-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, H/UQqpNBIK4MxMPtswsPqmODvywzsGtYTMg57GvF8K4tHcLUZGdlARfpIXhpdQVX Q7/Jp5gHPaAb6UiVNZf5Vw== 0000950152-04-002665.txt : 20040405 0000950152-04-002665.hdr.sgml : 20040405 20040405155808 ACCESSION NUMBER: 0000950152-04-002665 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20040405 GROUP MEMBERS: DENNIS C. ZENSEN GROUP MEMBERS: ROGER H. CLAYPOOLE GROUP MEMBERS: SNYDER ASSOCIATED COMPANIES, INC. SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: SYLVAN INC CENTRAL INDEX KEY: 0000861291 STANDARD INDUSTRIAL CLASSIFICATION: AGRICULTURE PRODUCTION - CROPS [0100] IRS NUMBER: 251603408 STATE OF INCORPORATION: NV FISCAL YEAR END: 0103 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-41138 FILM NUMBER: 04717578 BUSINESS ADDRESS: STREET 1: 333 MAIN STREET STREET 2: P.O. BOX 249 CITY: SAXONBURG STATE: PA ZIP: 16056-0249 BUSINESS PHONE: 724-352-75 MAIL ADDRESS: STREET 1: 333 MAIN STREET STREET 2: P.O. BOX 249 CITY: SAXONBURG STATE: PA ZIP: 16056-0249 FORMER COMPANY: FORMER CONFORMED NAME: SYLVAN FOODS HOLDINGS INC DATE OF NAME CHANGE: 19930328 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: SAC HOLDING CO CENTRAL INDEX KEY: 0001270358 FILING VALUES: FORM TYPE: SC 13D/A MAIL ADDRESS: STREET 1: C/O COHEN & GRIGSBY, P.C., STREET 2: 11 STANWIX STREET, 15TH FLOOR CITY: PITTSBURGH STATE: PA ZIP: 15222 SC 13D/A 1 j0676701sc13dza.htm SYLVAN INC. SC 13D/A
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 13D/A
(Amendment No. 3)*

Under the Securities Exchange Act of 1934

SYLVAN INC.

(Name of Issuer)

Common Stock, $.001 par value

(Title of Class of Securities)

871371100

(CUSIP Number)

SAC Holding Co.
P.O. Box 1022, One Glade Park East,
Kittanning, PA 16201
(724) 548-8101

(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)

Copies to:

Daniel L. Wessels
Cohen & Grigsby, P.C.
11 Stanwix Street
Pittsburgh, PA 15222
(412) 297-4900

April 5, 2004

(Date of Event which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Sections 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box [ ].

* The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

 

  
   
SCHEDULE 13D/A
    
           
   
CUSIP NO. 871371100
    
Page 2 of 13 Pages
  

         
1   NAMES OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
SAC Holding Co.		    

       
         
2   CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions)    
        (a) [X]

       
        (b) [   ]
3   SEC USE ONLY
  		   

       
4   SOURCE OF FUNDS    

            AF    
           
5   CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)         [   ]
6   CITIZENSHIP OR PLACE OF ORGANIZATION    

            Pennsylvania    
         
                 
NUMBER OF     7     SOLE VOTING POWER
SHARES
         
BENEFICIALLY           -0-
OWNED BY
       
  EACH     8     SHARED VOTING POWER
REPORTING
          
PERSON           537,771
WITH        
      9     SOLE DISPOSITIVE POWER

             
            -0-

           
      10     SHARED DISPOSITIVE POWER

             
            537,771
         
11   AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON    

       
              537,771    
12   CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*         [   ]
13   PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)    

       
              10.4%    
14   TYPE OF REPORTING PERSON*    

       
               CO      

 

  
   
SCHEDULE 13D/A
    
           
   
CUSIP NO. 871371100
    
Page 3 of 13 Pages
  

         
1   NAMES OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
          Roger H. Claypoole		    

       
         
2   CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions)    
        (a) [X]

       
        (b) [   ]
3   SEC USE ONLY
  		   

       
4   SOURCE OF FUNDS    

            N/A    
           
5   CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)         [   ]
6   CITIZENSHIP OR PLACE OF ORGANIZATION    

            United States of America    
         
                 
NUMBER OF     7     SOLE VOTING POWER
SHARES
         
BENEFICIALLY           -0-
OWNED BY
       
  EACH     8     SHARED VOTING POWER
REPORTING
          
PERSON           -0-
WITH        
      9     SOLE DISPOSITIVE POWER

             
            -0-

           
      10     SHARED DISPOSITIVE POWER

             
            -0-
         
11   AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON    

       
              -0-    
12   CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*         [   ]
13   PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)    

       
              0%    
14   TYPE OF REPORTING PERSON*    

       
               IN      

 

  
   
SCHEDULE 13D/A
    
           
   
CUSIP NO. 871371100
    
Page 4 of 13 Pages
  

         
1   NAMES OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
          Snyder Associated Companies, Inc.		    

       
         
2   CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions)    
        (a) [X]

       
        (b) [   ]
3   SEC USE ONLY
  		   

       
4   SOURCE OF FUNDS    

       WC    
           
5   CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)         [   ]
6   CITIZENSHIP OR PLACE OF ORGANIZATION    

        Pennsylvania    
         
                 
NUMBER OF     7     SOLE VOTING POWER
SHARES
         
BENEFICIALLY           -0-
OWNED BY
       
  EACH     8     SHARED VOTING POWER
REPORTING
          
PERSON           537,771
WITH        
      9     SOLE DISPOSITIVE POWER

             
            -0-

           
      10     SHARED DISPOSITIVE POWER

             
            537,771
         
11   AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON    

       
    537,771    
12   CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*         [   ]
13   PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)    

       
              10.4%    
14   TYPE OF REPORTING PERSON*    

       
               CO      

 

  
   
SCHEDULE 13D/A
    
           
   
CUSIP NO. 871371100
    
Page 5 of 13 Pages
  

         
1   NAMES OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
           Dennis C. Zensen 		   

       
         
2   CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions)    
        (a) [X]

       
        (b) [   ]
3   SEC USE ONLY
  		   

       
4   SOURCE OF FUNDS    

             PF    
           
5   CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)         [   ]
6   CITIZENSHIP OR PLACE OF ORGANIZATION    

             United States of America    
         
                 
NUMBER OF     7     SOLE VOTING POWER
SHARES
         
BENEFICIALLY                      45,000
OWNED BY
       
  EACH     8     SHARED VOTING POWER
REPORTING
          
PERSON                      694,128
WITH        
      9     SOLE DISPOSITIVE POWER

             
                       45,000

           
      10     SHARED DISPOSITIVE POWER

             
                       694,128
         
11   AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON    

       
               739,128    
12   CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*         [   ]
13   PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)    

       
              14.2%    
14   TYPE OF REPORTING PERSON*    

       
               IN      

 

   
SCHEDULE 13D/A
    
           
   
CUSIP NO. 871371100
    
Page 6 of 13 Pages
  

     This Amendment No. 3 (this “Amendment”) amends the statement on Schedule 13D filed on November 21, 2003 (the “Original Statement”), which was previously amended by Amendment No. 1 to Schedule 13D filed on December 24, 2003 (the "First Amendment”), and by Amendment No. 2 to Schedule 13D filed on February 18, 2004 (the “Second Amendment”), by SAC Holding Co. (“SAC”), Snyder Associated Companies, Inc. (“Snyder”), Roger H. Claypoole and Dennis C. Zensen (collectively, the “Reporting Persons”). The Reporting Persons, as a group, may be deemed, for purposes of Section 13(d) of the Exchange Act of 1934 (the "Act”) to beneficially own shares of stock beneficially owned by the other members of the group. Reference is made to that certain Agreement and Plan of Merger, dated as of November 16, 2003 (the “Merger Agreement”), among the Issuer, Snyder and SAC, and the merger contemplated thereby (the “Merger”).

Item 1. Security and Issuer.

     There have been no changes since the filing of the Original Statement.

Item 2. Identity and Background.

     There have been no changes since the filing of the Second Amendment.

Item 3. Source and Amount of Funds or Other Consideration.

     Except as set forth in Item 6, which is incorporated herein by reference to the extent it relates to source of funds necessary for any of the Reporting Persons to consummate the transactions contemplated by the Merger Agreement, there have been no other changes since the filing of the Second Amendment.

Item 4. Purpose of Transaction.

     Except as set forth in Items 6 or 7 below, which are incorporated herein by reference to the extent they relate to the purpose of the transaction, there have been no other changes since the filing of the Second Amendment.

Item 5. Interest in Securities of the Issuer.

     There have been no changes since the filing of the Second Amendment.

Item 6. Contracts, Arrangements, Understandings or Relationships With Respect to Securities of the Issuer.

     Item 6 is hereby amended to add the following:

Amendment to Merger Agreement

     On April 1, 2004, Snyder, SAC and the Issuer entered into a First Amendment to Agreement and Plan of Merger pursuant to which the parties have agreed to extend the end date of May 1, 2004 in the merger agreement to June 15, 2004 in light of the inability to complete the regulatory process and the proxy solicitation prior to May 1, 2004. A copy of the First Amendment to Merger Agreement is included as Exhibit 99.2A to this Amendment and is incorporated herein by reference.

 

 

   
SCHEDULE 13D/A
    
           
   
CUSIP NO. 871371100
    
Page 7 of 13 Pages
  

Amendment to Voting Agreement

     Reference is made to that certain voting agreement (the “Voting Agreement”), dated November 16, 2003, among Snyder, and each of Wynnefield Partners Small Cap Value, L.P., Wynnefield Partners Small Cap Value, L.P. I, Wynnefield Small Cap Value Offshore Fund, Ltd. and Nelson Obus (collectively, the “Wynnefield Stockholders”), as more fully described in the Original Statement and Second Amendment. As originally drafted, the voting provisions of the Voting Agreement were to terminate upon the earliest to occur of (i) the termination of the Merger Agreement, (ii) the consummation of the Merger, or (iii) April 15, 2004. By an amendment dated April 1, 2004, Snyder and the Wynnefield Group extended the April 15, 2004 date to June 15, 2004. In connection with the amendment, Snyder agreed to reimburse the Wynnefield Group for a portion of its legal expenses in the amount of $20,000. A copy of the First Amendment to Voting Agreement is included as Exhibit 99.4A to this Amendment and is incorporated herein by reference. The foregoing description of the First Amendment to Voting Agreement is qualified in its entirety by reference to such exhibit.

Revised Master Capitalization Agreement

     Reference is made to that certain form of Master Capitalization Agreement described in the Second Amendment. The anticipated parties to the Master Capitalization Agreement have agreed in principle to certain changes to the form of Master Capitalization Agreement, including adding a provision whereby SAC, upon consummation of the merger, would assume Snyder’s rights and obligations under that certain exchange agent agreement that Snyder expects to enter into with Mellon Investor Services, LLC prior to the merger. In addition, the parties have preliminarily agreed upon a form of Note Purchase Agreement and form of Senior Subordinated Promissory Note, to be attached as Exhibit D-1 and D-2, respectively, to the form of Master Capitalization Agreement. Accordingly, the Master Capitalization Agreement is being refiled as Exhibit 99.5A to this Amendment. The foregoing description of the revised form of Master Capitalization Agreement is qualified in its entirety by reference to such exhibit.

Source and Amount of Funds; Financing for the Merger

     Snyder and SAC estimate that the total amount of funds required under the Merger Agreement to purchase all of the outstanding shares of the Issuer’s common stock (other than the 537,771 shares of the Issuer’s common stock currently held by SAC and an additional 19,800 shares of the Issuer’s common stock that are expected to be contributed to SAC prior to closing) and to pay the cash amounts owed in respect of stock options outstanding at the time of the consummation of the Merger, and to pay related fees and expenses, will be approximately $59.5 million. This amount excludes the $6,587,695 that SAC paid to Steel Partners to purchase 537,771 shares of the Issuer’s common stock on November 17, 2003.

     It is currently estimated that Snyder or SAC will be obligated to pay an aggregate amount of approximately $57.4 million to the Issuer’s security holders in the Merger, consisting of an aggregate amount currently estimated to be $56,320,110 in exchange for the outstanding shares of the Issuer’s common stock (other than 537,771 shares of the Issuer’s common stock currently held by SAC and an additional 19,800 shares of the Issuer’s common stock that are expected to be contributed to SAC prior to closing), and an aggregate amount currently estimated to be $1,040,388 for all shares of the Issuer’s common stock subject to in-the-money stock options. The surviving entity will be responsible for an estimated $2.1 million in fees and expenses in connection with the Merger and related transactions that will not have been paid prior to closing (including expenses to be reimbursed to Snyder under the terms of the Master Capitalization Agreement). The funds necessary for consummation of the Merger are expected to be obtained from the following sources:

 

 

   
SCHEDULE 13D/A
    
           
   
CUSIP NO. 871371100
    
Page 8 of 13 Pages
  

—   Snyder will invest approximately $28.2 million in cash in SAC;
 
—   Affiliates of Snyder and related persons, including family members, will invest approximately $3.8 million in cash in SAC; these entities and individuals are also expected to contribute a total of 19,800 shares of the Issuer’s common stock currently owned by them to SAC;
 
—   NEAR L.P., an entity controlled by Roger H. Claypoole and his spouse, will invest $1.0 million in cash in SAC; and
 
—   Snyder and certain Snyder family members and trusts will make a loan to Merger Sub of approximately $26.5 million, $20.5 million of which is intended to be a bridge loan and $6.0 million of which is intended to remain outstanding as senior subordinated ''mezzanine’’ debt.

The above investments will provide SAC with approximately $59.5 million in cash with which to fund the payments to the holders of the Issuer’s common stock and the holders of the Issuer’s in-the-money stock options under the terms of the Merger Agreement, which payment obligation SAC is assuming from Snyder under the terms of the Master Capitalization Agreement.

     Snyder’s equity investments in SAC will be provided by its existing cash resources and an available line of credit. The cash equity investments in SAC to be made by affiliates of Snyder and related persons, and by NEAR L.P., will be provided by existing cash resources of those investors. The anticipated source of the $26.5 million loan to SAC is described below under the heading “Snyder Loans to Merger Sub.”

     It is anticipated that concurrently with the consummation of the Merger, the Issuer’s outstanding senior debt of $30 million (estimated as of closing and excluding certain debt related to the Issuer’s foreign subsidiaries) will be refinanced with a new senior credit facility with s national bank (in which one or more other lending institutions may participate) in the amount of $50 million. The amount necessary to refinance the Issuer’s outstanding senior debt, together with the amounts necessary to purchase all of the outstanding shares of the Issuer’s common stock, and pay cash amounts owed in respect of stock options and related fees and expenses will total approximately $90 million. It is anticipated that approximately $14 million of the new senior credit facility will be used to pay down a portion of the Snyder bridge loan. The closing of the new senior credit facility is not a condition to the parties’ respective obligations to consummate the Merger.

     Although the parties are currently negotiating the terms and documentation of the new senior credit facility, it is currently contemplated that this new senior credit facility will total $50 million, the components of which will be as follows:

—   A primary five-year revolving credit facility of $12.0 million;
 
—   A secondary two-year revolving credit facility of $3.0 million; and
 
—   A term loan of $35.0 million, which will mature five years after the closing date, with quarterly principal payments based upon annual reductions of $4.0 million in years 1, 2 and 3, and $6.0 million in years 4 and 5, with any remaining principal due at the maturity date.

     The revolving credit facilities are expected to bear interest, at the Issuer’s option, at either a base rate or a rate that is based upon the London interbank offered rate (LIBOR) plus a margin that is a function of the ratio of the Issuer’s senior indebtedness to its EBITDA at the time. Outstandings under the term loan will be at either a fixed rate or a variable rate, at the Issuer’s option. Minimum borrowed amounts and minimum maturity periods will be required for the fixed rate borrowings. The fixed rate will be determined by the banks at the time each advance is requested. The variable rate will be calculated the same as for the revolving credit borrowings. It is contemplated that the new credit facility will be

 

 

   
SCHEDULE 13D/A
    
           
   
CUSIP NO. 871371100
    
Page 9 of 13 Pages
  

essentially unsecured although all borrowings will be guaranteed by several of the Issuer’s subsidiaries and the Issuer will pledge 65% of the stock of its foreign direct subsidiaries as collateral.

     The Issuer will pay an origination fee equal to 25 basis points times the aggregate commitment and a commitment fee on the average daily un-borrowed portion of the revolvers that will be set forth in the credit agreement. A $10,000 administration fee will be due at closing and on a yearly basis thereafter. In addition, the Issuer will pay letter of credit fees equal to the applicable spread over LIBOR at the time.

     The loan agreement is expected to contain customary financial covenants, including those pertaining to maximum consolidated leverage ratio, minimum consolidated net worth, minimum consolidated interest coverage ratio, minimum fixed coverage ratio, minimum working capital and minimum current ratio.

     Approximately $6.5 million in principal amount of the Snyder and Snyder family bridge loan is expected to be repaid following the Merger with the proceeds of Dennis C. Zensen’s anticipated $6.5 million investment in the surviving entity. Mr. Zensen’s anticipated investment will be provided by the net proceeds of his sale of the Issuer stock in the Merger. If Mr. Zensen determines not to invest, $6.5 million of the bridge loan to be made by Snyder Lenders (as defined below) would be converted into equity in the form of additional shares of the surviving corporation at $12.25 per share.

     The consummation of the Merger is not conditioned upon obtaining the financing described above.

     The Snyder Entities do not currently have any alternative financing arrangements or alternative financing plans in the event the financing plans described above fail to materialize as anticipated. However, the Snyder Entities believe that they have sufficient working capital and/or access to additional funds sufficient to allow them to consummate the Merger in the event that these primary financing plans fall through.

Snyder Loans to SAC

     As discussed above, it is contemplated that a portion of the funds necessary for consummation of the Merger is expected to be obtained from Snyder and/or certain Snyder family members and trusts (referred to herein as the "Snyder Lenders”) in the form of approximately $26.5 million in loans. Pursuant to the terms of the Master Capitalization Agreement, the Snyder Lenders and SAC will agree to enter into a note purchase agreement pursuant to which Snyder will agree to loan approximately $20.5 million and such family members and trusts will agree to loan approximately $6.0 million to SAC. These loans (referred to herein as the “Snyder Loans”) will be made simultaneously with the other investments in SAC contemplated by the Master Capitalization Agreement. It is anticipated that the source of the funds for Snyder’s $20.5 million portion of the loans will be a $20.5 million bridge loan to Snyder from a national bank. There is currently no binding commitment or term sheet from this bank to make this loan, although Snyder believes that this bank will make such loan. It is anticipated that the source of the funds for Snyder’s family members’ $6.0 million portion of the loans will be personal funds.

     It is contemplated that the Snyder Loans will be unsecured, although the Snyder Lenders may request that the loans be guaranteed by the Issuer’s domestic subsidiaries. It is contemplated that SAC will only make limited representations and warranties in the note purchase agreement. The note purchase agreement will contain customary reporting requirements, financial covenants and negative covenants that will be similar to those imposed by the Issuer’s senior lenders. It is expected that the following

 

 

   
SCHEDULE 13D/A
    
           
   
CUSIP NO. 871371100
    
Page 10 of 13 Pages
  

would be the material conditions to the Snyder Lenders’ willingness to make the loans contemplated by the note purchase agreement:

—   no default will have occurred and be continuing or will be caused by the consummation of the transactions contemplated by note purchase agreement and related documents;
 
—   no event will have occurred and no condition will exist which, individually or in the aggregate, has had, or is likely to have, a material adverse effect on SAC;
 
—   the other anticipated equity investments in SAC shall have closed;
 
—   the representations and warranties of SAC in the note purchase agreement will be true and correct; and
 
—   the Issuer and its senior lender(s) shall have executed and delivered a credit agreement providing for a $50 million credit facility, in form and substance satisfactory to the Snyder Lenders, providing for the closing of the transaction contemplated thereby promptly following the closing of the Merger.

     It is also contemplated by the note purchase agreement that the Snyder Lenders would agree to execute and deliver subordination agreements with the Issuer’s senior lender(s), in form and substance typical for transactions of this type and reasonably approved by the Snyder Lenders, agreeing to subordinate payment of the Snyder Loans under certain circumstances to payment of the senior indebtedness under the Issuer’s senior credit facility.

     In connection with the Snyder Loans, SAC will sign and deliver senior subordinated promissory notes in the aggregate principal amount of $26,500,000 to the Snyder Lenders. Those promissory notes will bear interest at the rate of 18% per annum, which will be payable quarterly. The senior subordinated promissory notes will provide that, no later than two business days after the closing of the Merger, $14,000,000 of the principal of the promissory notes, together with all interest on that amount, will be due and payable. It is contemplated that this payment will be made from a portion of the proceeds obtained by the surviving corporation from its senior lenders. The promissory notes will also provide that, in the event Dennis C. Zensen makes his anticipated investment in the surviving corporation, an identical amount of the principal amount, anticipated to be $6.5 million, together with interest on that amount, will become due and payable. Assuming such payments are made when due, the remaining $6 million of the senior subordinated promissory notes will remain outstanding as senior subordinated mezzanine debt and will be due and payable at a later date, which has not yet been determined, but no earlier than January 1, 2007. The current forms of the note purchase agreement and senior subordinated promissory notes are attached as Exhibits D-1 and D-2, respectively, to the revised Master Capitalization Agreement attached hereto as Exhibit 99.5. However, the documentation governing the Snyder Loans to SAC, including the note purchase agreement and senior subordinated promissory notes, has not yet been finalized and, accordingly, remains subject to change.

     The debts of SAC under the note purchase agreement will, upon consummation of the Merger, become the debts of the surviving corporation. It is currently anticipated that these debts will be repaid as follows: (i) $14,000,000 of the debt will be repaid shortly following closing with proceeds from the anticipated new senior credit facility of the Issuer, (ii) $6,500,000 of the debt will be repaid with the proceeds of Mr. Zensen’s anticipated $6,500,000 investment in the surviving corporation, and (iii) the remaining $6,000,000 will be repaid at some point in the future from operating income of the surviving corporation or through a refinancing. It has not yet been determined which of the Snyder Lenders would continue to hold this $6,000,000 of senior subordinated indebtedness.

Snyder Line of Credit

 

 

   
SCHEDULE 13D/A
    
           
   
CUSIP NO. 871371100
    
Page 11 of 13 Pages
  

     As indicated above, it is contemplated that a portion of Snyder’s equity investment in SAC will be provided, directly or indirectly, by an existing line of credit. Currently, Snyder intends to draw approximately $15,000,000 on an existing line of credit with Citizens Bank of Pennsylvania, to fund its equity investment in SAC. The credit agreement between Snyder and Citizens Bank provides for a revolving credit loan in an aggregate amount of up to $25.0 million, of which the entire amount is currently available for draw. Snyder may select from among the following interest rate options to apply simultaneously to different parts of the unpaid principal amount of the loans: (1) the Federal Funds Rate plus 1.0%, or (2) the prime rate announced by Citizens Bank from time to time. The credit agreement contains customary representations and warranties by Snyder. The commitment to provide the senior credit facility is subject to the satisfaction of customary conditions and covenants, including the accuracy in all material respects of Snyder’s representations and warranties. The following is a summary of certain of the material conditions that must be satisfied in order for Citizens Bank to fund the amounts contemplated by the credit agreement:

—   no default will have occurred and be continuing or will be caused by the consummation of the transactions contemplated by the credit agreement and related documents; and
 
—   the absence of any material adverse change in the assets, business or financial condition of Snyder or in the ability of Snyder to perform its obligations under the terms of the revolving credit facility.

     The line of credit will mature on November 13, 2004 unless that maturity date is extended in accordance with the terms of the credit agreement. Advances under the line of credit may be borrowed, repaid and reborrowed until such maturity date. Snyder currently expects that the anticipated $15,000,000 draw on the line of credit to fund a portion of its equity investment in Snyder will be repaid with working capital. A copy of this line of credit, as amended, is included as an exhibit to the Schedule 13E-3 filed by Snyder, the Issuer, SAC and Dennis C. Zensen with the Securities and Exchange Commission on April 2, 2004.

Other Arrangements

     Other than described herein, there have been no other changes to the information provided under “Other Arrangements” of Item 6 of the Second Amendment since the filing of the Second Amendment.

Other Arrangements

     Other than described herein, there have been no other changes to the information provided under “Other Arrangements” of Item 6 of the Second Amendment since the filing of the Second Amendment.

Item 7. Material to be Filed as Exhibits.

Exhibit 99.2A First Amendment to Agreement and Plan of Merger

Exhibit 99.4A Amendment No. 1 to Voting Agreement

Exhibit 99.5A Form of Master Capitalization Agreement (Revised)

 

 

SIGNATURES

     After reasonable inquiry and to the best of each Reporting Person’s respective knowledge and belief, each Reporting Person certifies that the information set forth in this Amendment No. 3 to the Schedule 13D is true, complete and correct.

Date: April 5, 2004

         
SAC Holding Co.   Snyder Associated Companies, Inc.



 



By:
*
  By:
*
Name:
 Elmer A. Snyder
  Name: Elmer A. Snyder
Title:
 President
  Title: President
         
         
*
 
*
Roger H. Claypoole   Dennis C. Zensen
         
*By:
 /s/ Daniel L. Wessels
Daniel L. Wessels
Attorney-in-Fact		      

 

 

INDEX OF EXHIBITS TO SCHEDULE 13D

Exhibit 99.2A First Amendment to Agreement and Plan of Merger

Exhibit 99.4A Amendment No. 1 to Voting Agreement

Exhibit 99.5A Form of Master Capitalization Agreement (Revised)

 

EX-99.2A 3 j0676701exv99w2a.txt EXHIBIT 99.2A EXHIBIT 99.2A FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER ("AMENDMENT") dated as of April 1, 2004 among Sylvan Inc., a Nevada corporation (the "COMPANY"), Snyder Associated Companies, Inc., a Pennsylvania Corporation ("PARENT"), and SAC Holding Co., a Pennsylvania corporation and a wholly-owned subsidiary of Parent ("MERGER SUBSIDIARY"). W I T N E S S E T H: WHEREAS, the Company, Parent and Merger Subsidiary have entered into an Agreement and Plan of Merger dated as of November 16, 2003 (the "MERGER AGREEMENT"), and WHEREAS, the parties hereto desire to amend the Merger Agreement as set forth below. NOW, THEREFORE, the parties hereto hereby agree as follows: SECTION 1. Definitions. Unless other specifically defined herein, each term used herein that is defined in the Merger Agreement shall have the meaning assigned to such term in the Merger Agreement. SECTION 2. Amendment. Section 10.01(b)(i) of the Merger Agreement is hereby amended to read in full as follows: (i) the Merger has not been consummated on or before June 15, 2004 (the "END DATE"); provided, however, that the right to terminate this Agreement pursuant to this clause (i) shall not be available to any party whose willful or intentional breach of this Agreement has been the primary cause of, or resulted in, the failure of the Effective Time to occur on or before such date; SECTION 3. Effect. Except to the extent otherwise expressly set forth in this Amendment, all of the terms and conditions set forth in the Merger Agreement shall remain in full force and effect and all such terms and conditions are hereby ratified and confirmed in all respects. This Amendment is limited as specified and shall not constitute a modification, acceptance or waiver of any other provision of the Merger Agreement. SECTION 4. Governing Law. This Amendment shall be governed by and construed in accordance with the laws of the State of New York, without reference to its conflict of laws rules. SECTION 5. Counterparts. This Amendment may be signed in any number of counterparts, each of which shall be deemed to be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. * * * IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective authorized officers as of the day and year first above written. SYLVAN INC. By: /s/ FRED Y. BENNITT ------------------------------------ Name: Fred Y. Bennitt Title: Secretary SNYDER ASSOCIATED COMPANIES, INC. By: /s/ E.A. SNYDER ------------------------------------ Name: E.A. Snyder Title: President SAC HOLDING CO. By: /s/ E.A. SNYDER ------------------------------------ Name: E.A. Snyder Title: President EX-99.4A 4 j0676701exv99w4a.txt EXHIBIT 99.4A EXHIBIT 99.4A AMENDMENT NO. 1 TO VOTING AGREEMENT This Amendment No. 1 to Voting Agreement (this "AMENDMENT") is dated as of the 1st day of April, 2004, among each of the persons listed under the heading "Stockholders" on the signature page hereto (collectively, the "STOCKHOLDERS" and each, individually, a "STOCKHOLDER"), and Snyder Associated Companies, Inc., a Pennsylvania corporation. This Amendment amends that certain Voting Agreement, dated as of November 16, 2003, among the Stockholders and the Purchaser (the "VOTING AGREEMENT"). WITNESSETH: WHEREAS, the parties have agreed to make certain amendments to the Voting Agreement upon the terms and conditions set forth herein. NOW THEREFORE, in consideration of the premises, the mutual covenants and agreements contained herein and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and with the intent to be legally bound, the parties agree as follows: AMENDMENTS TO VOTING AGREEMENT 1. Section 5(d) of the Voting Agreement is hereby amended as follows: The reference to "April 15, 2004" is deleted and replaced with "June 15, 2004". 2. Ratification of Terms. Except as expressly amended by this Amendment, the Voting Agreement and each and every representation, warranty, covenant, term and condition contained therein remains in full force and effect. 3. Counterparts. This Amendment may be executed in different counterparts, each of which when executed shall be regarded as an original, and all such counterparts shall constitute one and the same agreement. 4. Capitalized Terms. Except for proper nouns and as otherwise defined herein, capitalized terms used herein as defined terms shall have the meanings ascribed to them in the Voting Agreement. 5. Governing Law. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE SUBSTANTIVE LAWS OF THE STATE OF NEVADA WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. 6. Headings. The headings of this Amendment are for purposes of reference only and shall not limit or otherwise affect the meaning thereof. [SIGNATURE PAGES FOLLOW] IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date and year first above written. PURCHASER: SNYDER ASSOCIATED COMPANIES, INC. By: /s/ E.A. SNYDER, PRESIDENT ------------------------------------ E.A. Snyder, President Stockholders: WYNNEFIELD PARTNERS SMALL CAP VALUE, L.P. By: Wynnefield Capital Management, LLC, its General Partner By: /s/ NELSON OBUS ----------------------------------------------------------- Nelson Obus, Co-Managing Member WYNNEFIELD PARTNERS SMALL CAP VALUE, L.P. I By: Wynnefield Capital Management, LLC, its General Partner By: /s/ NELSON OBUS ----------------------------------------------------------- Nelson Obus, Co-Managing Member WYNNEFIELD SMALL CAP VALUE OFFSHORE FUND, LTD. By: Wynnefield Capital, Inc. By: /s/ NELSON OBUS ----------------------------------------------------------- Nelson Obus, President NELSON OBUS /s/ NELSON OBUS - --------------------------------------------------------- 2 EX-99.5A 5 j0676701exv99w5a.txt EXHIBIT 99.5A EXHIBIT 99.5A FORM OF MASTER CAPITALIZATION AGREEMENT This Agreement is made as of ____________, 2004 among SAC HOLDING CO., a Pennsylvania corporation (the "COMPANY"), and each of the Investors signatory hereto (the "INVESTORS"). PREAMBLE The Company was formed for the purpose of acquiring the stock of Sylvan, Inc. ("SYLVAN") pursuant to the terms of an Agreement and Plan of Merger dated as of November 16, 2003 (as the same may be amended, the "MERGER AGREEMENT") among Sylvan, the Company and Snyder Associated Companies, Inc. ("SNYDER"). The Investors desire to purchase certain securities of the Company with cash or shares of Sylvan common stock in order to provide financing for such acquisition. Therefore, the parties severally, and not jointly, agree as follows with the intent to be legally bound. AGREEMENT 1. Purchase and Sale of Securities. On the Closing Date (defined below), the Company will sell to each Investor identified on Exhibit A, and each such Investor will purchase from the Company, the amount and type of shares of capital stock of the Company set forth beside such Investor's name on Exhibit A for the cash purchase price set forth on Exhibit A. Without limiting the generality of the foregoing, the Investors acknowledge that (a) pursuant to a Stock Purchase Agreement dated as of November 15, 2003 (the "STOCK PURCHASE AGREEMENT") among the Company, Snyder and Steel Partners II, L.P., the Company acquired 537,771 shares of Sylvan common stock for a purchase price of $6,587,694.75 ($12.25/share), which shares will be canceled in the Merger, (b) Snyder loaned the purchase price for such shares to the Company and (c) such loan was previously converted into shares of the Company's common stock at the rate of $12.25/share as a result of which Snyder currently owns 537,771 shares of the Company. 2. Contribution of Securities. On the Closing Date, each Investor identified on Exhibit B shall contribute to the Company the shares of common stock of Sylvan the Investor owns identified on Exhibit B. Each such Investor shall receive, for each such share of Sylvan common stock contributed, one share of common stock of the Company. Such contribution shall be made pursuant to the Contribution Agreements in the forms attached hereto as Exhibit C-1 and C-2. 3. Senior Subordinated Debt and Bridge Financing. At the Closing, Snyder shall make a loan to the Company in the amount of $26.5 million in the form of senior subordinated indebtedness pursuant to the Note Purchase Agreement and Senior Subordinated Promissory Note pursuant to documentation in substantially the forms of Exhibit D-1 and D-2 hereto. $20.5 million of such senior subordinated indebtedness is intended to be a bridge loan and will be due and payable no later than ten days following the closing of the Merger. 4. The Closing. The closing of the transactions contemplated hereby (the "CLOSING") will take place at the offices of Cohen & Grigsby, P.C., 11 Stanwix Street, 15th Floor, Pittsburgh, Pennsylvania 15222 on such date as is required by the disbursing agent in the Merger in order for the Company to have funds available to pay the Merger consideration, as determined by the Company. The date when the Closing occurs is referred to herein as the "CLOSING DATE". At the Closing, the Company will deliver to each Investor certificates evidencing the number of shares being purchased by such Investor upon payment of the purchase price therefor in immediately available funds or contribution of shares of common stock of Sylvan, as the case may be. As soon as is practicable after the Closing, (a) the Company will be merged with and into Sylvan, with Sylvan to be the surviving corporation, in accordance with the terms of the Merger Agreement (the "MERGER"), (b) each Investor's shares of common stock of the Company will be exchanged for securities of Sylvan in accordance with the terms of the Merger Agreement and (c) each Investor will enter into a Stockholders Agreement in substantially the form previously agreed to. The date when the foregoing transactions occur is referred to as the "EFFECTIVE DATE". 5. Restrictions on Transfer. The Investors acknowledge that the Securities have not been registered under the Securities Act of 1933, as amended (the "SECURITIES ACT"), or any applicable state securities laws, and may not be transferred in the absence of an effective registration statement under such laws except pursuant to an exemption from such laws. If Securities are being transferred pursuant to such an exemption, then the transferor will give prior written notice of such exemption to the Company, and the Company may request an opinion of the transferor's counsel as to the availability of such exemption, which opinion and counsel must be reasonably satisfactory to the Company. The Securities are also subject to restrictions on transfer as set forth in the Stockholders Agreement. Each certificate evidencing capital stock will bear a legend in the form specified in the Stockholders Agreement. 6. Merger Consideration; Fees and Expenses; Assumption of Exchange Agreement Obligations. As between Snyder and the Company, the Company shall be responsible for paying the merger consideration required to be paid pursuant to the Merger Agreement. The Company (or, following the Merger, Sylvan) will (a) pay, or reimburse Snyder for, all reasonable fees and expenses that it incurs or has incurred in connection with the formation and capitalization of the Company and the transactions contemplated by the Transaction Documents and the Steel Partners Agreement (including the preparation and negotiation of such documents) and (b) pay to Snyder the sum of $60,000 as a reimbursement for its payment of the Seller Reimbursement under and as defined in the Steel Partners Agreement. The Company hereby assumes, effective upon consummation of the Merger, the rights and obligations of Snyder under that certain Exchange Agent Agreement between Snyder and Mellon Investor Services LLC dated [__________]. 7. Miscellaneous. This Agreement: (a) may be amended only by a writing signed by each of the parties; (b) may not be assigned, pledged or otherwise transferred, whether by operation of law or otherwise, without the prior consent of the other parties, except that an Investor may assign all or a portion of his or its rights hereunder to a Permitted Transferee (as defined in the Stockholders Agreement) so long as such transferee joins this Agreement as an Investor and the Stockholders Agreement as a Stockholder; provided, that no such assignment will relieve the transferring Investor of his or its obligation to purchase Securities hereunder except with respect to Securities actually purchased by such transferee; (c) may be executed in several counterparts, each of which is deemed an original but all of which constitute one and the same instrument; (d) contains the entire agreement of the parties with respect to the transactions contemplated hereby and supersedes all prior written and oral agreements, and all contemporaneous oral agreements, relating to such transactions; (e) is governed by, and will be construed and enforced in accordance with, the laws of the Commonwealth of Pennsylvania, without giving effect to any conflict of laws rules; and (f) is binding upon, and will inure to the benefit of, the parties and their respective heirs, successors and permitted assigns. -2- SIGNATURE PAGE TO MASTER CAPITALIZATION AGREEMENT COMPANY SAC HOLDING CO. By: ---------------------------------- Title: -------------------------------- INVESTORS: SNYDER ASSOCIATED COMPANIES, INC. By: ---------------------------------- Title: -------------------------------- TC SNYDER FAMILY LIMITED PARTNERSHIP By: ---------------------------------- Title: -------------------------------- -------------------------------------- David E. Snyder DAVID E. SNYDER AND SANDRA J. SNYDER JOINT TENANTS BY THE ENTIRETIES -------------------------------------- David E. Snyder -------------------------------------- Sandra J. Snyder WESTMONT LIMITED PARTNERSHIP By: ---------------------------------- Name: --------------------------------- Title: -------------------------------- -3- MARK A. SNYDER REVOCABLE TRUST DATED 1/4/99 By: ---------------------------------- Name: --------------------------------- Title: -------------------------------- CHARLES H. SNYDER, JR. REVOCABLE TRUST DATED 7/3/95 By: ---------------------------------- Name: --------------------------------- Title: -------------------------------- RIDGEPOINT HOLDINGS LIMITED PARTNERSHIP By: ---------------------------------- Name: --------------------------------- Title: -------------------------------- -------------------------------------- Dennis C. Snyder MAVERICK HOLDINGS LIMITED PARTNERSHIP By: ---------------------------------- Name: --------------------------------- Title: -------------------------------- RICHARD G. SNYDER SECOND AMENDED AND RESTATED REVOCABLE TRUST DATED 12/13/95 By: ---------------------------------- Name: --------------------------------- Title: -------------------------------- -4- NEAR L.P. By: EARN, LLC By: ------------------------------------ Name: ---------------------------------- Title: ----------------------------------- -5- EXHIBIT D-1 NOTE PURCHASE AGREEMENT This Agreement is made as of ____________, 2004 between SAC HOLDING CO., a Pennsylvania corporation (the "BORROWER"), and SNYDER ASSOCIATED COMPANIES, INC., a Pennsylvania corporation (the "LENDER").* PREAMBLE The Borrower, the Lender and certain other persons are parties to a Master Capitalization Agreement dated as of ___________________, 2004 (the "CAPITALIZATION AGREEMENT"). Pursuant to the Capitalization Agreement, the Borrower and the Lender have agreed to execute, deliver and perform their obligations under this Agreement. Therefore, the parties agree as follows with the intent to be legally bound. For purposes of clarification, the term "Borrower" shall include the surviving corporation in the Merger. AGREEMENT ARTICLE I DEFINITIONS; NOTE PURCHASE TERMS; CLOSING 1.01. Certain Definitions. Capitalized terms used herein and not otherwise defined have the meanings assigned to such terms on Schedule 1.01. 1.02. Purchase of Note. Subject to the terms and conditions and in reliance upon the representations and warranties set forth in this Agreement, on the Closing Date the Borrower will issue and sell to the Lender, and the Lender will purchase from the Borrower, the Note. The purchase price for the Note will be $26,500,000. 1.03. Closing. The Closing will take place at 10:00 a.m., local time, on , 2004 at the offices of Cohen & Grigsby, P.C., or at such other time or place as the parties may mutually agree upon. It is intended that the Closing will occur simultaneously with the closing of all other transactions contemplated by the Capitalization Agreement. 1.04. Conditions Precedent to the Obligations of the Lender. The obligation of the Lender to purchase the Note, to execute and deliver the other Transaction Documents and to consummate the transactions to be consummated hereunder and thereunder on the Closing Date is subject to the satisfaction of each of the following conditions precedent: (a) no Default will have occurred and be continuing or will be caused by the consummation of the transactions contemplated by the Transaction Documents or the Related Documents; - --------------- * It is contemplated that approximately $6 million of the amount to be loaned by Snyder will be loaned by Snyder-related individuals. It has not been determined what portion of that will be included in the $6 million contemplated to remain outstanding. -6- (b) no event will have occurred and no condition will exist which, individually or in the aggregate, has had, or is likely to have, a Material Adverse Effect; (c) the transactions contemplated by Sections 1 and 2 of the Capitalization Agreement shall have closed; (d) the representations and warranties of the Borrower in Article II will be true and correct as of the Closing Date; (e) the Company and a national bank shall have executed and delivered a Credit Agreement providing for a $50 million credit facility, in form and substance satisfactory to the Lender, providing for the closing of the transaction contemplated thereby promptly following the closing of the Merger; and (f) the Borrower will have delivered to the Lender such certificates, opinions and other documentation as the Lender or its counsel may reasonably request. 1.05. Deliveries of Purchase Price and Notes. The Lender will deliver to the Borrower the purchase price for the Note, and the Borrower will deliver to the Lender the Note, upon the satisfaction of the conditions set forth in Section 1.04. ARTICLE II REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants to the Lender as follows as of the date hereof and as of the Closing Date: 2.01. Organization and Qualification. The Borrower is a corporation duly organized, validly existing and subsisting under the laws of the Commonwealth of Pennsylvania. The Borrower is not required to be qualified to do business as a foreign corporation in any other jurisdiction. 2.02. Power and Authority. The Borrower has the corporate power and authority to own and operate its assets, to conduct its business as presently conducted and to execute, deliver and perform the Transaction Documents. The execution, delivery and performance of the Transaction Documents have been duly authorized by all necessary corporate proceedings on the part of the Borrower. 2.03. Execution and Binding Effect. The Transaction Documents have been, or on the Closing Date will be, duly and validly executed and delivered by the Borrower and constitute, or when executed and delivered will constitute, legal, valid and binding obligations of the Borrower, enforceable against the Borrower in accordance with their respective terms. ARTICLE III COVENANTS The Borrower covenants to the Lender as follows: -7- 3.01. Visitation and Access to Records. The Borrower will permit such Persons as the Lender may designate to visit and inspect any of the properties of the Borrower and its Subsidiaries, to examine and to make copies or make extracts from its and their books and records and to discuss its and their affairs with its and their officers, employees and independent accountants at such times (during normal business hours) and as often as the Lender may reasonably request. The Borrower authorizes such officers, employees and independent accountants to discuss with the Lender the affairs of the Borrower and its Subsidiaries. The Borrower will bear the reasonable costs and expenses of such visitations and inspections. 3.02. Preservation of Existence and Franchises. Except for the Merger or as otherwise expressly permitted hereunder, the Borrower will, and will cause each of its Subsidiaries to, maintain their respective corporate existences, rights and franchises in full force and effect in their respective jurisdictions of incorporation. The Borrower will, and will cause each of its Subsidiaries to, qualify and remain qualified as a foreign corporation in good standing in each jurisdiction in which failure to receive or retain such qualification, individually or in the aggregate, would be likely to have a Material Adverse Effect. 3.03. Insurance. The Borrower will, and will cause each of its Subsidiaries to, maintain insurance with respect to their respective properties and businesses and against such liabilities, casualties and contingencies and of such types, in such amounts and with such financially sound and reputable third party insurers as is customary in the case of corporations engaged in the same or a similar business or having similar properties similarly situated. The Borrower will cause to be delivered to the Lender, upon its request, certificates for all of the foregoing policies. The activities and operations of the Borrower and its Subsidiaries will be conducted at all times in a manner so as to conform in all material respects to the applicable provisions of all such insurance policies and the Borrower and its Subsidiaries will not take or fail to take any action which would cause any such insurance policy to lapse. 3.04. Maintenance of Assets. The Borrower will, and will cause each of its Subsidiaries to, (a) maintain in good repair (ordinary wear and tear excepted), working order and condition their respective assets, (b) make all material repairs, renewals, replacements and improvements to such assets and (c) not use or permit the use of any of such assets for any unlawful purpose or permit any nuisance to exist thereon. The Borrower will, and will cause each of its Subsidiaries to, do all things necessary to maintain, preserve and renew all licenses, authorizations and permits necessary to the conduct of their respective businesses. 3.05. Payment of Liabilities. The Borrower will, and will cause each of its Subsidiaries to, pay or discharge the following, except those which the Borrower or such Subsidiary disputes in good faith and by appropriate proceedings, diligently prosecuted to final resolution and as to which appropriate reserves are being maintained to the extent required by GAAP: (a) on or prior to the date on which penalties attach, all taxes, assessments and other governmental charges or levies imposed upon it or any of its properties or income; (b) on or prior to the date when due, all lawful claims of materialmen, mechanics, carriers, warehousemen, landlords and other like Persons which, if unpaid, might result in the creation of a Lien upon any of its properties or income (other than a Permitted Lien); and (c) on or prior to the date when due, all other lawful claims the nonpayment of which, individually or in the aggregate, would be likely to have a Material Adverse Effect. 3.06. Compliance With Governmental Rules and Material Agreements. Except for instances of noncompliance which, individually or in the aggregate, would not be likely to have a Material Adverse Effect, the Borrower will, and will cause each of its Subsidiaries to, comply with all applicable -8- Governmental Rules and all material agreements to which the Borrower or any of its Subsidiaries is a party. 3.07. Proceeds. The Borrower will use the proceeds from the sale of the Note exclusively to complete the transactions contemplated by the Merger Documents, for the payment of costs and expenses related to the transactions contemplated by the Transaction Documents and the Related Documents and for general, ordinary course corporate purposes. 3.08. Reporting Requirements. The Borrower will comply with the reporting requirements on Schedule 3.08. 3.09. Financial Covenants. The Borrower will comply with the financial covenants on Schedule 3.09. 3.10. Negative Covenants. The Borrower will comply with the negative covenants on Schedule 3.10. ARTICLE IV DEFAULT 4.01. Events of Default. An Event of Default means the occurrence or existence of one or more of the following events or conditions (whatever the reason for the Event of Default and whether voluntary, involuntary or effected by operation of law): (a) the Borrower fails to pay when due principal or interest on the Note and such failure continues uncured for five days after the due date; (b) any representation or warranty made by the Borrower under this Agreement or any statement made by the Borrower in any financial statement, certificate, report, exhibit or document furnished by the Borrower to the Lender pursuant to this Agreement is incorrect or misleading in any material respect as of the time when made; (c) the Borrower defaults in the performance of any of its covenants set forth in Section 3.10; (d) the Borrower defaults in the performance or observance of any other covenant, agreement or duty under this Agreement or any of the other Transaction Documents which is not cured within 30 days following notice thereof to the Borrower; (e) the Borrower or any of its Subsidiaries defaults (as principal or guarantor or other surety) (i) in any payment of principal of or interest on any Debt having an aggregate principal amount in excess of $100,000 or (ii) in the observance of any covenant, term or condition contained in any agreement or instrument by which such Debt is created, secured or evidenced, if the effect of such default is to cause all or part of such Debt to become due before its otherwise stated maturity; (f) one or more final judgments for the payment of money aggregating in excess of $100,000 is rendered against the Borrower or any of its Subsidiaries, and the Borrower or such Subsidiary fails to discharge or stay the same within 60 days from the date of notice of entry thereof; (g) the Merger has not occurred on or before June 30, 2004; -9- (h) the Borrower sells substantially all of its assets or consummates a merger, sale of stock of similar transaction resulting in the owners of the Company's common stock following consummation of the Merger owning less than 51% of the common stock of the Company; (i) a proceeding is instituted against the Borrower or any of its Subsidiaries seeking a declaration or order for relief, or entailing a finding, that the Borrower or such Subsidiary is insolvent or bankrupt, or seeking reorganization, liquidation, dissolution, winding-up, charter revocation or other similar relief with respect to the Borrower or such Subsidiary or any of its properties, assets or debts, or seeking the appointment of a receiver, trustee, custodian, liquidator, sequestrator or similar official for the Borrower or such Subsidiary or any of its properties or assets, and such proceeding results in the making, entry or grant of any such declaration, order, finding, relief or appointment, or such proceeding remains undismissed and unstayed for a period of 30 consecutive days; or (j) the Borrower or any of its Subsidiaries becomes insolvent or bankrupt, becomes generally unable to pay its debts as they become due, voluntarily suspends transaction of its business, makes a general assignment for the benefit of creditors, initiates a proceeding described in subsection (i) above, consents to any such declaration, order, finding, relief or appointment described in subsection (i) above or takes any action in furtherance of any of the foregoing. 4.02. Consequences of an Event of Default. (a) If an Event of Default specified in subsections (a) through (h) of Section 4.01 occurs and is continuing, the Lender may, by notice to the Borrower, declare the Obligations to be immediately due and payable without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived, and an action therefor will immediately accrue. (b) If an Event of Default specified in subsections (i) or (j) of Section 4.01 occurs and is continuing, all of the Obligations will become immediately due and payable without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived, and an action therefor will immediately accrue. 4.03. Set-Off. If any of the Obligations becomes due and payable (by acceleration or otherwise), the Lender will have the right, in addition to all other rights and remedies available to it, without notice to the Borrower, to set-off against and to appropriate and apply to such due and payable amounts any debt owing to, and any other funds held in any manner for the account of, the Borrower or any of its Subsidiaries by the Lender or any of its Affiliates. Such right will exist whether or not the Lender gives notice or makes any demand under any Transaction Document or whether or not such debt owing to or funds held for the account of the Borrower is or are matured or unmatured, and regardless of the existence or adequacy of any collateral, guaranty or any other security, right or remedy available to the Lender. 4.04. No Waiver by Accepting Payment. The acceptance by the Lender of any sum after the same is due will not constitute a waiver of the right either to require prompt payment, when due, of all other sums due under the Transaction Documents or to declare an Event of Default as herein provided. The acceptance by the Lender of any sum in an amount less than the sum then due will be deemed an acceptance on account only and upon condition that it will not constitute a waiver of the obligation of the Borrower to pay the entire sum then due, and failure of the Borrower to pay such entire sum then due will be and continue to be an Event of Default notwithstanding such acceptance of such amount on account, and the Lender will at all times thereafter and until the entire sum then due has been paid, and -10- notwithstanding the acceptance by the Lender thereafter of further sums on account, entitled to exercise all rights conferred upon it by any of the Transaction Documents upon the occurrence of an Event of Default, whether any such amounts are received prior or subsequent to such exercise. E-12 ARTICLE V GENERAL PROVISIONS 5.01. Lender's Subordination Covenant. The Lender agrees to execute and deliver a Subordination Agreement and an Intercompany Subordination Agreement with a national bank, in form and substance typical for transactions of this type and reasonably approved by the Lender, agreeing to subordinate payment of the Note under certain circumstances to payment of the senior indebtedness to be provided by this bank under the credit facility described in Section 1.04(e) hereof. 5.02. Consent to Jurisdiction and Service of Process. (a) The Borrower hereby: (i) irrevocably submits to the jurisdiction of the Court of Common Pleas of Allegheny County, Pennsylvania and to the jurisdiction of the United States District Court for the Western District of Pennsylvania for the purposes of any action or proceeding arising out of or relating to this Agreement or the other Transaction Documents or the subject matter hereof or thereof; (ii) waives and agrees not to assert, by way of motion, as a defense or otherwise, in any such action or proceeding, any claim that (A) it is not personally subject to the jurisdiction of such courts, (B) the action or proceeding is brought in an inconvenient forum or (C) the venue of the action or proceeding is improper; and (iii) agrees that, notwithstanding any right or privilege it may possess at any time, such party and its property are and will be generally subject to suit on account of the obligations assumed by it hereunder. (b) The Borrower agrees that service in person or by certified or registered U.S. mail to its address set forth in Section 5.05 will constitute valid in personam service upon the Borrower and its successors and assigns in any action or proceeding with respect to any matter as to which it has submitted to jurisdiction hereunder. (c) Notwithstanding the foregoing, the Lender may at its option bring any action or other proceeding arising out of or relating to this Agreement or the other Transaction Documents or the subject matter hereof or thereof against the Borrower or any of its assets in the courts of any jurisdiction or place where the Borrower or such assets may be found or where the Borrower may be subject to personal jurisdiction, and may effect service of process as provided under any applicable Governmental Rule. (d) The Borrower hereby acknowledges that this is a commercial transaction, that the foregoing provisions for consent to jurisdiction and service of process have been read, understood and voluntarily agreed to by it and that by agreeing to such provisions it is waiving important legal rights. The obligations of the Borrower under this Section will survive any termination of this Agreement. 5.03. Cumulative Remedies. The rights and remedies of the Lender hereunder and under the Note are cumulative and not exclusive of any rights or remedies which the Lender would otherwise have. No single or partial exercise of any such right or remedy by the Lender, and no discontinuance of steps to enforce any such right or remedy, will preclude any further exercise thereof or of any other right or remedy of the Lender. -11- 5.04. Expenses; Taxes. The Borrower will pay, or will reimburse the Lender for: (a) all reasonable out-of-pocket expenses, including without limitation attorney's fees and court costs, incurred by the Lender from time to time and which arise out of or relate to (i) the preparation, negotiation, execution or delivery of this Agreement and the other Transaction Documents, (ii) any amendments, waivers or consents relating hereto or thereto and which are requested by the Borrower or (iii) the Lender's enforcement or preservation of its rights and remedies hereunder and thereunder; and (b) all stamp, document, transfer, recording or filing taxes or fees and similar impositions now or hereafter determined by the Lender to be payable in connection with this Agreement or the other Transaction Documents or any transaction contemplated hereby or thereby. All such amounts will be due and payable on the date specified in any invoice which the Borrower receives with respect thereto or, in the case of amounts to be reimbursed to the Lender, within five Business Days after the Lender's demand therefor. The obligations of the Borrower under this Section will survive any termination of this Agreement. 5.05. Notices. All notices, consents, requests, demands and other communications required or permitted hereunder: (a) will be in writing; (b) will be sent by messenger, certified or registered U.S. mail, a reliable express delivery service or telecopier (with a copy sent by one of the foregoing means), charges prepaid as applicable, to the appropriate address(es) or number(s) set forth below; and (c) will be deemed to have been given on the date of receipt by the addressee (or, if the date of receipt is not a Business Day, on the first Business Day after the date of receipt), as evidenced by (i) a receipt executed by the addressee (or a responsible person in his or her office), the records of the Person delivering such communication or a notice to the effect that such addressee refused to claim or accept such communication, if sent by messenger, U.S. mail or express delivery service, or (ii) a receipt generated by the sender's telecopier showing that such communication was sent to the appropriate number on a specified date, if sent by telecopier. All such communications will be sent to the following addresses or numbers, or to such other addresses or numbers as any party may inform the others by giving five Business Days' prior notice: If to the Borrower (prior to the Merger): If to the Lender: SAC Holding Co. Snyder Associated Companies, Inc. c/o Snyder Associated Companies, Inc. P.O. Box 1022 P.O. Box 1022 Kittanning, PA 16201 Kittanning, PA 16201 Attn: Mark A. Snyder Attn: Mark A. Snyder FAX No.: 724-545-2989 FAX No.: 724-545-2989
5.06. Miscellaneous. This Agreement: (a) may be amended only by a writing signed by each of the parties; (b) except pursuant to the Merger, may not be assigned, pledged or otherwise transferred by the Borrower, whether by operation of law or otherwise, without the prior consent of the Lender; (c) may be executed in several counterparts, each of which is deemed an original but all of which constitute one and the same instrument; (d) together with the other Transaction Documents, contains the entire agreement of the parties with respect to the transactions contemplated hereby and thereby and supersedes all prior written and oral agreements, and all contemporaneous oral agreements, relating to such transactions; (e) is governed by, and will be construed and enforced in accordance with, the laws of the Commonwealth of Pennsylvania without giving effect to any conflict of laws rules; and (f) is binding upon, and will inure to the benefit of, the parties and their respective successors and permitted assigns. The due performance or observance by the Borrower of any of its obligations hereunder may be waived only by a writing signed by the Lender, and any such waiver will be effective only to the extent -12- specifically set forth in such writing. The waiver by the Lender of any breach or violation of any provision of this Agreement will not operate as, or be construed to be, a waiver of any subsequent breach or violation hereof. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining portions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. -13- SIGNATURE PAGE TO NOTE PURCHASE AGREEMENT BORROWER SAC HOLDING CO. By: ---------------------------------- Title: -------------------------------- LENDER SNYDER ASSOCIATED COMPANIES, INC. By: ---------------------------------- Title: -------------------------------- -14- EXHIBIT D-2 SENIOR SUBORDINATED PROMISSORY NOTE $26,500,000* Pittsburgh, Pennsylvania ________________, 2004 FOR VALUE RECEIVED, the undersigned, SAC HOLDING CO., a Pennsylvania corporation (the "MAKER"), hereby promises to pay to the order of [SNYDER ASSOCIATED COMPANIES, INC.], its successors and assigns (collectively, the "HOLDER"), the principal sum of TWENTY SIX MILLION FIVE HUNDRED THOUSAND DOLLARS ($26,500,000), together with interest on the outstanding balance hereof at the rate specified herein. 1. This Senior Subordinated Promissory Note (this "NOTE") is the Note referred to in, and is entitled to the benefits of, the Note Purchase Agreement dated as of even date herewith between the Holder and the Maker (as the same may be amended, the "NOTE PURCHASE AGREEMENT"). The Note Purchase Agreement contains provisions, among others, for the acceleration of the maturity hereof in certain circumstances. All capitalized terms used herein and not otherwise defined will have the meanings assigned to such terms in the Note Purchase Agreement. 2. The unpaid principal balance hereof will bear interest at the rate of 18% per annum, based on a year of 360 days. Accrued interest on the unpaid principal balance hereof will be due and payable in arrears on ______________, 2004, and on the last day of each ____________, ____________, ______________ and ____________ thereafter (each an "INTEREST PAYMENT DATE") and on the Maturity Date (defined below). 3. The principal of this Note shall be payable as follows: (a) Within two Business Days after the closing of the Merger, $14,000,000 of the principal of this Note, together with all accrued but unpaid interest on such amount, shall be due and payable. (b) Promptly but in any event no later than two Business Days following the date on which Dennis C. Zensen purchases common stock of the Company for cash, the principal of this Note in an amount equal to the cash paid by Mr. Zensen for such common stock, together with all accrued but unpaid interest on such principal amount, shall be due and payable. (c) The entire unpaid principal balance of this Note, all accrued and unpaid interest due hereunder and any other amounts due from the Maker to the Holder hereunder, will be due and payable on the date which is the earliest to occur of (i) the effective date of the initial public offering of the Maker's equity securities, (ii) the date when the payment of this Note has been accelerated pursuant to Section 4.02 of the Note Purchase Agreement or (iii) _________________, 20__. 4. If any payment of principal or interest is not paid on the date when due, then such overdue payment and the entire principal amount hereof will bear interest at the rate of 20% per annum until such default is cured (if capable of cure) or until all amounts due hereunder are paid in full, which interest is payable upon demand. If any amount due under this Note is not paid when due, the Maker will pay to the Holder its reasonable attorneys' fees and other reasonable costs of collection in accordance with Section 4.03 of the Note Purchase Agreement. 5. Payments hereunder will be made to the Holder in immediately available funds at its address set forth in Section 5.05 of the Note Purchase Agreement. At any time following January 1, 2007, the Maker may prepay this Note in whole or in part at any time without penalty or premium. 6. The Maker hereby: (a) waives presentment for payment, demand, notice of protest and all other notices (not expressly provided for in this Note or the Note Purchase Agreement) in connection with the delivery, acceptance, performance, default or enforcement of the payment of this Note; (b) agrees that its liability is unconditional without regard to the liability of any other party and will not be affected in any manner by any indulgence, extensions of time, renewal, waiver or modification granted or consented to by the Holder at any time; (c) consents to any and all indulgences, extensions of time, renewals, waivers or modifications granted or consented to by the Holder at any time; and (d) agrees that additional makers, endorsers, guarantors or sureties may become parties to this Note or the Note Purchase Agreement without notice to it and without affecting its liability under this Note. 7. This Note: (a) may be amended only by a writing signed by the Maker and the Holder; (b) except pursuant to the Merger, may not be assigned or otherwise transferred by the Maker, whether by operation of law or otherwise, without the prior consent of the Holder; (c) is governed by, and will be construed and enforced in accordance with, the laws of the Commonwealth of Pennsylvania without giving effect to any conflict of law rules; and (d) is binding upon the Maker and its successors and permitted assigns, and will inure to the benefit of the Holder and its successors and assigns. -2- SIGNATURE PAGE TO SENIOR SUBORDINATED PROMISSORY NOTE SAC HOLDING CO. By: ---------------------------------- Title: -------------------------------- -3- SCHEDULE 1.01 DEFINED TERMS "AFFILIATE" means, with respect to any Person, any Person who directly or indirectly controls, is controlled by or is under common control with such Person. The term "CONTROL" means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise. "BUSINESS DAY" means any day other than a Saturday, Sunday, public holiday under the laws of the Commonwealth of Pennsylvania or other day on which banking or lending institutions are authorized or obligated to close in Pittsburgh, Pennsylvania. "CLOSING" means the consummation of the transactions contemplated by this Agreement on the Closing Date. "CLOSING DATE" means the date when the Closing occurs. "COMPANY" means Sylvan, Inc., a Nevada corporation. "DEBT" means, with respect to any Person, (a) all indebtedness or liability for or on account of money borrowed by, or deposits with or advances to, such Person, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all indebtedness or liability for or on account of property or services acquired by such Person, (d) all amounts secured by Liens on property owned by such Person (whether or not assumed) and capitalized leases (without regard to any limitation of the rights and remedies of the holder of such Lien or the lessor under any capitalized lease to repossession or sale of such property) and (e) the aggregate amount available to be drawn on any letters of credit, lines of credit or similar facilities with respect to which such Person is the account party, plus the aggregate amount owed by such Person as a result of draws on or advances under such facilities. [CONFORM TO SENIOR DEBT] "DEFAULT" means an Event of Default or any event or condition which, with the giving of notice or the passage of time or both, would constitute an Event of Default. "EVENT OF DEFAULT" means any of the Events of Default described in Section 4.01. "GOVERNMENTAL RULE" means any law (including common law), statute, rule, regulation, ordinance, code, order, writ, judgment, injunction, decree, guideline, directive or decision of any governmental authority, whether or not having the force of law and whether now or hereafter existing, as any of the same may be amended. "LIEN" means (a) any security arrangement, including without limitation any mortgage, deed of trust, pledge, collateral assignment, security interest, deposit, conditional sale agreement or title retention agreement, (b) any agreement of sale, assignment or other transfer and (c) any lien, easement, restrictive covenant or other encumbrance. [CONFORM TO SENIOR DEBT] "MATERIAL ADVERSE EFFECT" means a material adverse effect on the business, operations or financial condition of the Borrower and its Subsidiaries taken as a whole or on the ability of the Borrower to perform its obligations hereunder or under the other Transaction Documents. "MERGER DOCUMENTS" means the Merger Agreement and all documents executed and delivered in connection with the Merger, as the same may be amended. "NOTE" means the Senior Subordinated Promissory Note of the Borrower in the original principal amount of $26,500,000 to be delivered by the Borrower to the Lender on the Closing Date, which Note will be in the form of Exhibit A hereto, as the same may be amended. "OBLIGATIONS" means the obligations of the Borrower hereunder and under the Note. "PERMITTED LIENS" means: (a) Liens securing the Obligations; (b) Liens existing as of the Effective Time and listed on Annex hereto and extension, renewal and replacement Liens upon the same property subject to a listed Lien, so long as the amount secured by each such extension, renewal or replacement Lien does not exceed the amount secured by the Lien currently existing and the obligation secured by each such extension, renewal or replacement Lien is otherwise permitted hereunder; (c) Liens arising from taxes, assessments, charges, levies or claims described in Section 3.05 that are not yet due or that remain payable without penalty or to the extent permitted to remain unpaid under Section 3.05; (d) deposits or pledges made (i) to secure workmen's compensation, unemployment insurance, old age benefits or other statutory obligations, (ii) in connection with bids, tenders, trade contracts or leases or (iii) to secure stay, surety or appeal bonds, in each case in the ordinary course of business; (e) purchase money or title retention Liens and Liens existing on property at the time of the purchase thereof by the Borrower (whether or not assumed), but only so long as (i) each such Lien is confined solely to the property purchased, (ii) the amount secured by each such lien is not greater than 100% of the lesser of the fair market value of the purchased property at the time of purchase or the purchase price thereof (which, in the case of property purchased subject to existing Liens, include the amount secured by such Liens) and (iii) the aggregate Debt secured by all such Liens is permitted by item on Schedule 3.10; (f) Liens resulting from progress payments or partial payments under United States Government contracts or subcontracts thereunder; (g) Liens arising from legal proceedings, so long as such proceedings are being contested in good faith by appropriate proceedings diligently conducted and so long as execution is stayed on all judgments resulting from any such proceedings; and (h) zoning restrictions, easements and minor restrictions on the use of real property, minor irregularities in the title thereto and other minor Liens that do not secure the payment of money or the performance of an obligation and that do not in the aggregate materially detract from the value of such property or materially impair its use in the business of the Borrower. [CONFORM TO SENIOR DEBT] "PERSON" means any individual, partnership, corporation, limited liability company, trust, joint venture, unincorporated organization or other entity, including without limitation any governmental authority. "RELATED DOCUMENTS" means the Merger Documents and the Senior Debt Documents. "RESTRICTED PAYMENT" means: (a) any dividend or other distribution, direct or indirect, on account of any shares of any class of stock of the Borrower now or hereafter outstanding, except a dividend payable solely in shares of that class of stock to the holders of that class; and (b) any redemption, conversion, exchange, retirement, sinking fund or similar payment, purchase or other -2- acquisition for value, direct or indirect, of any shares of any class of stock of the Borrower now or hereafter outstanding. [CONFORM TO SENIOR DEBT] "SYLVAN" means Sylvan, Inc., a Nevada corporation. "TRANSACTION DOCUMENTS" means this Agreement, the Note, the Senior Intercreditor Agreement and any other documents executed and delivered by the Borrower in connection herewith or therewith, as any of the same may be amended. -3- SCHEDULE 3.08 REPORTING COVENANTS [TO BE CONFORMED TO SENIOR DEBT] SCHEDULE 3.09 FINANCIAL COVENANTS [TO BE CONFORMED TO SENIOR DEBT] SCHEDULE 3.10 NEGATIVE COVENANTS [TO BE CONFORMED TO SENIOR DEBT] -----END PRIVACY-ENHANCED MESSAGE-----