SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO.2
SCHEDULE 13E-3
Rule 13e-3 Transaction Statement
(Pursuant to Section 13(e) of the Securities
Exchange Act of 1934)
FOAMEX INTERNATIONAL INC.
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(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
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(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].
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Calculation of Filing Fee
Transaction Valuation (1): $279,097,394
Amount of Filing Fee (1): $55,820
(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
16,757,201 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) 3,217,378
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 $279,097,394 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) $18.75,
and (ii) cash consideration of $25,225,713 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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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 June 25, 1998, as amended by Amendment
No. 1 to the Agreement and Plan of Merger, dated as of July 6, 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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CROSS REFERENCE SHEET
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Item in Schedule 13E-3 Caption in Proxy Statement
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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 D - 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 Special
Committee; Fairness of the Merger; SPECIAL FACTORS -
Recommendation of the Board of Directors; THE MERGER AGREEMENT;
SPECIAL FACTORS - Interests of Certain Persons in the Merger;
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) and (e) SPECIAL FACTORS - Plans for the Company After the Merger
Item 5(c), (f) and (g) SUMMARY - Special Factors - Certain Effects of the Merger;
SPECIAL FACTORS - Interests of Certain Persons in the Merger -
Directors and Officers; SPECIAL FACTORS - Certain Effects of the
Merger
Item 6(a) - (b) SPECIAL FACTORS - Sources of Funds; Fees and Expenses; THE MERGER
AGREEMENT - Fees and Expenses
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Item in Schedule 13E-3 Caption in Proxy Statement
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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;
SPECIAL FACTORS - Purpose and Structure of the 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 - The Special Meeting - Vote Required; Revocability of
Proxies; SPECIAL FACTORS - Recommendation of the Special
Committee; Fairness of the Merger; SPECIAL FACTORS Recommendation
of the Board of Directors; THE SPECIAL MEETING Vote Required;
Revocability of Proxies
Item 7(d) 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 - Certain Effects of the
Merger; SPECIAL FACTORS - Interests of Certain Persons in the
Merger; SPECIAL FACTORS - Certain Federal Income Tax
Consequences; THE MERGER AGREEMENT
Item 8(a) - (b) SUMMARY - Special Factors - Recommendation of the Special
Committee; Fairness of the Merger; SUMMARY - Special Factors -
Recommendation of the Board of Directors; SPECIAL FACTORS -
Background of the Merger; SPECIAL FACTORS - Purpose and Structure
of Merger; SPECIAL FACTORS - Recommendation of the Special
Committee; Fairness of the Merger; SPECIAL FACTORS -
Recommendation of the Board of Directors; SPECIAL FACTORS -
Opinion of Financial Advisor to the Special Committee; SPECIAL
FACTORS - Opinion of Financial Advisor to the Special
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Item in Schedule 13E-3 Caption in Proxy Statement
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Committee - Comparative Stock Price Performance Analysis; 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; SPECIAL FACTORS - Interests of Certain Persons in the
Merger; CERTAIN TRANSACTIONS IN THE COMMON STOCK; APPENDIX B -
Fairness Opinion of The Beacon Group Capital Services, LLC
Item 8(c) SUMMARY - The Special Meeting - Vote Required; Revocability of
Proxies; SPECIAL FACTORS - Recommendation of the Special
Committee; Fairness of the Merger; SPECIAL FACTORS Recommendation
of the Board of Directors; THE SPECIAL MEETING Vote Required;
Revocability of Proxies
Item 8(d) SUMMARY - Special Factors - Recommendation of the Special
Committee; Fairness of the Merger; SUMMARY - Special Factors -
Recommendation of the Board of Directors; SUMMARY - Opinion of
Financial Advisor to the Special Committee; SPECIAL FACTORS -
Background of the Merger; SPECIAL FACTORS - Recommendation of the
Special Committee; Fairness of the Merger; SPECIAL FACTORS -
Recommendation of the Board of Directors; APPENDIX B - Fairness
Opinion of The Beacon Group Capital Services, LLC
Item 8(e) SUMMARY - Special Factors - Recommendation of the Special
Committee; Fairness of the Merger; SUMMARY - Special Factors
Recommendation of the Board of Directors; SPECIAL FACTORS
Recommendation of the Special Committee; Fairness of the Merger;
SPECIAL FACTORS - Recommendation of the Board of Directors
Item 8(f) None
Item 9(a)-(c) SUMMARY - Opinion of Financial Advisor to the Special Committee;
SPECIAL FACTORS - Background of the
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Item in Schedule 13E-3 Caption in Proxy Statement
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Merger; SPECIAL FACTORS - Recommendations of the Special Committee;
Fairness of the Merger; SPECIAL FACTORS - Recommendation of the Board
of Directors; SPECIAL FACTORS - Opinion of Financial Advisor to the
Special Committee; APPENDIX B - Fairness 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 - Sources of Funds; Fees and Expenses;
SPECIAL FACTORS - Interests of Certain Persons in the Merger; THE
SPECIAL MEETING - Record Date and Voting; THE SPECIAL MEETING -
Vote Required; Revocability of Proxies; THE SPECIAL MEETING -
Matters to be Considered at the Special Meeting; THE MERGER
AGREEMENT; CERTAIN TRANSACTIONS IN THE COMMON STOCK; APPENDIX
A--The Merger Agreement
Item 12(a) - (b) SUMMARY - Appraisal Rights; THE SPECIAL MEETING - Appraisal
Rights; THE SPECIAL MEETING - Vote Required; Revocability of
Proxies; 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 C to the Proxy Statement attached hereto as
Exhibit 17(d))
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Item in Schedule 13E-3 Caption in Proxy Statement
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Item 13(a) SUMMARY - Appraisal Rights; THE SPECIAL MEETING - Appraisal
Rights; statement of appraisal rights (incorporated by reference
to Appendix C 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) UNAUDITED PRO FORMA COMBINED AND CONSOLIDATED STATEMENTS OF
OPERATIONS
Item 15(a) - (b) SUMMARY - Special Factors -Recommendation of the Special
Committee; Fairness of the Merger; SUMMARY - Special Factors -
Recommendation of the Board of Directors; SUMMARY - Opinions of
Financial Advisor to the Special Committee; SUMMARY -
Solicitation of Proxies; SPECIAL FACTORS - Background of the
Merger; SPECIAL FACTORS - Recommendation of the Special
Committee; Fairness of the Merger; SPECIAL FACTORS -
Recommendation of the Board of Directors; SPECIAL FACTORS -
Opinions 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 executed until the closing of the transaction.
Item 17(b)(1) Opinion of The Beacon Group Capital Services, LLC, dated June 25,
1998 (incorporated by reference to Appendix B to the Proxy
Statement attached hereto as Exhibit 17(d)).
Item 17(b)(2) Report of The Beacon Group Capital Services, LLC, dated June 25,
1998.
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Item in Schedule 13E-3 Caption in Proxy Statement
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Item 17(c) Agreement and Plan of Merger, dated as of June 25, 1998, among
Trace, Merger Sub and Foamex International, as amended by
Amendment No. 1 to the Agreement and Plan of Merger, dated as of
July 6, 1998 (incorporated by reference to Appendix A to the
Proxy Statement attached hereto as Exhibit 17(d)).
Item 17(d) Preliminary copy of Letter to Stockholders, Notice of Special
Meeting of Stockholders, Amendment No. 2 to the Preliminary
Proxy Statement and form of Proxy for the Special meeting of
Stockholders of Foamex International.
Item 17(e) Statement of appraisal rights set forth in Appendix C (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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ITEM 1. Issuer and Class of Security Subject to the Transaction.
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(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.
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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
D - 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
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state securities laws or finding any violation with respect
to such laws.
ITEM 3. Past Contacts, Transactions or Negotiations.
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(a)(1) The information set forth in "CERTAIN TRANSACTIONS IN THE COMMON
STOCK" and "CERTAIN TRANSACTIONS" 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 Special
Committee; Fairness of the Merger," "SPECIAL FACTORS
Recommendation of the Board of Directors," "SPECIAL FACTORS -
Interests of Certain Persons in the Merger," "CERTAIN
TRANSACTIONS" and "THE MERGER AGREEMENT" in the Proxy Statement is
incorporated herein by reference.
ITEM 4. Terms of the Transaction.
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(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.
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(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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ITEM 6. Source and Amounts of Funds or Other
Consideration.
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(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.
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(a) The information set forth in "SUMMARY - Special Factors - Purpose
and Structure of the Merger," "SPECIAL FACTORS - Purpose and
Structure of the 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 - Purpose
and Structure of the Merger" and "SPECIAL FACTORS - Purpose and
Structure of the Merger" in the Proxy Statement is incorporated
herein by reference.
(d) The information set forth in "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 -
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.
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(a) - (b) The information set forth in "SUMMARY - Special Factors -
Recommendation of the Special Committee; Fairness of the Merger,"
"SUMMARY - Special Factors - Recommendation of the Board of
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Directors," "SPECIAL FACTORS - Background of the Merger," "SPECIAL
FACTORS - Purpose and Structure of Merger," "SPECIAL FACTORS -
Recommendation of the Special Committee; Fairness of the Merger,"
"SPECIAL FACTORS - Recommendation of the Board of Directors,"
"SPECIAL FACTORS - Opinion of Financial Advisor to the Special
Committee," "SPECIAL FACTORS - Opinion of Financial Advisor to the
Special Committee - Comparative Stock Price Performance Analysis,"
"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," "SPECIAL FACTORS - Interests of Certain
Persons in the Merger," "CERTAIN TRANSACTIONS IN THE COMMON STOCK"
and "APPENDIX B - Fairness 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 Special Committee; Fairness of the Merger,"
"SUMMARY - Special Factors - Recommendation of the Board of
Directors," "SPECIAL FACTORS - Recommendation of the Special
Committee; Fairness of the Merger," "SPECIAL FACTORS -
Recommendation of the Board of Directors" 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 Special Committee; Fairness of the Merger,"
"SUMMARY - Special Factors - Recommendation of the Board of
Directors," "SUMMARY - Special Factors - Opinion of Financial
Advisor to the Special Committee," "SPECIAL FACTORS - Background
of the Merger," "SPECIAL FACTORS - Recommendation of the Special
Committee; Fairness of the Merger," "SPECIAL FACTORS -
Recommendation of the Board of Directors" and "APPENDIX B -
Fairness 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 Special Committee;
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Fairness of the Merger," "SUMMARY - Special Factors
Recommendation of the Board of Directors," "SPECIAL FACTORS -
Recommendation of the Special Committee; Fairness of the
Merger," "SPECIAL FACTORS - Recommendation of the Board of
Directors" in the Proxy Statement is incorporated herein\
by reference.
(f) None.
ITEM 9. Reports, Opinions, Appraisals and Certain
Negotiations.
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(a) - (c) The information set forth in "SUMMARY - Special Factors - Opinion
of Financial Advisor to the Special Committee," "SPECIAL FACTORS -
Background of the Merger," "SPECIAL FACTORS - Recommendation of
the Special Committee; Fairness of the Merger," "SPECIAL FACTORS -
Recommendation of the Board of Directors," "SPECIAL FACTORS -
Opinion of Financial Advisor to the Special Committee" and
"APPENDIX B - Fairness 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.
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(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.
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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 -
Sources of Funds; Fees and Expenses," "SPECIAL FACTORS - Interests
of Certain Persons in the Merger," "THE SPECIAL MEETING - Record
Date and Voting," "THE SPECIAL MEETING - Vote Required;
Revocability of Proxies," " THE
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SPECIAL MEETING - Matters to be Considered at the Special
Meeting," "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.
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(a) - (b) The information set forth in "SUMMARY - Appraisal Rights," "THE
SPECIAL MEETING - Appraisal Rights," "SUMMARY - The Special
Meeting - Vote Required; Revocability of Proxies," "THE SPECIAL
MEETING - Vote Required; Revocability of Proxies," "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 C 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.
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(a) The information set forth in "SUMMARY - Appraisal Rights" and "THE
SPECIAL MEETING Appraisal Rights" in the Proxy Statement is
incorporated herein by reference.
(b) - (c) Not applicable.
ITEM 14. Financial Information.
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(a) The information set forth in "CERTAIN PROJECTED FINANCIAL DATA,"
"SELECTED HISTORICAL FINANCIAL DATA" and "UNAUDITED PRO FORMA
COMBINED AND CONSOLIDATED STATEMENTS OF OPERATIONS" in the Proxy
Statement is incorporated herein by reference, as is the
information in the Company's Annual Report on Form 10-K for the
year ended December 28, 1997 (as amended) and its quarterly report
on Form 10-Q for the quarterly period ended March 29, 1998 (as
amended).
(b) Not applicable.
ITEM 15. Persons and Assets Employed, Retained or Utilized.
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(a) - (b) The information set forth in "SUMMARY - Special Factors -
Recommendation of the Special Committee; Fairness of the Merger,"
"SUMMARY - Special
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Factors - Recommendation of the Board of Directors; "SUMMARY -
Opinion of Financial Advisor to the Special Committee," "SUMMARY -
Solicitation of Proxies," "SPECIAL FACTORS - Background of the
Merger," "SPECIAL FACTORS - Recommendation of the Special
Committee; Fairness of the Merger," "SPECIAL FACTORS -
Recommendation of the Board of Directors," "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.
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The information set forth in the Proxy Statement is incorporated
herein by reference.
ITEM 17. Material to be Filed as Exhibits.
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(a) To be filed by amendment.
(b)(1) Opinion of The Beacon Group Capital Services, LLC, dated June 25,
1998 (incorporated by reference to Appendix B to the Proxy
Statement attached hereto as Exhibit 17(d)).
(b)(2) Report of The Beacon Group Capital Services, LLC, dated June 25,
1998.
- --------------------------------------------------------------------------------
(c) Agreement and Plan of Merger, dated as of June 25, 1998, among
Trace, Merger Sub and Foamex International, as amended by
Amendment No. 1 to the Agreement and Plan of Merger, dated as of
July 6, 1998 (incorporated by reference to Appendix A to the Proxy
Statement attached hereto as Exhibit 17(d)).
(d) Amended preliminary copy of Letter to Stockholders, Notice of
Special Meeting of Stockholders and form of proxy, and Amendment
No. 2 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 C to the
Proxy Statement attached hereto as Exhibit 17 (d)).
(f) Not Applicable.
</TABLE>
-16-
<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: September 15, 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
-17-
<PAGE>
Exhibit Index
<TABLE>
<S> <C>
17(a) To be filed by amendment.
17(b)(1) Opinion of The Beacon Group Capital Services, LLC,
dated June 25, 1998 (incorporated by reference to
Appendix B to the Proxy Statement attached hereto as
Exhibit 17(d)).
17(b)(2) Report of The Beacon Group Capital Services, LLC,
dated June 25, 1998.
- --------------------------------------------------------------------------------
17(c) Agreement and Plan of Merger, dated as of June 25,
1998, among Trace, Merger Sub and Foamex
International, as amended by Amendment No. 1 to the
Agreement and Plan of Merger, dated as of July 6,
1998 (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. 2 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 C to the Proxy Statement
attached hereto as Exhibit 17(d)).
</TABLE>
-18-
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: June 25, 1998
Revised Offer Price Per Share: $18.75 in cash
Premium (Discount) to:
Closing Price on June 24, 1998 ($16.19) 15.8%
Closing Price on Last Business Day Before Initial Ofter (3/13/98-$13.88) 35.1%
30-Day Average Closing Price through March 13, 1998 ($13.60) 37.9%
52-Week Closing High (4/13/98-$17.94) 4.5%
All-Time High (2/3/97-$21.00) (10.7%)
% of Shares and Share Equivalents of Suds currently Owned by Trace: 41%(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) $497.9
Consideration Payable To Shareholders Other Than Trace:(c) $282.7
Enterpnse Value (Total Equity Value Plus Net Debt Assumed):(d) $1,267.9
Surviving Entity: Suds
Necessary Approvals: Board of Directors and Stockholders of Suds
(including Trace Shares)
</TABLE>
Notes:
(a) Based on total shares outstanding, warrants and options of 28.3 million
(b) Based on 26.5 million shares and share equivalents (as of 12/31/97)
calculated using the Treasury Method (1.4 million options with an average
exercise price of $7.08, 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 12/31/97)
(c) Includes cost to purchase shares not owned by Trace as well as to redeem
all outstanding warrants and stock options
(d) Based on March 31, 1998 net debt (total debt less cash and promissory
demand notes due from Trace) of $770.1 million
- --------------------------------------------------------------------------------
June 25, 1998 1 The Beacon Group Capital Services, LLC
<PAGE>
PROJECT SUDS Confidential
- --------------------------------------------------------------------------------
Beacon Has Conducted Due Diligence On Suds And The 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
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 integration plans and
specific cost savings and reduction initiatives
o Discussion of 1998 budget and forecast, as well as the five-year
forecast for the Company
o Review of historical restructuring initiatives and one-time charges
|_| A review of:
o The June 25, 1998 draft of the 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
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
- --------------------------------------------------------------------------------
June 25, 1998 2 The Beacon Group Capital Services, LLC
<PAGE>
PROJECT SUDS Confidential
- --------------------------------------------------------------------------------
Beacon Has Conducted Due Diligence On Suds And The Trace Offer,
Which Included (Continued):
|_| Tour of Company plants in
o Tupelo, Mississippi
o Santa Theresa, New Mexico
o Fairless Hills, Pennsylvania
o Eddystone, Pennsylvania
|_| Several meetings with Trace and Trace's legal and financial advisors and
financing sources
o Discussion of Trace's motivation for making the offer
o Review of Trace's historical affiliation with the Company
o Review of inter-company transactions and arrangements
o Review of financial forecasts for Suds prepared by Trace and provided
to Trace's financing sources
o Examination of transaction structure and financing
- --------------------------------------------------------------------------------
June 25, 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 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 projected synergies
o Forecast net cost savings synergies of approximately $26 million and
$40 million in 1998 and 1999, respectively
|_| Management financial forecasts for the years 1998-2002 ("Suds Management
Forecast" - see page 10)
o Projected EBITDA of $180 million to $190 million in 1998 growing to
$226 million in 2002 compared to cumulative pro forma 1997 EBITDA
(excluding non-recurring charges) of $127 million for Suds and Crain
combined
|_| 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 26.5 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
- --------------------------------------------------------------------------------
June 25, 1998 4 The Beacon Group Capital Services, LLC
<PAGE>
PROJECT SUDS Confidential
- --------------------------------------------------------------------------------
The Trace Offer Has Been Made In The Midst Of A Major Repositioning Of Suds
|_| The offer comes 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
- --------------------------------------------------------------------------------
June 25, 1998 5 The Beacon Group Capital Services, LLC
<PAGE>
PROJECT SUDS Confidential
- --------------------------------------------------------------------------------
The Trace 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:
(Millions of Pounds)
<TABLE>
<CAPTION>
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 $350 million in 1999. Annual sales growth between 1999 and 2002
forecast at 7%
|_| Potential international expansion in Mexico
o Sales growth in Mexico between 1997 and 1999 is forecast to more than
double to approximately $80 million and the business is expected to
achieve attractive levels of profitability
- --------------------------------------------------------------------------------
June 25, 1998 6 The Beacon Group Capital Services, LLC
<PAGE>
PROJECT SUDS Confidential
- --------------------------------------------------------------------------------
This Repositioning, Suds' High Leverage, And Equity Analysts' View Of Suds'
Near-Term Financial Prospects Provide The Framework For Valuing Suds
|_| The major repositioning of the Company is forecast by Suds Management to
lead to significantly higher levels of profitability and cash flow
generation in 1998 and beyond relative to latest twelve month results
through March 31, 1998
|_| High leverage (i.e., net debt is currently approximately 66% of Suds'
aggregate value) and the existence of a tax NOL carryforward make Aggregate
Value to EBITDA and EBIT multiples especially important valuation
parameters for Suds. These parameters, along with earnings per share-based
valuation parameters, were considered by Beacon in its valuation of Suds
|_| It is unclear whether investors appreciate the potential significance and
financial implications of the Crain transaction; current analyst consensus
1998 EPS estimates for Suds are in the range of $1.44 (current I/B/E/S -
one analyst estimate) to $1.60 (current Nelson - one analyst estimate) per
share versus $1.67(a) (at an EBITDA level of $180 million) to $1.90 per
share(a) (at an EBITDA level of $190 million) projected by Suds Management.
Current analyst consensus 1999 EPS estimates for Suds are $1.70 (current
I/B/E/S and Nelson - one analyst for each) per share versus $2.17 per
share(b) projected by Suds Management
Notes:
(a) Fully diluted EPS. Excludes non-recurring GFI transaction expenses of $.04
per share. (Corresponding basic EPS forecast before GFI transaction expenses
is $1.77 and $2.01, respectively, at EBITDA levels of $180 million to $190
million)
(b) Fully diluted EPS
- --------------------------------------------------------------------------------
June 25, 1998 7 The Beacon Group Capital Services, LLC
<PAGE>
PROJECT SUDS Confidential
- --------------------------------------------------------------------------------
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
million in 1998, and projects these synergies will increase to approximately
$40 million in 1999. The Company may face execution risk in realizing these
synergies
|_| The markets served by Suds are highly cyclical and the Company's business
would be adversely impacted in an economic downturn. Suds Management does
not account for any potential economic downturn over the five-year forecast
period through 2002. A mitigating factor in a downturn is the fact that a
high percentage of cost of goods sold are represented by raw material costs
|_| Suds operates in highly competitive market segments, all of which are served
by numerous foam suppliers. This dynamic 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. A price increase has recently been
announced by chemical producers effective July 1, 1998
- --------------------------------------------------------------------------------
June 25, 1998 8 The Beacon Group Capital Services, LLC
<PAGE>
PROJECT SUDS Confidential
- --------------------------------------------------------------------------------
Other Considerations With Respect To Valuation (Continued)
|_| 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
|_| The general risk profile of Suds is exacerbated as it moves through its
current inflection point by the fact that the Company's current senior
management team is unproven as Suds has implemented numerous recent senior
management changes (e.g., new Chairman/CEO, Chief Operating Officer and
Chief Financial Officer appointed within the past year)
|_| The Company has reportedly been unsuccessful in prior efforts undertaken in
recent years to sell itself. In addition, although we have not solicited
third parties, no party has approached Beacon or the Special Committee since
Trace made its initial offer on March 16, 1998 to express interest in
pursuing an acquisition of the Company
|_| Trace, the holder of 46% of Suds' outstanding common stock, has expressed an
unwillingness to sell its equity ownership interest in Suds
- --------------------------------------------------------------------------------
June 25, 1998 9 The Beacon Group Capital Services, LLC
<PAGE>
PROJECT SUDS Confidential
- --------------------------------------------------------------------------------
Historical And Forecast Financial Results
($ in millions, except per share amounts)
<TABLE>
<CAPTION>
Suds(a)
Fiscal Years Ended December 31,
------------------------------------------------------------ 1997
1993 1994 1995 1996 1997 Pro Forma(c)
------ ------ ------ ------ ------ -----------
<S> <C> <C> <C> <C> <C> <C>
Net Sales $695.8 $833.7 $862.8 $926.4 $931.1 $1,221.1
% Growth 38.7% 19.8% 3.5% 7.4% 0.5% 31.8%
EBITDA $76.4 $102.3 $54.1 $117.3 $102.6 $126.8
% Margin 11.0% 12.3% 6.3% 12.7% 11.0% 10.4%
% Growth 32.7% 33.8% (47.1%) 116.6% (12.5%) --
EBIT $45.8 $80.2 $30.8 $94.9 $80.6 $91.3
% Margin 6.6% 9.6% 3.6% 10.2% 8.7% 7.5%
% 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
% Growth NM NM NM NM (34.5%) --
<CAPTION>
Suds Management Forecast(d)
Fiscal Years Ending December 31,
--------------------------------------------------------------
1998 1999 2000 2001 2002
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Sales $1,353.1 $1,487.6 $1.553.4 $1,622.9 $1,694.3
% Growth 10.8% 9.0% 4.2% 4.5% 4.4%
EBITDA $190.1(c) $201.4 $209.9 $217.8 $226.0
% Margin 14.0% 13.5% 13.5% 13.4% 13.3%
% Growth 49.9% 5.9% 4.2% 3.8% 3.8%
EBIT $155.3 $165.8 $173.5 $180.5 $187.8
% Margin 11.5% 11.1% 11.2% 11.1% 11.1%
% Growth 70.1% 6.8% 4.6% 4.0% 4.0%
Earnings Per Share $1.90(f) $2.17 $2.41 $2.67 $2.94
% Growth 159.7% 14.7% 11.1% 10.6% 10.0%
</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) which Suds Management considers non-recurring
(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) Suds Management five-year forecast for 1998 through 2002 provided to Beacon
on May 15, 1998. Forecast EPS are fully diluted based on a $18.75 share
price. Basic EPS would be approximately $0.10 to $0.15 higher in each year
($2.01 and $2.31 in 1998 and 1999, respectively)
(e) Suds Chairman, CEO and President Andrea Farace indicated to Beacon in a
conversation on June 21st that he is "comfortable" with a 1998 EBITDA range
of $180 to $190 million, with his best estimate for full year being in the
low-$180 million range
(f) Excludes GFI transaction costs of $0.04 per share
- --------------------------------------------------------------------------------
June 25, 1998 10 The Beacon Group Capital Services, LLC
<PAGE>
PROJECT SUDS Confidential
- --------------------------------------------------------------------------------
Review Of Suds Actual Versus Budgeted Historical Financial Performance
<TABLE>
<CAPTION>
Fiscal Year 1995 Variance: Fiscal Year 1996 Variance:
-------------------- Budget to --------------------- Budget to
Budget Actual Actual Budget Actual Actual
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net Sales $947.0 $862.8 (9.8%) $914.0 $926.4 1.3%
% Growth -- 3.5% (3.5%) 7.4%
Gross Profit $153.8 $100.7 (52.7%) $155.3 $153.3 (1.3%)
% Margin 16.2% 11.7% 17.0% 16.5%
EBITDA $113.2 $54.1 (109.1%) $118.2 $117.3 (0.8%)
% Margin 12.0% 6.3% 12.9% 12.7%
% Growth -- (47.1%) 0.9% 116.6%
EBIT $91.0 $30.8 (195.1%) $95.6 $94.9 (0.7%)
% Margin 9.6% 3.6% 10.5% 10.2%
% Growth -- (61.5%) 1.2% 207.8%
Fiscal Year 1997 Variance: First Quarter 1998 Variance:
-------------------- Budget to --------------------- Budget to
Budget Actual Actual Budget Actual Actual
------ ------ ------ ------ ------ ------
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net Sales $1,005.3 $931.1 (8.0%) $307.7 $313.8 1.9%
% Growth 10.0% 0.5% (69.4%) (66.3%)
Gross Profit $183.2 $102.6 (78.6%) $52.4 $51.2 (2.4%)
% Margin 18.2% 11.0% 17.0% 16.3%
EBITDA $141.8 $102.6 (38.2%) $36.5 $37.4 2.4%
% Margin 14.1% 11.0% 11.9% 11.9%
% Growth 1.0% (12.5%) 0.2% (63.6%)
EBIT $118.2 $80.6 (46.7%) $28.4 $28.8 1.4%
% Margin 11.8% 8.7% 9.2% 9.2%
% Growth 1.3% (15.1%) 0.2% (64.3%)
</TABLE>
Note:
Source: Suds Management. Excludes non-recurring charges
- --------------------------------------------------------------------------------
June 25, 1998 11 The Beacon Group Capital Services, LLC
<PAGE>
PROJECT SUDS Confidential
- --------------------------------------------------------------------------------
Trace Has Prepared And Provided Its Financing Sources A Ten-Year Financial
Forecast For Suds Which Is More Optimistic Than That Prepared By Suds
Management(a)
($ in millions)
<TABLE>
<CAPTION>
Forecast Fiscal Years Ending December 31,
---------------------------------------------------------------------------------------------------------------
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $1,349.4 $1,526.5 $1,607.8 $1,681.2 $1,731.2 $1,780.7 $1,831.7 $1,884.2 $1,938.3 $1,994.1
% Growth 10.5% 13.1% 5.3% 4.6% 3.0% 2.9% 2.9% 2.9% 2.9% 2.9%
Gross Profit $297.1 $313.2 $332.4 $348.6 $359.9 $371.3 $383.0 $395.1 $407.5 $420.4
% Margin 22.0% 20.5% 20.7% 20.7% 20.8% 20.9% 20.9% 21.0% 21.0% 21.1%
EBITDA(b) $202.3 $213.8 $229.4 $241.0 $249.1 $257.2 $265.6 $274.3 $283.3 $292.6
% Margin 15.0% 14.0% 14.3% 14.3% 14.4% 14.4% 14.5% 14.6% 14.6% 14.7%
% Growth 42.1% 5.7% 7.3% 5.1% 3.4% 3.3% 3.3% 3.3% 3.3% 3.3%
EBIT(b) $159.5 $170.4 $184.4 $195.8 $202.1 $208.7 $215.7 $231.1 $239.2 $247.3
% Margin 11.8% 11.2% 11.5% 11.6% 11.7% 11.7% 11.8% 12.3% 12.3% 12.4%
% Growth 49.2% 6.8% 8.2% 6.2% 3.2% 3.3% 3.4% 7.1% 3.5% 3.4%
</TABLE>
Notes:
(a) "Trace Ten-Year Forecast" provided to Beacon by Trace. The Trace Ten-Year
Forecast was provided to Trace's financing sources and formed the basis for
such sources providing Commitment and "Highly Confident" letters to Trace
concerning financing for the Transaction
(b) Assumes annual management fee of $3 million. In post-transaction model,
Trace has assumed an annual management fee of $10 million
- --------------------------------------------------------------------------------
June 25, 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
- --------------------------------------------------------------------------------
June 25, 1998 13 The Beacon Group Capital Services, LLC
<PAGE>
PROJECT SUDS Confidential
- --------------------------------------------------------------------------------
Beacon Applied The Valuation Parameters From Its Analyses To Suds Management
Forecast And Trailing Pro Forma Financial Data
|_| Suds Management Forecast 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
the Five-Year Forecast (blue bars in graph on following page)
|_| Latest Twelve Months ("LTM") Pro Forma Results through March 31, 1998 of
EBITDA, EBIT and Net Income, including results of Crain and excluding
discontinued operations (red bars in graph on following page)
- --------------------------------------------------------------------------------
June 25, 1998 14 The Beacon Group Capital Services, LLC
<PAGE>
PROJECT SUDS Confidential
- --------------------------------------------------------------------------------
TAPE ON LAST PAGE!!!
================================================================================
Comparable Transactions Multiples Applied To
================================================================================
LTM Pro Forma and 1998F EBITDA
- --------------------------------------------------------------------------------
Automotive:(a) 7.5x 7.9x
Home:(b) 7.0 7.4
- --------------------------------------------------------------------------------
LTM Pro Forma and 1998F EBIT
- --------------------------------------------------------------------------------
Automotive:(a) 11.0x 11.5x
Home:(b) 8.7 10.0
- --------------------------------------------------------------------------------
================================================================================
Future Equity Value Methodology
================================================================================
- --------------------------------------------------------------------------------
================================================================================
Discounted Cash Flow
================================================================================
- --------------------------------------------------------------------------------
================================================================================
Leveraged Buyout Analysis(d)
================================================================================
- --------------------------------------------------------------------------------
Notes:
(a) See pages 32 and 33 for analyses of automotive interior component companies
and transactions
(b) See pages 29 and 30 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 42
(d) LBO from the perspective of a third-party investor
(e) Suds Management forecasts for 1998 are based on an EBITDA range of $180 to
$190 million, an EBIT range of $145 to $155 million and a Net Income range
of $44 to $50 million
- --------------------------------------------------------------------------------
June 25, 1998 15 The Beacon Group Capital Services, LLC
<PAGE>
PROJECT SUDS Confidential
- --------------------------------------------------------------------------------
Analysis At Various Prices For Suds
($ in millions, except per share amounts)
<TABLE>
<CAPTION>
Day Prior to Current Initial Revised
Announcement Price Trace Trace
3/13/98 6/24/98 Offer Price Offer Price
===================================================================================
<S> <C> <C> <C> <C> <C>
Share Price: $13.88 $16.19 $17.00 $18.75
===================================================================================
Equity Value:(a) 360.0 425.4 448.4 497.9
Aggregate Value:(b) 1,130.1 1,195.5 1,218.5 1,267.9
Financial Results:
Aggregate Value As a Multiple of:
Sales -------------------------------------------------------------
LTM Pro Forma $1,238.8 0.9x 1.0x 1.0x 1.0x
Suds 1998F 1,353.1 0.8 0.9 0.9 0.9
EBITDA(c)
LTM Pro Forma $127.3 8.9x 9.4x 9.6x 10.0x
Suds 1998F 180.0 6.3 6.6 6.8 7.0
Suds 1998F 190.1 5.9 6.3 6.4 6.7
EBIT(c)
LTM Pro Forma $ 91.8 12.3x 13.0x 13.3x 13.8x
Suds 1998F 145.2 7.8 8.2 8.4 8.7
Suds 1998F 155.3 7.3 7.7 7.8 8.2
Net Book Capital(d)
Pro Forma 1997 $660.1 1.7x 1.8x 1.8x 1.9x
Equity Value As a Multiple of:
Net Income(e) ------------------------------------------------------------
Suds 1998F $44.2 8.1x 9.6x 10.1x 11.3x
Suds 1998F 50.3 7.2 8.5 8.9 9.9
Suds 1999F 57.7 6.2 7.4 7.8 8.6
</TABLE>
See notes on following page
- --------------------------------------------------------------------------------
June 25, 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, 1.4 million net options with an average
exercise price of $7.08, 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 12/31/97 and calculated using the treasury
method
(b) Total Equity Value plus Net Debt of $770.1 as of 3/31/98
(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 ($113.4) million and total net debt of $770.1
million as of March 31, 1998
(e) Calculated by deducting Suds Management Forecast 1998 and 1999 net
interest expense and tax affecting at a rate of 40%
- --------------------------------------------------------------------------------
June 25, 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
- --------------------------------------------------------------------------------
June 25, 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 $214 million. Expands
scale in two largest foam market segments, general cushioning
(e.g., bedding and furniture) and carpet cushioning
1998 Completes a series of transactions designed to simplify the
Company's structure and to provide future operational
flexibility. Results in the elimination of Trace's 1% general
partnership interest in Suds L.P.
- --------------------------------------------------------------------------------
June 25, 1998 19 The Beacon Group Capital Services, LLC
<PAGE>
PROJECT SUDS Confidential
- --------------------------------------------------------------------------------
... Which Culminated In Early-1998 With A Reorganization Aimed At Focusing On
Four Principal Business Units With Two Strategic Orientations
($ in millions)
<TABLE>
<CAPTION>
% of Representative
Strategic Orientation & 1998F Total Major
Business Unit Sales(a) Sales Business Depreciation Customers
- ----------------------- -------- ----- --------------------- ---------------------
<S> <C> <C> <C> <C>
Price Realization & Cost Management
- -----------------------------------
Foam Products $642.0 47% Manufactures and sells flexible Sealy, Simmons, Serta
polyurethane foam and polyester fiber to and Spring Air
bedding, furniture, packaging and other Company
cushioned products manufacturers. These
foams are used by the bedding furniture
industry in quilts, toppers, cores and
border rolls for mattresses
Carpet Cushion $320.6 24% One of the largest manufacturers and Sears, Shaw Industries
distributors of prime and bonded foam, and Home Depot
sponge rubber and felt carpet cushion in
North America
====================================================================================================================================
Growth & Product Development
- ----------------------------
Automotive Foams $258.3 19% Supplier of roll foam and Lear, JCI/Prince,
foam/fabric laminates for the Magna and Chrysler
North American operations of
automotive manufacturers
Technical Foams $89.1 7% Manufactures reticulated foams Rogers Foam Corp.,
and other custom foams. Advanced Materials,
Reticulated foams are used in Inc. and Reilly Foam
applications which include Corp.
filtration, reservoiring,
sound absorption and sound
transmission
</TABLE>
Note:
(a) Suds Management sales forecast for 1998. Does not include $74 million of
sales from Suds Mexico, which is primarily concentrated in the automotive
market, and $31 million of Eliminations/Contingency
- --------------------------------------------------------------------------------
June 25, 1998 20 The Beacon Group Capital Services, LLC
<PAGE>
PROJECT SUDS Confidential
- --------------------------------------------------------------------------------
Overview Of Selected Polyurethane Foam Suppliers
($ 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) $1,221(a) 1997 PU foams for furniture, bedding, carpet 67
underlay, automotive, technical and packaging
Carpenter Co. 700-800 1996 Polyurethane foam 6
Woodbridge Holdings Inc. 700 1997 PU foams for automotive (primarily molded) NA
Leggett & Platt Inc.(b) 180 1996 Flexible PU foams for carpet underlay 11
Future Foam, Inc. 100 1996 PU foams for furniture, bed, packaging, 16
carpet padding NA
Vitafoam Inc. 40 1994 PU foams for furniture & bedding, auto
William T. Burnett & Co. 32 1994 Plastics foam products - technical NA
General Foam Division, PMC Inc. 125 1997 Plastics foam products NA
Hickory Springs Manufacturing Co. 23 1994 PU foams for furniture, bedding, packaging, 30
carpet underlay
Burkart Foam Inc. 30 1997 Foam cushion & padding NA
Nu-Foam Products Inc. 13 1996 Foam rubber NA
</TABLE>
Notes:
NA = Not Available
Source: J.P. Morgan estimates, Company data and industry sources
(a) Combined pro forma sales for Suds and Crain
(b) Publicly-held companies
(c) All sales for private companies assumed to be foam. There are many small
producers of foam not reflected on table above
- --------------------------------------------------------------------------------
June 25, 1998 21 The Beacon Group Capital Services, LLC
<PAGE>
PROJECT SUDS Confidential
- --------------------------------------------------------------------------------
Historical And Projected Suds Management Forecasts For 1998 And 1999
($ in millions, except per share amounts)
<TABLE>
<CAPTION>
Suds as Reported(a)
----------------------------------------------------------
Fiscal Years Ended December 31,
----------------------------------------------------------
1993 1994 1995 1996 1997(b)
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Sales $695.8 $833.7 $862.8 $926.4 $931.1
% Growth 38.7% 19.8% 3.5% 74% 0.5%
Gross Profit $96.0 $142.4 $100.7 $153.3 $102.6
% Margin 13.8% 17.1% 11.7% 16.5% 11.0%
EBITDA $76.4 $102.3 $54.1 $117.3 $102.6
% Margin 11.0% 12.3% 6.3% 12.7% 11.0%
EBIT $45.8 $80.2 $30.8 $94.9 $80.6
% Margin 6.6% 9.6% 3.6% 10.2% 8.7%
Earnings Per Share ($0.17) $0.83 ($1.00) $1.12 $0.73
Return on Invested Capital 12.4% 16.0% 7.8% 15.7% 17.7%
Depreciation & Amortization $30.6 $22.1 $23.3 $22.4 $22.0
Capital Expenditures 20.9 21.2 22.3 23.3 33.5
Net Debt 263.5 385.3 523.1 467.2 728.9
<CAPTION>
1998 1998 1999
Crain 1997 Suds Suds Suds
1997A(a) Pro Forma(c) Budget(d) Forecast(e) Forecast(c)
-------- ------------ --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net Sales $319.0 $1,221.1 $1,299.5 $1,353.1 $1,487.6
% Growth -- 31.8% 6.4% 10.8% 9.0%
Gross Profit $69.5 NA $232.8 $239.3 $253.5
% Margin 21.8% -- 17.9% 17.7% 17.0%
EBITDA $28.5 $126.8 $178.8 $190.1 $201.4
% Margin 8.9% 10.4% 13.8% 14.0% 13.5%
EBIT $14.7 $91.3 $144.6 $155.3 $165.8
% Margin 4.6% 8.9% 11.1% 11.5% 11.1%
Earnings Per Share NA NA $1.83 $1.90 $2.17
Return on Invested Capital 9.5% NA NA 22.9% 29.4%
Depreciation & Amortization $13.8 $35.5 $34.3 $34.8 $35.6
Capital Expenditures 5.2 38.7 38.1 36.0 39.6
Net Debt 121.8 728.9 644.8 734.7 690.5
</TABLE>
Notes:
(a) All figures exclude one-time charges and credits as identified in Suds'
audited financial statements. Historical EPS figures are fully-diluted EPS
(b) Excludes "special charges" of $4.4 million ($4.0 million in COGS and $0.4
million in SG&A) which Suds management considers non-recurring
(c) Pro forma to reflect full year of Suds, Crain and Simco (a small company
acquired by Crain in 1997) and excludes Dalton (sold by Suds in October
1997)
(d) Budget includes results of Crain and forecast synergies
(e) Suds Management detailed financial forecast for 1998 and 1999 provided to
Beacon on May 15, 1998. Forecast EPS is fully diluted and for 1998 excludes
GFI transaction costs of $0.04 per share
- --------------------------------------------------------------------------------
June 25, 1998 22 The Beacon Group Capital Services, LLC
<PAGE>
PROJECT SUDS Confidential
- --------------------------------------------------------------------------------
Suds Management Five-Year Financial Forecasts(a)
($ in millions, except per share amounts)
<TABLE>
<CAPTION>
Forecast Fiscal Years Ending December 31,
1997 ------------------------------------------------------------------
Pro Forma(b) 1998 1999 2000 2001 2002
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Sales $1,221.1 $1,353.1 $1,487.6 $1,553.4 $1,622.9 $1,694.3
% Growth 10.8% 9.9% 4.4% 4.5% 4.4%
Gross Profit $202.0 $239.3 $253.5 $265.5 $277.1 $289.2
% Margin 16.5% 17.7% 17.0% 17.1% 17.1% 171%
EBITDA $126.8 $190.1 $201.4 $209.9 $217.8 $226.0
% Margin 10.4% 14.0% 13.5% 13.5% 13.4% 13.3%
% Growth 49.9% 5.9% 4.2% 3.8% 3.8%
EBIT $91.3 $155.3 $165.8 $173.5 $180.5 $187.8
% Margin 7.5% 11.5% 11.1% 11.2% 11.1% 11.1%
Net Income NA $50.3 $57.7 $64.1 $70.9 $78.0
% Margin 3.7% 3.9% 4.1% 4.4% 4.6%
Fully-Diluted Earnings Per Share(e) NA $1.90(c) $2.17 $2.41 $2.67 $2.94
% Growth 72.7% 12.8% 10.0% 10.6% 10.0%
Depreciation & Amortization $35.5 $34.8 $35.6 $36.4 $37.3 $38.2
Capital Expenditures 38.7 36.0 39.6 41.3 43.2 45.1
Net Debt(d) 728.9 734.7 690.5 641.1 586.5 525.1
</TABLE>
Notes:
(a) "Suds Five-Year Forecast" provided by Suds Management to Beacon on May 15,
1998
(b) Pro forma to reflect full year of Suds, Crain and Simco (a small company
acquired by Crain in 1997) and excludes Dalton (sold by Suds in October
1997)
(c) Excludes GFI transaction expense of $0.04 per share
(d) Net debt is total debt less cash and demand promissory notes due from Trace
(assumed to be $9.8 million for each year)
(e) Fully-diluted shares calculated based on a $18.75 share price
- --------------------------------------------------------------------------------
June 25, 1998 23 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 - June 24, 1998
GRAPH: PAGE 24
COMPANY TICKER: FMXI
CURRENCY: LOCAL
from December 7, 1993 - June 24, 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
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3/27/95 35.20 8.06
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3/29/95 16.90 8.00
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3/31/95 88.10 8.00
4/3/95 68.00 8.00
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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
5/5/95 57.40 8.13
5/8/95 42.30 7.88
5/9/95 67.80 8.00
5/10/95 83.60 7.88
5/11/95 303.40 8.00
5/12/95 32.30 7.75
5/15/95 64.90 7.63
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5/26/95 27.60 7.63
5/30/95 19.40 7.75
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6/1/95 39.20 7.25
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7/7/95 235.10 7.75
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7/11/95 328.00 8.06
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7/13/95 323.70 8.50
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8/1/95 82.90 8.88
8/2/95 40.90 8.75
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8/4/95 124.40 8.50
8/7/95 118.50 8.50
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10/3/95 213.30 10.25
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10/6/95 61.00 10.00
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10/10/95 114.30 9.25
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10/12/95 269.50 10.00
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10/17/95 131.10 8.63
10/18/95 194.50 8.50
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10/20/95 169.50 8.25
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11/7/95 458.60 7.38
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11/13/95 51.00 7.00
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12/1/95 61.20 7.13
12/4/95 75.10 7.19
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12/8/95 35.80 6.63
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12/14/95 33.30 7.25
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12/20/95 69.70 7.13
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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
1/18/96 155.90 7.50
1/19/96 70.00 7.38
1/22/96 24.00 7.50
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1/24/96 51.70 7.38
1/25/96 70.10 7.19
1/26/96 23.40 7.13
1/29/96 16.10 6.88
1/30/96 80.60 6.75
1/31/96 118.70 6.63
2/1/96 29.70 6.63
2/2/96 72.30 7.00
2/5/96 138.00 6.94
2/6/96 6.60 7.00
2/7/96 28.00 6.88
2/8/96 51.10 6.63
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2/12/96 33.20 6.88
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2/14/96 11.90 7.00
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2/21/96 81.10 7.50
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2/26/96 46.10 8.00
2/27/96 56.30 8.25
2/28/96 95.70 8.38
2/29/96 203.30 8.19
3/1/96 74.70 8.13
3/4/96 94.30 8.13
3/5/96 140.00 8.13
3/6/96 112.70 8.00
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3/8/96 264.50 7.94
3/11/96 47.10 7.94
3/12/96 70.80 8.00
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3/15/96 184.40 8.25
3/18/96 356.30 8.63
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3/20/96 110.60 9.00
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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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4/8/96 179.80 9.50
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4/11/96 154.40 9.25
4/12/96 451.60 9.88
4/15/96 212.40 10.25
4/16/96 231.50 10.25
4/17/96 252.10 10.63
4/18/96 141.70 10.75
4/19/96 249.00 11.00
4/22/96 145.90 10.75
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4/24/96 193.70 11.25
4/25/96 430.50 10.75
4/26/96 1223.60 12.25
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4/30/96 726.40 12.38
5/1/96 124.70 11.88
5/2/96 591.90 11.75
5/3/96 95.50 11.75
5/6/96 249.40 11.75
5/7/96 113.40 11.88
5/8/96 292.30 11.75
5/9/96 81.40 11.75
5/10/96 163.40 11.75
5/13/96 185.80 11.88
5/14/96 66.70 12.00
5/15/96 44.70 11.75
5/16/96 336.90 12.13
5/17/96 132.70 12.13
5/20/96 153.80 12.25
5/21/96 211.60 12.50
5/22/96 60.20 12.50
5/23/96 63.80 11.88
5/24/96 98.60 11.88
5/28/96 290.30 11.88
5/29/96 454.30 12.25
5/30/96 157.20 12.25
5/31/96 288.00 12.25
6/3/96 195.20 12.13
6/4/96 251.10 11.88
6/5/96 65.40 11.88
6/6/96 116.90 11.50
6/7/96 81.50 11.50
6/10/96 114.80 10.88
6/11/96 71.80 11.00
6/12/96 417.60 11.88
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
6/26/96 311.70 12.25
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
7/8/96 119.10 11.63
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
7/15/96 158.50 12.25
7/16/96 94.20 12.13
7/17/96 448.80 11.88
7/18/96 692.70 12.13
7/19/96 18.00 11.88
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
7/29/96 198.50 12.00
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
8/7/96 372.40 14.13
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
8/15/96 178.30 15.38
8/16/96 130.60 15.75
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8/20/96 73.80 15.38
8/21/96 49.90 15.19
8/22/96 91.30 15.63
8/23/96 86.70 15.38
8/26/96 152.40 15.00
8/27/96 344.30 16.00
8/28/96 664.50 16.38
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
9/20/96 132.50 16.75
9/23/96 45.30 15.75
9/24/96 165.40 15.50
9/25/96 25.70 15.38
9/26/96 117.50 15.00
9/27/96 46.00 15.13
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
10/14/96 37.80 16.88
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
10/22/96 67.60 16.50
10/23/96 179.20 15.63
10/24/96 103.80 15.25
10/25/96 52.70 15.25
10/28/96 52.20 15.38
10/29/96 113.40 16.63
10/30/96 43.30 16.25
10/31/96 270.00 15.63
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
11/7/96 210.40 15.13
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
11/14/96 87.80 14.13
11/15/96 60.80 14.50
11/18/96 32.40 14.38
11/19/96 73.30 15.25
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
11/26/96 57.30 15.88
11/27/96 129.40 16.63
11/29/96 111.40 16.63
12/2/96 31.20 16.38
12/3/96 148.60 14.38
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
12/30/96 36.60 16.00
12/31/96 42.00 16.50
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
4/15/97 128.10 12.44
4/16/97 79.40 13.13
4/17/97 23.00 13.63
4/18/97 12.20 13.63
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
6/16/97 21.00 13.88
6/17/97 41.30 13.75
6/18/97 42.80 13.88
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
6/26/97 122.90 13.13
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
7/28/97 49.70 12.25
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
8/22/97 79.70 10.00
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
- --------------------------------------------------------------------------------
June 25, 1998 24 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 - June 24, 1998
CURRENCY: LOCAL
from December 7, 1993 - June 24, 1998
Date S&P FMXI Auto Home
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
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.
- --------------------------------------------------------------------------------
June 25, 1998 25 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 II 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
- --------------------------------------------------------------------------------
June 25, 1998 26 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 30 and 33 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
- --------------------------------------------------------------------------------
June 25, 1998 27 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 1998 and
2002 and ii) a terminal value which is estimated as a multiple of year 2002
EBITDA. Beacon used 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
6.5x 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 6.5x to 7.5x
- --------------------------------------------------------------------------------
June 25, 1998 28 The Beacon Group Capital Services, LLC
<PAGE>
PROJECT SUDS Confidential
- --------------------------------------------------------------------------------
Comparable Companies Analysis - Home Furnishings 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 6/24/98 Value Value(a) LTM 1998E(b) 1999E(b) Value
- ------------------------------- ------- ------- ------ -------- ----- -------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Armstrong World Industries Inc. 3/31/98 $75.38 $3,017 $3,346 15.1x 13.0x 11.8x 3.64x
Culp, Inc.(d) 2/1/98 12.44 158 303 9.7 11.0 11.3 1.30
Mohawk Industries Inc. 3/28/98 31.19 1,632 1,913 20.7 18.3 15.9 3.86
Synthetic Industries, Inc. 3/31/98 13.94 123 407 NM 6.5 5.6 1.75
--------------------------------------------------------
Statistics
----------
Mean: 15.2x 12.2x 11.1x 2.64x
Median: 15.1 12.0 11.5 2.69
High: 20.7 18.3 15.9 3.86
Low: 9.7 6.5 5.6 1.30
--------------------------------------------------------
Memo 1:
- ------------------------------------------------------------------------------------------------------------------------
Suds Pro Forma LTM(e) 3/31/97 $16.19 $405 $1,175 NA 11.2x 9.5x NM
- ------------------------------------------------------------------------------------------------------------------------
Suds Management 1998F(f) -- 16.19 405 1,175 -- 8.5x 7.4x NM
- ------------------------------------------------------------------------------------------------------------------------
<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>
Armstrong World Industries Inc. 1.50x 6.9x 9.5x 2.89x 33.6% 21.9% 15.9% 9.8%
Culp, Inc.(d) 0.68 6.6 9.7 1.14 18.1% 10.3% 7.0% 47.8%
Mohawk Industries Inc. 0.98 8.8 12.1 2.72 23.1% 11.2% 8.1% 14.7%
Synthetic Industries, Inc. 1.14 6.1 8.6 1.15 32.5% 18.8% 13.3% 69.8%
-------------------------------------------------------------------------------------
1.08x 7.1x lO.Ox 1.97x 26.8% 15.6% 11.1% 35.5%
1.06 6.7 9.6 1.93 27.8% 15.0% 10.7% 31.3%
1.50 8.8 12.1 2.89 33.6% 21.9% 15.9% 69.8%
0.68 6.1 8.6 1.14 18.1% 10.3% 7.0% 9.8%
-------------------------------------------------------------------------------------
Memo 1:
- ------------------------------------------------------------------------------------------------------------------------
Suds Pro Forma LTM(e) 0.92x 7.9x 10.3x 1.78x NA 11.5% 8.9% NA
- ------------------------------------------------------------------------------------------------------------------------
Suds Management 1998F(f) 0.87 6.2 7.6 1.80 17.7% 14.0% 11.5% 65.5%
- ------------------------------------------------------------------------------------------------------------------------
</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) Includes the results of three acquisitions consolidated only from the
effective dates of closing. Culp has announced its results for the fiscal
year ended May 3, 1998, but did not disclose sufficient information to
update the above analysis
(d) Pro forma for the acquisition of Crain and sale of Dalton
(f) Per Suds Management forecast for 1998 provided to Beacon on May 15, 1998
(e.g., EBITDA of approximately $190 million). EPS based on fully diluted
estimates
- --------------------------------------------------------------------------------
June 25, 1998 29 The Beacon Group Capital Services, LLC
<PAGE>
PROJECT SUDS Confidential
- --------------------------------------------------------------------------------
Comparable Transactions Analysis - Home Furnishings Industry
($ 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>
Dec-97 Crain Industries, Inc./Foamex International Inc.(e) $115 $214 NM 3.15x
(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.(a)/INTERCO 331 339 14.3x 10.54*
(Manufacturer of various home furnishings)
Nov-95 Syroco Inc. (Syratech Corp.)/Markey 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 Raytex Division (Golding Indsutries, Inc.)/Cone Mills Corp. 58 64 NA NA
(Manufactuer of fabrics used in home furnishings)
Feb-94 Aladdin Mills, Inc./Mohawk Industries, Inc. 310 387 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(b)/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.(c) 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 2.64x
Median: 14.8 3.15
High: 16.0 4.12
Low: 14.3 0.93
-----------------------------------
<CAPTION>
Aggregate Consideration
as a Multiple of LTM:
----------------------------------------
Effective Net Book
Date Target/Acquiror Sales EBITDA EBIT Capital(d)
- --------- ----------------------------------------------------------------------------- ----- ------ ----- ----------
<S> <C> <C> <C> <C> <C>
Dec-97 Crain Industries, Inc./Foamex International Inc.(e) 0.66x 7.4x 14.3x 1.58x
(Manufactures flexible polyurethane foam and foam products)
Jul-97 Mastercraft Group (Collins & Aikman Corp.)/Joan Fabrics Corp. 1.08 NA NA NA
(Manufacturer of flat-woven upholstery fabrics)
Feb-97 Floorcoverings Division (Collins & Aikman Corp.)/Investor Group 1.43 NA NA NA
(Manufacturer of various floorcoverings)
Aug-96 Home Furnishings Group (Masco)/Furnishings International Inc. 1.88 NA NA NA
(Manufacturer of residential furniture and decorative fabrics)
Apr-96 Graniteville Company (Triarc Co.)/Avondale Mills Inc. 0.51 NA NA NA
(Manufacturer of various textiles)
Dec-95 Thomasville Furniture Industries, Inc.(a)/INTERCO 0.64 NA 8.7 8.60*
(Manufacturer of various home furnishings)
Nov-95 Syroco Inc. (Syratech Corp.)/Markey PLC 1.47 NA 10.9 NA
(Manufacturer of household furniture and accessories)
Jan-95 Corsair Inc./La-Z-Boy Chair Company 0.73 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
(Manufactures tufted carpets primarily for residential use)
Dec-94 Raytex Division (Golding Indsutries, Inc.)/Cone Mills Corp. NA NA NA NA
(Manufactuer of fabrics used in home furnishings)
Feb-94 Aladdin Mills, Inc./Mohawk Industries, Inc. 0.84 7.7 10.1 2.54
(Manufactures carpets and rugs for residential and commercial use)
Nov-93 Perfect Fit/Foamex International Inc. 0.79 10.3 17.3 1.43
(Manufacturer of home comfort and furnishings products)
Sep-93 Hanes Holding Company(b)/Legget & Platt 0.75 6.0 7.2 1.66
(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
(Manufacturer of carpets and rugs)
May-93 Great Western Foam Products Corp./Foamex International Inc. 0.42 5.2 6.9 3.73
(Manufacturer and distributor of foam and foam products in the western U.S.)
Apr-93 Vintage Yarns, Inc./Unifi, Inc.(c) 2.01 NA 5.4 2.44
(Manufacturer of yarns)
Mar-93 General Felt Industries, Inc./Foamex International Inc. 0.50 4.7 7.4 1.46
(Distributor and manufacturer of carpet cushion)
Oct-92 Horizon Industries, Inc./Mohawk Industries, Inc. 0.42 7.5 15.4 1.30
(Manufacturer of residential carpets and rugs)
-------------------------------------
0.89x 7.0x 10.0x 1.82x
0.73 7.4 8.7 1.52
2.01 10.3 17.3 3.73
0.42 4.7 5.4 0.93
-------------------------------------
<CAPTION>
LTM
Effective EBITDA
Date Target/Acquiror Margin
- --------- ----------------------------------------------------------------------------- ------
<S> <C> <C>
Dec-97 Crain Industries, Inc./Foamex International Inc.(e) 8.9%
(Manufactures flexible polyurethane foam and foam products)
Jul-97 Mastercraft Group (Collins & Aikman Corp.)/Joan Fabrics Corp. NA
(Manufacturer of flat-woven upholstery fabrics)
Feb-97 Floorcoverings Division (Collins & Aikman Corp.)/Investor Group NA
(Manufacturer of various floorcoverings)
Aug-96 Home Furnishings Group (Masco)/Furnishings International Inc. NA
(Manufacturer of residential furniture and decorative fabrics)
Apr-96 Graniteville Company (Triarc Co.)/Avondale Mills Inc. NA
(Manufacturer of various textiles)
Dec-95 Thomasville Furniture Industries, Inc.(a)/INTERCO NA
(Manufacturer of various home furnishings)
Nov-95 Syroco Inc. (Syratech Corp.)/Markey PLC NA
(Manufacturer of household furniture and accessories)
Jan-95 Corsair Inc./La-Z-Boy Chair Company NA
(Manufacturer of upholstered furniture)
Jan-95 Galaxy Carpet Mills, Inc. (Peerless Carpet Corp.)/Mohawk Industries, Inc. 3.7%
(Manufactures tufted carpets primarily for residential use)
Dec-94 Raytex Division (Golding Indsutries, Inc.)/Cone Mills Corp. NA
(Manufactuer of fabrics used in home furnishings)
Feb-94 Aladdin Mills, Inc./Mohawk Industries, Inc. 10.8%
(Manufactures carpets and rugs for residential and commercial use)
Nov-93 Perfect Fit/Foamex International Inc. 7.7%
(Manufacturer of home comfort and furnishings products)
Sep-93 Hanes Holding Company(b)/Legget & Platt 12.5%
(Manufacturer of woven fabrics and dies mainly for the furniture industry)
Jul-93 Carpet Division (Fieldcrest Cannon, Inc.)/Mohawk Industries, Inc. 9.7%
(Manufacturer of carpets and rugs)
May-93 Great Western Foam Products Corp./Foamex International Inc. 8.1%
(Manufacturer and distributor of foam and foam products in the western U.S.)
Apr-93 Vintage Yarns, Inc./Unifi, Inc.(c) 37.1%
(Manufacturer of yarns)
Mar-93 General Felt Industries, Inc./Foamex International Inc. 10.6%
(Distributor and manufacturer of carpet cushion)
Oct-92 Horizon Industries, Inc./Mohawk Industries, Inc. 5.6%
(Manufacturer of residential carpets and rugs)
-----------
12.3%
9.7%
31.7%
5.6%
-----------
</TABLE>
See notes on following page
- --------------------------------------------------------------------------------
June 25, 1998 30 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) Results calculated by annualizing nine months ended September 30, 1995
(b) Results calculated by annualizing six months ended July 3, 1993
(c) Results calculated by annualizing six months ended March 31, 1993
(d) Net Book Capital is book value plus net debt
(e) Based on audited results for January 1 through December 23, 1997 annualized
- --------------------------------------------------------------------------------
June 25, 1998 31 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 6/24/98 Value Value (a) LTM 1998E(b) 1999E(b) Value
- ------- ----- ------- ----- --------- --- -------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Collins & Aikman Corporation 3/28/98 $7.38 $484 $1,215 424.3x* 12.1 x 9.8 x NM
Johnson Controls Inc. 3/31/98 $55.94 $4,733 $6,114 21.4 16.2 13.8 2.66 x
Lear Corporation (d) 3/28/98 $50.81 $3,409 $4,636 16.7 14.6 12.7 2.74
Magna International Inc. (e) 1/31/98 $68.63 $4,885 $5,024 11.9 * 11.3 9.2 1.37
</TABLE>
<TABLE>
----------------------------------------------------------
Statistics
----------
<S> <C> <C> <C> <C>
Mean: 19.0 x 13.5 x 11.4 x 2.25 x
Median 19.0 13.3 11.3 2.66
High: 21.4 16.2 13.8 2.74
Low: 16.7 11.3 9.2 1.37
----------------------------------------------------------
</TABLE>
<TABLE>
<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 0.72 x 7.3 x 11.4 x 1.80 x 14.1% 9.9% 6.3% 60.2%
Johnson Controls Inc. 0.52 6.2 9.7 1.93 14.8% 8.5% 5.4% 22.6
Lear Corporation (d) 0.61 6.8 9.5 1.88 10.9% 9.0% 6.4% 26.5
Magna International Inc. (e) 0.60 5.8 8.3 1.35 17.0% 10.3% 7.3% 2.8%
</TABLE>
<TABLE>
----------------------------------------------------------------------------------------------
Statistics
----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mean: 0.61 x 6.5 x 9.7 x 1.74 x 14.2% 9.4% 6.3% 28.0%
Median 0.61 6.5 9.6 1.84 14.5% 9.4% 6.4% 24 5%
High: 0.72 7.3 11.4 1.93 17.0% 10.3% 7.3% 60.2%
Low: 0.52 5.8 8.3 1.35 10.9% 8.5% 5.4% 2.8%
----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Memo:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Suds Pro Forma LTM (f) 3/31/97 $16.19 $405 $1,175 NA 11.2 x 9.5 x NM 0.92 x 7.9 x 10.3 x
Suds Management 1998F(G) -- 16.14 405 1,175 -- 85 7.4 NM 0.87 6.2 7.6
<CAPTION>
<S> <C> <C> <C> <C> <C>
Suds Pro Forma LTM (f) 1.78 x NA 11.5% 8.9% NA
Suds Management 1998F(G) 1.80 17.7% 14.0% 11.5% 65.5%
</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) Results include the effect of various significant acquisitions from the
date of purchase during fiscal year 1997
(e) Includes the effect of various transactions from the time of the
acquisitions
(f) Pro forma for the acquisition of Crain and sale of Dalton
(g) Per Suds Management forecast for 1998 provided to Beacon on May 15, 1998
(e.g., EBITDA of approximately $190 million). EPS based on fully diluted
estimates
- --------------------------------------------------------------------------------
June 25, 1998 32 The Beacon Group Capital Services, LLC
<PAGE>
PROJECT SUDS Confidential
- --------------------------------------------------------------------------------
Comparable Transactions Analysis - Automotive Interior Components Industry
($ in millions, except per share amounts)
<TABLE>
<CAPTION>
Consideration
Effective Target/Acquirer ------------------------------
Date (Target's Major Products) Equity Aggregate(a)
---- ------------------------- ------ ------------
<S> <C> <C> <C>
Pending Becker Group/Johnson Controls Inc. $550 $550
(Automotive interior supplier)
Nov-97 Allied Signal's Safety Restraint Systems Division/Breed
Technologies Inc. 710 688
(Manufactures seat-belts and airbags)
Ju1-97 JPS Automotive L.P. (Collins & Aikman)/Safety 56 57
Components International. Inc.
(Manufacturer and supplier of fabric to the airbag industry)
May-97 Keiper Car Seating Gmbh / Lear Corporation NA 237
(Manufactures seating systems for Mercedes, Audi & VW)
Dec-96 JPS Automotive L.P. /Collins & Aikman Corporation(a) 28 220
(Manufactures automotive carpets and synthetic industrial fabrics)
Aug-96 Douglas & Lomason/Magna International 139 222
(Automotive seating systems, frames, covers and mechanisms)
Aug-96 Foamex(JPS Automotive)/Collins & Aikman 22 220
(Automotive interior textile and plastic interior trim)
Ju1-96 Prince Automotive/Johnson Control Inc. 1,269 1,350
(Automotive interior floor and ceiling consoles, door
panels and arm rests)
May-96 Masland Corp /Lear Corp. 385 483
(Automotive interior components)
Jan-96 Larizza Industries/Collins & Aikman Corporation 144 178
(Door panels, headrests, floor console and instrument
panel components)
Ju1-95 Automotive Industries/Lear Corp. 644 926
(Automotive interiors)
Jan-95 Bostrom Seating Inc./Johnstown America Industries 19 32
(Seating for trucks)
<CAPTION>
Equity Consideration Aggregate Consideration
As a Multiple of: As a Muhiple of:
----------------- --------------------------------
Target/Acquirer Net Book Net Net Book
(Target's Major Products) Income Value Sales EBITDA EBIT Capital(b)
------------------------- ------ ----- ----- ------ ---- ----------
<S> <C> <C> <C> <C> <C> <C>
Becker Group/Johnson Controls Inc. NA NA 0.42x NA NA NA
(Automotive interior supplier)
Allied Signal's Safety Restraint Systems Division/Breed
Technologies Inc. 21.8x 3.1x 0.75 9.2x 14.9x 3.3x
(Manufactures seat-belts and airbags)
JPS Automotive L.P. (Collins & Aikman)/Safety 13.3 1.0 0.76 7.2 11.0 1.0
Components International. Inc.
(Manufacturer and supplier of fabric to the airbag industry)
Keiper Car Seating Gmbh / Lear Corporation NA NA 0.44 NA NA NA
(Manufactures seating systems for Mercedes, Audi & VW)
JPS Automotive L.P. /Collins & Aikman Corporation(a) NM 0.3 0.75 5.6 9.6 0.7
(Manufactures automotive carpets and synthetic industrial fabrics)
Douglas & Lomason/Magna International 12.5 1.5 0.39 8.5 16.6 NA
(Automotive seating systems, frames, covers and mechanisms)
Foamex(JPS Automotive)/Collins & Aikman 2.5* 0.2* 1.03 5.0 7.1 NA
(Automotive interior textile and plastic interior trim)
Prince Automotive/Johnson Control Inc. 18.6 10.1* 1.63 10.1 12.3 9.8*
(Automotive interior floor and ceiling consoles, door
panels and arm rests)
Masland Corp /Lear Corp. 21.3 3.9 1.04 8.6 12.3 2.5
(Automotive interior components)
Larizza Industries/Collins & Aikman Corporation 10.3 6.6* 0.90 6.9 8.5 3.2
(Door panels, headrests, floor console and instrument
panel components)
Automotive Industries/Lear Corp. 17.0 2.7 1.42 8.9 11.9 1.8
(Automotive interiors)
Bostrom Seating Inc./Johnstown America Industries 9.0 NM 0.57 5.3 6.3 2.4
(Seating for trucks)
------------------------------------------------------------------------------------------------
Mean: 15.5x 2.1x 0.84x 7.5x 11.0x 2.1x
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:
* Excluded from the calculation of the mean and median
(a) Results calculated by annualizing nine months ended September 29, 1996
(b) Net Book Capital = Book Value plus Net Debt
- --------------------------------------------------------------------------------
June 25, 1998 33 The Beacon Group Capital Services, LLC
<PAGE>
PROJECT SUDS Confidential
- --------------------------------------------------------------------------------
Suds' Five-Year Growth Rates, Average Margins And Returns Appear To Be In The
Range Of Or Higher Than Those Of Comparable Home Furnishings Companies
<TABLE>
<CAPTION>
Average Average
Sales EBITDA EBITDA EBIT Average Average
Growth Growth Margin Margin ROE(a) ROIC(b)
------ ------ ------ ------ ------ -------
Company:
- -----------------------------------
<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% 6.1% ]2.1% 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%
---------------------------------------------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
June 25, 1998 34 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
Growth Growth Margin Margin ROE(a) ROIC(b)
------ ------ ------ ------ ------ -------
Company:
- -----------------------------------
<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.(c) 31.1% 27.1% 12.1% 8.7% 20.2% 22.7%
---------------------------------------------------------------------------------------------------------------------
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(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 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
- --------------------------------------------------------------------------------
June 25, 1998 35 The Beacon Group Capital Services, LLC
<PAGE>
PROJECT SUDS Confidential
- --------------------------------------------------------------------------------
Technical Products Is Suds' Smallest But Fastest Growing Strategic Business
Unit. Specialty Materials Companies Comparable To Technical Products Appear To
Trade At Higher Valuation Multiples Than The Home Furnishings And Automotive
Interior Components Comparable Companies
($ 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 6/24/98 Value Value(a) LTM 1998E(b) 1999E(b) Value
- ------- ----- ------- ----- -------- --- -------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Chemfab Corporation 3/29/98 $21.00 $164 $156 16.7x 15.9x 14.4x 2.33x
Ferro Corporation(d) 3/31/98 $24.75 $920 $1,131 17.9 14.7 12.6 3.37
Furon Company 5/2/98 $17.69 $324 $478 15.4 13.6 11.2 3.78
H.B. Fuller 2/28/98 $53.59 $745 $1,082 20.9 15.7 13.6 2.19
Spartech Corporation(e) 5/2/98 $21.94 $596 $853 19.1 19.2 16.3 4.05
UFP Technologies 3/31/98 $4.09 $19 $26 14.5 NA NA 1.33
Uniroval Technology Corporation 3/29/98 $9.13 $122 $207 23.5 NA NA 2.99
----------------------------------------------------------------------------------------------------------------
Statistics
Mean: 18.3x 15.8x 13.6x 2.86x
Median: 17.9 15.7 13.6 2.99
High: 23.5 19.2 16.3 4.05
Low: 14.5 13.6 11.2 1.33
----------------------------------------------------------------------------------------------------------------
Memo:
- ----------------------------------------------------------------------------------------------------------------------
Suds Pro Forma LTM(f) 3/31/97 $16.19 405 $1.175 NA 11.2x 9.5x NM
- ----------------------------------------------------------------------------------------------------------------------
Suds Management 1998F(g) -- 16.19 405 1.175 -- 8.5x 7.4x NM
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
Aggregate Value
As a Multiple of: Capital
-------------------------------------- LTM Margin Comparisons: Data:
Net --------------------------- ----------
LTM LTM LTM Book Net Debt/
Company Sales EBITDA EBIT Capital(a) Gross EBITDA EBIT Agg. Value
- ------- ----- ------ ---- ---------- ----- ------ ---- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Chemfab Corporation 1.55x 7.9x 10.5x 2.51x 34.2% 19.6% 14.8% (5.3%)
Ferro Corporation(d) 0.82 7.0 9.7 2.34 25.9% 11.7% 8.4% 18.7%
Furon Company 0.98 7.4 11.4 1.99 32.0% 13.2% 8.6% 32.3%
H.B. Fuller 0.82 8.1 12.4 1.60 31.7% 10.2% 6.7% 31.1%
Spartech Corporation(e) 1.25 10.0 11.6 2.11 17.1% 12.5% 10.7% 30.2%
UFP Technologies 0.57 5.6 9.4 1.23 27.3% 10.1% 6.0% 25.6%
Uniroval Technology Corporation 0.95 7.5 10.8 1.64 25.9% 12.7% 8.8 41.2%
------------------------------------------------------------------------------------------------------------------------
Statistics
Mean: 0.99x 7.6x 10.8x 1.92x 27.7% 12.9% 9.2% 24.8%
Median: 0.95 7.5 10.8 1.99 27.3% 12.5% 8.6% 30.2%
High: 1.55 10.0 12.4 2.51 34.2% 19.6% 14.8% 41.2%
Low: 0.57 5.6 9.4 1.23 17.1% 10.1% 6.0% (5.3%)
------------------------------------------------------------------------------------------------------------------------
Memo:
Suds Pro Forma LTM(f) 0.92x 7.9x 10.3x 1.78x NA 11.5% 8.9% NA
- -------------------------------------------------------------------------------------------------------------------------------
Suds Management 1998F(g) 0.87 6.2 7.6 1.80 17.7% 14.0% 11.5% 65.5%
- -------------------------------------------------------------------------------------------------------------------------------
</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) D&A from FY ended 12/31/97.
(e) The results are pro forma for the acquisition of Polycom Huntsman, Inc. for
approximately $129 million in March 1998. D&A is not pro forma
(f) Pro forma for the acquisition of Crain and sale of Dalton
(g) Per Suds Management forecast for 1998 provided to Beacon on May 15, 1998
(e.g., EBITDA of approximately $190 million). EPS based on fully diluted
estimates
- --------------------------------------------------------------------------------
June 25, 1998 36 The Beacon Group Capital Services, LLC
<PAGE>
PROJECT SUDS Confidential
- --------------------------------------------------------------------------------
Discounted Future Equity Values Analysis
($ in millions, except per share amounts)
<TABLE>
<CAPTION>
Suds Management Forecasts
--------------------------------------------------------------------------------------------
Equity Value as a Function of Equity Value as a Function of
1998 Forecast EBITDA 1999 Forecast EBITDA
------------------------------------------------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EBITDA Multiple: 6.5x 7.0x 7.5x 6.5x 7.0x 7.5 x 6.5x 7.0x 7.5x
Forecast EBITDA $180.0 $180.0 $180.0 $190.1 $190.1 $190.1 $201.4 $201.4 $201.4
-------- -------- -------- -------- -------- -------- -------- -------- --------
Aggregate Value(a) $1,170.0 $1,260.0 $1,350.0 $1,235.7 $1,330.7 $1,425.8 $1,309.1 $1,409.8 $1,510.5
Less: Forecast Net Debt(b) 734.7 690.5
Plus: Warrant/Option Proceeds 32.2 32.2
------------------------------------------------------------- -----------------------------
Implied Equity Valuation $467.5 $557.5 $647.5 $533.1 $628.2 $723.2 $650.8 $751.5 $852.2
Shares, Warrants & Options (MM) 28.27 28.27 28.27 28.27 28.27 28.27 28.27 28.27 28.27
Future Per Share Equitv Value $16.54 $19.72 $22.90 $18.86 $22.22 $25.58 $23.02 $26.58 $30.15
- ------------------------------------------------------------------------------------------------------------------------------------
Present Value of Future Per Share Equity
Value At a Discount Rate of 14.0%:(c) $15.32 $18.27 $21.22 $17.47 $20.59 $23.70 $18.71 $21.60 $24.50
- ------------------------------------------------------------------------------------------------------------------------------------
As a Multiple of:(d)
Suds 1998F Net Income 9.2x 11.0x 12.8x 9.2x 10.9x 12.5x 343.3x 396.4x 449.5x
Suds 1999F Net Income 8.1 9.7 11.2 9.2 10.9 12.5 11.3 13.0 14.8
</TABLE>
Notes:
(a) Aggregate Value is the total enterprise value and is calculated by
multiplying the multiple by Suds Management's estimated EBITDA for 1998 and
1999
(b) Net Debt is forecast to be $734.7 million and $690.5 million at the end of
1998 and 1999
(c) Per share equity values discounted back approximately seven months (for
1998 EBITDA-based valuation) and nineteen 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 for 1998 and 1999, respectively
- --------------------------------------------------------------------------------
June 25, 1998 37 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 5.5%, 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 33.2% of Suds aggregate value based on current company
capitalization
|_| The analysis employed a terminal EBITDA multiple range of 6.5x 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 March 31, 1998 balance sheet; "Year One" cash flow is based on
operating forecasts for remaining nine months of 1998
|_| Current Suds tax NOL of $120 million consumed in shielding year-one
operating income
- --------------------------------------------------------------------------------
June 25, 1998 38 The Beacon Group Capital Services, LLC
<PAGE>
PROJECT SUDS Confidential
- --------------------------------------------------------------------------------
Discounted Cash Flow Analysis: Implied Per Share Valuations(a)
($ in millions, except per share amounts)
Terminal EBITDA Multiple(a)
6.5x 7.0x 7.5x
--------------------------------------------
10.0% $20.54 $23.21 $25.88
Discount
Rate 11.0% 19.00 21.57 24.13
12.0% 17.53 19.99 22.46
Terminal EBITDA Multiple(b)
6.5x 7.0x 7.5x
--------------------------------------------
10.0% $20.30 $22.97 $25.63
Discount
Rate 11.0% 18.76 21.32 23.89
12.0% 17.28 19.75 22.22
Notes:
(a) Based on Suds Management 1998 EBITDA forecast of approximately $190 million
(b) Based on Suds Management 1998 EBITDA forecast of approximately $180 million
- --------------------------------------------------------------------------------
June 25, 1998 39 The Beacon Group Capital Services, LLC
<PAGE>
PROJECT SUDS Confidential
- --------------------------------------------------------------------------------
Leveraged Buyout Analysis Assumptions
($ in millions)
|_| Trace capital structure, adjusted to exclude Trace-specific debt items,
deemed representative financing for a third-party leveraged buyout
o $170 million in total cash and non-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 Total debt set equal to 6.5x EBITDA of approximately $170 million; all
incremental funds invested by LBO investor as equity
o Financing costs set proportional to total debt required (i.e.,
elimination of debt associated with payments to Trace reduces fees)
|_| LBO investor management fee assumed to be $3 million annually, which is
included in calculation of equity returns
|_| Initial debt levels based on March 31 balance sheet of Suds International
- --------------------------------------------------------------------------------
June 25, 1998 40 The Beacon Group Capital Services, LLC
<PAGE>
PROJECT SUDS Confidential
- --------------------------------------------------------------------------------
Leveraged Buyout Analysis Assuming A Per Share Price Of $18.75
($ in millions)
Suds Management Forecast
- ------------------------
Terminal Year EBITDA (2002E) $226.0 $226.0 $226.0
Terminal Multiple 6.5x 7.0x 7.5x
- --------------------------------------------------------------------------------
Five-Year Internal Rate of Return 16.7% 20.9% 24.6%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
June 25, 1998 41 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 Aquiror 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. Delcor 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>
Premiuins Paid
$ Diffcrence/ Premium of --------------------
Date Unaffected Final Price/ One-Week One-Month
Announced Target Share Price(b) Initial Bid Prior Prior
--------- ------ -------------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C>
11/17/97 Shared Technologies Fairchild 32.6% 33.3% 30.4% 22.4%
9/12/97 Western National Corp. 3.4% 3.5% 2.4% 1.5%
7/30/97 Amdahl Corp. 18.1% 17.3% 22.5% 40.7%
1/30/97 AST Research Inc. 6.0% 5.9% 8.0% 29.0%
10/30/96 Vons Cos Inc. 8.2% 6.3% 37.4% 44.2%
7/17/96 New World Commun Grp (Mafco) 25.0% 16.7% 75.2% 65.1%
6/3/96 Univar Corp 19.4% 14.4% 54.1% 65.5%
5/10/96 Transnational Re Corp. 11.4% 10.2% 24.1% 15.8%
10/26/95 Maxtor Corp. 38.2% 30.1% 64.9% 46.8%
8/29/95 Turner Broadcasting System Inc. 8.8% 6.6% 41.2% 51.3%
7/24/95 AMFED Financial Inc. 7.9% 6.7% 26.7% 32.6%
4/24/95 Viagene Inc. 26.1% 20.0% 56.5% 45.5%
2/27/95 CCP Insurance Inc. 4.2% 3.3% 29.2% 21.6%
1/18/95 Arcadian Partners LP 12.6% 11.5% 21.5% 26.1%
11/16/94 National Gypsum Co. 30.9% 24.1% 58.8% 59.4%
9/12/94 Borden Inc. 6.2% 5.6% 17.5% 14.0%
6/29/94 Santa Fe Pacific Corp 29.4% 26.5% 40.2% NA
3/9/94 Dr Pepper/Seven-Up Cos. Inc 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>
Note:
(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
- --------------------------------------------------------------------------------
June 25, 1998 42 The Beacon Group Capital Services, LLC
<PAGE>
PROJECT SUDS Confidential
- --------------------------------------------------------------------------------
Overview Of Financing For The Proposed Transaction
|_| Letters signed on March 16, 1998 by Donaldson, Lufkin & Jenrette ("DLJ")
and The Bank of Nova Scotia ("TBNS") outline the following proposed debt
structure
o Bank Debt
- $700 million of borrowings under a Senior Secured Credit Facility
- $150 million Revolving Credit Facility, primarily for post-closing
general corporate and working capital purposes of Suds and Suds
Carpet Cushion. (Financial model and forecasts developed by Trace do
not reflect any drawings on this Facility at the closing of the
proposed Transaction)
o Operating Company Notes
- $100 million in aggregate principal amount of Senior Unsecured Notes
- $310 million in aggregate principal amount of Senior Subordinated
Notes
o Holding Company Notes
- $75 million in initial accreted value of Senior Discount Notes
(non-cash paying securities)
|_| DLJ has stated that it is "highly confident" of its ability to sell the
Operating Company Notes and the Holding Company Notes
|_| TBNS has states that it is "highly confident" of its ability to sell the
Operating Company Notes
|_| Equity to be composed of rollover of Trace's existing shareholdings in Suds
(11.5 million shares). In addition, TBNS will exchange a $16 million
promissory note of Trace for a 10% equity interest in Suds Holdings
(intermediate company between Suds and operating companies). DLJ
anticipates that warrants for up to 5% of the equity of Suds Holdings may
need to be provided to purchasers of the Holding Company Notes
- --------------------------------------------------------------------------------
June 25, 1998 43 The Beacon Group Capital Services, LLC
<PAGE>
PROJECT SUDS Confidential
- --------------------------------------------------------------------------------
Overview Of Financing For The Proposed Transaction (Continued)
|_| Interest Coverage Ratios based on Suds Management Forecast and Trace's
Proposed Capital Structure(a)
Pro Forma
LTM(b) 1998 1999
------ ---- ----
EBITDA/Cash Interest 1.3x 1.8x 1.9x
EBITDA- Cap. Exp./Cash Interest 1.0 1.4 1.6
EBITDA/Total Interest 1.2 1.6 1.7
EBITDA - Cap. Exp./Total Interest 0.9 1.3 1.4
Memo ($MM)
- ----------
EBITDA $142.9 $190.1 $201.4
Cash Interest 107.8 107.8 103.8
|_| Capitalization Rates based on Suds Management Forecast and Trace's Proposed
Capital Structure(a)
Total Debt/Pro Forma LTM EBITDA: 9.0x
Total Debt/1998F EBITDA: 6.8
Total Debt/1999F EBITDA: 6.4
Notes:
(a) Adjusted to reflect higher level of debt from Suds' March 31, 1998 balance
sheet. For illustrative purposes, based on $18.75 price and Suds' original
EBITDA forecast of $190.1 million
(b) Pro forma LTM EBITDA for Suds and Crain combined excluding discontinued
operations and one-time items and not taking into account any pro forma
cost savings
- --------------------------------------------------------------------------------
June 25, 1998 44 The Beacon Group Capital Services, LLC
<PAGE>
PROJECT SUDS Confidential
- --------------------------------------------------------------------------------
Sources And Uses Of Incremental Funds In Trace's Contemplated Transaction
Structure(a)
- --------------------------------------------------------------------------------
Uses(a)
- --------------------------------------------------------------------------------
Payment to non-Trace common shareholders $228.6
Payment to option/warrant holders 22.8
Refinance Suds 9 7/8% notes 150.0
Refinance Crain 13.50% notes 98.0
Refinance senior credit facility 458.3
Transaction fees (b) 55.3
Pre-payment penalties (c) 52.0
Payments to Trace
Tax sharing payment 60.0
Loan by Suds Holding to Trace 42.5
Transaction fee 17.5
----------
Total Payments to Trace 120.0
-----------
Total uses $1,185.0
-----------
- --------------------------------------------------------------------------------
Sources(a)
- --------------------------------------------------------------------------------
Senior notes $100.0
Senior credit facility 700.0
Junior subordinated notes 310.0
-----------
Total operating company debt 1,110.0
Public senior discount notes 75.0
-----------
Total sources $1,185.0
-----------
Notes:
Source: Trace. For illustrative purposes, based on $17 offer made on March 16,
1998
(a) Trace calculated sources and uses based on year-end balance sheet of Suds,
L.P. and Suds Carpet Cushion; additional Suds borrowings of $40-50 million
during the first quarter of 1998 suggest that Trace may need to
increase the amount of drawn Transaction financing; an additional $150
Senior Revolving Credit Facility has also been committed and is available
to fund any incremental draw-down
(b) Trace has indicated to Beacon that an additional $20 million in fees may
be incurred depending upon future negotiations between Trace, its advisors
and its financing sources
(c) Penalties estimated by Trace to be incurred to tender for and repurchase
the Crain 13.50% notes and the Suds 9 7/8% notes; actual amount is subject
to negotiation with bondholders
- --------------------------------------------------------------------------------
June 25, 1998 45 The Beacon Group Capital Services, LLC
<PAGE>
PROJECT SUDS Confidential
- --------------------------------------------------------------------------------
Financing Considerations Concerning The Proposed Transaction
|_| The sale of securities by DLJ and 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 DLJ
and 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 new issuances of high yield debt
securities
|_| The letter signed by TBNS and DLJ, in which they severally (and not
jointly) commit to provide $510 million and $340 million, respectively, of
the Bank Debt (including the $150 million Revolving Credit Facility),
contains certain conditions including:
o no material disruption of or material adverse change in current
financial, banking or capital market conditions or the business itself
o completion of due diligence
o satisfaction with the form, scope and substance of the projections
provided by Trace to TBNS and DLJ
|_| $120 million of cash raised in the debt financing is being paid to Trace
o Payment to Trace of $60 million 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
o Payment of $17.5 million as a transaction fee to Trace
o Loan of $42.5 million from Suds Holding to Trace, terms of which are
still to be negotiated
|_| Much of the transaction's complexity results from past actions of Trace and
Suds and a desire to achieve favorable tax treatment
- --------------------------------------------------------------------------------
June 25, 1998 46 The Beacon Group Capital Services, LLC
<PAGE>
PROJECT SUDS Confidential
- --------------------------------------------------------------------------------
Appendices
A. Additional Information on Suds
B. Comparable Company Summary Descriptions
- --------------------------------------------------------------------------------
June 25, 1998 47 The Beacon Group Capital Services, LLC
<PAGE>
PROJECT SUDS Confidential
- --------------------------------------------------------------------------------
There Are A Number Of Expenses Incurred By Suds Which Relate To Inter-Company
Activities Of Suds And Trace
($ in millions, except per share amounts)
Suds Suds
1997 1998
New York Office Expense Actual Budget
- ----------------------- ------ ------
Salary, Other Compensation & Benefits(a)
Executive $1.5 $1.3
Finance & Insurance 0.4 0.3
Legal 0.5 0.4 (b)
Public Relations 0.3 0.3
Secretaries & Other Support 0.3 0.3
---- ----
Subtotal $2.9 $2.5
Travel & Entertainment $0.2 $0.3
Annual Report 0.1 0.3
Professional Services 0.3 0.3
Advertising & Promotions 0.1 0.3
Rent 0.2 0.2
Miscellaneous Expenses 0.3 0.3
---- ----
Total - NY Office $4.1 $4.2
Trace Management Fee 2.3 3.0
Grand Total - NY Office and Management Fee $6.4 $7.2
==== ====
Memo - Aircraft Expense
- -----------------------
Expense of Aircraft to Suds(c) $2.8 $3.2
Cash Expense of Aircraft to Suds(d) 1.9 2.3
Notes:
All information provided by Suds management
(a) Includes costs of certain individuals who are employees of both Trace and
Suds, and, in some cases, of other Trace affiliates
(b) Includes $0.3 million of legal salary, other compensation and benefits
categorized in another department for 1998 budget purposes
(c) Includes interest on aircraft debt of $0.8 million and $0.9 million in 1997
and 1998B, respectively
(d) Total expense of aircraft to Suds before depreciation
- --------------------------------------------------------------------------------
June 25, 1998 48 The Beacon Group Capital Services, LLC
<PAGE>
PROJECT SUDS Confidential
- --------------------------------------------------------------------------------
Suds Year To Date Actual EBITDA Through April 1998 Was Slightly Better
Than Budget
($ in millions)
Year to Date
Through April 1998, Variance:
--------------------------- Actual to
Budget Actual Budget
------ ------ ------
EBITDA $50.0 $51.4 2.7%
Note:
(a) Data provided by Suds management
- --------------------------------------------------------------------------------
June 25, 1998 49 The Beacon Group Capital Services, LLC
<PAGE>
PROJECT SUDS Confidential
- --------------------------------------------------------------------------------
Review Of Suds Analysts Consensus Earnings Forecasts And P/E Multiples For 1996
Earnings Per Share
IBES 1996 FPrice/Earnings Ratio
-----------------------------
1/97 $1.11 17.9 x
12/96 $1.08 15.3 x
11/96 $1.08 15.4 x
10/96 $1.12 14.0 x
9/96 $1.12 14.5 x
8/96 $1.04 15.0 x
7/96 $0.98 12.2 x
6/96 $0.98 12.5 x
5/96 $0.96 12.8 x
4/96 $0.85 14.6 x
3/96 $0.90 10.6 x
2/96 $0.90 9.1 x
1/96 $0.92 7.2 x
12/95 $0.92 8.0 x
11/95 $1.02 7.0 x
10/95 $1.20 6.3 x
9/95 $1.20 8.6 x
8/95 $1.20 7.9 x
7/95 $1.23 7.2 x
6/95 $1.23 5.9 x
5/95 $1.35 5.6 x
4/95 $1.33 6.1 x
3/95 $1.30 6.2 x
-----------------------------
Average P/E Multiple = 10.4 x
- --------------------------------------------------------------------------------
June 25, 1998 50 The Beacon Group Capital Services, LLC
<PAGE>
PROJECT SUDS Confidential
- --------------------------------------------------------------------------------
Review Of Suds Analysts Consensus Earnings Forecasts And P/E Multiples For 1997
Earnings Per Share
IBES 1997 FoPrice/Earnings Ratio
-----------------------------
2/98 $1.17 12.3 x
1/98 $1.16 11.1 x
12/97 $1.20 9.1 x
11/97 $1.20 9.2 x
10/97 $1.29 9.0 x
9/97 $1.30 10.9 x
8/97 $1.40 8.0 x
7/97 $1.42 8.1 x
6/97 $1.42 9.2 x
5/97 $1.41 10.7 x
4/97 $1.42 10.1 x
3/97 $1.42 11.0 x
2/97 $1.43 13.0 x
1/97 $1.44 13.8 x
12/96 $1.44 11.5 x
11/96 $1.39 12.0 x
10/96 $1.45 10.8 x
9/96 $1.45 11.2 x
8/96 $1.39 11.2 x
7/96 $1.32 9.1 x
6/96 $1.32 9.3 x
5/96 $1.28 9.6 x
4/96 $1.38 9.0 x
3/96 $1.50 6.3 x
-----------------------------
Average P/E Multiple = 10.2 x
- --------------------------------------------------------------------------------
June 25, 1998 51 The Beacon Group Capital Services, LLC
<PAGE>
PROJECT SUDS Confidential
- --------------------------------------------------------------------------------
Review Of Suds Analysts Consensus Earnings Forecasts And P/E Multiples For 1998
Earnings Per Share
IBES 1998 FPrice/Earnings Ratio
-----------------------------
5/98 $1.44 11.4 x
4/98 $1.44 12.2 x
3/98 $1.42 12.4 x
2/98 $1.42 10.1 x
1/98 $1.42 9.1 x
12/97 $1.40 7.8 x
11/97 $1.43 7.7 x
10/97 $1.53 7.6 x
9/97 $1.54 9.2 x
8/97 $1.63 6.9 x
7/97 $1.69 6.8 x
6/97 $1.69 7.8 x
5/97 $1.68 9.0 x
4/97 $1.70 8.5 x
3/97 $1.70 9.2 x
2/97 $1.70 11.0 x
-----------------------------
Average P/E Multiple = 9.1 x
- --------------------------------------------------------------------------------
June 25, 1998 52 The Beacon Group Capital Services, LLC
<PAGE>
PROJECT SUDS Confidential
- --------------------------------------------------------------------------------
Review Of Comparable Home Furnishings Companies
|_| Armstrong World Industries Inc.
|_| Culp, Inc.
|_| Mohawk Industries Inc.
|_| Synthetic Industries, Inc.
- --------------------------------------------------------------------------------
June 25, 1998 53 The Beacon Group Capital Services, LLC
<PAGE>
PROJECT SUDS Confidential
- --------------------------------------------------------------------------------
Armstrong World Industries Inc.
($ 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
- --------------------------------------------------------------------------------
Market Information
- --------------------------------------------------------------------------------
Current Trading Price $75.38
Market Cap 3,017.4
52-Week Stock Price Change 8.7%
Current Aggregate Value/EBITDA 6.9x
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FY1997 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>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Summary Financial Information
- ------------------------------------------------------------------------------------------------------------------------------------
Fiscal Years Ended December 31, LTM
---------------------------------------------------------- Ended
1993 1994 1995 1996 1997 3/31/98 CAGR(d) Average(d)
-------- -------- -------- -------- -------- -------- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $2,525.4 $2,752.7 $2,084.9(d) $2,156.4 $2,198.7 $2,223.5 (3.4%)
% Growth (1.0%) 9.0% (24.3%) 3.4% 2.0% 1.1%
EBITDA $348.1 $466.6 $429.2 $407.0 $454.7 $486.6 6.9%
% Margin 13.8% 17.0% 20.6% 18.9% 20.7% 21.9% 18.2%
EBIT $218.1 $333.2 $293.1 $283.3 $322.0 $354.0 10.2%
% Margin 8.6% 12.1% 14.1% 13.1% 14.6% 15.9% 12.5%
Earnings Per Share $2.33 $4.64 $3.53 $4.37 $4.50 $4.98 17.9%
% Growth 107.5% 99.1% (23.9%) 23.7% 3.1% 10.7%
Return on Equity(a) 20.6% 32.3% 21.6% 23.2% 23.1% 24.8% 24.1%
Return on Invested Capital(b) 17.2% 27.0% 22.9% 24.4% 29.7% 30.3% 24.2%
Net Debt/Total Capitalization(c) 52.2% 41.6% 24.6% 18.7% 24.6% 28.4% 32.3%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes:
(a) Return on Equity is Net Income divided by average Shareholders' Equity
(b) Return on Invested Capital is EBIT divided by average Shareholders' Equity
(c) Net Debt is total debt less cash and Total Capitalization is Net Debt plus
Shareholders' Equity
(d) CAGR = Compound Annual Growth Rate. Average is the average of the margins
over the stated period
- --------------------------------------------------------------------------------
June 25, 1998 54 The Beacon Group Capital Services, LLC
<PAGE>
PROJECT SUDS Confidential
- --------------------------------------------------------------------------------
Culp, Inc.
($ in millions, except per share amounts)
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
- --------------------------------------------------------------------------------
Market Information
- --------------------------------------------------------------------------------
Current Trading Price $12.44
Market Cap 158.0
52-Week Share Price Change (27.2%)
Current Aggregate Value/EBITDA 6.6x
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Summary Financial Information
- ------------------------------------------------------------------------------------------------------------------------------------
Fiscal Years Ended April or May LTM
---------------------------------------------------------- Ended
1993 1994 1995 1996 1997 2/31/98(d) CAGR(d) Average(d)
-------- -------- -------- -------- -------- ---------- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $200.8 $245.0 $308.0 $351.7 $398.9 $446.6 18.7%
% Growth 5.0% 22.0% 25.7% 14.2% 13.4% 12.0%
EBITDA $14.9 $23.6 $33.1 $36.6 $40.9 $46.2 28.7%
% Margin 7.4% 9.6% 10.8% 10.4% 10.3% 10.3% 9.7%
EBIT $8.0 $14.8 $21.2 $23.5 $27.4 $31.2 36.2%
% Margin 4.0% 6.0% 6.9% 6.7% 6.9% 7.0% 6.1%
Earnings Per Share $0.62 $0.69 $0.87 $0.98 $1.18 $1.25 17.5%
% Growth 51.2% 11.3% 26.1% 12.6% 20.4% 5.9%
Return on Equity(a) 8.6% 13.1% 14.6% 14.4% 14.3% 7.4% 12.1%
Return on Invested Capital(b) 10.7% 14.4% 15.8% 15.2% 15.6% 9.5% 13.5%
Net Debt/Total Capitalization(c) 26.2% 48.4% 50.3% 50.0% 40.6% 30.7% 41.1%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes:
(a) Return on Equity is Net Income divided by average Shareholders' Equity
(b) Return on Invested Capital is EBIT divided by average Shareholders' Equity
(c) Net Debt is total debt less cash and Total Capitalization is Net Debt plus
Shareholders' Equity
(d) CAGR = Compound Annual Growth Rate. Average is the average of the margins
over the stated period
- --------------------------------------------------------------------------------
June 25, 1998 55 The Beacon Group Capital Services, LLC
<PAGE>
PROJECT SUDS Confidential
- --------------------------------------------------------------------------------
Mohawk Industries Inc.
($ 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 $31.19
Market Cap 1,631.8
52-Week Stock Price Change 85.8%
Current Aggregate Value/EBITDA 8.8x
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Summary Financial Information
- ------------------------------------------------------------------------------------------------------------------------------------
Fiscal Years Ended December 31, LTM
---------------------------------------------------------- Ended
1993 1994 1995 1996 1997 3/28/98 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 $1,951.8 12.5%
% Growth 56.1% 21.0% 14.7% 8.9% 5.9% 2.7%
EBITDA $120.0 $148.0 $112.9 $175.5 $203.4 $218.0 14.1%
% Margin 10.1% 10.3% 6.8% 9.8% 10.7% 11.2% 9.5%
EBIT $85.2 $98.5 $60.3 $120.4 $144.2 $157.8 14.0%
% Margin 7.2% 6.9% 3.7% 6.7% 7.6% 8.1% 6.4%
Earnings Per Share $0.80 $0.66 $0.26 $0.95 $1.33 $1.51 13.07%
% Growth 12.4% (17.1%) (59.8%) 260.3% 39.2% 13.4%
Return on Equity(a) 25.0% 13.4% 5.1% 16.3% 18.8% 19.1% 15.7%
Return on Invested Capital(b) 22.4% 16.1% 9.0% 17.2% 20.3% 22.5% 17.0%
Net Debt/Total Capitalization(c) 58.6% 60.2% 59.5% 53.8% 41.9% 40.0% 54.8%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes:
(a) Return on Equity is Net Income divided by average Shareholders' Equity
(b) Return on Invested Capital is EBIT divided by average Shareholders' Equity
(c) Net Debt is total debt less cash and Total Capitalization is Net Debt plus
Shareholders' Equity
(d) CAGR = Compound Annual Growth Rate. Average is the average of the margins
over the stated period
- --------------------------------------------------------------------------------
June 25, 1998 56 The Beacon Group Capital Services, LLC
<PAGE>
PROJECT SUDS Confidential
- --------------------------------------------------------------------------------
Synthetic Industries, Inc.
($ 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 $13.94
Market Cap 122.7
52-Week Stock Price Change (27.4%)
Current Aggregate Value/EBITDA 6.1x
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FY1997 Segment Information
- --------------------------------------------------------------------------------
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%
====== =====
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Summary Financial Information
- ------------------------------------------------------------------------------------------------------------------------------------
Fiscal Years Ended December 31, LTM
---------------------------------------------------------- Ended
1993 1994 1995 1996 1997 3/31/98 CAGR(d) Average(d)
-------- -------- -------- -------- -------- -------- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $210.5 $235.0 $271.4 $299.5 $345.6 $355.2 13.2%
% Growth 7.5% 11.6% 15.5% 10.4% 15.4% 2.8%
EBITDA $42.0 $53.2 $40.3 $54.8 $69.6 $66.9 13.5%
% Margin 19.9% 22.6% 14.9% 18.3% 20.2% 18.8% 19.2%
EBIT $29.9 $40.8 $28.7 $38.5 $51.4 $47.4 14.5%
% Margin 14.2% 17.4% 10.6% 12.8% 14.9% 13.3% 14.0%
Earnings Per Share NA NA NA $0.94 $2.10 ($3.16) NM
% Growth -- -- -- -- 124.0% NM
Return on Equity(a) 7.2% 22.8% 3.4% 13.1% 21.1% 11.7% 13.5%
Return on Invested Capital(b) 13.6% 18.1% 11.8% 15.1% 17.5% 13.9% 15.2%
Net Debt/Total Capitalization(c) 79.3% 76.2% 76.9% 74.7% 67.6% 80.2% 74.9%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes:
(a) Return on Equity is Net Income divided by average Shareholders' Equity
(b) Return on Invested Capital is EBIT divided by average Shareholders' Equity
(c) Net Debt is total debt less cash and Total Capitalization is Net Debt plus
Shareholders' Equity
(d) CAGR = Compound Annual Growth Rate. Average is the average of the margins
over the stated period
- --------------------------------------------------------------------------------
June 25, 1998 57 The Beacon Group Capital Services, LLC
<PAGE>
PROJECT SUDS Confidential
- --------------------------------------------------------------------------------
Review Of Comparable Automotive Interior Components Companies
|_| Collins & Aikman Corporation
|_| Johnson Controls Inc.
|_| Lear Corporation
|_| Magna International Inc.
- --------------------------------------------------------------------------------
June 25, 1998 58 The Beacon Group Capital Services, LLC
<PAGE>
PROJECT SUDS Confidential
- --------------------------------------------------------------------------------
Collins & Aikman Corporation
($ 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 $7.38
Market Cap 483.9
52-Week Stock Price Change (35.6%)
Current Aggregate Value/EBITDA 7.3 x
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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%
======== ========
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Summary Financial Information
- ------------------------------------------------------------------------------------------------------------------------------------
Fiscal Years Ended
Fiscal Years Ended January 28, December 28, LTM
-------------------------------- -------------------- Ended
1993 1994 1995 1996 1997 3/28/98 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 $1,691.9 5.7%
% Growth 2.2% 17.7 (15.9%) (18.2%) 54.3% 3.8%
EBITDA $168.4 $216.7 $191.4 $138.1 $199.9 $167.3 4.4%
% Margin 12.9% 14.1% 14.8% 13.1% 12.3% 9.9% 13.4%
EBIT $110.4 $172.8 $147.8 $102.0 $107.1 $106.6 (0.7%)
% Margin 8.5% 11.3% 11.4% 9.7% 6.6% 6.3% 9.5%
Earnings Per Share ($1.18) $1.13 $3.22 $0.68 $0.05 $0.02 NM
% Growth NM NM 185.3% (79.0%) (92.3%) (66.8%)
Return on Equity(a) 14.1% (13.6%) (71.7%) (22.5%) (2.7%) (1.4%) (19.3%)
Return on Invested Capital(b) 27.8% 90.9% 42.6% 13.4% 12.6% 15.2% 37.4%
Net Debt/Total Capitalization(c) NM 371.7% 142.3% 120.1% 109.6% 108.3% 185.9%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes:
(a) Return on Equity is Net Income divided by average Shareholders' Equity
(b) Return on Invested Capital is EBIT divided by average Shareholders' Equity
(c) Net Debt is total debt less cash and Total Capitalization is Net Debt plus
Shareholders' Equity
(d) CAGR = Compound Annual Growth Rate. Average is the average of the margins
over the stated period
- --------------------------------------------------------------------------------
June 25, 1998 59 The Beacon Group Capital Services, LLC
<PAGE>
PROJECT SUDS Confidential
- --------------------------------------------------------------------------------
Johnson Controls Inc.
($ 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 $55.94
Market Cap 4,723.6
52-Week Stock Price Change 31.6%
Current Aggregate Value/EBITDA 6114.1x
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Segment Information
- --------------------------------------------------------------------------------
Sales % of Total
-------- ----------
Automotive $ 8,022.1 72.0%
Controls 3,123.3 28.0%
--------- -----
Total $11,145.4 100.0%
========= =====
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Summary Financial Information
- ------------------------------------------------------------------------------------------------------------------------------------
Fiscal Years Ended September 30, LTM
---------------------------------------------------------- Ended
1993 1994 1995 1996 1997 3/31/98 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 $11.704.1 15.9%
% Growth 19.9% 11.1% 21.2% 20.2% 11.3% 5.0%
EBITDA $536.6 $623.5 $737.3 $829.7 $952.0 $993.0 15.4%
% Margin 8.7% 9.1% 8.9% 8.3% 8.5% 8.5% 8.7%
EBIT $298.3 $365.2 $448.8 $500.0 $597.1 $631.0 18.9%
% Margin 4.8% 5.3% 5.4% 5.0% 5.4% 5.4% 5.2%
Earnings Per Share $1.49 $1.80 $2.14 $2.55 $2.82 $2.61 17.3%
% Growth 10.0% 20.8% 18.6% 19.4% 10.6% (7.5%)
Return on Equity(a) 12.1% 14.5% 15.4% 16.5% 16.4% 14.0% 14.8%
Return on Invested Capital(b) 17.0% 20.6% 22.0% 21.2% 20.9% 19.5% 20.2%
Net Debt/Total Capitalization(c) 30.1% 32.6% 35.1% 36.8% 44.5% 43.7% 37.1%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes:
(a) Return on Equity is Net Income divided by average Shareholders' Equity
(b) Return on Invested Capital is EBIT divided by average Shareholders' Equity
(c) Net Debt is total debt less cash and Total Capitalization is Net Debt plus
Shareholders' Equity
(d) CAGR = Compound Annual Growth Rate. Average is the average of the margins
over the stated period
- --------------------------------------------------------------------------------
June 25, 1998 60 The Beacon Group Capital Services, LLC
<PAGE>
PROJECT SUDS Confidential
- --------------------------------------------------------------------------------
Lear Corporation
($ 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 $50.81
Market Cap 4,636.5
52-Week Stock Price Change 22.8%
Current Aggregate Value/EBITDA 6.8x
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Summary Financial Information
- ------------------------------------------------------------------------------------------------------------------------------------
Fiscal Years Ended September 30, LTM
---------------------------------------------------------- Ended
1993 1994 1995 1996 1997 3/31/98 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 $7,651.0 39.3%
% Growth 37.1% 61.4% 49.8% 32.6% 17.5% 4.2%
EBITDA $140.1 $228.1 $339.5 $521.5 $665.5 $685.5 47.6%
% Margin 7.2% 7.2% 7.2% 8.3% 9.1% 9.0% 7.8%
EBIT $97.6 $169.6 $244.8 $375.8 $481.1 $489.7 49.0%
% Margin 5.0% 5.4% 5.2% 6.0% 6.6% 6.4% 5.6%
Earnings Per Share $0.14 $0.96 $1.52 $2.38 $3.05 $3.05 116.2%
% Growth NM 590.3% 575% 56.6% 28.2% (0.1%)
Return on Equity(a) 18.7% 46.6% 23.7% 19.0% 18.7% 17.4% 25.3%
Return on Invested Capital(b) 18.5% 25.0% 20.0% 19.8% 21.8% 20.4% 21.0%
Net Debt/Total Capitalization(c) 92.2% 70.1% 65.3% 50.7% 47.6% 49.6% 65.2%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes:
(a) Return on Equity is Net Income divided by average Shareholders' Equity
(b) Return on Invested Capital is EBIT divided by average Shareholders' Equity
(c) Net Debt is total debt less cash and Total Capitalization is Net Debt plus
Shareholders' Equity
(d) CAGR = Compound Annual Growth Rate. Average is the average of the margins
over the stated period
- --------------------------------------------------------------------------------
June 25, 1998 61 The Beacon Group Capital Services, LLC
<PAGE>
PROJECT SUDS Confidential
- --------------------------------------------------------------------------------
Magna International Inc.
Business Description
|_| Magna is a full service supplier of interior and exterior body and chassis
systems to every major auto-maker in North America and Europe
|_| The company employs more than 36,000 people at 128 manufacturing divisions
and 26 product development and engineering centers throughout the world
($ in millions, except per share amounts)
- --------------------------------------------------------------------------------
Market Information
- --------------------------------------------------------------------------------
Current Trading Price $68.63
Market Cap 4,884.9
52-Week Stock Price Change 15.3%
Current Aggregate Value/EBITDA 5.8x
- --------------------------------------------------------------------------------
(Canadian$ in millions, except per share amounts)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Summary Financial Information
- ------------------------------------------------------------------------------------------------------------------------------------
Fiscal Years Ended July 31, LTM
---------------------------------------------------------- Ended
1993 1994 1995 1996 1997 1/31/98 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 $8,311.5 31.1%
% Growth 10.5% 36.9% 26.5% 29.8% 31.3% 8.1%
EBITDA $323.3 $472.7 $562.8 $667.2 $843.9 $859.7 27.1%
% Margin 12.4% 13.2% 12.5% 11.4% 11.0% 10.3% 12.1%
EBIT $218.8 $353.6 $414.4 $476.9 $611.8 $604.3 29.3%
% Margin 8.4% 9.9% 9.2% 8.1% 8.0% 73% 8.7%
Earnings Per Share $2.40 $3.81 $5.15 $4,59 $7.61 $5.77 33.5%
% Growth 28.1% 58.8% 35.2% (10.9%) 65.9% (24.1%)
Return on Equity(a) 19.6% 21.7% 21.8% 16.3% 21.6% 13.5% 20.2%
Return on Invested Capital(b) 23.5% 28.2% 24.1% 19.2% 18.4% 15.6% 22.7%
Net Debt/Total Capitalization(c) (0.3%) 2.4% (7.4%) (16.4%) (21.8%) 3.8% (8.7%)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes:
(a) Return on Equity is Net Income divided by average Shareholders' Equity
(b) Return on Invested Capital is EBIT divided by average Shareholders' Equity
(c) Net Debt is total debt less cash and Total Capitalization is Net Debt plus
Shareholders' Equity
(d) CAGR = Compound Annual Growth Rate. Average is the average of the margins
over the stated period
(e) Market information is in US dollars
- --------------------------------------------------------------------------------
June 25, 1998 62 The Beacon Group Capital Services, LLC
<PAGE>
Highly Confidential
PROJECT SUDS
- --------------------------------------------------------------------------------
Discussion Materials For A Meeting With The
Special Committee Of The Board Of Directors Of Suds
June 25, 1998
The Beacon Group Capital Services, LLC
<PAGE>
PROJECT SUDS Confidential
- --------------------------------------------------------------------------------
Discussion Agenda
I. Executive Summary
II. Overview Of Foamex International Inc. ("Suds" or the "Company")
III. Valuation Analysis
IV. Overview Of The Proposed Financing For The Transaction
Appendices
A. Additional Information On Suds
B. Comparable Company Descriptions
- --------------------------------------------------------------------------------
June 25, 1998 The Beacon Group Capital Services, LLC
<PAGE>
PROJECT SUDS Confidential
- --------------------------------------------------------------------------------
Summary Of Suds Implied Per Share Equity Values Based on Suds
Management Forecasts(e)
($ in millions, except per share amounts)
================================================================================
Comparable Companies Multiples Applied To
================================================================================
LTM Pro Forma and 1998F EBITDA
- --------------------------------------------------------------------------------
Automotive:(a) 6.5x 6.5x
Home:(b) 6.7 7.1
- --------------------------------------------------------------------------------
LTM Pro Forma and 1998F EBIT
- --------------------------------------------------------------------------------
Automotive:(a) 9.6x 9.7x
Home:(b) 9.6 10.0
- --------------------------------------------------------------------------------
================================================================================
1998F Mulpitples Applied to Suds 1998F Net Income
================================================================================
Automotive:(a) 13.3x 13.5x
Home:(b) 12.0 12.2
- --------------------------------------------------------------------------------
================================================================================
1998F Mulpitples Applied to Suds 1998F Net Income + 36%(c)
================================================================================
Automotive:(a) 11.3x 11.4x
Home:(b) 11.1 11.5
- --------------------------------------------------------------------------------
================================================================================
1999F Mulpitples Applied to Suds 1999F Net Income + 36%(c)
================================================================================
Automotive:(a) 11.3x 11.4x
Home:(b) 11.1 11.5
- -------------------------------------------------------------------------------
June 25, 1998 65 The Beacon Group Capital Services, LLC
AMENDMENT NO. 2
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:
16,757,201 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):
$18.75
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
$279,097,394(2)
- --------------------------------------------------------------------------------
(5) Total fee paid:
$55,820
- --------------------------------------------------------------------------------
[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 16,757,201 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) 3,217,378 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 $279,097,394
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)
$18.75, and (ii) cash consideration of $25,225,713 to be paid for the
options and warrants being surrendered in connection with 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 , 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 June 25, 1998 as amended on July 6, 1998
(as amended, 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 $18.75 in cash, without
interest.
Your Board of Directors, based upon the unanimous recommendation of a
special committee of independent directors (the "Special Committee"), 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 The Beacon Group Capital Services,
LLC ("Special Financial Advisor"), financial advisor to the Special Committee,
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 Special 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 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. See the section of the enclosed Proxy
Statement captioned "Special Factors--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 thereon,
the receipt of certain approvals from regulatory authorities and the obtaining
of necessary financing. Only holders of Common Stock of record at the close of
business on August 21, 1998 are entitled to notice of, and to vote at, the
Special Meeting or any adjournments or postponements thereof.
As of June 25, 1998, (i) the Trace Stockholders beneficially 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 beneficially 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) beneficially 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 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. Assuming that all such persons vote in favor of the Merger,
the affirmative vote of only approximately 4% of the Public Shares (as defined)
will be required to approve and adopt 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
<PAGE>
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. FAILURE TO RETURN A PROPERLY
EXECUTED PROXY CARD OR VOTE AT THE SPECIAL MEETING WOULD HAVE THE SAME EFFECT
AS A VOTE AGAINST THE MERGER AGREEMENT. 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,
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 , 1998
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders (the
"Special Meeting") of FOAMEX INTERNATIONAL INC. (the "Company") will be held on
, 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 June 25, 1998 as amended on July 6, 1998 (as
amended, 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 $18.75 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 August 21, 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 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. SEE THE SECTION OF THE ENCLOSED PROXY STATEMENT CAPTIONED
"SPECIAL FACTORS--INTERESTS OF CERTAIN PERSONS IN THE MERGER."
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
<PAGE>
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 , 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 ,
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 August 21, 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 June 25, 1998, as amended on July
6, 1998 (as amended, 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 $18.75 in cash.
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 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. See "Special Factors--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.
----------------
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.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
-----
<S> <C>
SUMMARY .................................................................... 1
The Special Meeting ....................................................... 1
Special Factors ........................................................... 2
The Merger ................................................................ 6
Appraisal Rights .......................................................... 9
Solicitation of Proxies ................................................... 9
The Parties ............................................................... 10
Market Price and Dividend Information ..................................... 10
Selected Historical Financial Data ........................................ 10
SPECIAL FACTORS ............................................................ 11
Background of the Merger .................................................. 11
Purpose and Structure of the Merger ....................................... 18
Recommendation of the Special Committee; Fairness of the Merger ........... 18
Recommendation of the Board of Directors .................................. 24
Opinion of Financial Advisor to the Special Committee ..................... 25
Preliminary Valuation Analyses Performed By Beacon ........................ 30
Plans for the Company After the Merger .................................... 31
Interests of Certain Persons in the Merger ................................ 31
Perspective of Trace and Merger Sub on the Merger ......................... 33
Perspective of Marshall S. Cogan on the Merger ............................ 33
Certain Effects of the Merger ............................................. 33
Material Federal Income Tax Consequences .................................. 33
Risk of Fraudulent Conveyance ............................................. 33
Anticipated Accounting Treatment .......................................... 35
Regulatory Approvals ...................................................... 35
Sources of Funds; Fees and Expenses ....................................... 35
THE SPECIAL MEETING ........................................................ 38
Matters to Be Considered at the Special Meeting ........................... 38
Record Date and Voting .................................................... 38
Vote Required; Revocability of Proxies .................................... 39
Appraisal Rights .......................................................... 39
Solicitation of Proxies ................................................... 41
THE MERGER AGREEMENT ....................................................... 42
General ................................................................... 42
Representations and Warranties ............................................ 44
Conduct of the Business Pending the Merger ................................ 44
No Solicitation ........................................................... 45
Conditions to the Merger .................................................. 46
Termination ............................................................... 46
Fees and Expenses ......................................................... 47
Indemnification of Directors and Officers ................................. 48
Access to Information ..................................................... 48
Legal Compliance .......................................................... 48
Amendment ................................................................. 48
CERTAIN PROJECTED FINANCIAL DATA ........................................... 48
SELECTED HISTORICAL FINANCIAL DATA ......................................... 51
UNAUDITED PRO FORMA COMBINED AND CONSOLIDATED STATEMENTS OF
OPERATIONS FINANCIAL INFORMATION ........................................... 52
CERTAIN TRANSACTIONS ....................................................... 55
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS ............. 58
PAYMENTS RELATING TO THE IPO ............................................... 60
Directors and Executive Officers of the Company, Trace and Merger Sub ..... 60
MARKET PRICE AND DIVIDEND INFORMATION ...................................... 61
CERTAIN TRANSACTIONS IN THE COMMON STOCK ................................... 62
STOCKHOLDER LITIGATION ..................................................... 62
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
-----
<S> <C>
INDEPENDENT PUBLIC ACCOUNTANTS ........................................... 63
STOCKHOLDER PROPOSALS .................................................... 63
ADDITIONAL INFORMATION ................................................... 63
AVAILABLE INFORMATION .................................................... 63
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE .......................... 65
APPENDIX A -- THE MERGER AGREEMENT ....................................... A-1
APPENDIX B -- FAIRNESS OPINION OF BEACON GROUP CAPITAL SERVICES, LLC ..... B-1
APPENDIX C -- SECTION 262 OF THE DGCL .................................... C-1
APPENDIX D -- CERTAIN INFORMATION REGARDING DIRECTORS AND EXECUTIVE
OFFICERS OF TRACE, MERGER SUB AND THE COMPANY ........................ D-1
APPENDIX E -- STIPULATION OF SETTLEMENT .................................. E-1
</TABLE>
iii
<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 , 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 August 21, 1998. At
the close of business on the Record Date, there
were 25,014,823 shares of Common Stock
outstanding and entitled to vote, held by
approximately 146 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 the
holders of a majority of the outstanding shares
of Common Stock entitled to vote thereon, and
is not conditioned upon the approval of a
majority vote of unaffiliated Stockholders. As
of the Record Date, (i) the Trace Stockholders
beneficially 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 beneficially 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) beneficially 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
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 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
1
<PAGE>
of only approximately 4% of the Public Shares
(as defined) 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.
The required vote of the Stockholders on the
Merger Agreement is based upon the total
number of outstanding shares of Common Stock.
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. 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 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 and provides the Public Stockholders
with prompt payment in cash in exchange for
the Public Shares. See "Special Factors--
Purpose and Structure of the Merger."
2
<PAGE>
Recommendation of the Special
Committee; Fairness of
the Merger.................... 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, and based in part on such
conclusion the Board of Directors concluded,
that the terms of the Merger are fair to the
Public Stockholders. The conclusion of the
Special Committee was conditioned on the Board
of Directors as a whole determining (the
"Solvency Determination") that consummation of
the transactions contemplated by the 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, which determination was made by the
unanimous vote of all directors present at the
meeting (Mr. Davignon was absent from the
meeting). For a discussion of the factors
considered by the Special Committee in making
its recommendation, see "Special Factors--
Recommendation of the Special Committee;
Fairness of the Merger."
Recommendation of Board
of Directors.................. On June 25, 1998, by unanimous vote of all
directors present and voting (Mr. Davignon was
absent from the meeting), based in part on the
recommendation and approval of the Special
Committee, the Company's Board of Directors (i)
determined that the Merger and the transactions
contemplated by the Merger Agreement are fair,
equitable and in the best interests of the
Company and the Public Stockholders, (ii)
approved and adopted the Merger Agreement 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." 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 that may be in addition
to, or different from, the interests of the
Public Stockholders. See "Special Factors--
Interests of Certain Persons in the Merger".
Opinion of Financial Advisor to
the Special Committee........ On June 25, 1998, The Beacon Group Capital
Services, LLC ("Special Financial Advisor" or
"Beacon") 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 fair to the
Public Stockholders from a financial point of
view. The full text of the written opinion of
the Special Financial Advisor, 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 Special Committee."
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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 Special
Committee; Fairness of the Merger." As of June
25, 1998, (i) the Trace Stockholders
beneficially 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 beneficially 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) beneficially 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 Dissenting Shares held by
Stockholders who properly exercise their
appraisal rights under the Delaware General
Corporation Law (the "DGCL") will be converted
into the right to receive $18.75 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 comply with the
proxy rules of Regulation 14A under Section 14
of the Exchange Act and its officers,
directors and 10%
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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." This
Stipulation of Settlement is subject to court
approval following notice to the Public
Stockholders. The court has set a hearing to
consider whether the settlement should be
approved for October 27, 1998. A copy of the
Stipulation of Settlement is included as
Appendix E to this Proxy Statement. In
connection with the proposed settlement, the
plaintiffs intend to apply for an award of
attorneys' fees and litigation expenses in an
amount not to exceed $925,000, and the
defendants have agreed not to oppose this
application. Additionally, the Company has
agreed to pay the cost of sending notice of
the settlement, if any, to the Public
Stockholders.
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. The defendants have agreed to
the proposed settlement because, among other
reasons, such settlement would eliminate the
burden and expense of further litigation and
would facilitate the consummation of a
transaction that they believe to be in the
best interests of the Company and the Public
Stockholders. 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. 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."
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<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
General....................... 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) $18.75 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 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
Stock Options and Warrants.... At the Effective Time, (i) each holder of a
then outstanding option (each, a "Company
Option") to purchase shares of Common Stock
will, in settlement thereof, receive from the
Company for each share of Common Stock subject
to such option an amount (subject to any
applicable withholding tax) in cash equal to
the amount, if any, by which the Merger
Consideration exceeds the per share exercise
price of the option (the "Option
Consideration") and (ii) each holder of a then
outstanding warrant (each, a "Company Warrant")
to purchase shares of Common Stock 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,
if any, by which the Merger Consideration
exceeds the per share exercise price of the
6
<PAGE>
warrant (the "Warrant Consideration"). 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 Special Committee,
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) 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 cash in 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 the affirmative vote of holders of
a majority of the outstanding shares of Common
Stock entitled to vote thereon, (ii) the
absence of any injunction preventing
consummation of the Merger and (iii) Trace
shall have obtained financing for the
transactions contemplated by the Merger
Agreement on terms and conditions and in
amounts reasonably satisfactory to it. See "The
Merger Agreement--Conditions to the Merger."
7
<PAGE>
No Solicitation............... Pursuant to the Merger Agreement, the Company
has agreed to, and to cause its subsidiaries,
officers, directors, employees, counsel,
investment bankers, financial advisers,
accountants, other representatives and agents
(collectively, the "Company Representatives")
to, terminate any ongoing discussions or
negotiations with respect to a Takeover
Proposal (as defined below). The Company has
agreed that it will not and will not authorize
or permit any Company Representative to (i)
solicit, initiate or encourage (including by
way of furnishing information), or take any
other action to facilitate, any inquiries or
the making of any proposal which constitutes,
or may reasonably be expected to lead to, any
Takeover Proposal, (ii) participate in any
discussions or negotiations regarding any
Takeover Proposal (other than to respond to an
inquiry by informing the inquiring party of
certain restrictions imposed by the Merger
Agreement) or (iii) enter into any agreement
with respect to any Takeover Proposal, except
under certain circumstances to the extent
required in order that the Board of Directors
or the Special Committee may, in its good faith
judgment, comply with its fiduciary duties to
Stockholders. For purposes of the Merger
Agreement, "Takeover Proposal" means any
inquiry, proposal or offer from any person
relating to any (w) merger, consolidation or
similar transaction involving the Company, (x)
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, (y) 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 (z)
transaction in which any person or "group" (as
such term is defined under 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. See "The
Merger Agreement--No Solicitation."
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 (with the concurrence of the
Special Committee) and Trace; (ii) by either
the Company (with the concurrence of the
Special Committee) 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 (with the concurrence of the
Special Committee) or Trace in the event the
Merger is not consummated by December 31, 1998;
(v) by either the Company (with the concurrence
of the Special Committee) 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
8
<PAGE>
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 or the Special
Committee has withdrawn, modified or amended
its recommendation of the Merger Agreement or
the Merger; (vii) by the Special Committee on
behalf of the Company if the Special Committee
has withdrawn its recommendation of the Merger
Agreement or the Merger or (viii) by the
Company (or the Special Committee on behalf of
the Company) or Trace under certain
circumstances in connection with a Takeover
Proposal. If the Merger Agreement is
terminated prior to the Effective Time, under
certain circumstances, the Company will be
required to pay Trace $30 million. See "The
Merger Agreement--Termination."
Sources of Funds; Fees
and Expenses.................. It is currently expected that approximately
$253.9 million will be required to pay the
Merger Consideration to the Public Stockholders
(assuming no such holder exercises appraisal
rights), approximately $25.2 million will be
required to pay the Option Consideration and
the Warrant Consideration to the holders of
Company Options and Company Warrants and
approximately $73.1 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 Cushion, Inc.
("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.
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 C.
Solicitation of Proxies
The Company will bear the costs of soliciting proxies from Stockholders.
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
9
<PAGE>
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 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 $137/8. 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 $163/16. 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."
10
<PAGE>
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 herein, 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
"Proposed 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 Proposed Transaction. On
January 5, 1998, Trace entered into a letter agreement with JP Morgan pursuant
to which J.P. Morgan agreed to act as a financial advisor to Trace in
connection with the Proposed Transaction. On January 13, 1998, Trace received a
letter from DLJ expressing interest in assisting Trace in the Proposed
Transaction. During January and February 1998, members of Trace's senior
management investigated the possible form, structure and timing of a possible
Proposed 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 Proposed 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 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.
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<PAGE>
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.
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 Proposed 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 Proposed 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 Proposed
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 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
Proposed Transaction, (i) a commitment letter (the "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 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 Commitment Letter and the Highly Confident
Letter and, after the close of business, issued a press release announcing the
Proposed Transaction.
On March 16, 1998, the Company's Board of Directors met to discuss Trace's
offer. At this meeting, Marshall S. Cogan, a director of the Company and
Chairman of the Board and CEO of Trace, discussed the 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 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 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 Stockholders, alleged that the defendants had
breached their fiduciary duties to the Plaintiffs and the other Public
Stockholders in connection with the 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.
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Over the following week, the Special Committee interviewed representatives
of three law firms with regard to their experience with transactions similar to
the 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 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. For a summary of
certain matters discussed by Beacon at certain meetings of the Special
Committee (including the meeting held son April 3, 1998), see "--Preliminary
Valuation Analyses Performed By Beacon" below. 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 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. Farace,
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 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 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
Proposed Transaction.
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
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
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expressed his confidence that the financing for the Proposed Transaction on the
terms set forth in the 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 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 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 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. See
"--Recommendation of the Special Committee; Fairness of the Merger." 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 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
Merger and although based on information provided by the Company, were not
prepared with any direct involvement by the Company. See "--Preliminary
Valuation Analyses Performed by Beacon." Beacon indicated that although they
were not yet prepared to render a formal opinion regarding the 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 Merger Agreement were discussed. The Special
Committee decided not to begin negotiations with respect to the draft Merger
Agreement until further progress was made with respect to the financial terms of
the 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 Karl Winters, Vice President--Finance of Trace,
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 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
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no third party buyer for the Company had come forward since the 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 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
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 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
Merger Agreement. Substantial changes were made to the draft 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 Merger. On behalf of the
Special Committee, Cleary, Gottlieb requested, among other things, to (i)
condition consummation of the Merger on the affirmative vote of holders of a
majority of the Public Shares, (ii) condition consummation of the Merger on the
receipt by the Board of Directors of an opinion (the "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
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 Merger is not
consummated, and (iv) provide that Trace bear the expenses of the Company in
the event the 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 Merger would be conditioned on the
affirmative vote of holders of a majority of the Public Shares, and (iii) the
Merger Agreement would provide for a $15 million termination fee payable to
Trace under certain circumstances in the event the 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 Merger
Agreement would provide for a $30 million termination fee payable to Trace
under certain circumstances in the event the Merger is not consummated. In
either case, in the event the Merger is not consummated, Trace would be
responsible for all of its and the Company's expenses, unless the Company
materially breached the 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.
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 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.
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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 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 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 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
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 Proposed Transaction. Plaintiffs' counsel also made 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.
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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 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 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
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 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 Merger Agreement, the Special Committee
planned to hold a meeting the next day to consider recommending adoption of the
Merger Agreement and the Merger based on Mr. Winters' last proposal, but that
given Trace's position that consummation of the 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 making the Solvency Determination.
On June 24, 1998, representatives of Cleary, Gottlieb and Willkie Farr
conducted further negotiations with respect to, and resolved, the remaining
open 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 proposed
Merger was fair to the Public Stockholders from a financial point of view. See
"--Opinion of Financial Advisor to the Special Committee." Cleary, Gottlieb
reviewed the principal terms and conditions of the proposed Merger Agreement
and reported to the Special Committee that a tentative settlement of the
Stockholder Litigation had been reached on the assumption that the Merger
Agreement would provide for the payment of $18.75 per Public Share. After a
full discussion, the Special Committee unanimously determined that the Merger
as set forth in the Merger Agreement is fair to the Public Stockholders, and
unanimously resolved to recommend that the Board of Directors approve the
Merger Agreement and the 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 and conditions
of the proposed 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 Merger and the
projected financial position of the Surviving Corporation following
consummation of the 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 Solvency
Determination, and the determination and recommendation of the Special
Committee with respect to the Merger and the Merger Agreement thereby became
effective. Following further discussion, those members of the Board of
Directors present at the meeting unanimously determined that the Merger was
fair to, and in the best interests of, the Company and the Public Stockholders,
and adopted resolutions
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to approve the Merger and approve and adopt the Merger Agreement and to
recommend that the holders of Common Stock vote to approve the Merger and
approve and adopt the Merger Agreement. The 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 price of $18.75 per Public
Share in cash.
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 sell all of their Common Stock at a price which
represents a substantial premium over trading prices in effect immediately
prior to the announcement 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 at a premium price 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 Special Committee; Fairness of the Merger
At a meeting duly called and held on June 25, 1998, the Special Committee
unanimously determined that the Merger as set forth in the Merger Agreement is
fair to the Public Stockholders and recommended that the Board of Directors
approve the Merger Agreement and the Merger. In reporting to the Board of
Directors, however, the Special Committee noted specifically that in its
consideration of the Merger Agreement and the Merger, the Special Committee and
the opinion of the Special Financial Advisor did not address certain issues
related to the solvency and financial viability of the Surviving Corporation
following the consummation of the transactions contemplated by the Merger
Agreement (including any related financing transactions). See "--Background of
the Merger." Accordingly, the determination and recommendation of the Special
Committee with respect to the Merger and the Merger Agreement was made by the
Special Committee subject to and was conditioned on the Solvency Determination
being made by the Board of Directors.
At the meeting of the Board of Directors held on June 25, 1998,
presentations were made by Andrea Farace, the Chairman and Chief Executive
Officer of the Company, regarding the recent financial and operating
performance of the Company, and Marshall S. Cogan, the Chairman and Chief
Executive Officer of Trace, regarding the Merger and the projected financial
position of the Surviving Corporation after consummation of the Merger.
Following such presentations, the Board of Directors, including the members of
the Special Committee, made the Solvency Determination, and as a result, the
determination and recommendation of the Special Committee with respect to the
Merger and the Merger Agreement became effective. See "--Background of the
Merger."
In making its determination and in recommending that the Board of
Directors approve the Merger Agreement and the Merger, the Special Committee
considered the following material factors:
(i) The Special Committee considered the historical results of operations
of the Company for the period from January 1, 1993 through April 30, 1998
(including pro forma results for the Crain Acquisition for fiscal
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1997 and the first quarter of 1998). In considering these results, the
Special Committee 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
Special Committee concluded that these factors supported a recommendation
that the Board of Directors approve the Merger Agreement and the Merger.
(ii) The Special Committee noted that the five-year forecast with respect
to the Company's operating and financial performance delivered to the
Special Committee and its financial advisor by management of the Company,
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 may have been a negative factor in connection with its
consideration of the Merger Agreement and the Merger. The Special
Committee, 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 (although the Special Committee noted that
there had been subsequent changes in management as discussed in paragraph
(viii) below) in two of the three preceding fiscal years. In particular,
with respect to forecasts, the Special Committee noted that (i) Net Sales
were 9.8% and 8.0% below the amount forecasted by management in fiscal 1995
and 1997, respectively, (ii) the Company's Gross Profit was 52.7% , 1.3%
and 78.6% below the amount forecasted by management in fiscal 1995, 1996
and 1997, respectively, (iii) EBITDA was 109.1% , 0.8% and 38.2% below the
amount forecasted by management in fiscal 1995, 1996 and 1997,
respectively, and (iv) EBIT was 195.1% , 0.7% and 46.7% below the amount
forecasted by management in each of fiscal 1995, 1996 and 1997,
respectively. As a result, the Special Committee 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 the Company's
prospects supported a recommendation that the Board of Directors approve
the Merger Agreement and the Merger.
(iii) The opinion of Beacon (attached as Appendix B hereto), the
financial advisor to the Special Committee, to the effect that, as of the
date of such opinion, a price of $18.75 per Public Share was fair to the
Public Stockholders from a financial point of view, and certain financial
analyses which Beacon presented to the Special Committee, supported a
recommendation that the Board of Directors approve the Merger Agreement and
the Merger. 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 opinion and the terms of Beacon's
engagement.
(iv) The Special Committee 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. In the judgment of the Special Committee and
Beacon, it was highly unlikely that any 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 Special Committee concluded that this factor supported a
recommendation that the Board of Directors approve the Merger Agreement and
the Merger.
(v) The Special Committee considered the fact that since Trace's offer
was first made on March 16, 1998, no third party approached the Special
Committee or its advisors with respect to a potential acquisition of the
Company or the Public Shares. The Special Committee concluded that this
factor supported a recommendation that the Board of Directors approve the
Merger Agreement and the Merger.
(vi) The Special Committee considered the fact that Trace's exploration
of a possible sale of the Trace Shares in 1995 did not result in any
transaction. The Special Committee concluded that this factor supported a
recommendation that the Board of Directors approve the Merger Agreement and
the Merger.
(vii) The Special Committee considered the trading history of the Common
Stock since the Company's initial public offering in December 1993, with
particular emphasis on (a) the fact that the Merger Consideration
represents a 35.1% premium over the closing price of the Common Stock on
Nasdaq on March 13, 1998, the last trading day prior to Trace's initial
offer, and a 37.9% premium over the average closing price of the Common
Stock on Nasdaq over the thirty trading day period ending on March 13,
1998, (b) the high volatility of the market price for the Common Stock
since the Company's initial public offering, (c) the Common Stock's
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consistent under-performance relative to the stock market as a whole as
well as certain indices composed of companies deemed comparable to the
Company by Beacon, (d) the relatively low trading volume in the Common
Stock, and (e) the possibility that the price of the Common Stock was
adversely affected by Trace's ownership of the Trace Shares. The Special
Committee concluded that these factors supported a recommendation that the
Board of Directors approve the Merger Agreement and the Merger.
(viii) The Special Committee considered the recent turnover in the senior
management of the Company, including the appointment of a new Chairman and
Chief Executive Officer, Chief Operating Officer and Chief Financial
Officer during the past year, and the lack of foam industry experience of
certain new senior managers, including the Chairman and Chief Executive
Officer, in light of the near-term and strategic challenges facing the
Company, including the integration process in connection with the Crain
Acquisition and the Company's recent restructuring of its business units.
The Special Committee concluded that these factors supported a
recommendation that the Board of Directors approve the Merger Agreement and
the Merger.
(ix) The Special Committee considered the history of negotiations between
Trace and the Special Committee with respect to the Merger and the Merger
Agreement that, among other things, resulted in an increase in Trace's
offer from $17.00 to $18.75 per Public Share. The Special Committee
concluded, based on such negotiations, that Trace would not pay more than
$18.75 per Public Share, which in the Special Committee's judgment
supported a recommendation that the Board of Directors approve the Merger
Agreement and the Merger. See "--Background of the Merger."
(x) The Special Committee considered the terms of the Merger Agreement
(in addition to the amount of Merger Consideration), and on balance, the
Special Committee concluded that the terms of the Merger Agreement (other
than the Merger Consideration), on their own, did not support a
recommendation that the Board of Directors approve the Merger Agreement and
the Merger. The Special Committee noted that while certain of such terms of
the Merger Agreement had been improved during the course of the negotiation
process, there were certain other significant terms that it unsuccessfully
sought to change in the Merger Agreement. For instance, as discussed in
more detail below, the Special Committee unsuccessfully sought to eliminate
the termination fee and sought to include as a condition to consummation of
the Merger that the Merger be approved by the affirmative vote of holders
of a majority of the Public Shares. However, the Special Committee
concluded, based on the negotiations, that Trace was not willing to change
those terms and, therefore, that in the absence of those terms the Public
Stockholders would not be able to receive the Merger Consideration of
$18.75 per Public Share in cash.
(xi) The Special Committee considered the historical cyclicality of the
automotive and home furnishings sectors, the two primary markets for the
Company's products, and the effect such cyclicality might have on the
Public Stockholders in the future in the absence of the Merger. Given the
mitigating factor that a high percentage of the Company's costs are
variable costs and the fact that the Special Committee could not predict
the timing or extent of future business cycles, the Special Committee
concluded that, on balance, this was a substantially neutral factor with
respect to its consideration of the Merger Agreement and the Merger.
(xii) The Special Committee considered the highly competitive nature of
the foam market and the inelastic nature of demand for the Company's
products, in light of recent pricing pressure exerted by customers in the
automotive sector. The Special Committee concluded that this factor
supported a recommendation that the Board of Directors approve the Merger
Agreement and the Merger.
(xiii) The Special Committee considered the fact that the Company is
highly-leveraged, with particular emphasis on the resulting limitations on
the financial and operating flexibility of the Company and the resulting
risks to the holders of Public Shares in the event of a decrease in the
Company's cash flows. The Special Committee concluded that this factor
supported a recommendation that the Board of Directors approve the Merger
Agreement and the Merger.
(xiv) The Special Committee concluded that the Company's history of
acquisitions and divestitures and the resulting complex corporate structure
and potential contingent liabilities supported a recommendation that the
Board of Directors approve the Merger Agreement and the Merger.
(xv) The Special Committee considered the fees paid by the Company to
Trace and its affiliates under inter-company service agreements and other
arrangements. The Special Committee noted on the one hand that the
provision of these services by Trace created certain efficiencies for the
Company and on the other hand that it was likely that the Company could
have obtained certain of these services at fees less expensive than those
paid to Trace. The Special Committee concluded that, on balance, this was a
substantially neutral factor with respect to its consideration of the
Merger Agreement and the Merger.
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(xvi) The Special Committee considered the uncertainty regarding the
prices of key raw materials used in the manufacture of the Company's
products. Given recent supply/demand dynamics which appear to favor
chemical consumers, the Special Committee concluded that, on balance, this
was a substantially neutral factor with respect to its consideration of the
Merger Agreement and the Merger.
(xvii) The Special Committee considered the fact that following
negotiations between plaintiffs' counsel and Trace a tentative settlement
was reached with respect to the Stockholder Litigation on the assumption
that the Merger Agreement would provide for the payment of $18.75 per
Public Share. The Special Committee concluded that this factor supported a
recommendation that the Board of Directors approve the Merger Agreement and
the Merger.
(xviii) As discussed more fully below, the Special Committee considered
the fact that Trace's obligation to consummate the Merger is contingent on
its ability to obtain adequate financing. The Special Committee concluded
that, on balance, the related financing risk was a negative factor with
respect to its consideration of the Merger Agreement and the Merger.
(xix) The Special Committee considered several recent events impacting
the Company's business, including the fire at the Company's Orlando,
Florida facility and the General Motors Corporation strike which was
ongoing at the time the Special Committee made its determination. As
certain of these events would result in opportunities for the Company and
others would result in decreased sales and/or increased costs, the Special
Committee concluded that, on balance, this was a substantially 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
Special Committee 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 Special Committee did not do so.
As mentioned above, the Special Committee considered as an important
element of its assessment of the Merger and the Merger Agreement, among the
other factors described in this section, the analyses and opinion of its
financial advisor as to the fairness of the Merger Consideration. See
"--Opinion of Financial Advisor to the Special Committee." The Special
Committee placed emphasis on the analyses performed by Beacon with respect to
the Company's results of operations for the twelve months ended March 31, 1998
computed on a pro forma basis to include the businesses acquired in the Crain
Acquisition. The Special Committee noted the fact that the Merger Consideration
exceeds the upper limit of each valuation range computed by Beacon based on
such pro forma results. In evaluating the analyses performed by Beacon based on
the forecasts provided by management, the Special Committee noted that,
depending on the analysis performed, the Merger Consideration was either
within, above or below the valuation range. In particular, the Special
Committee noted that the Merger Consideration was above the valuation range
based on management forecasts in the following cases: (i) the application of
multiples for certain publicly-traded automotive interior components companies
selected by Beacon for comparison (defined below as the "Automotive Comparable
Companies") to forecasted 1998 EBITDA, and (ii) Beacon's leveraged buyout
analysis. The Special Committee noted that the Merger Consideration was within
the valuation range based on management forecasts in the following cases: (i)
the application of multiples for certain publicly traded home furnishings
companies selected by Beacon for comparison (defined below as the "Home
Furnishings Comparable Companies") to forecasted 1998 EBITDA, (ii) the
application of 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
forecasted 1998 EBITDA, (iii) the application of multiples for such Home
Furnishings Comparable Transactions to forecasted 1998 EBIT, (iv) Beacon's
future equity value methodology and (v) Beacon's discounted cash flow analysis.
The Special Committee noted that the Merger Consideration was below the
valuation range based on management forecasts in the following cases: (i) the
application of multiples for the Automotive Comparable Companies to forecasted
1998 EBIT, (ii) the application of multiples for the Home Furnishings
Comparable Companies to forecasted 1998 EBIT, (iii) the application of
multiples for the Automotive Comparable Companies to forecasted 1998 Net
Income, (iv) the application of multiples for the Home Furnishings Comparable
Companies to forecasted 1998 Net Income, (v) the application of multiples for
the Automotive Comparable Companies to forecasted 1998 Net Income, including an
average premium for going private transactions, (vi) the application of
multiples for the Home Furnishings Comparable Companies to forecasted 1998 Net
Income, including an average premium for going private transactions, (vii) the
application of multiples for the Automotive Comparable Companies to forecasted
1999 Net Income, (viii) the application of multiples for Home Furnishings
Comparable Companies to forecasted 1999 Net Income, (ix) the application of
multiples for Automotive Comparable Companies to forecasted 1999 Net Income,
including an
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average premium for going private transactions, (x) the application of
multiples for Home Furnishings Comparable Companies to forecasted 1999 Net
Income, including an average premium for going private transactions, and (xi)
the application of multiples for certain merger and acquisition transactions
involving companies in the automotive interior components industry (defined
below as the "Automotive Comparable Transactions") to 1998 forecasted EBITDA
and to 1998 forecasted EBIT.
In considering these various analyses, including those analyses which led
to valuation ranges above the Merger Consideration, the Special Committee noted
that fairness analysis is a complex analytic process involving various
determinations as to the most appropriate and relevant methods of financial
analysis, the application of those methods to particular circumstances and the
synthesis of those methods into a conclusion concerning fairness. The Special
Committee noted that Beacon, its independent financial advisor, had concluded
based on its complete analysis, as to which the foregoing analyses were only
part, that the Merger Consideration is fair to the Public Stockholders from a
financial point of view. In addition, the Special Committee noted that all the
primary analyses performed by Beacon that resulted in valuation ranges above
the Merger Consideration were based on management forecasts. The Special
Committee evaluated such analyses in light of all other analyses presented by
Beacon as well as a variety of other factors including the execution risks
involved in the integration of the businesses acquired in the Crain Acquisition
with the existing businesses of the Company, the Company's substantial
underperformance relative to the budgets and forecasts prepared by management
in two of the three preceding fiscal years, and the recent turnover in senior
management of the Company. Based on these considerations taken together, the
Special Committee concluded that the Merger is fair to the Public Stockholders
from a financial point of view. See "--Background of the Merger."
As noted above, in its assessment of the Merger Agreement and the Merger,
the Special Committee considered the terms and conditions set forth in the
Merger Agreement (in addition to the amount of Merger Consideration provided
for in the Merger Agreement). The Special Committee noted that the extensive
negotiation by the Special Committee and its advisors with Trace and its
advisors resulted in substantial changes to the Merger Agreement originally
proposed by Trace, and the Special Committee believed, following such
negotiations, that Trace was unwilling to make further material changes in the
Merger Agreement. See "--Background of the Merger." Changes to the Merger
Agreement resulting from the negotiations include elimination of certain
representations and warranties of the Company and the elimination of certain
conditions to Trace's obligation to consummate the Merger. Among other things,
in evaluating the terms and conditions of the Merger Agreement (other than the
amount of the Merger Consideration), the Special Committee considered the
advice of its financial and legal advisors that the termination fee provision
set forth in the Merger Agreement is not a typical provision in transactions
whereby a controlling shareholder agrees to acquire the publicly-held shares of
a company, and that such provision may result in a substantial payment to Trace
under certain circumstances if the Merger is not completed. See "The Merger
Agreement." As a result, the Special Committee considered the termination fee a
negative factor in connection with its analysis of the Merger Agreement and the
Merger. However, there were certain factors that reduced the significance of
the termination fee in the Special Committee's analysis. In considering the
potential effect of the termination fee, the Special Committee noted that Trace
had expressly stated its unwillingness to sell the Trace Shares and that no
third party had expressed interest in an acquisition of the Company or the
Public Shares since Trace made its initial offer to acquire the Public Shares
through a merger on March 16, 1998. As a result, the Special Committee
considered it highly unlikely that any third party would make an offer to
purchase the Public Shares or participate in any other alternative transaction
with the Company or the Public Stockholders following execution of the Merger
Agreement, regardless of whether the Merger Agreement included a termination
fee. The Special Committee also took into account the fact that representatives
of Trace had stated that a termination fee was a condition of Trace's
willingness to proceed with the Merger, and therefore the Public Stockholders
would have been denied the opportunity to receive the Merger Consideration if
the Special Committee refused to agree to include a termination fee in the
Merger Agreement. The Special Committee also considered the fact that as a
result of the negotiation process, the amount of such fee was reduced from $45
million to $30 million (although such reduced amount was still a higher
percentage of the aggregate acquisition price than the Special Committee
believes is customary in acquisitions generally) and the circumstances under
which such fee would be paid were limited to circumstances under which it is
likely that the Public Stockholders would be participating in a sale of their
Public Shares to a third party as part of an acquisition at a price in excess
of the Merger Consideration. See "The Merger Agreement" and "--Background of
the Merger."
In evaluating the terms and conditions of the Merger Agreement (other than
the amount of the Merger Consideration), the Special Committee also considered
the fact that, under the terms of the Merger Agreement, adoption of the Merger
Agreement and approval of the Merger do not require an affirmative vote of
holders of a majority of the Public Shares, and that such adoption and approval
require only the affirmative vote of a majority
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of all the outstanding shares of Common Stock. In the course of its
negotiations with Trace, the Special Committee unsuccessfully sought to
include, as a condition to consummation of the Merger, a requirement that the
Merger Agreement and Merger be approved by the affirmative vote of holders of a
majority of the Public Shares. The Special Committee concluded that the absence
of such requirement was a negative factor in connection with its consideration
of the Merger Agreement and the Merger. In that regard, the Special Committee
noted that, as of June 25, 1998, the Trace Stockholders beneficially owned, in
the aggregate, approximately 45.8% of the outstanding shares of Common Stock
and have agreed pursuant to the Merger Agreement to vote in favor of adoption
of the Merger Agreement and approval of the Merger, and the directors and
officers of Parent and the Company beneficially owned, in the aggregate,
approximately 2.2% of the outstanding shares of Common Stock and, to the
knowledge of the Company, each such director and officer intends to vote his or
her shares in favor of adoption of the Merger Agreement and approval of the
Merger. As a result, the Merger Agreement presumably will be adopted and the
Merger approved at the Special Meeting even if holders of only approximately 4%
of the Public Shares (other than the officers and directors referred to above)
vote in favor of such adoption and approval. Nevertheless, the Special
Committee believed that, with the assistance of its financial and legal
advisors, it adequately represented the interests of the Public Stockholders
and did not believe it was necessary to appoint an unaffiliated representative
to act on behalf of the Public Stockholders in negotiating the terms of the
Merger Agreement. Similarly, in view of the engagement of Beacon by the Special
Committee, the Special Committee did not believe it was necessary to appoint
any other unaffiliated representative to prepare a report regarding the
fairness of the Merger Agreement and the Merger. In making these
determinations, the Special Committee considered the extensive due diligence
and negotiations conducted over three months by the Special Committee and its
advisors that led to an increase in Trace's offer from $17.00 to $18.75 per
Public Share. In addition, neither member of the Special Committee is employed
or affiliated with the Company or Trace except as a director of the Company,
and the Special Committee was advised and assisted by reputable, independent
legal and financial advisors with whom the Special Committee consulted
frequently and who played an active role in the consideration and negotiation
of the Merger and the Merger Agreement by the Special Committee. See
"--Background of the Merger."
As noted above, the Special Committee considered the fact that Trace's
obligation to consummate the Merger is contingent on Trace's ability to obtain
adequate financing. In that regard, the Special Committee considered the fact
that the Commitment Letter is subject to certain conditions (including
satisfactory completion of due diligence and no material adverse change in the
condition of the Company) and was scheduled to expire as of August 15, 1998
(Trace has subsequently obtained a new Commitment Letter scheduled to expire on
October 15, 1998) and considered that the Highly Confident Letter is based on a
number of assumptions (including that the Merger will be consummated on the
terms originally proposed by Trace on March 16, 1998 and that favorable market
conditions will exist at the time of the Merger) and is subject to certain
conditions (including satisfactory completion of due diligence and no material
adverse change in the condition of the Company). The Special Committee also
considered the fact that as set forth in the Merger Agreement consummation of
the Merger is conditioned on the ability of Trace to obtain adequate financing,
and therefore consummation of the Merger is subject to the risk that such
financing will not be obtained. However, the Special Committee considered
several factors that tend to mitigate the financing risk to an extent. The
Special Committee's financial and legal advisors met with representatives of
Trace (including Mr. Cogan), the Company, ScotiaBank, DLJ and SCM at which
meetings the representatives of each institution (including Mr. Cogan)
indicated that such institution was confident that the financing will be
completed as contemplated by the Commitment Letter and the Highly Confident
Letter, and following negotiation of a price of $18.75 per Public Share to be
paid in connection with the Merger, representatives of Trace subsequently
reiterated their confidence that the financing will be completed as proposed.
The members of the Special Committee and its legal and financial advisors also
met with financial officers of Trace and Trace's counsel to discuss the
structure and feasibility of such financing. See "--Background of the Merger."
In addition, the members of the Special Committee and their independent
financial advisor believe DLJ, ScotiaBank and SCM to be reputable financial
institutions. Further, the Special Committee took into account the fact that
the Merger Agreement obligates Trace to use its reasonable best efforts to
obtain adequate financing to complete the Merger, so long as such financing is
on terms and conditions and in amounts not materially less favorable to Trace
than those set forth in the Commitment Letter and the Highly Confident Letter.
See "The Merger Agreement."
As described above, the Special Committee concluded that Trace's stated
unwillingness to sell the Trace Shares to a third party effectively precluded a
sale of control of the Company and made it highly unlikely that any third party
would offer to purchase all of the Public Shares at a price comparable to the
Merger Consideration. In that regard the Special Committee considered the
statement made by a representative of Trace at one point during the course of
the negotiations to the effect that if the Special Committee believed the
Company was worth significantly in excess of $20.00 per share of Common Stock,
Trace may have been 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
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to pay that price for all outstanding shares of Common Stock. See "--Background
of the Merger." After consultation with its advisors, 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 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.
The Special Committee took into consideration the fact that the Public
Stockholders will not have the opportunity to participate in any future growth
of the Company following consummation of the Merger, including any future
growth resulting from the effects of the Crain Acquisition. The Special
Committee noted, however, that because the Merger Consideration is to be paid
in cash, following consummation of the Merger, the Public Stockholders will no
longer be exposed to the risk that equity securities of the Surviving
Corporation may decline in value.
The Special Committee also was aware that the Trace Stockholders will be
entitled to benefit from any increase in the value of the Company following the
Merger by virtue of their equity interest in the Surviving Corporation and that
certain representatives of Trace and certain members of the Company's
management and Board of Directors will receive cash payments for the
cancellation of stock options and the conversion of shares of Common Stock in
connection with the Merger. See "--Interests of Certain Persons in the Merger."
The Special Committee noted that in addition to Trace Shares held through
Parent, Mr. Cogan personally beneficially owns 400,000 shares of Common Stock
and options to purchase 500,000 shares of Common Stock, in respect of which he
will personally be entitled to receive (after deducting the exercise price in
respect of the options) $12,711,460 in the event the Merger is consummated. As
a result of such interest in the Merger, the Special Committee recognized that
such persons have existing or potential conflicts of interest with respect to
the Merger. Accordingly, the Special Committee considered such conflicts in
evaluating information received from such persons in connection with the
Special Committee's analysis of the Merger and the Merger Agreement.
In the course of its analyses, the Special Committee did not place
substantial emphasis on the liquidation value of the Company or the net book
value of the Company (which was $(109,993) at March 29, 1998) because it
believed that those measures of net asset value had limited relevance in the
determination of the value of a going concern such as the Company, and because
there was no intention to liquidate or break up the Company. The Special
Committee focused on the going concern value of the Company as reflected in,
among other things, the analyses presented by Beacon.
The Special Committee was created by resolution of the Board of Directors
on March 16, 1998 for the sole purpose of determining the fairness and
advisability of the Merger to the Public Stockholders. Pursuant to such
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, beneficially owns 9,944
shares of Common Stock which will be exchanged for the Merger Consideration if
the Merger is consummated.
Recommendation of the Board of Directors
On June 25, 1998, by unanimous vote of all directors present and voting
(Mr. Davignon was absent from the meeting), the Company's Board of Directors
(i) determined that the Merger and the transactions contemplated by the Merger
Agreement are fair, equitable and in the best interests of the Company and the
Public Stockholders, (ii) approved and adopted the Merger Agreement and (iii)
recommended that the Public Stockholders vote in favor of the Merger. Each
director of the Company who is not otherwise an employee or affiliate of the
Company or Trace and who attended the July 25, 1998 meeting of the Board of
Directors--Messrs. Gutfreund, Hay and Hershon--voted in favor of the Merger
Agreement and the Merger. Mr. Davignon, who is not an employee of the Company
or Trace but is an affiliate of a Trace creditor, did not attend the July 25
meeting and did not vote and has not subsequently been requested to vote with
respect to the Merger Agreement and the Merger.
In reaching these conclusions, the Board of Directors noted that (i) it
appointed a Special Committee and directed such Special Committee, in part, to
determine the advisability and fairness to the Public Stockholders of the
Proposed Transaction, (ii) the Special Committee retained its own legal counsel
and financial advisor and negotiated an over ten percent increase in the price
to be paid by Trace per Public Share from $17.00 per share to $18.75 per share
and (iii) upon Trace agreeing to pay $18.75 per Public Share, Plaintiffs'
counsel agreed in principle to settle the Stockholder Litigation pursuant to a
written Memorandum of Understanding, dated June 25,
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1998. Thus, the Board of Directors based its conclusions listed above primarily
(x) on the recommendation and approval of the Special Committee (as discussed
above) and (y) on the opinion delivered by Beacon to the Special Committee
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 (as discussed below). In addition, in reaching these
conclusions the Board of Directors also considered the settlement of the
Stockholder Litigation at $18.75 per Public Share and presentations by the
Company's management and legal counsel. The Board of Directors did not attach
specific weights to such factors in reaching its conclusions. 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 of the
Company and Trace have interests in the Merger which may present them with
certain potential conflicts of interest in connection with the Merger. See
"--Interests of Certain Persons in the Merger".
Opinion of Financial Advisor to the Special Committee
Beacon has acted as financial advisor to the Special Committee in
connection with the Merger. Beacon was selected by the Special Committee
because of its expertise and 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 June 25, 1998, Beacon delivered to the Special Committee an oral and
written opinion 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 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 B 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 shareholders 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
shareholders and Quarterly Reports on Form 10-Q; various other communications
from the Company to its shareholders; 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 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 pursuant to which it is anticipated that Trace would receive
payments (in the form of loans, fees and advances) of approximately $120
million, of which $60 million would be 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 has informed the Company that the Trace
Shares were not for sale, Beacon, with the approval of the Special Committee,
did not contact third parties to ascertain their interest in a combination with
the Company or in making a proposal which is competitive with the Merger.
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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 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 as to the future operating and
financial performance of the Company and relevant economic conditions. With
respect to its analyses that utilized forecast 1998 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 the Projections provided by the Company and guidance provided
by management of the Company. The relevant ranges of 1998 forecast financial
results utilized by Beacon were: (i) for EBITDA, $180 million to $190.1
million; (ii) for EBIT, $145.2 million to $155.3 million; and (iii) for Net
Income, $44.0 million to $50.3 million (in each case, the "1998 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.
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."). The following is a summary of the analyses performed
by Beacon in connection with the preparation of the Beacon opinion.
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 June 24, 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.
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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, 9.6x to 9.7x;
(ii) with respect to EBITDA, 6.5x; (iii) with respect to 1998 fiscal year
estimated earnings per share, 13.3x to 13.5x; and (iv) with respect to 1999
fiscal year estimated earnings per share, 11.3x to 11.4x. 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 March 29, 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, $5.21 to $5.65; and (ii) with respect to LTM
Results for EBITDA, $2.65 to $3.26. 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, $23.10 to $27.28; (ii)
with respect to projected 1998 EBITDA, $15.03 to $17.65; and (iii) with respect
to 1998 estimated earnings per share, $21.88 to $25.21. 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
Projections for 1999. This analysis generated a range of implied equity value
per share of Common Stock of $24.17 to $24.41.
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, 9.6x
to 10.0x; (ii) with respect to EBITDA, 6.1x to 7.1x; (iii) with respect to 1998
fiscal year estimated earnings per share, 12.0x to 12.2x; and (iv) with respect
to 1999 fiscal year estimated earnings per share, 11.1x to 11.5x. 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, $9.19 to
$9.75; and (ii) with respect to LTM Results for EBITDA, $8.52 to $8.67. 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, $23.08 to $28.63; (ii) with respect to projected 1998
EBITDA, $16.66 to $21.44; and (iii) with respect to 1998 estimated earnings per
share, $19.80 to $22.85. Beacon also applied the Home 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 Projections for 1999.
This analysis generated a range of implied equity value per share of Common
Stock of $23.90 to $24.68. Beacon noted that the implied equity valuations per
share of Common Stock were less than the Merger Consideration for both the
Automotive Comparable Companies and the Home Furnishings Comparable Companies
in all of Beacon's analyses using the LTM Results. For analyses using the 1998
Projection Range or 1999 forecasted earnings per share, the Merger
Consideration was in the range of or below the implied equity valuations per
share of Common Stock. Beacon considered the results of the Comparable
Companies Analysis in light of the previously described failure of the Company
to meet budgets and the difficulty of identifying companies which in all
material respects are comparable to the Company and determined that the Merger
Consideration was in the range of fairness based on this analysis.
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,
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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, and the acquisition of Crain by the Company (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, $9.61 to $11.07; and (ii) with respect to LTM Results
for EBITDA, $7.56 to $9.05. 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, $30.64 to $36.93; and (ii) with respect to projected 1998
EBITDA, $21.90 to $26.71.
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
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, $1.10 to $5.83; and (ii) with respect
to LTM Results for EBITDA, $4.64 to $6.68. 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, $18.54 to $28.71; and (ii) with respect to
projected 1998 EBITDA, $18.24 to $23.41.
Beacon noted that the implied equity valuations per share of Common Stock
were less than the Merger Consideration for both the Automotive Comparable
Transactions and the Home Furnishings Comparable Transactions in all of
Beacon's analyses using the LTM Results. For analyses using the 1998 Projection
Range, the Merger Consideration was in the range of or below the implied equity
valuations per share of Common Stock. Beacon considered the results of the
Comparable Transactions Analysis in light of the previously described failure
of the Company to meet budgets and the difficulty of identifying companies
which in all material respects are comparable to the Company and determined
that the Merger Consideration was in the range of fairness based on this
analysis.
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Discounted Cash Flow Analysis. Beacon performed a discounted cash flow
analysis for fiscal years 1998 through 2002 for the Company to estimate the
present value of the stand-alone, unlevered free cash flows of the Company
based upon the 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 6.5x to 7.5x to the projected EBITDA of
the Company in fiscal year 2002. 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 total debt less cash at March 29, 1998) to obtain the implied equity value.
Based on this analysis, the Projections generated an implied equity value range
of $17.28 to $25.88 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 Buyout Analysis. Based on the Projections, Beacon performed
analysis of the equity internal rates of return that could be achieved by a
third party leveraged buyout of the Company. Leveraged Buyout 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 a range of multiples 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 $18.60 per share
of Common Stock.
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 EBIT
and EBITDA 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 $15.32 to
$24.50 per share of Common Stock.
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 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 transaction as compared to one week prior to the
announcement of the transaction were 36.0% and 33.9%, respectively, as compared
to a premium of approximately 37.6% to be paid in the Merger and, therefore,
was supportive of Beacon's opinion.
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 1998 Projection Range and 1999 Projections. This analysis generated a
range of equity value per share of Common Stock of: (i) with respect to 1998
estimated earnings per share, $29.75 to $34.28; and (ii) with respect to 1999
estimated earnings per share, $32.87 to $33.19.
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 1998 Projection Range and 1999 Projections. This analysis generated a
range of equity value per share of the Common Stock of: (i) with respect to
1998 estimated earnings per share, $26.93 to $31.07; and (ii) with respect to
1999 estimated earnings per share, $32.50 to $33.56.
Beacon noted that in the latter two 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, was not supportive of Beacon's
opinion.
Miscellaneous. Pursuant to a letter agreement dated April 6, 1998 between
the Company and Beacon, the Company agreed to pay Beacon $750,000 upon Beacon's
rendering an opinion to the Special Committee, and
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additional compensation in the event a transaction occurs 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. Based on the
number of the Company's shares, options and warrants reported as being
outstanding in the Company's Report on Form 10-Q for the quarter ended March
31, 1998, and assuming consummation of the Merger at $18.75 per Public Share,
Beacon would receive total compensation pursuant to terms of the letter
agreement of approximately $1.84 million. 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
thereof) related to or arising out of, among other things, its engagement as
financial advisor.
Preliminary Valuation Analyses Performed By Beacon
In connection with its retention as the Special Committee's financial
advisor and throughout the period of its work for the Special Committee,
including during the negotiating process with Trace, Beacon advised the Special
Committee concerning the valuation methodologies that it was utilizing, the
information that it was gathering and developing and the progress it was making
in reaching an opinion as to fairness that properly reflected those
methodologies and that information. A summary of certain preliminary analyses
of Beacon follows. Beacon's definitive opinion concerning the fairness from a
financial point of view to the holders of the Public Shares of the Merger
Consideration is attached as Exhibit B and is based only on Beacon's final
analyses presented to the Special Committee on June 25, 1998.
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. Those preliminary analyses included only Beacon's initial
Comparable Companies Analysis, Comparable Transactions Analysis and Analysis of
Premiums Paid because at that time Beacon had conducted no due diligence
concerning the Company other than examining publicly available information.
That publicly available information included filings by the Company with the
SEC and equity research analysts' consensus earnings estimates for the Company.
Beacon did not, however, have the Company's forecasts, the 1998 Projection
Range or information required to construct the LTM Results, including the
impact of the Company's acquisitions, divestitures and restructuring programs
on the LTM Results. Consequently, the initial preliminary analyses did not
include Discounted Cash Flow Analysis, Leveraged Buyout Analysis or Discounted
Future Equity Value Analysis or reflect the LTM Results. Moreover, certain
companies used for the initial preliminary Comparable Companies Analysis were
later excluded because of Beacon's greater understanding of the Company after
conducting due diligence and its resulting determination that they were not
comparable to the Company. In addition, certain transactions described in the
Comparable Transactions Analysis segment under the heading "--Opinion of the
Financial Advisor to the Special Committee" were not included in the initial
preliminary Comparable Transactions Analysis because at that time Beacon had
not determined them to be comparable or information relating to those
transactions was not available. Beacon did not derive implied equity values per
share of Common Stock from these limited and preliminary analyses.
On May 29, 1998, Beacon representatives delivered to the Special Committee
materials supporting Beacon's preliminary view that $17.00 per Public Share was
not fair to the Public Stockholders from a financial point of view. These
materials included Comparable Companies Analysis, Comparable Transactions
Analysis, Discounted Cash Flow Analysis, Leveraged Buyout Analysis, Discounted
Future Equity Analysis and Analysis of Premiums Paid. These analyses were based
on the Company forecasts available at that time, which did not include the 1998
Projection Range. Projected EBITDA for 1998 at that time was $190.1 million
compared to the 1998 Projection Range of $180 million to $190.1 million,
projected EBIT at that time was $155.3 million compared to the 1998 Projection
Range of $145.2 million to $155.3 million, and projected Net Income for 1998
and 1999 at that time were $50.3 million and $57.7 million, respectively. These
analyses were based on forecasted results for 1998 and, therefore, differed
from the results of the analyses described under the heading "--Opinion of the
Financial Advisor to the Special Committee," which reflected Beacon's
assessment of the impact of the 1998 Projection Range on its views concerning
value. In addition, for purposes of the analyses presented on May 29, 1998,
Beacon also analyzed the implied equity valuations per share of Common Stock
based on the Trace Forecasts of projected EBITDA for 1998 of $202.3 million and
projected EBIT for 1998 of $159.5 million. Based on Beacon's analyses of the
Trace Forecasts, the implied equity value per share of Common Stock ranged from
$21.24 to $52.27. Because the Trace Forecasts are more optimistic regarding the
future financial performance of the Company than the Company's forecasts and
the 1998 Projection Range, the implied equity valuations per share of Common
Stock
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based on the Trace Forecasts were higher in every analysis prepared by Beacon
than the results of the same analyses based on the Company's forecasts and the
1998 Projection Range. Beacon concluded that the Trace Forecasts should not be
in its final analyses because, according to representatives of Trace, the Trace
Forecasts had been prepared by Trace for the purpose of arranging financing for
the Merger and, although based on information provided by the Company, were not
prepared with any direct involvement by the Company. Based on the foregoing
preliminary analyses, the implied equity value per share of Common Stock ranged
from $14.80 to $46.47.
On June 16, 1998, Beacon presented to the Special Committee valuation
analysis materials updated to reflect the 1998 Projection Range. Based on the
foregoing preliminary analyses, the implied equity value per share of Common
Stock ranged from $14.80 to $34.85.
On June 24 and 25, 1998, Beacon presented its final analyses to the
Special Committee, which are described above under the heading "--Opinion of
Financial Advisor to the Special Committee."
On each occasion that Beacon presented Comparable Companies Analysis to
the Special Committee, the stock prices and earnings estimates of the
Comparable Companies were updated to reflect current market conditions and
information.
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 10% economic interest in the Company's subsidiaries will be
issued to one of Trace's creditors in satisfaction of certain of Trace's debt
obligations and that up to a 9.9% interest in the Company's subsidiaries will
be issued to certain financing sources in connection with the financing of the
Merger and the related transactions. 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.
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 Special Committee and the Board of Directors were aware of these interests
and considered them along with other matters described under "--Recommendation
of the Special Committee; Fairness of the Merger."
Common Stock, Option and Warrant Ownership. As of June 25, 1998, the
executive officers and directors of the Company beneficially 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 $18,910,024 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.
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<PAGE>
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, to which Trace owes, either directly or indirectly through a
subsidiary, approximately $58,000,000 principal amount of promissory notes,
which are due in the years 2005 through 2007.
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.
Transaction Fee. Trace anticipates that upon consummation of the Merger,
it will be paid a transaction fee of $17.5 million. This fee represents
compensation to Trace for structuring the financing plan in connection with the
Merger that will fund the payment of the Merger Consideration, and constitutes
less than 1.5% of the amount being financed. The transaction fee will be paid
by Foamex Holdings, Inc. ("Foamex Holdings") after consummation of the Merger,
at which point in time Trace will have an approximately 90% beneficial
ownership interest in Foamex Holdings. Hence, the transaction fee, in
substance, will be a payment from a subsidiary of Trace to Trace itself, and
thus simply constitutes a change in the nature of Trace's ownership in Foamex
Holding from owning a 90% interest in an entity whose assets include $17.5
million in cash to having $17.5 million in cash and a 90% interest in an entity
with that much less cash. Such fee has been negotiated with the lenders under
the new Credit Facility, the initial purchasers of the Foamex Corp. Senior
Notes and Senior Subordinated Notes and Foamex Holdings Senior Discount
Debentures and with the proposed 10% minority shareholder in Foamex Holdings
(collectively, the "Capital Sources"). See "--Sources of Funds; Fees and
Expenses." It is anticipated that the transaction fee will be funded with the
proceeds of certain of the indebtedness incurred in connection with the Merger.
See "Certain Transactions."
Loan. Trace anticipates that upon consummation of the Merger, Foamex
Holdings will purchase for $47.5 million, a $47.5 million principal amount
promissory note of Trace (the "Trace-Holdings Note"). The Trace- Holdings Note
will be purchased by Foamex Holdings after consummation of the Merger, at which
point in time Trace will have an approximately 90% beneficial ownership
interest in Foamex Holdings. Hence, the Trace-Holdings Note, in substance, will
be a loan from a subsidiary of Trace to Trace itself, and thus simply
constitutes a change in the nature of Trace's ownership in Foamex Holdings from
owning a 90% interest in an entity whose assets include $47.5 million in cash
to having $47.5 million in cash, owing $47.5 million to Foamex Holdings and
owning a 90% beneficial interest in an entity with that much less cash, but
with the Trace-Holdings Note. Trace anticipates that Foamex Holdings will
distribute to the Company the Trace-Holdings Note, together with the $9.9
million principal amount Old Trace Notes, and the $16 million principal amount
Trace Stub Note. See notes (a) and (h) under "--Sources of Funds; Fees and
Expenses." Trace expects that the Company will then restructure such notes into
a single zero coupon note with a maturity beyond the maturity date of the
Foamex Holdings Junior Discount Debentures; however, such distribution, and the
terms of such consolidated note are subject to negotiation with the Capital
Sources. See "--Sources of Funds; Fees and Expenses" and "Certain
Transactions."
Special Committee. Robert J. Hay, one of the two members of the Special
Committee, beneficially owns 9,944 shares of Common Stock which will be
exchanged for the Merger Consideration if the Merger is consummated.
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<PAGE>
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 (i) the Company's Board of Directors
appointed a Special Committee and directed such committee, in part, to
determine the advisability and fairness to the Public Stockholders of the
Proposed Transaction, (ii) the Special Committee retained its own legal counsel
and financial advisor and negotiated an over ten percent increase in the price
to be paid by Trace per Public Share from $17.00 per share to $18.75 per share
and (iii) upon Trace agreeing to pay $18.75 per Public Share, Plaintiffs'
counsel agreed in principle to settle the Stockholder Litigation pursuant to a
written Memorandum of Understanding, dated June 25, 1998. Based upon the
opinion of Beacon, the financial advisor to the Special Committee of 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
Special Committee and 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 Beacon 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, equitable 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 Special Committee in reaching such conclusions as
to the fairness of the Merger to the Public Stockholders and adopted the
Special Committee's 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, 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.
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<PAGE>
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 Stockholder will generally recognize gain or loss for U.S. federal
income tax purposes in an amount equal to the difference between such
Stockholder's adjusted tax basis in such Stockholder's Common Stock and the
consideration received by such Stockholder in the Merger. Such gain or loss
will be calculated separately for each block of Common Stock exchanged by a
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 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
Stockholder (other than corporations and certain other exempt Stockholders)
unless the 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 Stockholder under the "backup" withholding
rules will be allowed as a refund or credit against such 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 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 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 pay
its debts as they came due or matured, such court could (A) find that the
Merger, the Merger Consideration and the financing thereof constituted
fraudulent transfers or conveyances, (B) void the Merger and require that the
assets of the Surviving Corporation be placed in a fund for the benefit of the
Company's creditors, (C) 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,
and/or (D) void or modify the rights and obligations with respect to the
financing of the Merger.
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, as required by the Special
Committee with respect to its recommendation that the Board of Directors
approve the Merger and the Merger Agreement, the Board of Directors in
approving and recommending the Merger and the Merger Agreement made the
Solvency Determination after hearing presentations from the management of the
Company and Trace with
34
<PAGE>
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. See "--Background of the Merger."
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 initial commitment from the proposed lenders under the Credit
Facility (as defined below) expired on August 15, 1998, and Trace has obtained
an extension until October 15, 1998. There can be no assurance that if this
extended commitment expires Trace will be able to obtain any further extension
from the proposed lenders. In addition, due, in part, to the recent volatility
in the financial markets, there can be no assurance that the financing
described below can be obtained. 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
97/8% Senior Subordinated Notes due 2007 and 131/2% Senior Subordinated Notes
due 2005 are tendered in the proposed tender offer, and as if the transaction
occurred on June 28, 1998:
<TABLE>
<CAPTION>
Sources of Funds $'s in 1,000's
- ---------------- --------------
<S> <C>
Cash on hand of the Company and its subsidiaries ................ $ 13,690
Foamex Holdings Senior Discount Debentures(a)(b) ................ 125,000
Foamex L.P., Foamex Carpet and Foamex Funding Credit Facility(c) 717,189
Foamex Corp. Senior Notes(d)(e) ................................. 150,000
Foamex Corp. Senior Subordinated Notes(d)(f) .................... 300,000
----------
Total ......................................................... $1,305,879
==========
Uses of Funds
- -------------
Merger Consideration ............................................ $ 253,872
Option Consideration ............................................ 12,983
Warrant Consideration ........................................... 12,242
Pay-Off of Existing Credit Agreement ............................ 406,189
Repurchase of Senior Subordinated Notes ......................... 248,000
Prepayment penalties and premiums on Existing Credit Facility
and Notes(g) ................................................... 45,527
Purchase of indebtedness of Foam Funding LLC(c) ................. 104,200
Loan to Trace(h) ................................................ 47,500
Transaction fee to Trace ........................................ 17,500
Advance against future tax sharing payments(i) .................. 75,000
Transaction fees and expenses(j) ................................ 73,112
Accrued interest and other ...................................... 9,754
----------
Total ......................................................... $1,305,879
==========
</TABLE>
35
<PAGE>
(a) 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 in exchange for all of the outstanding
capital stock . 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 and accrued interest thereon owed by the Company to Foamex L.P.,
which amount is estimated to be approximately $296.2 million (the
"Special Distribution"), (ii) a $16 million promissory note of Foamex
Holdings (the "New Holdings Note"), (iii) $40 million initial accreted
value of a new issue of Junior Discount Debentures ("Junior Debentures")
of Foamex Holdings, (iv) $9.9 million principal amount of pre-existing
promissory notes of Trace payable to Foamex L.P., (the "Old Trace
Notes"), and (v) the promissory note evidencing the new $47.5 million
loan from Foamex Holdings to Trace (the "Trace-Holdings Note") (see note
(h) below). It is anticipated that ScotiaBank will contribute a $16
million obligation of Trace (the "Trace Stub Note") to Foamex Holdings in
exchange for a 10% interest in Foamex Holdings. Foamex Holdings will
deliver the Trace Stub Note to the Company in satisfaction of the New
Holdings Note.
(b) Represents the gross proceeds to Foamex Holdings from the sale of a new
issue of Senior Discount Debentures (the "Senior Debentures") and
warrants for Foamex Holdings common stock (the "Warrants"). The term,
the interest rate, the security (if any) and other material terms of the
Senior Debentures and the term of the Warrants have not yet been
determined.
(c) 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 The
Bank of Nova Scotia, DLJ Funding, Inc., 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) a $700.0 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 $104.2 million in term loans which it will use to purchase from
The Bank of Nova Scotia and Citicorp USA, Inc. $104.2 million aggregate
principal amount of indebtedness of Foam Funding LLC. 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.
(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 in exchange
for all of the outstanding capital stock. 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 the gross proceeds to Foamex Corp. from the sale of a new
issue of Senior Notes. The term, the interest rate, the security (if
any) and other material terms of the of the Senior Notes have not yet
been determined.
(f) Represents the gross proceeds to Foamex Corp. from the sale of a new
issue of 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 of the Senior Subordinated Notes have not yet been determined.
(g) Represents prepayment penalties to repay the Existing Credit Facility
and consent fees and tender premiums to repurchase all outstanding 97/8%
Senior Subordinated Notes due 2007 and all outstanding 131/2% Senior
Subordinated Notes due 2005.
(h) Represents a loan by Foamex Holdings to Trace in the amount of $47.5
million The term, the interest rate and other material terms of the loan
have not yet been determined.
(i) 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 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.
36
<PAGE>
(j) 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 $63.3 million,
legal and accounting fees and expenses of $4.6 million and miscellaneous
fees and expenses of $5.2 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; provided, however, that if the Merger Agreement is
terminated prior to the Effective Time, under certain circumstances, the
Company will be required to pay Trace $30 million. 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.
37
<PAGE>
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 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, based upon the unanimous recommendation of the
Special Committee with respect to the fairness of the Merger and the Merger
Agreement, 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 unanimous vote of all directors
present at the relevant meeting (Mr. Davignon was absent from the meeting).
ACCORDINGLY, THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT. See "Special Factors--Background
of the Merger," "--Purpose and Structure of the Merger" and "--Recommendations
of the Special Committee; 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 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. See "Special Factors--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. FAILURE TO RETURN A PROPERLY EXECUTED PROXY CARD OR TO
VOTE AT THE SPECIAL MEETING WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE
MERGER AGREEMENT.
Record Date and Voting
The Board of Directors has fixed the close of business on August 21, 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 25,014,823 shares of Common Stock outstanding and
entitled to vote at the Special Meeting, held by approximately 146 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
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
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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, but the approval of the Merger Agreement is not conditioned
upon the approval of a majority vote of unaffiliated Stockholders. 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
beneficially 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) beneficially 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 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. 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.
Because the required vote of the Stockholders on the Merger Agreement is
based upon the total number of outstanding shares of Common Stock, 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. 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 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,
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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 C.
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 C 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 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
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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.
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
The Merger. 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 $18.75 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 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 Option 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 Option Consideration. The Option Consideration equals the amount, if
any, by which the Merger Consideration exceeds the per share exercise price of
the particular Option. The Option Consideration shall be paid without interest
after (a) verification by the Paying Agent 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; and (iii) a
confirmation of and consent to the cancellation of all of the Company Options
described pursuant to clause (i).
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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. 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 Special Committee 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 product of (X) the
number of shares of Common Stock subject to Company Options and (Y) the Option
Consideration and (iii) the product of (E) the number of shares of Common Stock
subject to Company Warrants and (F) the Warrant Consideration (such aggregate
amount 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 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.
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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 certain changes; (vii) the absence of undisclosed liabilities;
(viii) the absence of undisclosed pending or threatened litigation; (ix) the
absence of defaults or violations of the Company's Certificate of Incorporation
or By-Laws or certain agreements; and (x) 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 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
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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; (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); (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; (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.
No Solicitation
Pursuant to the Merger Agreement, the Company has agreed to, and to cause
the Company Representatives to, terminate any ongoing discussions or
negotiations with respect to a Takeover Proposal (as defined). The Company has
agreed that it will not and will not authorize or permit any Company
Representative to (i) solicit, initiate or encourage (including by way of
furnishing information), or take any other action to facilitate, any inquiries
or the making of any proposal which constitutes, or may reasonably be expected
to lead to, any Takeover Proposal, (ii) participate in any discussions or
negotiations regarding any Takeover Proposal (other than to respond to an
inquiry by informing the inquiring party of certain restrictions imposed by the
Merger Agreement) or (iii) enter into any agreement with respect to any
Takeover Proposal. Notwithstanding the foregoing, if at any time prior to the
Effective Time, the Board of Directors of the Company or the Special Committee
determines in good faith, based on the advice of its legal counsel, that it is
necessary to do so in order to comply with its fiduciary duties to the
Company's shareholders under applicable law, the Company or the Special
Committee may, in response to a Takeover Proposal, and subject to compliance
with the Merger Agreement, (i) furnish information with respect to the Company
to any person pursuant to a confidentiality agreement and (ii) participate in
negotiations regarding such Takeover Proposal.
The Company has agreed that neither the Board of Directors of the Company
nor the Special Committee shall (a) withdraw or modify, or propose to withdraw
or modify, in a manner adverse to Trace, the approval or recommendation by such
Board of Directors or such Special Committee of the Merger Agreement or the
Merger, (b) approve or recommend, or propose to approve or recommend, any
Takeover Proposal or (c) cause the Company to enter into any agreement with
respect to any Takeover Proposal. Notwithstanding the foregoing, in the event
that prior to the Effective Time the Board of Directors of the Company or the
Special Committee determines in good faith, based on the advice of its legal
counsel, that it is necessary to do so in order to comply with its fiduciary
duties to the Company's shareholders under applicable law, the Board of
Directors or the Special Committee may withdraw or modify its approval or
recommendation of the Merger Agreement and the Merger, approve or recommend any
Superior Proposal (as defined below) or cause the Company to enter into an
agreement with respect to a Superior Proposal, but in each case 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 the Superior Proposal. In
addition, if the Company enters into an agreement with respect to any Superior
Proposal, it shall concurrently with entering into such an agreement pay, or
cause to be paid, to Trace the Termination Fee.
45
<PAGE>
For purposes of the Merger Agreement, a "Superior Proposal" means any bona fide
Takeover Proposal which the Special Committee or the Board of Directors of the
Company determines in its good faith judgment (based on the advice of its
financial advisor of nationally recognized reputation) to be more favorable to
the Company's shareholders than the Merger.
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, any and all of which
may be waived in whole or in part by the Company (provided the Special
Committee consents to such waiver), Trace or Merger Sub, as the case may be, to
the extent permitted by law: (i) the adoption and approval of the Merger
Agreement by the requisite vote of the shareholders of the Company if required
by applicable law or the Certificate of Incorporation of the Company, in order
to consummate 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: (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) the Company has obtained financing for the transactions
contemplated in the Merger Agreement on terms, conditions and in amounts
reasonably satisfactory to Trace; and (iv) since March 29, 1998, no event or
events has occurred which have resulted in or would reasonably be expected to
result in a Material Adverse Effect.
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: (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; and (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.
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, with the concurrence of the Special Committee in the case of
the Company; (ii) by either Trace or the Company (with the concurrence of the
Special Committee if by the Company), if the Merger Agreement shall have been
voted 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 (with the concurrence of the
Special Committee, if by the Company), if the Merger shall not have been
consummated by December 31, 1998; 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
46
<PAGE>
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 (with the concurrence of the Special
Committee), 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
or the Special Committee (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 or the
Special Committee shall have resolved to take any of the foregoing actions;
(viii) by the Company with the concurrence of the Special Committee, (x) if the
Company's Board of Directors or the Special Committee 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 or the Special Committee shall have
resolved to take any of the foregoing actions, provided that in any case the
Company, the Board of Directors of the Company and the Special Committee shall
have complied with certain obligations provided in the Merger Agreement,
including making simultaneous payment of Trace's expenses and the Termination
Fee; or (ix) by the Special Committee on behalf of the Company, if the Special
Committee shall have withdrawn its recommendation of the Merger Agreement or
the Merger or shall have approved or recommended a Takeover Proposal, or if the
Special Committee shall have resolved to take any of the foregoing actions,
provided that in any case the Special Committee shall have complied with
certain obligations provided in the Merger Agreement, including making
simultaneous payment of Trace's expenses and the Termination Fee or (x) 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, including the
obligation to pay the Termination Fee as described under "--Fees and Expenses."
Fees and Expenses
The Merger Agreement provides that, except as provided in the following
paragraph, whether or not the Merger is consummated, 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.
If a Triggering Transaction (as defined below) is consummated within
twelve months of the termination of the Merger Agreement and the Merger
Agreement was terminated by (i) Trace or Merger Sub as a result of (A) actions
described under clause (v) under "--Termination" above; (B) actions described
under clause (vii) under "--Termination" above; or (C) at the time of the
termination of the Merger Agreement Trace or Merger Sub had the right to
terminate the Merger Agreement under such provisions, (ii) the Company
terminated the Merger Agreement as a result of actions described in clause
(viii) under "--Termination" above; (iii) the Special Committee terminated the
Merger Agreement as a result of actions described in clause (ix) under
"--Termination" above; or (4) prior to any termination of the Merger Agreement,
the Company had materially breached the provisions of the Merger Agreement
described in "--No Solicitation" above; then the Company shall pay, or cause to
be paid, to Trace $30 million (the "Termination Fee"). The Termination Fee
shall be paid in same day funds at the time of the first receipt by a holder of
shares of Common Stock (other than the Trace Stockholders) of any consideration
arising out of the Triggering Transaction.
For purposes of the Merger Agreement, a "Triggering Transaction" means any
of the transactions described in clauses (w), (x) (in the event the transaction
involves all or substantially all of the consolidated assets of the Company and
its subsidiaries), or (z) (in the event the 25% threshold is reached without
including in the shares of Common Stock of which beneficial ownership was
acquired those shares that immediately prior to the transaction were owned by
the Trace Stockholders) of the definition of "Takeover Proposal" set forth in
"Summary--The Merger--No Solicitation" with any person other than Trace or any
of its "affiliates" (as such term is used in the Exchange Act), other than the
Company and its subsidiaries, which either (i) provides that each share of
Common Stock (excluding the shares of Common Stock owned by the Trace
Stockholders) that is purchased or otherwise acquired or exchanged in
connection with such transaction will receive consideration having a value at
the time
47
<PAGE>
of the consummation of such transaction equal to or greater than the Merger
Consideration or (ii) was proposed to the Company, or publicly disclosed, prior
to the termination of the Merger Agreement.
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 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 the Company shall only agree to any material
modification, amendment, supplement or waiver with the consent of the Special
Committee; and provided, further, 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 by the Special Committee and the Special
Financial Advisor and the Special Financial Advisor's assessment of the
fairness, from a financial point of view, of the Merger Consideration, the
Company in May 1998 furnished the Special Committee and the Special Financial
Advisor with certain projections (the "Projections") prepared by the Company's
management and, therefore, the 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,
48
<PAGE>
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
STATEMENTS. 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 PUT UNDUE RELIANCE ON ANY FORWARD-LOOKING STATEMENTS.
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.
49
<PAGE>
FOAMEX INTERNATIONAL INC. (in millions except percentages)
<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 Projections included herein have been 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
projections, (i) the increase in net sales for 1998 over pro forma 1997 of
approximately 7.7% , reflects new business captured by the Company in all of
its business areas, (ii) the increase in net sales for 1999 of approximately
9.9% 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 4.5% per annum 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 17.7% and
to decrease to 17.0% in 1999 and then increase only slightly due to business
mix, (v) selling, general and administrative expenses are forecasted to be 6.2%
of sales in 1998 and to decrease to 6.0% 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 13.50% Senior
Subordinated Notes, and (vii) income taxes reflect all state and federal income
taxes, both domestic and foreign.
50
<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
---------------------------
June 28, June 29,
1998(3) 1997
------------- -------------
(unaudited)
<S> <C> <C>
Statements of Operations Data:
Net Sales .............................. $ 612,269 $ 469,007
Income (loss) from continuing
operations ........................... 16,699 17,606
Basic earnings per share from
continuing operations(8)(9) .......... 0.67 0.70
Diluted earnings per share from
continuing operations(8)(9) .......... 0.64 0.67
Balance Sheet Data (at period end):
Total assets ............................ $ 922,597 $ 647,425
Long-term debt ......................... 789,659 547,348
Stockholders' equity (deficit) ......... (99,435) (87,045)
Fiscal Year(1)(2)
-----------------------------------------------------------------
1997(4) 1996(5) 1995(6) 1994 1993(7)
------------- ------------- ----------- ------------- -----------
(thousands except for earnings per share)
<S> <C> <C> <C> <C> <C>
Statements of Operations Data:
Net Sales .............................. $ 931,095 $ 926,351 $ 862,834 $ 833,660 $684,310
Income (loss) from continuing
operations ........................... 4,131 32,492 (50,750) 22,211 (5,440)
Basic earnings per share from
continuing operations(8)(9) .......... 0.16 1.28 1.92 0.83 --
Diluted earnings per share from
continuing operations(8)(9) .......... 0.16 1.26 1.92 0.83 --
Balance Sheet Data (at period end):
Total assets ............................ $ 893,623 $ 619,846 $ 748,242 $ 786,895 $612,124
Long-term debt ......................... 735,724 483,344 514,954 502,980 414,445
Stockholders' equity (deficit) ......... (113,419) (58,103) 29,383 92,145 64,306
</TABLE>
(1) The Company has 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.
(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.
51
<PAGE>
UNAUDITED PRO FORMA COMBINED AND CONSOLIDATED STATEMENTS 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"). 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 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 earliest period presented.
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 earliest 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 within the meaning of the Private
Securities Litigation Reform Act of 1995. 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 $62.4
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 $10.7 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 twelve 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.
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.
52
<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.
53
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED AND CONSOLIDATED
STATEMENTS 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%.
54
<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. Upon consummation of the Merger, Foamex Holdings will pay to
Trace a transaction fee in the amount of $17.5 million. This fee represents
compensation to Trace for structuring the financing plan in connection with the
Merger that will fund the payment of the Merger Consideration, and constitutes
less than 1.5% of the amount being financed. Such fee has been negotiated with
the Capital Sources. See "Special Factors--Interests of Certain Persons in the
Merger" and "--Sources of Funds; Fees and Expenses." It is anticipated that the
transaction fee will be funded with the proceeds of certain of the indebtedness
incurred in connection with the Merger.
In addition, Foamex Holdings will purchase from Trace for $47.5 million,
the 47.5 million principal amount Trace-Holdings Note. The term, the interest
rate and other material terms of the Trace-Holdings Note have not yet been
determined. Trace anticipates that Foamex Holdings will distribute to the
Company the Trace-Holdings Note, together with the $9.9 million principal
amount Old Trace Notes, and the $16 million principal amount Trace Stub Note.
See Notes (a) and (h) under "Special Factors--Sources of Funds; Fees and
Expenses." Trace expects that the Company will then restructure such notes into
a single zero coupon note with a maturity beyond the maturity date of the
Foamex Holdings Junior Discount Debentures; however, such distribution, and the
terms of such consolidated note are subject to negotiation with the Capital
Sources. See "Special Factors--Interests of Certain Persons in the Merger" and
"--Sources of Funds; Fees and Expenses."
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 consummation of the Merger, Trace will assign
to the Company its right to receive a portion of the payments under the
management agreement in exchange for $40 million initial accreted value of
Junior Debentures. It is anticipated that the Company will declare an annual
dividend to Trace in the amount of such assigned payments.
Finally, in connection with the Merger, Foamex Funding, a wholly owned
subsidiary of the Company, will borrow approximately $104.2 million of term
loans under the New Credit Facility to purchase from Citicorp USA, Inc. and The
Bank of Nova Scotia approximately $104.2 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).
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 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
55
<PAGE>
Foamex Carpet and Foam Funding, Foamex Carpet leased all of the real estate of
General Felt (the "Foamex Carpet 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 Foamex Carpet 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") 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
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. ("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 below to Foamex Corp. and FMXI in connection with the
management services agreement. Also in connection with the consummation of the
Merger, Trace will assign to the Company its right to receive certain of the
payments under the management services agreement in exchange for $40 million
initial accreted value of Junior Discount Debentures of Foamex Holdings. 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.
56
<PAGE>
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.
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.
57
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information, as of June 25, 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 1,548,711 13.4
1301 Avenue of the Americas
New York, New York 10019
Apollo Advisors, L.P.(4) 3,347,421 1,798,710 13.4
2 Manhattanville Road
Purchase, New York 10577
Andrea Farace 52,546 33,546 *
Marshall S. Cogan(3)(5) 12,194,167 269,167 48.8
Robert J. Hay 9,944 -- *
Rolf E. Christensen 12,106 11,378 *
John H. Gutfreund -- -- *
Stuart J. Hershon(6) 36,166 -- *
Etienne Davignon 20,836 -- *
John V. Tunney(7) 15,200 -- *
Barry Zimmerman(8) 19,819 14,819 *
Philip N. Smith, Jr.(5)(8) 18,025 5,928 *
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 4,660 1,688 *
Darrell Nance -- -- *
Pratt Wallace -- -- *
All executive officers and directors of the Company as a 12,408,623 349,026 49.62
group (17 persons)(3)(5)(6)(7)
Saul S. Sherman(9) -- -- *
Fredrick Marcus(9)(10) 29,402 19,402 *
Robert H. Nelson(11) 9,737 9,737 *
Karl H. Winters(11) 3,638 3,638 *
Tambra S. King(11) 713 198 *
</TABLE>
- ----------
* Less than 1%
58
<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.
** 1 (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"). 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.
* 1 moved from here; text not shown
(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.
* 2 moved from here; text not shown
(5) Mr. Cogan, Mr. Zimmerman and Mr. Smith are also officers of Trace.
(6) Includes 35,087 shares of Common Stock held in the name of his wife and
1,079 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.
**2 (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.
* 3 moved from here; text not shown
(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.
**3(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.
59
<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 plans to make cash payments to these
individuals upon the closing of the Merger in an amount equal to 50% of the
number of Granted Shares to be issued to such persons multiplied by $18.75 per
Granted Share; provided, however, that Trace may elect to make cash payments to
such individuals at such time in an amount equal to 100% of the number of
Granted Shares to be issued to such persons multiplied by $18.75 per Granted
Share (the "Full Payment"). Set forth below is a table listing the current
officers or directors of Trace or the Company who will receive cash payments
relating to the Granted Shares, the number of Granted Shares issued to such
persons and the cash payments to be made to such persons by Trace upon the
closing of the Merger (assuming Trace elects to make the Full Payment).
<TABLE>
<CAPTION>
Number of Granted
Shares Cash Payment
------------------ -------------
<S> <C> <C>
Andrea Farace ................ 23,333 $491,663
Philip N. Smith, Jr. ......... 10,000 $187,500
Barry Zimmerman .............. 15,000 $281,250
Fredrick Marcus .............. 18,333 $343,744
Robert H. Nelson ............. 18,333 $343,744
</TABLE>
Directors and Executive Officers of the Company, Trace and Merger Sub
As set forth in Appendix D, 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, the
former President of the Company and 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 the period commencing May
6, 1998 through August 4, 1998. 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.
60
<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 $137/8. 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 $163/16. 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 $ . 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 bid prices per share of the Common Stock, based on information
supplied by Nasdaq.
<TABLE>
<CAPTION>
LOW HIGH
-------- -------
<S> <C> <C>
1996
First Quarter .............................. 63/8 97/8
Second Quarter ............................. 9 127/8
Third Quarter .............................. 111/4 17
Fourth Quarter ............................. 125/8 175/8
1997
First Quarter .............................. 15 221/8
Second Quarter ............................. 12 157/8
Third Quarter .............................. 91/2 151/4
Fourth Quarter ............................. 93/8 141/2
1998
First Quarter .............................. 107/8 183/8
Second Quarter ............................. 143/4 181/8
Third Quarter (through , 1998) ......... [ ] [ ]
</TABLE>
61
<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.
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 have 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 will be held to vote upon and
adopt the Merger Agreement which provides, 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 Merger have 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 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
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 the Memorandum of Understanding, on September 9,
1998, the parties entered into a definitive Stipulation of Settlement and the
court has set a hearing to consider whether the settlement should be approved
for October 27,
62
<PAGE>
1998. A copy of the Stipulation of Settlement is included as Appendix E to this
Proxy Statement. In connection with the proposed settlement, the plaintiffs
intend to apply for an award of attorneys' fees and litigation expenses in an
amount not to exceed $925,000, and the defendants have agreed not to oppose
this application. Additionally, the Company has agreed to pay the cost of
sending notice of the settlement, if any, to the Public Stockholders.
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. The defendants have agreed to the proposed
settlement because, among other reasons, such settlement would eliminate the
burden and expenses of further litigation and would facilitate the consummation
of a transaction that they believe to be in the best interests of the Company
and the Public Stockholders.
INDEPENDENT PUBLIC ACCOUNTANTS
PricewaterhouseCoopers LLP serves as the Company's independent certified
public accountants. A representative of PriewaterhouseCoopers 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 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."
63
<PAGE>
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.
64
<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 Quarterly Report on Form 10-Q for the fiscal quarter
ended March 29, 1998;
4. The Company's Quarterly Report on Form 10-Q/A for the fiscal quarter
ended March 29, 1998, filed July 1, 1998;
5. The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended June 28, 1998;
6. The Company's Annual Report on Form 11-K for the fiscal year ended
December 28, 1997;
7. The Company's Current Report on Form 8-K filed January 7, 1998;
8. The Company's Current Report on Form 8-K/A filed March 9, 1998;
9. The Company's Current Report on Form 8-K filed March 13, 1998;
10. The Company's Current Report on Form 8-K filed March 17, 1998;
11. The Company's Current Report on Form 8-K/A filed May 13, 1998;
12. The Company's Current Report on Form 8-K filed June 26, 1998;
13. The Company's Current Report on Form 8-K/A filed September 9, 1998;
14. The Annual Report on Form 10-K of Crain Industries for the fiscal
year ended December 31, 1996;
15. The Quarterly Report on Form 10-Q of Crain Industries for the fiscal
quarter ended March 31, 1997;
16. The Quarterly Report on Form 10-Q of Crain Industries for the fiscal
quarter ended June 30, 1997;
17. The Quarterly Report on Form 10-Q of Crain Industries for the fiscal
quarter ended September 30, 1997; and
18. 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 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.
65
<PAGE>
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 June 25, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
-----
<S> <C> <C>
ARTICLE I. THE MERGER
Section 1.1. The Merger ...................................................... 1
Section 1.2. Effective Time .................................................. 1
Section 1.3. Closing ......................................................... 1
Section 1.4. Directors and Officers of the Surviving Corporation ............. 1
Section 1.5. Certificate of Incorporation .................................... 1
Section 1.6. Bylaws .......................................................... 1
Section 1.7. Effect of the Merger ............................................ 2
Section 1.8. Special Meeting; Certain Voting Matters ......................... 2
Section 1.9. Company Action Regarding the Proxy Statement .................... 2
Section 1.10. Parent Action Regarding the Proxy Statement ..................... 2
ARTICLE II. CONVERSION OF SECURITIES
Section 2.1. Conversion of Capital Stock ..................................... 3
Section 2.2. Surrender of Certificates ....................................... 3
Section 2.3. Dissenting Shares ............................................... 4
Section 2.4. Termination of Company Stock Plans .............................. 5
Section 2.5. Termination of Warrants ......................................... 5
Section 2.6. Withholding Taxes ............................................... 6
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.1. Organization .................................................... 6
Section 3.2. Capitalization .................................................. 6
Section 3.3. Authorization; Validity of Agreement; Company Action ............ 7
Section 3.4. Consents and Approvals; No Violations ........................... 7
Section 3.5. SEC Reports and Financial Statements ............................ 7
Section 3.6. Absence of Certain Changes ...................................... 8
Section 3.7. No Undisclosed Liabilities ...................................... 8
Section 3.8. Litigation ...................................................... 8
Section 3.9. No Default; Compliance with Applicable Laws ..................... 8
Section 3.10. Brokers ......................................................... 8
Section 3.11. Opinion of Financial Advisor .................................... 8
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Section 4.1. Organization .................................................... 8
Section 4.2. Authorization; Validity of Agreement; Necessary Action .......... 9
Section 4.3. Consents and Approvals; No Violations ........................... 9
Section 4.4. Financing Arrangements .......................................... 9
Section 4.5. No Prior Activities ............................................. 9
Section 4.6. Litigation ...................................................... 9
Section 4.7. Other Arrangements .............................................. 9
ARTICLE V. COVENANTS
Section 5.1. Interim Operations of the Company ............................... 10
Section 5.2. Access; Confidentiality ......................................... 11
Section 5.3. Additional Agreements ........................................... 11
Section 5.4. Consents and Approvals; HSR Act ................................. 11
Section 5.5. No Solicitation ................................................. 12
Section 5.6. Publicity ....................................................... 12
Section 5.7. Notification of Certain Matters ................................. 12
Section 5.8. Fair Price Statute .............................................. 13
Section 5.9. Indemnification ................................................. 13
Section 5.10. Financing ....................................................... 14
Section 5.11. Conduct of Business of Sub ...................................... 14
A-(i)
<PAGE>
ARTICLE VI. CONDITIONS
Section 6.1. Conditions to Each Party's Obligation to Effect the Merger ........ 14
Section 6.2. Additional Conditions to Obligations of the Company ............... 15
Section 6.3. Additional Conditions to Obligations of Parent and Sub ............ 15
ARTICLE VII. TERMINATION AND AMENDMENT
Section 7.1. Termination ....................................................... 15
Section 7.2. Effect of Termination ............................................. 16
ARTICLE VIII. MISCELLANEOUS
Section 8.1. Fees and Expenses ................................................. 17
Section 8.2. Amendment and Modification ........................................ 17
Section 8.3. Nonsurvival of Representations and Warranties ..................... 17
Section 8.4. Notices ........................................................... 17
Section 8.5. Interpretation .................................................... 18
Section 8.6. Counterparts ...................................................... 18
Section 8.7. Entire Agreement; No Third Party Beneficiaries .................... 18
Section 8.8. Severability ...................................................... 18
Section 8.9. Governing Law ..................................................... 19
Section 8.10. Assignment ........................................................ 19
Section 8.11. Descriptive Headings .............................................. 19
Section 8.12. Obligation of Parent .............................................. 19
ARTICLE IX. DEFINITIONS
Section 9.1. Certain Definitions ............................................... 19
Section 9.2. Accounting Terms and Determinations ............................... 22
Exhibit A-- Form of Certificate of Merger
</TABLE>
A-(ii)
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of June 25, 1998,
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, the Boards of Directors of the Company (on the recommendation of
the Special Committee) 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 (on the recommendation of
the Special Committee) 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 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 shareholders
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.
A-1
<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 shareholders (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 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):
A-2
<PAGE>
(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,
(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.
(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 shareholders
exercising appraisal rights pursuant to the DGCL ("Dissenting Shareholders"))
shall be converted into the right to receive $18.75 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 Shareholders,
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 Special Committee 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
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Amount") to which holders of the Shares shall become entitled pursuant to
Section 2.1(c), the holders of 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 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 shareholder 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 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, 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
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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 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, whether or not then-exercisable, shall be canceled and, in consideration
of such cancellation, each holder of a Stock Option 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 Stock Option and (ii) the number of Shares subject
thereto. No payment shall be made with respect to any Stock Option having a per
Share exercise price, as in effect immediately prior to the Effective Time,
equal to or greater than the Merger Consideration. The consideration due under
this Section 2.4 shall be payable without interest after (a) verification by
the Paying Agent 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 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 (i), and that none of those Stock Options has expired or ceased to be
exercisable; and (iii) a confirmation of and consent to the cancellation of all
of the Stock Options described pursuant to clause (i), including the Stock
Options for which no consideration is payable pursuant to this Section 2.4, in
consideration of the payment provided for in this Section 2.4.
(b) 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 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,
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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.
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) Capitalization. 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 June 19, 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) 1,390,848
Shares were issuable upon exercise of outstanding Stock Options under the
Option Plans, (iv) 27,737 Shares were issuable under the Non-Employee Director
Compensation Plan, (v) 1,226,530 Shares were issuable pursuant to the
Participating Warrants, (vi) 600,000 Shares were issuable pursuant to the 1994
Warrants and (vii) 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 June 19, 1998 of all holders of Stock Options, the number of such
Stock Options outstanding as of such date and the exercise price per Stock
Option. 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 June 19, 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,
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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 Special
Committee, at a meeting held on June 25, 1998, unanimously resolved to
recommend that the Board of Directors of the Company approve this Agreement and
the Merger, and the Board of Directors of the Company, at a meeting duly called
and held on June 25, 1998 at which all of the members of the Board of Directors
were present, duly and unanimously adopted a resolution approving this
Agreement and its execution, delivery and performance and the transactions
contemplated hereby, recommended that the shareholders of the Company adopt
this Agreement and the Merger, and determined that this Agreement and the
Merger, are fair to the shareholders of the Company other than Parent and its
Subsidiaries; provided, however, any such recommendation of the Special
Committee or 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
transactions contemplated hereby (except for the stockholder approval described
in this Section 3.3). 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.
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
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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. Absence of Certain Changes. Since December 29, 1997, except
(x) as expressly disclosed in the SEC Documents filed prior to the date of this
Agreement, (y) as expressly contemplated in this Agreement and (z) as set forth
on Section 3.6 of the Company Disclosure Schedule, the business of the Company
and its Subsidiaries has been carried on only in the ordinary and usual course
and no event or events, except for events involving (A) changes in general
economic conditions, (B) changes in conditions affecting the polyurethane foam
industry generally, or (C) changes in any applicable Legal Requirement, has or
have occurred that, either individually or in the aggregate, has had, or would
reasonably be expected to result in a Material Adverse Effect.
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, 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, 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")) 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 Sub a true and complete
copy of the engagement letter between the Company and Beacon pursuant to which
such firm would be entitled to any payment in connection with the transactions
contemplated hereby.
Section 3.11. Opinion of Financial Advisor. Beacon has rendered to the
Special Committee a written opinion dated as of June 25, 1998, a copy of which
has been provided to Parent, to the effect that the consideration to be
received by the shareholders of the Company, other than Parent and its
Subsidiaries, pursuant to the Merger is fair to such shareholders from a
financial point of view. Such opinion was delivered orally to the Special
Committee not later than the time that consummation of the transactions
contemplated hereby was approved by the Company's Board of Directors, and was
delivered in writing to the Special Committee prior to the execution of this
Agreement. 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
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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 shareholder of Sub and no other corporate or shareholder
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
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 relating to a senior secured credit facility and a "highly confident"
letter relating to (i) a senior unsecured note offering, (ii) a senior
subordinated note offering and (iii) a senior discount note offering (the
"Financing Letters"), each of 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 and the Special Committee. The transactions
contemplated by the Financing Letters 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 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 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 shareholder of the Company regarding any
consideration to be paid to such shareholder in connection with the
transactions contemplated hereby except pursuant to the terms of this
Agreement.
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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 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, other than the Company's
Mesquite Texas facility, 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) enter into or modify
or amend any employment or severance agreement with or, except as required by
any applicable Legal Requirement or in connection with the Crain restructuring
or Contracts in effect on the date hereof, grant any severance or termination
pay to any officer or director of the Company or any of its Subsidiaries; 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 or waive, release or assign any
material rights or claims, other than in the ordinary course of business
consistent with past practice;
(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); (iv) make any loans, advances or capital
contributions to, or investments in, any other person (other than to the
Subsidiaries of the Company set forth on Section 3.1 of the Company's
Disclosure Schedule (provided the ownership structure of such Subsidiary has
not changed from that
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existing on the date hereof) or 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, 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 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 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
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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. No Solicitation.
(a) The Company shall, and shall cause its Subsidiaries, officers,
directors, employees, counsel, investment bankers, financial advisers,
accountants, other representatives and agents (collectively, the "Company
Representatives") to immediately as of the date hereof cease any discussions or
negotiations with any parties that may be ongoing with respect to a Takeover
Proposal. The Company shall not, and shall not authorize or permit any Company
Representative to (i) solicit, initiate or encourage (including by way of
furnishing information), or take any other action to facilitate, any inquiries
or the making of any proposal which constitutes, or may reasonably be expected
to lead to, any Takeover Proposal, (ii) participate in any discussions or
negotiations regarding any Takeover Proposal (other than to respond to an
inquiry by informing the inquiring party of the restrictions imposed by this
Section 5.5) or (iii) enter into any agreement with respect to any Takeover
Proposal; provided, however, that, if at any time prior to the Effective Time,
the Board of Directors of the Company or the Special Committee determines in
good faith, based on the advice of its legal counsel as to legal matters, that
it is necessary to do so in order to comply with its fiduciary duties to the
Company's shareholders under applicable law, the Company or the Special
Committee may, in response to a Takeover Proposal, and subject to compliance
with Section 5.5(c), (x) furnish information with respect to the Company to any
person pursuant to a confidentiality agreement in connection therewith and (y)
participate in negotiations regarding such Takeover Proposal. Without limiting
the foregoing, it is understood that any violation of the restrictions set
forth in the preceding sentence by any Company Representative shall be deemed
to be a breach of this Section 5.5(a) by the Company.
(b) Neither the Board of Directors of the Company nor the Special
Committee shall (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 or such Special Committee of this 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. Notwithstanding anything in this Agreement to the contrary,
in the event that prior to the Effective Time the Board of Directors of the
Company or the Special Committee determines in good faith, based on the advice
of its legal counsel as to legal matters, that it is necessary to do so in
order to comply with its fiduciary duties to the Company's shareholders under
applicable law, the Board of Directors of the Company or the Special Committee
may withdraw or modify its approval or recommendation of this Agreement and the
Merger, approve or recommend a Superior Proposal or cause the Company to enter
into an agreement with respect to a 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 immediately 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 and the Special Committee, of
(x) the occurrence or non-occurrence of any event the occurrence
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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.
(b) The Company also shall give prompt notice to Parent, and Parent or
Sub shall give prompt notice to the Company and the Special Committee, 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 and the
Special Committee of any material development with respect to the Financing
described in the Financing Letters that would reasonably be expected to result
in (i) the conditions precedent to the Financing described in the Financing
Letters not being satisfied, or (ii) the termination of the Financing Letters
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 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
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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 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, 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 Letters, or if the Financing
contemplated by the Financing Letters 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 Letters.
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, any and all of which may be waived in whole or in part by
the Company (provided the Special Committee
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consents to such waiver), Parent or Sub, as the case may be, to the extent
permitted by applicable Legal Requirements:
(a) Shareholder Approval. This Agreement shall have been approved and
adopted by the requisite vote of the shareholders of the Company, if required
by applicable law or the Certificate of Incorporation of the Company, in order
to consummate the Merger;
(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 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:
(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; and
(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.
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:
(a) Representations. The representations and warranties of the Company
contained in this Agreement, 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 (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 Letters 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 Letters, are and will be satisfactory to
Parent); and
(d) No Adverse Change. Since March 29, 1998, no event or events shall
have occurred which have resulted in or would reasonably be expected to result
in a Material Adverse Effect.
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 shareholders of the Company:
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(a) by mutual written consent of the Boards of Directors of Parent and
the Company, with the concurrence of the Special Committee in the case of the
Company;
(b) by either Parent or the Company (with the concurrence of the Special
Committee if by 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 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 (with the concurrence of the Special
Committee, if by the Company), if the Merger shall not have been consummated by
December 31, 1998; 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 (with the concurrence of the Special Committee), 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 (with the concurrence of
the Special Committee), 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 or the Special
Committee (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 or the
Special Committee shall have resolved to take any of the foregoing actions;
(h) by the Company with the concurrence of the Special Committee, (i) if
the Company's Board of Directors or the Special Committee shall have withdrawn
its recommendation of the Merger Agreement or the Merger or shall have approved
or 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 or the Special Committee shall have
resolved to take any of the foregoing actions, provided that in any case the
Company, the Board of Directors of the Company and the Special Committee shall
have complied with the provisions of Section 5.5; or
(i) by the Special Committee on behalf of the Company, if the Special
Committee shall have withdrawn its recommendation of the Merger Agreement or
the Merger or shall have approved or recommended a Takeover Proposal, or if the
Special Committee shall have resolved to take any of the foregoing actions,
provided that in any case the Special Committee 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
of this Agreement.
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ARTICLE VIII.
MISCELLANEOUS
Section 8.1. Fees and Expenses.
(a) All fees and expenses incurred in connection with the Merger, this
Agreement and the transactions contemplated by this Agreement shall be paid by
the party incurring such fees or expenses, whether or not the Merger is
consummated;
(b) If a Triggering Transaction is consummated within twelve months of
the termination of this Agreement pursuant to Section 7.1, then the Company
shall pay, or cause to be paid, to Parent $30,000,000 (the "Termination Fee")
if (i) Parent or Sub terminates this Agreement under Section 7.1(f)(ii) or (g)
or at the time of the termination of this Agreement Parent or Sub had the right
to terminate this Agreement under such Sections; (ii) the Company terminates
this Agreement pursuant to Section 7.1(h); (iii) the Special Committee
terminates the Agreement pursuant to Section 7.1(i); or (iv) prior to any
termination of this Agreement, the Company had materially breached the
provisions of Section 5.5 of this Agreement. The Termination Fee shall be paid
in same day funds at the time of the first receipt by a holder of Shares (other
than Parent Shares) of any consideration arising out of the Triggering
Transaction.
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 shareholders 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 the Company shall only agree to any material
modification, amendment, supplement or waiver with the consent of the Special
Committee; and provided, further, that after the approval of this Agreement by
the shareholders 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 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: 593-1363
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
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(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
and
Special Committee of Board of Directors
of Foamex
c/o Gutfreund & Co., Inc.
712 Fifth Avenue
New York, New York 10019
Attention: John Gutfreund
Telephone No.: (212) 956-1190
Telecopy No.: (212) 956-1390
with copies to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Victor I. Lewkow, Esq.
Telephone No.: (212) 225-2000
Telecopy No.: (212) 225-3999
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 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.
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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 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) "Aggregate Amount" shall have the meaning specified in Section 2.2
hereto.
(c) "Agreement" shall have the meaning specified in the preamble hereto.
(d) "Beacon" shall have the meaning specified in Section 3.10 hereto.
(e) "Certificate of Merger" shall have the meaning specified in Section
1.2 hereto.
(f) "Certificates" shall have the meaning specified in Section 2.2 hereto.
(g) "Closing" shall have the meaning specified in Section 1.3 hereto.
(h) "Closing Date" shall have the meaning specified in Section 1.3 hereto.
(i) "Code" means the Internal Revenue Code of 1986, as amended.
(j) "Company" shall have the meaning specified in the preamble hereto.
(k) "Company Disclosure Schedule" shall have the meaning specified in
Section 3.1 hereto.
(l) "Company Representatives" shall have the meaning specified in Section
5.5 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 Shareholders" shall have the meaning specified in Section
2.1 hereto.
(r) "Dissenting Shares" shall have the meaning specified in Section 2.3
hereto.
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(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) "Expenses" means all out-of-pocket fees and expenses incurred or paid
by or on behalf of Parent or Sub in connection with the negotiation, execution
and delivery of this Merger Agreement, the Financing, or the transactions
contemplated by this Agreement or the Financing, including all fees and
expenses of counsel, commercial banks, investment banking firms, accountants,
experts and consultants to Parent.
(v) "Financing" means the receipt of funds by Parent on terms and
conditions not materially less favorable than, and in amounts not less than,
those set forth in the Financing Letters.
(w) "Financing Letters" shall have the meaning specified in Section 4.4
hereto.
(x) "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.
(y) "Governmental Entity" means any court, administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign.
(z) "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
(aa) "Indemnified Parties" shall have the meaning specified in Section 5.9
hereto.
(bb) "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.
(cc) "Legal Requirement" means any federal, state, local, municipal,
foreign, international, multinational, or other administrative order, writ,
injunction, decree, constitution, law, rule, ordinance, Permit, principle of
common law, regulation, statute, or treaty.
(dd) "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.
(ee) "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.
(ff) "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.
(gg) "Merger" shall have the meaning specified in Section 1.1 hereto.
(hh) "Merger Consideration" shall have the meaning specified in Section
2.1 hereto.
(ii) "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.
(jj) "Notice of Superior Proposal" shall have the meaning specified in
Section 5.5 hereto.
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(kk) "Option Plans" shall have the meaning specified in Section 2.4
hereto.
(ll) "Option Release" shall have the meaning specified in Section 2.4
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 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) "SEC Documents" shall have the meaning specified in Section 3.5
hereto.
(vv) "Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
(ww) "Shares" shall have the meaning specified in the recitals hereto.
(xx) "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 in connection with Parent's proposal to acquire all outstanding
Shares (other than Parent Shares).
(yy) "Special Meeting" shall have the meaning specified in Section 1.8
hereto.
(zz) "Stock Options" shall have the meaning specified in Section 2.4
hereto.
(aaa) "Sub" shall have the meaning specified in the preamble hereto.
(bbb) "Sub Disclosure Schedule" shall have the meaning specified in
Section 4.3 hereto.
(ccc) "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 shall the
Company and its Subsidiaries be deemed to be Subsidiaries of Parent.
(ddd) "Superior Proposal" means any bona fide Takeover Proposal which the
Special Committee or the Board of Directors of the Company determines in its
good faith judgment (based on the advice of its financial advisor of nationally
recognized reputation) to be more favorable to the Company's shareholders than
the Merger.
(eee) "Surviving Corporation" shall have the meaning specified in Section
1.1 hereto.
(fff) "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.
(ggg) "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'
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compensation, alternative or add-on minimum, estimated, or other tax, including
without limitation any interest, penalties or additions thereto.
(hhh) "Termination Fee" shall have the meaning specified in Section 8.1
hereto.
(iii) "Triggering Transaction" means any of the transactions described in
clause (A), (B) (in the event the transaction involves all or substantially all
of the consolidated assets of the Company and its Subsidiaries), or (D) (in the
event the 25% threshold is reached without including in the Shares of which
beneficial ownership was acquired those Shares that immediately prior to the
transaction were Parent Shares or Shares held by controlling persons of Parent)
of the definition of the term "Takeover Proposal" with any Person other than
Parent or any of its Affiliates, which either (a) provides that each Share
(excluding Parent Shares or Shares held by affiliates of Parent) that is
purchased or otherwise acquired or exchanged in connection with such
transaction will receive consideration having a value at the time of the
consummation of such transaction equal to or greater than the Merger
Consideration or (b) was proposed to the Company, or publicly disclosed, prior
to the termination of this Agreement.
(jjj) "Warrant" shall have the meaning specified in Section 2.5 hereto.
(kkk) "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 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.
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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: Chief Executive Officer
TRACE MERGER SUB, INC.
By: /s/ Marshall S. Cogan
Name: Marshall S. Cogan
Title: President
FOAMEX INTERNATIONAL INC.
By: /s/ Andrea Farace
Name: Andrea Farace
Title: Chief Executive Officer
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Amendment No. 1 to Agreement and Plan of Merger
This Amendment No. 1 (this "Amendment") to the Agreement and Plan of
Merger (the "Merger Agreement"), dated as of June 25, 1998, by and among Trace
International Holdings, Inc., a Delaware corporation ("Parent"), Trace Merger
Sub, Inc., a Delaware corporation("Sub"), and Foamex International Inc., a
Delaware corporation (the "Company"), is being entered into as of July 6, 1998.
WHEREAS, Parent, Sub and the Company desire to amend the Merger Agreement;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration the receipt and sufficiency of which is hereby
acknowledged, the parties hereto, intending to be legally bound, hereby agree
as follows:
Section 1. Amendment to Section 5.1(e)(iii). Section 5.1(e)(iii) of the
Merger Agreement is hereby amended and restated as follows: "(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".
Section 2. Amendment to Sections 5.1(g)(iii) and (iv). Sections
5.1(g)(iii) and (iv) of the Merger Agreement are hereby amended and restated as
follows: "(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 to the Subsidiaries of the Company, pursuant to the Merger
Agreement or 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) or customary advances to employees); or".
Section 3. No Further Amendment. Except as otherwise provided herein, the
Merger Agreement shall remain unchanged and in full force and effect and as
amended hereby is ratified by the parties hereto.
Section 4. Effect of Amendment. From and after the execution of this
Amendment by the parties hereto, any references to the Merger Agreement shall
be deemed a reference to the Merger Agreement as amended hereby.
Section 5. Governing Law. This Amendment 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 6. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 7. Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and shall in no way be construed to
define, limit, describe, explain, modify, amplify, or add to the
interpretation, construction or meaning of any provision of, or scope or intent
of, this Amendment or the Merger Agreement nor in any way affect this Amendment
or the Merger Agreement.
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IN WITNESS WHEREOF, each of the undersigned has caused this Amendment to
be signed on his own behalf or by a duly authorized officer, as the case may
be, as of the date first above written.
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
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APPENDIX B
[BEACON LETTERHEAD]
June 25, 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 offer (the "Offer") made by Trace International Holdings Inc.
("Trace") on June 25, 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 $18.75 per
Share in cash, pursuant to the Agreement and Plan of Merger, dated June 25,
1998 (the "Merger Agreement"), by and among Trace, Trace Merger Sub Inc. and
Foamex International Inc.
Consummation of the proposed purchase is subject to the execution of the Merger
Agreement by and among Trace, Trace Merger Sub Inc. and the Company, approval
by the Company's Board of Directors and stockholders and other terms and
conditions in the 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.
Pursuant to our engagement, we have informed ourselves concerning those aspects
of the 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 Offer; 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 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
shareholders; 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 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 $120 million
in connection with the purchase of the Shares, of which $60 million is a
payment 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 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 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 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. Since Trace has informed the Company
that its equity position was not for sale, we have, with your approval, not
contacted third parties to ascertain their interest in a combination with the
Company or in making a proposal which is competitive with the 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 of any of its
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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 Offer or the financing
thereof would have on the solvency of the Company or any of its affiliates,
including Trace.
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 Offer and do not constitute a
recommendation to any shareholder. 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 $18.75 per Share in cash contained in the Offer is 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 C
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 D
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 theBoard 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
</TABLE>
D-1
<PAGE>
<TABLE>
<CAPTION>
NAME POSITION CITIZENSHIP
- ---- --------------------------------------------------------------- -----------
<S> <C> <C>
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. 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 USA
the 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 USA
Chairman 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 USA
since 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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<PAGE>
<TABLE>
<CAPTION>
NAME POSITION CITIZENSHIP
- ---- --------------------------------------------------------------- -----------
<S> <C> <C>
Etienne Davignon ......... Etienne Davignon, 64, has been a director of the Company Belgian
since 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 USA
since 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.
</TABLE>
D-3
<PAGE>
<TABLE>
<CAPTION>
NAME POSITION CITIZENSHIP
- ---- --------------------------------------------------------------- -----------
<S> <C> <C>
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 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.
Philip N. Smith, Jr. ......... Mr. Smith, 55, has been Senior Vice President or Vice USA
President, 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, USA
Automotive Products since July 1997. 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.
</TABLE>
D-4
<PAGE>
<TABLE>
<CAPTION>
NAME POSITION CITIZENSHIP
- ---- -------------------------------------------------------------- -----------
<S> <C> <C>
Christine A. Henisee ......... Ms. Henisee, 51, has been Executive Vice President, USA
Business 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.
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 USA
of 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 USA
of Directors and Senior Managing Director of Trace since
March 1993 and March 1987, respectively, and a director
since July 1976.
</TABLE>
D-5
<PAGE>
<TABLE>
<CAPTION>
NAME POSITION CITIZENSHIP
- ---- ------------------------------------------------------------- -----------
<S> <C> <C>
Robert H. Nelson ............. Robert H. Nelson, 52, has served as Chief Financial Officer USA
of 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".
Karl H. Winters .............. Karl H. Winters, 39, has served as Vice President-Finance USA
and 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 USA
Secretary 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 USA
Trace".
Robert H. Nelson .............. See above under "Directors and Executive Officers of USA
Trace".
Tambra S. King ................ See above under "Directors and Executive Officers of USA
Trace".
</TABLE>
D-6
<PAGE>
APPENDIX E
IN THE CHANCERY COURT OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
IN RE FOAMEX INTERNATIONAL INC. : CONSOLIDATED
SHAREHOLDERS LITIGATION : C.A. NO. 16259NC
STIPULATION OF SETTLEMENT
The parties to this action, by and through their respective attorneys,
have entered into this Stipulation of Settlement (the "Stipulation"), subject
to the approval of the Court of Chancery (the "Court"):
WHEREAS,
A. Foamex International Inc. ("Foamex" or the "Company") is a Delaware
corporation with its principal executive offices in Linwood, Pennsylvania.
Foamex is a holding company which does not conduct any business of its own.
B. Trace International Holdings, Inc. ("Trace") is a Delaware corporation
with its principal executive offices in New York, New York. Trace is a holding
company which does not conduct any business of its own. As of March 16, 1998,
Trace and its subsidiaries beneficially owned approximately 46% of the
outstanding common stock of Foamex.
C. Salvatore Bonnano, Marshall S. Cogan, Etienne Davignon, Andrea Farace,
John H. Gutfreund, Robert J. Hay, Stuart J. Hershon and John V. Tunney
(collectively, the "Individual Defendants") have been the members of the
Company's board of directors during the period relevant to this litigation,
except that Mr. Bonnano resigned from the Company's Board of Directors on or
about March 12, 1998. (Trace, Foamex and the Individual Defendants are
collectively referred to herein as "Defendants.")
D. On March 16, 1998, Trace delivered to Foamex's Board of Directors (the
"Board") a proposal to purchase the outstanding shares of Foamex common stock,
other than those shares held by Trace or affiliates ("Public Shares"), for a
purchase price of $17.00 in cash per share, without interest (the "Proposed
Transaction"). Trace announced the Proposed Transaction on the same day.
E. The Board met to discuss the Proposed Transaction on March 16, 1998. At
that meeting, the Board appointed a Special Committee composed of two
independent directors, John H. Gutfreund and Robert J. Hay, to assess the
Proposed Transaction (the "Special Committee").
F. On March 17, 1998, five purported class actions were filed on behalf of
Foamex shareholders in the Court. A sixth purported class action was filed on
March 20, 1998. By order dated May 28, 1998, the Court consolidated the six
purported class actions into the above-captioned action (the "Action").
G. The complaints filed in the Action allege that Foamex, Trace and the
Individual Defendants breached their fiduciary duties in connection with the
Proposed Transaction. The Action seeks, among other things, a permanent
injunction barring the implementation of the Proposed Transaction on the
grounds that it represented an attempt by Trace to acquire the Public Shares of
Foamex common stock through unfair dealing.
H. Subsequent to the filing of the Action, attorneys for all parties
conducted arms-length negotiations and discussed discovery concerning the
allegations of the Action. On June 22, 1998, counsel for certain of the
Defendants in the Action and counsel for the plaintiffs in the Action commenced
settlement negotiations with respect to the Action. As part of such settlement
negotiations, plaintiffs' counsel requested, were provided with and reviewed
extensive documents relating to Foamex and the Proposed Transaction. The
following day a meeting was held at which plaintiffs' counsel and a financial
expert they had retained to evaluate the Proposed Transaction were provided
additional information concerning Foamex and the Proposed Transaction and were
afforded the opportunity to interview a representative of Trace regarding the
Proposed Transaction. 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 Foamex and the Proposed Transaction.
Plaintiffs' counsel also made certain proposals relating to the possible
settlement of the Action, including the demand that the price to be paid by
Trace per Public Share of Foamex stock should be increased to $18.75.
Plaintiffs' counsel also requested the opportunity to review and comment upon
the proxy statement to be provided to Foamex stockholders.
I. On June 22, 1998, Trace informed the Special Committee that it would be
prepared to increase the consideration it had previously offered in the
Proposed Transaction to $18.75 in cash, without interest, per Public
E-1
<PAGE>
Share (the "Offer"). Trace indicated that its willingness to pay the increased
purchase price took into consideration the Action and the expectation that the
Action could be resolved satisfactorily.
J. On June 23, 1998, the parties to the Action reached an
agreement-in-principle concerning a proposed settlement of the Action which
would result in the public stockholders of Foamex receiving an increase in
consideration to $18.75 in cash, without interest, per Public Share of Foamex
stock. The agreement-in-principle was thereafter memorialized in a Memorandum
of Understanding, dated June 25, 1998 ("MOU").
K. On June 25, 1998, the Board met to consider the Offer. Upon the
recommendation of the Special Committee and the Special Committee's financial
advisor, the Board concluded that the Merger (described and defined below) was
fair to and in the best interests of Foamex and Foamex's public shareholders.
The Board also adopted resolutions approving and adopting an Agreement and Plan
of Merger, dated June 25, 1998 (the "Merger Agreement"), among Foamex, Trace
and Trace Merger Sub, Inc., a wholly owned subsidiary of Trace ("Merger Sub").
Pursuant to the terms of the Merger Agreement, the Merger Sub will be merged
with and into Foamex and each outstanding share of Foamex's common stock,
except for (1) shares owned by Trace or any subsidiary of Trace, (2) shares
owned by Foamex, and (3) shares owned by stockholders who perfect their
appraisal rights in accordance with Delaware law, will be converted into the
right to receive $18.75 in cash, without interest (the "Merger").
L. Prior to signing the MOU, counsel for the plaintiffs in the Action
conducted further investigation and legal analysis of the matters alleged in
the Action and examined hundreds of pages of public and non-public documents
from Foamex and Trace. Thereafter, plaintiffs' counsel also reviewed and
commented upon the proxy statement and related materials which Foamex prepared
for its stockholders. In addition, prior to entering into this Stipulation,
plaintiffs' counsel conducted the confirmatory discovery provided for in the
MOU. Such confirmatory discovery included the further review of numerous
documents provided by Trace and Foamex as well as the review of numerous
documents provided by the Special Committee and the financial advisor to the
Special Committee. Plaintiffs' counsel also took the depositions of the
Chairman of the Special Committee, John H. Gutfreund, as well as that of a
representative of Trace.
M. In light of the aforementioned investigation, the additional facts
developed in discovery, the events, negotiations and agreements discussed
above, and analysis of applicable law, counsel for plaintiffs in the Action
concluded that the terms and conditions of the settlement provided for in this
Stipulation (the "Settlement") are fair, reasonable, adequate and in the bests
interests of the plaintiffs and the class of Foamex stockholders represented in
the Action.
N. Plaintiffs enter into this Stipulation after taking into account (i)
the substantial benefits to the members of the Class (as defined in paragraph 2
below) from the increased consideration to be paid by Trace per Public Share of
Foamex stock pursuant to the terms of the Merger Agreement, (ii) the risk of
continued litigation, (iii) the desirability of permitting the Settlement to be
consummated as provided by the terms of this Stipulation, and (iv) the
conclusion of counsel for plaintiffs that the terms and conditions of the
Settlement are fair, reasonable, adequate and in the best interests of the
Foamex stockholders represented in the Action.
O. Foamex, Trace and the Individual Defendants (collectively,
"Defendants") have denied and continue to deny vigorously any liability with
respect to all claims alleged in the Action. Defendants have concluded that it
is desirable that the Action be settled and dismissed, subject to the terms and
conditions herein, because the Settlement will (i) halt the substantial
expense, inconvenience, distraction and risk of continued litigation, and (ii)
dispel any uncertainty that may exist as a result of this litigation.
NOW, THEREFORE, IT IS STIPULATED AND AGREED, subject to the approval of
the Court, pursuant to Court of Chancery Rule 23, that any and all claims,
whether individual, class or derivative, known or unknown, arising under state
or federal law or otherwise, which now exist or may hereafter exist in favor of
the plaintiffs or any member of the Class, as defined below in paragraph 2
(collectively, the "Releasing Parties"), which have been, could have been or in
the future might have been asserted in the Action or in any court, tribunal, or
proceeding against Defendants, or any of their respective parent entities,
associates, affiliates, subsidiaries and families, and each and all of their
respective past, present and future officers, directors, stockholders,
partners, principals, employees, representatives, agents, advisors, attorneys,
financial or investment advisors, accountants, auditors, consultants,
investment bankers, heirs, executors, trustees, general or limited partners or
partnerships, personal representatives, estates, administrators, predecessors,
successors and assigns (collectively, the "Releasees"), which have arisen,
could have arisen, arise now or hereafter arise out of, or relate in any manner
to, the allegations, facts, events, transactions, acts, occurrences,
statements, representations, misrepresentations, omissions or any other matter,
thing or cause whatsoever, or any series thereof, embraced, involved, set forth
or otherwise related, directly or indirectly, to: (1) the Action, (2) the
Proposed Transaction, the Offer, the Merger or the Merger Agreement; (3)
E-2
<PAGE>
any acts or omissions of Defendants in connection with or in response to any
offer by Trace or Merger Sub to acquire all or any portion of Foamex, and (4)
any other material, public filings or statements (including, but not limited
to, public statements) and disclosures by Defendants or any of their
representatives in connection with the Proposed Transaction, the Offer, the
Merger or the Merger Agreement shall be fully, finally and forever compromised,
settled, discharged, dismissed with prejudice and released (the "Released
Claims"), upon and subject to the following terms and conditions; provided
however, that the Released Claims shall not include the right of any members of
the Class to enforce the terms of the Settlement or the right of any Class
member whose Foamex stock was converted by the Merger into the right to receive
$18.75 per share to seek appraisal pursuant to 8 Del. C. [sec] 262.
The release contemplated by this Stipulation extends to claims that the
Releasing Parties do not know or suspect to exist at the time of the release,
which if known, might have affected any Releasing Parties' decision regarding
the release contained in the Settlement. The Releasing Parties shall be deemed
to relinquish, to the full extent permitted by law, the provision, rights and
benefits of [sec] 1542 of the California Civil Code which provides:
A general release does not extend to claims which the creditor does not
know or suspect to exist in his favor at the time of executing the release,
which if known by him must have materially affected his settlement with the
debtor.
In addition, each of the Releasing Parties also shall be deemed to waive any
and all provisions, rights and benefits conferred by any law of any state or
territory of the United States, or principle of common law, which is similar,
comparable or equivalent to California Civil Code [sec] 1542. The Releasing
Parties acknowledge that they may discover facts in addition to or different
from those that they know or believe to be true with respect to the subject
matter of this release, but that it is their intention to fully, finally and
forever settle and release any and all claims released hereby known or unknown,
suspected or unsuspected, which now exist, or heretofore existed, or may
hereafter exist, and without regard to the subsequent discovery or existence of
such additional or different facts.
TERMS AND CONDITIONS
1. In exchange for the dismissal, release and discharge of the Released
Claims, Foamex and Trace have agreed to the terms and conditions of the Merger
described herein, including Trace's agreement to increase the merger
consideration to $18.75 in cash per Public Share of Foamex stock, without
interest. The parties to this Settlement agree that the terms and conditions of
the Merger, including the increase in consideration, constitute fair, adequate
and reasonable consideration for the settlement of all claims which were raised
or could have been raised by plaintiffs and the Class in the Action. Foamex and
the Individual Defendants acknowledge that the filing and prosecution of the
Action was a factor which they took into account in giving fair and appropriate
consideration to, and ultimately agreeing to the Offer and the Merger Agreement
and the steps leading up thereto. Trace also agrees that it took into account
the desirability of satisfactorily addressing the claims asserted in the Action
in agreeing to the increased consideration to be paid to Foamex stockholders
pursuant to the Merger Agreement.
2. The parties agree, subject to Court approval, to certification, for
settlement purposes only, of a mandatory non-opt out class under Court of
Chancery Rule 23(b)(1) and 23(b)(2) of all record and beneficial owners of the
common stock of Foamex International Inc. at any time from and including March
16, 1998 to and including the date of the Merger (as defined in this
Stipulation) (other than the Defendants or their affiliates), including any and
all of their respective predecessors, trustees, executors, administrators,
representatives, heirs, transferees, successors in interest and assigns,
immediate and remote, and any person claiming under any of them, and each of
them, excluding Defendants and their affiliates (the "Class"). If for any
reason the Court does not approve the Settlement or the Settlement is
disapproved on appeal or otherwise, the parties shall revert to their original
positions and certification shall be deemed null and void without prejudice to
any party to subsequently seek or oppose certification.
3. As soon as practicable after the execution of this Stipulation, the
parties shall jointly apply to the Court for the entry of an order in the form
attached hereto as Exhibit A (the "Scheduling Order").
4. Foamex will pay all costs incurred in identifying the members of the
Class and notifying them of the Settlement by mail, including the costs of
printing and copying the Notice (attached hereto as Exhibit B) as required by
the Scheduling Order.
5. If the Settlement (including any modification thereto made with the
consent of the parties as provided for herein) is approved by the Court, the
parties shall promptly request the Court to enter an Order and Final Judgment
substantially in the form attached hereto as Exhibit C.
6. The approval of the Settlement shall be considered final ("Final" or
"Finally Approved") for purposes of this Stipulation: (i) upon entry of the
Order and Final Judgment approving the Settlement and (ii) upon the expiration
E-3
<PAGE>
of any applicable period for the appeal of the Order and Final Judgment without
an appeal having been taken, or, if an appeal is taken, upon entry of an order
affirming the Order and Final Judgment appealed from, and the expiration of any
applicable period for the reconsideration, rehearing or further appeal of such
affirmance without any motion for reconsideration or rehearing or further
appeal having been filed.
7. Defendants shall have the option to withdraw from and terminate the
Settlement in the event that the Merger is not consummated in accordance with
the terms of the Merger Agreement. Each of the parties also shall have the
option to withdraw from and terminate the Settlement in the event that either
(i) the Order of Final Judgment referred to above is not entered substantially
in the form attached hereto, or (ii) the Settlement is not approved by the
Court or is disapproved or substantially modified on appeal, reconsideration or
rehearing.
8. In the event the Settlement proposed herein is not approved by the
Court, or the Court approves the Settlement but such approval is reversed or
vacated on appeal, reconsideration or otherwise, and such order reversing or
vacating the Settlement becomes final by lapse of time or otherwise, or if any
of the conditions to such Settlement are not fulfilled, then the Settlement
proposed herein shall be of no further force and effect, and this Stipulation
and all negotiations, proceedings and statements relating thereto and any
amendment thereof shall be null and void and without prejudice to any party
hereto, and each party shall be restored to his, her or its respective position
as it existed prior to the execution of this Stipulation.
9. In order to exercise any option a party may have to withdraw from and
terminate this Settlement, a party must provide, within five (5) days of the
event giving rise to such option, written notice of such withdrawal and the
grounds thereof to all signatories to this Stipulation.
10. Defendants in this Action specifically disclaim any liability
whatsoever relating to any of the Released Claims, expressly deny having
engaged in any wrongful or illegal activity, or having violated any law or
regulation or duty, expressly deny that any person or entity has suffered any
harm or damages as a result of the Released Claims, do not concede any
infirmity in their defenses against the Released Claims, and are making this
Settlement solely to avoid the distraction, burden, expense and risk occasioned
by continued litigation. The Court has made no finding that Defendants engaged
in any wrongdoing or wrongful conduct or otherwise acted improperly or in
violation of any law or regulation or duty in any respect.
11. At or before the hearing on the Settlement, plaintiffs' attorneys will
apply for an award of attorneys' fees not to exceed $875,000 and an award of
expenses not to exceed $50,000. Any fee and expense award to plaintiffs'
attorneys shall be paid exclusively by Foamex. Defendants agree that they will
not object to plaintiffs' counsels' application for attorneys' fees and
expenses so long as the application does not exceed $925,000. The fairness,
reasonableness and adequacy of the Settlement may be considered and ruled upon
by the Court independently of any award of attorneys' fees and expenses.
Defendants retain the right to oppose any other application for fees or
disbursements by plaintiffs, plaintiffs' counsel or any other person. No
counsel for plaintiffs who has appeared in the Action shall apply to any Court
for any fees or disbursements except as provided in this paragraph.
12. Subject to the terms and conditions of this Stipulation, such fees and
expenses shall not become payable until ten (10) business days from the later
of (a) the date on which the Settlement becomes Final, or (b) the date when the
Order of the Court granting the application of plaintiffs' counsel for an award
of fees and expenses has become final and no longer subject to further appeal
or review, whether by exhaustion of any possible appeal, lapse of time or
otherwise. Except as expressly provided herein, Defendants shall bear no other
expenses, costs, damages or fees alleged or incurred by the plaintiffs or any
member of the Class, or by any of their attorneys, experts, advisors, agents or
representatives.
13. Each of the attorneys executing the Stipulation on behalf of one or
more of the parties hereto warrants and represents that he or she has been duly
authorized and empowered to execute this Stipulation on behalf of his or her
respective client or clients.
14. The provisions contained in the Stipulation and all negotiations,
statements and proceedings in connection with it shall not be deemed a
presumption, a concession or an admission by any defendant of any fault,
liability or wrongdoing as to any fact or claim alleged or asserted in the
Action or any other actions or proceedings, or a concession or admission by any
plaintiff of any lack of merit in any claims or facts alleged, and shall not be
offered in evidence or otherwise used by any person for such purposes in these
or any other actions or proceedings, whether civil, criminal or administrative,
except in a proceeding to enforce the terms or conditions of this Stipulation.
15. The waiver by any party of any breach of this Stipulation shall not be
deemed or construed as a waiver of any other breach, whether prior, subsequent
or contemporaneous, of this Stipulation.
E-4
<PAGE>
16. This Stipulation and its exhibits constitute the entire agreement
among the parties, and no representations, warranties or inducements have been
made to any party concerning this Stipulation or its exhibits other than any
representations, warranties and covenants contained and memorialized in such
documents. This Stipulation may not be amended, nor any of its provisions
waived, except by a writing executed by all of the parties hereto.
17. This Stipulation shall be binding upon and inure to the benefit of the
parties hereto and their respective successors, assigns, heirs, executors and
administrators and upon any corporation, partnership or other entity into which
any party may merge or consolidate.
18. All of the exhibits hereto are incorporated herein by reference as if
set forth herein verbatim, and the terms of all exhibits are expressly made
part of this Stipulation.
19. All terms of this Stipulation and the exhibits hereto shall be
governed by and interpreted according to the law of Delaware, without regard to
conflict of law principles.
20. This Settlement Stipulation may be executed in any number of actual or
telecopied counterparts. All executed counterparts and each of them shall be
deemed to be one and the same instrument.
21. The parties and their attorneys agree to cooperate fully with one
another in seeking the Court's approval of this Stipulation and the Settlement
and to use their best efforts to effect the confirmation of this Stipulation
and Settlement.
22. If any claims which are or would be subject to the release and
dismissal contemplated by the Settlement are asserted against any person in any
court prior to Final Approval of the Settlement, the plaintiffs shall join,
where possible, in any motion to dismiss or stay such proceedings and shall
otherwise use their best efforts to effect a withdrawal or dismissal of all
claims.
23. Plaintiffs and their counsel represent and warrant that (i) plaintiffs
are members of the Class, and (ii) none of the plaintiffs' claims or causes of
action in the Action have been assigned, encumbered or in any other manner
transferred in whole or in part.
Dated: September 9, 1998
ROSENTHAL, MONHAIT, GROSS &
GODDESS, P.A.
By: /s/ Norman M. Monhait
-----------------------------------
Norman M. Monhait
Suite 1401
Mellon Bank Center
P.O. Box 1070
Wilmington, DE 19899
(302) 656-4433
Delaware Liaison Counsel for
Plaintiffs and the Class
Of Counsel:
BERNSTEIN LIEBHARD & LIFSHITZ
274 Madison Avenue
New York, NY 10016
(212) 779-1414
E-5
<PAGE>
Co-Lead Counsel for Plaintiffs and the Class
WECHSLER HARWOOD HALEBIAN
& FEFFER LLP
488 Madison Avenue
New York, NY 10022
(212) 935-7400
Co-Lead Counsel for Plaintiffs and the Class
FARUQI & FARUQI, LLP
415 Madison Avenue
New York, NY 10017
(212) 986-1074
Co-Lead Counsel for Plaintiffs and the Class
ABBEY, GARDY & SQUITIERI, LLP
212 East 39th Street
New York, NY 10016
(212) 889-3700
FRUCHTER & TWERSKY
60 East 42nd Street
Suite 4700
New York, NY 10165
(212) 687-6655
LAW FIRM OF HARVEY GREENFIELD
10 East 40th Street
New York, NY 10016
(212) 679-0600
MILBERG WEISS BERSHAD HYNES
& LERACH LLP
One Pennsylvania Plaza
New York, NY 10119
(212) 594-5300
MORRIS and MORRIS
1105 N. Market Street
Suite 1600
P.O. Box 2166
Wilmington, DE 19899
(302) 426-0400
STULL, STULL & BRODY
6 East 45th Street
New York, NY 10017
(212) 687-7230
RICHARDS, LAYTON & FINGER
By: /s/ Allen M. Terrell, Jr.
-----------------------------------
Allen M. Terrell, Jr.
Srinivas M. Raju
One Rodney Square
P.O. Box 551
Wilmington, DE 19899
(302) 658-6541
E-6
<PAGE>
Counsel for Defendants
Salvatore J. Bonnano, Etienne
Davignon, Andrea Farace, Stuart J.
Hershon, John V. Tunney, Trace
International Holdings Inc. and
Marshall S. Cogan
Of Counsel:
WILLKIE FARR & GALLAGHER
787 Seventh Avenue
New York, NY 10019-6099
(212) 728-8000
MORRIS, NICHOLS, ARSHT & TUNNELL
By: /s/ Alan J. Stone
-----------------------------------
Alan J. Stone
1201 North Market Street
Wilmington, DE 19899
(302) 658-9200
Counsel for Defendants
Robert J. Hay, John H. Gutfreund
and Foamex International Inc.
Of Counsel:
CLEARY, GOTTLIEB, STEEN & HAMILTON
One Liberty Plaza
New York, NY 10006
(212) 225-2000
E-7
<PAGE>
EXHIBIT A
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- --------------------------------------------------------x
IN RE FOAMEX INTERNATIONAL INC. : CONSOLIDATED
SHAREHOLDERS LITIGATION : C.A. No. 16259NC
- --------------------------------------------------------x
SCHEDULING ORDER
The parties to the above captioned action (the "Action") having applied
pursuant to Court of Chancery Rule 23(e) for an Order to approve the proposed
settlement (the "Settlement") of the Action in accordance with the Stipulation
of Settlement entered into by the parties, dated September , 1998 (the
"Stipulation"), for the dismissal of the Action, and for class certification
solely for purposes of settlement, and the Court having read and considered the
Stipulation and accompanying documents, and all parties having consented to the
entry of this Order,
IT IS, this _____ day of _________________, 1998, upon application of the
parties, ORDERED as follows:
1. The Court adopts and incorporates the definitions in the Stipulation for
purposes of this Order.
2. Solely for purposes of the Settlement, (a) the Action preliminarily
shall be maintained as a class action pursuant to Chancery Court Rules 23(b)(1)
and (b)(2) on behalf of a class composed of all record and beneficial owners of
shares of Foamex International Inc. ("Foamex") common stock at any time from
and including March 16, 1998 to and including the date of the Merger (as
defined in the Stipulation), including any and all of their respective
predecessors, trustees, executors, administrators, representatives, heirs,
transferees, successors in interest and assigns, immediate and remote, and any
person claiming under any of them, excluding defendants and their affiliates
(the "Class"); (b) the Court preliminarily finds that plaintiffs are adequately
represented by counsel and that plaintiffs will fairly and adequately protect
the interests of the Class; and (c) plaintiffs' counsel are preliminarily
certified as counsel for the Class ("Class Counsel");
3. The Court, solely for purposes of the Settlement, preliminarily finds
that: (a) the Class is so numerous that joinder of all members is
impracticable; (b) there are questions of law or fact common to the Class; (c)
the claims of the representative parties are typical of the claims or defenses
of the Class; and (d) the representative parties will fairly and adequately
protect the interests of the Class.
4. A hearing shall be held on __________________, 1998, at _____ ___.m.
in the Court of Chancery in the Daniel L. Herrmann Courthouse, 1000 King
Street, Wilmington, Delaware (the "Settlement Hearing") to determine the
fairness, reasonableness and adequacy of the Settlement, whether the
Stipulation and the Settlement should be finally approved by the Court and
judgment entered thereon, and to hear and determine any objections to the
Settlement. At the Settlement Hearing, Class Counsel may apply for an award of
attorneys' fees and expenses as set forth in paragraph 11 of the Stipulation,
which application shall be heard by the Court at the Settlement Hearing or at
such time thereafter as the Court in its discretion deems appropriate.
5. The Court reserves the right to adjourn the Settlement Hearing,
including consideration of the application for attorneys' fees and expenses,
without further notice other than by announcement at the Settlement Hearing or
any adjournment thereof.
6. The Court reserves the right to approve the Settlement at or after the
Settlement Hearing with such modifications as may be consented to by the
parties to the Stipulation and without further notice to the Class.
7. Within 10 days of the date of this Order, Foamex shall mail, by
first-class mail, postage prepaid, the Notice of Pendency of Class Action,
Proposed Settlement of Class Action and Settlement Hearing, substantially in
the form attached to the Stipulation as Exhibit B (the "Notice"), to all Class
members of record.
8. The form and method of notice specified herein are the best notice
practicable and shall constitute due and sufficient notice of the Settlement
Hearing to all persons entitled to receive such notice, and fully satisfy the
requirements of due process and of Rule 23 of the Rules of the Court of
Chancery. Foamex shall, on or before the date of the Settlement Hearing, file
proof of mailing of the Notice.
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9. Any member of the Class who objects to the Stipulation, the Settlement,
the class action determination, the Order and Final Judgment to be entered
herein and/or the application for attorneys' fees and expenses, or who
otherwise wishes to be heard, may appear in person or by his or her attorney at
the Settlement Hearing and present any evidence or argument that may be proper
and relevant; provided however, that no person other than plaintiffs,
defendants and their counsel in the Action shall be heard, and no papers,
briefs, pleadings or other documents submitted by any such person shall be
received and considered by the Court (unless the Court in its discretion shall
thereafter otherwise direct, upon application of such person and for good cause
shown), unless no later than ten (10) days prior to the Settlement Hearing, (i)
written notice of the intention to appear, (ii) a detailed statement of such
person's objections to any matter before the Court, and (iii) the grounds
therefor or the reasons why such person desires to appear and to be heard, as
well as all documents and writings which such person desires the Court to
consider, shall be filed by such person with the Register in Chancery and, on
or before such filing, shall be served upon the following counsel of record:
Norman M. Monhait, Esquire
Rosenthal, Monhait Gross & Goddess, P.A.
Suite 1401, Mellon Bank Center
P.O. Box 1070
Wilmington, Delaware 19899
(302) 656-4433
Attorneys for Plaintiffs and the Class
Allen M. Terrell, Jr., Esquire
Richards, Layton & Finger
One Rodney Square
P.O. Box 551
Wilmington, Delaware 19899
(302) 658-6541
Attorneys for Defendants Salvatore J. Bonnano,
Etienne Davignon, Andrea Farace,
Stuart J.Hershon, John V. Tunney,
Trace International Holdings Inc. and
Marshall S. Cogan
Alan J. Stone, Esq.
Morris, Nichols, Arsht & Tunnell
1201 North Market Street
Wilmington, DE 19899
(302) 658-9200
Attorneys for Defendants Robert J. Hay, John H.
Gutfreund and Foamex International Inc.
10. Any person who fails to object in the manner prescribed above shall be
deemed to have waived such objection and shall be forever barred from raising
such objection in the Action or any other action or proceeding.
11. Pending final determination of whether the Stipulation of Settlement
should be approved and the Class finally certified, plaintiffs and all members
of the Class, or any of them, are barred and enjoined from commencing or
prosecuting any action asserting any claims, either directly, representatively,
derivatively or in any other capacity, against any defendant herein which are
or relate to the Released Claims as defined in the Stipulation or which arise
out of or relate in any way to any of the transactions or events described in
or relating to the Action.
12. If the Settlement provided for in the Stipulation shall be approved by
the Court following the Settlement Hearing, an Order and Final Judgment shall
be entered as described in the Stipulation.
13. If the Settlement is not approved by the Court or is terminated or
shall not become effective for any reason whatsoever, the Action shall proceed,
completely without prejudice to any party as to any matter of law or fact and
the conditional certification of the Class shall become null and void, as if
the Stipulation had not been made
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and had not been submitted to the Court, and neither the Stipulation nor any
provision contained in the Stipulation nor any action undertaken pursuant
thereto nor the negotiation thereof by any party shall be deemed an admission
or offered or received in evidence at any proceeding in the Action or any other
action or proceeding.
-------------------------------
Vice Chancellor
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EXHIBIT B
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
IN RE FOAMEX INTERNATIONAL INC.: CONSOLIDATED
SHAREHOLDERS LITIGATION : C.A. No. 16259NC
NOTICE OF PENDENCY OF CLASS ACTION, PROPOSED
SETTLEMENT OF CLASS ACTION AND SETTLEMENT HEARING
TO: ALL RECORD AND BENEFICIAL OWNERS OF THE COMMON STOCK OF FOAMEX
INTERNATIONAL INC. ("FOAMEX" OR THE "COMPANY") AT ANY TIME FROM AND
INCLUDING MARCH 16, 1998 TO AND INCLUDING THE DATE OF THE MERGER
(DESCRIBED HEREIN), EXCLUDING DEFENDANTS AND THEIR AFFILIATES
(COLLECTIVELY, THE "CLASS").
PLEASE READ ALL OF THIS NOTICE CAREFULLY. YOUR RIGHTS WILL BE AFFECTED BY
THE LEGAL PROCEEDINGS DESCRIBED IN THIS NOTICE. IF YOU WERE NOT THE
BENEFICIAL HOLDER OF FOAMEX STOCK BUT HELD FOAMEX STOCK FOR A BENEFICIAL
HOLDER, PLEASE TRANSMIT THIS DOCUMENT TO SUCH BENEFICIAL HOLDER.
1. The Delaware Court of Chancery (the "Court") has required that this
notice be given to all members of the Class as defined above.
SETTLEMENT HEARING
2. Members of the Class are hereby notified that the Court will hold a
hearing in the Daniel L. Herrmann Courthouse, 10th & King Streets, Wilmington,
Delaware 19801 on __________, 1998, at ___.m. (the "Settlement Hearing"), to (i)
determine whether the terms and conditions of a proposed settlement (the
"Settlement") of this action (the "Action"), are fair, reasonable and adequate
and in the best interests of the Class such that the Action should be settled
and ended; (ii) determine whether a class should be finally certified in this
Action, and whether the Class was adequately represented by the named
plaintiffs and plaintiffs' attorneys; (iii) hear and determine any objections
to the Settlement; and (iv) if the Court approves the Settlement, to determine
whether it should award attorneys' fees and expenses to plaintiffs' attorneys
as described below.
3. The Court has reserved the right to adjourn the Settlement Hearing, by
oral announcement at such hearing or any adjournment thereof, and without
further notice of any kind. The Court also has reserved the right to approve
the Settlement, with or without modifications, to enter its final judgment
dismissing the Action as to all defendants and their affiliates and with
prejudice as against the plaintiffs and all members of the Class, and to order
the payment of attorneys' fees and expenses, without further notice of any
kind.
SUMMARY OF SETTLEMENT
The Action and the Settlement address claims dealing with the proposed
merger between Foamex and Trace Merger Sub, Inc. ("Merger Sub"), a wholly-owned
subsidiary of Trace International Holdings, Inc. ("Trace") (the "Merger"). As a
result of the Settlement, the holders of outstanding shares of Foamex common
stock, other than those shares held by Trace or affiliates ("Public Shares"),
are to receive an increase in consideration for their shares of Foamex stock in
the Merger from $17.00 in cash per share, without interest, to $18.75 in cash
per share, without interest. In return, plaintiffs have agreed, subject to
approval of the Settlement by the Court, to dismiss all claims by the Foamex
stockholders relating to the Merger. A more complete summary of the Settlement
is set forth on pages ___ to ___ of this Notice.
THE FACTUAL BACKGROUND
THE DESCRIPTION OF THE ACTION AND THE SETTLEMENT WHICH FOLLOW HAVE BEEN
PREPARED BY COUNSEL FOR THE PARTIES. THE COURT HAS MADE NO FINDINGS WITH
RESPECT TO SUCH MATTERS, AND THIS NOTICE IS NOT AN EXPRESSION BY THE COURT OF
FINDINGS OF FACT.
A. Foamex is a Delaware corporation with its principal executive offices
in Linwood, Pennsylvania. Foamex is a holding company which does not conduct
any business of its own.
B. Trace is a Delaware corporation with its principal executive offices in
New York, New York. Trace is a holding company which does not conduct any
business of its own. As of March 16, 1998, Trace and its subsidiaries
beneficially owned approximately 46% of the outstanding common stock of Foamex.
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C. On March 16, 1998, Trace proposed to Foamex's Board of Directors (the
"Board") to purchase the Public Shares of Foamex stock for $17.00 in cash per
share, without interest (the "Proposed Transaction").
D. On March 16, 1998, the Board met to discuss the Proposed Transaction
and appointed a Special Committee composed of two independent directors, John
H. Gutfreund and Robert J. Hay, to assess the Proposed Transaction (the
"Special Committee").
E. On March 17, 1998, five purported class actions were filed on behalf of
Foamex shareholders in the Court. A sixth purported class action was filed on
March 20, 1998. By order dated May 28, 1998, the Court consolidated the six
purported class actions into the above-captioned Action. The Action sought,
among other things, a permanent injunction barring the implementation of the
Proposed Transaction on the grounds that it represented an attempt by Trace to
acquire the Public Shares of Foamex common stock through unfair dealing.
F. Subsequent to the filing of the Action, attorneys for all parties
conducted arms-length negotiations and discussed discovery concerning the
allegations of the Action. As part of such settlement negotiations, plaintiffs'
counsel requested, were provided with and reviewed extensive documents relating
to Foamex and the Proposed Transaction. Plaintiffs' counsel and their financial
expert which they had retained to evaluate the Proposed Transaction were also
provided with additional information about Foamex and the Proposed Transaction
at a meeting and were afforded an opportunity to interview a representative of
Trace regarding the Proposed Transaction. Plaintiffs' counsel and their expert
also made a presentation to the representatives of the defendants in the Action
present at the meeting concerning their view of Foamex and the Proposed
Transaction and made certain proposals relating to a possible settlement of the
Action, including a demand that the price to be paid by Trace per Public Share
of Foamex stock should be increased to $18.75. Plaintiffs' counsel also
requested the opportunity to review and comment upon the proxy statement to be
provided to Foamex stockholders.
G. On June 23, 1998, the parties to the Action reached an
agreement-in-principle concerning a proposed settlement of the Action which
would result in the holders of Public Shares of Foamex stock receiving an
increase in consideration to $18.75 in cash, without interest, per Public Share
of Foamex stock. The agreement-in-principle was thereafter memorialized in a
Memorandum of Understanding, dated June 25, 1998 (the "MOU").
H. On June 25, 1998, upon the recommendation of the Special Committee and
the Special Committee's financial advisor, the Board concluded that the Merger
(described below) was fair to and in the best interests of Foamex and Foamex's
public shareholders. The Board also adopted resolutions approving and adopting
an Agreement and Plan of Merger, dated June 25, 1998 (the "Merger Agreement"),
among Foamex, Trace and Merger Sub. Pursuant to the terms of the Merger
Agreement, Merger Sub will be merged with and into Foamex and each outstanding
share of Foamex's common stock, except for (1) shares owned by Trace or any
subsidiary of Trace, (2) shares owned by Foamex, and (3) shares owned by
stockholders who perfect their appraisal rights in accordance with Delaware
law, will be converted into the right to receive $18.75 in cash, without
interest.
I. Prior to signing the MOU, counsel for the plaintiffs in the Action
conducted further investigation and legal analysis of the matters alleged in
the Action, including the review of documents and other matter described above.
Following the signing of the MOU, plaintiffs' counsel reviewed and commented
upon the proxy statement and related materials which Foamex prepared for its
stockholders. Plaintiffs' counsel also engaged in formal discovery, including
the examination of additional documents from Foamex, Trace, the Special
Committee and the financial advisor to the Special Committee. Plaintiffs'
counsel also took the depositions of both a representative of Trace and that of
the Chairman of the Foamex Special Committee.
J. In light of the investigation described above, the additional facts
developed in discovery, the events, negotiations and agreements discussed
above, and analysis of applicable law, counsel for plaintiffs in the Action
concluded that the terms and conditions of the Settlement are fair, reasonable,
adequate and in the bests interests of the plaintiffs and the class of Foamex
stockholders represented in the Action.
K. Foamex, Trace and the Individual Defendants (collectively,
"Defendants") have denied and continue to deny vigorously any liability with
respect to all claims alleged in the Action. Defendants have nonetheless
concluded that it is desirable that the Action be settled and dismissed to halt
the substantial expense, inconvenience, distraction and risk of continued
litigation, and dispel any uncertainty that may exist as a result of this
Action.
THE SETTLEMENT TERMS
1. Plaintiffs and Defendants have agreed to the terms and conditions of
the Settlement described herein, including Trace's agreement to increase the
consideration which it has agreed to pay to acquire the Public Shares of Foamex
stock to $18.75 in cash per share, without interest (the "Offer"). The parties
to this Settlement agree
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<PAGE>
that the terms and conditions of the Merger, including the increase in
consideration, constitute fair, adequate and reasonable consideration for the
settlement of all claims which were raised or could have been raised by
plaintiffs and the Class in the Action. Foamex and the Individual Defendants
acknowledge that the filing and prosecution of the Action was a factor which
they took into account in giving fair and appropriate consideration to, and
ultimately approving and adopting the Merger Agreement and the steps leading up
thereto. Trace also agrees that it took into account the desirability of
satisfactorily addressing the claims asserted in the Action in agreeing to the
increased consideration to be paid to Foamex stockholders pursuant to the
Merger Agreement.
2. If the Court approves the Settlement, it will approve an Order and
Final Judgment which, among other things will provide that any and all claims,
whether individual, class or derivative, known or unknown, arising under state
or federal law or otherwise, which now exist or may hereafter exist in favor of
the plaintiffs or any member of the Class (collectively, the "Releasing
Parties"), which have been, could have been or in the future might have been
asserted in the Action or in any court, tribunal, or proceeding against
Defendants, or any of their respective parent entities, associates, affiliates,
subsidiaries and families, and each and all of their respective past, present
and future officers, directors, stockholders, partners, principals, employees,
representatives, agents, advisors, attorneys, financial or investment advisors,
accountants, auditors, consultants, investment bankers, heirs, executors,
trustees, general or limited partners or partnerships, personal
representatives, estates, administrators, predecessors, successors and assigns
(collectively, the "Releasees"), which have arisen, could have arisen, arise
now or hereafter arise out of, or relate in any manner to, the allegations,
facts, events, transactions, acts, occurrences, statements, representations,
misrepresentations, omissions or any other matter, thing or cause whatsoever,
or any series thereof, embraced, involved, set forth or otherwise related,
directly or indirectly, to: (1) the Action, (2) the Proposed Transaction, the
Offer, the Merger or the Merger Agreement; (3) any acts or omissions of
Defendants in connection with or in response to any offer by Trace or Merger
Sub to acquire all or any portion of Foamex, and (4) any other material, public
filings or statements (including, but not limited to, public statements) and
disclosures by Defendants or any of their representatives in connection with
the Proposed Transaction, the Offer, the Merger or the Merger Agreement shall
be fully, finally and forever compromised, settled, discharged, dismissed with
prejudice and released (the "Released Claims"), upon and subject to the
following terms and conditions; provided however, that the Released Claims
shall not include the right of any members of the Class to enforce the terms of
the Settlement or the right of any Class member whose Foamex stock was
converted by the Merger into the right to receive $18.75 per share to seek
appraisal pursuant to 8 Del. C. [sec] 262.
The release contemplated by the Settlement extends to claims that the
Releasing Parties do not know or suspect to exist at the time of the release,
which if known, might have affected any Releasing Parties' decision regarding
the release contained in the Settlement. The Releasing Parties shall be deemed
to relinquish, to the full extent permitted by law, the provision, rights and
benefits of [sec] 1542 of the California Civil Code which provides:
A general release does not extend to claims which the creditor does not
know or suspect to exist in his favor at the time of executing the release,
which if known by him must have materially affected his settlement with the
debtor.
In addition, each of the Releasing Parties also shall be deemed to waive any
and all provisions, rights and benefits conferred by any law of any state or
territory of the United States, or principle of common law, which is similar,
comparable or equivalent to California Civil Code [sec] 1542. The Releasing
Parties acknowledge that they may discover facts in addition to or different
from those that they know or believe to be true with respect to the subject
matter of this release, but that it is their intention to fully, finally and
forever settle and release any and all claims released hereby known or unknown,
suspected or unsuspected, which now exist, or heretofore existed, or may
hereafter exist, and without regard to the subsequent discovery or existence of
such additional or different facts.
3. Under the terms of the Settlement, this release and dismissal will bar
plaintiffs or any member of the Class from starting or prosecuting any other
action asserting any Released Claims against any of the Releasees.
4. THE COURT HAS NOT FINALLY DETERMINED THE MERITS OF THE CLAIMS MADE BY
PLAINTIFFS AGAINST, OR THE DEFENSES OF, THE DEFENDANTS. THIS NOTICE DOES NOT
IMPLY THAT THERE HAS BEEN OR WOULD BE ANY FINDING OF VIOLATION OF THE LAW OR
THAT RELIEF IN ANY FORM OR RECOVERY IN ANY AMOUNT COULD BE HAD IF THE ACTION
WAS NOT SETTLED.
5. It is the intent of the parties to the Action that the Settlement, if
approved by the Court, shall extinguish for all time rights, claims and causes
of action that are or relate to the Released Claims against any of the
Releasees.
6. The Settlement will become effective at such time as the Order and
Final Judgment entered by the Court approving the Settlement shall become final
and not subject to further appeal or review. If the Court does not approve
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<PAGE>
the Settlement or it does not become effective, then the Settlement shall be of
no further force and effect and each party shall be restored to his, her or its
respective position prior to entering into the Stipulation, except that all
costs incurred in connection with notifying the Class of the proposed
Settlement shall be the obligation of Foamex.
ATTORNEYS' FEES
7. Plaintiffs' attorneys will ask the Court for an award of attorneys'
fees not to exceed $875,000 and an award of expenses not to exceed $50,000.
Defendants have agreed not to oppose this application, but Defendants retain
the right to oppose any other application for fees or disbursements by
plaintiffs' counsel or any other persons. Any fee award to plaintiffs'
attorneys shall be paid exclusively by Foamex on behalf of and for the benefit
of all Defendants in the event the Settlement is approved by the Court. The
Court may consider and rule upon the fairness, reasonableness and adequacy of
the Settlement independently of any award of attorneys' fees and expenses.
CLASS CERTIFICATION
8. On _________, 1998, the Court signed an order (the "Scheduling Order")
determining preliminarily and solely for purposes of the Settlement, that the
Action may be maintained as a class action by plaintiffs as representatives of
the Class, and naming the law firm of Rosenthal, Monhait, Gross & Goddess,
P.A., as Delaware Liaison Counsel and the firms of Bernstein Liebhard &
Lifshitz, Wechsler Harwood Halebian & Feffer LLP, and Faruqi & Faruqi, LLP as
Co-lead Counsel for the Class ("Class Counsel"), pursuant to Chancery Court
Rules 23(b)(1) and (b)(2). At the Settlement Hearing the Court will be asked to
consider these issues and make specific findings that (i) the Action is finally
certified as a class action pursuant to Chancery Court Rules 23(b)(1) and
(b)(2), including a finding that the Class was adequately represented by the
plaintiffs and plaintiffs' attorneys and (ii) the Settlement is approved as
fair, reasonable and adequate.
RIGHT TO APPEAR AT SETTLEMENT HEARING
9. Any Class member who objects to the Settlement, the class action
determination, the Order and Final Judgment to be entered herein, and/or the
application for attorneys' fees and expenses, or who otherwise wishes to be
heard, may appear in person or by his/her attorney at the Settlement Hearing
and present any evidence or argument that may be proper and relevant. To do so,
however, a class member must no later than ten days before the Settlement
Hearing (unless the Court in its discretion shall thereafter otherwise direct,
upon application of such person and for good cause shown), file (i) a written
notice of the intention to appear; (ii) a detailed statement of such person's
objections to any matter before the Court; and (iii) the grounds therefor or
the reasons why such person desires to appear and to be heard, as well as all
documents and writings which such person desires the Court to consider, with
the Register in Chancery and, on or before such filing, serve a copy of all
such documents by hand or first class mail, postage prepaid, upon the following
counsel of record:
Norman M. Monhait, Esquire
Rosenthal, Monhait Gross & Goddess, P.A.
Suite 1401, Mellon Bank Center
P.O. Box 1070
Wilmington, Delaware 19899
(302) 656-4433
Delaware Liaison Counsel for Plaintiffs and the Class
Allen M. Terrell, Jr., Esquire
Richards, Layton & Finger
One Rodney Square
P.O. Box 551
Wilmington, Delaware 19899
(302) 658-6541
Counsel for Defendants Salvatore J. Bonnano, Etienne Davignon, Andrea
Farace, Stuart J. Hershon, John V. Tunney, Trace International Holdings
Inc. and Marshall S. Cogan
Alan J. Stone, Esq.
Morris, Nichols, Arsht & Tunnell
1201 North Market Street
Wilmington, Delaware 19899
(302) 658-9200
Counsel for Defendants Robert J. Hay, John H. Gutfreund and Foamex
International Inc.
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<PAGE>
Any person who fails to object in the manner prescribed above shall be deemed
to have waived such objection and shall be forever barred from raising such
objection in this or any other action or proceeding.
INTERIM INJUNCTION
10. Pending final determination of whether the Settlement should be
approved, the plaintiffs and all members of the Class, and each of them, and
any of their respective representatives, trustees, successors, heirs and
assigns shall not commence or prosecute any action either directly or in any
other capacity which asserts Released Claims against any of the Releases.
SCOPE OF THIS NOTICE AND FURTHER INFORMATION
11. This Notice does not purport to be a comprehensive description of the
Action, the allegations or transactions related thereto, the terms of the
Settlement or the Settlement Hearing. For a more detailed statement of the
matters involved in this litigation, you may inspect the pleadings, the
Stipulation of Settlement, the Orders entered by the Chancery Court and other
papers filed in the litigation, unless sealed, at the Office of the Register in
Chancery of the Court of Chancery of the State of Delaware, Daniel L. Herrmann
Courthouse, 10th & King Streets, New Castle County, Wilmington, Delaware,
during regular hours of each business day. DO NOT WRITE OR TELEPHONE THE COURT.
If you have questions, you may write Co-lead Counsel for plaintiffs and the
Class:
Stanley Bernstein, Esquire Robert Harwood, Esquire
Bernstein Leibhard & Lifshitz Wechsler Harwood Halebian & Feffer LLP
274 Madison Avenue 488 Madison Avenue
New York, NY 10016 New York, New York 10022
Lubna Faruqi, Esquire
Faruqi & Faruqi, LLP
415 Madison Avenue
New York, NY 10017
NOTICE TO PERSONS OR ENTITIES HOLDING
RECORD OWNERSHIP ON BEHALF OF OTHERS
12. Brokerage firms, banks and other persons or entities who are members
of the Class in their capacities as record owners, but not as beneficial
owners, are requested to send this Notice promptly to beneficial owners.
Additional copies of this Notice for transmittal to beneficial owners are
available on request directed to Foamex International Inc., Attention: Tambra
S. King, 375 Park Avenue, New York, New York 10152.
ENTERED BY ORDER OF THE COURT:
-----------------------------------
Register in Chancery
Dated: ______, 1998
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<PAGE>
EXHIBIT C
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- --------------------------------------------------------x
IN RE FOAMEX INTERNATIONAL INC. : CONSOLIDATED
SHAREHOLDERS LITIGATION : C.A. No. 16259NC
- --------------------------------------------------------x
ORDER AND FINAL JUDGMENT
A hearing having been held before this Court (the "Court") on _________
,1998, pursuant to the Court's Order of _________, 1998 (the "Scheduling
Order"), upon a Stipulation of Settlement, filed on __________, 1998 (the
"Stipulation"), of the above-captioned action (the "Action"), which is
incorporated herein by reference; it appearing that due notice of said hearing
has been given in accordance with the aforesaid Scheduling Order; the
respective parties having appeared by their attorneys of record; the Court
having heard and considered evidence in support of the proposed Settlement (as
defined in the Stipulation); the attorneys for the respective parties having
been heard; an opportunity to be heard having been given to all other persons
requesting to be heard in accordance with the requirements of the Scheduling
Order; the Court having determined that notice to the Class (as defined below)
preliminarily certified, pursuant to aforesaid Scheduling Order, was adequate
and sufficient; and the entire matter of the proposed Settlement having been
heard and considered by the Court;
IT IS HEREBY ORDERED, ADJUDGED AND DECREED this ________ day of _________
1998, that:
1. The form and manner of notice given to the members of the Class is
hereby determined to have been the best notice practicable under the
circumstances and to have been given in full compliance with the requirements
of due process and of Court of Chancery Rule 23.
2. Based on the record of the Action, each of the provisions of Chancery
Court Rule 23(a) has been satisfied and the Action has been properly maintained
according to the provisions of Chancery Court Rules 23(b)(1) and (b)(2).
Specifically, this Court finds, solely for purposes of the Settlement, that (1)
the Class contemplated in the Action is so numerous that joinder of all members
is impracticable, (2) there are questions of law or fact common to the Class,
(3) the claims of the representative plaintiffs are typical of the claims of
the Class, and (4) the representative plaintiffs and plaintiffs' counsel have
fairly and adequately represented and protected the interests of the Class. The
Court further finds that (i) the prosecution of separate actions by individual
members of the Class would create a risk of inconsistent or varying
adjudications with respect to individual members of the Class which would
establish incompatible standards of conduct for the parties opposing the Class
or would be as a practical matter dispositive to the other members of the Class
not parties to the adjudications, and (ii) defendants have acted on grounds
generally applicable to the Class, thereby making appropriate final relief with
respect to the Class as a whole. The Action is certified as a class action,
pursuant to Chancery Court Rules 23(b)(1) and (b)(2), on behalf of a class
composed of all record and beneficial owners of shares of Foamex International
Inc. ("Foamex") common stock at any time from and including March 16, 1998 to
and including the date of the Merger (as defined in the Stipulation), including
any and all of their respective predecessors, trustees, executors,
administrators, representatives, heirs, transferees, successors in interest and
assigns, immediate and remote, and any person claiming under any of them, and
each of them, excluding defendants in the Action ("Defendants") and their
affiliates (the "Class"); and the law firms of Rosenthal, Monhait, Gross &
Goddess, P.A., Bernstein Liebhard & Lifshitz, Wechsler Harwood Halebian &
Feffer LLP, and Faruqi & Faruqi, LLP are certified as Counsel for the Class
("Class Counsel").
3. The Stipulation and the Settlement are approved as fair, reasonable,
adequate and in the best interests of the Class.
4. The Action and any and all claims, whether individual, class or
derivative, known or unknown, arising under state or federal law or otherwise,
which now exist or may hereafter exist in favor of the plaintiffs or any member
of the Class (collectively, the "Releasing Parties") which have been, could
have been or in the future might have been asserted in the Action or in any
court, tribunal, or proceeding against Defendants, or any of their respective
parent entities, associates, affiliates, subsidiaries and families, and each
and all of their respective past, present and future officers, directors,
stockholders, partners, principals, employees, representatives, agents,
advisors, attorneys,
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<PAGE>
financial or investment advisors, accountants, auditors, consultants,
investment bankers, heirs, executors, trustees, general or limited partners or
partnerships, personal representatives, estates, administrators, predecessors,
successors and assigns (collectively, the "Releasees"), which have arisen,
could have arisen, arise now or hereafter arise out of, or relate in any manner
to, the allegations, facts, events, transactions, acts, occurrences,
statements, representations, misrepresentations, omissions or any other matter,
thing or cause whatsoever, or any series thereof, embraced, involved, set forth
or otherwise related, directly or indirectly, to: (1) the Action, (2) the
Proposed Transaction, the Offer, the Merger or the Merger Agreement (all as
defined in the Stipulation), (3) any acts or omissions of Defendants in
connection with or in response to any offer by Trace or Merger Sub (each as
defined in the Stipulation) to acquire all or any portion of Foamex, and (4)
any other material, public filings or statements (including, but not limited
to, public statements) and disclosures by defendants or any of their
representatives in connection with the Proposed Transaction, the Offer, the
Merger or the Merger Agreement shall be fully, finally and forever compromised,
settled, discharged, dismissed with prejudice and released (the "Released
Claims"), pursuant to the terms and conditions set forth herein; provided
however, that the Released Claims shall not include the right of any members of
the Class to enforce the terms of the Settlement or the right of any Class
member whose Foamex stock was converted by the Merger into the right to receive
$18.75 per share to seek appraisal pursuant to 8 Del. C. [sec] 262.
The release contemplated by the Stipulation and herein extends to claims
that the Releasing Parties do not know or suspect to exist at the time of the
release, which if known, might have affected any Releasing Parties' decision
regarding the release contained in the Settlement. The Releasing Parties shall
be deemed to relinquish, to the full extent permitted by law, the provisions,
rights and benefits of [sec] 1542 of the California Civil Code which provides:
A general release does not extend to claims which the creditor does not
know or suspect to exist in his favor at the time of executing the release,
which if known by him must have materially affected his settlement with the
debtor.
In addition, each of the Releasing Parties also shall be deemed to waive
any and all provisions, rights and benefits conferred by any law of any state
or territory of the United States, or principle of common law, which is
similar, comparable or equivalent to California Civil Code [sec] 1542. The
Releasing Parties have acknowledged that they may discover facts in addition to
or different from those that they now know or believe to be true with respect
to the subject matter of the release, but that it is their intention to fully,
finally and forever settle and release any and all claims released hereby known
or unknown, suspected or unsuspected, which now exist, or heretofore existed,
or may hereafter exist, and without regard to the subsequent discovery or
existence of such additional or different facts.
5. The plaintiffs, Class Counsel and all members of the Class, either
directly, individually, derivatively, representatively or in any other
capacity, are permanently barred and enjoined from instigating, instituting,
commencing, asserting, prosecuting, continuing or participating in any way in
the maintenance of any of the Released Claims in any court or tribunal of this
or any other jurisdiction.
6. The attorneys for the plaintiffs and the Class are awarded attorneys'
fees and reimbursement of expenses in the amount of $ , which sum the
Court finds to be fair and reasonable, to be paid exclusively by Foamex on
behalf of and for the benefit of all Defendants ten (10) business days from the
later of (a) the date on which the Settlement becomes Final as provided in the
Stipulation, or (b) the date when the Order of the Court granting the
application of plaintiffs' counsel for an award of fees and expenses has become
final and no longer subject to further appeal or review, whether by exhaustion
of any possible appeal, lapse of time or otherwise.
7. Without affecting the finality of this Order and Final Judgment in any
way, this Court reserves jurisdiction over all matters relating to the
administration and consummation of the Settlement.
-------------------------------------
Vice Chancellor
E-C-2
<PAGE>
PROXY
FOAMEX INTERNATIONAL INC.
SPECIAL MEETING OF THE STOCKHOLDERS
The undersigned hereby constitutes and appoints and , and each
of them, the attorneys and proxies of the undersigned, with full power of
substitution, to vote on behalf of the undersigned all the shares of Common
Stock of Foamex International Inc. (the "Company") which the undersigned is
entitled to vote at the Special Meeting of the stockholders of the Company, to
be held at 1000 Columbia Avenue, Linwood, Pennsylvania 19061, on October ,
1998, at 10:00 a.m., local time, and all adjournments thereof, upon the matters
set forth on the reverse side and upon all matters incident to the conduct of
the Special Meeting. This proxy revokes all prior proxies given by the
undersigned. Receipt of the Notice of Special Meeting and Proxy Statement is
hereby acknowledged.
(CONTINUED AND TO BE SIGNED AND DATED ON THE OTHER SIDE)
----------------
SEE REVERSE SIDE
----------------
<PAGE>
[X] PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOLLOWING PROPOSAL.
1. To approve and adopt the Agreement and Plan of Merger, dated as of June 25,
1998, as amended on July 6, 1998, by and among Trace International Holdings,
Inc., a Delaware corporation ("Trace"), Trace Merger Sub, Inc., a Delaware
corporation ("Merger Sub"), and Foamex International Inc., a Delaware
corporation (the "Company"), pursuant to which (A) Merger Sub would be merged
with and into the Company, 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, 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 $18.75 in cash.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
THIS PROXY WILL BE VOTED FOR THE ABOVE PROPOSAL UNLESS INSTRUCTIONS TO THE
CONTRARY ARE INDICATED. PLEASE NOTE THAT ALL ABSTAIN VOTES WILL BE COUNTED IN
DETERMINING THE EXISTENCE OF A QUORUM AT THE SPECIAL MEETING BUT WILL NOT BE
VOTED FOR THE PROPOSAL.
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
I plan to attend the meeting -"PLEASE MARK INSIDE BOXES SO THAT DATA PROCESSING
EQUIPMENT WILL RECORD YOUR VOTES"
Please sign as name appears hereon. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. Joint
tenants should both sign.
- -------------------------------------
- ------------------------------------- , 1998
SIGNATURE(S) DATE
