sub................................28
ARTICLE VI. CONDITIONS.....................................................28
Section 6.1. Conditions to Each Party's Obligation to Effect the
Merger.................................................28
Section 6.2. Additional Conditions to Obligations of the Company.......29
Section 6.3. Additional Conditions to Obligations of Parent and Sub....29
ARTICLE VII. TERMINATION AND AMENDMENT.....................................30
Section 7.1. Termination...............................................30
Section 7.2. Effect of Termination.....................................32
ARTICLE VIII. MISCELLANEOUS................................................32
Section 8.1. Fees and Expenses.........................................32
Section 8.2. Amendment and Modification................................32
Section 8.3. Nonsurvival of Representations and Warranties.............32
Section 8.4. Notices...................................................32
Section 8.5. Interpretation............................................33
Section 8.6. Counterparts..............................................34
Section 8.7. Entire Agreement; No Third Party Beneficiaries............34
Section 8.8. Severability..............................................34
Section 8.9. Governing Law.............................................34
Section 8.10. Assignment................................................34
Section 8.11. Descriptive Headings......................................35
Section 8.12. Obligation of Parent......................................35
ARTICLE IX. DEFINITIONS....................................................35
Section 9.1. Certain Definitions.......................................35
Section 9.2. Accounting Terms and Determinations.......................40
</TABLE>
Exhibit A -- Form of Certificate of Merger
(ii)
<PAGE>
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of
November 5, 1998, is by and among Trace International Holdings, Inc., a Delaware
corporation ("Parent"), Trace Merger Sub, Inc., a Delaware corporation and a
wholly owned subsidiary of Parent ("Sub"), and Foamex International Inc., a
Delaware corporation (the "Company").
RECITALS:
WHEREAS, on June 25, 1998, Parent, Sub, and the Company entered into
an Agreement and Plan of Merger relating to the merger of Sub with and into the
Company, which was subsequently amended on July 6, 1998 (the "Original Merger
Agreement"); and
WHEREAS, the Original Merger Agreement was terminated by Parent on
November 5, 1998 pursuant to a Notice of Termination, dated November 5, 1998,
delivered by Parent to the Company; and
WHEREAS, the Boards of Directors of the Company and Parent have each
adopted a resolution approving this Agreement and the Merger (as hereinafter
defined) of Sub with and into the Company in accordance with the Delaware
General Corporation Law, and upon the terms and subject to the conditions set
forth herein; and
WHEREAS, the Board of Directors of the Company has adopted a
resolution approving this Agreement and the Merger, and has determined that the
consideration to be paid for each share of the Company's Common Stock, $0.01 par
value per share (the "Shares") in the Merger (other than Shares held by Parent
and its Subsidiaries) is fair to the holders of such Shares;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, the Company, Parent and Sub hereby agree as follows:
ARTICLE I.
THE MERGER
Section 1.1. The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time, Sub shall be merged (the "Merger") with and
into the Company in accordance with the relevant provisions of the Delaware
General Corporation Law ("DGCL"), the separate corporate existence of Sub
(except as may be continued by operation of law) shall cease, and the Company
shall continue as the surviving corporation in the Merger (the Company is
sometimes referred to as the "Surviving Corporation"; Sub and the Company are
sometimes referred to as
<PAGE>
the "Constituent Corporations"). Notwithstanding the foregoing, at the election
of Parent, Parent may substitute any direct or indirect wholly owned Subsidiary
of Parent or Sub as a Constituent Corporation. To the extent that Parent
exercises its election to substitute a direct or indirect wholly owned
Subsidiary of Parent or Sub as a Constituent Corporation, then the parties
hereto shall promptly enter into an amendment to this Agreement necessary or
desirable to provide for such election, without any approval, authorization or
adoption by the Board of Directors or stockholders of the Company if none is
required by any applicable Legal Requirement. If Parent exercises such election
in accordance with this Section 1.1, all reference herein to "Sub" shall be
deemed to refer to such substitute Subsidiary.
Section 1.2. Effective Time. As soon as practicable after
satisfaction or waiver of the conditions set forth in Article VI, or at such
other time as the parties shall agree, the parties shall file a certificate of
merger or other appropriate documents (in any such case, the "Certificate of
Merger") executed in accordance with the relevant provisions of the DGCL,
substantially in the form of Exhibit A hereto, and shall make all other filings
or recordings required under the DGCL in order to effectuate the Merger. The
Merger shall become effective at the time when the Certificate of Merger has
been duly filed with the Delaware Secretary of State, or such time as is agreed
upon by the parties and specified in the Certificate of Merger, and such time is
hereinafter referred to as the "Effective Time."
Section 1.3. Closing. The closing of the Merger (the "Closing")
shall take place (i) at 10:00 a.m., local time, on a date to be specified by the
parties, which shall be no later than the second business day after satisfaction
or waiver of all of the conditions set forth in Article VI hereof, at the
offices of Willkie Farr & Gallagher in New York, NY, or (ii) at such other time
and place as Sub and the Company shall agree (the "Closing Date").
Section 1.4. Directors and Officers of the Surviving Corporation.
The directors and officers of Sub at the Effective Time shall be the directors
and officers, respectively, of the Surviving Corporation.
Section 1.5. Certificate of Incorporation. The certificate of
incorporation of the Company in effect at the Effective Time shall be the
certificate of incorporation of the Surviving Corporation until amended in
accordance with applicable law.
Section 1.6. Bylaws. The bylaws of the Company in effect at the
Effective Time shall be the bylaws of the Surviving Corporation until amended in
accordance with applicable law.
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<PAGE>
Section 1.7. Effect of the Merger. At the Effective Time, the effect
of the Merger shall be as provided in the applicable provisions of the DGCL and
in Article II hereof. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time all the property, rights, privileges,
powers and franchises of the Company and Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Sub shall
become the debts, liabilities and duties of the Surviving Corporation.
Section 1.8. Special Meeting; Certain Voting Matters.
(a) The Company, acting through its Board of Directors, shall, in
accordance with applicable law, duly call, give notice of, convene and
hold a special meeting of its stockholders (the "Special Meeting") as
promptly as practicable following the date hereof for the purpose of
considering and taking action regarding the adoption of this Agreement.
(b) Parent shall vote, or cause to be voted, all of the Shares then
owned by it, Sub, and any of its other Subsidiaries in favor of the
approval of the Merger and the authorization and adoption of this
Agreement to the extent permitted pursuant to the terms of the agreements
filed as exhibits as of the date hereof to Parent's Schedule 13D with
respect to the Company.
Section 1.9. Company Action Regarding the Proxy Statement.
(a) The Company, acting through its Board of Directors shall, in
accordance with applicable law and after consultation with Parent and its
legal counsel, exercise its reasonable best efforts:
(i) to prepare and file with the SEC as soon as reasonably
practicable after the date hereof, a preliminary proxy statement
relating to the Merger and this Agreement;
(ii) to obtain and furnish the information required by the SEC
to be included in the Proxy Statement or otherwise required to be
furnished to the staff of the SEC in connection therewith;
(iii) to respond as promptly as reasonably practicable to, and
resolve, all comments made by the SEC with respect to the
preliminary proxy statement;
(iv) to cause a definitive proxy statement, including any
amendment or supplement thereto (the "Proxy Statement") to be mailed
to the holders of the Shares as promptly as reasonably practicable
after
-3-
<PAGE>
resolution of the comments of the SEC staff with respect thereto;
and
(v) to obtain the necessary approvals of the Merger and
authorization and adoption of this Agreement by the holders of the
Shares.
(b) The Company shall prepare and revise the Proxy Statement and the
Company 13E-3 Information so that, at the date mailed to the holders of
Shares, and at the time of the Special Meeting, the Proxy Statement and
the Company 13E-3 Information will (except that the Company shall not be
responsible under this clause (b) with respect to statements made in the
Proxy Statement based on information supplied by Parent or Sub expressly
for inclusion in the Proxy Statement):
(i) not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary in order to make the statements made therein, in light of
the circumstances under which they are made, not misleading; and
(ii) comply in all material respects with the provisions of
the Exchange Act and the rules and regulations thereunder.
(c) The Company, acting through its Board of Directors shall,
subject to the provisions of Section 5.5, make at the Special Meeting, and
include in the Proxy Statement, the recommendation of the Board of
Directors of the Company that holders of Shares vote in favor of the
adoption of this Agreement.
(d) The Company shall use its reasonable best efforts to assist
Parent (to the extent Parent so requests) in the preparation of the
Schedule 13E-3 relating to the Merger (the "Schedule 13E-3"), and shall
furnish such information as may be reasonably requested by Parent for
inclusion in the Schedule 13E-3 (such information furnished by the
Company, the "Company 13E-3 Information").
Section 1.10. Parent Action Regarding the Proxy Statement.
(a) Parent shall use its reasonable best efforts to assist the
Company (to the extent the Company so requests):
(i) in the preparation of the preliminary proxy statement
relating to the Merger,
(ii) in responding to and resolving any comments made by the
staff of the SEC with respect to the preliminary proxy statement,
-4-
<PAGE>
(iii) in the preparation of the Proxy Statement, and
(iv) in obtaining the necessary approvals of the Merger and
adoption of this Agreement by the holders of the Shares as provided
herein.
(b) Parent and Sub will timely file with the SEC a Schedule 13E-3
relating to the transactions contemplated hereby, and such Schedule 13E-3
will comply in all material respects with the requirements of the Exchange
Act and the rules and regulations thereunder.
(c) Parent shall furnish to the Company written information
concerning itself and Sub as may be reasonably requested by the Company
expressly for inclusion in the Proxy Statement, including without
limitation information required pursuant to Rule 13e-3 and Schedule 13E-3
under the Exchange Act (the "Parent-Furnished Information"). Parent shall
prepare and revise the Parent-Furnished Information and the Schedule 13E-3
so that the Parent-Furnished Information and the Schedule 13E-3 will not,
at the date the Proxy Statement is mailed to the holders of the Shares, or
at the time of the Special Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements made therein, in
light of the circumstances under which they are made, not misleading
(except that Parent shall not be responsible under this paragraph (c) with
respect to (i) statements made in the Schedule 13E-3 incorporated by
reference from the Proxy Statement (except to the extent constituting
Parent-Furnished Information), or (ii) with respect to statements made in
the Schedule 13E-3 based on information supplied by the Company expressly
for inclusion in the Schedule 13E-3).
ARTICLE II.
CONVERSION OF SECURITIES
Section 2.1. Conversion of Capital Stock. As of the Effective Time,
by virtue of the Merger and without any action on the part of the holders of any
Shares or any shares of capital stock of Sub:
(a) Sub Capital Stock. Each issued and outstanding share of capital
stock of Sub shall be canceled and retired and shall cease to exist and no
consideration shall be delivered in exchange therefor.
-5-
<PAGE>
(b) Parent Shares; Cancellation of Treasury Stock and
Subsidiary Owned Stock.
(i) All Shares that are owned by the Company or any Subsidiary
of the Company shall be canceled and retired and shall cease to
exist and no consideration shall be delivered in exchange therefor.
(ii) All Shares that are owned by Parent or any Subsidiary of
Parent at the Effective Time ("Parent Shares") shall remain
outstanding, and from and after the Effective Time shall constitute
shares of the Surviving Corporation.
(c) Exchange of Shares. Each issued and outstanding Share (other
than Parent Shares, Shares to be canceled in accordance with Section
2.1(b)(i) and, as set forth in Section 2.3, any Shares which are held by
stockholders exercising appraisal rights pursuant to the DGCL ("Dissenting
Stockholders")) shall be converted into the right to receive $12.00 per
Share, payable to the holder thereof, without interest (the "Merger
Consideration"), upon surrender of the certificate formerly representing
such Share in the manner provided in Section 2.2. All such Shares, when so
converted, shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each holder of a
certificate representing any such Shares shall cease to have any rights
with respect thereto, except the right to receive the Merger Consideration
therefor upon the surrender of such certificate in accordance with Section
2.2, without interest, or, in the case of Dissenting Stockholders, the
right, if any, as set forth in Section 2.3, to receive payment from the
Surviving Corporation of the fair value of such Shares as determined in
accordance with the DGCL (plus, in each case, any dividend or distribution
payable with respect to such Shares with a record date prior to the
Effective Time).
Section 2.2. Surrender of Certificates.
(a) Paying Agent. Prior to the Effective Time, Parent shall
designate The Bank of Nova Scotia or another bank or trust company
reasonably acceptable to the Company to act as agent for the holders of
the Shares in connection with the Merger (the "Paying Agent") to receive
the aggregate amount of funds (the "Aggregate Amount") to which holders of
the Shares shall become entitled pursuant to Section 2.1(c), the holders
of vested Stock Options shall become entitled to pursuant to Section 2.4,
and the holders of Warrants shall become entitled to pursuant to Section
2.5. Parent shall deposit with the Paying Agent at the Closing the
Aggregate Amount, to be held by the Paying Agent and paid to holders of
Shares pursuant to Section 2.2(b), holders of vested
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Stock Options pursuant to Section 2.4 and holders of Warrants pursuant to
Section 2.5. All interest earned on such funds shall be paid to Parent.
(b) Surrender Procedures. As soon as reasonably practicable after
the Effective Time, the Paying Agent shall mail to each holder of record
of a certificate or certificates, which immediately prior to the Effective
Time represented outstanding Shares (the "Certificates"), whose Shares
were converted pursuant to Section 2.1(c) into the right to receive the
Merger Consideration (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon delivery of the Certificates to the Paying Agent and
shall be in such form and have such other provisions as Parent and the
Surviving Corporation may reasonably specify) and (ii) instructions for
use in effecting the surrender of the Certificates in exchange for payment
of the Merger Consideration. Upon surrender of a Certificate for
cancellation to the Paying Agent or to such other agent or agents as may
be appointed by Parent, together with such letter of transmittal, duly
executed, the holder of such Certificate shall be entitled to receive and
shall be paid in exchange therefor the Merger Consideration for each Share
formerly represented by such Certificate and the Certificate so
surrendered shall forthwith be canceled. No interest will be paid or
accrued on the cash payable upon the surrender of the Certificates. If
payment of the Merger Consideration is to be made to a person other than
the person in whose name the surrendered Certificate is registered, it
shall be a condition of payment that the Certificate so surrendered shall
be properly endorsed or shall be otherwise in proper form for transfer and
that the person requesting such payment shall have paid any transfer and
other taxes required by reason of the payment of the Merger Consideration
to a person other than the registered holder of the Certificate
surrendered or shall have established to the reasonable satisfaction of
the Surviving Corporation that such tax either has been paid or is not
applicable. Until surrendered as contemplated by this Section 2.2, each
Certificate (other than Certificates for Parent Shares) shall be deemed at
any time after the Effective Time to represent only the right to receive
the Merger Consideration in cash as contemplated by this Section 2.2. The
right of any stockholder to receive the Merger Consideration shall be
subject to Section 2.6.
(c) Transfer Books; No Further Ownership Rights in the Shares. At
the Effective Time, the stock transfer books of the Company shall be
closed and thereafter there shall be no further registration of transfers
of the Shares on the records of the Company. From and after the Effective
Time, the holders of Certificates evidencing ownership of the Shares
(other than Parent Shares) outstanding immediately
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prior to the Effective Time shall cease to have any rights with respect to
such Shares, except for (i) the right to surrender such Certificate in
exchange for the amount of Merger Consideration to which such holder is
entitled under this Agreement, or (ii) the rights available under the DGCL
for Dissenting Shares (plus, in each case, the right to receive any
dividend or distribution payable with respect to such Shares with a record
date prior to the Effective Time). If, after the Effective Time,
Certificates (other than Certificates for Parent Shares) are presented to
the Surviving Corporation for any reason, they shall be canceled and the
Merger Consideration shall be paid as provided in this Article II.
(d) Termination of Fund; No Liability. At any time following twelve
months after the Effective Time, the Surviving Corporation shall be
entitled to require the Paying Agent to deliver to it any funds (including
any interest received with respect thereto) which had been deposited with
the Paying Agent and which have not been disbursed to holders of
Certificates, vested Stock Options, and Warrants, and thereafter such
holders shall be entitled to look to the Surviving Corporation (subject to
abandoned property, escheat or other similar laws) only as general
creditors thereof with respect to the Merger Consideration payable upon
due surrender of their Certificates, without any interest thereon.
Notwithstanding the foregoing, none of Parent, the Surviving Corporation
or the Paying Agent shall be liable to any holder of a Certificate for
Merger Consideration delivered to a public official in good faith pursuant
to any applicable abandoned property, escheat or similar law.
Section 2.3. Dissenting Shares. Notwithstanding any other provision
of this Agreement to the contrary, Shares held by a holder who has not voted
such Shares in favor of the Merger and with respect to which appraisal rights
shall have been exercised and perfected in accordance with Section 262 of the
DGCL (the "Dissenting Shares") and as of the Effective Time not withdrawn shall
not be converted into the right to receive the Merger Consideration at or after
the Effective Time, but such Shares shall be converted into the right to receive
such consideration as may be determined to be due to holders of Dissenting
Shares pursuant to the laws of the State of Delaware unless and until the holder
of such Dissenting Shares withdraws his or her demand for such appraisal or
becomes ineligible for such appraisal (through failure to perfect or otherwise).
If a holder of Dissenting Shares shall withdraw his or her demand for such
appraisal or shall become ineligible for such appraisal (through failure to
perfect or otherwise), then, as of the Effective Time or the occurrence of such
event, whichever last occurs, such holder's Dissenting Shares shall
automatically be converted into and represent the right to receive the Merger
Consideration, without interest, as provided in Section 2.1(c). The Company
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shall give Parent (i) prompt notice of any demands for appraisal of Shares
received by the Company and (ii) the opportunity to participate in and direct
all negotiations and proceedings with respect to any such demands. The Company
shall not, without the prior written consent of Parent, voluntarily make any
payment with respect to, settle or offer to settle, any such demands.
Section 2.4. Termination of Company Stock Plans.
(a) As of the Effective Time, the Company shall use its reasonable
best efforts to take such actions to provide that by virtue of the Merger
and without any action on the part of the holders thereof, each option to
purchase Shares (a "Stock Option") that is outstanding immediately before
the Effective Time:
(i) for which the per Share exercise price of the Stock Option
equals or exceeds the Merger Consideration shall be canceled, and
the Surviving Corporation shall have no further liability with
respect to such Stock Option;
(ii) that is vested and for which the Merger Consideration
exceeds the per Share exercise price of the Stock Option shall be
canceled, and in exchange for such cancellation, each holder of such
a vested Stock Option shall receive at the Effective Time an amount,
subject to Section 2.6, equal to the product of (x) the amount, if
any, by which the Merger Consideration exceeds the per Share
exercise price of the Stock Option and (y) the number of Shares
subject thereto; and
(iii) that is not vested and for which the Merger
Consideration exceeds the per Share exercise price of the Stock
Option ("Unvested In The Money Stock Options") shall not be
canceled, and shall remain outstanding after the Effective Time.
(b) No payment shall be made at the Effective Time with respect to
any Unvested In The Money Stock Options; provided, however, that each
holder of an Unvested In The Money Stock Option shall be entitled to
receive from the Surviving Corporation, upon the vesting of such option on
the terms and conditions in effect on the date hereof, an amount, subject
to Section 2.6, equal to the product of (i) the amount, if any, by which
the Merger Consideration exceeds the per Share exercise price of the
Unvested In The Money Stock Option at the Effective Time and (ii) the
number of Shares subject thereto.
(c) The consideration due under this Section 2.4, whether at the
Effective Time or upon the vesting of an Unvested In The Money Stock
Option, shall be payable without
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interest after (a) verification by the Paying Agent (or the Surviving
Corporation, in the case of Unvested In The Money Stock Options) of the
ownership and terms of the particular Stock Option by reference to the
Company's records or such other evidence reasonably acceptable to the
Surviving Corporation as the holder may provide, and (b) delivery in the
manner provided in Section 2.2(b) of a written instrument (the "Option
Release"), duly executed by the owner of the applicable Stock Options, in
a form provided by the Paying Agent (or the Surviving Corporation, in the
case of Unvested In The Money Stock Options) and setting forth (i) the
aggregate number of Stock Options owned by that person (including Stock
Options as to which no consideration is payable under this Section 2.4);
(ii) a representation by the person that such person is the owner of all
Stock Options described pursuant to clause (a), and that none of those
Stock Options has expired or ceased to be exercisable (except as a result
of the transactions contemplated hereby); and (iii) a confirmation of and
consent to the cancellation of all of the Stock Options described pursuant
to clause (i), in consideration of the payment provided for in this
Section 2.4.
(d) As of the Effective Time, the Company shall use its reasonable
best efforts to provide that (i) the plans of the Company providing for
Stock Options (the "Option Plans") shall terminate as of the Effective
Time and the provisions in any other plan, program or arrangement,
providing for the issuance or grant by the Company or any of its
Subsidiaries of any interest in respect of the capital stock of the
Company or any of its Subsidiaries shall terminate as of the Effective
Time, and (ii) following the Effective Time no holder of Stock Options or
any participant in the Option Plans or any other such plans, programs or
arrangements shall have the right thereunder to acquire any equity
securities of the Company or any Subsidiary thereof.
Section 2.5. Termination of Warrants.
(a) As of the Effective Time, the Company shall use its reasonable
best efforts to take such actions to provide that by virtue of the Merger
and without any action on the part of the holders thereof, each warrant to
purchase Shares (a "Warrant") that is outstanding immediately before the
Effective Time, whether or not then-exercisable, shall be canceled and, in
consideration of such cancellation, each holder of a Warrant shall receive
at the Effective Time an amount, subject to Section 2.6, equal to the
product of (i) the amount, if any, by which the Merger Consideration
exceeds the per Share exercise price of the Warrant and (ii) the number of
Shares subject thereto. No payment shall be made with respect to any
Warrant having a per Share exercise price, as in effect immediately prior
to the Effective Time, equal to or greater than the Merger Consideration.
The
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consideration due under this Section 2.5 shall be payable without interest
after (a) verification by the Paying Agent of the ownership and terms of
the particular Warrant by reference to the Company's records or such other
evidence reasonably acceptable to the Surviving Corporation as the holder
may provide, and (b) delivery in the manner provided in Section 2.2(b) of
a written instrument (the "Warrant Release"), duly executed by the owner
of the applicable Warrants, in a form provided by the Paying Agent and
setting forth (i) the aggregate number of Warrants owned by that person
(including Warrants as to which no consideration is payable under this
Section 2.5); (ii) a representation by the person that such person is the
owner of all Warrants described pursuant to clause (i), and that none of
those Warrants has expired or ceased to be exercisable; and (iii) a
confirmation of and consent to the cancellation of all of the Warrants
described pursuant to clause (i), including the Warrants for which no
consideration is payable pursuant to this Section 2.5, in consideration of
the payment provided for in this Section 2.5.
(b) As of the Effective Time, the Company shall use its reasonable
best efforts to provide that (i) except as set forth in Section 2.5 of the
Sub Disclosure Schedule (as defined below), the agreements of the Company
providing for Warrants (the "Warrant Agreements"), including the Warrant
Agreement, dated as of June 28, 1994, by and between the Company and
Shawmut Bank Connecticut, National Association, the Warrant Exchange
Agreement, dated as of December 14, 1993, by and between the Company and
DLJ Funding, Inc. and the Warrant Exchange Agreement, dated as of December
14, 1993, by and between the Company and Marely I S.A., shall terminate as
of the Effective Time and the provisions in any other agreement or
arrangement, providing for the issuance or grant by the Company of any
interest in respect of the capital stock of the Company shall terminate as
of the Effective Time, and (ii) following the Effective Time no holder of
Warrants or any party to a Warrant Agreement or any other such agreements
or arrangements shall have the right thereunder to acquire any equity
securities of the Company from the Company or any Subsidiary thereof.
Section 2.6. Withholding Taxes. The Surviving Corporation shall be
entitled to deduct and withhold from the consideration otherwise payable to a
holder of Shares, Stock Options or Warrants pursuant to the Merger, such amounts
as are required to be withheld under the Code, or any applicable Legal
Requirement. To the extent that amounts are so withheld by the Surviving
Corporation, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the Shares, Stock Options or
Warrants in respect of which such deduction and withholding was made by the
Surviving Corporation.
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ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as
follows:
Section 3.1. Organization. Each of the Company and its Subsidiaries
is an entity duly organized, validly existing and in good standing under the
laws of the jurisdiction of its formation and has the requisite corporate or
partnership power and authority to own, operate or lease the properties that it
purports to own, operate or lease and to carry on its business as it is now
being conducted, and, except as set forth in Section 3.1 of the Company
Disclosure Schedule (as defined below), is duly qualified as a foreign entity to
do business, and is in good standing, in each jurisdiction where the character
of its properties owned, operated or leased or the nature of its activities
makes such qualification necessary, except for such failure which, when taken
together with all other such failures, would not reasonably be expected to
result in a Material Adverse Effect. The certificate of incorporation and the
bylaws or equivalent organizational documents, each as amended to the date
hereof, of the Company and such documents with respect to all Subsidiaries of
the Company have been made available to Parent. Such certificate of
incorporation, bylaws and equivalent organizational documents are in full force
and effect. A true and complete list of all the Company's Subsidiaries, together
with the jurisdiction of incorporation of each Subsidiary is set forth in
Section 3.1 of the Company Disclosure Schedule delivered to Parent and Sub on or
before the date hereof (the "Company Disclosure Schedule").
Section 3.2. Capitalization.
(a) The authorized capital stock of the Company consists of
50,000,000 Shares, par value $.01 per Share and 5,000,000 shares of
Preferred Stock, par value $1.00 per share. As of October 30, 1998, (i)
25,014,843 Shares were issued and outstanding, (ii) 1,989,000 Shares were
held in the treasury of the Company or by Subsidiaries of the Company,
(iii) 549,124 Shares were issuable upon exercise of outstanding vested
Stock Options under the Option Plans, (iv) 841,724 Shares were issuable
upon exercise of outstanding unvested Stock Options under the Option
Plans, (v) 27,737 Shares were issuable under the Non-Employee Director
Compensation Plan, (vi) 1,226,530 Shares were issuable pursuant to the
Participating Warrants, (vii) 600,000 Shares were issuable pursuant to the
1994 Warrants and (viii) no shares of Preferred Stock were issued and
outstanding. Section 3.2 of the Company Disclosure Schedule sets forth a
true and correct list as of October 30, 1998 of all holders of Stock
Options, the number of such Stock Options outstanding as of such date, the
exercise price per
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Stock Option and whether or not such Stock Options are vested. All of the
outstanding Shares have been duly authorized and validly issued and are
fully paid and nonassessable and free of preemptive rights. Subsequent to
October 30, 1998, no Shares have been issued by the Company except upon
the exercise of outstanding Stock Options or Warrants described in this
Section 3.2(a). Each of the outstanding Stock Options described in this
Section 3.2 allows the optionee to purchase Shares which have been
authorized to be issued by the Company's Board of Directors. Each of the
outstanding Warrants described in this Section 3.2 allows the holder to
purchase Shares which have been authorized to be issued by the Company's
Board of Directors under the Warrant Agreements. Except as set forth in
Section 3.2 of the Company Disclosure Schedule, there are no other
options, warrants or other rights, convertible debt, agreements,
arrangements or commitments of any character obligating the Company or any
of its Subsidiaries to issue or sell any shares of capital stock of or
other equity interests in the Company or any of its Subsidiaries. The
Company is not obligated to redeem, repurchase or otherwise reacquire any
of its capital stock or other securities.
(b) Except as set forth in Section 3.2 of the Company Disclosure
Schedule, all of the outstanding shares of the capital stock of each
Subsidiary of the Company are beneficially owned by the Company, directly
or indirectly, and all such shares have been duly authorized, validly
issued and are fully paid and nonassessable and are owned by either the
Company or one of its Subsidiaries free and clear of all Liens. There are
no existing options, calls or commitments of any character relating to the
issued or unissued capital stock or other securities of any Subsidiary.
Section 3.3. Authorization; Validity of Agreement; Company Action.
The Company has full corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby, subject to
obtaining stockholder approval as described in this Section 3.3. The Board of
Directors, at a meeting duly called and held on November 5, 1998 at which all of
the members of the Board of Directors were present, duly adopted a resolution by
a vote of five in favor and two opposed approving this Agreement and its
execution, delivery and performance and the transactions contemplated hereby,
recommended that the stockholders of the Company adopt this Agreement and the
Merger, and determined that this Agreement and the Merger, are fair to the
stockholders of the Company other than Parent and its Subsidiaries; provided,
however, any such recommendation of the Board of Directors may be withdrawn,
modified or amended to the extent permitted by Section 5.5 of this Agreement. No
other corporate action on the part of the Company is necessary to authorize the
execution and delivery by the Company of this Agreement and the consummation by
it of the
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transactions contemplated hereby (except for the stockholder approval described
in this Section 3.3 and in Section 6.1(a)(ii)). This Agreement has been duly
executed and delivered by the Company and, assuming due and valid authorization,
execution and delivery hereof by Parent and Sub, is a valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, subject to applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally and to general principles of equity. The affirmative
vote of the holders of a majority of the outstanding Shares are the only votes
of the holders of any class or series of the Company's capital stock necessary
under the DGCL and the Company's Certificate of Incorporation to adopt this
Agreement and approve the transactions contemplated hereby. Section 203 of the
DGCL is not applicable to the Merger. The provisions of Article X of the
Company's Certificate of Incorporation will not apply to this Agreement, the
Merger or any of the transactions contemplated hereby.
Section 3.4. Consents and Approvals; No Violations. Except for the
filings or the consents, authorizations or approvals set forth on Section 3.4 of
the Company Disclosure Schedule and the filings, permits, authorizations,
consents and approvals as may be required under, and other applicable
requirements of, the Exchange Act, the HSR Act, state securities or blue sky
laws, and the filing and recordation of a certificate of merger under the DGCL,
neither the execution, delivery or performance of this Agreement by the Company
nor the consummation by the Company of the transactions contemplated hereby nor
compliance by the Company with any of the provisions hereof will (i) conflict
with or result in any breach of any provision of the certificate of
incorporation or the bylaws of the Company or of any of its Subsidiaries, (ii)
require any filing with, or permit, authorization, consent or approval of, any
Governmental Entity on the part of the Company or any of its Subsidiaries, (iii)
require the consent of any person under, result in a violation or breach of,
accelerate the performance of obligations or alter the rights under, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, amendment, cancellation or acceleration)
under, any of the terms, conditions or provisions of any Contract, or (iv)
violate any Legal Requirement applicable to the Company, any of its Subsidiaries
or any of their properties or assets except in any case referred to in any of
clauses (ii) through (iv) above, which individually or in the aggregate, would
not reasonably be expected to result in a Material Adverse Effect.
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Section 3.5. SEC Reports and Financial Statements.
(a) The Company and its Subsidiaries have timely filed with the SEC,
and have made available to Parent, true and complete copies of, all forms,
reports, schedules, statements and other documents required to be filed by
each of them since January 1, 1997 under the Securities Act or the
Exchange Act (collectively, the "SEC Documents"). Except as set forth in
Section 3.5 of the Company Disclosure Schedule, each of the SEC Documents
(i) was prepared, in all material respects, in accordance with the
requirements of the Securities Act or the Exchange Act, as the case may
be, including without limitation the applicable accounting requirements
thereunder and the published rules and regulations of the SEC with respect
thereto, and (ii) when filed did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
(b) Except as set forth in Section 3.5 of the Company Disclosure
Schedule, the consolidated financial statements of the Company included in
the SEC Documents: (i) were prepared from, and in accord with, the books
and records of the Company and its Subsidiaries, (ii) were prepared in
accordance with GAAP applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and (iii)
fairly present the consolidated financial position and the consolidated
results of operations and cash flows (and changes in financial position,
if any) of the Company and its consolidated subsidiaries as of the
respective dates and for the respective periods thereof, except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments.
Section 3.6. Reserved.
Section 3.7. No Undisclosed Liabilities. Except (a) as set forth in
Section 3.7 of the Company Disclosure Schedule, (b) as reflected or reserved
against in the consolidated financial statements contained in the SEC Documents,
or (c) for fees or expenses incurred by or on behalf of the Special Committee
and the Board of Directors in connection with the Merger, the Company and its
Subsidiaries have no Liabilities, except Liabilities which would not,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect.
Section 3.8. Litigation. Except as disclosed in the SEC Documents or
in Section 3.8 of the Company Disclosure Schedule, there are no claims, actions,
suits, proceedings or investigations pending or, to the knowledge of the
Company,
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threatened, against the Company or any of its Subsidiaries, before any
Governmental Entity, that seek to prevent or delay the performance of this
Agreement or the transactions contemplated hereby or that would reasonably be
expected to result in a Material Adverse Effect.
Section 3.9. No Default; Compliance with Applicable Laws. Except as
disclosed in Section 3.9 of the Company Disclosure Schedule, the business of the
Company and each of its Subsidiaries is not being conducted in default or
violation of any term, condition or provision of (i) its respective certificate
of incorporation or bylaws, (ii) any Contract, or (iii) any Legal Requirement,
excluding from the foregoing clauses (ii) and (iii), defaults or violations
which would not, individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect. Except as disclosed in Section 3.9 of the
Company Disclosure Schedule, each of the Company and its Subsidiaries has in
effect all Permits necessary for it to own, lease or operate its properties and
assets and to carry on its business as now conducted, and there has occurred no
default under any such Permit, except for the absence of Permits and for
defaults under Permits which absence or defaults, individually or in the
aggregate, would not reasonably be expected to result in a Material Adverse
Effect.
Section 3.10. Brokers. No broker, finder or investment banker (other
than Beacon Group Capital Services, LLC ("Beacon") or Ramius Capital Group,
L.L.C. ("Ramius")) is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by and on behalf of the Company. The Company has
heretofore furnished to Parent a true and complete copy of the engagement
letters between (i) the Company and Beacon and (ii) the Company and Ramius,
pursuant to which such firms would be entitled to any payment in connection with
the transactions contemplated hereby.
Section 3.11. Opinion of Financial Advisor.
(a) Ramius has rendered to the Company's Board of Directors a
written opinion dated as of November 5, 1998, a copy of which has been
provided to Parent, to the effect that the consideration to be received by
the stockholders of the Company, other than Parent and its Subsidiaries,
pursuant to the Merger is fair to such stockholders from a financial point
of view. Such opinion was delivered orally to the Board of Directors not
later than the time that consummation of the transactions contemplated
hereby was approved by the Board of Directors, and was delivered in
writing to the Board of Directors prior to the execution of this
Agreement.
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(b) Such opinion has not been withdrawn or modified in any manner
adverse to Parent except as expressly permitted by Section 5.5.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub jointly and severally represent and warrant to the
Company as follows:
Section 4.1. Organization. Each of Parent and Sub is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has the requisite corporate power and
authority to own, operate or lease the properties that it purports to own,
operate or lease and to carry on its business as it is now being conducted,
except for such failure which, when taken together with all other such failures,
would not reasonably be expected to result in a material adverse effect on (i)
Parent, its Subsidiaries and Sub, taken as a whole or (ii) their ability to
perform their obligations under this Agreement or to consummate the transactions
contemplated hereby.
Section 4.2. Authorization; Validity of Agreement; Necessary Action.
Each of Parent and Sub has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution, delivery and performance by Parent and Sub of this Agreement, and
the consummation of the Merger and of the transactions contemplated hereby, have
been duly authorized by the Boards of Directors of Parent and Sub and by Parent
as the sole stockholder of Sub and no other corporate or stockholder action on
the part of Parent or Sub is necessary to authorize the execution and delivery
by Parent and Sub of this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Parent and Sub and, assuming due and valid authorization, execution and delivery
hereof by the Company, is a valid and binding obligation of each of Parent and
Sub, enforceable against each of Parent and Sub in accordance with its terms,
subject to applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally and to general principles of equity.
Section 4.3. Consents and Approvals; No Violations. Except for the
filings set forth on Section 4.3 of the Sub Disclosure Schedule delivered to the
Company on or before the date hereof (the "Sub Disclosure Schedule") and the
filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the HSR Act and the DGCL, neither
the execution, delivery or performance of this Agreement by Parent or Sub nor
the consummation by Parent or Sub of the transactions contemplated hereby nor
compliance by Parent or Sub with any of the provisions hereof will (i) conflict
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with or result in any breach of any provision of the Certificate of
Incorporation or the bylaws of Parent or its Subsidiaries, (ii) require any
filing with, or permit, authorization, consent or approval of, any Governmental
Entity on the part of Parent or its Subsidiaries, (iii) result in a violation or
breach of, accelerate the performance of obligations or alter the rights under,
or constitute (with or without due notice or lapse of time or both) a default
(or give rise to any right of termination, amendment, cancellation or
acceleration) under, any of the terms, conditions or provisions of any
contracts, agreements, commitments, instruments and guarantees to which Parent
or its Subsidiaries is a party, or (iv) violate any Legal Requirement applicable
to Parent or its Subsidiaries, except in any case referred to in any of clauses
(ii) through (iv) above which, individually or in the aggregate, would not
reasonably be expected to result in a material adverse effect on the ability of
Parent and Sub to perform their obligations under this Agreement or consummate
the transactions contemplated hereby.
Section 4.4. Financing Arrangements. Parent has received a
commitment letter from The Bank of Nova Scotia, CIBC Oppenheimer Corp. and
Canadian Imperial Bank of Commerce, dated November 5, 1998, relating to a senior
secured credit facility (the "Financing Letter"), which is as of the date hereof
in full force and effect and true and correct copies of which have been provided
to the Board of Directors of the Company. The transactions contemplated by the
Financing Letter will, upon completion of such transactions, result in the
receipt of funds by the Surviving Corporation sufficient to enable the Surviving
Corporation to pay the Aggregate Amount and otherwise to consummate the
transactions contemplated hereby and thereby, and to fund all costs and expenses
of the Company, Parent and Sub incurred in connection with the Merger, the
Financing contemplated therein and the transactions contemplated hereby and
thereby.
Section 4.5. No Prior Activities. Except for Liabilities incurred in
connection with its incorporation or organization or the negotiation and
consummation of the Original Merger Agreement and the transactions contemplated
thereby (including any financing of such transactions) and the negotiation and
consummation of this Agreement and the transactions contemplated hereby
(including any Financing), Sub has not incurred any Liabilities, and has not
engaged in any business or activities of any type or kind whatsoever or entered
into any agreements or arrangements with any person or entity. Sub is a wholly
owned Subsidiary of Parent.
Section 4.6. Litigation. Except as set forth on Schedule 4.6 of the
Sub Disclosure Schedules, there are no claims, actions, suits, proceedings or
investigations pending or, to the knowledge of Parent or Sub, threatened,
against Parent or Sub or any of their Subsidiaries, before any Governmental
Entity
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that seek to prevent or delay the performance of this Agreement or the
transactions contemplated hereby.
Section 4.7. Other Arrangements. Except as set forth in Schedule 4.7
of the Sub Disclosure Schedule, Parent and Sub have no agreements or
understandings with any other stockholder of the Company regarding any
consideration to be paid to such stockholder in connection with the transactions
contemplated hereby except pursuant to the terms of this Agreement.
ARTICLE V.
COVENANTS
Section 5.1. Interim Operations of the Company. The Company
covenants and agrees that, except (i) as expressly contemplated by this
Agreement, (ii) as set forth in Section 5.1 of the Company Disclosure Schedule
or (iii) as agreed in writing by Parent, after the execution and delivery of
this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time:
(a) the business of the Company and its Subsidiaries shall be
conducted only in the ordinary and usual course and in all material
respects in compliance with all applicable Legal Requirements and, to the
extent consistent therewith, each of the Company and its Subsidiaries
shall use its commercially reasonable efforts to preserve its business
organization intact, to maintain its existing relations with customers,
suppliers, employees, creditors and business partners and to maintain
customary levels of insurance coverage with respect to its assets and
operations;
(b) the Company shall not, directly or indirectly, amend its or any
of its Subsidiaries' certificate of incorporation or bylaws or similar
organizational documents;
(c) the Company shall not, and it shall not permit its Subsidiaries
to: (i)(A) declare, set aside or pay any dividend or other distribution
payable in cash, stock or property with respect to the Company's capital
stock or that of its Subsidiaries other than those dividends or other
distributions payable solely to the Company or one of its wholly-owned
Subsidiaries, or (B) redeem, purchase or otherwise acquire directly or
indirectly any of the Company's capital stock (or options, warrants,
calls, commitments or rights of any kind to acquire any shares of capital
stock) or that of its Subsidiaries; (ii) issue, sell, pledge, dispose of
or encumber any additional shares of, or securities convertible into or
exchangeable for, or options, warrants, calls, commitments or rights of
any kind to acquire, any shares of capital stock of any class of the
Company or its Subsidiaries, other than Shares issued upon the exercise of
Stock Options or Warrants outstanding on the
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date hereof; or (iii) split, combine or reclassify the outstanding capital
stock of the Company or of its Subsidiaries;
(d) the Company shall not, and it shall not permit its Subsidiaries
to, acquire or agree to acquire, or except as contemplated by the Crain
Restructuring (as defined in the Foamex Credit Agreement), transfer,
lease, license, sell, mortgage, pledge, encumber, dispose of or agree to
dispose of, any material assets, including Intellectual Property, either
by purchase, merger, consolidation, sale of shares in any of its
Subsidiaries or otherwise, except pursuant to Contracts of the Company or
its Subsidiaries in effect on the date hereof, in the ordinary course of
business consistent with past practice or in transactions involving
consideration of less than $5,000,000, in the aggregate;
(e) neither the Company nor its Subsidiaries shall: (i) grant any
increase in the compensation payable or to become payable by the Company
or any of its Subsidiaries (A) to any of its executive officers or
directors, other than regularly scheduled pay increases of not more than
10% per annum, or (B) to any of its key employees other than in the
ordinary course of business consistent with past practice; or (ii)(A)
adopt any new, or (B) except as contemplated by Section 2.4 or as required
by any obligation existing as of the date hereof to do so or any
applicable Legal Requirement or in connection with the Crain
Restructuring, amend or otherwise increase, or accelerate the payment or
vesting of the amounts payable or to become payable under any existing,
bonus, incentive compensation, deferred compensation, severance, profit
sharing, stock option, stock purchase, insurance, pension, retirement or
other employee benefit plan, agreement or arrangement; or (iii) (A) enter
into or modify or amend any employment agreement or arrangement with any
officer or director of the Company or any of its Subsidiaries, other than
in the ordinary course of business consistent with past practice or (B)
enter into or modify or amend any severance agreement with, or grant any
severance or termination pay to, any officer or director of the Company or
any of its Subsidiaries, except in the ordinary course of business
consistent with past practice or as required by any applicable Legal
Requirement or in connection with the Crain Restructuring or Contracts in
effect on the date hereof; or (iv) enter into any collective bargaining
agreement;
(f) neither the Company nor any of its Subsidiaries shall modify,
amend or terminate any of its material Contracts (other than the Credit
agreement of Foamex Cuautitlan, S.A. de C.V.) or waive, release or assign
any material rights or claims, other than in the ordinary course of
business consistent with past practice;
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(g) neither the Company nor any of its Subsidiaries shall: (i) incur
or assume any indebtedness other than indebtedness with respect to working
capital in amounts consistent with past practice and capital leases in the
ordinary course of business; (ii) materially modify any material
indebtedness; (iii) assume, guarantee, endorse or otherwise become liable
or responsible (whether directly, contingently or otherwise) for any
material obligations of any other person (other than a Subsidiary of the
Company or as set forth on Section 5.1 of the Company's Disclosure
Schedule); (iv) make any loans, advances or capital contributions to, or
investments in, any other person (other than (A) to the Subsidiaries of
the Company, (B) pursuant to the Merger Agreement, (C) as set forth on
Section 5.1 of the Company's Disclosure Schedule (provided the ownership
structure of such Subsidiary has not changed from that existing on the
date hereof), (D) to Foamtec (Singapore) Pte. Ltd. or Foamex Asia Co. Ltd.
in the ordinary course of business consistent with past practice, or (E)
customary advances to employees); or (v) enter into any material Contract
or transaction other than in the ordinary course of business consistent
with past practice;
(h) neither the Company nor any of its Subsidiaries shall materially
change any of the accounting methods, practices or policies used by it,
other than changing its fiscal year to a calendar year, unless required by
GAAP;
(i) the Company shall not, and it shall not permit its Subsidiaries
to, make any material tax election (unless required by law) or settle or
compromise any material income tax liability;
(j) the Company shall not, and it shall not permit its Subsidiaries
to (i) except in connection with any transaction permitted by Section 5.5,
waive the benefits of, or agree to modify in any material manner, any
confidentiality, standstill or similar agreement to which the Company or
any of its Subsidiaries is a party, or (ii) except in the ordinary course
of business consistent with past practice, pay, discharge or satisfy any
actions, suits, proceedings or claims, other than the payment, discharge
or satisfaction, in each case in complete satisfaction, and with a
complete release, of such matter with respect to all parties to such
matter, of actions, suits, proceedings or claims that would not reasonably
be expected to result in, individually or in the aggregate, a Material
Adverse Effect;
(k) the Company shall not, and it shall not permit its Subsidiaries
to, commence a lawsuit other than (i) for the routine collection of bills,
(ii) in such cases where the Company in good faith determines that the
failure to commence suit would result in a material impairment of a
valuable aspect of the Company's business or the forfeiture
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of substantial rights, provided that the Company consults with Parent
prior to filing such suit or (iii) to enforce this Agreement; and
(l) neither the Company nor any of its Subsidiaries shall enter into
an agreement, contract, commitment or arrangement to do any of the
foregoing, or to authorize, recommend, propose or announce an intention to
do any of the foregoing.
Section 5.2. Access; Confidentiality. The Company shall (and shall
cause each of its Subsidiaries to) (a) afford to the officers, employees,
accountants, counsel, and other representatives of Parent, upon reasonable
advance notice, reasonable access to and the right to inspect and observe,
during normal business hours during the period prior to the Effective Time, all
its personnel, accountants, representatives, properties, books, contracts,
insurance policies, commitments and records, offices, plants and other
facilities, (b) make available promptly to Parent (i) a copy of each report,
schedule, registration statement and other document filed or received by it
during such period pursuant to the requirements of federal securities laws and
(ii) all other information concerning its business, properties and personnel
(including, without limitation, insurance policies) as Parent may reasonably
request. Parent shall treat any such information in accordance with the
provisions of a letter agreement dated March 4, 1998 between the Company and
Parent (the "Confidentiality Agreement"). No investigation conducted by Parent
shall impact any representation or warranty given by the Company to Parent
hereunder.
Section 5.3. Additional Agreements. Subject to the terms and
conditions herein provided, each of the parties hereto shall use all reasonable
best efforts to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations, or to remove any injunctions or other impediments or delays, legal
or otherwise, to consummate and make effective the Merger and the other
transactions contemplated by this Agreement. The Company also agrees to timely
file all reports and other documents required to be filed by it with the SEC.
Section 5.4. Consents and Approvals; HSR Act.
(a) Each of the Company, Parent and Sub shall use its reasonable
best efforts to comply promptly with all Legal Requirements which may be
imposed on it with respect to this Agreement and the transactions
contemplated hereby (which actions shall include, without limitation,
furnishing all information required under the HSR Act and in connection
with approvals of or filings with any other Governmental Entity) and will
promptly cooperate with and furnish information to each other in
connection with any such requirements imposed upon any of them or any of
their Subsidiaries in connection with this Agreement and the transactions
contemplated hereby. Each of the Company, Parent and Sub shall, and shall
cause its Subsidiaries to, use their reasonable best efforts to obtain
(and will cooperate with each other in obtaining) any consent,
authorization, order or approval of, or any exemption by, any Governmental
Entity or other public or private third party required to be obtained or
made by Parent, Sub, the Company or any of their
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Subsidiaries in connection with the Merger or the taking of any action
contemplated thereby or by this Agreement. Notwithstanding the foregoing,
the Company shall not obtain any consent that will affect Parent or the
Company to either of their material economic detriment, including any
modification of any Contract or Permit. Each party shall promptly inform
the other party of any communication with, and any proposed understanding,
undertaking, or agreement with, any Governmental Entity regarding any such
filings or any such transaction. Neither party shall participate in any
meeting with any Governmental Entity in respect of any such filings,
investigation, or other inquiry without giving the other party notice of
the meeting and, to the extent permitted by such Governmental Entity, the
opportunity to attend and participate.
(b) In connection with any action, suit or proceeding relating to
this Agreement or the Merger, Parent, Sub and the Company agree to consult
with each other in formulating strategies, including, without limitation,
consultation regarding the retention of counsel in situations involving
multiple defendants, and in taking any other action material to the
outcome of any such action, suit or proceeding.
Section 5.5. Board Recommendation.
(a) Except as expressly provided in Section 5.5(b) or (c), nothing
contained in this Agreement shall be construed in any manner to limit the
Company's ability, or the ability of its officers, directors, employees,
advisors or other agents to provide information in response to, or
negotiate or participate in discussions with respect to, any Takeover
Proposal; provided, however, that the Company shall obtain reasonable
protection of its confidential information on substantially the same terms
as the Confidentiality Agreement, and, in the case of confidential
information requested by a competitor of the Company, the Company shall
obtain an agreement from such party restricting the solicitation of the
Company's executive officers and other key employees.
(b) The Board of Directors of the Company shall not (i) withdraw or
modify, or propose to withdraw or modify, in a manner adverse to Parent,
the approval or recommendation by such Board of Directors of this
Agreement or the Merger, (ii) approve or
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recommend, or propose to approve or recommend, any Takeover Proposal or
(iii) cause the Company to enter into any agreement with respect to any
Takeover Proposal. Notwithstanding anything in this Agreement to the
contrary, in the event that prior to the Effective Time the Company
receives a Superior Proposal, the Board of Directors of the Company may
withdraw or modify its approval or recommendation of this Agreement and
the Merger, approve or recommend such Superior Proposal, but in each case
only at a time that is after the first business day following Parent's
receipt of written notice (a "Notice of Superior Proposal") advising
Parent that the Board of Directors of the Company has received a Superior
Proposal, specifying the material terms and conditions of such Superior
Proposal and identifying the person making such Superior Proposal.
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 5.5, the Company shall promptly
advise Parent orally and in writing of any request for information in
connection with a potential Takeover Proposal, or of any Takeover
Proposal, or any inquiry with respect to or which reasonably could lead to
any Takeover Proposal, the material terms and conditions of such request,
Takeover Proposal or inquiry and the identity of the person making such
request, Takeover Proposal or inquiry.
Section 5.6. Publicity. Each party's initial press release with
respect to the execution of this Agreement has been previously approved by the
other parties. Following such initial press releases, so long as this Agreement
is in effect, neither the Company, Parent nor any of their respective Affiliates
shall issue or cause the publication of any press release or other public
announcement with respect to the Merger, this Agreement or the other
transactions between the parties contemplated hereby without prior consultation
with the other parties, except as may be required by law or by any listing
agreement with a national securities exchange or trading market.
Section 5.7. Notification of Certain Matters.
(a) The Company shall give prompt notice to Parent and Sub, and
Parent and Sub shall give prompt notice to the Company, of (x) the
occurrence or non-occurrence of any event the occurrence or non-occurrence
of which would cause any representation or warranty of such party
contained in this Agreement to be untrue or inaccurate in any material
respect at or prior to the Effective Time and (y) any material failure of
the Company, Parent or Sub, as the case may be, to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by
it hereunder; provided, however, that the delivery of any notice pursuant
to this Section 5.7 shall not limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
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(b) The Company also shall give prompt notice to Parent, and Parent
or Sub shall give prompt notice to the Company, of:
(i) any notice or other communication from any person alleging
that the consent of such person is or may be required in connection
with the transactions contemplated by this Agreement;
(ii) any notice or other communication from any Governmental
Entity in connection with the transactions contemplated by this
Agreement;
(iii) any actions, suits, claims, investigations or
proceedings commenced or, to the best of its knowledge, threatened
against, relating to or involving or otherwise affecting it or any
of its Subsidiaries or which relate to the consummation of the
transactions contemplated by this Agreement; and
(iv) any occurrence of any event having, or which would
reasonably be expected to result in a Material Adverse Effect or a
material adverse effect on the ability of such party to perform its
obligations under this Agreement or consummate the transactions
contemplated hereby.
(c) Parent and Sub shall give prompt notice to the Company of any
material development with respect to the Financing described in the
Financing Letter that would reasonably be expected to result in (i) the
conditions precedent to the Financing described in the Financing Letter
not being satisfied, or (ii) the termination of the Financing Letter by
the parties thereto.
Section 5.8. Fair Price Statute. If any "business combination,"
"fair price," "control share acquisition" or "moratorium" statute or other
similar statute or regulation or any state "blue sky" or securities law statute
shall become applicable to the transactions contemplated hereby, the Company and
the Board of Directors of the Company shall, to the extent consistent with
applicable law and their fiduciary duties, grant such approvals and take such
actions as are reasonably necessary so that the transactions contemplated hereby
may be consummated as promptly as practicable on the terms contemplated hereby
and otherwise use reasonable best efforts to minimize the effects of such
statute or regulations on the transactions contemplated hereby.
Section 5.9. Indemnification.
(a) Until, and for a period of six years after, the Effective Time,
the indemnification provisions of Article VIII of the By-laws of the
Company and the provisions of
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Article IX of the Restated Certificate of Incorporation of the Company
limiting the personal liability of directors for damages, shall not be
amended, repealed or otherwise modified in any manner that would make any
of such provisions less favorable to the directors of the Company or the
Surviving Corporation than pertain to such directors on the date hereof.
Without limiting the foregoing, from and after the Effective Time, the
Surviving Corporation shall, (i) indemnify, defend and hold harmless the
present and former officers, directors, employees, and agents of the
Company and its Subsidiaries and of Sub (collectively, the "Indemnified
Parties"), from and against, and pay or reimburse the Indemnified Parties
for, all losses, obligations, expenses, claims, damages or liabilities
(whether or not resulting from third-party claims and including interest,
penalties, out-of-pocket expenses and attorneys' fees incurred in the
investigation or defense of any of the same or in asserting any of their
rights hereunder) resulting from or arising out of actions or omissions of
such Indemnified Parties occurring at or prior to the Effective Time
(including, without limitation, the transactions contemplated by this
Agreement) to the fullest extent permitted under (A) applicable Legal
Requirements, (B) the certificate of incorporation or by-laws of the
Company or Sub in effect on the date of this Agreement, including, without
limitation, provisions relating to advances of expenses incurred in the
defense of any action or suit, or (C) any indemnification agreement
between the Indemnified Party and the Company; and (ii) advance to any
Indemnified Parties expenses incurred in defending any action or suit with
respect to such matters, to the fullest extent permitted by applicable law
(and without requiring the Indemnified Party to provide any bond or other
security in respect thereof).
(b) Any Indemnified Party wishing to claim indemnification under
Section 5.9(a) shall provide notice to the Surviving Corporation promptly
after such Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought, and the Indemnified Party shall permit the
Surviving Corporation (at its expense) to assume the defense of any claim
or any litigation resulting therefrom; provided, however, that (i) counsel
for the Surviving Corporation, who shall conduct the defense of such claim
or litigation shall be reasonably satisfactory to the Indemnified Party
and the Indemnified Party may participate in such defense at such
Indemnified Party's expense, and (ii) the omission by any Indemnified
Party to give notice as provided herein shall not relieve the Surviving
Corporation of its indemnification obligation under this Agreement, except
to the extent that such omission results in a failure of actual notice to
the Surviving Corporation, and the Surviving Corporation is actually
prejudiced as a result of such failure to give notice. In the event that
the
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Surviving Corporation does not promptly assume the defense of any matter
as above provided, or counsel for the Indemnified Parties reasonably
believes and advises the Indemnified Parties in writing that there are
issues that raise conflicts of interest between the Surviving Corporation
and the Indemnified Parties or among the Indemnified Parties, each group
of Indemnified Parties who are not subject to such conflicts may retain
counsel satisfactory to such group, and the Surviving Corporation shall
pay all reasonable fees and expenses of such counsel for each such group
of Indemnified Parties promptly as statements therefor are received;
provided, however, that the Surviving Corporation shall not be liable for
any settlement effected without its prior written consent (which consent
shall not be unreasonably withheld); provided, further, however, that the
Surviving Corporation shall not be responsible for the fees and expenses
of more than one counsel for each group of Indemnified Parties without any
such conflicts. In any event, the Surviving Corporation and the
Indemnified Parties shall cooperate in the defense of any action or claim.
The Surviving Corporation shall not, in the defense of any such claim or
litigation, except with the consent of the Indemnified Party, consent to
entry of any judgment or enter into any settlement that provides for
injunctive or other nonmonetary relief affecting the Indemnified Party or
that does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all
liability with respect to such claim or litigation.
(c) At or prior to the Effective Time, the Company shall purchase
and pay all premiums with respect to a six year extension of the current
policies of directors' and officers' liability insurance maintained by the
Company with respect to matters arising before and acts or omissions
occurring or existing at or prior to the Effective Time, including the
transactions contemplated by this Agreement. The Company shall not cancel
such insurance with respect to any officer or director without the express
written consent of such officer or director.
(d) This Section 5.9 is intended for the benefit of, and to grant
third party rights to, persons entitled to indemnification under this
Section 5.9 and the benefits of Article IX of the Restated Certificate of
Incorporation of the Company, whether or not parties to this Agreement,
and each of such persons shall be entitled to enforce the covenants
contained herein.
(e) If Parent or the Surviving Corporation, as the case may be, or
any of their respective successors or assigns (i) reorganizes or
consolidates with or merges into any other person and is not the
resulting, continuing or surviving corporation or entity of such
reorganization,
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consolidation or merger, or (ii) liquidates, dissolves or transfers all or
substantially all of its properties and assets to any person or persons,
then, and in such case, proper provision will be made so that the
successors and assigns of Parent or the Surviving Corporation assumes all
of the obligations of Parent or the Surviving Corporation, as the case may
be, as set forth in this Section 5.9.
(f) Notwithstanding anything in this Section 5.9 to the contrary,
nothing in this Agreement shall in any way limit the rights of any party
under any indemnity agreement with the Company or the Surviving
Corporation.
Section 5.10. Financing. The Company shall use its reasonable best
efforts to assist Parent in obtaining the Financing, including, without
limitation, taking all action reasonably requested by Parent in connection
therewith. Parent shall use its reasonable best efforts to obtain Financing on
terms and conditions in amounts set forth in the Financing Letter, or if the
Financing contemplated by the Financing Letter is not consummated, other than as
a result of a breach by the Company of the terms of this Agreement, on similar
terms and conditions and in amounts which are not materially less favorable to
Parent than those set forth in the Financing Letter.
Section 5.11. Conduct of Business of Sub. Until the Effective Time,
Sub shall not engage in any activities of any nature, except as required by any
applicable Legal Requirement or as provided in or contemplated by this
Agreement.
ARTICLE VI.
CONDITIONS
Section 6.1. Conditions to Each Party's Obligation to Effect the
Merger. The respective obligation of each party to effect the Merger shall be
subject to the satisfaction on or prior to the Effective Time of each of the
following conditions:
(a) Stockholder Approval. This Agreement shall have been approved
and adopted by: (i) the requisite vote of the stockholders of the Company,
as required by applicable law or the Certificate of Incorporation of the
Company, in order to consummate the Merger and (ii) the affirmative vote
of a majority of the Shares voting with respect to the Merger (excluding
the Parent Shares and Affiliate Shares);
(b) Statutes. No Legal Requirement shall have been enacted or
promulgated by any Governmental Entity which prohibits the consummation of
the Merger or the transactions contemplated hereby;
(c) Injunctions. There shall be no order or injunction of a court or
other governmental authority of
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competent jurisdiction in effect precluding, restraining, enjoining or
prohibiting consummation of the Merger; and
(d) HSR Act. Any applicable waiting period under the HSR Act
relating to the Merger shall have expired or been terminated.
Section 6.2. Additional Conditions to Obligations of the Company.
The obligation of the Company to effect the Merger is also subject to the
fulfillment of the following conditions (any and all of which may be waived in
whole or in part by the Company to the extent permitted by applicable Legal
Requirements(whether before or after the Company's stockholders shall have
approved the Merger)):
(a) Representations and Warranties. The representations and
warranties of Parent and Sub contained in this Agreement, without regard
to any material adverse effect or any other materiality qualification
contained in any such representation or warranty, shall be true and
correct on and as of the Effective Time (except where such representation
and warranty speaks by its terms as of a different date, in which case it
shall be true and correct as of such date), with the same force and effect
as if made on and as of the Effective Time, unless the failure of such
representations and warranties to be true and correct would not reasonably
be expected to result in, individually or in the aggregate, a material
adverse effect on the ability of Parent and Sub to consummate the
transactions contemplated hereby, including the Merger in accordance with
the terms hereof;
(b) Agreements, Conditions and Covenants. Parent and Sub shall have
performed or complied in all material respects with all agreements,
conditions and covenants required by this Agreement to be performed or
complied with by them on or before the Effective Time; and
(c) Litigation. No action, suit, claim or legal, administrative or
arbitral proceeding or investigation shall be pending before any
Governmental Entity to restrain or prohibit, or to obtain damages in
respect of, this Agreement or the consummation of the transactions
contemplated hereby.
Section 6.3. Additional Conditions to Obligations of Parent and Sub.
The obligations of Parent and Sub to effect the Merger are also subject to the
following conditions (any and all of which may be waived in whole or in part by
Parent or Sub, as the case may be, to the extent permitted by applicable Legal
Requirements):
(a) Representations. The representations and warranties of the
Company contained in this Agreement, without regard to any Material
Adverse Effect qualification
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or any other materiality qualification contained in any such
representation and warranty, shall be true and correct in all respects on
and as of the Effective Time (except where such representation and
warranty speaks by its terms as of a different date, in which case it
shall be true and correct as of such date), with the same force and effect
as if made on and as of the Effective Time, unless the failure of such
representations and warranties to be true and correct would not reasonably
be expected to result in, individually or in the aggregate, a Material
Adverse Effect.
(b) Agreements, Conditions and Covenants. The Company shall have
performed or complied in all material respects with all agreements,
conditions and covenants required by this Agreement to be performed or
complied with by it on or before the Effective Time;
(c) Financing. Financing shall have been obtained on terms,
conditions and in amounts reasonably satisfactory to Parent (it being
acknowledged and agreed by Parent that the terms, conditions and amounts
set forth in the Financing Letter for the Financing contemplated thereby,
and any terms, conditions and amounts of any other Financing that are not
materially worse for the Parent, Sub or the Surviving Corporation than
those terms, conditions and amounts set forth in the Financing Letter, are
and will be satisfactory to Parent); and
(d) Litigation. No action, suit, claim or legal, administrative or
arbitral proceeding or investigation shall be pending before any
Governmental Entity to restrain or prohibit, or to obtain damages in
respect of, this Agreement or the consummation of the transactions
contemplated hereby.
ARTICLE VII.
TERMINATION AND AMENDMENT
Section 7.1. Termination. This Agreement may be terminated at any
time prior to the Effective Time, whether before or after approval of the terms
of this Agreement by the stockholders of the Company:
(a) by mutual written consent of the Boards of Directors of
Parent and the Company;
(b) by either Parent or the Company if this Agreement shall have
been voted on by the stockholders of the Company at the Special Meeting
and the vote shall not have been sufficient to satisfy the conditions set
forth in Section 6.1(a);
(c) by either Parent or the Company if any Governmental Entity shall
have issued an order, decree or
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ruling or taken any other action permanently enjoining, restraining or
otherwise prohibiting the acceptance for payment of, or payment for,
Shares pursuant to the Merger and such order, decree or ruling or other
action shall have become final and nonappealable;
(d) by either Parent or the Company if the Merger shall not have
been consummated by January 29, 1999; provided, however, that the right to
terminate this Agreement pursuant to this Section 7.1(d) shall not be
available to any party whose failure to perform any of its obligations
under this Agreement has been the cause of, or resulted in, the failure of
the Merger to occur on or before such date;
(e) by the Company if (i) any of the conditions set forth in
Sections 6.1 or 6.2 that (A) are required to occur prior to the Closing
shall have become incapable of occurring, or (B) are not permitted to
occur prior to the Closing shall have occurred prior to the Closing and
are incapable of being cured or reversed, and, in either case (A) or (B),
shall not have been, on or before the date of such termination,
permanently waived by the Company, or (ii) Parent or Sub shall have
breached any of their respective representations, warranties, covenants or
other agreements contained in this Agreement which breach is incapable of
being cured or has not been cured within 30 days after the giving of
written notice to Parent or Sub, as applicable;
(f) by Parent or Sub, if (i) any of the conditions set forth in
Sections 6.1 or 6.3 that (A) are required to occur prior to the Closing
shall have become incapable of occurring, or (B) are not permitted to
occur prior to the Closing, shall have occurred prior to the Closing and
are incapable of being cured or reversed, and, in either case (A) or (B),
shall not have been, on or before the date of such termination,
permanently waived by Parent and Sub, or (ii) the Company shall have
breached in any material respect any representation, warranty, covenant or
other agreement contained in this Agreement which breach is incapable of
being cured or has not been cured within 30 days after the giving of
written notice to the Company;
(g) by Parent or Sub, if the Company's Board of Directors (i) shall
have withdrawn or modified or amended in any respect its recommendation of
the Merger Agreement or the Merger, (ii) shall have caused the Company to
enter into an agreement with a third party with respect to any Takeover
Proposal, or (iii) the Board of Directors of the Company shall have
resolved to take any of the foregoing actions; or
(h) by the Company (i) if the Company's Board of Directors shall
have withdrawn its recommendation of the Merger Agreement or the Merger or
shall have approved or
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recommended a Takeover Proposal, (ii) in connection with entering into an
agreement with a third party with respect to any Takeover Proposal, or
(iii) if the Board of Directors of the Company shall have resolved to take
any of the foregoing actions, provided that in any case the Company, the
Board of Directors of the Company shall have complied with the provisions
of Section 5.5.
Section 7.2. Effect of Termination. In the event of a termination of
this Agreement by either the Company, Parent or Sub as provided in Section 7.1,
this Agreement shall forthwith become void and there shall be no liability or
obligation on the part of Parent, Sub or the Company or their respective
officers or directors, except with respect to the penultimate sentence of
Section 5.2, Sections 8.1 and 8.9 and this Section 7.2. Nothing herein shall
relieve any party of liability with respect to any fraud or intentional breach
by any party hereto of this Agreement.
ARTICLE VIII.
MISCELLANEOUS
Section 8.1. Fees and Expenses. All fees and expenses incurred by
any party hereto in connection with the Merger, the Original Merger Agreement or
this Agreement and the transactions contemplated by the Original Merger
Agreement or this Agreement shall be paid by the party incurring such fees or
expenses, whether or not the Merger is consummated.
Section 8.2. Amendment and Modification. Subject to applicable law,
this Agreement may be amended, modified and supplemented in any and all
respects, whether before or after any vote of the stockholders of the Company
contemplated hereby, by written agreement of the parties hereto, at any time
prior to the Closing Date with respect to any of the terms contained herein and
any provision of this Agreement may be waived by the party benefited thereby;
provided, however, that after the approval of this Agreement by the stockholders
of the Company, no such amendment, modification or supplement shall reduce the
amount or change the form of the Merger Consideration without further approval
by the holders of such number of Shares that are required to approve this
Agreement pursuant to Section 6.1(a).
Section 8.3. Nonsurvival of Representations and Warranties. None of
the representations and warranties in this Agreement or in any schedule,
instrument or other document delivered pursuant to this Agreement shall survive
the Effective Time, except for remedies that may be available for fraud.
Section 8.4. Notices. All notices, demands or other communications
to be given or delivered under or by reason of the provisions of this Agreement
shall be in writing and shall be deemed to have been given (a) when delivered
personally to the
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recipient, (b) when sent to the recipient by telecopy (receipt electronically
confirmed by sender's telecopy machine) if during normal business hours of the
recipient, otherwise on the next business day, (c) one business day after the
date when sent to the recipient by reputable express courier service (charges
prepaid), or (d) seven business days after the date when mailed to the recipient
by certified or registered mail, return receipt requested and postage prepaid.
Such notices, demands and other communications shall be sent to the parties at
the following addresses (or at such other address for a party as shall be
specified by like notice):
(a) if to Parent or Sub, to:
Trace International Holdings, Inc.
375 Park Avenue
New York, New York 10152
Attention: Philip N. Smith, Jr., Esq.
Telephone No.: (212) 230-0400
Telecopy No.: (212) 593-1363
with copies to:
Willkie Farr & Gallagher
Equitable Tower
787 Seventh Avenue
New York, NY 10019
Attention: Jack H. Nusbaum, Esq.
Telephone No.: (212) 728-8000
Telecopy No.: (212) 728-8111
(b) if to the Company, to:
Foamex International Inc.
1000 Columbia Avenue
Linwood, PA 19061
Attention: Chief Executive Officer
Telephone No.: (610) 859-3030
Telecopy No.: (610) 859-3069
with copies to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019
Attention: Judith R. Thoyer
Telephone No.: (212) 373-3000
Telecopy No.: (212) 757-3990
Section 8.5. Interpretation. The language used in this Agreement
shall be deemed to be the language chosen by the parties to express their mutual
intent, and no rule of strict construction will be applied against any party.
Any references
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to any federal, state, local or foreign statute or law shall also refer to all
rules and regulations promulgated thereunder, unless the context requires
otherwise. Unless the context otherwise requires: (a) a term has the meaning
assigned to it by this Agreement; (b) including means "including but not limited
to"; (c) "or" is disjunctive but not exclusive; (d) words in the singular
include the plural, and in the plural include the singular; (e) provisions apply
to successive events and transactions; and (f) "$" means the currency of the
United States of America. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated.
Section 8.6. Counterparts. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when two or more counterparts have been signed by
each of the parties and delivered to the other parties.
Section 8.7. Entire Agreement; No Third Party Beneficiaries. This
Agreement and the Confidentiality Agreement (including the documents and the
instruments referred to herein and therein): (a) constitute the entire agreement
and supersede all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof, and (b) other than
the provisions of Section 5.9 hereof, nothing expressed or implied in this
Agreement is intended or will be construed to confer upon or give to any person,
firm or corporation other than the parties hereto any rights or remedies under
or by reason of this Agreement or any transaction contemplated hereby.
Section 8.8. Severability. In the event that any one or more of the
provisions contained in this Agreement or in any other instrument referred to
herein, shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument. Furthermore, in lieu of any such invalid
or unenforceable term or provision, the parties hereto intend that there shall
be added as a part of this Agreement a provision as similar in terms to such
invalid or unenforceable provision as may be possible and be valid and
enforceable.
Section 8.9. Governing Law. This Agreement and the legal relations
between the parties hereto will be governed by and construed in accordance with
the laws of the State of Delaware, without giving effect to the choice of law
principles thereof.
Section 8.10. Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of
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law or otherwise) without the prior written consent of the other parties, except
as provided in Section 1.1 and that Sub may assign, in its sole discretion, any
or all of its rights, interests and obligations hereunder to any direct or
indirect wholly owned subsidiary of Parent. If Sub so assigns any of its rights,
interests or obligations hereunder, all references herein to "Sub" shall be
deemed to refer to the Subsidiary to which such rights, interests or obligations
were assigned with respect to such rights, interests or obligations. Subject to
the preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors and
assigns.
Section 8.11. Descriptive Headings. The descriptive headings of
the several sections of this Agreement are inserted for convenience only and
shall not control or affect the meaning or construction of any of the
provisions hereof.
Section 8.12. Obligation of Parent. Whenever this Agreement requires
Sub to take any action, such requirement shall be deemed to include an
undertaking on the part of Parent to use its reasonable best efforts to cause
Sub to take such action. Parent hereby guarantees the complete and timely
performance by Sub of all its obligations under this Agreement.
ARTICLE IX.
DEFINITIONS
Section 9.1. Certain Definitions.
For purposes of this Agreement, the following terms shall have the
meanings ascribed to them in this Section 9.1:
(a) "Affiliate" shall have the meaning set forth in Rule 12b-2 of
the Exchange Act; provided, however, for purposes of this Agreement the
Company and its subsidiaries shall not be deemed to be Affiliates of
Parent, and vice versa.
(b) "Affiliate Shares" means any Shares owned by an executive
officer or director of Parent (including Marshall S. Cogan) or by an
affiliate of Marshall S. Cogan or by a member of the Immediate Family (as
defined in NASD Rule IM-2110-1(l)(3)) of any of the foregoing.
(c) "Aggregate Amount" shall have the meaning specified in Section
2.2 hereto.
(d) "Agreement" shall have the meaning specified in the preamble
hereto.
(e) "Beacon" shall have the meaning specified in Section 3.10
hereto.
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(f) "Certificate of Merger" shall have the meaning specified in
Section 1.2 hereto.
(g) "Certificates" shall have the meaning specified in Section 2.2
hereto.
(h) "Closing" shall have the meaning specified in Section 1.3
hereto.
(i) "Closing Date" shall have the meaning specified in Section 1.3
hereto.
(j) "Code" means the Internal Revenue Code of 1986, as amended.
(k) "Company" shall have the meaning specified in the preamble
hereto.
(l) "Company Disclosure Schedule" shall have the meaning specified
in Section 3.1 hereto.
(m) "Confidentiality Agreement" shall have the meaning specified in
Section 5.2 hereto.
(n) "Constituent Corporations" shall have the meaning specified in
Section 1.1 hereto.
(o) "Contracts" as of any date means, collectively, all contracts,
agreements, commitments, instruments and guaranties to which the Company
or any of its Subsidiaries is a party or by which any of their respective
property is bound as of such date, all unfilled orders outstanding as of
such date for the purchase of raw materials, goods or services by the
Company and its Subsidiaries, and all unfilled orders outstanding as of
such date for the sale of goods or services by the Company and its
Subsidiaries.
(p) "DGCL" shall have the meaning specified in Section 1.1 hereto.
(q) "Dissenting Shares" shall have the meaning specified in Section
2.3 hereto.
(r) "Dissenting Stockholders" shall have the meaning specified in
Section 2.1 hereto.
(s) "Effective Time" shall have the meaning specified in Section 1.2
hereto.
(t) "Exchange Act" shall mean the Securities and Exchange Act of
1934, as amended.
(u) "Financing" means the receipt of funds by Parent on terms and
conditions not materially less favorable than,
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and in amounts not less than, those set forth in the Financing Letter.
(v) "Financing Letter" shall have the meaning specified in Section
4.4 hereto.
(w) "Foamex Credit Agreement" means the Credit Agreement, dated as
of February 27, 1998, by and among Foamex L.P., FMXI, Inc., the
institutions from time to time party thereto as lenders, the institutions
from time to time party thereto as issuing banks and Citicorp USA, Inc.
and The Bank of Nova Scotia, as administrative agents.
(x) "Governmental Entity" means any court, administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign.
(y) "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
(z) "Indemnified Parties" shall have the meaning specified in
Section 5.9 hereto.
(aa) "Intellectual Property" means, collectively: (i) trademarks and
service marks (registered or unregistered), trade dress, trade names and
other names and slogans embodying business or product goodwill or
indications of origin, all applications or registrations in any
jurisdiction pertaining to the foregoing and all goodwill associated
therewith; (ii) patents, patentable inventions, discoveries, improvements,
ideas, know-how, formula methodology, processes, technology and computer
programs, software and databases (including source code, object code,
development documentation, programming tools, drawings, specifications and
data) and all applications or registrations in any jurisdiction pertaining
to the foregoing, including all reissues, continuations, divisions,
continuations-in-part, renewals or extensions thereof; (iii) trade
secrets, including confidential and other non-public information, and the
right in any jurisdiction to limit the use or disclosure thereof; (iv)
copyrights in writings, designs, mask works or other works, and
registrations or applications for registration of copyrights in any
jurisdiction; (v) Internet Web sites, domain names and registrations or
applications for registration thereof; (vi) licenses, immunities,
covenants not to sue and the like relating to any of the foregoing; (vii)
books and records describing or used in connection with any of the
foregoing; and (viii) claims or causes of action arising out of or related
to infringement or misappropriation of any of the foregoing.
(bb) "Legal Requirement" means any federal, state, local, municipal,
foreign, international, multinational, or
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other administrative order, writ, injunction, decree, constitution, law,
rule, ordinance, Permit, principle of common law, regulation, statute, or
treaty.
(cc) "Liability" means any liability or obligation whether absolute
or contingent, whether accrued or unaccrued, whether liquidated or
unliquidated and whether due or to become due), including, without
limitation, any liability for Taxes.
(dd) "Liens" means any charge, claim, community property interest,
condition, equitable interest, lien, mortgage, option, pledge, security
interest, right of first refusal, or restriction of any kind, including
any restriction on use, voting, transfer, receipt of income, or exercise
of any other attribute of ownership.
(ee) "Material Adverse Effect" means any material adverse effect on
the business, operations, properties (including intangible properties), or
condition (financial or otherwise) of the Company and its Subsidiaries,
taken as a whole.
(ff) "Merger" shall have the meaning specified in Section 1.1
hereto.
(gg) "Merger Consideration" shall have the meaning specified in
Section 2.1 hereto.
(hh) "1994 Warrants" means the Warrants issued pursuant to the
Warrant Agreement, dated as of June 28, 1994, by and between the Company
and Shawmut Bank Connecticut, National Association.
(ii) "Notice of Superior Proposal" shall have the meaning specified
in Section 5.5 hereto.
(jj) "Option Plans" shall have the meaning specified in Section 2.4
hereto.
(kk) "Option Release" shall have the meaning specified in Section
2.4 hereto.
(ll) "Original Merger Agreement" shall have the meaning specified in
the recitals hereto.
(mm) "Parent" shall have the meaning specified in the preamble
hereto.
(nn) "Parent Shares" shall have the meaning specified in Section 2.1
hereto.
(oo) "Participating Warrants" means the Warrants issued pursuant to
(i) the Warrant Exchange Agreement, dated as of
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December 14, 1993, by and between the Company and DLJ Funding, Inc. and
(ii) the Warrant Exchange Agreement, dated as of December 14, 1993, by and
between the Company and Marely I S.A.
(pp) "Paying Agent" shall have the meaning specified in Section 2.2
hereto.
(qq) "Permits" means Federal, state, local and foreign governmental
approvals, authorizations, certificates, filings, franchises, licenses,
notices, permits and rights.
(rr) "Proxy Statement" shall have the meaning specified in Section
1.9 hereto.
(ss) "Schedule 13E-3" shall have the meaning specified in Section
1.9 hereto.
(tt) "SEC" means the Securities and Exchange Commission.
(uu) "Ramius" shall have the meaning specified in Section 3.11
hereto.
(vv) "SEC Documents" shall have the meaning specified in Section 3.5
hereto.
(ww) "Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
(xx) "Shares" shall have the meaning specified in the recitals
hereto.
(yy) "Special Committee" means the Special Committee of the Board of
Directors of the Company appointed by the Board of Directors of the
Company on March 16, 1998.
(zz) "Special Meeting" shall have the meaning specified in Section
1.8 hereto.
(aaa) "Stock Options" shall have the meaning specified in Section
2.4 hereto.
(bbb) "Sub" shall have the meaning specified in the preamble
hereto.
(ccc) "Sub Disclosure Schedule" shall have the meaning specified in
Section 4.3 hereto.
(ddd) "Subsidiary" of any entity means all corporations or other
entities in which such entity owns a majority of the issued and
outstanding capital stock or equity or similar interests; provided,
however, in no event
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shall the Company and its Subsidiaries be deemed to be Subsidiaries of
Parent.
(eee) "Superior Proposal" means any bona fide Takeover Proposal
which the Board of Directors of the Company determines in its good faith
judgment (based on the advice of either (x) Ramius or (y) a financial
advisor of nationally recognized reputation) to be more favorable to the
Company's stockholders than the Merger.
(fff) "Surviving Corporation" shall have the meaning specified in
Section 1.1 hereto.
(ggg) "Takeover Proposal" means any inquiry, proposal or offer from
any person relating to any: (A) merger, consolidation or similar
transaction involving the Company, (B) sale, lease or other disposition
directly or indirectly by merger, consolidation, share exchange or
otherwise of assets of the Company or its Subsidiaries representing 15% or
more of the consolidated assets of the Company and its Subsidiaries, (C)
issue, sale, or other disposition of (including by way of merger,
consolidation, share exchange or any similar transaction) securities (or
options, rights or warrants to purchase, or securities convertible into,
such securities) representing 15% or more of the voting power of the
Company or (D) transaction in which any person or "group" (as such terms
used in the Exchange Act) shall acquire beneficial ownership (as such term
is defined in Rule 13d-3 under the Exchange Act) of 25% or more of the
outstanding Company common stock, in each case, other than the
transactions with Parent contemplated by this Agreement.
(hhh) "Taxes" means all federal, state, local, foreign and other
taxes, assessments and water and sewer charges and rents, including
without limitation, income, gross receipts, excise, employment, sales,
use, transfer, license, payroll, franchise, severance, stamp, withholding,
Social Security, unemployment, real property, personal property, property
gains, registration, capital stock, value added, single business,
occupation, workers' compensation, alternative or add-on minimum,
estimated, or other tax, including without limitation any interest,
penalties or additions thereto.
(iii) "Warrant" shall have the meaning specified in Section 2.5
hereto.
(jjj) "Warrant Release" shall have the meaning specified in Section
2.5 hereto.
Section 9.2. Accounting Terms and Determinations. All references in
this Agreement to "generally accepted accounting principles" or "GAAP" shall
mean generally accepted accounting principles in effect in the United States of
America at the time of application thereof, applied on a consistent
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basis. Unless otherwise specified herein, all accounting terms used herein shall
be interpreted, all determinations with respect to accounting matters hereunder
shall be made, and all financial statements and certificates and reports as to
financial matters required to be furnished hereunder shall be prepared, in
accordance with generally accepted accounting principles, applied on a
consistent basis.
<PAGE>
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized as
of the date first written above.
TRACE INTERNATIONAL HOLDINGS, INC.
By: /s/ Marshall S. Cogan
----------------------------
Name: Marshall S. Cogan
Title: Chairman
TRACE MERGER SUB, INC.
By: /s/ Marshall S. Cogan
----------------------------
Name: Marshall S. Cogan
Title: Chairman
FOAMEX INTERNATIONAL INC.
By: /s/ Andrea Farace
----------------------------
Name: Andrea Farace
Title: Chairman
<PAGE>
APPENDIX B
[LETTERHEAD OF RAMIUS CAPITAL GROUP, L.L.C.]
November 5, 1998
Board of Directors
Foamex International Inc.
1000 Columbia Avenue
Linwood, PA 19061-3997
Ladies and Gentlemen:
We understand that pursuant to the Agreement and Plan of Merger dated as
of November 5, 1998 (the "Agreement") by and among Trace International Holdings,
Inc. ("Trace"), Trace Merger Sub, Inc. ("Merger Sub") and Foamex International
Inc., a Delaware corporation (the "Company"), Merger Sub will be merged with and
into the Company (the "Merger"), and each outstanding share of common stock, par
value $.01 per share, of the Company not owned by Trace or any of its
subsidiaries (the "Shares") will be converted into the right to receive $12.00
per Share in cash, without interest thereon (the "Merger Consideration"). The
terms and conditions of the Merger are more fully set forth in the Agreement.
You have requested our opinion as to the fairness, from a financial point
of view, of the Merger Consideration to the holders of the Shares. You have not
asked us to solicit or otherwise evaluate any other offers that may be available
to the Company.
Ramius Capital Group, L.L.C. ("Ramius") has been retained by the Board of
Directors of the Company (the "Board") to render this opinion in connection with
the Merger and will receive a fee for rendering such services. In the ordinary
course of business, Ramius and its affiliates actively trade and/or hold the
securities of the Company for their own accounts and the accounts of their
customers and, accordingly, may at any time hold a long or short position in
such securities.
We have not been asked to, nor do we, offer any opinion as to the material
terms of the Agreement or the form of the Merger. In rendering this opinion, we
have assumed that the Company, Trace, and Merger Sub will comply with all the
material terms of the Agreement.
In arriving at our opinion, we have, among other things:
1. reviewed a draft of the Agreement that you have advised us is substantially
in the form to be executed by the parties;
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Board of Directors, Foamex International Inc.
November 5, 1998
Page 2
2. reviewed certain publicly available business and historical financial
information relating to the Company;
3. reviewed certain internal financial analyses and forecasts for the Company
prepared by its management;
4. conducted discussions with members of the senior management of the Company
with respect to the operations, financial condition, history and prospects
of the Company;
5. reviewed the historical market prices and trading activity of the common
stock of the Company;
6. compared certain financial and stock market information for the Company
similar information for certain other companies the securities of which are
publicly traded and which we deemed generally compared to the Company or
otherwise relevant to our inquiry;
7. reviewed the terms, to the extent publicly available, of certain recent
business combinations in industries and markets in which the Company
participates which we deemed generally comparable to the Merger or otherwise
relevant to our inquiry; and
8. conducted such other financial studies, analyses, and investigations, and
considered such other information as we deemed necessary or appropriate.
In connection with our review and arriving at our opinion, we have relied
upon and assumed, without any obligation for independent verification, the
accuracy and completeness of the financial and other information that was
available to us from public sources, that was provided to us by the Company or
that was otherwise reviewed by us. With respect to the financial forecasts
provided to or otherwise reviewed by or discussed with us, we have assumed that
they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the Company's management as to the expected
future financial performance of the Company and that they will be realized in
the amounts and at the times contemplated thereby. We have not assumed any
responsibility for the information or forecasts provided to us and we have
further relied upon the assurances of management of the Company that they are
unaware of any facts that would make the information or forecasts provided to us
incomplete or misleading. We have also assumed with your consent that the Merger
will be consummated in accordance with the terms described in the Agreement. In
arriving at our opinion, we have not performed any independent evaluation or
appraisal of the assets or liabilities (contingent or otherwise) of the Company
or any of its subsidiaries and we have not been furnished with any such
evaluation or appraisal.
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Board of Directors, Foamex International Inc.
November 5, 1998
Page 3
Our opinion necessarily is based upon economic, market, financial and
other conditions as in effect, and the information made available to us, as they
exist and can be evaluated as of the date hereof. It should be understood that,
although subsequent developments may affect this opinion, we do not have any
obligation to update, revise or reaffirm this opinion. This opinion does not
constitute an opinion with respect to, and does not address, the effect which
consummation of the Merger or the financing thereof would have on the solvency
of the Company or any of its affiliates, including Trace.
This letter and the opinion expressed herein are for the benefit and use
of the Board in connection with their evaluation of the terms of the Merger.
This opinion does not address the Company's underlying business decision to
approve the Merger or constitute a recommendation to any stockholder of the
Company as to how such stockholder should vote with respect to the Merger. This
opinion may not be reproduced, summarized, excerpted from or otherwise publicly
referred to or disclosed in any manner without our prior written consent,
excerpt that the Company may include this opinion in its entirety in any proxy
statement or information statement relating to the Merger sent to the Company's
stockholders.
Based upon and subject to the foregoing and based upon such other matters
as we consider relevant, it is our opinion that, as of the date hereof, the
Merger Consideration is fair, from a financial point of view, to the holders of
the Shares.
Very truly yours,
RAMIUS CAPITAL GROUP, L.L.C.
By: /s/ Peter A. Cohen
-------------------------
Peter A. Cohen
Principal
By: /s/ Jeffrey M. Solomon.
-------------------------
Jeffrey M. Solomon
Principal
B-3
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APPENDIX C
399 PARK AVENUE
NEW YORK, NEW YORK 10022
(212) 339 9100
FAX: (212) 339 9109
THE BEACON GROUP
CAPITAL SERVICES, LLC
November 2, 1998
Special Committee of the Board of Directors
Foamex International Inc.
1000 Columbia Avenue
Linwood, PA 19061
Gentlemen:
You have engaged us as your financial advisor to assist in your evaluation, and
you have requested our opinion as to the fairness from a financial point of
view, of the revised offer (the "New Offer") made by Trace International
Holdings Inc. ("Trace") on October 16, 1998 to purchase all of the outstanding
shares of common stock, par value $0.01 per share, of Foamex International Inc.
(the "Company") which are not owned by Trace or its subsidiaries (the "Shares")
for $12.00 per Share in cash.
Consummation of the proposed purchase would be subject to a number of
conditions, including approval by the Company's Board of Directors and
stockholders, including a majority of the stockholders other than Trace and its
subsidiaries, the receipt of necessary financing, the termination of the
existing Merger Agreement, dated as of June 25, 1998, by and among Trace, Trace
Merger Sub Inc. and the Company, as amended on July 6, 1998 (the "Existing
Merger Agreement"), the execution of a new definitive merger agreement (the
"New Merger Agreement") prior to November 5, 1998 and other terms and
conditions which would be in the New Merger Agreement.
The Beacon Group Capital Services, LLC, as part of its strategic advisory
business, is engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, private placements and valuations for
estate, corporate and other purposes. We are familiar with the Company, having
served as financial advisor to the Special Committee of the Company's Board of
Directors and having participated in certain of the negotiations leading to the
offer covered by the Existing Merger Agreement (the "Original Offer").
Pursuant to our engagement, we have informed ourselves concerning those aspects
of the New Offer and the Company's business, operations, financial condition,
prospects and management which we have deemed appropriate and material. In that
regard, we have reviewed, among other things, the New Offer; the Existing
Merger Agreement; the October 28, 1998 draft of the New Merger Agreement; the
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Foamex International Inc.
November 2, 1998
Page 2
Schedule 13E-3 relating to the Original Offer; the Prospectus issued by the
Company in connection with initial public offering of its common stock in
December 1993; Annual Reports to shareholders and Annual Reports on Form 10-K
of the Company for each of the four years ended December 31, 1997; certain
interim reports to shareholders and Quarterly Reports on Form 10-Q; various
other communications from the Company to its stockholders; and certain internal
financial analyses and financial forecasts for the Company prepared by its
management, including those relating to the Company's December 1997 acquisition
of Crain Industries, Inc. ("Crain"), the integration of Crain into the Company
and the reorganization of the Company in 1998 following the acquisition of
Crain. We have discussed the New Offer and the Company's business and prospects
with the Company's senior management and with others we have deemed
appropriate, including senior management and other representatives of Trace. We
have also discussed with such individuals the relationship of the Company and
Trace, as well as inter-company transactions between the Company and Trace,
including the fact that Trace will receive payments of $75 million in
connection with the purchase of the Shares pursuant to the New Offer in
consideration for a Trace tax Net Operating Loss carryforward. We have reviewed
in outline form the proposed terms, conditions and structure of the financing
for the proposed purchase of the Shares pursuant to the New Offer and had
discussions with representatives of the principal sources of financing
concerning their confidence in completing that financing. In addition, we have
reviewed the reported price and trading activitiy for the Company's common
stock; compared financial and stock market information for the Company with
similar information for selected other companies whose securities are publicly
traded and which we deemed to be comparable to the Company in material
respects; reviewed the financial terms of certain recent business combinations
in industries and markets in which the Company participates; and performed such
other studies and analyses as we considered appropriate. Due to restrictions in
the Existing Merger Agreement, we have, with your approval, not contacted third
parties formally to ascertain their interest in a combination with the Company
or in making a proposal which is competitive with the New Offer.
We have assumed and relied without independent verification on the accuracy and
completeness of all of the financial and other information reviewed by us for
purposes of the opinion which you have requested. With respect to the financial
projections furnished to us by the Company, we have assumed that they have been
reasonably prepared on a basis which reflects the best current estimates and
judgments of the management of the Company as to the future operating and
financial performance of the Company and relevant economic conditions. We have
not made an independent evaluation or appraisal of the assets and liabilities
of the Company or any of its subsidiaries, and we have not been furnished with
any such evaluation or appraisal. This letter does not constitute an opinion
with respect to, and does not address, the effect which consummation of the New
Offer or the financing thereof would have on the solvency of the Company or any
of its affiliates, including Trace, or the effect which Trace's present or
future financial condition, or any changes therein, might have on the Company,
its present or future financial condition or the value of the Shares. In
addition, we are not addressing
C-2
<PAGE>
Foamex International Inc.
November 2, 1998
Page 3
the advisability of the Company entering into the New Offer transaction or
expressing an opinion as to the consequences to the Company of determining not
to proceed with the New Offer transaction.
The financial advisory services which we have provided to you and our opinion
expressed below have been and are provided for your information and assistance
in connection with your consideration of the New Offer and do not constitute a
recommendation to any stockholder. Our opinion is necessarily based on
economic, market, financial and other conditions as they existed on, and could
be evaluated as of, the date hereof. Although subsequent developments may
affect our opinion, we do not have an obligation to update, revise or reaffirm
our opinion.
Based on and subject to the foregoing and such other matters as we considered
relevant, it is our opinion that as of the date hereof the proposed purchase
price of $12.00 per Share in cash contained in the New Offer is not fair from a
financial point of view to holders of the Shares.
Very truly yours,
/s/ The Beacon Group Capital Services, LLC
THE BEACON GROUP CAPITAL SERVICES, LLC
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APPENDIX D
DELAWARE GENERAL CORPORATION LAW
SECTION 262. APPRAISAL RIGHTS
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d)of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to ss.228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and
the words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions
thereof, solely of stock of a corporation, which stock is deposited with the
depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to [sec]251 (other than a merger effected pursuant to
[sec]251(g) of this title), [sec]252, [sec]254, [sec]257, [sec]258, [sec]263 or
[sec]264 of this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to determine
the stockholders entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders;
and further provided that no appraisal rights shall be available for any shares
of stock of the constituent corporation surviving a merger if the merger did
not require for its approval the vote of the stockholders of the surviving
corporation as provided in subsection (f) of [sec]251 of this title.
(2) Notwithstanding paragraph(1)of this subsection, appraisal rights under
this section shall be available for the shares of any class or series of stock
of a constituent corporation if the holders thereof are required by the terms
of an agreement of merger or consolidation pursuant to [sec][sec]251, 252, 254,
257, 258, 263 and 264 of this title to accept for such stock anything except:
a. Shares of stock of the corporation surviving or resulting from such
merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts in
respect thereof, which shares of stock (or depository receipts in respect
thereof) or depository receipts at the effective date of the merger or
consolidation will be either listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or held of
record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a. and b. of this paragraph; or
d. Any combination of the shares of stock, depository receipts and cash in
lieu of fractional shares or fractional depository receipts described in the
foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under [sec]253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall be
available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains such a
provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
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(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for such
meeting with respect to shares for which appraisal rights are available
pursuant to subsections (b) or (c) hereof that appraisal rights are available
for any or all of the shares of the constituent corporations, and shall include
in such notice a copy of this section. Each stockholder electing to demand the
appraisal of his shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for appraisal of his
shares. Such demand will be sufficient if it reasonably informs the corporation
of the identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein provided.
Within 10 days after the effective date of such merger or consolidation, the
surviving or resulting corporation shall notify each stockholder of each
constituent corporation who has complied with this subsection and has not voted
in favor of or consented to the merger or consolidation of the date that the
merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to [sec]228 or
[sec]253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days thereafter,
shall notify each of the holders of any class or series of stock of such
constituent corporation who are entitled to appraisal rights of the approval of
the merger or consolidation and that appraisal rights are available for any or
all shares of such class or series of stock of such constituent corporation,
and shall include in such notice a copy of this section; provided that, if the
notice is given on or after the effective date of the merger or consolidation,
such notice shall be given by the surviving or resulting corporation to all
such holders of any class or series of stock of a constituent corporation that
are entitled to appraisal rights. Such notice may, and, if given on or after
the effective date of the merger or consolidation, shall, also notify such
stockholders of the effective date of the merger or consolidation. Any
stockholder entitled to appraisal rights may, within 20 days after the date of
mailing of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the appraisal of
such holder's shares. If such notice did not notify stockholders of the
effective date of the merger or consolidation, either (i) each such constituent
corporation shall send a second notice before the effective date of the merger
or consolidation notifying each of the holders of any class or series of stock
of such constituent corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the surviving or
resulting corporation shall send such a second notice to all such holders on or
within 10 days after such effective date; provided, however, that if such
second notice is sent more than 20 days following the sending of the first
notice, such second notice need only be sent to each stockholder who is
entitled to appraisal rights and who has demanded appraisal of such holder's
shares in accordance with this subsection. An affidavit of the secretary or
assistant secretary or of the transfer agent of the corporation that is
required to give either notice that such notice has been given shall, in the
absence of fraud, be prima facie evidence of the facts stated therein. For
purposes of determining the stockholders entitled to receive either notice,
each constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given, provided, that if
the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record date
is fixed and the notice is given prior to the effective date, the record date
shall be the close of business on the day next preceding the day on which the
notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who
has complied with subsections (a) and (d) hereof and who is otherwise entitled
to appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10
days after his written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register
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in Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail and
by publication shall be approved by the Court, and the costs thereof shall be
borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as
to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger
or consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In determining
the fair rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of the proceeding.
Upon application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding, the Court may,
in its discretion, permit discovery or other pretrial proceedings and may
proceed to trial upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name appears on the
list filed by the surviving or resulting corporation pursuant to subsection (f)
of this section and who has submitted his certificates of stock to the Register
in Chancery, if such is required, may participate fully in all proceedings
until it is finally determined that he is not entitled to appraisal rights
under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to. each such stockholder, in the
case of holders of uncertificated stock forthwith, and the case of holders of
shares represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees And the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall
deliver to the surviving or resulting corporation a written withdrawal of his
demand for an appraisal and an acceptance of the merger or consolidation,
either within 60 days after the effective date of the merger or consolidation
as provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the
Court of Chancery shall be dismissed as to any stockholder without the approval
of the Court, and such approval may be conditioned upon such terms as the Court
deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
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APPENDIX E
DIRECTORS AND EXECUTIVE OFFICERS OF
THE COMPANY, TRACE AND MERGER SUB
Set forth below is the name, business address and citizenship of each
person who is a director or executive officer of the Company, Trace and Merger
Sub, and, except as otherwise indicated, the present principal occupation or
employment of each person listed below and the name, principal business and
address of the corporation or other organization in which such occupation or
employment of each such person is conducted and the material occupation,
positions, offices and employment and the name, principal business and address
of any corporation or other organization in which any material occupational
position, office or employment of each such person was held during the past
five years. Unless otherwise indicated, the business address of each person at
(i) the Company is 1000 Columbia Avenue, Linwood, PA 19061 and (ii) Trace and
Merger Sub is 375 Park Avenue, 11th Floor, New York, NY 10152.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
<TABLE>
<CAPTION>
NAME POSITION CITIZENSHIP
- - ---------------------------- ------------------------------------------------------------------- ------------
<S> <C> <C>
Andrea Farace .............. Mr. Farace, 42, began serving as Chairman of the Board and ITALY
Chief Executive Officer of the Company and certain affiliated
entities in May 1997. Mr. Farace has also served as Chairman
of the Board of General Felt since May 1997. Mr. Farace has
also served as a director of the Company since February 1996.
Mr. Farace served as President and a director of Trace from
December 1994 and December 1993, respectively, to December
1997. Prior to December 1993, Mr. Farace held several
executive positions within Trace beginning in April 1991. Mr.
Farace was Senior Executive of C.I.R. S.p.A. from May 1990
to March 1991. Prior to that, Mr. Farace was a Managing
Director at Shearson Lehman Hutton, Inc. Mr. Farace is a
director of TFC and CHF Industries, Inc., both of which are
subsidiaries of Trace. Additionally, Mr. Farace is a director of
the Managed High Income Portfolio, Inc. and a member of the
Advisory Board of the Italy Fund, both of which are NYSE-
listed mutual funds.
Marshall S. Cogan .......... Mr. Cogan, 61, has been the Chairman of the Executive USA
Committee of the Company since its inception in September
1993, served as Chairman and Chief Executive Officer from
January 1994 through May 1997 and has been the Vice
Chairman of the Board of Directors since May 1997. Mr. Cogan
has been a director of TFC since December 1991 and the
Chairman of the Board and President of TFC and Trace Foam
Sub since January 1992 and March 1995, respectively. He has
been the principal stockholder, Chairman or Co-Chairman of the
Board and Chief Executive Officer or Co-Chief Executive
Officer of Trace since 1974. Mr. Cogan has been a Director and
President of Merger Sub since June 1998. He has also been a
member of the Board of Director of Recticel since February
1993. Mr. Cogan was named Chairman and Chief Executive
Officer of United Auto Group Inc., an affiliate of Trace, in April
1997. He has also served as Chairman, Director and Managing
General Partner of other companies formerly owned by the
Company, including JPSGP Inc., and JPS, and companies
formerly owned by Trace, including Color Tile, Inc., General
Felt, Knoll International Inc. and Sheller-Globe Corporation.
Prior to forming Trace, he was senior partner at Cogan, Berlind,
Weill & Levitt and subsequently CBWL--Hayden Stone, Inc.
</TABLE>
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<TABLE>
<CAPTION>
NAME POSITION CITIZENSHIP
- - ----------------------------- ----------------------------------------------------------------- ------------
<S> <C> <C>
Additionally, Mr. Cogan serves on the Board of Directors of the
American Friends of the Israel Museum and the American Ballet
Theater, and the Board of Trustees of the Museum of Modern
Art, the Boston Latin School and New York University Medical
Center. Mr. Cogan also serves on several committees of Harvard
University.
Robert J. Hay ............... Mr. Hay , 72, has been Chairman Emeritus and a director of the USA
Company since September 1993. Mr. Hay was Chairman and
Chief Executive Officer of Foamex L.P. from January 1993 to
January 1994. Mr. Hay was President of Foamex L.P. and its
predecessor from 1972 through 1992. Mr. Hay began his career
in 1948 as a chemist with The Firestone Tire and Rubber
Company, a predecessor of Foamex L.P.
Rolf E. Christensen ......... Mr. Christensen, 53, has been Chief Operating Officer since USA
March 1998. Prior to that Mr. Christensen served as Executive
Vice President, Technical Products of Foamex L.P. Mr.
Christensen has served in several management positions since
joining Foamex L.P. in 1967.
John H. Gutfreund ........... John H. Gutfreund, 68, has served as a director and as Chairman USA
of the Special Committee of the Board of Directors of the
Company since February 1998. He is President of Gutfreund &
Company, Inc., a financial consulting firm, which he formed in
1992. Prior to that, Mr. Gutfreund served in various positions
with Salomon Brothers from 1953 until 1991, most recently as
Chairman of the Board and Chief Executive Officer. Mr.
Gutfreund is also a director of AquaPenn Spring Water
Company, Inc., Baldwin Piano & Organ Company, LCA-
Vision, Inc., The Universal Bond Fund and Montefiore Medical
Center and is on the Board of Trustees of the New York Public
Library. Mr. Gutfreund served as Vice Chairman of the New
York Stock Exchange from 1985 until 1987.
Stuart J. Hershon ........... Stuart J. Hershon, 60, has been a director of the Company since USA
December 1993. He was a member of the Board of Directors of
Trace from April 1986 until May 1994. He is a board certified,
practicing orthopedic surgeon at North Shore University
Hospital and at Columbia Presbyterian Medical Center in New
York where he is an assistant clinical professor of orthopedic
surgery. Dr. Hershon has served as orthopedic consultant and
team physician for certain New York area professional sports
teams.
</TABLE>
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<TABLE>
<CAPTION>
NAME POSITION CITIZENSHIP
- - -------------------------- ------------------------------------------------------------------ ------------
<S> <C> <C>
Etienne Davignon ......... Etienne Davignon, 64, has been a director of the Company since Belgian
December 1993. Mr. Davignon has been the Chairman of
Societe Generale de Belgique, a Belgian bank and holding
company, and a director of its subsidiary Recticel since April
1989. Mr. Davignon was a Vice President of the EEC
Commission in charge of industry, research and energy from
1977 through 1984. He was the first President of the
International Energy Agency. Mr. Davignon currently serves as
a director of, among other companies, Generale de Banque s.a.,
Gilead Sciences, Compagnie de Suez s.a., Solvay s.a. and
Kissinger Associates. Mr. Davignon also serves as a member of
the International Advisory Board of Fiat S.p.A. He is the
Chairman of the Association for the Monetary Union of Europe,
the Paul-Henri Spaak Foundation and the Royal Institute for
International Relations and is a member of the European
Roundtable of Industrialists, chairing the working group on
Trade and Investment.
John V. Tunney ........... John V. Tunney, 63, has been a director of the Company since USA
May 1994. He has been Chairman of the Board of Cloverleaf
Group, Inc., an investment company, since 1981, President of
John V. Tunney & Associates, Inc. since 1991 and Chairman of
the Board of Logan Manufacturing Company since 1993. Mr.
Tunney has served as Vice Chairman of the Board of the
Corporate Fund for Housing since 1988. Mr. Tunney served as
a U.S. Senator from the State of California from 1971 until 1977.
Prior to that, Mr. Tunney served as a member of Congress from
the 38th district of California from 1965 until 1971. Mr. Tunney
currently serves as a member of the Board of Directors of the
Prospect Group, Inc., Garnet Resources Corporation, Illinois
Central Railroad Corp. Enterprise Plan, Inc. and The Forschner
Group.
John A. Feenan ........... Mr. Feenan, 37, was appointed Executive Vice President and USA
Chief Financial Officer in June 1998. Prior to joining the
Company, Mr. Feenan served as Chief Financial Officer of
LaPorte, Inc., the North American subsidiary of LaPorte, PLC,
a UK-based manufacturer of specialty chemicals since 1994.
From 1992 to 1994, Mr. Feenan served in a variety of positions
at Plasti-Line Inc., including General Manager, and from 1989
to 1992 he was employed by IBM Corporation in a variety of
positions, including Senior Financial Analyst.
Barry Zimmerman .......... Dr. Zimmerman, 60, has been Executive Vice President, USA
Manufacturing Services and Corporate Development of the
Company since July 1997, Chairman, President and a director
of Foamex Mexico since September 1993 and Vice President of
FMXI since April 1995. Dr. Zimmerman has been an Executive
Vice President of Foamex L.P. since October 1995 and a Senior
Vice President or Vice President and Managing Director of
Trace since October 1986. Prior to that, Dr. Zimmerman held
several executive positions within Trace beginning in August
1978. Dr. Zimmerman has been an Executive Vice President of
TFC since October 1990. Dr. Zimmerman has served as director
of Foamex Capital Corporation since July 1992.
</TABLE>
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<TABLE>
<CAPTION>
NAME POSITION CITIZENSHIP
- - ------------------------------ ------------------------------------------------------------------ ------------
<S> <C> <C>
Philip N. Smith, Jr. ......... Mr. Smith, 56, has been Senior Vice President or Vice President, USA
Secretary and General Counsel of the Company since its
inception in September 1993. Mr. Smith has been a Vice
President and Assistant Secretary of TFC since its inception in
October 1990 and a Vice President and Assistant Secretary of
Trace Foam Sub since December 1991. Mr. Smith has been a
Senior Vice President or Vice President and the Secretary or
Assistant Secretary and General Counsel of Trace since January
1988 and has overseen and been actively involved in transaction
negotiations, litigation, stockholder and director relations and
other corporate legal matters. Mr. Smith has been a Director,
Vice President and Secretary of Merger Sub since June 1998.
Prior to joining Trace, he was the sole shareholder of a
professional corporation which was a partner of Akin, Gump,
Strauss, Hauer & Feld, L.L.P.
Phil Allen ................... Mr. Allen, 58, has been Executive Vice President of Foamex USA
Carpet since September 1997. From July 1993 to January 1998,
Mr. Allen served as Vice President, Sales and Marketing for
General Felt.
Gregory M. Barbe ............. Mr. Barbe, 43, has been Executive Vice President, Foam USA
Products since March 1998. He was Executive Vice President,
Cushioning Products from July 1997 through March 1998. Mr.
Barbe also served as Vice President of Sales from April 1994
to July 1997. Prior to joining the Company, Mr. Barbe was the
director of Marketing for Sealy brand products at Sealy, Inc.
from 1990 to 1994. Prior to that, Mr. Barbe held several sales
and marketing positions at three different units of the General
Electric Company.
Gregory W. Brown ............. Mr. Brown, 42, has been Executive Vice President, Automotive USA
Products since July 1997. From September 1996 to July 1997,
Mr. Brown was employed as Vice President, Marketing and
Sales by Guardian Industries, a producer of glass and
automotive trim. From 1995 to 1996, Mr. Brown served as
President of DCT Material Handling Systems, Inc. and from
1993 to 1995, he served as Vice President, Business
Development of DCT Material Handling Inc.; the principal
business of these companies is material handling, consisting of
monorail systems and floor conveyor systems for automotive
facilities.
Christine A. Henisee ......... Ms. Henisee, 51, has been Executive Vice President, Business USA
Development and Technology since July 1997. From 1995 until
joining the Company, Ms. Henisee served as an advisor to
Johnson & Johnson Consumer Products in her capacity as
founder of Cheswold Group, a consulting enterprise. From 1992
to 1995, she served as Division Vice President of Scott Paper
Company for the Global Wet Wipes Business. Prior thereto, Ms.
Henise held various management positions for over 25 years at
Scott Paper Co. Ms. Henisee also serves on the Board of
Episcopal Academy.
</TABLE>
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<TABLE>
<CAPTION>
NAME POSITION CITIZENSHIP
- - ----------------------- ---------------------------------------------------------------- ------------
<S> <C> <C>
Stephen Drap .......... Mr. Drap, 48, has been Executive Vice President, Technical USA
Products since March 1998. Prior to that, Mr. Drap served as
Vice President, Manufacturing and Customer Service, Technical
Products beginning July 1997. Mr. Drap has held various
management positions since joining the Company in 1980.
Darrel Nance .......... Mr. Nance, 45, has been Executive Vice President, Foam USA
Products since March 1998. From 1995 until joining the
Company, Mr. Nance served as Vice President and General
Manager of California Operations of Crain Industries.
Pratt Wallace ......... Mr. Wallace, 38, has been the Executive Vice President, USA
Manufacturing Technology since March 1998. From 1997 to
until joining the Company, Mr. Wallace served as Vice President
of the Southeast region of Crain Industries. From 1993 to 1997,
Mr. Wallace served as the General Manager of Crain Industries'
Newnan, Georgia facility.
</TABLE>
DIRECTORS AND EXECUTIVE OFFICERS OF TRACE
<TABLE>
<CAPTION>
NAME POSITION CITIZENSHIP
- - ------------------------------- ---------------------------------------------------------------- ------------
<S> <C> <C>
Marshall S. Cogan ............. See above under "Directors and Executive Officers of the USA
Company".
Saul S. Sherman ............... Saul S. Sherman, 80, has been Vice Chairman of the Board of USA
Directors and a member of the Executive Committee of Trace
since March 1987 and a director since 1981. Mr. Sherman has
served as Chairman of the Board and Executive Vice President
of Unitcrane Shovel Corp. ("Unitcrane") since 1978 and 1996,
respectively. Mr. Sherman served as Chief Executive Officer of
Unitcrane from 1978 until 1996. Additionally, Mr. Sherman has
served as a director of Allied Products Corporation since March
1973.
Frederick Marcus .............. Frederick Marcus, 63, has been Vice Chairman of the Board of USA
Directors and Senior Managing Director of Trace since March
1993 and March 1987, respectively, and a director since July
1976.
Robert H. Nelson .............. Robert H. Nelson, 53, has served as Chief Financial Officer of USA
Trace since 1987 and Senior Vice President, Chief Operating
Officer and a director of Trace since 1994 and Vice President
and Treasurer of TFC and a director, Vice President and
Treasurer of Trace Foam Sub since October 1990 and July 1992,
respectively. Additionally, Mr. Nelson has served as a director
of United Auto Group, Inc. ("UAG") since January 1996 and as
Executive Vice President and Chief Financial Officer of UAG
since January 1997. He has also served as Vice Chairman of
Atlantic Finance since March 1996.
Barry Zimmerman ............... See above under "Directors and Executive Officers of the USA
Company".
Philip N. Smith, Jr. .......... See above under "Directors and Executive Officers of the USA
Company".
</TABLE>
E-5
<PAGE>
<TABLE>
<CAPTION>
NAME POSITION CITIZENSHIP
- - ------------------------- ----------------------------------------------------------------- ------------
<S> <C> <C>
Karl H. Winters ......... Karl H. Winters, 39, has served as Vice President-Finance and USA
Controller of Trace since September 1993 and as Vice President
of TFC since December 1997. Additionally, Mr. Winters has
served as Vice President and Treasurer of UAG from March
1997 and has served as Executive Vice President and Chief
Financial Officer of UAG since August 1997. Prior thereto, Mr.
Winters served as a senior audit manager for Coopers &
Lybrand, L.L.P. an accounting, financial advisory services and
management consulting firm, which he joined in 1983.
Tambra S. King .......... Tambra S. King, 36, has served as Vice President and Secretary USA
or Assistant Secretary of Trace since September 1996 and
October 1992, respectively, and as Vice President and Secretary
or Assistant Secretary of TFC and Secretary of Trace Foam Sub
since August 1997 and October 1992, respectively. Additionally,
Ms. King has served as Vice President and Secretary or Assistant
Secretary of UAG since May 1998 and October 1992,
respectively.
</TABLE>
DIRECTORS AND EXECUTIVE OFFICERS OF MERGER SUB
<TABLE>
<CAPTION>
NAME POSITION CITIZENSHIP
- - ------------------------------- -------------------------------------------------------------- ------------
<S> <C> <C>
Marshall S. Cogan ............. See above under "Directors and Executive Officers of the USA
Company".
Philip N. Smith, Jr. .......... See above under "Directors and Executive Officers of the USA
Company".
Karl H. Winters ............... See above under "Directors and Executive Officers of Trace". USA
Robert H. Nelson .............. See above under "Directors and Executive Officers of Trace". USA
Tambra S. King ................ See above under "Directors and Executive Officers of Trace". USA
</TABLE>
E-6
