Exhibit 10.31
RECAPITALIZATION AGREEMENT
--------------------------
THIS AGREEMENT is made as of May 6, 1996 between Polymer Group, Inc.,
a Delaware corporation (the "Company"), The InterTech Group, Inc., a South
Carolina corporation ("InterTech"), Golder, Thoma, ▇▇▇▇▇▇▇ Fund III Limited
Partnership, an Illinois limited partnership ("GTC Fund III"), ▇▇▇▇▇ ▇▇▇▇▇▇
("▇▇▇▇▇▇"), ▇▇▇▇▇ ▇. ▇▇▇▇ ("▇▇▇▇"), FTG, Inc., a South Carolina corporation
("FTG"), Chase Manhattan Investment Holdings, Inc., a Delaware corporation
("CMIHI"), Leeway & Co. ("Leeway") and California Public Employees' Retirement
System ("CalPERS"). InterTech, GTC Fund III, Zucker, Boyd, FTG, CMIHI, Leeway
and CalPERS are referred to herein as the "Stockholders." Except as otherwise
indicated herein, capitalized terms used herein are defined in Section 6 hereof.
GTC Fund III owns 190,277 shares of the Company's Class A-1 Common
Stock, par value $.01 per share ("Class A-1 Common"), 115,000 shares of the
Company's Class A-3 Common Stock, par value $.01 per share ("Class A-3 Common")
and 185,902 shares of the Company's Class B Common Stock, par value $.01 per
share ("Class B Common"). CMIHI owns 25,832 shares of Class A-1 Common, 35,000
shares of the Company's Class A-2 Common Stock, par value $.01 per share ("Class
A-2 Common") and 14,136 shares of Class B Common. InterTech owns 210,415 shares
of Class B Common. ▇▇▇▇▇▇ owns 83,611 shares of Class B Common. ▇▇▇▇ owns
27,870 shares of Class B Common. FTG owns 15,295 shares of Class B Common.
Leeway and CalPERS each own 26,150 shares of Class A-1 Common and warrants to
purchase 35,500 shares of the Company's Class C Common Stock, par value $.01 per
share ("Class C Common"), which warrants will be exercised concurrently with the
Initial Public Offering (as defined herein). All such shares of Class A-1
Common, Class A-2 Common, Class A-3 Common, Class B Common and Class C Common
are referred to herein as the "Exchange Shares."
The Company has filed a Registration Statement on Form S-1 (File No.
333-2424) with the Securities and Exchange Commission relating to an initial
public offering (the "Initial Public Offering") of the Company's common stock,
par value $.01 per share (the "Common Stock"), under the Securities Act. In
connection with the Initial Public Offering, the Stockholders desire to (i)
cause the Company to amend and restate its certificate of incorporation and (ii)
exchange their Exchange Shares for shares of Common Stock. Following such
exchange, the Exchange Shares shall be canceled.
The parties hereto agree as follows:
Section 1. Authorization and Exchange.
1A. Restated Certificate of Incorporation. The Company has previously
authorized the amendment and restatement of the Company's Restated Certificate
of Incorporation in the form attached hereto as Exhibit A (the "Restated
Certificate"), to be filed and to be effective as of the date of the
consummation of the Initial Public Offering (the "Closing Date"). The
Stockholders have
previously approved such amendment and restatement pursuant to Section 242 of
the General Corporation Law of the State of Delaware.
1B. Authorization of the Common Stock. The Company hereby authorizes
the issuance of an aggregate of 20,500,000 shares of Common Stock to the
Stockholders in exchange for the Exchange Shares.
1C. Calculation of the Exchange Shares. The number of shares of
Common Stock to be issued to each Stockholder (net of any fractional shares)
shall be equal to (i) the aggregate amount such Stockholder would receive under
the Company's currently effective certificate of incorporation attached hereto
as Exhibit B (the "Current Certificate") upon a Distribution (as defined in the
Current Certificate) by the Company of an amount equal to the Pre-IPO Company
Value divided by (ii) an amount equal to (A) the initial price to the public per
share of Common Stock in the Initial Public Offering multiplied by (B) 19.96809
(the "Pre-Split IPO Price"). "Pre-IPO Company Value" means an amount equal to
(i) the Pre-Split IPO Price multiplied by (ii) 1,026,638.00093. Immediately
following the exchange, the Company will execute a 19.96809-for-one split of its
Common Stock (the "Split"). An example of the calculations set forth herein is
attached hereto as Annex A.
1D. Notice. Prior to the Closing, the Company shall calculate the
number of shares of Common Stock to be issued to each Stockholder as set forth
above, and shall deliver notice to each Stockholder of the results of such
calculation in accordance with Section 7M hereof at least two days before the
Closing. The Company's calculations shall be conclusive and binding upon each
Stockholder unless such Stockholder objects to such calculation in writing prior
to the Closing.
1E. Exchange of the Exchange Shares. At the Closing, the Company
shall, upon the effectiveness of the Restated Certificate and subject to the
terms and conditions set forth herein, issue to each Stockholder a number of
shares of Common Stock calculated as set forth below, in exchange for the
Exchange Shares held by such Stockholder which shares shall be canceled
immediately thereafter. The Company will pay each Stockholder for any
fractional shares resulting from such calculation by check and such fractional
shares will not be issued.
1F. The Closing. The closing of the transactions contemplated hereby
(the "Closing") shall take place at the offices of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ at 10:00 a.m. on the Closing Date, or at such
other place as may be mutually agreeable to the Company and the Stockholders.
At the Closing, the Company shall deliver, or cause the Company's transfer agent
to deliver, to each Stockholder stock certificates evidencing the shares of
Common Stock to be issued by the Company to each such Stockholder, registered in
each such Stockholder's name or its nominee's name, upon presentment and
delivery by each such Stockholder to the Company of the certificates
representing the Exchange Shares duly endorsed for transfer to the Company. At
the option of any Stockholder who is subject to Regulation Y of the Board of
Governors of the Federal Reserve System, the Company shall deliver shares of the
Company's non-voting common stock, par value $.01 per share, to such Stockholder
in lieu of Common Stock.
-2-
Section 2. Conditions of Each Stockholder's Obligation at the
Closing. The obligation of each Stockholder to exchange its Exchange Shares for
the Common Stock at the Closing is subject to the satisfaction as of the Closing
of the following conditions:
2A. Representations and Warranties. The representations and
warranties contained in Section 4 hereof shall be true and correct in all
material respects at and as of the Closing as though then made, except to the
extent of changes caused by the transactions expressly contemplated herein.
2B. Initial Public Offering. The Company shall consummate the
Initial Public Offering concurrently with the transactions contemplated hereby.
2C. Amendment of Certificate of Incorporation. The Restated
Certificate shall be in full force and effect as of the Closing under the laws
of Delaware and shall not have been further amended or modified.
2D. Securities Law Compliance. The Company shall have made all
filings under all applicable federal and state securities laws necessary to
consummate the issuance of the Common Stock pursuant to this Agreement in
compliance with such laws.
2E. Voting Agreement. The Company and the Stockholders (other than
CalPERS) shall have entered into a voting agreement (the "Voting Agreement")
substantially in the form attached hereto as Exhibit C, and the Voting Agreement
shall be in full force and effect as of the Closing and shall not have been
amended or modified.
2F. Credit Agreement. The Company and its subsidiaries and The Chase
Manhattan Bank (National Association) and certain other lenders shall have
entered into a credit agreement (the "Credit Agreement"), and related documents,
providing for term loans and revolving loans of up to an aggregate of $200
million and $125 million, respectively, and the Credit Agreement shall be in
full force and effect as of the Closing and shall not have been amended or
modified.
2G. Closing Documents. The Company shall have delivered to each
Stockholder such documents relating to the transactions contemplated by this
Agreement as any Stockholder or its special counsel may reasonably request.
2H. Proceedings. All corporate and other proceedings taken or
required to be taken by the Company in connection with the transactions
contemplated hereby to be consummated at or prior to the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to each Stockholder and its special counsel.
2I. Waiver. Any condition specified in this Section 2 may be waived
if consented to by each Stockholder; provided that no such waiver shall be
effective against any Stockholder unless it is set forth in a writing executed
by such Stockholder.
-3-
Section 3. Transfer of Restricted Securities.
3A. General Provisions. Restricted Securities are transferable only
pursuant to (i) public offerings registered under the Securities Act, (ii) Rule
144 or Rule 144A under the Securities Act (or any similar rule or rules then in
force) if such rule is available and (iii) subject to the conditions specified
in paragraph 3B below, any other legally available means of transfer.
3B. Opinion Delivery. In connection with the transfer of any
Restricted Securities (other than a transfer described in paragraph 3A(i) or
(ii) above), the holder thereof shall deliver written notice to the Company
describing in reasonable detail the transfer or proposed transfer, together with
an opinion of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ or other counsel which (to the Company's
reasonable satisfaction) is knowledgeable in securities law matters to the
effect that such transfer of Restricted Securities may be effected without
registration of such Restricted Securities under the Securities Act. In
addition, if the holder of the Restricted Securities delivers to the Company an
opinion of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ or such other counsel that no subsequent transfer of
such Restricted Securities shall require registration under the Securities Act,
the Company shall promptly upon such contemplated transfer deliver new
certificates for such Restricted Securities which do not bear the Securities Act
legend set forth in paragraph 7E. If the Company is not required to deliver new
certificates for such Restricted Securities not bearing such legend, the holder
thereof shall not transfer the same until the prospective transferee has
confirmed to the Company in writing its agreement to be bound by the conditions
contained in this paragraph and paragraph 7E.
3C. Rule 144A. Upon the request of any Stockholder, the Company
shall promptly supply to such Stockholder or its prospective transferees all
information regarding the Company required to be delivered in connection with a
transfer pursuant to Rule 144A under the Securities Act.
3D. Legend Removal. If any Restricted Securities become eligible for
sale pursuant to Rule 144(k) under the Securities Act, the Company shall, upon
the request of the holder of such Restricted Securities, remove the legend set
forth in paragraph 7E(i) from the certificates for such Restricted Securities.
Section 4. Representations and Warranties of the Company. As a
material inducement to the Stockholders to enter into this Agreement and to
exchange their Exchange Shares for Common Stock hereunder, the Company hereby
represents and warrants that:
4A. Organization and Corporate Power. The Company is a corporation
duly organized, validly and in good standing under the laws of Delaware and is
qualified to do business in every jurisdiction in which the failure to so
qualify has had or would reasonably be expected to have a material adverse
effect on the financial condition, operating results, assets, operations or
business prospects of the Company and its Subsidiaries taken as a whole.
4B. Authorization; No Breach. The execution, delivery and
performance of this Agreement, the Stock Purchase Agreement, the Voting
Agreement, the Credit Agreement and all
-4-
other agreements contemplated hereby and thereby to which the Company is a
party, the amendment of the Certificate of Incorporation have been duly
authorized by the Company. This Agreement, the Voting Agreement, the Credit
Agreement, the Restated Certificate and all other agreements contemplated hereby
and thereby to which the Company is a party each constitutes a valid and binding
obligation of the Company, enforceable in accordance with its terms. The
execution and delivery by the Company of this Agreement, the Voting Agreement,
the Credit Agreement and all other agreements contemplated hereby and thereby to
which the Company is a party, the issuance of the Common Stock hereunder, the
amendment of the Restated Certificate and the fulfillment of and compliance with
the respective terms hereof and thereof by the Company, do not and shall not (i)
conflict with or result in a breach of the terms, conditions or provisions of,
(ii) constitute a default under, (iii) except pursuant to the Credit Agreements,
result in the creation of any lien, security interest, charge or encumbrance
upon the Company's or any Subsidiary's capital stock or assets pursuant to, (iv)
give any third party the right to modify, terminate or accelerate any obligation
under, (v) result in a violation of, or (vi) require any authorization, consent,
approval, exemption or other action by or notice or declaration to, or filing
with, any court or administrative or governmental body or agency pursuant to,
the Current Certificate or the certificate of incorporation of any Subsidiary,
or any law, statute, rule or regulation to which the Company or any Subsidiary
is subject, or any agreement, instrument, order, judgment or decree to which the
Company or any Subsidiary is a party or by which their respective property is
bound, other than as expressly contemplated in such agreements described above
and other than those made and obtained.
4C. Capital Stock and Related Matters. As of the Closing and
immediately thereafter, the authorized capital stock of the Company shall
consist of 100,000,000 shares of Common Stock, of which 32,000,000 shares will
be issued and outstanding, 3,000,000 shares of Non-Voting Common Stock, par
value $.01 per share (none of which shall be issued and outstanding), and
10,000,000 shares of preferred stock, par value $.01 per share (none of which
shall be issued and outstanding). As of the Closing, all of the outstanding
shares of the Company's capital stock shall be validly issued, fully paid and
nonassessable. There are no statutory or contractual stockholders preemptive
rights or rights of refusal with respect to the issuance of Common Stock
hereunder which have not been waived or terminated. The Company has not
violated any applicable federal or state securities laws in connection with the
offer, sale or issuance of any of its capital stock, and the offer, sale and
issuance of the Common Stock hereunder does not require registration under the
Securities Act or any applicable state securities laws.
Section 5. Representations and Warranties of the Stockholders. The
Stockholders hereby represent and warrant to the Company that:
5A. Authorization; Enforceability. The execution, delivery and
performance of this Agreement and the Voting Agreement, all other agreements
contemplated hereby and thereby to which any Stockholder is a party each
constitutes a valid and binding obligation of such Stockholder, enforceable in
accordance with its terms.
5B. No Violation. Neither the execution and the delivery of this
Agreement and the other documents contemplated hereby to which each Stockholder
is a party, nor the
-5-
consummation of the transactions contemplated hereby and thereby, will (a)
conflict with, result in a breach of any of the provisions of, (b) constitute a
default under, (c) result in the violation of, (d) give any third party the
right to terminate or to accelerate any obligation under, or (e) require any
authorization, consent, approval, execution or other action by or notice to or
filing with any court or administrative or governmental body under, the
provisions of the certificate of incorporation or bylaws of the Stockholder
(where the Stockholder is an incorporated entity) or any statute, regulation,
rule, judgment, order, decree or other restriction of any government,
governmental agency or court to which the Stockholder is subject.
5C. Ownership. Each Stockholder owns the Exchange Shares being
exchanged by such Stockholder pursuant to this Agreement free and clear of any
restrictions on transfer, claims, taxes, liens, charges, encumbrances, pledges,
security interests, options, warrants, rights, contracts, calls, commitments,
equities and demands, except for applicable restrictions on transfer under
securities laws.
Section 6. Definitions. For the purposes of this Agreement, the
following terms have the meanings set forth below:
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Restricted Securities" means (i) the Common Stock issued hereunder
and (ii) any securities issued with respect to the securities referred to in
clause (i) above by way of a stock dividend or stock split or in connection with
a combination of shares, recapitalization, merger, consolidation or other
reorganization. As to any particular Restricted Securities, such securities
shall cease to be Restricted Securities when they have (a) been effectively
registered under the Securities Act and disposed of in accordance with the
registration statement covering them, (b) become eligible for sale pursuant to
Rule 144 (or any similar provision then in force) under the Securities Act or
(c) been otherwise transferred and new certificates for them not bearing the
Securities Act legend set forth in paragraph 7E have been delivered by the
Company in accordance with paragraph 3B. Whenever any particular securities
cease to be Restricted Securities, the holder thereof shall be entitled to
receive from the Company, without expense, new securities of like tenor not
bearing a Securities Act legend of the character set forth in paragraph 7E.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar federal law then in force.
"Subsidiary" means, with respect to any Person, any corporation,
limited liability company, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or
-6-
other business entity, a majority of the partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
any Person or one or more Subsidiaries of that Person or a combination thereof.
For purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a limited liability company, partnership, association or
other business entity if such Person or Persons shall be allocated a majority of
limited liability company, partnership, association or other business entity
gains or losses or shall be or control any managing director or general partner
of such limited liability company, partnership, association or other business
entity.
Section 7. Miscellaneous.
7A. Termination. This Agreement shall terminate upon the earlier of
(i) June 30, 1996 and (ii) the sending of notice by the Company to each
Stockholder that the Initial Public Offering will not be consummated.
7B. Termination of Stockholders Agreement. Contingent upon the
consummation of the Initial Public Offering, the Company and each of the
Stockholders hereby agree to terminate that certain Amended and Restated
Stockholders Agreement, dated as of March 15, 1995, by and among the Company and
the Stockholders.
7C. Expenses. The Company shall pay, and hold each Stockholder and
all holders of Common Stock harmless against liability for the payment of, the
fees and expenses of their special counsel arising in connection with the
negotiation and execution of this Agreement and the agreements contemplated
hereby and the consummation of the transactions contemplated hereby.
7D. Remedies. Any Person having any rights under any provision of
this Agreement shall be entitled to enforce such rights specifically (without
posting a bond or other security), to recover damages by reason of any breach of
any provision of this Agreement and to exercise all other rights granted by law.
7E. Legend. Each certificate or instrument representing Restricted
Securities shall be imprinted with a legend in substantially the following form:
"The securities represented by this certificate were originally issued
on_______ __, 199__ and have not been registered under the Securities Act
of 1933, as amended. The transfer of the securities represented by this
certificate is subject to the conditions specified in the Recapitalization
Agreement, dated as of May 6, 1996 and as amended and modified from time to
time, between the issuer (the "Company") and certain investors, and the
Company reserves the right to refuse the transfer of such securities until
such conditions have been fulfilled with respect to such transfer. A copy
of such conditions shall be furnished by the Company to the holder hereof
upon written request and without charge."
7F. Consent to Amendments. Except as otherwise expressly provided
herein, the provisions of this Agreement may be amended and the Company may take
any action herein
-7-
prohibited, or omit to perform any act herein required to be performed by it,
only if the Company has obtained the written consent of the holders of at least
two-thirds of the Common Stock held by the parties subject to this Agreement
(voting together as a single class).
7G. Survival of Representations and Warranties. All representations
and warranties contained herein or made in writing by any party in connection
herewith shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, regardless of any
investigation made by any Stockholder or on its behalf.
7H. Successors and Assigns. Except as otherwise expressly provided
herein, all covenants and agreements contained in this Agreement by or on behalf
of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto whether so expressed or
not. In addition, and whether or not any express assignment has been made, the
provisions of this Agreement which are for any Stockholder's benefit as a
Stockholder or holder of Common Stock are also for the benefit of, and
enforceable by, any subsequent holder of such Common Stock.
7I. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
7J. Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together shall constitute
one and the same Agreement.
7K. Descriptive Headings; Interpretation. The descriptive headings
of this Agreement are inserted for convenience only and do not constitute a
substantive part of this Agreement. The use of the word "including" in this
Agreement shall be by way of example rather than by limitation.
7L. Governing Law. The corporate law of Delaware shall govern all
issues concerning the relative rights of the Company and its stockholders. All
other questions concerning the construction, validity and interpretation of this
Agreement and the exhibits and schedules hereto shall be governed by the
internal law, and not the law of conflicts, of New York.
7M. 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 when delivered personally
to the recipient, sent to the recipient by reputable overnight courier service
(charges prepaid) or telecopied to the recipient. Such notices, demands and
other communications shall be sent to each Stockholder at the address indicated
next to such party's name on the signature pages hereto or to such other address
or to the attention of such other person as the recipient party has specified by
prior written notice to the sending party.
-8-
IN WITNESS WHEREOF, the parties hereto have executed this
Recapitalization Agreement on the date first written above.
Address: POLYMER GROUP, INC.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
Attention: President --------------------------
Telecopier: 803/747-4092
Its: Chairman, President & CEO
--------------------------
Address: THE INTERTECH GROUP, INC.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
Attention: President --------------------------
Telecopier: 803/747-4092
Its: Chairman, President & CEO
--------------------------
Address: GOLDER, THOMA, ▇▇▇▇▇▇▇ FUND III
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: Golder, Thoma, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Its: General Partner
Telecopier: 312/382-2201
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------
Its: General Partner
--------------------------
Address:
c/o The InterTech Group, Inc. /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ -------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
Telecopier: 803/747-4092
Address:
c/o The InterTech Group, Inc. /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ -------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇
Telecopier: 803/747-4092
Address: FTG, INC.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
Attention: President --------------------------
Telecopier: 803/747-4092 Its: Chairman, President & CEO
--------------------------
-9-
Address: CHASE MANHATTAN INVESTMENT
c/o Chase Capital Partners HOLDINGS, INC.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ------------------------------------
Telecopier: 212/622-3101 Its: Senior Vice President & Treasurer
------------------------------------
Address: LEEWAY & CO.
c/o State Street Bank and
Trust Company By: State Street Bank & Trust,
Master Trust Division-Q4W -------------------------------------
▇.▇. ▇▇▇ ▇▇▇▇ by /s/ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ----------------------------------
Telecopier: Its: Assistant Vice President
-------------------------------------
Address: CALIFORNIA PUBLIC EMPLOYEES'
CalPERS RETIREMENT SYSTEM
Investment ▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, -------------------------------------
Principal Investment Officer Its: Principal Investment Officer
Telecopier: 916/326-3330 -------------------------------------
ANNEX A--Example Share Calculation
There are currently 418,409 shares of Class A Common, 537,229 shares
of Class B Common and 71,000 shares of Class C Common outstanding (assuming
exercise of warrants to purchase shares of Class C Common). Assume the
aggregate face value of the Class A Common is $48,000,000 and the accrued yield
on the Class A Common is $6,826,308 as of April 30, 1996 and $7,094,044 as of
May 15, 1996. Further assume the Pre-Split IPO Price is $329.47349 per share
($16.50 post-Split) and therefore the Pre-IPO Company Value is $338,250,000.
Under the Current Certificate (i) first, the holders of Class A Common
are entitled to receive the face value of the Class A Common plus accrued but
unpaid yield thereon, (ii) second, the holders of Class A Common and Class B
Common are entitled to receive an amount equal to $85,000,000 less the amount
distributed to holders of Class A Common pursuant to clause (i) above (allocated
pro rata according to the number of shares owned) and (iii) third, holders of
Class A Common, Class B Common and Class C Common are entitled to receive the
remainder (allocated pro rata according to the number of shares owned).
Using the April 30, 1996 accrued yield assumptions, the
1,026,638.00093 shares of Common Stock to be outstanding after the exchange
would be distributed as follows: holders of Class A Common would receive an
aggregate of 166,405.82525 shares of Common Stock (3,322,806.49504 shares after
giving effect to the Split) in respect of the face value and accrued yield on
their Class A Common, holders of Class A Common and Class B Common would receive
an aggregate of 91,581.54727 shares of Common Stock (1,828,708.57831 shares
after giving effect to the Split) in respect of the distribution contemplated by
clause (ii) above and the holders of Class A Common, Class B Common and Class C
Common would receive an aggregate of 768,650.6284 shares of Common Stock
(15,348,484.9265 shares after giving effect to the Split) in respect of the
distribution contemplated by clause (iii) above. As a result, Holders of Class
A Common would receive 1.24225 shares of Common Stock per share of Class A
Common, for an aggregate of 519,768.73960 shares of Common Stock
(10,378,788.9715 shares after giving effect to the Split); holders of Class B
Common would receive .84454 shares of Common Stock per share of Class B Common
for an aggregate of 453,711.09397 shares of Common Stock (9,059,743.95834 shares
after giving effect to the Split); and holders of Class C Common would receive
.74871 shares of Common Stock per share of Class C Common, for an aggregate of
53,158.167735 shares of Common Stock (1,061,467 shares after giving effect to
the Split). Using the May 15, 1996 accrued yield assumption would, of course,
yield slightly different results.
The following chart shows the results of such calculations for each
Stockholder after giving effect to the Split as of April 30, 1996 and as of
May 15, 1996:
Class A-1 Class A-2 Class A-3 Class B Class C Common Stock Common Stock
Common Common Common Common Common As of April 30 As of May 15
------- ------ ------- ------- ------ -------------- ------------
Golder, Thoma, 190,277 115,000 185,902 10,707,531 10,711,029
▇▇▇▇▇▇▇ Fund III
Chase Manhattan 25,832 35,000 14,136 1,747,348 1,748,434
Investment Holdings
The InterTech Group 210,765 3,554,307 3,550,728
▇▇▇▇▇ ▇▇▇▇▇▇ 83,349 1,405,584 1,404,169
▇▇▇▇▇ ▇. ▇▇▇▇ 27,782 468,511 468,039
FTG 15,295 257,932 257,673
Leeway & Co. 26,150 35,500 1,179,394 1,179,964
CalPERS 26,150 35,500 1,179,394 1,179,964
------- ------ ------- ------- ------ -------------- ------------
Total 268,409 35,000 115,000 537,229 71,000 20,500,001 20,500,000
-11-