<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 2, 1998
REGISTRATION NO. 333-59565
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
TRIARCO INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
DELAWARE 2833 22-3081998
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification No.)
incorporation or
organization)
400 HAMBURG TURNPIKE
WAYNE, NEW JERSEY 07470
(973) 942-5100
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
ANGELO R. APPIERTO
CHIEF FINANCIAL OFFICER
400 HAMBURG TURNPIKE
WAYNE, NEW JERSEY 07470
(973) 942-5100
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
LOUIS J. BEVILACQUA, ESQ. EDWARD S. ROSENTHAL, ESQ. FRIED,
CADWALADER, WICKERSHAM & TAFT FRANK, HARRIS, SHRIVER & JACOBSON
100 MAIDEN LANE 350 SOUTH GRAND AVENUE, 32ND FLOOR
NEW YORK, NEW YORK 10038 LOS ANGELES, CALIFORNIA 90071
(212) 504-6000 (213) 473-2000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [_]
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO
SECTION 8(a), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED SEPTEMBER 2, 1998
3,300,000 SHARES
LOGO
COMMON STOCK
All of the shares of Common Stock offered hereby are being sold by Triarco
Industries, Inc. (the "Company"). Prior to this offering, there has been no
public market for the Common Stock of the Company. It is currently estimated
that the initial public offering price will be between $ and $ per share.
See "Underwriting" for a discussion of factors considered in determining the
initial public offering price. Application has been made for quotation of the
Common Stock on the Nasdaq National Market under the symbol "TRCO."
SEE "RISK FACTORS" BEGINNING ON PAGE 7 OF THIS PROSPECTUS FOR A DISCUSSION OF
CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE
COMMON STOCK OFFERED HEREBY.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
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<CAPTION>
Price to Underwriting Proceeds to
Public Discount(1) Company(2)
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<S> <C> <C> <C>
Per Share................................. $ $ $
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Total(3).................................. $ $ $
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- ------------------------------------------------------------------------------
</TABLE>
(1) See "Underwriting" for information concerning indemnification of the
Underwriters and other matters.
(2) Before deducting expenses payable by the Company, estimated at $ .
(3) Mr. Rodger R. Rohde, Sr. (the "Selling Stockholder") has granted to the
Underwriters a 30-day option to purchase up to an additional 495,000
shares of Common Stock solely to cover over-allotments, if any. If the
Underwriters exercise this option in full, the Price to Public will total
$ , the Underwriting Discount will total $ , the Proceeds to Company
will total $ and the Proceeds to Selling Stockholder will total $ .
See "Principal Stockholders" and "Underwriting."
The shares of Common Stock are offered by the Underwriters named herein,
subject to receipt and acceptance by them and subject to their right to reject
any order in whole or in part. It is expected that delivery of the certificates
representing such shares will be made against payment therefor at the office of
NationsBanc Montgomery Securities LLC on or about , 1998.
-----------
NationsBanc Montgomery Securities LLC CIBC Oppenheimer
, 1998
<PAGE>
[Pictorial and graphic representations are: "Better Products, Better Ideas"
trademark (inside front cover); graphic depiction of six step production
process describing product procurement, quality control, processing, advanced
testing, shipping and final product with accompanying photos of herbs, photos
from the Agricultural Division, photos of laboratory and production
operations, photos of distribution vehicles, and photos of finished goods with
Fingerprint(R) Botanicals logo and Triarco Industries, Inc. reference (fold
out); and architectural rendering of the Herbal Processing Facility (inside
back cover).]
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK
OFFERED HEREBY, INCLUDING OVER-ALLOTMENT, THE ENTRY OF STABILIZING BIDS,
SYNDICATE COVERING TRANSACTIONS OR THE IMPOSITION OF PENALTY BIDS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information contained in this Prospectus, including "Risk Factors" and the
Financial Statements and Notes thereto. Except as otherwise noted, all
references to the "Company" include its predecessors and all information in
this Prospectus (i) assumes no exercise of the Underwriters' over-allotment
option and (ii) gives effect to a 4,469-for-1 split of the shares of Common
Stock to be effected prior to consummation of this offering. See "--Corporate
Consolidation," "Description of Capital Stock" and "Underwriting." Compound
annual growth rate, or "CAGR," represents the constant annual rate of growth
over a period required to achieve specified values at the beginning and end of
such period. Caution should be used to avoid confusion of CAGRs with actual
annual growth rates on a year to year basis.
THE COMPANY
The Company is a leading vertically integrated supplier of high-quality,
high-purity natural product ingredients in "ready-to-run" form to nutritional
supplement manufacturers. The Company cultivates, procures, cleans, processes,
grinds, granulates, blends and formulates premium natural products that meet
the increasing demands of its customers for value-added ingredients. The
Company works closely with these customers in developing products that meet the
customers' desired label claims with consistent and measurable compounds.
Moreover, the Company's ingredients are "ready-to-run," which enables its
customers to introduce these ingredients immediately into the manufacturing
process without additional preparation. The Company develops various ready-to-
run forms that accommodate customers' existing tablet, capsule, powder or
liquid packaging capabilities. In addition, the Company provides to its
customers value-added technical and research and development ("R&D") support.
In 1997, the Company manufactured over 700 products in three categories,
botanicals (herbs), teas and specialty products, which accounted for 55.6%,
27.7% and 16.7% of net sales, respectively.
The Company's customers include a diverse range of nutritional supplement
manufacturers which process the Company's natural product ingredients into
consumer salable form which are then marketed through various distribution
channels. These distribution channels include (i) multi-level marketers such as
Herbalife International Inc. ("Herbalife") and Amway Corporation ("Amway"),
(ii) specialty health products retailers such as General Nutrition Companies,
Inc. ("GNC"), Whole Foods Market Inc. ("Whole Foods") and Wild Oats Markets
Inc. ("Wild Oats") and (iii) mass market retailers such as major drug stores,
supermarkets and discount stores. Under the dedication and leadership of the
Rohde family, who share more than 40 years experience in the nutritional
supplements industry, the Company has developed long-standing relationships
with industry leaders including GNC, Global Health Sciences, Inc. ("Global
Health") (a major manufacturer for Herbalife), Pharmavite Corporation
("Pharmavite") and Rexall Sundown, Inc. ("Rexall Sundown"). GNC's manufacturing
subsidiary and Global Health represented approximately 36.6% and 35.9%,
respectively, of the Company's net sales in 1997, and in common with peers in
its industry, the Company does not have long-term contracts with these or other
customers. Each distribution channel targets consumers with specific purchasing
characteristics with respect to product formulation, quality and price. By
maintaining the flexibility to effectively assist its customers in meeting
these diverse consumer requirements, the Company believes it maximizes its
ability to continually increase the breadth and depth of its customer base.
Quality assurance and quality control are a fundamental aspect of the
Company's business strategy. These disciplines are designed to address both the
quality of the Company's botanical manufacturing process and the identity and
purity of the Company's ingredients. The Company continues to invest in
agricultural, scientific and manufacturing assets and personnel and is
committed to elevating the standards for acceptable purity, consistency and
quality of natural product ingredients, thus establishing a competitive
advantage over other ingredient suppliers. In conjunction with this effort, the
Company launched its agricultural division (the "Agricultural Division") in
late 1996 by leasing a 500 acre certified organic farm, principally for the
purpose of conducting agricultural R&D. In addition, the Company is currently
constructing a state-of-the-art herbal processing facility (the "Herbal
Processing Facility") that will expand its botanical processing capacity and
capabilities.
The Company believes that it is well positioned to capitalize on the
continued growth in the nutritional supplements industry. According to the
Packaged Facts Report (as defined herein), the retail market for vitamins,
3
<PAGE>
minerals and other supplements (excluding sports nutrition and diet products)
has grown at a CAGR of 15% from $3.7 billion in 1992 to $6.5 billion in 1996. A
large portion of this growth is attributable to an increase in sales of other
supplements (primarily herbal products), which grew from $570 million in 1992
to $2.3 billion in 1996. According to the Packaged Facts Report, CAGRs from
1992 through 1996 for vitamins, minerals and other supplements were 8.0%, 5.2%
and 41.7%, respectively. In addition, the Packaged Facts Report forecasts a
13.6% CAGR in the market for vitamins, minerals and other supplements
(excluding sports nutrition and diet products), including a 25% CAGR in the
market for other supplements, through 2001. See "Business--Industry Growth" for
detailed information regarding annual growth rates underlying CAGRs.
Since its inception in 1978, the Company has experienced rapid growth in net
sales and operating income. From 1993 to 1997, net sales and operating income
have grown at CAGRs of 34.6% and 84.5%, respectively. Net sales were $42.0
million and $22.9 million and operating income was $8.3 million and $4.8
million in 1997 and the six months ended June 30, 1998, respectively.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company......................3,300,000.shares
Common Stock to be outstanding after this offering.......12,693,838 shares(1)
Use of proceeds..........................................For repayment of outstanding indebtedness,
expansion of the Company's Agricultural
Division and Herbal Processing Facility,
expansion of R&D and management information system
("MIS") functions, launching a branding
initiative with respect to certain of the
Company's products, and working capital and
general corporate purposes, including
potential acquisitions.
See "Use of Proceeds."
Proposed Nasdaq National Market symbol...................TRCO
</TABLE>
- --------
(1) Excludes shares to be issuable upon exercise of stock options expected
to be granted on or after the consummation of this offering at an exercise
price equal to the closing price of the Common Stock on the Nasdaq National
Market on the date of grant (or 110% thereof in the case of greater than
10% stockholders). See "Capitalization" and "Management--Employee Benefit
Plans--1998 Omnibus Stock Incentive Plan."
--------------------
The Company was incorporated under the laws of Delaware in June 1998, and its
principal executive offices are located at 400 Hamburg Turnpike, Wayne, New
Jersey 07470, telephone number: (973) 942-5100.
4
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------------------- ---------------
1993 1994 1995 1996 1997 1997 1998
------- ------- ------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA(1):
Net sales............... $12,783 $28,169 $23,646 $32,012 $41,995 $18,706 $22,881
Gross profit............ 5,651 14,529 9,398 14,018 17,400 7,638 9,575
Operating income........ 718 9,429 3,693 6,506 8,327 3,336 4,724
Net income.............. 294 7,423 3,655 6,250 8,125 3,261 4,754
PRO FORMA DATA (UNAU-
DITED):
Historical income before
income taxes........... 8,460 4,917
Pro forma adjustments
other than income
taxes(2)............... 1 88
------- -------
Pro forma income before
income taxes........... 8,461 5,005
Pro forma provision for
income taxes(3)........ 3,394 1,970
------- -------
Pro forma net income.... $ 5,067 $ 3,035
======= =======
Pro forma earnings per
share(4)............... $ $
======= =======
Pro forma weighted
average shares
outstanding(4).........
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1998
-----------------------------------
PRO FORMA
ACTUAL PRO FORMA(5) AS ADJUSTED(6)
------- ------------ --------------
(UNAUDITED)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................. $ 763 $ 763 $
Working capital............................ 339 609
Total assets............................... 23,421 23,795
Total debt, including current portion...... 9,515 13,465 --
Stockholders' equity....................... 4,765 5,139
</TABLE>
- --------
(1) To the extent set forth in the Financial Statements, each of the
Predecessor Companies (as defined herein) was treated as an S corporation
and therefore was not subject to federal income taxes and was subject to a
reduced corporate rate for state income taxes. As a result, income was
passed through to the respective shareholders for tax purposes. See Note 11
to the Financial Statements and Note 3 below.
(2) Pro forma adjustments other than income taxes represents a reduction in
interest expense assuming the application of proceeds from the sale of
sufficient shares of Common Stock to repay all of the Company's outstanding
debt. See Note 4 below.
(3) Pro forma provision for income taxes is calculated as if the Company had
been subject to federal and additional state income taxes since January 1
of each period and represents an increase in income taxes of approximately
$3,059 and $1,807 in 1997 and for the six months ended June 30, 1998,
respectively. See "--Corporate Consolidation" and "Use of Proceeds."
(4) Pro forma earnings per share is based on (i) pro forma net income as
indicated and (ii) 9,394 shares of Common Stock outstanding prior to this
offering, increased by the sale of sufficient shares of Common Stock,
assumed to be shares based on an assumed initial public offering price
of $ per share, to repay the Company's outstanding debt, assumed to be
$13,465, composed of $10,965 under the Term Notes (as defined herein) and
$2,500 under the revolving credit facility.
(5) Pro forma to reflect (i) the distribution of $10,965 to the shareholders of
the Predecessor Companies, funded by the Term Notes and (ii) a net deferred
tax asset of approximately $374 which the Company will record concurrently
with becoming a C corporation. See "--Corporate Consolidation."
(6) Pro forma as adjusted to reflect the sale of 3,300 shares of Common Stock
offered hereby at an assumed initial public offering price of $ per
share and the application of the estimated net proceeds therefrom. See "Use
of Proceeds" and "Capitalization."
5
<PAGE>
CORPORATE CONSOLIDATION
The predecessors of the Company consist of three corporations: Leica Sordik,
Inc., a New Jersey corporation ("LSI"), Triarco Industries, Inc., a New Jersey
corporation ("Old Triarco"), and Body Mechanics, Inc., a Florida corporation
("BMI"), (collectively, the "Predecessor Companies"). The Predecessor Companies
were owned, directly or beneficially, in various ownership proportions by
Rodger R. Rohde, Sr., Rodger R. Rohde, Jr., Christopher J. Rohde and Cynthia J.
Rohde (collectively, the "Rohde Family Members"). Each of the Predecessor
Companies had elected to be taxed as an S corporation under the Internal
Revenue Code of 1986, as amended (the "Code"). The Company is a recently
organized Delaware corporation formed for the purpose of effecting the
consolidation of LSI, Old Triarco and BMI and pursuing this offering. The
Company has elected to be taxed as an S corporation under the Code; however, it
will withdraw such election prior to the consummation of this offering and will
thereafter be taxed as a C corporation under the Code.
On July 14, 1998, LSI and BMI were merged with and into Old Triarco, and on
July 20, 1998, Old Triarco was merged with and into the Company (collectively,
the "Mergers"). Prior to their Merger, LSI and Old Triarco borrowed
approximately $7.0 million and $4.0 million, respectively, under term notes
from a bank (the "Term Notes"), the proceeds of which were used by LSI and Old
Triarco to make a distribution of substantially all of their respective
accumulated and previously taxed S corporation earnings as of March 31, 1998 to
their respective shareholders, and BMI used its available cash to make such a
distribution to its shareholders. In addition, the Company anticipates that it
will make a further distribution of S corporation earnings prior to
consummation of this offering. The transactions described in this paragraph,
and the conversion of the Company from an S corporation to a C corporation, are
collectively referred to as the "Consolidation."
FORWARD-LOOKING STATEMENTS
This Prospectus includes "forward-looking statements." All statements other
than statements of historical facts included in this Prospectus, including,
without limitation, certain statements under the captions "Prospectus Summary,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business" and located elsewhere herein may constitute forward-
looking statements. In addition, forward-looking statements generally can be
identified by the use of forward-looking terminology such as "may," "will,"
"expect," "intend," "estimate," "anticipate," "believe" or "continue" or the
negatives thereof or variations thereon or similar terminology. Although the
Company believes that the expectations reflected in such forward-looking
statements are reasonable, it can give no assurance that such expectations will
prove to have been correct. Important factors that could cause actual results
to differ materially from the Company's expectations ("Cautionary Statements")
are disclosed in this Prospectus, including, without limitation, in conjunction
with the forward-looking statements included in this Prospectus and under "Risk
Factors." All subsequent written and oral forward-looking statements
attributable to the Company or persons acting on its behalf are expressly
qualified in their entirety by the Cautionary Statements. These forward-looking
statements speak only as of the date of this Prospectus. The Company expressly
disclaims any obligation or undertaking to disseminate any updates or revisions
to any forward-looking statement contained herein to reflect any change in
their expectations with regard thereto or any change in events, conditions or
circumstances on which any such statement is based.
----------------
The Company uses the following trademarks, "Aminogen(R)," "Body
Mechanics(R)," "Carbogen(R)," "Fingerprint(R) Botanicals," "Legumase(R),"
"3D(R) Extracts" and "3D(R) Botanicals" and phrases, "Agree(TM) Enzymes" and
"Better Products, Better Ideas(TM)," among others, to identify its products.
Unless otherwise indicated, all other trademarks or service marks appearing in
this Prospectus are the trademarks or service marks of the companies that
utilize them.
6
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the
shares of Common Stock offered hereby.
DEPENDENCE ON SIGNIFICANT CUSTOMERS; LACK OF LONG-TERM CONTRACTS
Net sales to General Nutrition Products, Inc. ("GNP"), a manufacturing
subsidiary of GNC, accounted for approximately 36.0%, 36.6% and 33.8% of the
Company's net sales for 1996, 1997 and the six months ended June 30, 1998,
respectively. Although GNP is primarily a manufacturer for GNC, GNP is also a
contract manufacturer for other customers. Net sales to Global Health, a
primary manufacturer of natural products for Herbalife as well as a contract
manufacturer for other customers, accounted for approximately 38.0%, 35.9% and
26.0% of the Company's net sales for 1996, 1997 and the six months ended June
30, 1998, respectively. In addition, one product line, teas, represented
approximately 80% of Global Health's purchases from the Company and 27.6% of
the Company's net sales in 1997. No other single customer accounted for 10% or
more of the Company's net sales in 1997. The Company does not have long-term
contracts with any of its customers. There can be no assurance that the
Company's major customers will continue as major customers of the Company. The
loss of a major customer, the loss of a significant number of other customers,
or a significant reduction in purchase volume by or financial difficulty of
such customers, for any reason, could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business--Customers."
EFFECT OF ADVERSE DEVELOPMENTS IN THE NUTRITIONAL SUPPLEMENTS INDUSTRY
The Company is a supplier of botanicals, teas, digestive enzymes, minerals
and other ingredients primarily to the nutritional supplement segment of the
natural products industry. The manufacturers of nutritional supplements
suggest that their offerings are safe natural products that may offer certain
health benefits. Accordingly, the Company is highly dependent upon consumers'
perception of the overall integrity of the nutritional supplements industry,
as well as the safety and quality of nutritional supplements. Although many of
the products supplied by the Company are substances for which there is a long
history of human consumption, some of the Company's products are innovative
ingredients or combinations of ingredients for which there is little long-term
experience with human consumption. Although the Company conducts extensive
quality control testing of its products, the Company generally does not
conduct or sponsor clinical studies relating to the benefits, or the long-term
effects, of its ingredient products or the final consumer products. The
Company has no control over the level of quality control testing of either its
customers or other suppliers of nutritional supplement ingredients, and there
can be no assurance that its customers or other suppliers adhere to the same
quality standards as the Company. Moreover, the Company has no control over
the labeling of most consumer products containing the Company's ingredients.
The Company could be materially adversely affected if a nutritional supplement
should prove, or be asserted to be, harmful to consumers, if scientific
studies provide unfavorable findings regarding the effectiveness of
nutritional supplements or if there are any other adverse developments in the
perception of nutritional supplements. As a supplier of ingredients for
nutritional supplements and other products that are ingested by consumers or
applied topically, the Company may be subjected to various product liability
claims, including, among others, that its products contain contaminants or are
not safe for their intended use. While such claims to date have not been
material to the Company and the Company maintains product liability insurance,
there can be no assurance that product liability claims and the resulting
adverse publicity will not have a material adverse effect on the Company. The
Company's business, financial condition and results of operations could also
be adversely affected if its customers fail to develop new consumer products
on a regular basis or to provide adequate marketing support for new or
existing products. The ability of the Company to supply ingredients for new
products is dependent upon a number of factors, including the Company's
ability to procure sufficient amounts of high-quality raw materials and to
respond to its customers' demands in a timely manner. See "Business--Industry
Growth," "--Governmental Regulation" and "--Product Liability Insurance."
AVAILABILITY OF RAW MATERIALS
Although the Company has begun to cultivate some of its raw botanicals,
substantially all of the Company's raw materials are purchased from third
parties. The Company does not have any long-term supply contracts with
7
<PAGE>
respect to its raw material requirements. Two of the Company's suppliers each
accounted for approximately 13% of the Company's purchases of raw materials in
1997; however, no other single supplier accounted for more than 10% of such
purchases. The raw materials utilized by the Company are agricultural or are
otherwise naturally occurring materials. The availability of agricultural raw
materials is subject to many risks, including agricultural disease, insect or
animal infestation, adverse weather conditions, adverse ground conditions and
natural and other disasters. Certain agricultural raw materials are available
only at specific times during a year due to the seasonality of growing periods
and harvest times. In addition, the available amount of raw materials which
are gathered and not cultivated (such as goldenseal and saw palmetto) may not
adjust in response to increasing demand. A substantial portion of the
Company's raw materials are obtained from foreign sources which are subject to
various restrictions related to imports to the United States, as well as
foreign governmental and other restrictions related to the production of the
raw materials and the export thereof. There can be no assurance that foreign
raw materials are cultivated or gathered subject to quality control standards,
if any, utilized by the Company or its domestic suppliers. Foreign raw
materials are subject to delays due to transportation, handling and/or export
or import controls. There can be no assurance that the Company will be able to
obtain the necessary amounts of its raw materials to meet the demand for its
products. If the Company experiences a raw materials shortage, it could have a
material adverse effect on the Company's business, financial condition and
results of operations.
GOVERNMENTAL REGULATION
The Company's business is subject to comprehensive regulation by numerous
federal governmental agencies, including the Food and Drug Administration (the
"FDA"), the Occupational Safety and Health Administration ("OSHA") and the
Environmental Protection Agency (the "EPA"). The FDA regulates the Company's
products under the Food Drug and Cosmetic Act (the "FDCA") and the regulations
promulgated thereunder. In addition, the Company is subject to regulation by
various state and local agencies and will be subject to governmental
regulations in foreign countries where the Company plans to commence or expand
sales. The FDA has promulgated regulations with respect to the manufacture of
pharmaceuticals, foods, flavors and dietary supplements and has established
Good Manufacturing Practices ("GMPs") for, among other things, foods and
pharmaceuticals. The Company's nutritional supplement ingredients fit within
the category of "dietary supplements" and, along with the Company's teas, must
be manufactured in compliance with food GMPs. Recently, however, the FDA has
announced that it is considering promulgating GMPs specific to dietary
supplements, which could adversely affect the Company's business, financial
condition and results of operations if the Company were unable to comply with
such GMPs. The safety of the Company's manufacturing operations are regulated
by OSHA. The Company's operations are subject to laws and regulations
governing, among other things, air emissions, waste water discharge, solid and
hazardous waste treatment and storage, disposal and remediation of releases of
hazardous materials administered by the EPA and other state and local
authorities. The inability or failure of the Company to comply with any
existing, modified or new governmental regulations applicable to its business
could have a material adverse effect on the Company's business, financial
condition and results of operations. In addition, the Company manufactures
ingredients for nutritional supplements that are further manufactured,
packaged, labeled, distributed and sold by third party manufacturers,
marketers and/or retailers that, along with other similar participants in the
nutritional supplements industry, are subject to governmental regulations with
respect to their businesses, including under the Dietary Supplement Health and
Education Act of 1994 ("DSHEA") which amended the FDCA to provide increased
flexibility in the marketing and sale of dietary supplements. The Company has
no control over the regulatory compliance activities of these manufacturers,
marketers and retailers, and their failure to comply with applicable laws or
regulations, and any detrimental effect such failure has on the nutritional
supplements industry, could have a material adverse effect on the Company's
business, financial condition and results of operations. In addition, an
increase or change in the nature of the governmental regulation applicable to
the natural products or nutritional supplements business, even if it were not
to affect the Company's operations directly, could have a material adverse
effect on its business, financial condition and results of operations to the
extent such increase or change impairs the business of its customers. See
"Business--Governmental Regulation."
DEPENDENCE ON PROPRIETARY PROCESSES
Certain of the Company's products are produced pursuant to proprietary
processes which provide the Company a competitive advantage with respect to
those products. Generally, these proprietary processes are not
8
<PAGE>
patented and are protected as trade secrets pursuant to confidentiality
agreements with third parties and key employees. If a competitor were to
independently develop, or otherwise legally obtain, a non-patented proprietary
process of the Company and use such process to produce products competing with
those of the Company, the Company's business, financial condition and results
of operations could be materially adversely affected.
RISKS ASSOCIATED WITH LIMITED MANUFACTURING FACILITIES
The Company's results of operations are dependent upon the continued
operation of its manufacturing facilities. Currently, the Company principally
relies on one manufacturing facility and is constructing another. Accordingly,
if either such principal manufacturing facility should experience any business
interruption, including the breakdown, failure or substandard performance of
equipment, construction delays, or natural and other disasters, it could have
a material adverse effect on the Company's business, financial condition and
results of operations. See "Business--Processing" and "--Processing Facilities
and Distribution."
MANAGING AND MAINTAINING GROWTH
The Company is currently experiencing a period of rapid growth and expansion
which has placed, and could continue to place, significant demands on the
Company's management, customer service and support, operations, sales and
administrative personnel, and other resources. In order to serve the needs of
its existing and future customers, the Company has substantially increased and
will continue to increase its workforce, which requires the Company to
attract, train, motivate and manage qualified employees. As a result of recent
hiring to implement the Company's growth strategy, a significant number of the
Company's management team, other than the Rohde Family Members, have been with
the Company for less than one year. The Company's ability to manage its
planned growth requires the Company to continue to expand its operating
management, MIS and financial systems, all of which may significantly increase
its operating expenses. Failure of the Company to achieve its growth as
planned or the inability to manage its anticipated growth could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business--Growth Strategy."
DEPENDENCE ON KEY PERSONNEL
The success of the Company has been largely dependent on the efforts of
Rodger R. Rohde, Sr., its Chairman of the Board and Chief Executive Officer,
and the other Rohde Family Members. The Company has entered into an employment
agreement with each of the Rohde Family Members which has a three year term
and non-competition provisions generally applying for one year following the
termination of employment. The loss of the services of Rodger R. Rohde, Sr.,
the other Rohde Family Members or other key members of the management team
could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Management."
COMPETITION
The nutritional supplements industry is highly competitive. The Company's
principal competition comes from major domestic and foreign manufacturers of
natural product ingredients, some of which have greater financial and other
resources than the Company. Although the ingredient suppliers segment within
the nutritional supplements industry has been characterized by many relatively
small participants, there can be no assurance that national or international
companies will not seek to enter or to increase their presence in the natural
products industry. Increased competition from current or future competitors or
backward integration by significant customers of the Company could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business--Competition."
NO ASSURANCE OF FUTURE INDUSTRY GROWTH
Although market data referred to in this Prospectus and otherwise available
to prospective investors regarding the size and projected growth rates of the
nutritional supplements industry indicate that such industry is large and
rapidly growing, there can be no assurance that such industry is as large as
reported or that such projected growth will occur or continue. Market data and
projections, such as those presented in this Prospectus, are inherently
uncertain and subject to change. In addition, the underlying market conditions
are subject to
9
<PAGE>
change based on economic conditions, consumer preferences and other factors
that are beyond the Company's control. There can be no assurance that an
adverse change in the size or growth rate of the natural products industry or
the nutritional supplements segment thereof will not have a material adverse
effect on the Company's business, financial condition and results of
operations.
UNCERTAINTY RELATED TO ACQUISITIONS
The Company intends to use a portion of the net proceeds from this offering
to pursue the acquisition of complementary products, product lines or
businesses. Acquisitions involve a number of risks that could adversely affect
the Company's operating results, including the diversion of management's
attention, the assimilation of operations and personnel of the acquired
companies, the amortization of acquired intangible assets and the potential
loss of key employees of the acquired companies. Moreover, the Company has
never completed an acquisition, and currently is not engaged in any
acquisition discussions. There can be no assurance that the Company will
consummate future acquisitions on satisfactory terms, if at all, that adequate
financing will be available on terms acceptable to the Company, if at all,
that any acquired products, product lines or businesses will be successfully
integrated or that such products, product lines or businesses will ultimately
have a positive impact on the Company's business, financial condition or
results of operations.
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS
An element of the Company's growth strategy is to increase the distribution
and sale of the Company's products into international markets. The Company's
existing and planned international operations are subject to political and
economic uncertainties, including, among others, inflation, risk of
renegotiation or modification of existing agreements or arrangements with
governmental authorities, transportation, tariffs, export controls, government
regulation, trademark availability and registration issues, currency exchange
rate fluctuations, foreign exchange restrictions which limit the repatriation
of investments and earnings therefrom, changes in taxation, hostilities or
confiscation of property. Changes related to these matters could have a
material adverse effect on the Company.
BROAD DISCRETION IN USE OF PROCEEDS
Other than the repayment of indebtedness, the Company may not use the net
proceeds immediately upon consummation of this offering, and in some
instances, though the general purpose has been identified, no specific
expenditures have been committed. Accordingly, the Company will have broad
discretion in using the net proceeds of this offering. An investor will not
have the opportunity to evaluate the economic, financial and other relevant
information which will be utilized by the Company in determining the
application of such proceeds. See "Use of Proceeds" and "Business--Growth
Strategy."
CONCENTRATION OF OWNERSHIP
Following this offering, the Rohde Family Members and trusts for their
benefit will beneficially own approximately 74% of the outstanding Common
Stock. Accordingly, these stockholders will continue to have the ability to
elect all of the directors of the Company and to thereby direct or
substantially influence the management, policies and business operations of
the Company and will have the power to control the outcome of any matters
submitted to a vote of the Company's stockholders.
CERTAIN ANTI-TAKEOVER CONSIDERATIONS
The Company's Board of Directors has the authority to approve the issuance
of 1,000,000 shares of Preferred Stock and to fix the rights, preferences,
privileges and restrictions, including voting rights, of those shares without
any further vote or action by the Company's stockholders. The rights of the
holders of Common Stock will be subject to, and may be adversely affected by,
the rights of holders of any Preferred Stock that may be issued in the future.
Certain provisions of the Delaware General Corporation Law (the "DGCL"), as
well as the issuance of Preferred Stock, could delay or inhibit the removal of
incumbent directors and could delay, defer,
10
<PAGE>
make more difficult or prevent a merger, tender offer or proxy contest, or any
change in control involving the Company, as well as the removal of management,
even if such events would be beneficial to the interests of the Company's
stockholders, and may limit the price certain investors may be willing to pay
in the future for shares of Common Stock. In addition, the Company's Board of
Directors is classified into three classes serving staggered, three-year
terms, and accordingly, at least two annual meetings of stockholders, instead
of one, generally will be required to change a majority of the Board of
Directors. Prior to the consummation of this offering, the Board of Directors
of the Company will declare a dividend of one Right (as defined) for each
outstanding share of Common Stock of the Company. A Right will also be
attached to each share of Common Stock subsequently issued. The Rights will
have certain anti-takeover effects. If triggered, the Rights would cause
substantial dilution to a person or group that acquires 15% or more of the
Common Stock unless the Rights are first redeemed by the Board of Directors of
the Company. The Rights could discourage or make more difficult a merger,
tender offer, sale of all or substantially all of the Company assets or other
similar transactions. See "Management--Executive Officers and Directors" and
"Description of Capital Stock--Anti-Takeover Matters."
IMMEDIATE AND SUBSTANTIAL DILUTION
Investors participating in this offering will incur immediate and
substantial dilution of $ per share in the net tangible book value of their
shares from the initial public offering price. To the extent that currently
outstanding options to purchase Common Stock are exercised, there will be
further dilution. See "Dilution."
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of shares of Common Stock in a public market
following this offering could adversely affect the market price of the Common
Stock. Holders of all outstanding shares of Common Stock have agreed, pursuant
to lock-up agreements (the "Lock-Up Agreements"), not to sell, offer, contract
or grant any option to sell, pledge, transfer, establish an open put
equivalent position or otherwise dispose of such shares for 180 days after the
date of the final Prospectus. Upon expiration of the Lock-Up Agreements,
approximately 9,393,838 additional shares of Common Stock will be available
for sale in the public market, subject to the provisions of Rule 144 under the
Securities Act of 1933, as amended (the "Securities Act"). Following the
consummation of this offering, the Company intends to register an aggregate of
1,400,000 shares of Common Stock to be issuable under the 1998 Omnibus Stock
Incentive Plan. The Company is unable to predict the effect that sales made
pursuant to Rule 144 under the Securities Act, or otherwise, may have on the
then prevailing market price of the Common Stock. Sales pursuant to Rule 144
under the Securities Act or an exemption from registration may have an adverse
effect on the market price for the Common Stock and could impair the Company's
ability to raise capital through an offering of its equity securities. See
"Management--Employee Benefit Plans," "Description of Capital Stock," "Shares
Eligible for Future Sale" and "Underwriting."
NO PRIOR MARKET FOR COMMON STOCK; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to this offering, there has been no public market for the Common
Stock, and there can be no assurance that an active public market for the
Common Stock will develop or be sustained after this offering or that the
market price of the Common Stock will not decline below the initial public
offering price. The initial public offering price will be determined by
negotiations among the Company and the Representatives of the Underwriters and
may not be indicative of market prices of the Common Stock after this
offering. See "Underwriting" for a discussion of the factors considered in
determining the initial public offering price. The market price of the Common
Stock may be subject to significant fluctuations in response to variations in
quarterly operating results and other events or factors, such as announcements
of new products by the Company, its customers or its competitors and changes
in financial estimates by securities analysts. Moreover, the stock market and
the market prices of the shares of many natural products companies in recent
years have experienced significant price and volume fluctuations. These
fluctuations often have been unrelated to the operating performance of
specific public companies. Broad market fluctuations, as well as economic
conditions generally, may adversely affect the market price of the Common
Stock.
11
<PAGE>
COMPUTER SYSTEMS AND YEAR 2000 ISSUES
The "Year 2000" issue concerns the potential exposures related to the
automated generation of business and financial misinformation resulting from
the application of computer programs which have been written using two digits,
rather than four, to define the applicable year of business transactions. The
Company is conducting an assessment of its Year 2000 issues by reviewing
software and hardware requirements of its business systems and process control
environments. Based on this assessment to date, the Company does not
anticipate any significant costs, problems or uncertainties associated with
becoming Year 2000 compliant and is currently developing a plan to ensure that
its computer systems are modified to be compliant on a timely basis. The
Company expects to upgrade its accounting system software to be Year 2000
compliant by the end of 1998. The Company has commenced informal discussions,
which will be formalized with written confirmations, with its customers and
vendors to determine whether they will be Year 2000 compliant. The Company's
major customers and vendors have indicated that they expect to be Year 2000
compliant. Failure of the Company or its software providers to adequately
address the Year 2000 issue could result in misstatement of reported financial
information or otherwise adversely affect the Company's business, financial
condition and results or operations. In addition, the failure by the Company's
customers to adequately address the Year 2000 issue could adversely affect
such customers' ability to procure raw materials, such as those supplied by
the Company, or otherwise adversely affect such customers' operations, which
in turn could result in a material adverse effect to the Company's business,
financial condition and results of operations.
12
<PAGE>
DIVIDEND POLICY
After conversion to a C corporation, the Company does not expect to declare
or pay any cash dividends on its Common Stock. The Company currently intends
to retain future earnings, if any, to finance operations and expansion of its
business and, therefore, does not anticipate paying any cash dividends in the
foreseeable future. Future cash dividends, if any, will be determined by the
Board of Directors and will be based upon the Company's results of operations,
capital, financial condition and other factors deemed relevant by the Board of
Directors. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources."
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 3,300,000 shares of
Common Stock offered by the Company hereby are estimated to be approximately
$ million, after deducting the underwriting discount and estimated offering
expenses. If the Underwriters' over-allotment option is exercised, the Company
will not receive any of the net proceeds from the sale of shares by the
Selling Stockholder. See "Principal and Selling Stockholders."
The Company intends to use the net proceeds from this offering as follows:
(i) approximately $15.0 million to repay indebtedness under the Term Notes and
the Company's revolving credit facility, (ii) approximately $1.0 million and
$9.0 million to expand the Agricultural Division and the Herbal Processing
Facility, respectively, (iii) approximately $2.5 million and $2.5 million to
expand the Company's R&D and MIS functions, respectively and (iv)
approximately $2.5 million to launch the branding initiative.
The Company plans to use the balance of the net proceeds from this offering,
or approximately $14.0 million, for working capital and other general
corporate purposes, including potential acquisitions of complementary
businesses or business lines. The Company currently is not in negotiations
with respect to any potential acquisitions. Pending such uses, the Company
intends to invest the net proceeds from this offering in short-term,
investment-grade, interest-bearing instruments.
The revolving credit facility expires June 30, 1999 and bears interest at a
rate based upon the option selected by the Company or approximately 6.91% per
annum as of June 30, 1998. Each of the Term Notes matures on December 15, 1998
and bears interest at a rate based upon the option selected by the Company or
approximately 6.66% per annum as of June 30, 1998. The proceeds of these Term
Notes were used by the Predecessor Companies to make a distribution of
substantially all of their respective accumulated and previously taxed
S corporation earnings to their respective shareholders. See "Prospectus
Summary--Corporate Consolidation."
13
<PAGE>
CAPITALIZATION
The following table sets forth as of June 30, 1998 the capitalization of the
Company (i) on a historical basis, (ii) on a pro forma basis assuming
consummation of the Consolidation, recording of a deferred tax asset
concurrent with the Company becoming a C corporation, and recording of an
$11.0 million distribution of substantially all of the Predecessor Companies'
respective accumulated and previously taxed S corporation earnings to their
respective shareholders (collectively, the "Consolidation Adjustments") and
(iii) on a pro forma basis as adjusted to reflect the issuance and sale of the
3,300,000 shares of Common Stock offered by the Company hereby at an assumed
initial public offering price of $ per share and the application of the
estimated net proceeds therefrom. This table should be read in conjunction
with the Company's Financial Statements and Notes thereto appearing elsewhere
in this Prospectus. See "Use of Proceeds" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."
<TABLE>
<CAPTION>
AS OF JUNE 30, 1998
-----------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Total debt, including current portion(1)......... $ 9,515 $13,465 $ --
Stockholders' equity:
Preferred Stock, par value $1.00 per share,
1,000,000 shares authorized; none issued and
outstanding................................... -- -- --
Common Stock, par value $0.01 per share;
50,000,000 shares authorized; 9,393,838 shares
issued and outstanding actual and pro forma;
12,693,838 shares issued and outstanding pro
forma as adjusted(2).......................... 94 94 127
Additional paid-in capital..................... -- 5,045
Retained earnings.............................. 4,671 -- --
------- ------- -------
Total stockholders' equity................... 4,765 5,139
------- ------- -------
Total capitalization....................... $14,280 $18,604 $
======= ======= =======
</TABLE>
- --------
(1) Represents the revolving credit facility and the Term Notes.
(2) Excludes shares to be issuable upon exercise of stock options expected
to be granted on or after the consummation of this offering at an exercise
price equal to the initial public offering price. All share amounts
exclude 1,400,000 shares available for issuance under the Company's 1998
Omnibus Stock Incentive Plan. See "Management--Employee Benefit Plans--
1998 Omnibus Stock Incentive Plan."
14
<PAGE>
DILUTION
As of June 30, 1998, the historical net tangible book value of the Company
was $4.6 million, or $0.49 per share of Common Stock, and after giving effect
to the Consolidation Adjustments, the pro forma net tangible book value would
have been approximately $5.0 million, or $0.53 per share of Common Stock.
After giving further effect to the sale by the Company of the 3,300,000 shares
of Common Stock offered hereby, assuming an initial public offering price of
$ per share and after deducting the underwriting discount and estimated
offering expenses, the Company's pro forma as adjusted net tangible book value
as of June 30, 1998 would have been approximately $ million, or $ per
share of Common Stock. This represents an immediate increase in pro forma as
adjusted net tangible book value of $ per share to existing stockholders and
an immediate dilution of $ per share to new investors. The following table
illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Initial public offering price per share.......................... $
Net tangible book value per share as of June 30, 1998.......... $0.49
Decrease per share attributable to the Consolidation Adjust-
ments.........................................................
Increase per share attributable to new investors...............
-----
Pro forma as adjusted net tangible book value after this offer-
ing.............................................................
----
Dilution per share to new investors.............................. $
====
</TABLE>
The following table summarizes, on a pro forma basis as of June 30, 1998,
the number of shares of Common Stock purchased from the Company, the total
consideration paid and the average consideration paid per share by the
existing stockholders and by the new investors, assuming an initial public
offering price of $ per share but before deducting the underwriting discount
and estimated offering expenses:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------ --------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders..... 9,393,838 74.0% $ 93,938 % $0.01
New investors............. 3,300,000 26.0
---------- ----- ---------- --------
Total................... 12,693,838 100.0% $ 100.0%
========== ===== ========== ========
</TABLE>
15
<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
The following selected financial data of the Company set forth below should
be read in conjunction with the Financial Statements of the Company, including
the Notes thereto, and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere herein. The statements
of operations data for the years ended December 31, 1995, 1996 and 1997, and
the balance sheet data as of December 31, 1996 and 1997 are derived from, and
are qualified by reference to, the audited Financial Statements included
elsewhere in this Prospectus. The statements of operations data for the years
ended December 31, 1993 and 1994 and the balance sheet data as of December 31,
1993, 1994 and 1995 are derived from audited financial statements not included
herein. The statements of operations data for the six months ended June 30,
1997 and 1998 and the balance sheet data as of June 30, 1998 are derived from
unaudited financial statements included elsewhere in this Prospectus. The
unaudited financial statements have been prepared by the Company on a basis
consistent with the Company's audited Financial Statements and, in the opinion
of management, include all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of the information. Historical
results are not necessarily indicative of results to be expected in the
future. The unaudited pro forma statements of operations data give effect to
the Consolidation as if it had occurred at the beginning of the applicable
statements of operations period. The unaudited pro forma data do not purport
to be indicative of the results that would have been obtained had such
transactions in fact been completed after the periods presented or that may be
obtained in the future.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------- ----------------
1993 1994 1995 1996 1997 1997 1998
------- ------- ------- ------- ------- ------- -------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA(1):
Net sales............... $12,783 $28,169 $23,646 $32,012 $41,995 $18,706 $22,881
Cost of sales........... 7,132 13,640 14,248 17,994 24,595 11,068 13,306
------- ------- ------- ------- ------- ------- -------
Gross profit............ 5,651 14,529 9,398 14,018 17,400 7,638 9,575
Selling, general and
administrative
expenses............... 4,933 5,100 5,557 7,128 8,666 4,099 4,589
Research and
development............ -- -- 148 384 407 203 262
------- ------- ------- ------- ------- ------- -------
Operating income........ 718 9,429 3,693 6,506 8,327 3,336 4,724
Interest expense........ -- -- 79 76 4 2 88
Other income............ (18) (93) (192) (23) (137) (58) (281)
------- ------- ------- ------- ------- ------- -------
Income before income
taxes.................. 736 9,522 3,806 6,453 8,460 3,392 4,917
Income taxes............ 442 2,099 151 203 335 131 163
------- ------- ------- ------- ------- ------- -------
Net income.............. $ 294 $ 7,423 $ 3,655 $ 6,250 $ 8,125 $ 3,261 $ 4,754
======= ======= ======= ======= ======= ======= =======
PRO FORMA DATA
(UNAUDITED):
Historical income before
income taxes........... 8,460 4,917
Pro forma adjustments
other than income
taxes(2)............... 1 88
------- -------
Pro forma income before
income taxes........... 8,461 5,005
Pro forma provision for
income taxes(3)........ 3,394 1,970
------- -------
Pro forma net income.... $ 5,067 $ 3,035
======= =======
Pro forma earnings per
share(4)............... $ $
======= =======
Pro forma weighted
average shares
outstanding(4).........
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, 1998
-------------------------------------- ----------------
PRO
1993 1994 1995 1996 1997 ACTUAL FORMA(5)
------ ------- ------- ------- ------- ------- --------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents............ $ 865 $ 4,117 $ 677 $ 1,780 $ 3,847 $ 763 $ 763
Working capital......... 915 6,637 6,147 9,046 12,408 339 609
Total assets............ 4,755 11,649 11,334 12,130 20,186 23,421 23,795
Total debt, including
current portion........ 590 42 1,289 54 2,000 9,515 13,465
Stockholders' equity.... 1,184 7,543 7,531 10,461 15,524 4,765 5,139
</TABLE>
- --------
(1) To the extent set forth in the Financial Statements, each of the
Predecessor Companies was treated as an S corporation and therefore was
not subject to federal income taxes and was subject to a reduced corporate
rate for state income taxes. As a result, income was passed through to the
respective shareholders for tax purposes. See Note 11 to the Financial
Statements and Note 3 below.
(2) Pro forma adjustments other than income taxes represents a reduction in
interest expense assuming the application of proceeds from the sale of
sufficient shares of Common Stock to repay all of the Company's
outstanding debt. See Note 4 below.
(3) Pro forma provision for income taxes is calculated as if the Company had
been subject to federal and additional state income taxes since January 1
of each period and represents an increase in income taxes of approximately
$3,059 and $1,807 in 1997 and for the six months ended June 30, 1998,
respectively. See "Prospectus Summary--Corporate Consolidation" and "Use
of Proceeds."
(4) Pro forma earnings per share is based on (i) pro forma net income as
indicated and (ii) 9,394 shares of Common Stock outstanding prior to this
offering, increased by the sale of sufficient shares of Common Stock,
assumed to be shares based on an assumed initial public offering price
of $ per share, to repay the Company's outstanding debt, assumed to be
$13,465, composed of $10,965 under the Term Notes and $2,500 under the
revolving credit facility.
(5) Pro forma to reflect (i) the distribution of $10,965 to the shareholders
of the Predecessor Companies, funded by the Term Notes and (ii) a net
deferred tax asset of approximately $374 which the Company will record
concurrently with becoming a C corporation. See "Prospectus Summary--
Corporate Consolidation."
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
"Selected Historical and Pro Forma Financial Data" and the Company's Financial
Statements and Notes thereto, which are included elsewhere in this Prospectus.
The following discussion contains forward-looking statements. Actual results
could differ materially. See "Risk Factors."
OVERVIEW
The Company is a leading vertically integrated supplier of high-quality,
high-purity natural product ingredients in ready-to-run form to nutritional
supplement manufacturers. These manufacturers further process these
ingredients into consumer salable form which are marketed through various
distribution channels. The Company records revenue upon shipment of natural
product ingredients to its customers. Net sales reflect discounts, allowances
and estimated returns and credits. Cost of sales consists primarily of
material costs, direct labor, manufacturing depreciation, processing and
packaging charges, and includes costs associated with the Agricultural
Division and the new Herbal Processing Facility. Selling, general and
administrative expenses consist primarily of administrative salaries, payroll
taxes, other depreciation, freight, professional fees and marketing and
advertising costs. Research and development costs consist primarily of lab
supplies, equipment and staff and scientists associated with the Company's
product development efforts.
Gross margins are affected by, among other things, changes in the relative
sales mix among and within the Company's three main product categories:
botanicals (herbs), teas and specialty products. Historically, gross margins
from teas have been higher than gross margins on botanicals or specialty
items. Fluctuations in product categories, and product mix within those
categories, are attributable to (i) cyclical and seasonal variations in
consumer demand for individual natural products, (ii) sudden shifts in
consumer demand for particular natural products, (iii) order flow from the
Company's customers, which may or may not correspond directly to consumer
demand and typically reflects the customers' desire for just-in-time inventory
and (iv) timing and availability issues associated with the Company's
purchases of raw materials from vendors, which reflects the agricultural
nature of these raw materials and does not necessarily correlate with order
flow from customers. Gross margins are also currently adversely affected by
the Company's investment in the Agricultural Division and the Herbal
Processing Facility, the benefits of which are expected to positively affect
gross margins in the future. This variability in gross margins makes quarterly
results difficult to predict.
As a result of the Company's conversion to C corporation status in
conjunction with this offering, the Company will become subject to federal and
additional state income taxes. Accordingly, the Company will pay significantly
higher income taxes in the future.
<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES
---------------------------------------
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------- ------------
1995 1996 1997 1997 1998
------- ------- ------- ----- -----
<S> <C> <C> <C> <C> <C>
Net sales............................ 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales........................ 60.3 56.2 58.6 59.2 58.2
------- ------- ------- ----- -----
Gross profit......................... 39.7 43.8 41.4 40.8 41.8
Selling, general and administrative
expenses............................ 23.5 22.3 20.6 21.9 20.1
Research and development............. 0.6 1.2 1.0 1.1 1.1
------- ------- ------- ----- -----
Operating income..................... 15.6 20.3 19.8 17.8 20.6
Interest expense..................... 0.3 0.2 -- -- 0.4
Other income......................... (0.8) (0.1) (0.3) (0.3) (1.2)
------- ------- ------- ----- -----
Income before income taxes........... 16.1% 20.2% 20.1% 18.1% 21.5%
======= ======= ======= ===== =====
</TABLE>
18
<PAGE>
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997
Net sales increased by $4.2 million, or 22.3%, to $22.9 million for the six
months ended June 30, 1998 from $18.7 million for the six months ended June
30, 1997. This increase was due primarily to a $4.4 million and $103,000
increase in the sale of botanicals and specialty products, respectively,
offset by a $363,000 decrease in the sale of teas. This increase was also
attributable to sales to new customers.
Cost of sales increased by $2.2 million, or 20.2%, to $13.3 million for the
six months ended June 30, 1998 from $11.1 million for the six months ended
June 30, 1997. This increase was primarily attributable to an increase in net
sales as well as higher overhead costs associated with the new Herbal
Processing Facility and Agricultural Division. As a percentage of net sales,
cost of sales decreased to 58.2% for the six months ended June 30, 1998 from
59.2% for the six months ended June 30, 1997. The decrease in cost of sales as
a percentage of net sales was primarily due to the increase in net sales for
the six months ended June 30, 1998 over the six months ended June 30, 1997.
Selling, general and administrative expenses increased by $490,000, or
12.0%, to $4.6 million for the six months ended June 30, 1998 from $4.1
million for the six months ended June 30, 1997. This increase was primarily
attributable to the addition of senior personnel and their associated costs
required to implement the Company's growth strategy, an increase in marketing
effort and an increase in freight costs. As a percentage of net sales,
selling, general and administrative expenses decreased to 20.1% for the six
months ended June 30, 1998 from 21.9% for the six months ended June 30, 1997.
This decrease was primarily a result of the increase in net sales.
Research and development increased by $59,000, or 29.1%, to $262,000 for the
six months ended June 30, 1998 from $203,000 for the six months ended June 30,
1997. This increase was primarily attributable to the hiring of two scientists
in late 1997 to increase the Company's product development efforts. As a
percentage of net sales, research and development remained unchanged at 1.1%
for both the six months ended June 30, 1998 and 1997. The Company expects
research and development to approximate 1.0% to 1.5% of annual net sales in
the future.
Interest expense increased by $86,000 to $88,000 for the six months ended
June 30, 1998 from $2,000 for the six months ended June 30, 1997. This
increase in interest expense was primarily due to a higher average debt
balance outstanding under the Company's revolving line of credit, as the
Company did not utilize the revolving line of credit during the six months
ended June 30, 1997.
Other income increased by $223,000 to $281,000 for the six months ended June
30, 1998 from $58,000 for the six months ended June 30, 1997. The increase in
other income was primarily due to the receipt of settlement proceeds relating
to litigation settled in January 1998 for $1.2 million, payable in 60 equal
monthly installments.
Income taxes increased by $32,000 to $163,000 for the six months ended June
30, 1998 from $131,000 for the six months ended June 30, 1997. The increase in
income tax was primarily due to higher income generated during the six months
ended June 30, 1998 over the six months ended June 30, 1997. As discussed
above, upon termination of the Company's S corporation status, the Company
will become subject to federal and additional state income taxes.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Net sales increased by $10.0 million, or 31.2%, to $42.0 million for 1997
from $32.0 million for 1996. This increase was due primarily to a $6.3
million, $3.2 million and $534,000 increase in the sale of botanicals, teas
and specialty products, respectively. A portion of the increase in the sale of
botanicals resulted from sales of St. John's wort, which became popular in the
United States in 1997.
Cost of sales increased by $6.6 million, or 36.7%, to $24.6 million for 1997
from $18.0 million for 1996. As a percentage of net sales, cost of sales
increased to 58.6% for 1997 from 56.2% for 1996. The increase in the cost of
sales as a percentage of net sales was primarily due to the start-up nature of
the Herbal Processing Facility and Agricultural Division, which had limited
production in 1997.
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<PAGE>
Selling, general and administrative expenses increased by $1.5 million, or
21.6%, to $8.7 million for 1997 from $7.1 million for 1996. This increase was
primarily due to higher personnel costs associated with an increase in
executive compensation and profit sharing due to the Company's increased
profitability and an increase in administrative staff to support the Company's
expansion and new operations. There were also increases in consulting costs to
improve the Company's MIS and marketing effort to increase customer awareness
of the Company. As a percentage of net sales, selling, general and
administrative expenses decreased to 20.6% for 1997 from 22.3% for 1996. This
decrease was primarily a result of the increase in net sales.
Research and development increased by $23,000, or 6.0%, to $407,000 for 1997
from $384,000 for 1996. As a percentage of net sales, research and development
decreased to 1.0% for 1997 from 1.2% for 1996.
Interest expense decreased by $72,000 to $4,000 for 1997 from $76,000 for
1996. The decrease in interest expense was primarily due to a higher average
debt balance outstanding during 1996 under a revolving line of credit, which
was fully repaid by December 31, 1996. The Company did not utilize its line of
credit again until the end of 1997.
Other income increased by $114,000 to $137,000 for 1997 from $23,000 for
1996. The increase in other income was primarily due to an increase in
interest income earned on higher average invested cash balances during 1997.
The increase in invested cash was primarily due to the Company's increased
profitability during 1997.
Income taxes increased by $132,000 to $335,000 for 1997 from $203,000 for
1996. The increase in income tax was primarily due to higher income generated
during 1997.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Net sales increased by $8.4 million, or 35.4%, to $32.0 million for 1996
from $23.6 million for 1995. This increase was due primarily to a $2.3 million
and $6.7 million increase in the sale of botanicals and teas, respectively,
offset by a $667,000 decrease in specialty products. Tea sales increased to
$8.4 million in 1996 from $1.7 million in 1995; however, tea sales in 1995
were negatively affected by the Company's primary tea customer procuring a
substantial portion of its 1995 tea requirements in 1994.
Cost of sales increased by $3.7 million, or 26.3%, to $18.0 million for 1996
from $14.2 million for 1995. As a percentage of net sales, cost of sales
decreased to 56.2% for 1996 from 60.3% for 1995. This decrease was primarily
due to the higher proportion of sales of tea, which typically has a lower cost
than botanicals and specialty products.
Selling, general and administrative expenses increased by $1.6 million, or
28.3%, to $7.1 million for 1996 from $5.6 million for 1995. This increase was
a result of increased personnel costs associated with the hiring of additional
management and support staff, primarily to expand human resources and
accounting functions, and an increase in executive compensation as a result of
the Company's improved profitability. In addition, the Company moved into a
new corporate headquarters during early 1996 to accommodate the increased
management and administrative staff. As a percentage of net sales, selling,
general and administrative expenses decreased to 22.3% for 1996 from 23.5% for
1995. This decrease was primarily a result of the increase in net sales.
Research and development increased by $236,000, or 159.5%, to $384,000 for
1996 from $148,000 for 1995. This increase was primarily attributable to the
hiring of additional lab personnel to expand the Company's product development
efforts. As a percentage of net sales, research and development increased to
1.2% for 1996 from 0.6% for 1995.
Interest expense decreased by $3,000 to $76,000 for 1996 from $79,000 for
1995.
20
<PAGE>
Other income decreased by $169,000 to $23,000 for 1996 from $192,000 for
1995. The decrease in other income was primarily attributable to a decrease in
interest income as a result of lower average invested cash balances. The
decrease in invested cash was the result of the pay down of the Company's
revolving line of credit and an effort to reduce trade payables.
Income taxes increased by $52,000 to $203,000 for 1996 from $151,000 for
1995.
SELECTED QUARTERLY OPERATING RESULTS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30,
1997 1997 1997 1997 1998 1998
-------- -------- --------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net sales............... $10,133 $8,573 $11,171 $12,118 $11,074 $11,807
Cost of sales........... 5,908 5,160 6,347 7,180 6,552 6,754
------- ------ ------- ------- ------- -------
Gross profit............ 4,225 3,413 4,824 4,938 4,522 5,053
Selling, general and ad-
ministrative expenses.. 2,032 2,067 2,240 2,327 2,183 2,406
Research and develop-
ment................... 102 101 102 102 150 112
------- ------ ------- ------- ------- -------
Operating income........ 2,091 1,245 2,482 2,509 2,189 2,535
Interest expense........ 2 -- 1 1 31 57
Other income............ (24) (34) (39) (40) (169) (112)
------- ------ ------- ------- ------- -------
Income before income
taxes.................. $ 2,113 $1,279 $ 2,520 $ 2,548 $ 2,327 $ 2,590
======= ====== ======= ======= ======= =======
<CAPTION>
PERCENTAGE OF NET SALES
---------------------------------------------------------
THREE MONTHS ENDED
---------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30,
1997 1997 1997 1997 1998 1998
-------- -------- --------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net sales............... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales........... 58.3 60.2 56.8 59.3 59.2 57.2
------- ------ ------- ------- ------- -------
Gross profit............ 41.7 39.8 43.2 40.7 40.8 42.8
Selling, general and ad-
ministrative expenses.. 20.1 24.1 20.1 19.2 19.7 20.4
Research and develop-
ment................... 1.0 1.2 0.9 0.8 1.4 0.9
------- ------ ------- ------- ------- -------
Operating income........ 20.6 14.5 22.2 20.7 19.8 21.5
Interest expense........ -- -- -- -- 0.3 0.5
Other income............ (0.2) (0.4) (0.3) (0.3) (1.5) (0.9)
------- ------ ------- ------- ------- -------
Income before income
taxes.................. 20.9% 14.9% 22.6% 21.0% 21.0% 21.9%
======= ====== ======= ======= ======= =======
</TABLE>
The Company believes that its sales are somewhat seasonal, historically
experiencing somewhat higher activity during the second half of the year.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary source of liquidity and capital resources has been
cash flow generated from operations, supplemented from time to time by
borrowings under revolving credit facilities. Net cash provided by operating
activities was $2.8 million, $5.3 million and $6.0 million for the six months
ended June 30, 1998, and in 1997 and 1996, respectively.
The Company's primary uses of capital have been expansion and maintenance of
manufacturing, processing and agricultural facilities. Net cash used in
investing activities, primarily capital expenditures, was $1.7 million, $2.1
million and $344,000 for the six months ended June 30, 1998 and in 1997 and
1996, respectively. Capital expenditures for the Company are expected to total
approximately $7.4 million and $1.7 million in 1998 and 1999, respectively.
21
<PAGE>
The Company currently has a $5.0 million revolving credit facility which
expires on June 30, 1999. At June 30, 1998, $2.5 million was outstanding under
the revolving credit facility, which bears interest at the lender's prime rate
or the London Interbank Offered Rate ("LIBOR") plus 1.25%. Borrowings under
the revolving credit facility are collateralized by substantially all of the
Company's assets. The revolving credit facility contains customary covenants,
including a restriction on certain business combinations.
In June 1998, the Company entered into the Term Notes under which it has
borrowed an aggregate of $11.0 million, which are due December 15, 1998 and
bear interest at the lender's prime rate or LIBOR plus 1.0%. The proceeds from
the Term Notes were utilized to make a distribution of substantially all of
the Company's accumulated and previously taxed S corporation earnings as of
March 31, 1998. Borrowings under the Term Notes are collateralized by
substantially all of the Company's assets. The Term Notes will be repaid with
the proceeds of this offering.
The Company intends on using a portion of the net proceeds from this
offering to repay borrowings under the revolving credit facility and the Term
Notes discussed above. The Company believes that proceeds from this offering,
internally generated funds and amounts available under its revolving credit
facility will be sufficient to meet the Company's capital and other cash
requirements for the foreseeable future.
YEAR 2000
The Company has developed a plan to achieve Year 2000 compliance with
respect to its business systems, including systems and user testing scheduled
to commence in the fourth quarter of 1998. The Company does not currently
expect Year 2000 issues related to its business systems to have any material
effect on the Company's costs or to cause any significant disruption in
operations and expects such systems to be Year 2000 compliant by early 1999.
The Company has completed the necessary modifications and upgrades to its
process control environment to be Year 2000 compliant. The Company expects to
upgrade its accounting system software to be Year 2000 compliant by the end of
1998. The Company relies on systems maintained by third parties; accordingly,
the Company also is developing a contingency plan designed to minimize the
risk of third party noncompliance. The Company believes that it will incur
additional costs ranging from $125,000 to $175,000 to achieve Year 2000
compliance. The Company has commenced informal discussions, which will be
formalized with written confirmations, with its customers and vendors to
determine whether they will be Year 2000 compliant. The Company's major
customers and vendors have indicated that they expect to be Year 2000
compliant.
22
<PAGE>
BUSINESS
OVERVIEW
The Company is a leading vertically integrated supplier of high-quality,
high-purity natural product ingredients in "ready-to-run" form to nutritional
supplement manufacturers. The Company cultivates, procures, cleans, processes,
grinds, granulates, blends and formulates premium natural products that meet
the increasing demands of its customers for value-added ingredients. The
Company works closely with these customers in developing products that meet
the customers' desired label claims with consistent and measurable compounds.
Moreover, the Company's ingredients are "ready-to-run," which enables its
customers to introduce these ingredients immediately into the manufacturing
process without additional preparation. The Company develops various ready-to-
run forms that accommodate customers' existing tablet, capsule, powder or
liquid packaging capabilities. In addition, the Company provides to its
customers value-added technical and R&D support.
The Company's customers include a diverse range of nutritional supplement
manufacturers which process the Company's natural product ingredients into
consumer salable form which are then marketed through various distribution
channels. These distribution channels include (i) multi-level marketers such
as Herbalife and Amway, (ii) specialty health products retailers such as GNC,
Whole Foods and Wild Oats and (iii) mass market retailers such as major drug
stores, supermarkets and discount stores. Under the dedication and leadership
of the Rohde family, who share more than 40 years experience in the
nutritional supplements industry, the Company has developed long-standing
relationships with industry leaders including GNC, Global Health (a major
manufacturer for Herbalife), Pharmavite and Rexall Sundown. GNC's
manufacturing subsidiary and Global Health represented approximately 36.6% and
35.9%, respectively, of the Company's net sales in 1997, and in common with
peers in its industry, the Company does not have long-term contracts with
these or other customers. Each distribution channel targets consumers with
specific purchasing characteristics with respect to product formulation,
quality and price. By maintaining the flexibility to effectively assist its
customers in meeting these diverse consumer requirements, the Company believes
it maximizes its ability to continually increase the breadth and depth of its
customer base.
Quality assurance and quality control are a fundamental aspect of the
Company's business strategy. These disciplines are designed to address both
the quality of the Company's botanical manufacturing process and the identity
and purity of the Company's ingredients. The Company continues to invest in
agricultural, scientific and manufacturing assets and personnel and is
committed to elevating the standards for acceptable purity, consistency and
quality of natural product ingredients, thus establishing a competitive
advantage over other ingredient suppliers. In conjunction with this effort,
the Company launched its Agricultural Division in late 1996 by leasing a 500
acre certified organic farm, principally for the purpose of conducting
agricultural R&D. In addition, the Company is currently constructing a state-
of-the-art Herbal Processing Facility that will expand its botanical
processing capacity and capabilities.
COMPETITIVE STRENGTHS
INNOVATIVE CUSTOMER SOLUTIONS
Vertical integration provides the Company with the operational flexibility
and breadth of capabilities to offer innovative customer solutions in a
rapidly evolving industry. The Company's botanical ingredient production
system begins with the acquisition of raw botanicals and extends through the
shipment of consistent, high-quality, high-purity ingredients to its customers
in ready-to-run form. As a result, the Company is able to provide to its
customers innovative solutions at each level of botanical production, from R&D
at the agricultural level to branding initiatives at the consumer level, thus
meeting the increasing demand of customers for value-added ingredients and
services. This vertical integration is in contrast to many of the Company's
competitors, which typically possess only a few botanical processing
capabilities in-house. See "--Products--Branding Initiatives" and "--
Processing."
DOCUMENTED QUALITY ASSURANCE PROGRAM
To ensure the production of high-quality, high-purity natural product
ingredients, the Company utilizes a documented quality assurance program. This
program implements GMPs established by the FDA that, among
23
<PAGE>
other things, address processing, cleanliness, testing, sampling and
formulations. The Company believes that in appropriate instances its GMPs
approach pharmaceutical standards. Currently, the Company is pursuing ISO 9002
certification (an internationally recognized quality assurance standard),
which it believes will complement its customers' GMP endeavors and facilitate
entry into European markets.
STRINGENT QUALITY CONTROL
The Company has developed and operates a comprehensive quality control
program that subjects all of the Company's products to a battery of stringent
tests commencing prior to acceptance of raw materials and continuing through
the shipment of finished goods. This program, among other things, identifies
botanical raw materials and measures the marker compounds. By precisely
identifying and measuring marker compounds, the Company selects and
standardizes ingredients to customer specifications, thus substantially
reducing the natural inconsistencies of raw botanicals. To support this
effort, the Company has made significant investments in sophisticated testing
methods and equipment, including thin layer chromatography ("TLC"), gas
chromatography ("GC") and high performance liquid chromatography ("HPLC"). The
Company's stringent quality control is a value-added service that complements
its customers' internal quality control programs.
BROAD CUSTOMER REACH
The Company supplies natural product ingredients to customers that
manufacture nutritional supplements for sale through three major distribution
channels: multi-level marketers, specialty health products retailers and mass
market retailers. Each distribution channel targets consumers with specific
purchasing characteristics with respect to product formulation, quality and
price. By maintaining the flexibility to effectively assist its customers in
meeting these diverse consumer requirements, the Company believes it maximizes
its ability to continually increase the breadth and depth of its customer
base.
EXPERIENCED MANAGEMENT
The Company's management team has extensive experience in the nutritional
supplements industry. Rodger R. Rohde, Sr., who founded the Company in 1978,
has over 30 years of experience in the nutritional supplements, flavors and
fragrance industries. Since the Company's inception, Rodger R. Rohde, Sr. and
each of the other Rohde Family Members who has subsequently joined him have
been actively involved in the day-to-day operations of the business. The Rohde
Family Members have developed long-standing relationships with industry
leaders, such as GNC, Global Health, Pharmavite and Rexall Sundown, as well as
with major vendors of the Company's raw materials. In an industry
characterized by few long-term contracts, these long-standing relationships
are a significant source of competitive advantage.
GROWTH STRATEGY
The Company's growth strategy is to maintain and strengthen customer
relationships and improve operations and financial performance by focusing on
the following principal elements:
BROADEN MARKET REACH
Develop New Products. The Company, through the efforts of its product
development team, has four patents on enzyme products and is continuing to
aggressively develop patentable formulas and processes, as well as other
proprietary ingredients. The Company's growth strategy entails aiming new
product development initially at the multi-level marketing distribution
channel to capture the benefits of personal selling and maximize consumer
acceptance of the new product or category. This new product development effort
will be marketed to new and existing customers by the Company's new national
sales manager and sales team.
Enter New Markets. The Company plans to leverage its competitive strengths
to enter related markets in the natural products industry, such as the natural
food and cosmetic and beauty aids industries, as well as the pharmaceutical
industry. Each of these related industries is increasingly demanding premium
natural ingredients. The Company also plans to pursue sales into international
markets by recruiting dedicated sales professionals and continuing to register
products and trademarks in attractive foreign markets.
24
<PAGE>
Strengthen Existing Relationships. The Company's long standing customer
relationships are based on its commitment to providing high-quality, high-
purity ingredients and proactive customer service. The Company's growth
strategy entails assembling specialized internal marketing teams to develop
innovative customer solutions, such as specialized ingredient blends and end-
product forms, technical and R&D assistance, and flexible and reliable
deliveries. In addition, senior management continues to support new
initiatives that augment customers' new product development and marketing
activities.
IMPROVE RAW MATERIAL QUALITY AND AVAILABILITY THROUGH AGRICULTURAL R&D
As a part of its agricultural R&D efforts, the Company is developing
improved farming methods for its raw botanicals at its 500 acre certified
organic farm. These farming initiatives are designed to increase yield,
improve plant strength, accelerate plant growth and reduce related farming
costs. Additional agricultural R&D initiatives are directed at developing
methods to cultivate naturally occurring raw materials which traditionally
have been purchased from gatherers. The Company intends to leverage the
proprietary knowledge gained from its agricultural R&D by assisting other
growers in improving the quality and yield of their raw materials and
providing incentives to such growers to cultivate raw materials on behalf of
the Company.
DEVELOP BRAND NAME RECOGNITION
The Company's growth strategy emphasizes building strong recognition, at the
consumer level, of the Company's branded ingredients as premium brands of
high-quality, high-purity natural product ingredients. The Company's
Fingerprint(R) Botanicals trademark is used on a line of products sold by GNC
and is specifically attributed to the Company on the labeling of these GNC
products. The Company will promote this and other brands it is currently
developing for mass market retailers through a widespread multimedia marketing
and advertising strategy aimed at both its customers and the end consumers.
PURSUE STRATEGIC ACQUISITIONS
The Company plans to capitalize on the highly fragmented nature of the
nutritional supplements industry by seeking acquisitions of (i) additional
natural ingredient manufacturing companies, (ii) niche companies that provide
services along the botanical ingredient production process, (iii) agricultural
concerns that produce raw materials, (iv) companies that provide vertical
integration opportunities for the Company's enzyme and mineral product lines
and (v) companies in related industries such as natural foods and cosmetic and
beauty aids.
INDUSTRY GROWTH
The natural products industry is composed of three segments: nutritional
supplements, natural foods, and natural cosmetics and beauty aids. Within the
natural products industry, the Company competes primarily in the nutritional
supplements segment which is composed of vitamins, minerals and other dietary
supplements. The Company is also currently developing products suitable for
sale to the natural foods and natural cosmetics and beauty aid segments.
NUTRITIONAL SUPPLEMENTS
According to The U.S. Market for Vitamins, Supplements, and Minerals, a 1997
market report prepared by Packaged Facts (the "Packaged Facts Report"), an
independent consumer marketing research firm, the retail market for vitamins,
minerals and other supplements (excluding sports nutrition and diet products)
has grown at a CAGR of 15.0% from $3.7 billion in 1992 to $6.5 billion in
1996, representing annual growth rates of 16.9%, 14.8%, 16.2% and 12.2% during
that period. A large portion of this growth is attributable to an increase in
sales of other supplements (primarily herbal products), which grew from $570
million in 1992 to $2.3 billion in 1996. Growth in this category has been
fueled by the popularity of such herbs as echinacea, garlic, ginseng, ginkgo
and, more recently, saw palmetto and St. John's wort. According to the
Packaged Facts Report, CAGRs from 1992 through 1996 for vitamins, minerals and
other supplements were 8.0%, 5.3% and 41.7%, respectively. From 1992 to 1996
the annual growth in the retail market for vitamins was 13.0%, 8.1%, 6.4% and
4.8%; for minerals was 2.5%, 1.7%, 6.5% and 10.7%; and for other supplements
was 49.1%, 47.1% 45.6% and 26.4%. In addition,
25
<PAGE>
the Packaged Facts Report forecasts a 13.6% CAGR in the market for vitamins,
minerals and other supplements (excluding sports nutrition and diet products),
including a 25% CAGR in the market for other supplements, through 2001.
The Company believes that growth in the nutritional supplements industry has
been driven by (i) the aging of the "baby boom" generation combined with
consumers' tendency to purchase more nutritional supplements as they age, (ii)
the publication of research findings supporting the positive health effects of
certain nutritional supplements, (iii) increased media attention on the use
and efficacy of nutritional supplements, (iv) the nationwide trend toward
preventive medicine in response to rising healthcare costs, (v) increased
consumer interest in herbs and herb-related supplements and (vi) increased
interest in healthier lifestyles and the connection between diet and health.
NATURAL FOODS AND NATURAL COSMETICS AND BEAUTY AIDS
The Company believes that the natural foods and natural cosmetics and beauty
aids industries will also demonstrate growth due to several factors, including
(i) consumer concern over the purity and safety of foods and cosmetics and
beauty aids due to the presence of pesticide residues, preservatives,
artificial ingredients and other chemicals, (ii) consumer awareness of the
link between diet and health, (iii) consumer desire for cosmetics and beauty
aids free from animal testing and (iv) consumer awareness of environmental
issues. The proliferation of natural food supermarkets, including Whole Foods
and Wild Oats, is helping to fuel growth in these industries, as well as the
increasing acceptance of natural food products and cosmetics by traditional
grocery stores and supermarkets.
DISTRIBUTION CHANNELS
The natural products industry growth has been fueled by sales across a
number of distribution channels. Nutritional supplements are sold through
several channels of distribution, primarily mass market retailers, specialty
health products retailers and multi-level marketers, as well as through mail
order and the Internet. In 1996, according to the Packaged Facts Report, 45.8%
of sales of vitamins, minerals and other supplements were generated through
the mass market retailers channel, 38.2% of such sales through specialty
health products retailers and 16.0% of such sales through multi-level
marketers, mail order and the Internet.
The United States mass market retailers distribution channel consists of
major drug stores, supermarkets and discount stores. According to the Packaged
Facts Report, in the mass market retailers distribution channel, sales of
vitamins, minerals and other supplements have increased from approximately
$2.3 billion in 1994 to approximately $3.0 billion in 1996. Sales of herbal
and other supplements have exhibited the highest level of growth in the mass
market distribution channel from 1994 to 1996. Within drug stores and discount
stores, sales of herbal and other supplements increased as a percentage of
total sales from an estimated 13.1% in 1994 to an estimated 20.9% in 1996.
Herbal and other supplements have begun to penetrate food stores as well,
increasing from 8% of total sales in 1994 to 12% in 1996.
The United States specialty health products retailers distribution channel
is composed of over 9,500 stores, which are generally either independently
owned or associated with one of several regional or national chains, such as
GNC, Wild Oats and Whole Foods. According to the Packaged Facts Report,
nutritional supplements account for over 38% of a typical health products
store's sales. The specialty health products retailers channel of distribution
has continued to experience growth in recent years as national chains, as well
as other industry participants, continue to add stores in new and existing
markets.
The distribution of products through multi-level marketing has grown
significantly in recent years. The Direct Sellers Association (the "DSA")
reported total 1996 direct sales at retail of $20.8 billion in the United
26
<PAGE>
States. According to the Survey of Attitudes Toward Direct Selling
commissioned by the DSA, food, nutrition and wellness products are among the
fastest growing categories in the direct selling industry.
PRODUCTS
The Company offers a broad range of ready-to-run premium ingredients for
nutritional supplements and other natural products. In 1997, the Company
manufactured over 700 products in three categories, botanicals (herbs), teas
and specialty products, which accounted for 55.6%, 27.7% and 16.7% of net
sales, respectively. The Company is continually reviewing and rationalizing
its product line in order to focus on products with higher margins and growth
potential in conjunction with customers' needs.
BOTANICALS (HERBS)
Botanicals are ingredients derived from plants that are cultivated or
collected and processed with the intent to supplement wellness. Examples of
the Company's botanicals include bilberry, black cohosh, chamomile, cranberry,
dong quai, echinacea, feverfew, garlic, ginkgo biloba, ginseng, goldenseal,
guarana, kava kava, milk thistle, St. John's wort, saw palmetto and valerian.
The Company sells botanicals as milled powders and, to a limited extent,
granulations, where the plant has been dried and ground, and extracts, where
the plant has been dried, ground and exposed to solvents designed to
concentrate the constituents of the botanical, with the remaining solvents
being distilled off leaving a concentrated paste. Botanical extracts are sold
as liquid extracts (emulsions) or, if dried, as powdered extracts. The Company
has the capability of producing and blending each of its botanicals in a wide
variety of forms and concentrations to meet the various requirements of its
customers. For example, the Company produces over 20 ginseng products that
vary as to marker compound concentration, density, viscosity and form, a
capability possessed by few of the Company's competitors.
TEAS
The Company has developed a proprietary process to manufacture a granulated
instantized tea mix formulation that meets the specified preparation, flavor,
calorie and energy requirements of Herbalife, which purchases this formulation
from Global Health. These teas were launched in 1994 and have achieved a high
level of consumer acceptance as a weight management product and are promoted
by Herbalife both domestically and internationally. The Company is currently
collaborating with Herbalife and Global Health to develop a line extension of
flavored teas to improve the penetration of, and expand the overall market
for, its tea.
SPECIALTY PRODUCTS
Minerals. The mineral ingredients sold by the Company are compounds that
seek to increase the effectiveness of elemental minerals by binding them to
other organic materials. Examples of the Company's minerals include calcium,
chromium, iron, magnesium, molybdenum, selenium and zinc. In addition, the
Company blends certain minerals to produce premixed ingredients for customers
which manufacture multivitamins.
Enzymes. Enzymes are proteins that isolate and break down certain compounds
within certain classifications of foods. Examples of the Company's enzymes
include cellulase, lactase, lipase and protease which isolate and break down
cellulose, lactose, fats and protein, respectively. The Company has also
created custom enzyme blends such as Agree(TM) Enzymes that exploit the
specific activities of individual enzymes to address the most common digestive
intolerances associated with dairy products, rich foods, beef, pork and fish,
fruits and vegetables, and pasta and potatoes. In addition, the Company has
patented enzyme systems such as Legumase(R), an anti-flatulent, Aminogen(R), a
sports nutrition product designed to aid in the break down of proteins for
muscle building, and Carbogen(R), which breaks down complex carbohydrates.
Although enzymes accounted for minimal net sales in 1997, the Company believes
that the category exhibits significant growth potential.
Other Specialty Products. Other specialty products include aloe vera, dry
apple cider vinegar, garlic oil, lactobacillus acidophilus, lecithin, parsley
seed oil, shark cartilage, spirulina algae and various specialty ingredients
for the sports nutrition, dietary, and cosmetics and beauty aids industries.
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<PAGE>
BRANDING INITIATIVES
One of the Company's growth strategies is to create recognition of the
Company's products at the consumer level through branding initiatives. The
Company expects that creating recognition of its ingredients at the consumer
level and the association of the Company's brand with high-quality, high-
purity ingredients will result in increased demand by the Company's customers
for the Company's ingredients.
GNC was the first customer to support the concept of the Company's branded
ingredients and introduced its Nature's Fingerprint line in 1995. GNC's
Nature's Fingerprint line contains the Company's first line of branded,
premium, natural ingredients, Fingerprint(R) Botanicals. Supported by the use
of TLC, an advanced scientific identifying testing method that reveals a
botanical's "fingerprint," the Fingerprint(R) Botanicals brand has a distinct
consumer marketing appeal. The Company-owned Fingerprint(R) Botanicals
trademark and logo, along with the Company's name, appear on the bottles of
all two-piece capsule and liquid Nature's Fingerprint products for which the
Company supplies ingredients.
The Company is currently developing other branded ingredients for mass
market retailers and plans to promote its branded ingredient products through
a widespread multimedia marketing and advertising strategy aimed at both its
customers and the end consumers.
CUSTOMERS
The Company sells its products to a diverse range of nutritional supplement
manufacturers for multi-level marketers, specialty health products retailers
and mass market retailers, as well as private label manufacturers. Selected
key customers of the Company include:
GNC......................
GNC is a domestic and international
specialty retailer of vitamin and mineral
supplements, sports nutrition products and
herbs and is also a provider of personal
care and other health related products. As
of January 31, 1998, the GNC chain
consisted of approximately 3,210 stores
domestically and approximately 225 owned
and franchised stores in approximately 15
international markets, including the United
Kingdom and Canada. For the year ended
January 31, 1998, net revenue totaled
approximately $1.2 billion. GNC has been a
customer of the Company since 1980 and
accounted for 36.0%, 36.6% and 33.8% of the
Company's net revenues in 1996, 1997 and
the six months ended June 30, 1998,
respectively.
Global Health............
Global Health is a developer and custom
manufacturer of dietary and nutritional
supplements. Global Health develops and
manufactures vitamins, minerals, herbs,
teas and other supplements in tablet,
capsule and powder form in a variety of
shapes, sizes, colors, flavors and textures
designed to meet its customers'
specifications. Global Health's products
are sold to over 60 customers, including
Herbalife, which accounted for a major
portion of Global Health's sales in 1997.
Herbalife is a multi-level marketing
company that sells a wide range of weight
management products, food and dietary
supplements and personal care products
worldwide. In 1997, Herbalife conducted
business in over 36 countries and had
retail sales totaling approximately $1.5
billion. Global Health and its predecessors
have been a customer of the Company since
1987 and accounted for 38.0%, 35.9% and
26.0% of the Company's net sales in 1996,
1997 and the six months ended June 30,
1998, respectively.
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<PAGE>
Pharmavite............... Pharmavite is a manufacturer and marketer
of nutritional supplements, including
vitamins, minerals and dietary supplements,
under the Nature Made and Nature's Resource
brand names. Pharmavite also manufactures
private label nutritional supplements on
behalf of various food, drug and mass
market retailers. Pharmavite is a
privately-held company.
Rexall Sundown........... Rexall Sundown develops, manufactures,
markets and sells vitamins, nutritional
supplements and consumer health products
through three channels of distribution:
sales to retailers, direct sales through
independent distributors, and mail order.
Rexall Sundown offers a broad product line
of approximately 1,300 products, including
vitamins in both multivitamin and single-
entity formulas, minerals, herbals,
homeopathic remedies, weight management
products, skin care products and over-the-
counter pharmaceuticals. For the year ended
August 31, 1997, net sales totaled
approximately $263 million.
Additional key customers include (i) Banner Pharmacaps Inc., (ii) Celestial
Seasonings, Inc., (iii) Chem International, Inc., (iv) Leiner Health Products
Inc., a private label manufacturer that also markets nutritional supplements
under the Your Life brand, (v) Natural Alternatives International, Inc., a
supplier of dosage form nutritional supplements to NSA International, Inc. and
Nutrilite Products, a division of Amway, (vi) Nion Laboratories, a division of
Weider Nutrition International, Inc. and (vii) Nutrilite Products. Other than
GNC and Global Health, no other single customer accounted for 10% or more of
the Company's net sales in 1997.
The ultimate consumers of nutritional supplements have varying levels of
product awareness, adoption rates, price sensitivity and quality requirements.
Therefore, the Company works with its customers to maximize their reach to the
broadest possible consumer base. In many instances, the Company works closely
with its customers to identify suitable distribution channels and to formulate
marketing strategies designed to extend product life cycles and maximize sales
and margin potential. The Company's growth strategy entails assembling
internal marketing teams to develop innovative customer solutions, such as
specialized ingredients blends and end-product medium, technical and R&D
assistance, and flexible and reliable deliveries. In addition, senior
management is launching new initiatives to support customers' new product
development and marketing activities.
RAW MATERIALS
The Company procures substantially all of its raw materials from third
parties, with the balance grown at the Agricultural Division.
SOURCING AND PROCUREMENT
The Company sources and procures raw materials for nutritional supplement
ingredients from growers, collectors and brokers. Growers cultivate the
agricultural raw materials for nutritional supplement ingredients, while
collectors gather naturally existing raw materials. In addition to purchasing
raw materials directly from growers or collectors, the Company purchases raw
materials from brokers who typically consolidate the production of various
smaller producers in order to provide the necessary volumes from one source. A
substantial portion of the Company's raw materials are not indigenous to the
United States and must be procured from foreign growers, collectors and
brokers. The Company maintains relationships with approximately 140 growers,
collectors and brokers, thus enabling the Company to offer customers a single
source for a comprehensive line of natural product ingredients.
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<PAGE>
The Company's purchasing objective is to ensure a stable supply of natural
product raw materials which consistently meet Company specifications at the
most competitive price. In conjunction with its growth strategy, the Company
has recently hired a new director of purchasing with more than ten years of
procurement experience, including with CPC International, Inc. (now known as
Bestfoods, Inc.) The director of purchasing is currently exploring incremental
efficiencies and economies in the Company's procurement process.
AGRICULTURAL DIVISION
The Company launched its Agricultural Division in the fourth quarter of 1996
and solidified its commitment by entering into a long-term lease for a 500
acre certified organic farm in Jennings, Florida. The Agricultural Division
was formed to develop superior methods of breeding and cultivating its
botanical raw materials and thus increase yield, improve quality and plant
strength, and reduce costs. In addition, the farm supplies a small portion of
the Company's requirements for selected botanicals. The farm currently grows
several botanicals, including echinacea (purpurea, angustifolia and pallida),
St. John's wort and feverfew. Agricultural Division activities include seed
sourcing and identification, germination, planting, harvesting, drying and
preliminary grinding. In addition to 450 acres devoted to growing botanicals,
the Agricultural Division operates a 6,000 square foot warehouse for storing
dried botanicals and a 4,000 square foot cooler for storing fresh botanicals.
After harvesting and drying (where appropriate) and preliminary grinding
(where appropriate), raw botanicals will be shipped by the Company to its
Herbal Processing Facility. The Agricultural Division is headed by a senior
Ph.D. scientist with over 20 years of food chemistry and engineering
experience, including with GNC. The Agricultural Division employs
approximately 16 full-time employees and, based on seasonal needs,
will typically employ up to 27 part-time employees. See "--Processing
Facilities and Distribution--Herbal Processing Facility."
The knowledge already gained during the Agricultural Division's first 18
months of operations has confirmed the Company's opportunity to improve the
raw botanical cultivation process. The Company is continuing to study various
farming methods, including seed selection and germination, irrigation,
planting techniques, photo sensitivities, and harvesting methods and timing.
In addition, by planting a significant crop of a single botanical, the Company
expects to identify plants with more favorable genetic constitution and seeks
to replicate those plants through R&D. The Company intends to leverage its
proprietary knowledge by assisting other growers in improving quality and
yield of raw materials and providing incentives to such growers to cultivate
raw materials on behalf of the Company.
The Agricultural Division has also commissioned a research study at the
Clemson University Agricultural Extension Center in Charleston, South
Carolina. In May 1998, this center commenced a research program to observe
five key botanicals from germination through one year's growth and identify
opportunities to improve the botanicals' life and care. The study is being
conducted by scientists with agricultural doctorates specializing in
entomology, production, germination (pest and weed) and post harvest. Results
of this study are expected to improve the Company's raw botanical cultivation
process, as well as serve as a foundation for further research.
PROCESSING
BOTANICAL PROCESSING
The Company's botanical manufacturing process for the creation of natural
product ingredients starts with receiving raw botanicals. The raw botanicals
are inspected for quality and crushed for ease of handling. The crushed
botanicals are blended for consistency and further subject to grinding and
extracting. Ground botanicals are packaged for sale or further processed by
granulation. Extracts are produced by exposing the ground botanicals to
solvents designed to concentrate the constituents of the botanicals, with the
remaining solvents being distilled off leaving a concentrated paste. The
extract pastes are either spray dried or emulsified into liquid form. Powdered
spray dried extracts are returned for granulating and agglomerating.
Typically, the Company's customers use these botanical preparations as raw
materials for manufacturing consumer products. Currently, the Company
outsources three stages of processing, spray drying, agglomeration and
sterilization; however, upon completion of the Herbal Processing Facility, the
spray drying and agglomeration functions will be performed in-house.
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<PAGE>
CUSTOMIZING READY-TO-RUN INGREDIENTS
The Company specializes in custom formulated and blended products designed
to provide its customer base with unique and differentiated products in ready-
to-run form. In many cases, the Company's scientists and formulation experts,
through customer product development teams, work with customers to develop
viable products which meet the customers' desired label claims, end use
requirements and marker compound content. The Company's process engineers also
work with customers to develop dosage delivery forms that accommodate
customers' existing tableting, capsule, powder or liquid packaging
capabilities. A sample of the product is made on a small scale and evaluated
to ensure that it will match the customer's requirements. Upon approval, the
preliminary specifications, including sample, price and other terms are
provided to the customer, and, upon approval thereof by the customer, the
formula and manufacturing technology is transferred to production scale.
QUALITY ASSURANCE AND QUALITY CONTROL
The Company utilizes a documented quality assurance program to ensure the
production of high-quality, high-purity natural product ingredients for
nutritional supplements. This program implements GMPs that, among other
things, address processing, cleanliness, testing, sampling and formulations.
The Company believes that in appropriate instances its GMPs approach
pharmaceutical standards. The Company has also developed and operates a
comprehensive quality control program that subjects all of the Company's
products to a battery of stringent tests commencing prior to acceptance of raw
materials through shipment of finished goods. This program, among other
things, identifies botanical raw materials and measures the marker compounds.
By precisely identifying and measuring marker compounds, the Company is able
to substantially reduce the natural inconsistencies of raw botanicals and
standardize its ingredients to customer specifications. To support this
effort, the Company has made significant investments in sophisticated testing
methods and equipment, including TLC, GC and HPLC. TLC is used to produce a
specific marker compound fingerprint of the material which identifies it in
terms of genus and species. HPLC procedures are used to quantify specific
marker compounds identified from the fingerprint. These techniques are
developed in-house by adapting and modifying methods published in the
scientific literature. Once developed, these techniques are validated with
procedures that are recommended and currently in use by the pharmaceutical
industry. The Company is continually researching and developing new procedures
to enhance the scope of testing capabilities and ensure product quality.
PROCESSING FACILITIES AND DISTRIBUTION
The Company currently produces substantially all of its products at its
production and warehouse facility located in Paterson, New Jersey (the
"Paterson Facility"). In order to further position the Company as a leading
supplier of high-quality, high-purity natural ingredients, the Company is
constructing the state-of-the-art Herbal Processing Facility in Green Pond,
South Carolina.
PATERSON FACILITY
The Paterson Facility is composed of an approximately 60,000 square foot
warehouse and an approximately 20,000 square foot production facility. The
warehouse handles the receipt of raw materials and the delivery of the
Company's products. Accordingly, both raw materials inventory and finished
goods inventory are maintained at the warehouse. In addition, initial quality
control macro sampling of, and separation of contaminants from, the raw
materials is performed at the warehouse. In 1997, the warehouse staged and
shipped approximately 1.8 million kilograms of the Company's finished products
utilizing only a single shift production schedule. The Paterson warehouse has
the capacity to add additional work shifts in response to increased demand for
the Company's products.
At the production facility, approximately 17,500 square feet are devoted to
grinding, distilling, packaging and other production functions and
approximately 2,500 square feet are devoted to quality control, quality
assurance and R&D. The Company operates laboratories that run TLC, GC and HPLC
assaying tests on the raw materials. The company operates blenders that blend
the raw materials, based on the results of the TLC, GC and
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<PAGE>
HPLC tests, to produce standardized lots. The Company maintains grinders that
produce powders and granulates and distillation systems that produce extracts,
which can be converted into emulsions. Finally, the Company utilizes packing
machines to package its products for delivery.
HERBAL PROCESSING FACILITY
The Company is currently constructing a state-of-the-art Herbal Processing
Facility, which is located on an approximately 56 acre campus, in Green Pond,
South Carolina, located approximately 40 miles southwest of the Port of
Charleston, a major port on the Southeastern Seaboard. The Company believes
the Herbal Processing Facility is strategically located, providing ready
access to sea, rail and highway transportation, an accessible labor force and
proximity to certain key customers, as well as to the Agricultural Division.
Upon completion, the Herbal Processing Facility will encompass five buildings:
the agricultural pre-processing building, the pharmaceutical building, the
extraction building, the finished products building and the R&D laboratory.
The Herbal Processing Facility is expected to be able to process approximately
8.0 million kilograms annually of the Company's finished products utilizing a
single work shift, thus more than quadrupling the Company's current single
shift production capacity. The Herbal Processing Facility will expand
capacities and capabilities in response to market demands, resulting in more
efficient production of consistent and high-quality products. The Herbal
Processing Facility is expected to be completed in mid-1999 at a total cost of
approximately $10 million, of which approximately $3.4 million has been
expended to date.
The agricultural pre-processing building will house the inspection conveyor,
to be used for visual and metal inspection, the hammer mills, which will crush
the raw materials, and a 325 cubic foot blender, which will blend the crushed
raw materials into standardized lots. The pharmaceutical building will be
designed with the precision and cleanliness associated with pharmaceuticals,
through the use of an air filtration system and negative pressure rooms, among
other things, to create a bacteria and debris free environment. The extraction
building will contain distillation systems using either water or alcohol to
extract the botanicals, which will be spray dried or converted into emulsions.
DISTRIBUTION
The Company primarily utilizes third party common carriers to deliver its
natural product ingredients to customers from its warehouses in Paterson, New
Jersey and Fountain Valley, California. In addition, the Company maintains a
fleet of five large trucks to facilitate local deliveries. As production at
the Herbal Processing Facility increases, products will be shipped directly to
customers utilizing third party common carriers and additional Company-owned
trucks.
RESEARCH AND DEVELOPMENT
A key element in the Company's business strategy is to identify and develop
commercial opportunities from ideas generated through its R&D. These R&D
efforts are generally devoted to four principal areas, (i) development of new
technology, (ii) application of the Company's processing technology to new
products, (iii) improvement of existing processes and (iv) development of
viable alternate raw materials for natural products extraction and
purification. The Company also conducts R&D at the Agricultural Division. See
"--Raw Materials--Agricultural Division."
The Company's internally funded research and development expenditures during
1996, 1997 and the six months ended June 30, 1998 were approximately $384,000,
$407,000, and $262,000, respectively. The Company intends to continue actively
pursuing research and development efforts and these costs are likely to
increase in future periods in conjunction with growth in net sales.
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INTELLECTUAL PROPERTY
The Company's proprietary technology and knowledge are important to its
business. The Company relies on patents, trade secrets, and confidentiality
agreements, as well as continuing technological innovation, to protect its
proprietary technology and knowledge and thus maintain its competitive
advantage. The Company produces certain products which management believes
could not be duplicated without the use of the Company's proprietary
knowledge.
The Company has developed numerous proprietary assay methods to test
botanicals. The Company's expertise in analyzing, identifying and measuring
marker compounds is important to raw material analysis, process development,
and process and quality control. Designing a particular process application
involves selecting the most appropriate processing steps, determining the
proper sequence, and establishing optimum temperature, pressure, solvent and
other parameters for each process step. The Company develops variations of its
processes based on the nature of the raw material used and the specifications
of the desired product.
The Company patents technology when appropriate to obtain long-term
protection. The Company owns patents for proprietary composition of matter and
manufacturing processes. The Company has three patents for Legumase(R), an
enzyme system for antiflatulence, which expire February 10, 2014; one patent
for Aminogen(R), an enzyme system used to replace free form amino acid
supplementation, which expires March 11, 2013; and one patent claim allowed
for Carbogen(R), an enzyme system designed to break down complex
carbohydrates. In addition, three patents are still pending. With respect to
its proprietary processes for which it has not obtained patent protection, the
Company relies on internal procedures and trade secret laws to protect these
proprietary processing technologies.
The Company protects its proprietary technology and knowledge through
established security practices and confidentiality agreements with employees,
consultants, strategic industry participants, and technical advisors. Few
individuals within the Company possess a full working knowledge of these
processes. Joint development agreements and consultant relationships generally
allow only limited access to Company information, which is protected through
confidentiality agreements with the parties involved. The Company is
continually improving its processes and developing additional technological
knowledge relating to the extraction of natural products.
COMPETITION
The Company's principal competition comes from major domestic and foreign
suppliers of nutritional product ingredients. The Company competes principally
on the basis of product quality, product availability and timely delivery,
price, value-added R&D, product knowledge and formulation capabilities. The
Company believes that it competes favorably with its competitors due to its
documented quality assurance program, stringent quality control and vertically
integrated development and manufacturing capabilities; its ability to
specifically formulate products for distribution along multiple distribution
channels; and its ability to react to market trends and customer demands
through extensive experience with, and understanding of, its products, as well
as its customers and suppliers.
GOVERNMENTAL REGULATION
THE COMPANY
The Company's business is subject to comprehensive regulation by numerous
federal governmental agencies, including the FDA, OSHA and EPA. The FDA
regulates the Company's products under the FDCA and the regulations
promulgated thereunder. In addition, the Company is subject to regulation by
various state and local agencies and will be subject to governmental
regulations in foreign countries where the Company plans to commence or expand
sales.
The FDA has promulgated regulations with respect to the manufacture of
pharmaceuticals, foods, flavors and dietary supplements and has established
GMPs for, among other things, foods and pharmaceuticals. The
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Company's nutritional supplement ingredients fit within the category of
"dietary supplements" and, along with the Company's teas, must be manufactured
in compliance with food GMPs. Recently, however, the FDA has announced that it
is considering promulgating GMPs specific to dietary supplements. If
promulgated, these dietary supplement specific GMPs may be significantly more
rigorous than those currently applicable to the Company's products and may
require quality assurance requirements similar to pharmaceutical GMPs.
Therefore, the Company may be required to expend additional capital and
resources in the future to comply with new FDA regulations. Nevertheless, the
Company believes its quality assurance in certain cases meets or exceeds the
quality assurance levels applicable to pharmaceuticals. The failure of the
Company to comply with applicable FDA regulatory requirements could result in,
among other things, injunctions, product withdrawals, recalls, product
seizures, fines and criminal prosecutions.
The safety of the Company's manufacturing operations are regulated by OSHA.
The Company's facilities are currently classified as low risk by OSHA. The
Company's operations are subject to laws and regulations governing, among
other things, air emissions, waste water discharge, solid and hazardous waste
treatment, and storage, disposal and remediation of releases of hazardous
materials administered by the EPA and other state and local authorities. The
Company has made and intends to continue to make the necessary expenditures
for environmental compliance. Health and safety and/or environmental laws and
regulations may become more stringent in the future which would increase the
costs of compliance.
The Company may be subject to additional laws or regulations by the FDA or
other federal, state or foreign regulatory authorities, the repeal of laws or
regulations which the Company considers favorable, or more stringent
interpretations of current laws or regulations, from time to time in the
future. The Company is unable to predict the nature of such future laws,
regulations, interpretations or applications, nor can it predict what effect
additional governmental regulations or administrative orders, when and if
promulgated, would have on its business in the future. They could, however,
require, among other things, the reformulation of certain products to meet new
standards, the discontinuance of certain products not able to be reformulated,
the imposition of additional quality assurance procedures, or expanded or
different scientific substantiation.
NUTRITIONAL SUPPLEMENTS INDUSTRY
The Company manufactures ingredients for nutritional supplements that are
further manufactured, packaged, labeled, distributed and sold by third party
manufacturers, marketers and/or retailers that, along with other similar
participants in the nutritional supplements industry, are subject to
governmental regulations with respect to their businesses. Though not directly
applicable to the Company, the enactment of DSHEA has had a significant effect
on the nutritional supplements industry, which effect the Company believes to
be favorable. DSHEA revised the provisions of the FDCA concerning the
regulation of dietary supplements. The legislation for the first time defined
"dietary supplement" as a product intended to supplement the diet that
contains one or more of certain dietary ingredients, such as a vitamin, a
mineral, an herb or botanical, an amino acid, a dietary substance for use by
humans to supplement the diet by increasing the total dietary intake, or a
concentrate, metabolite, constituent, extract, or combination of the preceding
ingredients. A substantial portion of the products sold by the Company are
ingredients for dietary supplements.
Under the current provisions of the FDCA, there are four categories of
claims that pertain to the regulation of dietary supplements. Health claims
are claims that describe the relationship between a nutrient or dietary
ingredient and a disease or health related condition and can be made on the
labeling of dietary supplements if supported by significant scientific
agreement and authorized by the FDA in advance through notice and comment
rulemaking. Nutrient content claims describe the nutritional value of the
product and may be made if defined by the FDA through notice and comment
rulemaking and if one serving of the product meets the definition. Health
claims and nutrient content claims may also be made if a scientific body of
the U.S. government with official responsibility for the public health has
made an authoritative statement regarding the claim, the claim accurately
reflects that statement and the manufacturer, among other things, provides the
FDA with notice of and basis for the claim at least 120 days before the
introduction of the supplement with a label containing the claim into
interstate commerce. Statements of nutritional support or product performance,
which are permitted on labeling
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of dietary supplements without FDA pre-approval, are defined to include
statements that (i) claim a benefit related to a classical nutrient deficiency
disease and discloses the prevalence of such disease in the United States,
(ii) describe the role of a nutrient or dietary ingredient intended to affect
the structure or function in humans, (iii) characterize the documented
mechanism by which a dietary ingredient acts to maintain such structure or
function or (iv) describe general well-being from consumption of a nutrient or
dietary ingredient. In order to make a nutritional support claim the marketer
must possess substantiation to demonstrate that the claim is not false or
misleading and, if the claim is for a dietary ingredient that does not provide
traditional nutritional value, prominent disclosure of the lack of FDA review
of the relevant statement, and notification to the FDA of using the claim is
required. Drug claims are representations that a product is intended to
diagnose, mitigate, treat, cure or prevent a disease. Drug claims are
prohibited from use in the labeling of dietary supplements.
The advertising of nutritional supplements is subject to regulation by the
Federal Trade Commission (the "FTC") under the Federal Trade Commission Act
(the "FTCA"). The FTCA prohibits unfair methods of competition and unfair or
deceptive acts or practices in or affecting commerce. In addition, the FTCA
provides that the dissemination, or the causing to be disseminated, of any
false advertisement pertaining to drugs or foods, which would include dietary
supplements, is an unfair or deceptive act or practice. Under the FTC's
substantiation doctrine, an advertiser is required to have a "reasonable
basis" for all objective product claims before the claims are made. Failure to
adequately substantiate claims may be considered either deceptive or unfair
practices. Pursuant to this FTC requirement, the manufacturers of nutritional
supplements containing the Company's ingredients are required to have adequate
substantiation for all material advertising claims made for their products.
In recent years, the FTC has initiated numerous investigations of
nutritional supplement and weight loss products and companies. The FTC is
reexamining its regulation of advertising for dietary supplements and has
announced that it will issue a guidance document to assist supplement
marketers in understanding and complying with the substantiation requirement.
Upon release of this guidance document, many of the Company's customers will
be required to evaluate its compliance with the guideline and may be required
to change their advertising and promotional practices.
FACILITIES
The Company maintains offices, production facilities, distribution
facilities and a farm. The following table sets forth the location, total land
area and facility size of each of the Company's facilities:
<TABLE>
<CAPTION>
FACILITY LOCATION SIZE
- -------- -------- ----
<S> <C> <C> <C>
Corporate headquarters(1)........... Wayne, New Jersey 15,000 sq. ft.
Paterson Facility(2) --Production... Paterson, New Jersey 20,000 sq. ft.
- --Warehouse......................... Paterson, New Jersey 60,000 sq. ft.
Fountain Valley facility(1)(3)...... Fountain Valley, California 5,500 sq. ft.
Herbal Processing Facility(4)....... Green Pond, South Carolina 56 acres
Agricultural Division(1)............ Jennings, Florida 500 acres
</TABLE>
- --------
(1) This facility is leased.
(2) This facility is leased from an affiliate of the Company. See "Certain
Transactions."
(3) This facility is used for sales and distribution primarily to West Coast
customers and is leased on a month-to-month basis.
(4) This facility is currently under construction and is expected to be
completed in mid-1999. See "--Production Facilities and Distribution--
Herbal Processing Facility."
EMPLOYEES
As of June 30, 1998, the Company had 120 full time and 57 part-time
employees. Of such employees, 113 employees were devoted to production and
distribution, 44 employees were responsible for management and administration
and 20 employees were scientific personnel. None of the Company's employees
are unionized or subject to any collective bargaining agreement. The Company
considers its relations with its employees to be good.
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PRODUCT LIABILITY INSURANCE
The testing and sale of the Company's products include an inherent risk that
product liability claims may be asserted against the Company. The Company has
obtained product liability insurance coverage which it believes to be
adequate. There can be no assurance that the Company will be able to maintain
product liability insurance on acceptable terms or that its insurance will
provide adequate coverage against potential claims. While the Company has not
experienced any product liability claims, if such claims should arise in the
future, they could have a material adverse effect on the Company's business,
financial condition and results of operations.
LEGAL PROCEEDINGS
From time to time, the Company is subject to litigation incidental to its
business, including product liability claims, which could exceed applicable
insurance coverage. The Company currently is not a party to any material legal
proceedings.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The current directors and executive officers of the Company and their ages
and positions are listed in the following table.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <C> <S>
Rodger R. Rohde, Sr. .......... 56 Chairman of the Board, Chief Executive
Officer and Director
Rodger R. Rohde, Jr. .......... 36 President, Chief Operating Officer and
Director
Angelo R. Appierto............. 46 Vice President--Finance, Chief Financial
Officer, Secretary, Treasurer and
Director
Andres E. Menendez............. 59 Vice President--Special Projects and
Director
Christopher J. Rohde........... 30 Vice President--Operations and Director
Cynthia J. Rohde............... 31 Vice President--Corporate Communication
and Director
David P. Walsh................. 59 Vice President--Technical Services
</TABLE>
References to service with the Company in the following biographies do not
include service with predecessors. Rodger R. Rohde, Sr. is the father of
Rodger R. Rohde, Jr., Christopher J. Rohde and Cynthia J. Rohde.
RODGER R. ROHDE, SR. founded the initial predecessor to the Company in 1978
and has been Chairman of the Board, Chief Executive Officer and a Director of
the Company since its inception. Mr. Rohde was Chairman of the Board of LSI
and BMI from March 1988 and June 1993, respectively, and a Director thereof
from May 1987 and June 1993, respectively, until the consummation of the
Mergers. Mr. Rohde has over 30 years of experience in the nutritional
supplement, flavors and fragrance industries.
RODGER R. ROHDE, JR. has been President, Chief Operating Officer and a
Director of the Company since its inception and joined the Predecessor
Companies in July 1985. Mr. Rohde was President of LSI, Old Triarco and BMI
from March 1988, December 1990 and June 1993, respectively, and was a Director
of Old Triarco and BMI from November 1990 and June 1993, respectively, until
the consummation of the Mergers.
ANGELO R. APPIERTO has been Vice President--Finance, Chief Financial
Officer, Secretary and a Director of the Company since its inception. Mr.
Appierto joined the Predecessor Companies in December 1997 and was Vice
President--Finance, Chief Financial Officer, Secretary and Treasurer of LSI,
Old Triarco and BMI from March 1998, January 1998 and January 1998,
respectively, until the consummation of the Mergers. From June 1993 to October
1997, Mr. Appierto served as Chairman and Chief Executive Officer of The Aegis
Consumer Funding Group, Inc., a national consumer finance company, and was its
Chief Financial Officer from May 1992 to June 1993. Mr. Appierto is a
certified public accountant.
ANDRES E. MENENDEZ has been Vice President--Special Projects and a Director
of the Company since its inception. Mr. Menendez had been with the Predecessor
Companies in various capacities, including Vice President--Production, from
March 1991 until the consummation of the Mergers.
CHRISTOPHER J. ROHDE has been Vice President--Operations and a Director of
the Company since its inception and joined the Predecessor Companies in June
1990. Mr. Rohde was Vice President--Operations of LSI, Old Triarco and BMI
from March 1995, January 1991 and June 1993, respectively, and was a Director
of Old Triarco and BMI from November 1990 and June 1993, respectively, until
the consummation of the Mergers.
CYNTHIA J. ROHDE has been Vice President--Corporate Communication and a
Director of the Company since its inception. Ms. Rohde had been with the
Predecessor Companies in various capacities, including Director of Corporate
Communication and Human Resources, from November 1994 until the consummation
of the Mergers. From February 1993 to November 1994, Ms. Rohde was a Senior
Associate with Burson-Marsteller, an international public relations firm.
37
<PAGE>
DAVID P. WALSH has been Vice President--Technical Services of the Company
since its inception. From March 1991 to June 1998, Dr. Walsh served as Senior
Food and Pharmaceutical Consultant of Simons Engineering, Inc., an engineering
consulting company. Prior to joining Simons Engineering, Inc., Dr. Walsh held
various positions at GNC, including Vice President and Technical Director and
President and Chief Executive Officer of GNP, from 1974 to 1986. Dr. Walsh has
a Ph.D. in Cereal Chemistry/Industrial Engineering from North Dakota State
University.
The Company's Board of Directors is composed of eight members. Currently
there are two vacancies. Within 90 days following the consummation of this
offering, the Company intends to fill those vacancies with individuals who
will be neither officers nor employees of the Company or its affiliates.
The Company's Board of Directors is divided into three classes. Directors of
each class will be elected at the annual meeting of stockholders held in the
year in which the term for such class expires and will serve for three years
thereafter. Class I directors, whose term will expire at the first annual
meeting after this offering, currently consist of Andres E. Menendez and
Cynthia J. Rohde; Class II directors, whose term will expire at the second
annual meeting after this offering, currently consist of Christopher J. Rohde
and Rodger R. Rohde, Jr.; Class III directors, whose term will expire at the
third annual meeting after this offering, currently consist of Rodger R.
Rohde, Sr. and Angelo R. Appierto. The two additional directors appointed
after this offering will be appointed to Class II and Class III as determined
by the Board of Directors.
COMMITTEES OF THE BOARD OF DIRECTORS
Within 90 days following the consummation of this offering, the Board of
Directors will establish an Audit Committee and a Compensation Committee.
Effective upon their election to the Board of Directors, the independent
directors will serve as the members of the Audit Committee and the
Compensation Committee. The Audit Committee's principal functions will include
making recommendations to the Board of Directors regarding the annual
selection of independent public accountants, reviewing the proposed scope of
each annual audit and reviewing the recommendations of the independent public
accountants resulting from the audit of the Company's consolidated financial
statements. The Compensation Committee's principal function will be to
establish the compensation of the Chief Executive Officer and other senior
officers of the Company and to establish and administer the Company's
compensation programs, including the grant of awards under the 1998 Omnibus
Stock Incentive Plan. See "--Employee Benefit Plans." The Board of Directors
may from time to time establish other committees to facilitate the management
of the Company.
DIRECTOR COMPENSATION
Prior to this offering, directors received no compensation for their service
on the Board of Directors. Upon completion of this offering, directors who are
not employees of the Company or its affiliates will receive an annual retainer
of $10,000 plus $1,000 per committee served per committee meeting attended.
Directors will be reimbursed for out-of-pocket expenses incurred in connection
with their service as directors. In addition, each non-employee director is
eligible to receive awards pursuant to the 1998 Omnibus Stock Incentive Plan,
under which such directors will receive an option to purchase 7,500 shares of
Common Stock upon becoming a director and annual awards of options to purchase
2,500 shares of Common Stock. Directors who are officers or employees of the
Company will not receive any additional compensation for their services as
directors. See "--Employee Benefit Plans--1998 Omnibus Stock Incentive Plan."
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<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information with respect to the annual and
long-term compensation earned during the year ended December 31, 1997 from the
Predecessor Companies by the Chief Executive Officer and certain other
executive officers of the Company (collectively, the "Named Executive
Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1)
-----------------------
NAME AND PRINCIPAL POSITION SALARY BONUS
- --------------------------- ----------- -----------
<S> <C> <C>
Rodger R. Rohde, Sr. .................................. $ 907,000 $ 450,000
Chairman of the Board and Chief Executive Officer
Rodger R. Rohde, Jr. .................................. 260,000 400,000
President and Chief Operating Officer
Andres E. Menendez..................................... 178,345 75,000
Vice President--Special Projects
Christopher J. Rohde................................... 125,060 250,000
Vice President--Operations
Cynthia J. Rohde....................................... 73,078 100,000
Vice President--Corporate Communication
</TABLE>
- --------
(1) Perquisites and other personal benefits, securities and property, valued
on the basis of the aggregate incremental cost to the Predecessor
Companies, did not exceed the lesser of $50,000 or 10% of the total annual
salary and bonus reported for each of the Named Executive Officers. The
amounts set forth do not include S corporation dividend distributions
sufficient to pay income taxes on the earnings of the Predecessor
Companies that were treated as having been earned by the individual as a
shareholder of the Predecessor Companies. See "--Employment Agreements"
for a description of the compensation of the Named Executive Officers upon
consummation of this offering.
EMPLOYEE BENEFIT PLANS
1998 OMNIBUS STOCK INCENTIVE PLAN
Prior to the consummation of this offering, the Board of Directors of the
Company will adopt and the Company's stockholders will approve a 1998 Omnibus
Stock Incentive Plan (the "Omnibus Stock Plan"). The Company will reserve an
aggregate of 1,400,000 shares of Common Stock for issuance under the Omnibus
Stock Plan. The purpose of the Omnibus Stock Plan will be to promote the long-
term growth and profitability of the Company by providing individuals with
incentives to improve stockholder value and contribute to the growth and
financial success of the Company, and by enabling the Company to attract,
retain and reward the best available persons for positions of substantial
responsibility. The Omnibus Stock Plan will provide for the grant of non-
qualified stock options, incentive stock options within the meaning of Section
422 of the Code, stock appreciation rights and restricted and non-restricted
stock awards, each of which may be granted separately or in tandem with other
awards. Participation in the Omnibus Stock Plan will be open to all employees,
officers and directors of the Company or any of its affiliated entities;
however, only employees of the Company or its subsidiaries may receive
incentive stock option awards. Options to acquire shares of Common stock
will be granted upon consummation of this offering, exercisable at the initial
public offering price.
The Omnibus Stock Plan will be administered by the Compensation Committee of
the Board of Directors (the "Administrator"). The Administrator has the
authority to (i) determine the eligible persons to whom, and the time or times
at which, awards shall be granted, (ii) determine the types of awards to be
granted, (iii) determine the number of shares to be covered by or used for
reference purposes for each award, (iv) impose such terms, limitations,
restrictions and conditions upon any such award as the Administrator shall
deem appropriate, (v) modify, amend, extend or renew outstanding awards, or
accept the surrender of outstanding awards and substitute new awards
(provided, however, that except in specified circumstances, any modification
39
<PAGE>
that would materially adversely affect any outstanding award shall not be made
without the consent of the grantee), (vi) accelerate or otherwise change the
time in which an award may be exercised or becomes payable and to waive or
accelerate the lapse, in whole or in part, of any restriction or condition
with respect to such award, including, without limitation, any restriction or
condition with respect to the vesting or exercisability of an award following
termination of any grantee's employment and (vii) establish objectives and
conditions, if any, for earning awards and determining whether awards will be
paid after the end of a performance period. In addition, the Administrator is
authorized to make adjustments in the terms and conditions of, and the
criteria included in, awards in recognition of unusual or nonrecurring events
affecting the Company, or the financial statements of the Company or any
subsidiary, or of changes in applicable laws, regulations or accounting
principles, whenever the Administrator determines that such adjustments are
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Omnibus Stock Plan.
Options intended to qualify as incentive stock options under Section 422 of
the Code must have an exercise price at least equal to fair market value on
the date of grant. Incentive stock options may not be exercisable more than
ten years from the date the option is granted. If any employee of the Company
or any subsidiary owns or is deemed to own at the date of grant shares of
stock representing in excess of 10% of the combined voting power of all
classes of stock of the Company, the exercise price for the incentive stock
options granted to such employee may not be less than 110% of the fair market
value of the underlying shares on that date and the option may not be
exercisable more than five years from the date the option is granted. The
option exercise price may be paid in cash, by tender of shares of Common
Stock, by a combination of cash and shares or by any other means the
Administrator approves. Awards of stock appreciation rights, stock and phantom
stock awards and performance awards may be settled in cash, shares of Common
Stock or a combination of both, in the discretion of the Administrator.
The Board of Directors of the Company may terminate, amend or modify the
Omnibus Stock Plan or any portion thereof at any time, except that all awards
made prior to termination of the Omnibus Stock Plan will remain in effect
until such awards have been satisfied or terminated in accordance with the
terms of the Omnibus Stock Plan and such awards.
EMPLOYMENT AGREEMENTS
The Company requires its management and key employees to sign employment
agreements upon joining the Company. The Company will enter into employment
agreements with each Named Executive Officer prior to the consummation of this
offering. The employment agreements will provide for annual base salaries of
$400,000, $260,000, $150,000, $175,000, $175,000, and $125,000 for Rodger R.
Rohde, Sr., Rodger R. Rohde, Jr., Angelo R. Appierto, Andres E. Menendez,
Christopher J. Rohde and Cynthia J. Rohde, respectively. The employment
agreements will be effective as of the closing date of this offering for an
initial term of three years and automatically renewable for one year terms,
provided that either party may terminate the employment agreement upon 12
months prior notice. The employment agreements generally will contain
confidentiality provisions and covenants not to compete during the term of
employment and for one year after termination of employment. Each employment
agreement will provide that in the event of a merger or acquisition of the
Company by another entity in which the employee's position is eliminated or
radically altered, the Company must pay up to 2.99 times the employee's base
salary.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to this offering, the Company has had no separate compensation
committee or other board committee performing equivalent functions. As a
result, the functions of a compensation committee were performed by Rodger R.
Rohde, Sr. Upon filling the vacancies on the Board of Directors, the Board of
Directors will create a Compensation Committee composed solely of outside
directors. During the year ended December 31, 1997, no executive officer of
the Company served (i) as a member of the compensation committee (or other
board committee performing equivalent functions or, in the absence of any such
committee, the entire board of directors) of another entity, one of whose
executive officers served on the Board of Directors of the Company,
40
<PAGE>
(ii) as a director of another entity, one of whose executive officers served
on the Board of Directors of the Company or (iii) as a member of the
compensation committee (or other board committee performing equivalent
functions or, in the absence of any such committee, the entire board of
directors) of another entity, one of whose executive officers served as a
director of the Company.
CERTAIN TRANSACTIONS
The Company leases the production building and warehouse building at the
Paterson Facility from Rodger R. Rohde, Sr., an executive officer and director
of the Company, and Rohde Holdings, Inc. ("RHI"), respectively. All of the
outstanding capital stock of RHI is owned by Rodger R. Rohde, Sr., Rodger R.
Rohde, Jr. and Christopher J. Rohde, each of whom is an executive officer and
director of the Company. During 1997, the Company made aggregate lease
payments of $204,000 and $96,000 for the production building and the warehouse
building, respectively. In addition, the Company is a guarantor of the
mortgage obligations with respect to each of the buildings, with outstanding
balances as of December 31, 1997 of $99,283 and $182,069 on the mortgages for
the production building and the warehouse building, respectively. The Company
believes that its leasing costs with respect to these facilities were no less
favorable than the costs of leasing comparable facilities from unaffiliated
entities. In connection with the purchase of the warehouse building by RHI,
the Company advanced certain expenses of RHI. As of December 31, 1997, the
outstanding balance of such advanced expenses was $73,725, which bears
interest at the rate of 7% per annum and is being repaid in monthly
installments of $1,500.
41
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to the beneficial
ownership of the Common Stock as of the date of this Prospectus and as
adjusted to reflect the sale by the Company of the shares offered hereby with
respect to (i) each of the directors of the Company, (ii) each of the Named
Executive Officers, (iii) each person known to the Company to own beneficially
more than 5% of the Company's Common Stock and (iv) all officers and directors
as a group. Unless otherwise indicated, each person named in the table has
sole voting power and investment power, subject to community property laws
where applicable.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED PRIOR TO PERCENT OF
OFFERING(1) SHARES BENEFICIALLY
----------------------- OWNED AFTER
NAME OF BENEFICIAL OWNER(1) NUMBER PERCENT OFFERING(1)
- --------------------------- ------------ ---------- -------------------
<S> <C> <C> <C>
Rodger R. Rohde, Sr.(2)(3)......... 5,130,412 54.6% 40.4%
Rohde Trust(3)(4).................. 4,022,100 42.8 31.7
Rodger R. Rohde, Jr. .............. 120,663 1.3 *
Andres E. Menendez................. -- * *
Christopher J. Rohde............... 120,663 1.3 *
Cynthia J. Rohde................... -- * *
All officers and directors as a
group (7 persons)................. 5,371,738 57.2 42.3
</TABLE>
- --------
*Less than 1% of the outstanding Common Stock.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally include voting or
investment power with respect to securities.
(2) If the Underwriters' over-allotment option is exercised in full, Mr. Rohde
will sell all of the 495,000 shares comprising the over-allotment option
and his shares beneficially owned after this offering will be 4,635,412
shares or 36.5% of the total outstanding shares of Common Stock.
(3) The address of this beneficial owner is c/o Triarco Industries, Inc., 400
Hamburg Turnpike, Wayne, New Jersey 07470.
(4) The Rohde Trust is composed of three equal trusts for the benefit of
Rodger R. Rohde, Jr., Christopher J. Rohde and Cynthia J. Rohde. The
beneficiaries have neither voting nor investment power with respect to the
shares of Common Stock held by the Rohde Trust, and such voting and
investment power is vested in the trustees of the Rohde Trust, [ ] and
[ ].
42
<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company is authorized to issue up to 50,000,000 shares of Common Stock
and 1,000,000 shares of Preferred Stock. As of the date of this Prospectus,
(i) 9,393,838 shares of Common Stock are issued and outstanding, held by four
stockholders of record and (ii) no shares of Preferred Stock are issued and
outstanding. An additional shares of Common Stock are issuable upon
exercise of outstanding stock options under the 1998 Omnibus Stock Incentive
Plan.
The following description provides a summary of the material rights and
limitations relating to ownership of the Company's capital stock. For a
complete legal description of the Company's capital stock, reference should be
made to the Company's Certificate of Incorporation and Bylaws, copies of which
are included as exhibits to the Registration Statement of which this
Prospectus is a part.
COMMON STOCK
All outstanding shares of Common Stock are, and the shares to be issued in
this offering will be, fully paid and non-assessable. Upon completion of this
offering, there will be no preemptive, conversion, subscription, redemption or
repurchase rights associated with the shares of Common Stock. Each holder of
Common Stock is entitled to one vote for each share owned of record on matters
submitted to a vote of the stockholders. Holders of Common Stock are not
entitled to cumulative voting rights in the election of directors. Upon
liquidation of the Company, the holders of Common Stock are entitled to
participate ratably in the assets available for distribution after
satisfaction of (i) all claims of the Company's creditors and (ii) the
liquidation preference enjoyed by the holders of any outstanding Preferred
Stock.
The holders of Common Stock are entitled to receive ratably such dividends
as the Board of Directors, in its discretion, may declare out of funds legally
available therefor. Under the DGCL, dividends may be paid out of either (i)
surplus as defined in the DGCL or (ii) net profits for the fiscal year in
which the dividend is declared and/or the preceding fiscal year, unless the
capital of the Company has diminished to an amount less than the aggregate
amount of the capital represented by the issued and outstanding shares of
Preferred Stock. See "Dividend Policy."
CERTAIN BYLAW PROVISIONS
The Company's Bylaws provide that stockholders may act by written consent,
without prior notice and without a vote, if a consent is signed by
stockholders having not less than the minimum number of votes that would be
necessary to authorize such action at a meeting of stockholders. The Bylaws
may be amended by a majority vote of the stockholders or Board of Directors.
See "Risk Factors--Concentration of Ownership" and "--Certain Anti-Takeover
Considerations." The foregoing summary of material provisions is qualified in
its entirety by reference to the Company's Bylaws, which are filed as an
exhibit to the Registration Statement of which this Prospectus is a part.
ANTI-TAKEOVER MATTERS
CERTAIN PROVISIONS OF THE DGCL
Section 203 of the DGCL generally restricts a corporation from entering into
certain business combinations with an interested stockholder (defined as any
person or entity that is the beneficial owner of at least 15% of a
corporation's voting stock) or its affiliates, unless (i) the transaction is
approved by the board of directors of the corporation prior to the date such
person became an interested stockholder, (ii) the interested stockholder
acquired 85% of the corporation's stock, excluding voting stock owned by
directors and officers and certain employee stock plans of the corporation, in
the same transaction in which the interested stockholder exceeds 15% or (iii)
the business combination is approved by the board of directors and by a vote
of two-thirds of the outstanding voting stock not owned by the interested
stockholder. The DGCL provides that a corporation may
43
<PAGE>
elect not to be governed by Section 203. At present, the Company does not
intend to make such an election and intends to avail itself of the rights
afforded by Section 203. The effect of Section 203 may be to render more
difficult a change in control of the Company.
The ability of the Company to issue Preferred Stock following this offering
could be deemed to have an anti-takeover effect. It is not possible to state
the actual effects of the issuance after this offering of any shares of a new
class or series of Preferred Stock upon the rights of holders of Common Stock.
However, such effects might include, among other things, restricting dividends
on Common Stock, diluting the voting power of the Common Stock and impairing
the liquidation rights of the Common Stock. Issuance of Preferred Stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could, among other things, adversely affect the
voting rights of the Common Stock. In addition, the issuance of Preferred
Stock could make it more difficult for a third party to acquire a majority of
the outstanding voting stock. Even if the Preferred Stock were not generally
accorded voting rights, however, approval by the holders of at least 50% of
the outstanding shares of Preferred Stock must be received before any of the
following corporate actions may be taken: (i) the creation of any class of
stock ranking equal or senior to the Preferred Stock, (ii) the amendment,
alteration or repeal of any provision of the Certificate of Incorporation
which adversely affects the rights of preferred stockholders or increases the
authorized number of shares of Preferred Stock and (iii) the authorization of
a merger, consolidation, liquidation or sale of all or substantially all of
the assets of the Company (with certain exceptions). Therefore, a merger,
tender offer, proxy contest, the assumption of control by a holder of a large
block of the Company's securities, or the removal of incumbent management
might be discouraged or rendered more difficult. Accordingly, the issuance
after this offering of a new class or series of Preferred Stock may be used as
an "anti-takeover" device without further action on the part of the
stockholders of the Company. The Company has no present plans to issue any
shares of Preferred Stock.
CLASSIFIED BOARD OF DIRECTORS
The Company's Board of Directors is divided into three classes of directors,
designated Class I, Class II and Class III. Each class will consist, as nearly
as possible, of one-third of the total number of directors. The term of the
initial Class I directors will expire on the date of the 1999 annual meeting
of stockholders (an "Annual Meeting"); the term of the initial Class II
directors will expire on the date of the 2000 Annual Meeting; and the term of
the initial Class III directors will expire on the date of the 2001 Annual
Meeting. At each Annual Meeting, beginning in 1999, successors to the class of
directors whose term expires at that Annual Meeting will be elected for a
three-year term. See "Management--Executive Officers and Directors." At least
two annual meetings of stockholders, instead of one, generally will be
required to change the majority of the Company's Board of Directors.
STOCKHOLDER PROTECTION RIGHTS AGREEMENT
Prior to the consummation of this offering, the Board of Directors of the
Company will declare a dividend of one right (a "Right") for each outstanding
share of Common Stock of the Company held of record at the close of business
on a specified date (the "Record Time"), or issued thereafter and prior to the
Separation Time (as defined). Each Right entitles its registered holder to
purchase from the Company, after the Separation Time, one share of Common
Stock for $ (the "Exercise Price"), subject to adjustment. The Rights will
be issued pursuant to a Stockholder Protection Rights Agreement (the "Rights
Agreement"), between the Company and American Stock Transfer & Trust Company,
as Rights Agent, a copy of which will be filed as an exhibit to the
Registration Statement. The following description of the Rights Agreement and
the Rights is qualified in its entirety by reference to the Rights Agreement.
The Rights will be evidenced by the Common Stock certificates until the
close of business on the earlier of (either, the "Separation Time") (i) the
tenth day (or such later date as the Board of Directors of the Company may
from time to time fix by resolution adopted prior to the Separation Time that
would otherwise have occurred) after the date on which any Person (as defined
in the Rights Agreement) (other than the Company, a majority-owned subsidiary
of the Company or an employee stock ownership or other employee benefit plan
of
44
<PAGE>
the Company or a majority-owned subsidiary of the Company) commences a tender
or exchange offer which, if consummated, would result in such Person becoming
the Beneficial Owner of 15% or more of the outstanding shares of Common Stock
(any Person having such Beneficial Ownership being referred to as an
"Acquiring Person") and (ii) the first date (the "Flip-in Date") of public
announcement by the Company or an Acquiring Person that an Acquiring Person
has become such, other than as a result of a Flip-over Transaction or Event
(as defined); provided that if the foregoing results in the Separation Time
being prior to the Record Time, the Separation Time shall be the Record Time
and provided further that if a tender or exchange offer referred to in clause
(i) is canceled, terminated or otherwise withdrawn prior to the Separation
Time, such offer shall be deemed never to have been made. The Rights Agreement
provides that, until the Separation Time, the Rights will be transferred with
and only with the Common Stock. Common Stock certificates issued after the
Record Time but prior to the Separation Time shall evidence one Right for each
share of Common Stock represented thereby and shall contain a legend
incorporating by reference the terms of the Rights Agreement (as such may be
amended from time to time). Notwithstanding the absence of the aforementioned
legend, certificates evidencing shares of Common Stock outstanding at the
Record Time shall also evidence one Right for each share of Common Stock
evidenced thereby. As long as the Rights are attached to the Common Stock, the
Company will issue one Right with each new share of Common Stock so that all
such shares will have Rights attached. Promptly following the Separation Time,
separate certificates evidencing the Rights will be mailed to holders of
record of Common Stock at the Separation Time.
The Rights will not be exercisable until the Business Day (as defined in the
Rights Agreement) following the Separation Time. The Rights will expire on the
earliest of (i) the Exchange Time (as defined), (ii) the close of business on
the tenth anniversary of the Rights Agreement and (iii) the date on which the
Rights are redeemed as described below (in any such case, the "Expiration
Time").
The Exercise Price and the number of Rights outstanding, or in certain
circumstances the securities purchasable upon exercise of the Rights, are
subject to adjustment from time to time to prevent dilution in the event of a
Common Stock dividend on, or a subdivision or a combination into a smaller
number of shares of, Common Stock, or the issuance or distribution of any
securities or assets in respect of, in lieu of, or in exchange for Common
Stock.
In the event that, prior to the Expiration Time, a Flip-in Date occurs, the
Company shall take such action as shall be necessary to ensure and provide
that each Right (other than Rights Beneficially Owned by the Acquiring Person
or any affiliate or associate thereof, which Rights shall become void) shall
constitute the right to purchase from the Company, upon the exercise thereof
in accordance with the terms of the Rights Agreement, that number of shares of
Common Stock of the Company having an aggregate Market Price (as defined in
the Rights Agreement), on the date of the public announcement of an Acquiring
Person's becoming such (the "Stock Acquisition Date") that gave rise to the
Flip-in Date, equal to twice the Exercise Price for an amount in cash equal to
the then current Exercise Price. In addition, the Board of Directors of the
Company may, at its option, at any time after a Flip-in Date and prior to the
time that an Acquiring Person becomes the Beneficial Owner of more than 50% of
the outstanding shares of Common Stock, elect to exchange all (but not less
than all) of the then outstanding Rights (other than Rights Beneficially Owned
by the Acquiring Person or any affiliate or associate thereof, which Rights
become void) for shares of Common Stock at an exchange ratio of one share of
Common Stock per Right, appropriately adjusted to reflect any stock split,
stock dividend or similar transaction occurring after the date of the
Separation Time (the "Exchange Ratio"). Immediately upon such action by the
Board of Directors (the "Exchange Time"), the right to exercise the Rights
will terminate and each Right will thereafter represent only the right to
receive a number of shares of Common Stock equal to the Exchange Ratio.
In the event that prior to the Expiration Time the Company enters into,
consummates or permits to occur a transaction or series of transactions on or
after the Stock Acquisition Date in which, directly or indirectly, (A) the
Company shall consolidate or merge with any other Person or (B) the Company
shall sell or otherwise transfer (or one or more of its subsidiaries shall
sell or otherwise transfer) assets (i) aggregating more than 50% of the assets
(measured by either book value or fair market value) or (ii) generating more
than 50% of the
45
<PAGE>
operating income or cash flow, of the Company and its subsidiaries (taken as a
whole) to any other Person (other than the Company or one or more of its
wholly-owned subsidiaries) or to two or more such Persons which are affiliated
or otherwise acting in concert or (C) any Acquiring Person shall (i) obtain,
with or without consideration, over any period of 12 consecutive calendar
months, any additional shares of any class of capital stock of the Company or
any of its subsidiaries equal in the aggregate to more than 1% of the
outstanding shares of such class, or securities exercisable or exchangeable
for or convertible into more than 1% of the outstanding shares of any class of
capital stock of the Company or any of its subsidiaries (in each case other
than as part of a pro rata distribution to all holders of such stock or
pursuant to the exercise of rights or warrants, or the conversion or exchange
of securities, issued pro rata in such a distribution), (ii) sell, purchase,
lease, exchange, mortgage, pledge, transfer or otherwise acquire or dispose
of, to, from, or with, as the case may be, the Company or any of its
subsidiaries, over any period of 12 consecutive calendar months, assets (x)
having an aggregate fair market value of more than $50,000,000 or (y) on terms
and conditions less favorable to the Company than the Company would be able to
obtain through arm's length negotiations with an unaffiliated third party,
(iii) receive any compensation for services from the Company or any of its
subsidiaries, other than compensation for full-time employment as a regular
employee at rates in accordance with the Company's (or its subsidiaries') past
practices or (iv) receive the benefit, directly or indirectly (except
proportionately as a shareholder), over any period of 12 consecutive calendar
months, of any loans, advances, guarantees, pledges, insurance, reinsurance or
other financial assistance or any tax credits or other tax advantage provided
by the Company or any of its subsidiaries involving an aggregate principal
amount in excess of $50,000,000 or an aggregate cost or transfer of benefits
from the Company or any of its subsidiaries in excess of $15,000,000 or, in
any case, on terms and conditions less favorable to the Company than the
Company would be able to obtain through arm's length negotiations with a third
party, or (D) as a result of any reclassification of securities (including any
reverse stock split), or recapitalization, of the Company, or any merger or
consolidation of the Company with any of its subsidiaries or any other
transaction or series of transactions (whether or not with or into or
otherwise involving an Acquiring Person), the proportionate share of the
outstanding shares of any class of equity or convertible securities of the
Company or any of its subsidiaries which is directly or indirectly owned by
any Acquiring Person is increased by more than 1% (a "Flip-over Transaction or
Event"). For purposes of the foregoing description, the term "Acquiring
Person" shall include any Acquiring Person and its Affiliates and Associates
(each as defined in the Rights Agreement) (other than the Company, a wholly-
owned subsidiary of the Company or an employee stock ownership or other
employee benefit plan of the Company or a wholly-owned subsidiary of the
Company), counted together as a single Person, the Company shall take such
action as shall be necessary to ensure, and shall not enter into, consummate
or permit to occur such Flip-over Transaction or Event until it shall have
entered into a supplemental agreement with the Person engaging in such Flip-
over Transaction or Event (the "Flip-over Entity"), for the benefit of the
holders of the Rights, providing, that upon consummation or occurrence of the
Flip-over Transaction or Event (i) each Right shall thereafter constitute the
right to purchase from the Flip-over Entity, upon exercise thereof in
accordance with the terms of the Rights Agreement, that number of shares of
common stock of the Flip-over Entity having an aggregate Market Price on the
date of consummation or occurrence of such Flip-over Transaction or Event
equal to twice the Exercise Price for an amount in cash equal to the then
current Exercise Price and (ii) the Flip-over Entity shall thereafter be
liable for, and shall assume, by virtue of such Flip-over Transaction or Event
and such supplemental agreement, all the obligations and duties of the Company
pursuant to the Rights Agreement.
The Board of Directors of the Company may, at its option, at any time prior
to the Flip-in Date, redeem all (but not less than all) the then outstanding
Rights at a price (calculated to the nearest one one-hundredth of a cent)
equal to the Exercise Price, as in effect at the Redemption Time, divided by
(initially $0.01 per Right) (the "Redemption Price"), as provided in the
Rights Agreement. Immediately upon the action of the Board of Directors of the
Company electing to redeem the Rights, without any further action and without
any notice, the right to exercise the Rights will terminate and each Right
will thereafter represent only the right to receive the Redemption Price in
cash for each Right so held.
The holders of Rights will, solely by reason of their ownership of Rights,
have no rights as stockholders of the Company, including, without limitation,
the right to vote or to receive dividends.
46
<PAGE>
The Rights will not prevent a takeover of the Company. The Rights, however,
may have certain anti-takeover effects. The Rights may cause substantial
dilution to a person or group that acquires 15% or more of the Common Stock
unless the Rights are first redeemed by the Board of Directors of the Company.
Nevertheless, the Rights should not interfere with a transaction that is in
the best interests of the Company and its stockholders on or prior to the
Flip-in Date, because the Rights can be redeemed before the consummation of
such transaction.
LIMITATION OF DIRECTOR AND OFFICER LIABILITY
The Company's Certificate of Incorporation and Bylaws provide that, to the
extent not prohibited by law, the Company shall indemnify any person who is or
was made, or threatened to be made, party to any threatened, pending or
completed action, suit or proceeding, by reason of the fact that such person
is or was a director or officer of the Company, or is or was serving in any
capacity at the request of the Company for any other corporation, partnership
or other enterprise, against judgments, fines, penalties, excise taxes,
amounts paid in settlement costs, charges and expenses (including attorneys'
fees). Persons who are not directors or officers of the Company may be
similarly indemnified in respect of service to the Company to the extent the
Board of Directors at any time specifies such persons are entitled to the
benefits of the indemnification provisions contained in the Certificate of
Incorporation or Bylaws of the Company. The Certificate of Incorporation does
not provide for the elimination of or any limitation on the personal liability
of a director for (i) any breach of the director's duty of loyalty to the
Company or its stockholders, (ii) acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) certain
unlawful dividends or redemptions as provided under Section 174 of the DGCL or
(iv) any transaction from which the director derived an improper personal
benefit.
TRANSFER AGENT
American Stock Transfer & Trust Company will be the transfer agent and
registrar for the Common Stock.
47
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for the securities
of the Company. Upon completion of this offering, based upon the number of
shares outstanding at , 1998, there will be 12,693,838 shares of Common
Stock of the Company outstanding (assuming no exercise of the Underwriters'
over-allotment option or options outstanding under the Company's stock option
plans). Of these shares, the 3,300,000 shares sold in this offering will be
freely tradable without restriction or further registration under the
Securities Act, except that any shares purchased by "affiliates" of the
Company, as that term is defined in Rule 144 ("Rule 144") under the Securities
Act ("Affiliates"), may generally only be sold in compliance with the
limitations of Rule 144 described below.
SALES OF RESTRICTED SHARES
The remaining 9,393,838 shares of Common Stock are deemed "restricted
securities" under Rule 144. Upon expiration of the Lock-Up Agreements, these
shares of Common Stock will be available for sale in the public market,
subject to the provisions of Rule 144 under the Securities Act.
The Lock-Up Agreement provide that, for a period of 180 days after the date
of this Prospectus, the stockholders of the Company prior to this offering
will not sell, offer, contract or grant any option to sell, pledge, transfer,
establish an open put equivalent position or otherwise dispose of any shares
of Common Stock, any options to purchase shares of Common Stock or any shares
convertible into or exchangeable for shares of Common Stock, owned directly by
such persons or with respect to which they have the power of disposition,
without the prior written consent of NationsBanc Montgomery Securities LLC.
In general, under Rule 144 as currently in effect, beginning 90 days after
the effective date of the Registration Statement of which this Prospectus is a
part, a stockholder, including an Affiliate, who has beneficially owned his or
her restricted securities (as that term is defined in Rule 144) for at least
one year from the later of the date such securities were acquired from the
Company or (if applicable) the date they were acquired from an Affiliate of
the Company is entitled to sell, within any three-month period, a number of
such shares that does not exceed the greater of 1% of the then outstanding
shares of Common Stock (126,938 shares immediately after this offering) or the
average weekly trading volume in the Common Stock during the four calendar
weeks preceding the date on which notice of such sale was filed under Rule
144, provided certain requirements concerning availability of public
information, manner of sale and notice of sale are satisfied. In addition,
under Rule 144(k), if a period of at least two years has elapsed between the
later of the date restricted securities were acquired from the Company or (if
applicable) the date they were acquired from an Affiliate of the Company, a
stockholder who is not an Affiliate of the Company at the time of sale and has
not been an Affiliate of the Company for at least three months prior to the
sale is entitled to sell the shares immediately without compliance with the
foregoing requirements under Rule 144.
Securities issued in reliance on Rule 701 (such as shares of Common Stock
acquired pursuant to the exercise of certain options granted under the
Company's stock option plan) are also restricted securities and, beginning 90
days after the effective date of the Registration Statement of which this
Prospectus is a part, may be sold by stockholders other than Affiliates of the
Company subject only to the manner of sale provisions of Rule 144 and by
Affiliates under Rule 144 without compliance with its one-year holding period
requirement.
OPTIONS
The Company intends to file registration statements on Form S-8 under the
Securities Act to register all shares of Common Stock issuable under the 1998
Omnibus Stock Incentive Plan. Shares issued upon the exercise of stock options
after the effective date of the registration statements on Form S-8 will be
eligible for resale in the public market without restriction, subject to Rule
144 limitations applicable to Affiliates and the Lock-up Agreements noted
above, if applicable.
48
<PAGE>
EFFECT OF SALES OF SHARES
Prior to this offering, there has been no public market for the Common Stock
of the Company, and no prediction can be made as to the effect, if any, that
market sales of shares of Common Stock or the availability of shares for sale
will have on the market price of the Common Stock prevailing from time to
time. Nevertheless, sales of significant numbers of shares of the Common Stock
in the public market could adversely affect the market price of the Common
Stock and could impair the Company's future ability to raise capital through
an offering of its equity securities.
49
<PAGE>
UNDERWRITING
The underwriters named below (the "Underwriters"), represented by
NationsBanc Montgomery Securities LLC and CIBC Oppenheimer Corp. (the
"Representatives"), have severally agreed, subject to the terms and conditions
set forth in the Underwriting Agreement, to purchase from the Company the
number of shares of Common Stock indicated below opposite their respective
names at the initial public offering price less the underwriting discount set
forth on the cover page of this Prospectus. The Underwriting Agreement
provides that the obligations of the Underwriters are subject to certain terms
and conditions precedent and that the Underwriters are committed to purchase
all of such shares, if any are purchased.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
NationsBanc Montgomery Securities LLC..............................
CIBC Oppenheimer Corp..............................................
---------
Total............................................................ 3,300,000
=========
</TABLE>
The Representatives have advised the Company and the Selling Stockholder
that the Underwriters initially propose to offer the Common Stock to the
public on the terms set forth on the cover page of this Prospectus. The
Underwriters may allow to selected dealers a concession of not more than $
per share, and the Underwriters may allow, and any such dealers may reallow, a
concession of not more than $ per share to certain other dealers. After the
initial public offering, the offering price and other selling terms may be
changed by the Representatives. The Common Stock is offered subject to receipt
and acceptance by the Underwriters and to certain other conditions, including
the right to reject orders in whole or in part.
The Selling Stockholder has granted an option to the Underwriters,
exercisable during the 30-day period after the date of this Prospectus, to
purchase up to a maximum of 495,000 additional shares of Common Stock to cover
over-allotments, if any, at the same price per share as the initial shares to
be purchased by the Underwriters. To the extent the Underwriters exercise this
option, each of the Underwriters will be committed, subject to certain
conditions, to purchase such additional shares in approximately the same
proportion as set forth in the above table. The Underwriters may purchase such
shares only to cover over-allotments made in connection with this offering.
The Company and its current stockholders have agreed not to directly or
indirectly offer for sale, sell, solicit an offer to sell, contract or grant
an option to sell, pledge, transfer, establish an open put equivalent position
or otherwise dispose of any rights with respect to any shares of Common Stock,
any options or warrants to purchase Common Stock, or any securities
convertible or exchangeable for equity securities, owned directly by such
holders or with respect to which they have the power of disposition for a
period of 180 days after the date of this Prospectus without the prior written
consent of NationsBanc Montgomery Securities LLC. NationsBanc Montgomery
Securities LLC may, in its sole discretion and at any time without notice,
release all or any portion of the securities subject to these lock-up
agreements. In addition, the Company has agreed not to directly or indirectly
offer for sale, sell, solicit an offer to sell, contract or grant an option to
purchase, pledge, transfer or otherwise dispose of any shares of Common Stock,
options, warrants to purchase Common Stock or any securities convertible or
exchangeable for equity securities, other than the shares of Common Stock
offered hereby or pursuant to its stock plans or upon the exercise of
outstanding options or warrants, for a period of 180 days after the date of
this Prospectus without the prior written consent of NationsBanc Montgomery
Securities LLC. See "Shares Eligible for Future Sale."
The Underwriting Agreement provides that the Company and, if the over-
allotment option is exercised, the Selling Stockholder will indemnify the
Underwriters against certain liabilities, including civil liabilities under
the Securities Act, or will contribute to payments the Underwriters may be
required to make in respect thereof.
50
<PAGE>
Until the distribution of the Common Stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the Underwriters
and certain selling group members to bid for and purchase the Common Stock. As
an exception to these rules, the Underwriters are permitted to engage in
certain transactions that stabilize the price of the Common Stock. Such
transactions consist of bids or purchase for the purpose of pegging, fixing or
maintaining the price of the Common Stock. If the Underwriters create a short
position in the Common Stock in connection with this offering, i.e., if they
sell more shares of Common Stock than are set forth on the cover page of this
Prospectus, the Underwriters may reduce that short position by purchasing
Common Stock in the open market. The Underwriters may also elect to reduce any
short position by exercising all or part of the over-allotment option
described above. The Underwriters may also impose a penalty bid on certain
selling group members. This means that if the Underwriters purchase shares of
Common Stock in the open market to reduce the Underwriters' short position or
to stabilize the price of the Common Stock, they may reclaim the amount of the
selling concession from the Underwriters and selling group members who sold
those shares as part of this offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchases. The imposition of a penalty
bid might also have an effect on the price of a security to the extent that it
were to discourage resales of the security. The Underwriters make no
representation or predications as to the direction or magnitude of any effect
that the transactions described above may have on the price of the Common
Stock. In addition, the Underwriters make no representation that the
Underwriters will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.
The Representatives have informed the Company that they do not expect to
make sales to accounts over which they exercise discretionary authority in
excess of 5% of the number of shares of Common Stock offered hereby.
Prior to this offering, there has been no public market for the Common Stock
of the Company. Consequently, the initial public offering price has been
determined through negotiations among the Company and the Representatives.
Among the factors considered in such negotiations were the history of, and
prospects for, the Company and the industry in which it competes, an
assessment of the Company's management, the present state of the Company's
development, the prospects for future earnings of the Company, the prevailing
market conditions at the time of this offering, market valuations of publicly
traded companies that the Company and the Representatives believe to be
comparable to the Company, and other factors deemed relevant.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered hereby
and certain other matters will be passed upon for the Company and the Selling
Stockholder by Cadwalader, Wickersham & Taft, New York, New York. Certain
legal matters in connection with this offering will be passed upon for the
Underwriters by Fried, Frank, Harris, Shriver & Jacobson (a partnership
including professional corporations), Los Angeles, California.
EXPERTS
The financial statements of Triarco Industries, Inc. at December 31, 1997
and 1996, and for each of the three years in the period ended December 31,
1997, appearing in this Prospectus and Registration Statement have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon appearing elsewhere herein, and are included in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.
51
<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (together with all
amendments, exhibits, schedules and supplements thereto, the "Registration
Statement") under the Securities Act with respect to the Common Stock offered
hereby. This Prospectus, which forms a part of the Registration Statement,
does not contain all the information set forth in the Registration Statement.
certain parts of which have been omitted in accordance with the rules and
regulations of the Commission. For further information with respect to the
Company and the Common Stock offered hereby, reference is made to the
Registration Statement. Statements contained in this Prospectus as to the
contents of certain documents filed as exhibits to the Registration Statement
are not necessarily complete and, in each case, are qualified by reference to
the copy of the document so filed. The Registration Statement can be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's regional offices at 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and 7 World Trade Center, 13th Floor, New York, New York 10048.
Copies of such material may be obtained from the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. Such material also can be reviewed through the Commission's
Electronic Data Gathering, Analysis, and Retrieval System, which is publicly
available through the Commission's web site (http://www.sec.gov.).
The Company intends to furnish to its stockholders annual reports containing
audited financial statements and quarterly reports containing unaudited
financial information for the first three quarters of each fiscal year. The
Company also will furnish to its stockholders such other reports as may be
required by applicable law.
52
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors........................................... F-2
Balance Sheets as of December 31, 1996 and 1997 and as of June 30, 1998
(unaudited)............................................................. F-3
Statements of Income for the years ended December 31, 1995, 1996 and 1997
and for the six months ended June 30, 1997 and 1998 (unaudited)......... F-4
Statements of Stockholders' Equity for the years ended December 31, 1995,
1996 and 1997 and for the six months ended June 30, 1998 (unaudited).... F-5
Statements of Cash Flows for the years ended December 31, 1995, 1996 and
1997 and for the six months ended June 30, 1997 and 1998 (unaudited).... F-6
Notes to Financial Statements............................................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Boards of Directors
Triarco Industries, Inc.
We have audited the accompanying balance sheets of Triarco Industries, Inc.
as of December 31, 1997 and 1996, and the related statements of income,
stockholders' equity and cash flows for each of the years in the three year
period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Triarco Industries, Inc.
at December 31, 1997 and 1996, and the results of its operations and its cash
flows for each of the years in the three year period ended December 31, 1997,
in conformity with generally accepted accounting principles.
Ernst & Young LLP
Hackensack, New Jersey
March 6, 1998, except for Note 10,
as to which the date is July 20, 1998
F-2
<PAGE>
TRIARCO INDUSTRIES, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
DECEMBER 31, EQUITY
--------------- JUNE 30, JUNE 30,
1996 1997 1998 1998
------- ------- ----------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......... $ 1,780 $ 3,847 $ 763
Accounts receivable, less allowance
of $18 in 1996 and 1997........... 4,795 5,790 5,595
Inventories........................ 3,941 7,108 12,107
Due from affiliate................. 74 13 14
Prepaid expenses and other current
assets............................ 92 312 516
------- ------- -------
Total current assets................. 10,682 17,070 18,995
Property, plant and equipment, net... 1,298 2,843 4,179
Due from affiliates--non-current..... 61 61 53
Other assets......................... 89 212 194
------- ------- -------
$12,130 $20,186 $23,421
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving note payable............. -- $ 2,000 $ 2,500
Current portion of notes payable... $ 21 -- 7,015
Accounts payable................... 1,001 1,736 3,471
Accrued expenses................... 560 926 1,720
Dividend payable................... -- -- 3,950
Due to stockholders................ 54 -- --
------- ------- -------
Total current liabilities............ 1,636 4,662 18,656
Notes payable, net of current por-
tion................................ 33 -- --
Stockholders' equity:
Preferred stock, $1.00 par value,
authorized 1,000,000 shares, none
issued and outstanding............ -- -- --
Common stock, $.01 par value,
authorized 50,000,000 shares,
issued and outstanding 9,393,838
shares............................ 94 94 94 $ 94
Paid-in capital.................... -- -- -- 5,045
Retained earnings.................. 10,367 15,430 4,671 --
------- ------- ------- ------
Total stockholders' equity........... 10,461 15,524 4,765 $5,139
------- ------- ------- ======
$12,130 $20,186 $23,421
======= ======= =======
</TABLE>
See accompanying notes.
F-3
<PAGE>
TRIARCO INDUSTRIES, INC.
STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------- ------------------
1995 1996 1997 1997 1998
------- ------- ------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales...................... $23,646 $32,012 $41,995 $ 18,706 $ 22,881
Cost of sales.................. 14,248 17,994 24,595 11,068 13,306
------- ------- ------- -------- --------
Gross profit................... 9,398 14,018 17,400 7,638 9,575
Selling, general and
administrative expenses....... 5,557 7,128 8,666 4,099 4,589
Research and development....... 148 384 407 203 262
Interest expense............... 79 76 4 2 88
Other income................... (192) (23) (137) (58) (281)
------- ------- ------- -------- --------
Income before income taxes..... 3,806 6,453 8,460 3,392 4,917
Income taxes................... 151 203 335 131 163
------- ------- ------- -------- --------
Net income..................... $ 3,655 $ 6,250 $ 8,125 $ 3,261 $ 4,754
======= ======= ======= ======== ========
Pro forma data (unaudited)
Historical income before income
taxes......................... $ 8,460 $ 4,917
Pro forma adjustments other
than income taxes............. 1 88
------- --------
Pro forma income before income
taxes......................... 8,461 5,005
Pro forma provision for income
taxes......................... 3,394 1,970
------- --------
Pro forma net income........... $ 5,067 $ 3,035
======= ========
Pro forma earnings per share... $ $
======= ========
Pro forma common shares
outstanding...................
======= ========
</TABLE>
See accompanying notes.
F-4
<PAGE>
TRIARCO INDUSTRIES, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON RETAINED
STOCK EARNINGS TOTAL
------ -------- -------
<S> <C> <C> <C>
Balance at January 1, 1995............................ $94 $ 7,449 $ 7,543
Distribution to stockholders........................ -- (3,667) (3,667)
Net income.......................................... -- 3,655 3,655
--- ------- -------
Balance at December 31, 1995.......................... 94 7,437 7,531
Distribution to stockholders........................ -- (3,320) (3,320)
Net income.......................................... -- 6,250 6,250
--- ------- -------
Balance at December 31, 1996.......................... 94 10,367 10,461
Distribution to stockholders........................ -- (3,062) (3,062)
Net income.......................................... -- 8,125 8,125
--- ------- -------
Balance at December 31, 1997.......................... 94 15,430 15,524
Distribution to stockholders (unaudited)............ -- (15,513) (15,513)
Net income (unaudited).............................. -- 4,754 4,754
--- ------- -------
Balance at June 30, 1998 (unaudited).................. $94 $ 4,671 $ 4,765
=== ======= =======
</TABLE>
See accompanying notes.
F-5
<PAGE>
TRIARCO INDUSTRIES, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------- -----------------
1995 1996 1997 1997 1998
------- ------- ------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income...................... $ 3,655 $ 6,250 $ 8,125 $ 3,261 $ 4,754
Adjustments to reconcile net in-
come to net cash (used in)
provided by operating activi-
ties:
Depreciation and amortization.. 224 269 511 153 383
Provision for doubtful ac-
counts........................ 18 -- -- -- --
Loss (gain) on disposal of
property, plant and
equipment..................... -- 32 -- -- --
Provision for obsolete invento-
ry............................ -- -- 300 150 --
Changes in operating assets and
liabilities:
Accounts receivable........... (964) 396 (995) (124) 195
Inventories................... (1,566) (200) (3,467) (1,047) (4,999)
Due from affiliate............ (8) 32 61 50 7
Prepaid expenses and other.... (140) 121 (220) (78) (128)
Other assets.................. (18) -- (123) (95) 18
Accounts payable.............. 549 (921) 735 897 1,735
Accrued expenses and income
taxes........................ (1,870) 27 366 1,061 794
------- ------- ------- ------- --------
Net cash (used in) provided by
operating activities........... (120) 6,006 5,293 4,228 2,759
INVESTING ACTIVITIES
Purchases of property, plant and
equipment, net................. (671) (344) (2,056) (1,003) (1,719)
------- ------- ------- ------- --------
Net cash used in investing ac-
tivities....................... (671) (344) (2,056) (1,003) (1,719)
FINANCING ACTIVITIES
Deferred costs in connection
with initial public offering... -- -- -- -- (76)
Borrowings on revolving notes
payable........................ 1,250 -- 2,000 -- 1,500
Payments on revolving notes pay-
able........................... -- (1,250) -- -- (1,000)
Borrowings on term notes pay-
able........................... -- 40 -- -- 7,015
Principal payments on notes pay-
able........................... (4) (24) (54) (54) --
Decrease in due to stockholder.. (228) (5) (54) -- --
Distributions to stockholders... (3,667) (3,320) (3,062) (2,227) (15,513)
Increase in dividends payable... -- -- -- -- 3,950
------- ------- ------- ------- --------
Net cash used in financing ac-
tivities....................... (2,649) (4,559) (1,170) (2,281) (4,124)
------- ------- ------- ------- --------
(Decrease) increase in cash and
cash equivalents............... (3,440) 1,103 2,067 944 (3,084)
Cash and cash equivalents at
beginning of period............ 4,117 677 1,780 1,780 3,847
------- ------- ------- ------- --------
Cash and cash equivalents at end
of period...................... $ 677 $ 1,780 $ 3,847 $ 2,724 $ 763
======= ======= ======= ======= ========
SUPPLEMENTAL CASH FLOW INFORMA-
TION
Interest paid................... $ 78 $ 76 $ 4 $ 3 $ 22
Taxes paid...................... $ 2,312 $ 60 $ 299 $ 98 $ 247
</TABLE>
See accompanying notes.
F-6
<PAGE>
TRIARCO INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The financial statements of Triarco Industries, Inc., a Delaware corporation
(the "Company"), include the combined financial statements of Triarco
Industries, Inc., a New Jersey corporation ("Old Triarco"), Leica Sordik,
Inc., a New Jersey corporation, and Body Mechanics, Inc., a Florida
corporation, (collectively the "Predecessor Companies"). These entities were
under common control and were merged into Old Triarco on July 14, 1998, and on
July 20, 1998 Old Triarco was merged into the Company (see Note 10). The
financial statements have been restated similar to a pooling of interest to
reflect this merger. All significant intercompany transactions have been
eliminated.
Certain amounts in the 1995 and 1996 financial statements have been
reclassified to conform with the 1997 presentation.
All information as of June 30, 1998 and for the six months ended June 30,
1998 and 1997 is unaudited. In addition, all amounts are in thousands, except
per share amounts.
Nature of Business and Concentration of Credit Risk
The Company is engaged in a single industry segment; the production and
distribution of a variety of products used by manufacturers of natural
products, principally nutritional supplements. Substantially all of the
Company's customers are located in the United States. The Company performs
periodic credit evaluations of its customers but generally does not require
collateral.
The Company had sales to two customers (one in 1995) representing 10% or
more of the Company's total net sales totaling approximately 40%, 74%, 73%,
74% and 60% of total net sales for 1995, 1996, 1997 and the six months ended
June 30, 1997 and 1998, respectively. Accounts receivable from these customers
were $3,340, $3,817 and $3,429 at December 31, 1996 and 1997, and June 30,
1998, respectively.
Cash Equivalents
The Company considers all highly liquid investments with original maturities
of three months or less to be cash equivalents. The carrying value of cash
equivalents approximates fair value.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation and
amortization are provided using the straight-line and certain accelerated
methods over the estimated useful lives of the related assets.
Expenditures for major renewals and betterments that extend the useful lives
of property and equipment are capitalized. Expenditures for maintenance and
repairs that do not materially add to the value of the property nor
appreciably extend the useful life of the property are charged to expense as
incurred.
Impairment of Long-Lived Assets
The Company records impairment losses on long-lived assets used in
operations when events and circumstances indicate that the assets might be
impaired and the undiscounted cash flows estimated to be generated by those
assets are less than the carrying amounts of those assets. If an impairment is
indicated, the amount of the loss to be recorded is based upon an estimate of
the difference between the carrying amount and the fair value of the asset. No
such impairment losses have been identified by the Company.
F-7
<PAGE>
TRIARCO INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Revenue Recognition
The Company recognizes revenue upon shipment of products to customers.
Research and Development
Research and development costs are expensed as incurred.
Earnings Per Share
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings Per Share, which is required to be adopted on December 31,
1997. Statement 128 replaced the calculation of primary and fully-diluted
earnings per share with basic and diluted earnings per share. Unlike primary
earnings per share, basic earnings per share excludes any dilutive effects of
options, warrants and convertible securities. Diluted earnings per share is
similar to the previously required fully-diluted earnings per share.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Income Taxes
Deferred income taxes are determined using the liability method. Under this
method, deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and
liabilities (i.e., temporary differences) and are measured using the enacted
tax rates and laws that will be in effect when the differences are expected to
reverse. No deferred tax asset or liability exists at December 31, 1996 and
1997, or June 30, 1998.
The Company has elected to be treated under Subchapter S of the Internal
Revenue Code for federal and New Jersey purposes. Accordingly, no provision is
made for federal income taxes, and a reduced rate is provided for state income
taxes since the Company's income will be included in the personal income tax
returns of the stockholders. See Note 11.
Interim Financial Statements
The accompanying unaudited interim financial statements as of June 30, 1998
and for each of the six month periods ended June 30, 1997 and 1998 include all
adjustments which, in the opinion of management, are necessary for a fair
presentation of the Company's financial position and results of operations and
cash flows for the periods presented. All such adjustments are of a normal
recurring nature. The results of the Company's operations for the six months
ended June 30, 1997 and 1998 are not necessarily indicative of the results of
operations for a full fiscal year.
2. INVENTORIES
Inventory consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------- JUNE 30,
1996 1997 1998
------ ------ --------
<S> <C> <C> <C>
Raw materials....................................... $1,380 $2,488 $ 6,208
Finished goods...................................... 2,561 4,920 6,199
------ ------ -------
3,941 7,408 12,407
Reserve for obsolete inventory...................... -- (300) (300)
------ ------ -------
$3,941 $7,108 $12,107
====== ====== =======
</TABLE>
F-8
<PAGE>
TRIARCO INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------- JUNE 30,
1996 1997 1998
------ ------- --------
<S> <C> <C> <C>
Land and buildings................................ -- $ 676 $ 1,668
Furniture and fixtures............................ $ 243 325 437
Leasehold improvements............................ 844 1,030 1,105
Machinery and equipment........................... 992 2,101 2,641
------ ------- -------
2,079 4,132 5,851
Accumulated depreciation.......................... (781) (1,289) (1,672)
------ ------- -------
$1,298 $ 2,843 $ 4,179
====== ======= =======
</TABLE>
4. ACCRUED EXPENSES
Other accrued liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------- JUNE 30,
1996 1997 1998
------ ------ --------
<S> <C> <C> <C>
Employee compensation................................ $ 89 $ 210 $ 866
Volume rebates....................................... 251 386 285
Other................................................ 220 330 569
------ ------ ------
$ 560 $ 926 $1,720
====== ====== ======
</TABLE>
5. DEBT
The revolving note payable represents borrowings from a bank under a $5.0
million revolving line of credit which expires on June 30, 1998 (see Note 11).
The revolving note payable bears interest, payable monthly, based upon a rate
option selected by the Company. The rate in effect at December 31, 1997 was
7.16% representing the LIBOR rate plus 1.25%.
Borrowings under the revolving line of credit are collateralized by
substantially all of the Company's assets. In addition, the Company is
required to maintain compliance with certain financial covenants.
Notes payable consists of the following at December 31, 1996:
<TABLE>
<S> <C>
Secured term note payable to bank. Payable in monthly installments of $1
plus interest at 8.50% through February 2001............................. $33
Secured term note payable to bank. Payable in monthly installments of $1
plus interest at 8.50% through November 1998............................. 16
Secured term note payable to bank. Payable in monthly installments of $.5
plus interest at 8.25% through November 1997............................. 5
---
54
Less current portion...................................................... 21
---
$33
===
</TABLE>
F-9
<PAGE>
TRIARCO INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The secured term notes were collateralized by vehicles and equipment with an
aggregate net carrying value of $42 at December 31, 1996.
The fair value of the Company's debt, which approximates its carrying value,
is estimated using discounted cash flow analysis based on the Company's
current incremental borrowing rates.
6. RETIREMENT PLAN
The Company maintains a defined contribution profit sharing plan. The profit
sharing plan covers hourly and salaried employees who meet prescribed age and
service requirements. The Company, at its discretion, contributes to the plan
amounts for each employee as determined by the Board of Directors. The Company
accrued for contributions to the plan amounting to approximately $250, $326,
$423, $208 and $249 for the years ended December 31, 1995, 1996, 1997, and the
six months ended June 30, 1997 and 1998, respectively.
7. RELATED PARTY TRANSACTIONS
The Company leases its manufacturing and warehouse facilities from an entity
related through common ownership and a stockholder. Total rent expense on
these leases was approximately $155, $300, $300, $150 and $150 for the years
ended December 31, 1995, 1996 and 1997, and the six months ended June 30, 1997
and 1998, respectively.
The Company is contingently liable as a guarantor of two mortgage
obligations of the entity from which it leases its manufacturing facilities.
The aggregate outstanding balance of these mortgages was $298, $281, and $273
at December 31, 1996 and 1997, and June 30, 1998, respectively.
The balance due from affiliate bears interest at 7% and is due to the
Company in monthly installments of $2.
Other assets includes a note receivable from a stockholder of $49 at
December 31, 1996 which bore interest at 10% and was repaid in 1997.
The balance due to stockholders at December 31, 1996 which bore interest at
8% was repaid in full in 1997.
8. COMMITMENTS
The Company leases manufacturing, distribution and office facilities under
several non-cancelable operating leases. The leases have terms of one to five
years and contain renewal options of similar periods. In addition, certain
leases require the Company to pay maintenance and other operating costs of the
properties.
Future minimum lease payments for noncancelable operating leases having
initial or remaining terms in excess of one year are as follows:
<TABLE>
<S> <C>
1998................................................................. $169
1999................................................................. 148
2000................................................................. 160
2001................................................................. 140
</TABLE>
Rental expense for all operating leases, inclusive of the leases described
in Note 6, was approximately $370, $475, $576, $273 and $318 for the years
ended December 31, 1995, 1996, 1997, and the six months ended June 30, 1997
and 1998, respectively.
F-10
<PAGE>
TRIARCO INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
9. NOTE RECEIVABLE
Other assets at December 31, 1997 includes a note receivable of $116 from a
landlord of the Company. The note bears interest at 8% and is due to the
Company in monthly installments of $3 through October 2001. Other current
assets at December 31, 1997 include $27 related to this note receivable.
10. SUBSEQUENT EVENTS
In January 1998, a lawsuit relating to the ownership of one of the combined
entities was settled in favor of the Company for $1.2 million, payable in 60
monthly installments of $20. The Company will recognize the revenue as cash is
collected.
As discussed in Note 1, on July 20, 1998 the Predecessor Companies were
merged into Triarco Industries, Inc. The Company was incorporated in Delaware
on June 23, 1998 for the purpose of acquiring and continuing the operations of
the Predecessor Companies, in contemplation of the Offering discussed in Note
11. The Company is authorized to issue up to 50,000,000 shares of common stock
and 1,000,000 shares of preferred stock in one or more series, with each
series to have such designations, rights and preferences as may be determined
by the Board of Directors.
Upon consummation of the merger, the shareholders of the Predecessor
Companies contributed all of the outstanding stock in the Predecessor
Companies to the Company in exchange for 9,393,838 shares of the Company's
common stock, after giving effect to a proposed 4,469-for-1 stock split. The
financial statements have been prepared as if such shares were outstanding for
all periods presented.
On June 25, 1998 two of the Predecessor Companies declared dividends to
their shareholders, which in the aggregate totaled $10,965 (the
"Distributions"), representing estimated accumulated undistributed S
corporation taxable income through March 31, 1998. On June 29, 1998, $7,015 of
the total Distribution was paid, with the remaining $3,950 paid on July 6,
1998.
On the respective Distribution payment dates, the Predecessor Companies
borrowed $10,965 from a bank pursuant to two term notes (the "Term Notes")
which mature on December 15, 1998. The Term Notes bear interest, payable
monthly at LIBOR plus 1.00% and are secured by all of the assets of the
Company. The Company intends to repay the Term Notes from the net proceeds of
the Offering.
On June 24, 1998 the maturity date of the revolving line of credit was
extended to June 30, 1999. See Note 5.
11. PLANNED INITIAL PUBLIC OFFERING AND PRO FORMA ADJUSTMENTS (UNAUDITED)
Planned Initial Public Offering
In May 1998, the Company's Board of Directors authorized the filing of a
registration statement with the Securities and Exchange Commission for an
initial public offering (the "Offering") of the Company's Common Stock.
Pro Forma Adjustments
The unaudited pro forma net income for the year ended December 31, 1997 and
the six-month period ended June 30, 1998 reflects the Offering and the
following adjustments as if they had occurred on January 1 of each period: a)
a reduction in interest expense of $1 for the year ended December 31, 1997 and
$88 for the six-month period ended June 30, 1998 assuming the application of
proceeds from the Offering to repay all of the Company's indebtedness; and b)
an increase in income taxes of $3,059 for the year ended December 31, 1997 and
$1,807 for the six-month period ended June 30, 1998 based upon pro forma pre-
tax income as if the Company had been subject to federal and additional state
income taxes.
F-11
<PAGE>
TRIARCO INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The following table sets forth the capitalization of the Company at June 30,
1998 and the pro forma capitalization of the Company as of such date after
giving effect to the Distributions to the stockholders and the recording of a
net deferred tax benefit of approximately $374 in connection with the Company
becoming subject to federal and additional state and local income taxes.
<TABLE>
<CAPTION>
ACTUAL PRO FORMA
------ ---------
<S> <C> <C>
Common stock............................................ $ 94 $ 94
Additional paid-in capital.............................. -- 5,045
Retained earnings....................................... 4,671 --
------ ------
Total Stockholders' equity.............................. $4,765 $5,139
====== ======
</TABLE>
Income Taxes
As discussed in Note 1, the Company has elected to be taxed as an S
corporation pursuant to the Internal Revenue Code and certain state and local
tax regulations. In connection with the Offering made hereby, the Company will
become subject to federal and additional state income taxes. Accordingly, in
the quarter in which the Offering is completed, the Company will record
additional deferred tax assets of $402 and additional deferred tax liabilities
of ($28) and a corresponding net tax benefit of $374 in the statement of
income in accordance with the provisions of SFAS No. 109.
The pro forma provision for income taxes represents the income tax
provisions that would have been reported had the Company been subject to
federal and additional state income taxes during the year ended December 31,
1997 and the six months ended June 30, 1998. The unaudited pro forma net
income for the year ended December 31, 1997 and the six months ended June 30,
1998, reflects a decrease of $3,059 and $1,807 respectively, for income taxes
based upon income before income taxes as if the Company had become subject to
federal and additional state income taxes on that date.
Pro forma deferred income taxes will reflect the net tax effects of
temporary differences between the carrying amounts of assets and liabilities
for pro forma financial reporting and the amounts used for income tax
purposes. Significant components of the Company's pro forma net deferred tax
assets and liabilities as of December 31, 1997 and June 30, 1998 are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998
------------ --------
<S> <C> <C>
Deferred tax assets:
Book depreciation over tax depreciation.............. $ 73 $107
Allowance for doubtful accounts...................... 7 7
Inventory capitalization and reserves................ 213 279
Other book accruals.................................. 7 9
---- ----
Subtotal--deferred tax asset........................... 300 402
Deferred tax liabilities:
Intangibles.......................................... (3) (3)
Unrealized income.................................... (20) (25)
---- ----
Subtotal--deferred tax liabilities..................... (23) (28)
---- ----
Net deferred tax asset................................. $277 $374
==== ====
</TABLE>
F-12
<PAGE>
TRIARCO INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The pro forma income tax provisions for the year ended December 31, 1997 and
the six months ended June 30, 1998 are as follows:
<TABLE>
<CAPTION>
SIX
MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
1997 1998
------------ --------
<S> <C> <C>
Current:
Federal.............................................. $2,759 $1,601
State and local...................................... 803 466
------ ------
3,562 2,067
Deferred income tax benefit............................ (168) (97)
------ ------
$3,394 $1,970
====== ======
</TABLE>
A reconciliation setting forth the differences between the pro forma
effective tax rate of the Company and the U.S. federal statutory tax rate is
as follows:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998
------------ --------
<S> <C> <C>
Federal statutory rate................................ 34.0% 34.0%
State and local taxes, net of federal tax benefit..... 6.0 6.0
---- ----
Effective tax rate.................................... 40.0% 40.0%
==== ====
</TABLE>
Pro Forma Earnings Per Share
Pro forma earnings per share is based on 9,393,838 shares of common stock
outstanding prior to the Offering, increased by the sale of shares of
common stock assuming an initial public offering price of $ per share
($ , net of underwriting discounts and commissions and estimated offering
expenses), the proceeds of which would be necessary to pay approximately
$13,465 representing the borrowings related to the Distributions and amounts
outstanding under the revolving note payable.
12. IMPACT OF YEAR 2000 (UNAUDITED)
The Company has developed a plan to achieve Year 2000 compliance with
respect to its business systems, including systems and user testing scheduled
to commence in the fourth quarter of 1998. The Company does not currently
expect Year 2000 issues related to its business systems to have any material
effect on the Company's costs or to cause any significant disruption in
operations and expects such systems to be Year 2000 compliant by early 1999.
The Company has completed the necessary modifications and upgrades to its
process control environment to be Year 2000 compliant. The Company expects to
upgrade its accounting system software to be Year 2000 compliant by the end of
1998. The Company relies on systems maintained by third parties; accordingly,
the Company also is developing a contingency plan designed to minimize the
risk of third party noncompliance. The Company believes that it will incur
additional costs ranging from $125,000 to $175,000 to achieve Year 2000
compliance. The Company has commenced informal discussions, which will be
formalized with written confirmations, with its customers and vendors to
determine whether they will be Year 2000 compliant. The Company's major
customers and vendors have indicated that they expect to be Year 2000
compliant. However, the failure by the Company's customers to adequately
address the Year 2000 issue could adversely affect such customers' ability to
procure raw materials, such as those supplied by the Company, or otherwise
adversely affect such customers' operations, which in turn could result in a
material adverse effect to the Company's business, financial condition and
results of operations.
F-13
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
No dealer, sales representative or any other person has been authorized to
give any information or to make any representations in connection with this
offering other than those contained in this Prospectus, and, if given or made,
such information or representations must not be relied upon as having been au-
thorized by the Company, the Selling Stockholder or any Underwriter. This Pro-
spectus does not constitute an offer to sell or a solicitation of any offer to
buy any securities other than the shares of Common Stock to which it relates
or an offer to, or a solicitation of, any person in any jurisdiction where
such an offer or solicitation would be unlawful. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that there has been no change in the affairs of the Company or
that the information contained herein is correct as of any time subsequent to
the date hereof.
-----------------------
TABLE OF CONTENTS
-----------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 7
Dividend Policy.......................................................... 13
Use of Proceeds.......................................................... 13
Capitalization........................................................... 14
Dilution................................................................. 15
Selected Historical and Pro Forma Financial Data......................... 16
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 18
Business................................................................. 23
Management............................................................... 37
Certain Transactions..................................................... 41
Principal Stockholders................................................... 42
Description of Capital Stock............................................. 43
Shares Eligible for Future Sale.......................................... 48
Underwriting............................................................. 50
Legal Matters............................................................ 51
Experts.................................................................. 51
Additional Information................................................... 52
Index to Financial Statements............................................ F-1
</TABLE>
----------------
Until , 1998 (25 days after the date of this Prospectus), all dealers
effecting transactions in the registered securities, whether or not partici-
pating in this distribution, may be required to deliver a Prospectus. This is
in addition to the obligations of dealers to deliver a Prospectus when acting
as Underwriters and with respect to their unsold allotments or subscriptions.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
3,300,000 SHARES
LOGO
COMMON STOCK
--------------
PROSPECTUS
--------------
NationsBanc Montgomery
Securities LLC
CIBC Oppenheimer
, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the expenses in connection with this
Registration Statement. The Company will pay all expenses of the offering. All
of such expenses are estimates, other than the filing fees payable to the
Securities and Exchange Commission, National Association of Securities
Dealers, Inc. ("NASD") and the Nasdaq National Market.
<TABLE>
<S> <C>
Securities and Exchange Commission Filing Fee....................... $15,930
NASD Filing Fee..................................................... 5,813
Nasdaq National Market Listing Fee.................................. 84,875
Printing Fees and Expenses.......................................... *
Legal Fees and Expenses............................................. *
Directors' and Officers' Insurance Premium.......................... *
Accounting Fees and Expenses........................................ *
Blue Sky Fees and Expenses.......................................... *
Miscellaneous....................................................... *
-------
Total............................................................. $ *
=======
</TABLE>
- --------
* To be completed in an amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Subsection (a) of Section 145 of the General Corporation Law of Delaware
(the "DGCL") empowers a corporation to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
complete action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the corporation)
by reason of the fact that he is or was a director, employee or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding
if he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no cause to believe his conduct was
unlawful.
Subsection (b) of Section 145 of the DGCL empowers a corporation to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of
the corporation to procure a judgment in its favor by reason of the fact that
such person acted in any of the capacities set forth above, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted
in good faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the corporation and except that no indemnification
may be made in respect to any claim, issue or matter as to which such person
shall have been adjudged to be liable to the corporation unless and only to
the extent that the Court of Chancery or the court in which such action or
suit was brought shall determine that despite the adjudication of liability
such person is fairly and reasonably entitled to indemnity for such expenses
which the court shall deem proper.
Section 145 of the DGCL further provides that to the extent a director,
officer, employee or agent of a corporation has been successful in the defense
of any action, suit or proceeding referred to in subsections (a) and (b) or in
the defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred
by him in connection therewith; that indemnification or advancement of
expenses provided for by Section 145 shall not be deemed exclusive of any
other rights to which
II-1
<PAGE>
the indemnified party may be entitled; and empowers the corporation to
purchase and maintain insurance on behalf of a director, officer, employee or
agent of the corporation against any liability asserted against him or
incurred by him in any such capacity or arising out of his status as such
whether or not the corporation would have the power to indemnify him against
such liabilities under Section 145.
The Certificate of Incorporation of the Registrant provides that a director
of the Registrant shall not be personally liable to the Registrant or its
stockholders for monetary damages for breach of fiduciary duty as a director
except to the extent such exemption from liability or limitation thereof is
not permitted under the DGCL as therein effect.
The Bylaws of the Registrant provide, in effect, that the Registrant shall
indemnify every person who was or is a party, or is or was threatened to be
made a party, to any action, suit, or proceeding, whether civil, criminal,
administrative, or investigative, by reason of the fact that he or she is or
was a director, officer, employee, or agent of the Registrant, or is or was
serving at the request of the Registrant as a director, officer, employee, or
agent of another corporation, partnership, joint venture, trust, employee
benefit plan, or other enterprise, against expenses (including attorneys'
fees), judgments, fines, and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit, or
proceedings, to the fullest extent permitted by applicable law. Such
indemnifications may, in the discretion of the board of directors, include
advances of the person's expenses in advance of final disposition of such
action, suit, or proceeding, subject to the provisions of any applicable
statute. The Registrant is empowered to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee, or agent of
the Registrant, or is or was serving at the request of the Registrant as a
director, officer, employee, or agent of another corporation, partnership,
joint venture, trust, or other enterprise, against any liability incurred by
such person in such capacity, or arising out of such person's capacity.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In the three years preceding the filing of this Registration Statement, the
Registrant has sold unregistered securities in the following transactions,
each of which was intended to be exempt from the registration requirements of
the Securities Act of 1933, as amended, by virtue of Section 4(2) thereunder,
and none of which involved any underwriters:
On June 24, 1998 the Company issued 59 shares of Common Stock to Rodger R.
Rohde at a price of $1.00 per share for cash in connection with the formation
of the Registrant.
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
1.1 --Form of Underwriting Agreement.*
3.1 --Certificate of Incorporation of the Registrant.**
3.2 --Bylaws of the Registrant.**
4.1 --Specimen Common Stock Certificate.*
4.2 --Form of Stockholder Protection Rights Agreement between the
Registrant and American Stock Transfer & Trust Company, as Rights
Agent (including specimen Rights Certificate).*
5.1 --Opinion of Cadwalader, Wickersham & Taft.*
10.1.1 --Form of Employment Agreement by and between the Registrant and
Rodger R. Rohde, Sr.
10.1.2 --Form of Employment Agreement by and between the Registrant and
Rodger R. Rohde, Jr.
10.1.3 --Form of Employment Agreement by and between the Registrant and
Angelo R. Appierto.
10.1.4 --Form of Employment Agreement by and between the Registrant and
Andres E. Menendez.
10.1.5 --Form of Employment Agreement by and between the Registrant and
Christopher J. Rohde.
10.1.6 --Form of Employment Agreement by and between the Registrant and
Cynthia J. Rohde.
10.2 --Form of 1998 Omnibus Stock Incentive Plan.
10.3 --Business Lease, dated November 1, 1996, between Thomas Associates,
as landlord, and the Registrant, as tenant.**
10.4 --Real Estate Lease, dated as of January 1, 1997, by and between
Rodger R. Rohde, Sr., as landlord, and the Registrant, as tenant,
related to the premises at 6 Morris, Paterson, New Jersey.**
10.5 --Real Estate Lease, dated as of January 1, 1997, by and between Rohde
Holdings, Inc., as landlord, and the Registrant, as tenant, related
to the premises at 8 Morris, Paterson, New Jersey.**
10.6.1 --Memorandum of Lease, dated July 17, 1997, executed by Wade Howell
and the Registrant.**
10.6.2 --Ground & Equipment Lease, dated July 17, 1997, by and between Wade
Howell and the Registrant.**
10.7 --Letter agreement, dated June 30, 1997, between Fleet Bank, National
Association and the Registrant, as amended by letter agreement, dated
June 24, 1998, and promissory note relating to revolving credit
facility.**
21.1 --Subsidiaries of the Registrant.**
23.1 --Consent of Cadwalader, Wickersham & Taft (included in Exhibit 5.1).*
23.2 --Consent of Ernst & Young LLP.
24.1 --Power of Attorney (included on signature page).**
27.1 --Financial Data Schedule.**
</TABLE>
- --------
* To be filed by amendment.
** Previously filed.
(b) Financial Statement Schedules.
All schedules are omitted because they are not applicable or the required
information is shown in the consolidated financial statements or the notes
thereto.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the underwriter
at the closing specified in the underwriting agreements certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
II-3
<PAGE>
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question of whether such indemnification
by it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Wayne, State of New
Jersey, on September 2, 1998.
Triarco Industries, Inc.
By: /s/ Rodger R. Rohde, Sr.
--------------------------------
Rodger R. Rohde, Sr.
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities indicated
on September 2, 1998
<TABLE>
<CAPTION>
Signature Title
--------- -----
<C> <S>
/s/ Rodger R. Rohde, Sr. Chairman of the Board, Chief
- --------------------------- Executive Officer and Director
Rodger R. Rohde, Sr. (Principal Executive Officer)
/s/ Rodger R. Rohde, Jr. President, Chief Operating
- --------------------------- Officer and Director
Rodger R. Rohde, Jr.
/s/ Angelo R. Appierto Vice President-Finance, Chief
- --------------------------- Financial Officer, Secretary,
Angelo R. Appierto Treasurer and Director
(Principal Financial and
Accounting Officer)
/s/ Andres E. Menendez Vice President-Special
- --------------------------- Projects and Director
Andres E. Menendez
/s/ Christopher J. Rohde Vice President-Operations
- --------------------------- and Director
Christopher J. Rohde
Vice President-Corporate
- --------------------------- Communication and Director
Cynthia J. Rohde
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
1.1 --Form of Underwriting Agreement.*
3.1 --Certificate of Incorporation of the Registrant.**
3.2 --Bylaws of the Registrant.**
4.1 --Specimen common stock certificate.*
4.2 --Form of Stockholder Protection Rights Agreement between the
Registrant and American Stock Transfer & Trust Company, as Rights
Agent (including specimen Rights Certificate).*
5.1 --Opinion of Cadwalader, Wickersham & Taft.*
10.1.1 --Form of Employment Agreement by and between the Registrant and
Rodger R. Rohde, Sr.
10.1.2 --Form of Employment Agreement by and between the Registrant and
Rodger R. Rohde, Jr.
10.1.3 --Form of Employment Agreement by and between the Registrant and
Angelo R. Appierto.
10.1.4 --Form of Employment Agreement by and between the Registrant and
Andres E. Menendez.
10.1.5 --Form of Employment Agreement by and between the Registrant and
Christopher J. Rohde.
10.1.6 --Form of Employment Agreement by and between the Registrant and
Cynthia J. Rohde.
10.2 --Form of 1998 Omnibus Stock Incentive Plan.
10.3 --Business Lease, dated November 1, 1996, between Thomas Associates,
as landlord, and the Registrant, as tenant.**
10.4 --Real Estate Lease, dated as of January 1, 1997, by and between
Rodger R. Rohde, Sr., as landlord, and the Registrant, as tenant,
related to the premises at 6 Morris, Paterson, New Jersey.**
10.5 --Real Estate Lease, dated as of January 1, 1997, by and between Rohde
Holdings, Inc., as landlord, and the Registrant, as tenant, related
to the premises at 8 Morris, Paterson, New Jersey.**
10.6.1 --Memorandum of Lease, dated July 17, 1997, executed by Wade Howell
and the Registrant.**
10.6.2 --Ground & Equipment Lease, dated July 17, 1997, by and between Wade
Howell and the Registrant.**
10.7 --Letter agreement, dated June 30, 1997, between Fleet Bank, National
Association and the Registrant, as amended by letter agreement, dated
June 24, 1998, and promissory note relating to revolving credit
facility.**
21.1 --Subsidiaries of the Registrant.**
23.1 --Consent of Cadwalader, Wickersham & Taft (included in Exhibit 5.1).*
23.2 --Consent of Ernst & Young LLP.
24.1 --Power of Attorney (included on signature page).**
27.1 --Financial Data Schedule.**
</TABLE>
- --------
* To be filed by amendment.
** Previously filed.
<PAGE>
EXHIBIT 10.1.1
EMPLOYMENT AGREEMENT
This Employment Agreement, dated as of __________, 1998 (this
"Agreement"), is by and between Triarco Industries, Inc., a Delaware corporation
having its principal executive offices at 400 Hamburg Turnpike, Wayne, New
Jersey 07470 (the "Company"), and Rodger R. Rohde, Sr. (the "Executive").
Whereas, the Company wishes to assure itself of the continued services
of the Executive, and the Executive is willing to continue in the employ of the
Company, upon the terms and conditions hereinafter set forth.
Now, Therefore, the Company and the Executive hereby agree as follows:
1. Definitions. Unless defined elsewhere in this Agreement,
capitalized terms contained herein shall have the meanings set forth or
incorporated by reference in Section 18.
2. Employment. The Company agrees to continue to employ the
Executive, and the Executive agrees to continue to be employed by the Company
and/or any subsidiary of the Company, during the term set forth in Section 3 and
on the other terms and conditions of this Agreement.
3. Term.
(a) The term of this Agreement shall commence as of the date hereof,
and, subject to Section 3(b), shall terminate at the close of business on the
third anniversary of that date.
(b) The term of this Agreement set forth in Section 3(a) shall be
extended or further extended, as the case may be, without any action by the
Company or the Executive, on the third anniversary of the date hereof and on
each subsequent anniversary of the date hereof, for an additional period of one
year, until either party gives written notice to the other party in advance of
any anniversary of the date hereof, in the manner set forth in Section 15, that
the term in effect when such notice is given is not to be extended or further
extended, as the case may be, beyond the year following the next anniversary.
If the Executive shall continue in the full-time employment of the Company after
the term of this Agreement, such continued employment shall be at will, and
otherwise subject to the terms and conditions of this Agreement.
4. Position, Duties and Responsibilities, Rights.
(a) During the term of this Agreement, the Executive shall serve as,
and be elected to and hold the office and title of Chairman of the Board and
Chief Executive Officer of the Company. As such, the Executive shall report
only to the Board of Directors of the Company, and shall have all of the powers
and duties usually incident to the office of
<PAGE>
Chairman of the Board and Chief Executive Officer, and shall have powers to
perform such other reasonable additional duties as may from time to time be
lawfully assigned to the Executive by the Board of Directors.
(b) During the term of this Agreement, the Board of Directors and the
stockholders of the Company may cause the Executive to be elected and re-elected
to the Board of Directors of the Company or its subsidiaries (and to be
appointed to any committees thereof), and the Executive agrees, if elected, to
serve on such Board(s) of Directors and committee(s) during the term of this
Agreement, without any additional compensation beyond that provided in this
Agreement.
(c) During the term of this Agreement, the Executive agrees to devote
substantially all the Executive's time, efforts and skills to the affairs of the
Company during the Company's normal business hours, except for vacations,
illness and incapacity, but nothing in this Agreement shall preclude the
Executive from devoting reasonable periods to (i) manage the Executive's
personal investments, (ii) participate in professional, educational, public
interest, charitable, civic or community activities, including activities
sponsored by trade organizations, and (iii) serve as a director or member of an
advisory committee of any corporation not in competition with the Company or any
of its subsidiaries, or as an officer, trustee or director of any charitable,
educational, philanthropic, civic, social or industry organizations, or as a
speaker or arbitrator, provided that the performance of the Executive's duties
or responsibilities in any of such capacities does not materially interfere with
the regular performance of the Executive's duties and responsibilities
hereunder.
5. Place of Performance. In connection with the Executive's
employment by the Company, the Executive shall be based at the Company's
principal executive offices, and shall not be required to be absent therefrom on
travel status or otherwise for more than a reasonable time each year as
necessary or appropriate for the performance of the Executive's duties
hereunder.
6. Compensation.
(a) During the term of this Agreement, the Company, shall pay the
Executive, and the Executive agrees to accept a base salary at the rate of not
less than $400,000.00 per year, with increases in such rate in accordance with
the Company's regular administrative practices of salary increases applicable to
senior officers from time to time during the term of this Agreement (the annual
base salary as increased from time to time during the term of this Agreement
being hereinafter referred to as the "Base Salary"). The Base Salary shall be
paid in installments no less frequently than monthly. Any increase in Base
Salary or other compensation shall not limit or reduce any other obligation of
the Company hereunder, and once established at an increased specified rate, the
Executive's Base Salary hereunder shall not thereafter be reduced.
(b) During the term of this Agreement, the Executive shall be a full
participant in any and all of the Company's short and long-term incentive plans
and equity
2
<PAGE>
compensation plans in which senior officers of the Company participate that are
in effect on the date hereof or that may hereafter be adopted, including,
without limitation, the Company's 1998 Omnibus Stock Incentive Plan (the "Stock
Incentive Plan"), with at least the same reward opportunities, if any, that are
provided to other senior officers of the Company from time to time during the
term of this Agreement, and with at least the same reward opportunities that
have heretofore been provided to the Executive under any such plans, provided
that in no event shall the Executive be granted stock options, restricted stock
awards or other stock-based long-term incentives after a Change in Control less
often than annually, nor on terms and conditions (including performance goals)
less favorable to the Executive than those which (a) are granted to officers or
employees of similar position and status in the Company, or (b) were granted to
the Executive during the term of this Agreement prior to such Change in Control
(or, if shorter, during the three years preceding the Change in Control), nor on
fewer than the following number of shares:
(i) the average annual number of shares awarded (in the case of
restricted stock awards), or underlying options granted, to the Executive
during the term of this Agreement prior to such Change in Control (or, if
shorter, during the two years preceding the Change in Control); or
(ii) if greater than the number described in clause (i) above,
the number of shares whose Fair Market Value on the date the shares are
optioned or awarded to the Executive equals the average annual Fair Market
Value (determined on the respective grant or award date) of the shares that
were optioned or awarded to the Executive during the term of this Agreement
prior to such Change in Control (or, if shorter, during the two years
preceding the Change in Control).
(c) During the term of this Agreement, the Executive shall be entitled
to (i) perquisites, including, without limitation, an office and secretarial and
clerical staff, and (ii) fringe benefits, including, without limitation, parking
and health insurance, in each case at least equal to, and on the same terms and
conditions as, those attached to the Executive's office on the date hereof, as
the same may be improved from time to time during the term of this Agreement, as
well as to reimbursement, upon proper accounting, of all reasonable expenses and
disbursements incurred by the Executive in the course of the Executive's duties.
(d) The Executive, the Executive's dependents and beneficiaries shall
be entitled to all benefits and service credit for benefits during the term of
this Agreement to which senior officers of the Company and their dependents and
beneficiaries are entitled as the result of the employment of such officers
during the term of this Agreement under the terms of employee plans and
practices of the Company and its subsidiaries, including, without limitation,
any pension plans, profit sharing plans, any non-qualified deferred compensation
plans and related "rabbi" trusts, the Company's life insurance plans, its
disability benefit plans, its vacation and holiday pay plans, its medical,
dental and welfare plans, and other present or successor plans and practices of
the Company and its subsidiaries for which senior officers, their dependents and
beneficiaries are eligible, and to all payments and other benefits
3
<PAGE>
under any such plan or practice subsequent to the term of this Agreement as a
result of participation in such plan or practice during the term of this
Agreement.
7. TERMINATION OF EMPLOYMENT.
(a) The term of this Agreement shall terminate upon the death of the
Executive.
(b) The Company may terminate the Executive's employment during the
term of this Agreement for Cause as provided in Section 7(b)(i) or in the event
of Disability as provided in Section 7(b)(ii).
(i) This Agreement shall be considered terminated for "Cause"
only:
(A) if the Executive willfully and repeatedly fails to
substantially perform the Executive's duties hereunder, other than by
reason of a Disability;
(B) if the Executive is grossly negligent or engages in
gross misconduct in the performance of the Executive's duties
hereunder;
(C) if the Executive knowingly engages in an act of
dishonesty intended to result in substantial personal enrichment at
the expense of the Company, an act of fraud or embezzlement, or any
conduct resulting in a felony conviction;
and, in the case of each of clauses (A), (B) and (C) above, the applicable
conditions set forth in Section 7(e) are satisfied.
Anything in this Section 7(b) to the contrary notwithstanding,
the Executive's employment shall in no event be considered terminated by
the Company for Cause if termination takes place (I) as the result of bad
judgment or negligence on the part of the Executive other than gross
negligence or willful or reckless misconduct, (II) for any act or omission
in respect of which a determination could properly be made that the
Executive met the applicable standard of conduct prescribed for
indemnification or reimbursement or payment of expenses of an officer or
director under the Bylaws or Certificate of Incorporation of the Company or
the laws of the State of Delaware or the directors' or officers' liability
insurance of the Company in each case as in effect at the time of such act
or omission, (III) as the result of an act or omission which occurred more
than three calendar months prior to the Executive's having been given
Notice of Termination for such act or omission unless the commission of
such act or such omission was not or could not reasonably have been, at the
time of such commission or omission, known to a member of the Board of
Directors (other than the Executive), in which case more than three
calendar months from the date the commission of such act or such omission
was or could reasonably have been so known, (IV) as the result of a
continuing course of action which commenced and was or could reasonably
have been
4
<PAGE>
known to a member of the Board of Directors (other than the Executive) more
than three calendar months prior to Notice of Termination having been given
to the Executive for such course of action, or (V) because of an act or
omission believed by the Executive in good faith to have been in, or not
opposed to, the interests of the Company.
(ii) The term "Disability" as used in this Agreement means an
accident or physical or mental illness which prevents the Executive from
substantially performing the Executive's duties hereunder for six
consecutive months. The term of this Agreement shall end as of the close
of business on the last day of such six month period but without prejudice
to any payments due to the Executive in respect of disability under this
Agreement or any plan or practice of the Company. The amount of any
payments payable under Section 6(a) during such six month period shall be
reduced by any payments to which the Executive may be entitled for the same
period because of disability under any disability or pension plan or
arrangement of the Company or any subsidiary or affiliate thereof.
(c) The Executive may terminate the Executive's employment during the
term of this Agreement for Good Reason. For purposes of this Agreement, "Good
Reason" shall mean (i) any assignment to the Executive without the Executive's
express written consent of any duties, functions, authority or responsibilities
other than those contemplated by, or any material limitation or expansion
without the Executive's express written consent of the duties, functions,
authority or responsibilities of the Executive in any respect not contemplated
by, Section 4(a), including, without limitation, a change in reporting
relationships, any such assignment, limitation or expansion being deemed a
continuing breach of this Agreement, (ii) a reduction of the Executive's rate of
compensation or any other failure by the Company to comply with Section 6, (iii)
failure by the Company to comply with Section 5, (iv) failure by the Company to
obtain the assumption of, and the agreement to perform, this Agreement by any
successor as contemplated in Section 11(a), (v) such assignment, limitation or
expansion described in the foregoing clause (i), reduction described in the
foregoing clause (ii) or failure described in the foregoing clauses (ii), (iii)
or (iv), as the case may be, is not cured within 30 days after receipt by the
Company of written notice from the Executive describing such event or (vi) a
determination by the Executive made in good faith that, as a result of a
detrimental change in circumstances after a Change in Control significantly
affecting the Executive's position, the Executive is unable properly to carry
out all of the authorities, powers, functions, duties and responsibilities
attached to the Executive's position and contemplated by Section 4(a), and the
situation is not remedied within 30 days after receipt by the Company of written
notice from the Executive of such determination.
(d) Notwithstanding anything to the contrary set forth herein, subject
to the Bylaws of the Company, the Board of Directors shall have the right by
majority vote of the entire membership of the Board of Directors to terminate
the Executive's employment for any reason other than Cause at any time, subject
to the consequences of such termination as set forth in Section 8.
5
<PAGE>
(e) In no event shall the Company be entitled to terminate the
Executive's employment during the term of this Agreement for Cause pursuant to
Section 7(b), unless and until all of the following take place, provided that
Sections 7(e)(i) through (iii) shall not apply to any termination for Cause
pursuant to Section 7(b)(i)(C):
(i) the Secretary of the Company, pursuant to a resolution duly
adopted by the affirmative vote of not less than a majority of the entire
membership of the Board of Directors at a meeting called for that purpose,
gives written notice to the Executive (the "Warning Notice") setting forth
with particularity (A) the specific provision of this Agreement that the
Executive is alleged to have failed to satisfy, (B) the acts or omissions
alleged to constitute such failure, (C) the date on which the Executive
shall be given a reasonable opportunity to appear before and be heard by
the Board of Directors concerning the allegations, which date shall be not
less than 30 nor more than 90 days after the Executive's receipt of the
Warning Notice, and (D) the loss of rights under this Agreement that shall
occur unless the Executive diligently and in good faith takes reasonable
steps to remedy such failure within 30 days after the Executive's receipt
of the Warning Notice; and
(ii) the Executive does not diligently and in good faith take all
reasonable steps to remedy such failure within 30 days after the
Executive's receipt of the Warning Notice; and
(iii) the Executive is given a reasonable opportunity to appear
before and be heard by the Board of Directors concerning the allegations,
in accordance with the Warning Notice; and
(iv) the Secretary of the Company gives the Executive a certified
copy of a resolution duly adopted by the affirmative vote of not less than
a majority of the entire membership of the Board of Directors after any
opportunity to appear before the Board of Directors required by Section
7(e)(iii), at a meeting called for that purpose, that sets forth the Board
of Director's finding that the Executive both (A) failed to satisfy the
specific provision of this Agreement set forth in the Warning Notice
previously given, or if no such Warning Notice is required pursuant to this
Section 7(c), the specific provision of the Agreement set forth in such
resolution, and (B) if Sections 7(e)(i) through (iii) apply, did not
diligently and in good faith take all reasonable steps to remedy such
failure within 30 days after the Executive's receipt of the Warning Notice,
and that in all cases specifies the particulars thereof in detail.
(f) Any termination by the Company pursuant to Section 7(b) or by the
Executive pursuant to Section 7(c) shall be communicated by a written Notice of
Termination to the other party hereto. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice which indicates the specific
termination provision in this Agreement relied upon and sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provisions so indicated.
6
<PAGE>
(g) "Date of Termination" shall mean (i) if the Executive's employment
is terminated by the Executive's death, the date of the Executive's death, (ii)
if the Executive's employment is terminated pursuant to Section 7(b)(ii), 30
days after Notice of Termination is given (provided that the Executive shall not
have returned to the performance of the Executive's duties on a full-time basis
during such 30 day period), and (iii) if the Executive's employment is
terminated for any other reason, the date on which a Notice of Termination is
given.
8. Compensation on Termination. The parties recognize and agree
that, if the Company terminates the Executive's employment during the term of
this Agreement other than pursuant to Section 7(b) or if the Executive
terminates the Executive's employment during the term of this Agreement for Good
Reason pursuant to Section 7(c), the actual damages to the Executive would be
difficult if not impossible to ascertain and agree that the Executive's sole
remedy shall be a right to receive amounts determined and paid in accordance
with the provisions of this Section 8. The Executive shall not be required to
mitigate the amount of any payment provided for in this Section 8 by seeking
other employment or otherwise, nor shall any compensation earned by the
Executive in other employment or otherwise reduce the amount of any payment
provided for in this Section 8.
(a) If the Company shall terminate the Executive's employment during
the term of this Agreement other than pursuant to Section 7(b) or if the
Executive shall terminate the Executive's employment during the term of this
Agreement for Good Reason pursuant to Section 7(c), then, as severance pay or
liquidated damages or both:
(i) the Company shall pay the Executive the Executive's full Base
Salary through the Date of Termination at the rate in effect at the time
Notice of Termination is given, together with any other amounts payable to
the Executive under Section 6 for periods prior to the Date of Termination
and all outstanding stock options shall become immediately vested and
exercisable;
(ii) the Company shall pay the Executive a lump sum payment, on
the tenth day after the Date of Termination, equal to 299% of (A) the Base
Salary at the rate in effect as of the Date of Termination, plus (B) the
average annual incentive award awarded to the Executive by the Company or
any subsidiary of the Company for any of the five most recent fiscal years
for which annual incentive award determinations were made before the Date
of Termination, except as limited by applicable law; provided, however,
that notwithstanding the foregoing, under no circumstances shall the
Company pay the Executive a payment that would result in an "Excess
Parachute Payment," as defined in Section 280G(b) of the Code; provided,
further, that in the event any payment under this clause (ii) would
constitute an Excess Parachute Payment, such payment shall be reduced to
the extent necessary so that the payment does not constitute an Excess
Parachute Payment; and
(iii) the Company shall pay any amounts payable under Section
17.
7
<PAGE>
(b) If the Executive's employment terminates under any circumstance
that does not entitle the Executive to payments under Section 8(a) (including a
termination by reason of the death or Disability of the Executive, or by reason
of the Company or the Executive electing not to extend or further extend the
term of this Agreement pursuant to Section 3(b)), the Executive shall not be
entitled to receive any compensation under Section 6 accruing after the date of
such termination, or any payment under Section 8(a) (other than Section 9).
(c) Nothing in Section 8(a) or 8(b) shall deprive the Executive of any
rights, payments, benefits or service credit for benefits after termination of
employment which were earned pursuant to any provision of this Agreement or any
plan or practice of the Company on or prior to such termination including,
without limitation, any pension or welfare benefits and any rights under the
Company's pension, deferred compensation or stock option or other benefit plans
and any legal fees and expenses payable pursuant to Section 17.
9. Indemnification. The Company shall indemnify the Executive to the
fullest extent permitted by the General Corporation Law of the State of
Delaware, as amended from time to time, for all amounts (including, without
limitation, judgments, fines, settlement payments, expenses and attorneys' fees)
incurred or paid by the Executive in connection with any action, suit,
investigation or proceeding arising out of or relating to the performance by the
Executive of services for, or the acting by the Executive as a director, officer
or employee of, the Company, or any subsidiary of the Company or any other
Person at the Company's request. Nothing in this Section 9 or elsewhere in this
Agreement is intended to prevent the Company from indemnifying the Executive to
any greater extent than is required by this Section 9.
10. Non-competition; Non-solicitation.
(a) In consideration of this Agreement, the Executive agrees that, for
the period ending one year after the termination of the Executive's employment
with the Company by the Company for Cause or by the Executive without Good
Reason (the "Non-Competition Period"), the Executive will not, directly or
indirectly (whether as a sole proprietor, partner or venturer, stockholder,
director, officer, employee, consultant or in any other capacity as principal or
agent or through any Person, subsidiary or employee acting as nominee or agent):
(i) conduct or engage in or be interested in or associated with
any Person which conducts or engages in the Triarco Business within the
United States;
(ii) take any action, directly or indirectly, to finance,
guarantee or provide any other material assistance to any Person engaged in
the Triarco Business;
(iii) solicit, contact or accept business of any client or
counterparty whom the Company served or conducted business with or whose
name became known to the Executive as a potential client or counterparty
while in the employ of the Company or during the Non-Competition Period; or
8
<PAGE>
(iv) influence or attempt to influence any Person that is a
contracting party with the Company at any time during the Non-Competition
Period to terminate any written or oral agreement with the Company.
(b) The Executive shall neither, either on the Executive's own account
or in conjunction with or on behalf of any other Person, solicit or entice away
from the Company any officer, employee or customer of the Company during the
term hereof or the Non-Competition Period nor engage, hire, employ, or induce
the employment of any such Person whether or not such officer, employee or
customer would commit a breach of contract by reason of leaving service or
transferring business.
(c) The restrictive provisions hereof shall not prohibit the Executive
from (i) having an equity interest in the securities of any entity engaged in
the Triarco Business or any business with respect to which the Executive
obtained confidential or proprietary data or information, which entity's
securities are listed on a nationally-recognized securities exchange or
quotation system or traded in the over-the-counter market, to the extent that
such interest does not exceed 5% of the outstanding equity interests of such
entity, (ii) investing as a passive investor in an entity engaging in the
Triarco Business that is not so listed or traded, so long as such interest does
not exceed 5% of the outstanding equity interests of such entity or (iii) with
the prior written consent of the Company, serving as a director or other advisor
to any other Person.
(d) The Executive agrees that the covenants contained in this Section
10 are reasonable covenants under the circumstances, and further agrees that if
in the opinion of a court of competent jurisdiction, such restraint is not
reasonable in any respect, such court shall have the right, power and authority
to excise or modify such provision or provisions of these covenants which as to
such court shall appear not reasonable and to enforce the remainder thereof as
so amended.
11. Successors; Binding Agreement.
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the extent
that the Company would be required to perform it if no such succession had taken
place; provided that no such agreement with a successor shall release the
Company without the Executive's express written consent. Failure of the Company
to obtain such agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement and shall entitle the Executive to compensation
from the Company in the same amount and on the same terms as the Executive would
be entitled to hereunder if the Executive's employment were terminated by the
Company other than pursuant to Section 7(b), except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination.
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(b) If the Executive should die while any amounts are due and payable
to the Executive hereunder, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of the Agreement to the Executive's
devisees, legatee, or other designee or, if there be no such designee, to the
Executive's estate.
(c) Except as to withholding of any tax under the laws of the United
States or any state or locality, neither this Agreement nor any right or
interest hereunder nor any amount payable at any time hereunder shall be subject
in any manner to alienation, sale, transfer, assignment, pledge, attachment, or
other legal process, or encumbrance of any kind by the Executive or the
beneficiaries of the Executive or by legal representatives without the Company's
prior written consent, nor shall there be any right of set-off or counterclaim
in respect of any debts or liabilities of the Executive, the Executive's
beneficiaries or legal representatives against any right or interest hereunder
or any amount payable at any time hereunder to the Executive, the Executive's
beneficiaries or legal representatives; provided, however, that nothing in this
Section 11 shall preclude the Executive from designating a beneficiary to
receive any benefit payable on the Executive's death, or the legal
representatives of the Executive from assigning any rights hereunder to the
Person or Persons entitled thereto under the Executive's will or, in case of
intestacy, to the Person or Persons entitled thereto under the laws of intestacy
applicable to the Executive's estate.
12. Parties. This Agreement shall be binding upon and shall inure to
the benefit of the Company and the Executive, the Executive's heirs,
beneficiaries and legal representatives.
13. Entire Agreement; Amendment.
(a) This Agreement contains the entire understanding of the parties
with respect to the subject matter hereof and supersedes any and all other
agreements between the parties with respect to the subject matter hereof.
(b) Any amendment of this Agreement shall not be binding unless in
writing and signed by both (i) an officer or director of the Company duly
authorized to do so and (ii) the Executive.
14. Enforceability. In the event that any provision of this
Agreement is determined to be invalid or unenforceable, the remaining terms and
conditions of this Agreement shall be unaffected and shall remain in full force
and effect, and any such determination of invalidity or enforceability shall not
affect the validity or enforceability of any other provision of this Agreement.
15. Notices. All notices which may be necessary or proper for either
the Company or the Executive to give to the other shall be in writing and shall
be sent by hand delivery, registered or certified mail, return receipt
requested, overnight courier or facsimile, if to the Executive, at 35 Townsend
Road, Wanaque, New Jersey 07465, facsimile: (973) 839-5034 or, if to the
Company, at its principal executive offices at 400 Hamburg Turnpike, Wayne, New
Jersey 07470, Attention: Secretary, facsimile: (973) 942-5429, and shall be
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deemed given when sent, provided that any Notice of Termination or other notice
given pursuant to Section 7 shall be deemed given only when received. Either
party may by like notice to the other party change the address at which the
Executive or it is to receive notices hereunder.
16. Governing Law. THIS AGREEMENT IS EXECUTED IN THE STATE OF NEW
JERSEY AND SHALL BE GOVERNED BY, AND BE ENFORCEABLE IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW JERSEY WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS
OF LAWS THEREOF.
17. Legal Fees and Expenses. To induce the Executive to execute this
Agreement and to provide the Executive with reasonable assurance that the
purposes of this Agreement will not be frustrated by the cost of its enforcement
should the Company fail to perform its obligations under this Agreement, the
Company shall pay and be solely responsible for any reasonable attorneys' fees
and expenses and court costs incurred by the Executive and any of the
Executive's beneficiaries, heirs or legal representatives as a result of the
Company's failure to perform this Agreement or any provision hereof to be
performed by the Company.
18. Definitions. The following terms, when capitalized in this
Agreement, shall have the meanings set forth or incorporated by reference in
this Section 18.
(a) "Base Salary" shall have the meaning set forth in Section 6(a).
(b) "Board of Directors" means the Board of Directors of the Company,
as constituted from time to time.
(c) "Cause" shall have the meaning set forth in Section 7(b)(i).
(d) "Change in Control" means a change in control of the Company of a
nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A under the Exchange Act, whether or not the
Company is subject to the Exchange Act at such time; provided, however, that
without limiting the generality of the foregoing, such a Change in Control shall
in any event be deemed to occur if and when:
(i) any person (as such term is used in Sections 13(d) and
14(d)(2) of the Exchange Act), other than the Rohde Family Members, the
Company, its subsidiaries and affiliates (as defined in Rule 12b-2 under
the Exchange Act), becomes the beneficial owner (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Company representing (A) more than 15% of the combined voting power of the
Company's then outstanding securities, and (B) more than the percentage of
the combined voting power of the Company's then outstanding securities
beneficially owned, directly or indirectly, at that time by the Rohde
Family Members;
(ii) stockholders approve a merger or consolidation as a result
of which securities representing less than 70% of the combined voting power
of the
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outstanding voting securities of the surviving or resulting corporation
will be beneficially owned, directly or indirectly, in the aggregate by the
former stockholders of the Company;
(iii) stockholders approve either (A) an agreement for the sale
or disposition of all or substantially all of the Company's assets to an
entity which is not a subsidiary of the Company, or (B) a plan of complete
liquidation; or
(iv) the Persons who were members of the Board of Directors
immediately before a tender offer by any Person other than the Company or a
subsidiary or affiliate of the Company, or before a merger, consolidation,
or contested election, or before any combination of such transactions,
cease to constitute a majority of the Board of Directors as a result of
such transaction or transactions.
(e) "Code" means the Internal Revenue Code of 1986, as amended.
(f) "Company" means Triarco Industries, Inc., a Delaware corporation,
and any successors to its business and/or assets, which executes and delivers an
agreement provided for in Section 11(a) or which otherwise becomes bound by all
the terms and conditions of this Agreement by operation of law.
(g) "Date of Termination" shall have the meaning set forth in Section
7(g).
(h) "Disability" shall have the meaning set forth in Section 7(b)(ii).
(i) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(j) "Fair Market Value" means Fair Market Value as defined in the
Stock Incentive Plan.
(k) "Good Reason" shall have the meaning set forth in Section 7(c).
(l) "Non-Competition Period" shall have the meaning set forth in
Section 10(a).
(m) "Notice of Termination" shall have the meaning set forth in
Section 7(f).
(n) "Person" means any individual, corporation, partnership, limited
liability company, limited duration company, trust or other entity of any nature
whatsoever.
(o) "Rohde Family Members" means, collectively, Rodger R. Rohde, Sr.,
Roger R. Rohde, Jr., Christopher J. Rohde, Cynthia J. Rohde and the Rohde Trust.
(p) "Triarco Business" means a business involving the supply of goods
or services substantially the same as or capable of use in substitution for any
goods or services
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supplied or proposed to be supplied by the Company at the time of the
termination of the Executive's employment.
13
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In WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first written above.
Triarco Industries, Inc.
By:
-------------------------
Name:
Title:
----------------------------
Rodger S. Rohde, Sr.
<PAGE>
EXHIBIT 10.1.2
EMPLOYMENT AGREEMENT
This Employment Agreement, dated as of __________, 1998 (this
"Agreement"), is by and between Triarco Industries, Inc., a Delaware corporation
having its principal executive offices at 400 Hamburg Turnpike, Wayne, New
Jersey 07470 (the "Company"), and Rodger R. Rohde, Jr. (the "Executive").
Whereas, the Company wishes to assure itself of the continued services
of the Executive, and the Executive is willing to continue in the employ of the
Company, upon the terms and conditions hereinafter set forth.
Now, Therefore, the Company and the Executive hereby agree as follows:
1. Definitions. Unless defined elsewhere in this Agreement,
capitalized terms contained herein shall have the meanings set forth or
incorporated by reference in Section 18.
2. Employment. The Company agrees to continue to employ the
Executive, and the Executive agrees to continue to be employed by the Company
and/or any subsidiary of the Company, during the term set forth in Section 3 and
on the other terms and conditions of this Agreement.
3. Term.
(a) The term of this Agreement shall commence as of the date hereof,
and, subject to Section 3(b), shall terminate at the close of business on the
third anniversary of that date.
(b) The term of this Agreement set forth in Section 3(a) shall be
extended or further extended, as the case may be, without any action by the
Company or the Executive, on the third anniversary of the date hereof and on
each subsequent anniversary of the date hereof, for an additional period of one
year, until either party gives written notice to the other party in advance of
any anniversary of the date hereof, in the manner set forth in Section 15, that
the term in effect when such notice is given is not to be extended or further
extended, as the case may be, beyond the year following the next anniversary.
If the Executive shall continue in the full-time employment of the Company after
the term of this Agreement, such continued employment shall be at will, and
otherwise subject to the terms and conditions of this Agreement.
4. Position, Duties and Responsibilities, Rights.
(a) During the term of this Agreement, the Executive shall serve as,
and be elected to and hold the office and title of President and Chief Operating
Officer of the Company. As such, the Executive shall report only to the Board
of Directors and Chairman of the Board of the Company, and shall have all of the
powers and duties usually incident to the
<PAGE>
office of President and Chief Operating Officer, and shall have powers to
perform such other reasonable additional duties as may from time to time be
lawfully assigned to the Executive by the Board of Directors.
(b) During the term of this Agreement, the Board of Directors and the
stockholders of the Company may cause the Executive to be elected and re-elected
to the Board of Directors of the Company or its subsidiaries (and to be
appointed to any committees thereof), and the Executive agrees, if elected, to
serve on such Board(s) of Directors and committee(s) during the term of this
Agreement, without any additional compensation beyond that provided in this
Agreement.
(c) During the term of this Agreement, the Executive agrees to devote
substantially all the Executive's time, efforts and skills to the affairs of the
Company during the Company's normal business hours, except for vacations,
illness and incapacity, but nothing in this Agreement shall preclude the
Executive from devoting reasonable periods to (i) manage the Executive's
personal investments, (ii) participate in professional, educational, public
interest, charitable, civic or community activities, including activities
sponsored by trade organizations, and (iii) serve as a director or member of an
advisory committee of any corporation not in competition with the Company or any
of its subsidiaries, or as an officer, trustee or director of any charitable,
educational, philanthropic, civic, social or industry organizations, or as a
speaker or arbitrator, provided that the performance of the Executive's duties
or responsibilities in any of such capacities does not materially interfere with
the regular performance of the Executive's duties and responsibilities
hereunder.
5. Place of Performance. In connection with the Executive's
employment by the Company, the Executive shall be based at the Company's
principal executive offices, and shall not be required to be absent therefrom on
travel status or otherwise for more than a reasonable time each year as
necessary or appropriate for the performance of the Executive's duties
hereunder.
6. Compensation.
(a) During the term of this Agreement, the Company, shall pay the
Executive, and the Executive agrees to accept a base salary at the rate of not
less than $260,000.00 per year, with increases in such rate in accordance with
the Company's regular administrative practices of salary increases applicable to
senior officers from time to time during the term of this Agreement (the annual
base salary as increased from time to time during the term of this Agreement
being hereinafter referred to as the "Base Salary"). The Base Salary shall be
paid in installments no less frequently than monthly. Any increase in Base
Salary or other compensation shall not limit or reduce any other obligation of
the Company hereunder, and once established at an increased specified rate, the
Executive's Base Salary hereunder shall not thereafter be reduced.
(b) During the term of this Agreement, the Executive shall be a full
participant in any and all of the Company's short and long-term incentive plans
and equity
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compensation plans in which senior officers of the Company participate that are
in effect on the date hereof or that may hereafter be adopted, including,
without limitation, the Company's 1998 Omnibus Stock Incentive Plan (the "Stock
Incentive Plan"), with at least the same reward opportunities, if any, that are
provided to other senior officers of the Company from time to time during the
term of this Agreement, and with at least the same reward opportunities that
have heretofore been provided to the Executive under any such plans, provided
that in no event shall the Executive be granted stock options, restricted stock
awards or other stock-based long-term incentives after a Change in Control less
often than annually, nor on terms and conditions (including performance goals)
less favorable to the Executive than those which (a) are granted to officers or
employees of similar position and status in the Company, or (b) were granted to
the Executive during the term of this Agreement prior to such Change in Control
(or, if shorter, during the three years preceding the Change in Control), nor on
fewer than the following number of shares:
(i) the average annual number of shares awarded (in the case of
restricted stock awards), or underlying options granted, to the Executive
during the term of this Agreement prior to such Change in Control (or, if
shorter, during the two years preceding the Change in Control); or
(ii) if greater than the number described in clause (i) above,
the number of shares whose Fair Market Value on the date the shares are
optioned or awarded to the Executive equals the average annual Fair Market
Value (determined on the respective grant or award date) of the shares that
were optioned or awarded to the Executive during the term of this Agreement
prior to such Change in Control (or, if shorter, during the two years
preceding the Change in Control).
(c) During the term of this Agreement, the Executive shall be entitled
to (i) perquisites, including, without limitation, an office and secretarial and
clerical staff, and (ii) fringe benefits, including, without limitation, parking
and health insurance, in each case at least equal to, and on the same terms and
conditions as, those attached to the Executive's office on the date hereof, as
the same may be improved from time to time during the term of this Agreement, as
well as to reimbursement, upon proper accounting, of all reasonable expenses and
disbursements incurred by the Executive in the course of the Executive's duties.
(d) The Executive, the Executive's dependents and beneficiaries shall
be entitled to all benefits and service credit for benefits during the term of
this Agreement to which senior officers of the Company and their dependents and
beneficiaries are entitled as the result of the employment of such officers
during the term of this Agreement under the terms of employee plans and
practices of the Company and its subsidiaries, including, without limitation,
any pension plans, profit sharing plans, any non-qualified deferred compensation
plans and related "rabbi" trusts, the Company's life insurance plans, its
disability benefit plans, its vacation and holiday pay plans, its medical,
dental and welfare plans, and other present or successor plans and practices of
the Company and its subsidiaries for which senior officers, their dependents and
beneficiaries are eligible, and to all payments and other benefits
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<PAGE>
under any such plan or practice subsequent to the term of this agreement as a
result of participation in such plan or practice during the term of this
Agreement.
7. TERMINATION OF EMPLOYMENT.
(a) The term of this Agreement shall terminate upon the death of the
Executive.
(b) The Company may terminate the Executive's employment during the
term of this Agreement for cause as provided in Section 7(b)(i) or in the event
of Disability as provided in Section 7(b)(ii).
(i) This Agreement shall be considered terminated for "Cause"
only:
(A) if the Executive willfully and repeatedly fails to
substantially perform the Executive's duties hereunder, other than by
reason of a Disability;
(B) if the Executive is grossly negligent or engages in
gross misconduct in the performance of the Executive's duties
hereunder;
(C) if the Executive knowingly engages in an act of
dishonesty intended to result in substantial personal enrichment at
the expense of the Company, an act of fraud or embezzlement, or any
conduct resulting in a felony conviction;
and, in the case of each of clauses (A), (B) and (C) above, the applicable
conditions set forth in Section 7(e) are satisfied.
Anything in this Section 7(b) to the contrary notwithstanding,
the Executive's employment shall in no event be considered terminated by
the Company for Cause if termination takes place (I) as the result of bad
judgment or negligence on the part of the Executive other than gross
negligence or willful or reckless misconduct, (II) for any act or omission
in respect of which a determination could properly be made that the
Executive met the applicable standard of conduct prescribed for
indemnification or reimbursement or payment of expenses of an officer or
director under the Bylaws or Certificate of Incorporation of the Company or
the laws of the State of Delaware or the directors' or officers' liability
insurance of the Company in each case as in effect at the time of such act
or omission, (III) as the result of an act or omission which occurred more
than three calendar months prior to the Executive's having been given
Notice of Termination for such act or omission unless the commission of
such act or such omission was not or could not reasonably have been, at the
time of such commission or omission, known to a member of the Board of
Directors (other than the Executive), in which case more than three
calendar months from the date the commission of such act or such omission
was or could reasonably have been so known, (IV) as the result of a
continuing course of action which commenced and was or could reasonably
have been
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<PAGE>
known to a member of the Board of Directors (other than the Executive) more
than three calendar months prior to Notice of Termination having been given
to the Executive for such course of action, or (V) because of an act or
omission believed by the Executive in good faith to have been in, or not
opposed to, the interests of the Company.
(ii) The term "Disability" as used in this Agreement means an
accident or physical or mental illness which prevents the Executive from
substantially performing the Executive's duties hereunder for six
consecutive months. The term of this Agreement shall end as of the close
of business on the last day of such six month period but without prejudice
to any payments due to the Executive in respect of disability under this
Agreement or any plan or practice of the Company. The amount of any
payments payable under Section 6(a) during such six month period shall be
reduced by any payments to which the Executive may be entitled for the same
period because of disability under any disability or pension plan or
arrangement of the Company or any subsidiary or affiliate thereof.
(c) The Executive may terminate the Executive's employment during the
term of this Agreement for Good Reason. For purposes of this Agreement, "Good
Reason" shall mean (i) any assignment to the Executive without the Executive's
express written consent of any duties, functions, authority or responsibilities
other than those contemplated by, or any material limitation or expansion
without the Executive's express written consent of the duties, functions,
authority or responsibilities of the Executive in any respect not contemplated
by, Section 4(a), including, without limitation, a change in reporting
relationships, any such assignment, limitation or expansion being deemed a
continuing breach of this Agreement, (ii) a reduction of the Executive's rate of
compensation or any other failure by the Company to comply with Section 6, (iii)
failure by the Company to comply with Section 5, (iv) failure by the Company to
obtain the assumption of, and the agreement to perform, this Agreement by any
successor as contemplated in Section 11(a), (v) such assignment, limitation or
expansion described in the foregoing clause (i), reduction described in the
foregoing clause (ii) or failure described in the foregoing clauses (ii), (iii)
or (iv), as the case may be, is not cured within 30 days after receipt by the
Company of written notice from the Executive describing such event or (vi) a
determination by the Executive made in good faith that, as a result of a
detrimental change in circumstances after a Change in Control significantly
affecting the Executive's position, the Executive is unable properly to carry
out all of the authorities, powers, functions, duties and responsibilities
attached to the Executive's position and contemplated by Section 4(a), and the
situation is not remedied within 30 days after receipt by the Company of written
notice from the Executive of such determination.
(d) Notwithstanding anything to the contrary set forth herein, subject
to the Bylaws of the Company, the Board of Directors shall have the right by
majority vote of the entire membership of the Board of Directors to terminate
the Executive's employment for any reason other than Cause at any time, subject
to the consequences of such termination as set forth in Section 8.
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<PAGE>
(e) In no event shall the Company be entitled to terminate the
Executive's employment during the term of this Agreement for Cause pursuant to
Section 7(b), unless and until all of the following take place, provided that
Sections 7(e)(i) through (iii) shall not apply to any termination for Cause
pursuant to Section 7(b)(i)(C):
(i) the Secretary of the Company, pursuant to a resolution duly
adopted by the affirmative vote of not less than a majority of the entire
membership of the Board of Directors at a meeting called for that purpose,
gives written notice to the Executive (the "Warning Notice") setting forth
with particularity (A) the specific provision of this Agreement that the
Executive is alleged to have failed to satisfy, (B) the acts or omissions
alleged to constitute such failure, (C) the date on which the Executive
shall be given a reasonable opportunity to appear before and be heard by
the Board of Directors concerning the allegations, which date shall be not
less than 30 nor more than 90 days after the Executive's receipt of the
Warning Notice, and (D) the loss of rights under this Agreement that shall
occur unless the Executive diligently and in good faith takes reasonable
steps to remedy such failure within 30 days after the Executive's receipt
of the Warning Notice; and
(ii) the Executive does not diligently and in good faith take all
reasonable steps to remedy such failure within 30 days after the
Executive's receipt of the Warning Notice; and
(iii) the Executive is given a reasonable opportunity to appear
before and be heard by the Board of Directors concerning the allegations,
in accordance with the Warning Notice; and
(iv) the Secretary of the Company gives the Executive a certified
copy of a resolution duly adopted by the affirmative vote of not less than
a majority of the entire membership of the Board of Directors after any
opportunity to appear before the Board of Directors required by Section
7(e)(iii), at a meeting called for that purpose, that sets forth the Board
of Director's finding that the Executive both (A) failed to satisfy the
specific provision of this Agreement set forth in the Warning Notice
previously given, or if no such Warning Notice is required pursuant to this
Section 7(c), the specific provision of the Agreement set forth in such
resolution, and (B) if Sections 7(e)(i) through (iii) apply, did not
diligently and in good faith take all reasonable steps to remedy such
failure within 30 days after the Executive's receipt of the Warning Notice,
and that in all cases specifies the particulars thereof in detail.
(f) Any termination by the Company pursuant to Section 7(b) or by the
Executive pursuant to Section 7(c) shall be communicated by a written Notice of
Termination to the other party hereto. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice which indicates the specific
termination provision in this Agreement relied upon and sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provisions so indicated.
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(g) "Date of Termination" shall mean (i) if the Executive's employment
is terminated by the Executive's death, the date of the Executive's death, (ii)
if the Executive's employment is terminated pursuant to Section 7(b)(ii), 30
days after Notice of Termination is given (provided that the Executive shall not
have returned to the performance of the Executive's duties on a full-time basis
during such 30 day period), and (iii) if the Executive's employment is
terminated for any other reason, the date on which a Notice of Termination is
given.
8. Compensation on Termination. The parties recognize and agree
that, if the Company terminates the Executive's employment during the term of
this Agreement other than pursuant to Section 7(b) or if the Executive
terminates the Executive's employment during the term of this Agreement for Good
Reason pursuant to Section 7(c), the actual damages to the Executive would be
difficult if not impossible to ascertain and agree that the Executive's sole
remedy shall be a right to receive amounts determined and paid in accordance
with the provisions of this Section 8. The Executive shall not be required to
mitigate the amount of any payment provided for in this Section 8 by seeking
other employment or otherwise, nor shall any compensation earned by the
Executive in other employment or otherwise reduce the amount of any payment
provided for in this Section 8.
(a) If the Company shall terminate the Executive's employment during
the term of this Agreement other than pursuant to Section 7(b) or if the
Executive shall terminate the Executive's employment during the term of this
Agreement for Good Reason pursuant to Section 7(c), then, as severance pay or
liquidated damages or both:
(i) the Company shall pay the Executive the Executive's full Base
Salary through the Date of Termination at the rate in effect at the time
Notice of Termination is given, together with any other amounts payable to
the Executive under Section 6 for periods prior to the Date of Termination
and all outstanding stock options shall become immediately vested and
exercisable;
(ii) the Company shall pay the Executive a lump sum payment, on
the tenth day after the Date of Termination, equal to 299% of (A) the Base
Salary at the rate in effect as of the Date of Termination, plus (B) the
average annual incentive award awarded to the Executive by the Company or
any subsidiary of the Company for any of the five most recent fiscal years
for which annual incentive award determinations were made before the Date
of Termination, except as limited by applicable law; provided, however,
that notwithstanding the foregoing, under no circumstances shall the
Company pay the Executive a payment that would result in an "Excess
Parachute Payment," as defined in Section 280G(b) of the Code; provided,
further, that in the event any payment under this clause (ii) would
constitute an Excess Parachute Payment, such payment shall be reduced to
the extent necessary so that the payment does not constitute an Excess
Parachute Payment; and
(iii) the Company shall pay any amounts payable under Section
17.
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(b) If the Executive's employment terminates under any circumstance
that does not entitle the Executive to payments under Section 8(a) (including a
termination by reason of the death or Disability of the Executive, or by reason
of the Company or the Executive electing not to extend or further extend the
term of this Agreement pursuant to Section 3(b)), the Executive shall not be
entitled to receive any compensation under Section 6 accruing after the date of
such termination, or any payment under Section 8(a) (other than Section 9).
(c) Nothing in Section 8(a) or 8(b) shall deprive the Executive of any
rights, payments, benefits or service credit for benefits after termination of
employment which were earned pursuant to any provision of this Agreement or any
plan or practice of the Company on or prior to such termination including,
without limitation, any pension or welfare benefits and any rights under the
Company's pension, deferred compensation or stock option or other benefit plans
and any legal fees and expenses payable pursuant to Section 17.
9. Indemnification. The Company shall indemnify the Executive to the
fullest extent permitted by the General Corporation Law of the State of
Delaware, as amended from time to time, for all amounts (including, without
limitation, judgments, fines, settlement payments, expenses and attorneys' fees)
incurred or paid by the Executive in connection with any action, suit,
investigation or proceeding arising out of or relating to the performance by the
Executive of services for, or the acting by the Executive as a director, officer
or employee of, the Company, or any subsidiary of the Company or any other
Person at the Company's request. Nothing in this Section 9 or elsewhere in this
Agreement is intended to prevent the Company from indemnifying the Executive to
any greater extent than is required by this Section 9.
10. Non-competition; Non-solicitation.
(a) In consideration of this Agreement, the Executive agrees that, for
the period ending one year after the termination of the Executive's employment
with the Company by the Company for Cause or by the Executive without Good
Reason (the "Non-Competition Period"), the Executive will not, directly or
indirectly (whether as a sole proprietor, partner or venturer, stockholder,
director, officer, employee, consultant or in any other capacity as principal or
agent or through any Person, subsidiary or employee acting as nominee or agent):
(i) conduct or engage in or be interested in or associated with
any Person which conducts or engages in the Triarco Business within the
United States;
(ii) take any action, directly or indirectly, to finance,
guarantee or provide any other material assistance to any Person engaged in
the Triarco Business;
(iii) solicit, contact or accept business of any client or
counterparty whom the Company served or conducted business with or whose
name became known to the Executive as a potential client or counterparty
while in the employ of the Company or during the Non-Competition Period; or
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(iv) influence or attempt to influence any Person that is a
contracting party with the Company at any time during the Non-Competition
Period to terminate any written or oral agreement with the Company.
(b) The Executive shall neither, either on the Executive's own account
or in conjunction with or on behalf of any other Person, solicit or entice away
from the Company any officer, employee or customer of the Company during the
term hereof or the Non-Competition Period nor engage, hire, employ, or induce
the employment of any such Person whether or not such officer, employee or
customer would commit a breach of contract by reason of leaving service or
transferring business.
(c) The restrictive provisions hereof shall not prohibit the Executive
from (i) having an equity interest in the securities of any entity engaged in
the Triarco Business or any business with respect to which the Executive
obtained confidential or proprietary data or information, which entity's
securities are listed on a nationally-recognized securities exchange or
quotation system or traded in the over-the-counter market, to the extent that
such interest does not exceed 5% of the outstanding equity interests of such
entity, (ii) investing as a passive investor in an entity engaging in the
Triarco Business that is not so listed or traded, so long as such interest does
not exceed 5% of the outstanding equity interests of such entity or (iii) with
the prior written consent of the Company, serving as a director or other advisor
to any other Person.
(d) The Executive agrees that the covenants contained in this Section
10 are reasonable covenants under the circumstances, and further agrees that if
in the opinion of a court of competent jurisdiction, such restraint is not
reasonable in any respect, such court shall have the right, power and authority
to excise or modify such provision or provisions of these covenants which as to
such court shall appear not reasonable and to enforce the remainder thereof as
so amended.
11. Successors; Binding Agreement.
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the extent
that the Company would be required to perform it if no such succession had taken
place; provided that no such agreement with a successor shall release the
Company without the Executive's express written consent. Failure of the Company
to obtain such agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement and shall entitle the Executive to compensation
from the Company in the same amount and on the same terms as the Executive would
be entitled to hereunder if the Executive's employment were terminated by the
Company other than pursuant to Section 7(b), except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination.
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(b) If the Executive should die while any amounts are due and payable
to the Executive hereunder, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of the Agreement to the Executive's
devisees, legatee, or other designee or, if there be no such designee, to the
Executive's estate.
(c) Except as to withholding of any tax under the laws of the United
States or any state or locality, neither this Agreement nor any right or
interest hereunder nor any amount payable at any time hereunder shall be subject
in any manner to alienation, sale, transfer, assignment, pledge, attachment, or
other legal process, or encumbrance of any kind by the Executive or the
beneficiaries of the Executive or by legal representatives without the Company's
prior written consent, nor shall there be any right of set-off or counterclaim
in respect of any debts or liabilities of the Executive, the Executive's
beneficiaries or legal representatives against any right or interest hereunder
or any amount payable at any time hereunder to the Executive, the Executive's
beneficiaries or legal representatives; provided, however, that nothing in this
Section 11 shall preclude the Executive from designating a beneficiary to
receive any benefit payable on the Executive's death, or the legal
representatives of the Executive from assigning any rights hereunder to the
Person or Persons entitled thereto under the Executive's will or, in case of
intestacy, to the Person or Persons entitled thereto under the laws of intestacy
applicable to the Executive's estate.
12. Parties. This Agreement shall be binding upon and shall inure to
the benefit of the Company and the Executive, the Executive's heirs,
beneficiaries and legal representatives.
13. Entire Agreement; Amendment.
(a) This Agreement contains the entire understanding of the parties
with respect to the subject matter hereof and supersedes any and all other
agreements between the parties with respect to the subject matter hereof.
(b) Any amendment of this Agreement shall not be binding unless in
writing and signed by both (i) an officer or director of the Company duly
authorized to do so and (ii) the Executive.
14. Enforceability. In the event that any provision of this
Agreement is determined to be invalid or unenforceable, the remaining terms and
conditions of this Agreement shall be unaffected and shall remain in full force
and effect, and any such determination of invalidity or enforceability shall not
affect the validity or enforceability of any other provision of this Agreement.
15. Notices. All notices which may be necessary or proper for either
the Company or the Executive to give to the other shall be in writing and shall
be sent by hand delivery, registered or certified mail, return receipt
requested, overnight courier or facsimile, if to the Executive, at 786 Hemlock
Ct., Franklin Lakes, New Jersey 07417 or, if to the Company, at its principal
executive offices at 400 Hamburg Turnpike, Wayne, New Jersey 07470, Attention:
Secretary, facsimile: (973) 942-5429, and shall be deemed given when
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sent, provided that any Notice of Termination or other notice given pursuant to
Section 7 shall be deemed given only when received. Either party may by like
notice to the other party change the address at which the Executive or it is to
receive notices hereunder.
16. Governing Law. THIS AGREEMENT IS EXECUTED IN THE STATE OF NEW
JERSEY AND SHALL BE GOVERNED BY, AND BE ENFORCEABLE IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW JERSEY WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS
OF LAWS THEREOF.
17. Legal Fees and Expenses. To induce the Executive to execute this
Agreement and to provide the Executive with reasonable assurance that the
purposes of this Agreement will not be frustrated by the cost of its enforcement
should the Company fail to perform its obligations under this Agreement, the
Company shall pay and be solely responsible for any reasonable attorneys' fees
and expenses and court costs incurred by the Executive and any of the
Executive's beneficiaries, heirs or legal representatives as a result of the
Company's failure to perform this Agreement or any provision hereof to be
performed by the Company.
18. Definitions. The following terms, when capitalized in this
Agreement, shall have the meanings set forth or incorporated by reference in
this Section 18.
(a) "Base Salary" shall have the meaning set forth in Section 6(a).
(b) "Board of Directors" means the Board of Directors of the Company,
as constituted from time to time.
(c) "Cause" shall have the meaning set forth in Section 7(b)(i).
(d) "Change in Control" means a change in control of the Company of a
nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A under the Exchange Act, whether or not the
Company is subject to the Exchange Act at such time; provided, however, that
without limiting the generality of the foregoing, such a Change in Control shall
in any event be deemed to occur if and when:
(i) any person (as such term is used in Sections 13(d) and
14(d)(2) of the Exchange Act), other than the Rohde Family Members, the
Company, its subsidiaries and affiliates (as defined in Rule 12b-2 under
the Exchange Act), becomes the beneficial owner (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Company representing (A) more than 15% of the combined voting power of the
Company's then outstanding securities, and (B) more than the percentage of
the combined voting power of the Company's then outstanding securities
beneficially owned, directly or indirectly, at that time by the Rohde
Family Members;
(ii) stockholders approve a merger or consolidation as a result
of which securities representing less than 70% of the combined voting power
of the outstanding voting securities of the surviving or resulting
corporation will be
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beneficially owned, directly or indirectly, in the aggregate by the former
stockholders of the Company;
(iii) stockholders approve either (A) an agreement for the sale
or disposition of all or substantially all of the Company's assets to an
entity which is not a subsidiary of the Company, or (B) a plan of complete
liquidation; or
(iv) the Persons who were members of the Board of Directors
immediately before a tender offer by any Person other than the Company or a
subsidiary or affiliate of the Company, or before a merger, consolidation,
or contested election, or before any combination of such transactions,
cease to constitute a majority of the Board of Directors as a result of
such transaction or transactions.
(e) "Code" means the Internal Revenue Code of 1986, as amended.
(f) "Company" means Triarco Industries, Inc., a Delaware corporation,
and any successors to its business and/or assets, which executes and delivers an
agreement provided for in Section 11(a) or which otherwise becomes bound by all
the terms and conditions of this Agreement by operation of law.
(g) "Date of Termination" shall have the meaning set forth in Section
7(g).
(h) "Disability" shall have the meaning set forth in Section 7(b)(ii).
(i) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(j) "Fair Market Value" means Fair Market Value as defined in the
Stock Incentive Plan.
(k) "Good Reason" shall have the meaning set forth in Section 7(c).
(l) "Non-Competition Period" shall have the meaning set forth in
Section 10(a).
(m) "Notice of Termination" shall have the meaning set forth in
Section 7(f).
(n) "Person" means any individual, corporation, partnership, limited
liability company, limited duration company, trust or other entity of any nature
whatsoever.
(o) "Rohde Family Members" means, collectively, Rodger R. Rohde, Sr.,
Roger R. Rohde, Jr., Christopher J. Rohde, Cynthia J. Rohde and the Rohde Trust.
(p) "Triarco Business" means a business involving the supply of goods
or services substantially the same as or capable of use in substitution for any
goods or services supplied or proposed to be supplied by the Company at the time
of the termination of the Executive's employment.
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In WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first written above.
Triarco Industries, Inc.
By:
-----------------------------
Name:
Title:
--------------------------------
Rodger R. Rohde, Jr.
<PAGE>
EXHIBIT 10.1.3
EMPLOYMENT AGREEMENT
This Employment Agreement, dated as of __________, 1998 (this
"Agreement"), is by and between Triarco Industries, Inc., a Delaware corporation
having its principal executive offices at 400 Hamburg Turnpike, Wayne, New
Jersey 07470 (the "Company"), and Angelo R. Appierto (the "Executive").
Whereas, the Company wishes to assure itself of the continued services
of the Executive, and the Executive is willing to continue in the employ of the
Company, upon the terms and conditions hereinafter set forth.
Now, Therefore, the Company and the Executive hereby agree as follows:
1. Definitions. Unless defined elsewhere in this Agreement,
capitalized terms contained herein shall have the meanings set forth or
incorporated by reference in Section 18.
2. Employment. The Company agrees to continue to employ the
Executive, and the Executive agrees to continue to be employed by the Company
and/or any subsidiary of the Company, during the term set forth in Section 3 and
on the other terms and conditions of this Agreement.
3. Term.
(a) The term of this Agreement shall commence as of the date hereof,
and, subject to Section 3(b), shall terminate at the close of business on the
third anniversary of that date.
(b) The term of this Agreement set forth in Section 3(a) shall be
extended or further extended, as the case may be, without any action by the
Company or the Executive, on the third anniversary of the date hereof and on
each subsequent anniversary of the date hereof, for an additional period of one
year, until either party gives written notice to the other party in advance of
any anniversary of the date hereof, in the manner set forth in Section 15, that
the term in effect when such notice is given is not to be extended or further
extended, as the case may be, beyond the year following the next anniversary.
If the Executive shall continue in the full-time employment of the Company after
the term of this Agreement, such continued employment shall be at will, and
otherwise subject to the terms and conditions of this Agreement.
4. Position, Duties and Responsibilities, Rights.
(a) During the term of this Agreement, the Executive shall serve as,
and be elected to and hold the office and title of Vice President--Finance,
Chief Financial Officer, Secretary and Treasurer of the Company. As such, the
Executive shall report only to the Board of Directors, Chairman of the Board and
President of the Company, and shall have all
<PAGE>
of the powers and duties usually incident to the office of Vice President--
Finance, Chief Financial Officer, Secretary and Treasurer, and shall have powers
to perform such other reasonable additional duties as may from time to time be
lawfully assigned to the Executive by the Board of Directors.
(b) During the term of this Agreement, the Board of Directors and the
stockholders of the Company may cause the Executive to be elected and re-elected
to the Board of Directors of the Company or its subsidiaries (and to be
appointed to any committees thereof), and the Executive agrees, if elected, to
serve on such Board(s) of Directors and committee(s) during the term of this
Agreement, without any additional compensation beyond that provided in this
Agreement.
(c) During the term of this Agreement, the Executive agrees to devote
substantially all the Executive's time, efforts and skills to the affairs of the
Company during the Company's normal business hours, except for vacations,
illness and incapacity, but nothing in this Agreement shall preclude the
Executive from devoting reasonable periods to (i) manage the Executive's
personal investments, (ii) participate in professional, educational, public
interest, charitable, civic or community activities, including activities
sponsored by trade organizations, and (iii) serve as a director or member of an
advisory committee of any corporation not in competition with the Company or any
of its subsidiaries, or as an officer, trustee or director of any charitable,
educational, philanthropic, civic, social or industry organizations, or as a
speaker or arbitrator, provided that the performance of the Executive's duties
or responsibilities in any of such capacities does not materially interfere with
the regular performance of the Executive's duties and responsibilities
hereunder.
5. Place of Performance. In connection with the Executive's
employment by the Company, the Executive shall be based at the Company's
principal executive offices, and shall not be required to be absent therefrom on
travel status or otherwise for more than a reasonable time each year as
necessary or appropriate for the performance of the Executive's duties
hereunder.
6. Compensation.
(a) During the term of this Agreement, the Company, shall pay the
Executive, and the Executive agrees to accept a base salary at the rate of not
less than $150,000.00 per year, with increases in such rate in accordance with
the Company's regular administrative practices of salary increases applicable to
senior officers from time to time during the term of this Agreement (the annual
base salary as increased from time to time during the term of this Agreement
being hereinafter referred to as the "Base Salary"). The Base Salary shall be
paid in installments no less frequently than monthly. Any increase in Base
Salary or other compensation shall not limit or reduce any other obligation of
the Company hereunder, and once established at an increased specified rate, the
Executive's Base Salary hereunder shall not thereafter be reduced.
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(b) During the term of this Agreement, the Executive shall be a full
participant in any and all of the Company's short and long-term incentive plans
and equity compensation plans in which senior officers of the Company
participate that are in effect on the date hereof or that may hereafter be
adopted, including, without limitation, the Company's 1998 Omnibus Stock
Incentive Plan (the "Stock Incentive Plan"), with at least the same reward
opportunities, if any, that are provided to other senior officers of the Company
from time to time during the term of this Agreement, and with at least the same
reward opportunities that have heretofore been provided to the Executive under
any such plans, provided that in no event shall the Executive be granted stock
options, restricted stock awards or other stock-based long-term incentives after
a Change in Control less often than annually, nor on terms and conditions
(including performance goals) less favorable to the Executive than those which
(a) are granted to officers or employees of similar position and status in the
Company, or (b) were granted to the Executive during the term of this Agreement
prior to such Change in Control (or, if shorter, during the three years
preceding the Change in Control), nor on fewer than the following number of
shares:
(i) the average annual number of shares awarded (in the case of
restricted stock awards), or underlying options granted, to the Executive
during the term of this Agreement prior to such Change in Control (or, if
shorter, during the two years preceding the Change in Control); or
(ii) if greater than the number described in clause (i) above,
the number of shares whose Fair Market Value on the date the shares are
optioned or awarded to the Executive equals the average annual Fair Market
Value (determined on the respective grant or award date) of the shares that
were optioned or awarded to the Executive during the term of this Agreement
prior to such Change in Control (or, if shorter, during the two years
preceding the Change in Control).
(c) During the term of this Agreement, the Executive shall be entitled
to (i) perquisites, including, without limitation, an office and secretarial and
clerical staff, and (ii) fringe benefits, including, without limitation, parking
and health insurance, in each case at least equal to, and on the same terms and
conditions as, those attached to the Executive's office on the date hereof, as
the same may be improved from time to time during the term of this Agreement, as
well as to reimbursement, upon proper accounting, of all reasonable expenses and
disbursements incurred by the Executive in the course of the Executive's duties.
(d) The Executive, the Executive's dependents and beneficiaries shall
be entitled to all benefits and service credit for benefits during the term of
this Agreement to which senior officers of the Company and their dependents and
beneficiaries are entitled as the result of the employment of such officers
during the term of this Agreement under the terms of employee plans and
practices of the Company and its subsidiaries, including, without limitation,
any pension plans, profit sharing plans, any non-qualified deferred compensation
plans and related "rabbi" trusts, the Company's life insurance plans, its
disability benefit plans, its vacation and holiday pay plans, its medical,
dental and welfare plans, and other present or successor plans and practices of
the Company and its subsidiaries for which senior
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officers, their dependents and beneficiaries are eligible, and to all payments
and other benefits under any such plan or practice subsequent to the term of
this Agreement as a result of participation in such plan or practice during the
term of this Agreement.
7. TERMINATION OF EMPLOYMENT.
(a) The term of this Agreement shall terminate upon the death of the
Executive.
(b) The Company may terminate the Executive's employment during the
term of this Agreement for Cause as provided in Section 7(b)(i) or in the event
of Disability as provided in Section 7(b)(ii).
(i) This Agreement shall be considered terminated for "Cause"
only:
(A) if the Executive willfully and repeatedly fails to
substantially perform the Executive's duties hereunder, other than by
reason of a Disability;
(B) if the Executive is grossly negligent or engages in
gross misconduct in the performance of the Executive's duties
hereunder;
(C) if the Executive knowingly engages in an act of
dishonesty intended to result in substantial personal enrichment at
the expense of the company, an act of fraud or embezzlement, or any
conduct resulting in a felony conviction;
and, in the case of each of clauses (A), (B) and (C) above, the applicable
conditions set forth in Section 7(e) are satisfied.
Anything in this Section 7(b) to the contrary notwithstanding,
the Executive's employment shall in no event be considered terminated by
the Company for Cause if termination takes place (I) as the result of bad
judgment or negligence on the part of the Executive other than gross
negligence or willful or reckless misconduct, (II) for any act or omission
in respect of which a determination could properly be made that the
Executive met the applicable standard of conduct prescribed for
indemnification or reimbursement or payment of expenses of an officer or
director under the Bylaws or Certificate of Incorporation of the Company or
the laws of the State of Delaware or the directors' or officers' liability
insurance of the Company in each case as in effect at the time of such act
or omission, (III) as the result of an act or omission which occurred more
than three calendar months prior to the Executive's having been given
Notice of Termination for such act or omission unless the commission of
such act or such omission was not or could not reasonably have been, at the
time of such commission or omission, known to a member of the Board of
Directors (other than the Executive), in which case more than three
calendar months from the date the commission of such act or such omission
was or could reasonably have been so known, (IV) as the result of a
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continuing course of action which commenced and was or could reasonably
have been known to a member of the Board of Directors (other than the
Executive) more than three calendar months prior to Notice of Termination
having been given to the Executive for such course of action, or (V)
because of an act or omission believed by the Executive in good faith to
have been in, or not opposed to, the interests of the Company.
(ii) The term "Disability" as used in this Agreement means an
accident or physical or mental illness which prevents the Executive from
substantially performing the Executive's duties hereunder for six
consecutive months. The term of this Agreement shall end as of the close
of business on the last day of such six month period but without prejudice
to any payments due to the Executive in respect of disability under this
Agreement or any plan or practice of the Company. The amount of any
payments payable under Section 6(a) during such six month period shall be
reduced by any payments to which the Executive may be entitled for the same
period because of disability under any disability or pension plan or
arrangement of the Company or any subsidiary or affiliate thereof.
(c) The Executive may terminate the Executive's employment during the
term of this Agreement for Good Reason. For purposes of this Agreement, "Good
Reason" shall mean (i) any assignment to the Executive without the Executive's
express written consent of any duties, functions, authority or responsibilities
other than those contemplated by, or any material limitation or expansion
without the Executive's express written consent of the duties, functions,
authority or responsibilities of the Executive in any respect not contemplated
by, Section 4(a), including, without limitation, a change in reporting
relationships, any such assignment, limitation or expansion being deemed a
continuing breach of this Agreement, (ii) a reduction of the Executive's rate of
compensation or any other failure by the Company to comply with Section 6, (iii)
failure by the Company to comply with Section 5, (iv) failure by the Company to
obtain the assumption of, and the agreement to perform, this Agreement by any
successor as contemplated in Section 11(a), (v) such assignment, limitation or
expansion described in the foregoing clause (i), reduction described in the
foregoing clause (ii) or failure described in the foregoing clauses (ii), (iii)
or (iv), as the case may be, is not cured within 30 days after receipt by the
Company of written notice from the Executive describing such event or (vi) a
determination by the Executive made in good faith that, as a result of a
detrimental change in circumstances after a Change in Control significantly
affecting the Executive's position, the Executive is unable properly to carry
out all of the authorities, powers, functions, duties and responsibilities
attached to the Executive's position and contemplated by Section 4(a), and the
situation is not remedied within 30 days after receipt by the Company of written
notice from the Executive of such determination.
(d) Notwithstanding anything to the contrary set forth herein, subject
to the Bylaws of the Company, the Board of Directors shall have the right by
majority vote of the entire membership of the Board of Directors to terminate
the Executive's employment for any reason other than Cause at any time, subject
to the consequences of such termination as set forth in Section 8.
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(e) In no event shall the Company be entitled to terminate the
Executive's employment during the term of this Agreement for Cause pursuant to
Section 7(b), unless and until all of the following take place, provided that
Sections 7(e)(i) through (iii) shall not apply to any termination for Cause
pursuant to Section 7(b)(i)(C):
(i) the Secretary of the Company, pursuant to a resolution duly
adopted by the affirmative vote of not less than a majority of the entire
membership of the Board of Directors at a meeting called for that purpose,
gives written notice to the Executive (the "Warning Notice") setting forth
with particularity (A) the specific provision of this Agreement that the
Executive is alleged to have failed to satisfy, (B) the acts or omissions
alleged to constitute such failure, (C) the date on which the Executive
shall be given a reasonable opportunity to appear before and be heard by
the Board of Directors concerning the allegations, which date shall be not
less than 30 nor more than 90 days after the Executive's receipt of the
Warning Notice, and (D) the loss of rights under this Agreement that shall
occur unless the Executive diligently and in good faith takes reasonable
steps to remedy such failure within 30 days after the Executive's receipt
of the Warning Notice; and
(ii) the Executive does not diligently and in good faith take all
reasonable steps to remedy such failure within 30 days after the
Executive's receipt of the Warning Notice; and
(iii) the Executive is given a reasonable opportunity to appear
before and be heard by the Board of Directors concerning the allegations,
in accordance with the Warning Notice; and
(iv) the Secretary of the Company gives the Executive a certified
copy of a resolution duly adopted by the affirmative vote of not less than
a majority of the entire membership of the Board of Directors after any
opportunity to appear before the Board of Directors required by Section
7(e)(iii), at a meeting called for that purpose, that sets forth the Board
of Director's finding that the Executive both (A) failed to satisfy the
specific provision of this Agreement set forth in the Warning Notice
previously given, or if no such Warning Notice is required pursuant to this
Section 7(c), the specific provision of the Agreement set forth in such
resolution, and (B) if Sections 7(e)(i) through (iii) apply, did not
diligently and in good faith take all reasonable steps to remedy such
failure within 30 days after the Executive's receipt of the Warning Notice,
and that in all cases specifies the particulars thereof in detail.
(f) Any termination by the Company pursuant to Section 7(b) or by the
Executive pursuant to Section 7(c) shall be communicated by a written Notice of
Termination to the other party hereto. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice which indicates the specific
termination provision in this Agreement relied upon and sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provisions so indicated.
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(g) "Date of Termination" shall mean (i) if the Executive's employment
is terminated by the Executive's death, the date of the Executive's death, (ii)
if the Executive's employment is terminated pursuant to Section 7(b)(ii), 30
days after Notice of Termination is given (provided that the Executive shall not
have returned to the performance of the Executive's duties on a full-time basis
during such 30 day period), and (iii) if the Executive's employment is
terminated for any other reason, the date on which a Notice of Termination is
given.
8. Compensation on Termination. The parties recognize and agree
that, if the Company terminates the Executive's employment during the term of
this Agreement other than pursuant to Section 7(b) or if the Executive
terminates the Executive's employment during the term of this Agreement for Good
Reason pursuant to Section 7(c), the actual damages to the Executive would be
difficult if not impossible to ascertain and agree that the Executive's sole
remedy shall be a right to receive amounts determined and paid in accordance
with the provisions of this Section 8. The Executive shall not be required to
mitigate the amount of any payment provided for in this Section 8 by seeking
other employment or otherwise, nor shall any compensation earned by the
Executive in other employment or otherwise reduce the amount of any payment
provided for in this Section 8.
(a) If the Company shall terminate the Executive's employment during
the term of this Agreement other than pursuant to Section 7(b) or if the
Executive shall terminate the Executive's employment during the term of this
Agreement for Good Reason pursuant to Section 7(c), then, as severance pay or
liquidated damages or both:
(i) the Company shall pay the Executive the Executive's full Base
Salary through the Date of Termination at the rate in effect at the time
Notice of Termination is given, together with any other amounts payable to
the Executive under Section 6 for periods prior to the Date of Termination
and all outstanding stock options shall become immediately vested and
exercisable;
(ii) the Company shall pay the Executive a lump sum payment, on
the tenth day after the Date of Termination, equal to 299% of (A) the Base
Salary at the rate in effect as of the Date of Termination, plus (B) the
average annual incentive award awarded to the Executive by the Company or
any subsidiary of the Company for any of the five most recent fiscal years
for which annual incentive award determinations were made before the Date
of Termination, except as limited by applicable law; provided, however,
that notwithstanding the foregoing, under no circumstances shall the
Company pay the Executive a payment that would result in an "Excess
Parachute Payment," as defined in Section 280G(b) of the Code; provided,
further, that in the event any payment under this clause (ii) would
constitute an Excess Parachute Payment, such payment shall be reduced to
the extent necessary so that the payment does not constitute an Excess
Parachute Payment; and
(iii) the Company shall pay any amounts payable under Section
17.
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(b) If the Executive's employment terminates under any circumstance
that does not entitle the Executive to payments under Section 8(a) (including a
termination by reason of the death or Disability of the Executive, or by reason
of the Company or the Executive electing not to extend or further extend the
term of this Agreement pursuant to Section 3(b)), the Executive shall not be
entitled to receive any compensation under Section 6 accruing after the date of
such termination, or any payment under Section 8(a) (other than Section 9).
(c) Nothing in Section 8(a) or 8(b) shall deprive the Executive of any
rights, payments, benefits or service credit for benefits after termination of
employment which were earned pursuant to any provision of this Agreement or any
plan or practice of the Company on or prior to such termination including,
without limitation, any pension or welfare benefits and any rights under the
Company's pension, deferred compensation or stock option or other benefit plans
and any legal fees and expenses payable pursuant to Section 17.
9. Indemnification. The Company shall indemnify the Executive to the
fullest extent permitted by the General Corporation Law of the State of
Delaware, as amended from time to time, for all amounts (including, without
limitation, judgments, fines, settlement payments, expenses and attorneys' fees)
incurred or paid by the Executive in connection with any action, suit,
investigation or proceeding arising out of or relating to the performance by the
Executive of services for, or the acting by the Executive as a director, officer
or employee of, the Company, or any subsidiary of the Company or any other
Person at the Company's request. Nothing in this Section 9 or elsewhere in this
Agreement is intended to prevent the Company from indemnifying the Executive to
any greater extent than is required by this Section 9.
10. Non-competition; Non-solicitation.
(a) In consideration of this Agreement, the Executive agrees that, for
the period ending one year after the termination of the Executive's employment
with the Company by the Company for Cause or by the Executive without Good
Reason (the "Non-Competition Period"), the Executive will not, directly or
indirectly (whether as a sole proprietor, partner or venturer, stockholder,
director, officer, employee, consultant or in any other capacity as principal or
agent or through any Person, subsidiary or employee acting as nominee or agent):
(i) conduct or engage in or be interested in or associated with
any Person which conducts or engages in the Triarco Business within the
United States;
(ii) take any action, directly or indirectly, to finance,
guarantee or provide any other material assistance to any Person engaged in
the Triarco Business;
(iii) solicit, contact or accept business of any client or
counterparty whom the Company served or conducted business with or whose
name became known to the Executive as a potential client or counterparty
while in the employ of the Company or during the Non-Competition Period; or
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(iv) influence or attempt to influence any Person that is a
contracting party with the Company at any time during the Non-Competition
Period to terminate any written or oral agreement with the Company.
(b) The Executive shall neither, either on the Executive's own account
or in conjunction with or on behalf of any other Person, solicit or entice away
from the Company any officer, employee or customer of the Company during the
term hereof or the Non-Competition Period nor engage, hire, employ, or induce
the employment of any such Person whether or not such officer, employee or
customer would commit a breach of contract by reason of leaving service or
transferring business.
(c) The restrictive provisions hereof shall not prohibit the Executive
from (i) having an equity interest in the securities of any entity engaged in
the Triarco Business or any business with respect to which the Executive
obtained confidential or proprietary data or information, which entity's
securities are listed on a nationally-recognized securities exchange or
quotation system or traded in the over-the-counter market, to the extent that
such interest does not exceed 5% of the outstanding equity interests of such
entity, (ii) investing as a passive investor in an entity engaging in the
Triarco Business that is not so listed or traded, so long as such interest does
not exceed 5% of the outstanding equity interests of such entity or (iii) with
the prior written consent of the Company, serving as a director or other advisor
to any other Person.
(d) The Executive agrees that the covenants contained in this Section
10 are reasonable covenants under the circumstances, and further agrees that if
in the opinion of a court of competent jurisdiction, such restraint is not
reasonable in any respect, such court shall have the right, power and authority
to excise or modify such provision or provisions of these covenants which as to
such court shall appear not reasonable and to enforce the remainder thereof as
so amended.
11. Successors; Binding Agreement.
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the extent
that the Company would be required to perform it if no such succession had taken
place; provided that no such agreement with a successor shall release the
Company without the Executive's express written consent. Failure of the Company
to obtain such agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement and shall entitle the Executive to compensation
from the Company in the same amount and on the same terms as the Executive would
be entitled to hereunder if the Executive's employment were terminated by the
Company other than pursuant to Section 7(b), except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination.
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(b) If the Executive should die while any amounts are due and payable
to the Executive hereunder, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of the Agreement to the Executive's
devisees, legatee, or other designee or, if there be no such designee, to the
Executive's estate.
(c) Except as to withholding of any tax under the laws of the United
States or any state or locality, neither this Agreement nor any right or
interest hereunder nor any amount payable at any time hereunder shall be subject
in any manner to alienation, sale, transfer, assignment, pledge, attachment, or
other legal process, or encumbrance of any kind by the Executive or the
beneficiaries of the Executive or by legal representatives without the Company's
prior written consent, nor shall there be any right of set-off or counterclaim
in respect of any debts or liabilities of the Executive, the Executive's
beneficiaries or legal representatives against any right or interest hereunder
or any amount payable at any time hereunder to the Executive, the Executive's
beneficiaries or legal representatives; provided, however, that nothing in this
Section 11 shall preclude the Executive from designating a beneficiary to
receive any benefit payable on the Executive's death, or the legal
representatives of the Executive from assigning any rights hereunder to the
Person or Persons entitled thereto under the Executive's will or, in case of
intestacy, to the Person or Persons entitled thereto under the laws of intestacy
applicable to the Executive's estate.
12. Parties. This Agreement shall be binding upon and shall inure to
the benefit of the Company and the Executive, the Executive's heirs,
beneficiaries and legal representatives.
13. Entire Agreement; Amendment.
(a) This Agreement contains the entire understanding of the parties
with respect to the subject matter hereof and supersedes any and all other
agreements between the parties with respect to the subject matter hereof.
(b) Any amendment of this Agreement shall not be binding unless in
writing and signed by both (i) an officer or director of the Company duly
authorized to do so and (ii) the Executive.
14. Enforceability. In the event that any provision of this
Agreement is determined to be invalid or unenforceable, the remaining terms and
conditions of this Agreement shall be unaffected and shall remain in full force
and effect, and any such determination of invalidity or enforceability shall not
affect the validity or enforceability of any other provision of this Agreement.
15. Notices. All notices which may be necessary or proper for either
the Company or the Executive to give to the other shall be in writing and shall
be sent by hand delivery, registered or certified mail, return receipt
requested, overnight courier or facsimile, if to the Executive, at 786 Hemlock
Ct., Franklin Lakes, New Jersey 07417 or, if to the Company, at its principal
executive offices at 400 Hamburg Turnpike, Wayne, New Jersey 07470, Attention:
Secretary, facsimile: (973) 942-5429, and shall be deemed given when
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sent, provided that any Notice of Termination or other notice given pursuant to
Section 7 shall be deemed given only when received. Either party may by like
notice to the other party change the address at which the Executive or it is to
receive notices hereunder.
16. Governing Law. THIS AGREEMENT IS EXECUTED IN THE STATE OF NEW
JERSEY AND SHALL BE GOVERNED BY, AND BE ENFORCEABLE IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW JERSEY WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS
OF LAWS THEREOF.
17. Legal Fees and Expenses. To induce the Executive to execute this
Agreement and to provide the Executive with reasonable assurance that the
purposes of this Agreement will not be frustrated by the cost of its enforcement
should the Company fail to perform its obligations under this Agreement, the
Company shall pay and be solely responsible for any reasonable attorneys' fees
and expenses and court costs incurred by the Executive and any of the
Executive's beneficiaries, heirs or legal representatives as a result of the
Company's failure to perform this Agreement or any provision hereof to be
performed by the Company.
18. Definitions. The following terms, when capitalized in this
Agreement, shall have the meanings set forth or incorporated by reference in
this Section 18.
(a) "Base Salary" shall have the meaning set forth in Section 6(a).
(b) "Board of Directors" means the Board of Directors of the Company,
as constituted from time to time.
(c) "Cause" shall have the meaning set forth in Section 7(b)(i).
(d) "Change in Control" means a change in control of the Company of a
nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A under the Exchange Act, whether or not the
Company is subject to the Exchange Act at such time; provided, however, that
without limiting the generality of the foregoing, such a Change in Control shall
in any event be deemed to occur if and when:
(i) any person (as such term is used in Sections 13(d) and
14(d)(2) of the Exchange Act), other than the Rohde Family Members, the
Company, its subsidiaries and affiliates (as defined in Rule 12b-2 under
the Exchange Act), becomes the beneficial owner (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Company representing (A) more than 15% of the combined voting power of the
Company's then outstanding securities, and (B) more than the percentage of
the combined voting power of the Company's then outstanding securities
beneficially owned, directly or indirectly, at that time by the Rohde
Family Members;
(ii) stockholders approve a merger or consolidation as a result
of which securities representing less than 70% of the combined voting power
of the outstanding voting securities of the surviving or resulting
corporation will be
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beneficially owned, directly or indirectly, in the aggregate by the former
stockholders of the Company;
(iii) stockholders approve either (A) an agreement for the sale
or disposition of all or substantially all of the Company's assets to an
entity which is not a subsidiary of the Company, or (B) a plan of complete
liquidation; or
(iv) the Persons who were members of the Board of Directors
immediately before a tender offer by any Person other than the Company or a
subsidiary or affiliate of the Company, or before a merger, consolidation,
or contested election, or before any combination of such transactions,
cease to constitute a majority of the Board of Directors as a result of
such transaction or transactions.
(e) "Code" means the Internal Revenue Code of 1986, as amended.
(f) "Company" means Triarco Industries, Inc., a Delaware corporation,
and any successors to its business and/or assets, which executes and delivers an
agreement provided for in Section 11(a) or which otherwise becomes bound by all
the terms and conditions of this Agreement by operation of law.
(g) "Date of Termination" shall have the meaning set forth in Section
7(g).
(h) "Disability" shall have the meaning set forth in Section 7(b)(ii).
(i) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(j) "Fair Market Value" means Fair Market Value as defined in the
Stock Incentive Plan.
(k) "Good Reason" shall have the meaning set forth in Section 7(c).
(l) "Non-Competition Period" shall have the meaning set forth in
Section 10(a).
(m) "Notice of Termination" shall have the meaning set forth in
Section 7(f).
(n) "Person" means any individual, corporation, partnership, limited
liability company, limited duration company, trust or other entity of any nature
whatsoever.
(o) "Rohde Family Members" means, collectively, Rodger R. Rohde, Sr.,
Roger R. Rohde, Jr., Christopher J. Rohde, Cynthia J. Rohde and the Rohde Trust.
(p) "Triarco Business" means a business involving the supply of goods
or services substantially the same as or capable of use in substitution for any
goods or services supplied or proposed to be supplied by the Company at the time
of the termination of the Executive's employment.
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In WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first written above.
Triarco Industries, Inc.
By:
------------------------------------
Name:
Title:
---------------------------------------
Angelo R. Appierto
<PAGE>
EXHIBIT 10.1.4
EMPLOYMENT AGREEMENT
This Employment Agreement, dated as of __________, 1998 (this
"Agreement"), is by and between Triarco Industries, Inc., a Delaware corporation
having its principal executive offices at 400 Hamburg Turnpike, Wayne, New
Jersey 07470 (the "Company"), and Andres E. Menendez (the "Executive").
Whereas, the Company wishes to assure itself of the continued services
of the Executive, and the Executive is willing to continue in the employ of the
Company, upon the terms and conditions hereinafter set forth.
Now, Therefore, the Company and the Executive hereby agree as follows:
1. Definitions. Unless defined elsewhere in this Agreement,
capitalized terms contained herein shall have the meanings set forth or
incorporated by reference in Section 18.
2. Employment. The Company agrees to continue to employ the
Executive, and the Executive agrees to continue to be employed by the Company
and/or any subsidiary of the Company, during the term set forth in Section 3 and
on the other terms and conditions of this Agreement.
3. Term.
(a) The term of this Agreement shall commence as of the date hereof,
and, subject to Section 3(b), shall terminate at the close of business on the
third anniversary of that date.
(b) The term of this Agreement set forth in Section 3(a) shall be
extended or further extended, as the case may be, without any action by the
Company or the Executive, on the third anniversary of the date hereof and on
each subsequent anniversary of the date hereof, for an additional period of one
year, until either party gives written notice to the other party in advance of
any anniversary of the date hereof, in the manner set forth in Section 15, that
the term in effect when such notice is given is not to be extended or further
extended, as the case may be, beyond the year following the next anniversary.
If the Executive shall continue in the full-time employment of the Company after
the term of this Agreement, such continued employment shall be at will, and
otherwise subject to the terms and conditions of this Agreement.
4. Position, Duties and Responsibilities, Rights.
(a) During the term of this Agreement, the Executive shall serve as,
and be elected to and hold the office and title of Vice President--Special
Projects of the Company. As such, the Executive shall report only to the Board
of Directors, Chairman of the Board and President of the Company, and shall have
all of the powers and duties usually incident to the
<PAGE>
office of Vice President--Special Projects, and shall have powers to perform
such other reasonable additional duties as may from time to time be lawfully
assigned to the Executive by the Board of Directors.
(b) During the term of this Agreement, the Board of Directors and the
stockholders of the Company may cause the Executive to be elected and re-elected
to the Board of Directors of the Company or its subsidiaries (and to be
appointed to any committees thereof), and the Executive agrees, if elected, to
serve on such Board(s) of Directors and committee(s) during the term of this
Agreement, without any additional compensation beyond that provided in this
Agreement.
(c) During the term of this Agreement, the Executive agrees to devote
substantially all the Executive's time, efforts and skills to the affairs of the
Company during the Company's normal business hours, except for vacations,
illness and incapacity, but nothing in this Agreement shall preclude the
Executive from devoting reasonable periods to (i) manage the Executive's
personal investments, (ii) participate in professional, educational, public
interest, charitable, civic or community activities, including activities
sponsored by trade organizations, and (iii) serve as a director or member of an
advisory committee of any corporation not in competition with the Company or any
of its subsidiaries, or as an officer, trustee or director of any charitable,
educational, philanthropic, civic, social or industry organizations, or as a
speaker or arbitrator, provided that the performance of the Executive's duties
or responsibilities in any of such capacities does not materially interfere with
the regular performance of the Executive's duties and responsibilities
hereunder.
5. Place of Performance. In connection with the Executive's
employment by the Company, the Executive shall be based at the Company's
principal executive offices, and shall not be required to be absent therefrom on
travel status or otherwise for more than a reasonable time each year as
necessary or appropriate for the performance of the Executive's duties
hereunder.
6. Compensation.
(a) During the term of this Agreement, the Company, shall pay the
Executive, and the Executive agrees to accept a base salary at the rate of not
less than $175,000.00 per year, with increases in such rate in accordance with
the Company's regular administrative practices of salary increases applicable to
senior officers from time to time during the term of this Agreement (the annual
base salary as increased from time to time during the term of this Agreement
being hereinafter referred to as the "Base Salary"). The Base Salary shall be
paid in installments no less frequently than monthly. Any increase in Base
Salary or other compensation shall not limit or reduce any other obligation of
the Company hereunder, and once established at an increased specified rate, the
Executive's Base Salary hereunder shall not thereafter be reduced.
(b) During the term of this Agreement, the Executive shall be a full
participant in any and all of the Company's short and long-term incentive plans
and equity
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compensation plans in which senior officers of the Company participate that are
in effect on the date hereof or that may hereafter be adopted, including,
without limitation, the Company's 1998 Omnibus Stock Incentive Plan (the "Stock
Incentive Plan"), with at least the same reward opportunities, if any, that are
provided to other senior officers of the Company from time to time during the
term of this Agreement, and with at least the same reward opportunities that
have heretofore been provided to the Executive under any such plans, provided
that in no event shall the Executive be granted stock options, restricted stock
awards or other stock-based long-term incentives after a Change in Control less
often than annually, nor on terms and conditions (including performance goals)
less favorable to the Executive than those which (a) are granted to officers or
employees of similar position and status in the Company, or (b) were granted to
the Executive during the term of this Agreement prior to such Change in Control
(or, if shorter, during the three years preceding the Change in Control), nor on
fewer than the following number of shares:
(i) the average annual number of shares awarded (in the case of
restricted stock awards), or underlying options granted, to the Executive
during the term of this Agreement prior to such Change in Control (or, if
shorter, during the two years preceding the Change in Control); or
(ii) if greater than the number described in clause (i) above,
the number of shares whose Fair Market Value on the date the shares are
optioned or awarded to the Executive equals the average annual Fair Market
Value (determined on the respective grant or award date) of the shares that
were optioned or awarded to the Executive during the term of this Agreement
prior to such Change in Control (or, if shorter, during the two years
preceding the Change in Control).
(c) During the term of this Agreement, the Executive shall be entitled
to (i) perquisites, including, without limitation, an office and secretarial and
clerical staff, and (ii) fringe benefits, including, without limitation, parking
and health insurance, in each case at least equal to, and on the same terms and
conditions as, those attached to the Executive's office on the date hereof, as
the same may be improved from time to time during the term of this Agreement, as
well as to reimbursement, upon proper accounting, of all reasonable expenses and
disbursements incurred by the Executive in the course of the Executive's duties.
(d) The Executive, the Executive's dependents and beneficiaries shall
be entitled to all benefits and service credit for benefits during the term of
this Agreement to which senior officers of the Company and their dependents and
beneficiaries are entitled as the result of the employment of such officers
during the term of this agreement under the terms of employee plans and
practices of the Company and its subsidiaries, including, without limitation,
any pension plans, profit sharing plans, any non-qualified deferred compensation
plans and related "rabbi" trusts, the Company's life insurance plans, its
disability benefit plans, its vacation and holiday pay plans, its medical,
dental and welfare plans, and other present or successor plans and practices of
the Company and its subsidiaries for which senior officers, their dependents and
beneficiaries are eligible, and to all payments and other benefits
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under any such plan or practice subsequent to the term of this Agreement as a
result of participation in such plan or practice during the term of this
Agreement.
7. TERMINATION OF EMPLOYMENT.
(A) The term of this Agreement shall terminate upon the death of the
Executive.
(b) The Company may terminate the Executive's employment during the
term of this agreement for Cause as provided in Section 7(b)(i) or in the event
of Disability as provided in Section 7(b)(ii).
(i) This Agreement shall be considered terminated for "Cause"
only:
(A) if the Executive willfully and repeatedly fails to
substantially perform the Executive's duties hereunder, other than by
reason of a Disability;
(B) if the Executive is grossly negligent or engages in
gross misconduct in the performance of the Executive's duties
hereunder;
(C) if the Executive knowingly engages in an act of
dishonesty intended to result in substantial personal enrichment at
the expense of the Company, an act of fraud or embezzlement, or any
conduct resulting in a felony conviction;
and, in the case of each of clauses (A), (B) and (C) above, the applicable
conditions set forth in Section 7(e) are satisfied.
Anything in this Section 7(b) to the contrary notwithstanding,
the Executive's employment shall in no event be considered terminated by
the Company for Cause if termination takes place (I) as the result of bad
judgment or negligence on the part of the Executive other than gross
negligence or willful or reckless misconduct, (II) for any act or omission
in respect of which a determination could properly be made that the
Executive met the applicable standard of conduct prescribed for
indemnification or reimbursement or payment of expenses of an officer or
director under the Bylaws or Certificate of Incorporation of the Company or
the laws of the State of Delaware or the directors' or officers' liability
insurance of the Company in each case as in effect at the time of such act
or omission, (III) as the result of an act or omission which occurred more
than three calendar months prior to the Executive's having been given
Notice of Termination for such act or omission unless the commission of
such act or such omission was not or could not reasonably have been, at the
time of such commission or omission, known to a member of the Board of
Directors (other than the Executive), in which case more than three
calendar months from the date the commission of such act or such omission
was or could reasonably have been so known, (IV) as the result of a
continuing course of action which commenced and was or could reasonably
have been
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known to a member of the Board of Directors (other than the Executive) more
than three calendar months prior to Notice of Termination having been given
to the Executive for such course of action, or (V) because of an act or
omission believed by the Executive in good faith to have been in, or not
opposed to, the interests of the Company.
(ii) The term "Disability" as used in this Agreement means an
accident or physical or mental illness which prevents the Executive from
substantially performing the Executive's duties hereunder for six
consecutive months. The term of this Agreement shall end as of the close
of business on the last day of such six month period but without prejudice
to any payments due to the Executive in respect of disability under this
Agreement or any plan or practice of the Company. The amount of any
payments payable under Section 6(a) during such six month period shall be
reduced by any payments to which the Executive may be entitled for the same
period because of disability under any disability or pension plan or
arrangement of the Company or any subsidiary or affiliate thereof.
(c) The Executive may terminate the Executive's employment during the
term of this Agreement for Good Reason. For purposes of this Agreement, "Good
Reason" shall mean (i) any assignment to the Executive without the Executive's
express written consent of any duties, functions, authority or responsibilities
other than those contemplated by, or any material limitation or expansion
without the Executive's express written consent of the duties, functions,
authority or responsibilities of the Executive in any respect not contemplated
by, Section 4(a), including, without limitation, a change in reporting
relationships, any such assignment, limitation or expansion being deemed a
continuing breach of this Agreement, (ii) a reduction of the Executive's rate of
compensation or any other failure by the Company to comply with Section 6, (iii)
failure by the Company to comply with Section 5, (iv) failure by the Company to
obtain the assumption of, and the agreement to perform, this Agreement by any
successor as contemplated in Section 11(a), (v) such assignment, limitation or
expansion described in the foregoing clause (i), reduction described in the
foregoing clause (ii) or failure described in the foregoing clauses (ii), (iii)
or (iv), as the case may be, is not cured within 30 days after receipt by the
Company of written notice from the Executive describing such event or (vi) a
determination by the Executive made in good faith that, as a result of a
detrimental change in circumstances after a Change in Control significantly
affecting the Executive's position, the Executive is unable properly to carry
out all of the authorities, powers, functions, duties and responsibilities
attached to the Executive's position and contemplated by Section 4(a), and the
situation is not remedied within 30 days after receipt by the Company of written
notice from the Executive of such determination.
(d) Notwithstanding anything to the contrary set forth herein, subject
to the Bylaws of the Company, the Board of Directors shall have the right by
majority vote of the entire membership of the Board of Directors to terminate
the Executive's employment for any reason other than Cause at any time, subject
to the consequences of such termination as set forth in Section 8.
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<PAGE>
(e) In no event shall the Company be entitled to terminate the
Executive's employment during the term of this Agreement for Cause pursuant to
Section 7(b), unless and until all of the following take place, provided that
Sections 7(e)(i) through (iii) shall not apply to any termination for Cause
pursuant to Section 7(b)(i)(C):
(i) the Secretary of the Company, pursuant to a resolution duly
adopted by the affirmative vote of not less than a majority of the entire
membership of the Board of Directors at a meeting called for that purpose,
gives written notice to the Executive (the "Warning Notice") setting forth
with particularity (A) the specific provision of this Agreement that the
Executive is alleged to have failed to satisfy, (B) the acts or omissions
alleged to constitute such failure, (C) the date on which the Executive
shall be given a reasonable opportunity to appear before and be heard by
the Board of Directors concerning the allegations, which date shall be not
less than 30 nor more than 90 days after the Executive's receipt of the
Warning Notice, and (D) the loss of rights under this Agreement that shall
occur unless the Executive diligently and in good faith takes reasonable
steps to remedy such failure within 30 days after the Executive's receipt
of the Warning Notice; and
(ii) the Executive does not diligently and in good faith take all
reasonable steps to remedy such failure within 30 days after the
Executive's receipt of the Warning Notice; and
(iii) the Executive is given a reasonable opportunity to appear
before and be heard by the Board of Directors concerning the allegations,
in accordance with the Warning Notice; and
(iv) the Secretary of the Company gives the Executive a certified
copy of a resolution duly adopted by the affirmative vote of not less than
a majority of the entire membership of the Board of Directors after any
opportunity to appear before the Board of Directors required by Section
7(e)(iii), at a meeting called for that purpose, that sets forth the Board
of Director's finding that the Executive both (A) failed to satisfy the
specific provision of this Agreement set forth in the Warning Notice
previously given, or if no such Warning Notice is required pursuant to this
Section 7(c), the specific provision of the Agreement set forth in such
resolution, and (B) if Sections 7(e)(i) through (iii) apply, did not
diligently and in good faith take all reasonable steps to remedy such
failure within 30 days after the Executive's receipt of the Warning Notice,
and that in all cases specifies the particulars thereof in detail.
(f) Any termination by the Company pursuant to Section 7(b) or by the
Executive pursuant to Section 7(c) shall be communicated by a written Notice of
Termination to the other party hereto. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice which indicates the specific
termination provision in this Agreement relied upon and sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provisions so indicated.
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(g) "Date of Termination" shall mean (i) if the Executive's employment
is terminated by the Executive's death, the date of the Executive's death, (ii)
if the Executive's employment is terminated pursuant to Section 7(b)(ii), 30
days after Notice of Termination is given (provided that the Executive shall not
have returned to the performance of the Executive's duties on a full-time basis
during such 30 day period), and (iii) if the Executive's employment is
terminated for any other reason, the date on which a Notice of Termination is
given.
8. Compensation on Termination. The parties recognize and agree
that, if the Company terminates the Executive's employment during the term of
this Agreement other than pursuant to Section 7(b) or if the Executive
terminates the Executive's employment during the term of this Agreement for Good
Reason pursuant to Section 7(c), the actual damages to the Executive would be
difficult if not impossible to ascertain and agree that the Executive's sole
remedy shall be a right to receive amounts determined and paid in accordance
with the provisions of this Section 8. The Executive shall not be required to
mitigate the amount of any payment provided for in this Section 8 by seeking
other employment or otherwise, nor shall any compensation earned by the
Executive in other employment or otherwise reduce the amount of any payment
provided for in this Section 8.
(a) If the Company shall terminate the Executive's employment during
the term of this Agreement other than pursuant to Section 7(b) or if the
Executive shall terminate the Executive's employment during the term of this
Agreement for Good Reason pursuant to Section 7(c), then, as severance pay or
liquidated damages or both:
(i) the Company shall pay the Executive the Executive's full Base
Salary through the Date of Termination at the rate in effect at the time
Notice of Termination is given, together with any other amounts payable to
the Executive under Section 6 for periods prior to the Date of Termination
and all outstanding stock options shall become immediately vested and
exercisable;
(ii) the Company shall pay the Executive a lump sum payment, on
the tenth day after the Date of Termination, equal to 299% of (A) the Base
Salary at the rate in effect as of the Date of Termination, plus (B) the
average annual incentive award awarded to the Executive by the Company or
any subsidiary of the Company for any of the five most recent fiscal years
for which annual incentive award determinations were made before the Date
of Termination, except as limited by applicable law; provided, however,
that notwithstanding the foregoing, under no circumstances shall the
Company pay the Executive a payment that would result in an "Excess
Parachute Payment," as defined in Section 280G(b) of the Code; provided,
further, that in the event any payment under this clause (ii) would
constitute an Excess Parachute Payment, such payment shall be reduced to
the extent necessary so that the payment does not constitute an Excess
Parachute Payment; and
(iii) the Company shall pay any amounts payable under Section
17.
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(b) If the Executive's employment terminates under any circumstance
that does not entitle the Executive to payments under Section 8(a) (including a
termination by reason of the death or Disability of the Executive, or by reason
of the Company or the Executive electing not to extend or further extend the
term of this Agreement pursuant to Section 3(b)), the Executive shall not be
entitled to receive any compensation under Section 6 accruing after the date of
such termination, or any payment under Section 8(a) (other than Section 9).
(c) Nothing in Section 8(a) or 8(b) shall deprive the Executive of any
rights, payments, benefits or service credit for benefits after termination of
employment which were earned pursuant to any provision of this Agreement or any
plan or practice of the Company on or prior to such termination including,
without limitation, any pension or welfare benefits and any rights under the
Company's pension, deferred compensation or stock option or other benefit plans
and any legal fees and expenses payable pursuant to Section 17.
9. Indemnification. The Company shall indemnify the Executive to the
fullest extent permitted by the General Corporation Law of the State of
Delaware, as amended from time to time, for all amounts (including, without
limitation, judgments, fines, settlement payments, expenses and attorneys' fees)
incurred or paid by the Executive in connection with any action, suit,
investigation or proceeding arising out of or relating to the performance by the
Executive of services for, or the acting by the Executive as a director, officer
or employee of, the Company, or any subsidiary of the Company or any other
Person at the Company's request. Nothing in this Section 9 or elsewhere in this
Agreement is intended to prevent the Company from indemnifying the Executive to
any greater extent than is required by this Section 9.
10. Non-competition; Non-solicitation.
(a) In consideration of this Agreement, the Executive agrees that, for
the period ending one year after the termination of the Executive's employment
with the Company by the Company for Cause or by the Executive without Good
Reason (the "Non-Competition Period"), the Executive will not, directly or
indirectly (whether as a sole proprietor, partner or venturer, stockholder,
director, officer, employee, consultant or in any other capacity as principal or
agent or through any Person, subsidiary or employee acting as nominee or agent):
(i) conduct or engage in or be interested in or associated with
any Person which conducts or engages in the Triarco Business within the
United States;
(ii) take any action, directly or indirectly, to finance,
guarantee or provide any other material assistance to any Person engaged in
the Triarco Business;
(iii) solicit, contact or accept business of any client or
counterparty whom the Company served or conducted business with or whose
name became known to the Executive as a potential client or counterparty
while in the employ of the Company or during the Non-Competition Period; or
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<PAGE>
(iv) influence or attempt to influence any Person that is a
contracting party with the Company at any time during the Non-Competition
Period to terminate any written or oral agreement with the Company.
(b) The Executive shall neither, either on the Executive's own account
or in conjunction with or on behalf of any other Person, solicit or entice away
from the Company any officer, employee or customer of the Company during the
term hereof or the Non-Competition Period nor engage, hire, employ, or induce
the employment of any such Person whether or not such officer, employee or
customer would commit a breach of contract by reason of leaving service or
transferring business.
(c) The restrictive provisions hereof shall not prohibit the Executive
from (i) having an equity interest in the securities of any entity engaged in
the Triarco Business or any business with respect to which the Executive
obtained confidential or proprietary data or information, which entity's
securities are listed on a nationally-recognized securities exchange or
quotation system or traded in the over-the-counter market, to the extent that
such interest does not exceed 5% of the outstanding equity interests of such
entity, (ii) investing as a passive investor in an entity engaging in the
Triarco Business that is not so listed or traded, so long as such interest does
not exceed 5% of the outstanding equity interests of such entity or (iii) with
the prior written consent of the Company, serving as a director or other advisor
to any other Person.
(d) The Executive agrees that the covenants contained in this Section
10 are reasonable covenants under the circumstances, and further agrees that if
in the opinion of a court of competent jurisdiction, such restraint is not
reasonable in any respect, such court shall have the right, power and authority
to excise or modify such provision or provisions of these covenants which as to
such court shall appear not reasonable and to enforce the remainder thereof as
so amended.
11. Successors; Binding Agreement.
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the extent
that the Company would be required to perform it if no such succession had taken
place; provided that no such agreement with a successor shall release the
Company without the Executive's express written consent. Failure of the Company
to obtain such agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement and shall entitle the Executive to compensation
from the Company in the same amount and on the same terms as the Executive would
be entitled to hereunder if the Executive's employment were terminated by the
Company other than pursuant to Section 7(b), except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination.
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(b) If the Executive should die while any amounts are due and payable
to the Executive hereunder, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of the Agreement to the Executive's
devisees, legatee, or other designee or, if there be no such designee, to the
Executive's estate.
(c) Except as to withholding of any tax under the laws of the United
States or any state or locality, neither this Agreement nor any right or
interest hereunder nor any amount payable at any time hereunder shall be subject
in any manner to alienation, sale, transfer, assignment, pledge, attachment, or
other legal process, or encumbrance of any kind by the Executive or the
beneficiaries of the Executive or by legal representatives without the Company's
prior written consent, nor shall there be any right of set-off or counterclaim
in respect of any debts or liabilities of the Executive, the Executive's
beneficiaries or legal representatives against any right or interest hereunder
or any amount payable at any time hereunder to the Executive, the Executive's
beneficiaries or legal representatives; provided, however, that nothing in this
Section 11 shall preclude the Executive from designating a beneficiary to
receive any benefit payable on the Executive's death, or the legal
representatives of the Executive from assigning any rights hereunder to the
Person or Persons entitled thereto under the Executive's will or, in case of
intestacy, to the Person or Persons entitled thereto under the laws of intestacy
applicable to the Executive's estate.
12. Parties. This Agreement shall be binding upon and shall inure to
the benefit of the Company and the Executive, the Executive's heirs,
beneficiaries and legal representatives.
13. Entire Agreement; Amendment.
(a) This Agreement contains the entire understanding of the parties
with respect to the subject matter hereof and supersedes any and all other
agreements between the parties with respect to the subject matter hereof.
(b) Any amendment of this Agreement shall not be binding unless in
writing and signed by both (i) an officer or director of the Company duly
authorized to do so and (ii) the Executive.
14. Enforceability. In the event that any provision of this
Agreement is determined to be invalid or unenforceable, the remaining terms and
conditions of this Agreement shall be unaffected and shall remain in full force
and effect, and any such determination of invalidity or enforceability shall not
affect the validity or enforceability of any other provision of this Agreement.
15. Notices. All notices which may be necessary or proper for either
the Company or the Executive to give to the other shall be in writing and shall
be sent by hand delivery, registered or certified mail, return receipt
requested, overnight courier or facsimile, if to the Executive, at 2501
Bergenline Avenue, Union City, New Jersey 07087 or, if to the Company, at its
principal executive offices at 400 Hamburg Turnpike, Wayne, New Jersey 07470,
Attention: Secretary, facsimile: (973) 942-5429, and shall be deemed given
when
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<PAGE>
sent, provided that any Notice of Termination or other notice given pursuant to
Section 7 shall be deemed given only when received. Either party may by like
notice to the other party change the address at which the Executive or it is to
receive notices hereunder.
16. Governing Law. THIS AGREEMENT IS EXECUTED IN THE STATE OF NEW
JERSEY AND SHALL BE GOVERNED BY, AND BE ENFORCEABLE IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW JERSEY WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS
OF LAWS THEREOF.
17. Legal Fees and Expenses. To induce the Executive to execute this
Agreement and to provide the Executive with reasonable assurance that the
purposes of this Agreement will not be frustrated by the cost of its enforcement
should the Company fail to perform its obligations under this Agreement, the
Company shall pay and be solely responsible for any reasonable attorneys' fees
and expenses and court costs incurred by the Executive and any of the
Executive's beneficiaries, heirs or legal representatives as a result of the
Company's failure to perform this Agreement or any provision hereof to be
performed by the Company.
18. Definitions. The following terms, when capitalized in this
Agreement, shall have the meanings set forth or incorporated by reference in
this Section 18.
(a) "Base Salary" shall have the meaning set forth in Section 6(a).
(b) "Board of Directors" means the Board of Directors of the Company,
as constituted from time to time.
(c) "Cause" shall have the meaning set forth in Section 7(b)(i).
(d) "Change in Control" means a change in control of the Company of a
nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A under the Exchange Act, whether or not the
Company is subject to the Exchange Act at such time; provided, however, that
without limiting the generality of the foregoing, such a Change in Control shall
in any event be deemed to occur if and when:
(i) any person (as such term is used in Sections 13(d) and
14(d)(2) of the Exchange Act), other than the Rohde Family Members, the
Company, its subsidiaries and affiliates (as defined in Rule 12b-2 under
the Exchange Act), becomes the beneficial owner (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Company representing (A) more than 15% of the combined voting power of the
Company's then outstanding securities, and (B) more than the percentage of
the combined voting power of the Company's then outstanding securities
beneficially owned, directly or indirectly, at that time by the Rohde
Family Members;
(ii) stockholders approve a merger or consolidation as a result
of which securities representing less than 70% of the combined voting power
of the outstanding voting securities of the surviving or resulting
corporation will be
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beneficially owned, directly or indirectly, in the aggregate by the former
stockholders of the Company;
(iii) stockholders approve either (A) an agreement for the sale
or disposition of all or substantially all of the Company's assets to an
entity which is not a subsidiary of the Company, or (B) a plan of complete
liquidation; or
(iv) the Persons who were members of the Board of Directors
immediately before a tender offer by any Person other than the Company or a
subsidiary or affiliate of the Company, or before a merger, consolidation,
or contested election, or before any combination of such transactions,
cease to constitute a majority of the Board of Directors as a result of
such transaction or transactions.
(e) "Code" means the Internal Revenue Code of 1986, as amended.
(f) "Company" means Triarco Industries, Inc., a Delaware corporation,
and any successors to its business and/or assets, which executes and delivers an
agreement provided for in Section 11(a) or which otherwise becomes bound by all
the terms and conditions of this Agreement by operation of law.
(g) "Date of Termination" shall have the meaning set forth in Section
7(g).
(h) "Disability" shall have the meaning set forth in Section 7(b)(ii).
(i) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(j) "Fair Market Value" means Fair Market Value as defined in the
Stock Incentive Plan.
(k) "Good Reason" shall have the meaning set forth in Section 7(c).
(l) "Non-Competition Period" shall have the meaning set forth in
Section 10(a).
(m) "Notice of Termination" shall have the meaning set forth in
Section 7(f).
(n) "Person" means any individual, corporation, partnership, limited
liability company, limited duration company, trust or other entity of any nature
whatsoever.
(o) "Rohde Family Members" means, collectively, Rodger R. Rohde, Sr.,
Roger R. Rohde, Jr., Christopher J. Rohde, Cynthia J. Rohde and the Rohde Trust.
(p) "Triarco Business" means a business involving the supply of goods
or services substantially the same as or capable of use in substitution for any
goods or services supplied or proposed to be supplied by the Company at the time
of the termination of the Executive's employment.
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In WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first written above.
Triarco Industries, Inc.
By:
-----------------------------
Name:
Title:
--------------------------------
Andres E. Menendez
<PAGE>
EXHIBIT 10.1.5
EMPLOYMENT AGREEMENT
This Employment Agreement, dated as of __________, 1998 (this
"Agreement"), is by and between Triarco Industries, Inc., a Delaware corporation
having its principal executive offices at 400 Hamburg Turnpike, Wayne, New
Jersey 07470 (the "Company"), and Christopher J. Rohde (the "Executive").
Whereas, the Company wishes to assure itself of the continued services
of the Executive, and the Executive is willing to continue in the employ of the
Company, upon the terms and conditions hereinafter set forth.
Now, Therefore, the Company and the Executive hereby agree as follows:
1. Definitions. Unless defined elsewhere in this Agreement,
capitalized terms contained herein shall have the meanings set forth or
incorporated by reference in Section 18.
2. Employment. The Company agrees to continue to employ the
Executive, and the Executive agrees to continue to be employed by the Company
and/or any subsidiary of the Company, during the term set forth in Section 3 and
on the other terms and conditions of this Agreement.
3. Term.
(a) The term of this Agreement shall commence as of the date hereof,
and, subject to Section 3(b), shall terminate at the close of business on the
third anniversary of that date.
(b) The term of this Agreement set forth in Section 3(a) shall be
extended or further extended, as the case may be, without any action by the
Company or the Executive, on the third anniversary of the date hereof and on
each subsequent anniversary of the date hereof, for an additional period of one
year, until either party gives written notice to the other party in advance of
any anniversary of the date hereof, in the manner set forth in Section 15, that
the term in effect when such notice is given is not to be extended or further
extended, as the case may be, beyond the year following the next anniversary.
If the Executive shall continue in the full-time employment of the Company after
the term of this Agreement, such continued employment shall be at will, and
otherwise subject to the terms and conditions of this Agreement.
4. Position, Duties and Responsibilities, Rights.
(a) During the term of this Agreement, the Executive shall serve as,
and be elected to and hold the office and title of Vice President--Operations of
the Company. As such, the Executive shall report only to the Board of
Directors, Chairman of the Board and President of the Company, and shall have
all of the powers and duties usually incident to the
<PAGE>
office of Vice President--Operations, and shall have powers to perform such
other reasonable additional duties as may from time to time be lawfully assigned
to the Executive by the Board of Directors.
(b) During the term of this Agreement, the Board of Directors and the
stockholders of the Company may cause the Executive to be elected and re-elected
to the Board of Directors of the Company or its subsidiaries (and to be
appointed to any committees thereof), and the Executive agrees, if elected, to
serve on such Board(s) of Directors and committee(s) during the term of this
Agreement, without any additional compensation beyond that provided in this
Agreement.
(c) During the term of this Agreement, the Executive agrees to devote
substantially all the Executive's time, efforts and skills to the affairs of the
Company during the Company's normal business hours, except for vacations,
illness and incapacity, but nothing in this Agreement shall preclude the
Executive from devoting reasonable periods to (i) manage the Executive's
personal investments, (ii) participate in professional, educational, public
interest, charitable, civic or community activities, including activities
sponsored by trade organizations, and (iii) serve as a director or member of an
advisory committee of any corporation not in competition with the Company or any
of its subsidiaries, or as an officer, trustee or director of any charitable,
educational, philanthropic, civic, social or industry organizations, or as a
speaker or arbitrator, provided that the performance of the Executive's duties
or responsibilities in any of such capacities does not materially interfere with
the regular performance of the Executive's duties and responsibilities
hereunder.
5. Place of Performance. In connection with the Executive's
employment by the Company, the Executive shall be based at the Company's
principal executive offices, and shall not be required to be absent therefrom on
travel status or otherwise for more than a reasonable time each year as
necessary or appropriate for the performance of the Executive's duties
hereunder.
6. Compensation.
(a) During the term of this Agreement, the Company, shall pay the
Executive, and the Executive agrees to accept a base salary at the rate of not
less than $175,000.00 per year, with increases in such rate in accordance with
the Company's regular administrative practices of salary increases applicable to
senior officers from time to time during the term of this Agreement (the annual
base salary as increased from time to time during the term of this Agreement
being hereinafter referred to as the "Base Salary"). The Base Salary shall be
paid in installments no less frequently than monthly. Any increase in Base
Salary or other compensation shall not limit or reduce any other obligation of
the Company hereunder, and once established at an increased specified rate, the
Executive's Base Salary hereunder shall not thereafter be reduced.
(b) During the term of this Agreement, the Executive shall be a full
participant in any and all of the Company's short and long-term incentive plans
and equity
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compensation plans in which senior officers of the Company participate that are
in effect on the date hereof or that may hereafter be adopted, including,
without limitation, the Company's 1998 Omnibus Stock Incentive Plan (the "Stock
Incentive Plan"), with at least the same reward opportunities, if any, that are
provided to other senior officers of the Company from time to time during the
term of this Agreement, and with at least the same reward opportunities that
have heretofore been provided to the Executive under any such plans, provided
that in no event shall the Executive be granted stock options, restricted stock
awards or other stock-based long-term incentives after a Change in Control less
often than annually, nor on terms and conditions (including performance goals)
less favorable to the Executive than those which (a) are granted to officers or
employees of similar position and status in the Company, or (b) were granted to
the Executive during the term of this Agreement prior to such Change in Control
(or, if shorter, during the three years preceding the Change in Control), nor on
fewer than the following number of shares:
(i) the average annual number of shares awarded (in the case of
restricted stock awards), or underlying options granted, to the Executive
during the term of this Agreement prior to such Change in Control (or, if
shorter, during the two years preceding the Change in Control); or
(ii) if greater than the number described in clause (i) above,
the number of shares whose Fair Market Value on the date the shares are
optioned or awarded to the Executive equals the average annual Fair Market
Value (determined on the respective grant or award date) of the shares that
were optioned or awarded to the executive during the term of this agreement
prior to such Change in Control (or, if shorter, during the two years
preceding the Change in Control).
(c) During the term of this Agreement, the Executive shall be entitled
to (i) perquisites, including, without limitation, an office and secretarial and
clerical staff, and (ii) fringe benefits, including, without limitation, parking
and health insurance, in each case at least equal to, and on the same terms and
conditions as, those attached to the Executive's office on the date hereof, as
the same may be improved from time to time during the term of this Agreement, as
well as to reimbursement, upon proper accounting, of all reasonable expenses and
disbursements incurred by the Executive in the course of the Executive's duties.
(d) The Executive, the Executive's dependents and beneficiaries shall
be entitled to all benefits and service credit for benefits during the term of
this Agreement to which senior officers of the Company and their dependents and
beneficiaries are entitled as the result of the employment of such officers
during the term of this Agreement under the terms of employee plans and
practices of the Company and its subsidiaries, including, without limitation,
any pension plans, profit sharing plans, any non-qualified deferred compensation
plans and related "rabbi" trusts, the company's life insurance plans, its
disability benefit plans, its vacation and holiday pay plans, its medical,
dental and welfare plans, and other present or successor plans and practices of
the Company and its subsidiaries for which senior officers, their dependents and
beneficiaries are eligible, and to all payments and other benefits
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<PAGE>
under any such plan or practice subsequent to the term of this Agreement as a
result of participation in such plan or practice during the term of this
Agreement.
7. TERMINATION OF EMPLOYMENT.
(a) The term of this Agreement shall terminate upon the death of the
Executive.
(b) The Company may terminate the Executive's employment during the
term of this Agreement for Cause as provided in Section 7(b)(i) or in the event
of disability as provided in Section 7(b)(ii).
(i) This Agreement shall be considered terminated for "Cause"
only:
(A) if the Executive willfully and repeatedly fails to
substantially perform the executive's duties hereunder, other than by
reason of a Disability;
(B) if the Executive is grossly negligent or engages in
gross misconduct in the performance of the Executive's duties
hereunder;
(C) if the Executive knowingly engages in an act of
dishonesty intended to result in substantial personal enrichment at
the expense of the Company, an act of fraud or embezzlement, or any
conduct resulting in a felony conviction;
and, in the case of each of clauses (A), (B) and (C) above, the applicable
conditions set forth in Section 7(e) are satisfied.
Anything in this Section 7(b) to the contrary notwithstanding,
the Executive's employment shall in no event be considered terminated by
the Company for Cause if termination takes place (I) as the result of bad
judgment or negligence on the part of the Executive other than gross
negligence or willful or reckless misconduct, (II) for any act or omission
in respect of which a determination could properly be made that the
Executive met the applicable standard of conduct prescribed for
indemnification or reimbursement or payment of expenses of an officer or
director under the Bylaws or Certificate of Incorporation of the Company or
the laws of the State of Delaware or the directors' or officers' liability
insurance of the Company in each case as in effect at the time of such act
or omission, (III) as the result of an act or omission which occurred more
than three calendar months prior to the Executive's having been given
Notice of Termination for such act or omission unless the commission of
such act or such omission was not or could not reasonably have been, at the
time of such commission or omission, known to a member of the Board of
Directors (other than the Executive), in which case more than three
calendar months from the date the commission of such act or such omission
was or could reasonably have been so known, (IV) as the result of a
continuing course of action which commenced and was or could reasonably
have been
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<PAGE>
known to a member of the Board of Directors (other than the Executive) more
than three calendar months prior to Notice of Termination having been given
to the Executive for such course of action, or (V) because of an act or
omission believed by the Executive in good faith to have been in, or not
opposed to, the interests of the Company.
(ii) The term "Disability" as used in this Agreement means an
accident or physical or mental illness which prevents the Executive from
substantially performing the Executive's duties hereunder for six
consecutive months. The term of this Agreement shall end as of the close of
business on the last day of such six month period but without prejudice to
any payments due to the Executive in respect of disability under this
Agreement or any plan or practice of the Company. The amount of any
payments payable under Section 6(a) during such six month period shall be
reduced by any payments to which the Executive may be entitled for the same
period because of disability under any disability or pension plan or
arrangement of the Company or any subsidiary or affiliate thereof.
(c) The Executive may terminate the Executive's employment during the
term of this Agreement for Good Reason. For purposes of this Agreement, "Good
Reason" shall mean (i) any assignment to the Executive without the Executive's
express written consent of any duties, functions, authority or responsibilities
other than those contemplated by, or any material limitation or expansion
without the Executive's express written consent of the duties, functions,
authority or responsibilities of the Executive in any respect not contemplated
by, Section 4(a), including, without limitation, a change in reporting
relationships, any such assignment, limitation or expansion being deemed a
continuing breach of this Agreement, (ii) a reduction of the Executive's rate of
compensation or any other failure by the Company to comply with Section 6, (iii)
failure by the Company to comply with Section 5, (iv) failure by the Company to
obtain the assumption of, and the agreement to perform, this Agreement by any
successor as contemplated in Section 11(a), (v) such assignment, limitation or
expansion described in the foregoing clause (i), reduction described in the
foregoing clause (ii) or failure described in the foregoing clauses (ii), (iii)
or (iv), as the case may be, is not cured within 30 days after receipt by the
Company of written notice from the Executive describing such event or (vi) a
determination by the Executive made in good faith that, as a result of a
detrimental change in circumstances after a Change in Control significantly
affecting the Executive's position, the Executive is unable properly to carry
out all of the authorities, powers, functions, duties and responsibilities
attached to the Executive's position and contemplated by Section 4(a), and the
situation is not remedied within 30 days after receipt by the Company of written
notice from the Executive of such determination.
(d) Notwithstanding anything to the contrary set forth herein, subject
to the Bylaws of the Company, the Board of Directors shall have the right by
majority vote of the entire membership of the Board of Directors to terminate
the Executive's employment for any reason other than Cause at any time, subject
to the consequences of such termination as set forth in Section 8.
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<PAGE>
(e) In no event shall the Company be entitled to terminate the
Executive's employment during the term of this Agreement for Cause pursuant to
Section 7(b), unless and until all of the following take place, provided that
Sections 7(e)(i) through (iii) shall not apply to any termination for Cause
pursuant to Section 7(b)(i)(C):
(i) the Secretary of the Company, pursuant to a resolution duly
adopted by the affirmative vote of not less than a majority of the entire
membership of the Board of Directors at a meeting called for that purpose,
gives written notice to the Executive (the "Warning Notice") setting forth
with particularity (A) the specific provision of this Agreement that the
Executive is alleged to have failed to satisfy, (B) the acts or omissions
alleged to constitute such failure, (C) the date on which the Executive
shall be given a reasonable opportunity to appear before and be heard by
the Board of Directors concerning the allegations, which date shall be not
less than 30 nor more than 90 days after the Executive's receipt of the
Warning Notice, and (D) the loss of rights under this Agreement that shall
occur unless the Executive diligently and in good faith takes reasonable
steps to remedy such failure within 30 days after the Executive's receipt
of the Warning Notice; and
(ii) the Executive does not diligently and in good faith take all
reasonable steps to remedy such failure within 30 days after the
Executive's receipt of the Warning Notice; and
(iii) the Executive is given a reasonable opportunity to appear
before and be heard by the Board of Directors concerning the allegations,
in accordance with the Warning Notice; and
(iv) the Secretary of the Company gives the Executive a certified
copy of a resolution duly adopted by the affirmative vote of not less than
a majority of the entire membership of the Board of Directors after any
opportunity to appear before the Board of Directors required by Section
7(e)(iii), at a meeting called for that purpose, that sets forth the Board
of Director's finding that the Executive both (A) failed to satisfy the
specific provision of this Agreement set forth in the Warning Notice
previously given, or if no such Warning Notice is required pursuant to this
Section 7(c), the specific provision of the Agreement set forth in such
resolution, and (B) if Sections 7(e)(i) through (iii) apply, did not
diligently and in good faith take all reasonable steps to remedy such
failure within 30 days after the Executive's receipt of the Warning Notice,
and that in all cases specifies the particulars thereof in detail.
(f) Any termination by the Company pursuant to Section 7(b) or by the
Executive pursuant to Section 7(c) shall be communicated by a written Notice of
Termination to the other party hereto. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice which indicates the specific
termination provision in this Agreement relied upon and sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provisions so indicated.
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(g) "Date of Termination" shall mean (i) if the Executive's employment
is terminated by the Executive's death, the date of the Executive's death, (ii)
if the Executive's employment is terminated pursuant to Section 7(b)(ii), 30
days after Notice of Termination is given (provided that the Executive shall not
have returned to the performance of the Executive's duties on a full-time basis
during such 30 day period), and (iii) if the Executive's employment is
terminated for any other reason, the date on which a Notice of Termination is
given.
8. Compensation on Termination. The parties recognize and agree
that, if the Company terminates the Executive's employment during the term of
this Agreement other than pursuant to Section 7(b) or if the Executive
terminates the Executive's employment during the term of this Agreement for Good
Reason pursuant to Section 7(c), the actual damages to the Executive would be
difficult if not impossible to ascertain and agree that the Executive's sole
remedy shall be a right to receive amounts determined and paid in accordance
with the provisions of this Section 8. The Executive shall not be required to
mitigate the amount of any payment provided for in this Section 8 by seeking
other employment or otherwise, nor shall any compensation earned by the
Executive in other employment or otherwise reduce the amount of any payment
provided for in this Section 8.
(a) If the Company shall terminate the Executive's employment during
the term of this Agreement other than pursuant to Section 7(b) or if the
Executive shall terminate the Executive's employment during the term of this
Agreement for Good Reason pursuant to Section 7(c), then, as severance pay or
liquidated damages or both:
(i) the Company shall pay the Executive the Executive's full Base
Salary through the Date of Termination at the rate in effect at the time
Notice of Termination is given, together with any other amounts payable to
the Executive under Section 6 for periods prior to the Date of Termination
and all outstanding stock options shall become immediately vested and
exercisable;
(ii) the Company shall pay the Executive a lump sum payment, on
the tenth day after the Date of Termination, equal to 299% of (A) the Base
Salary at the rate in effect as of the Date of Termination, plus (B) the
average annual incentive award awarded to the Executive by the Company or
any subsidiary of the Company for any of the five most recent fiscal years
for which annual incentive award determinations were made before the Date
of Termination, except as limited by applicable law; provided, however,
that notwithstanding the foregoing, under no circumstances shall the
Company pay the Executive a payment that would result in an "Excess
Parachute Payment," as defined in Section 280G(b) of the Code; provided,
further, that in the event any payment under this clause (ii) would
constitute an Excess Parachute Payment, such payment shall be reduced to
the extent necessary so that the payment does not constitute an Excess
Parachute Payment; and
(iii) the Company shall pay any amounts payable under Section
17.
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(b) If the Executive's employment terminates under any circumstance
that does not entitle the Executive to payments under Section 8(a) (including a
termination by reason of the death or Disability of the Executive, or by reason
of the Company or the Executive electing not to extend or further extend the
term of this Agreement pursuant to Section 3(b)), the Executive shall not be
entitled to receive any compensation under Section 6 accruing after the date of
such termination, or any payment under Section 8(a) (other than Section 9).
(c) Nothing in Section 8(a) or 8(b) shall deprive the Executive of any
rights, payments, benefits or service credit for benefits after termination of
employment which were earned pursuant to any provision of this Agreement or any
plan or practice of the Company on or prior to such termination including,
without limitation, any pension or welfare benefits and any rights under the
Company's pension, deferred compensation or stock option or other benefit plans
and any legal fees and expenses payable pursuant to Section 17.
9. Indemnification. The Company shall indemnify the Executive to the
fullest extent permitted by the General Corporation Law of the State of
Delaware, as amended from time to time, for all amounts (including, without
limitation, judgments, fines, settlement payments, expenses and attorneys' fees)
incurred or paid by the Executive in connection with any action, suit,
investigation or proceeding arising out of or relating to the performance by the
Executive of services for, or the acting by the Executive as a director, officer
or employee of, the Company, or any subsidiary of the Company or any other
Person at the Company's request. Nothing in this Section 9 or elsewhere in this
Agreement is intended to prevent the Company from indemnifying the Executive to
any greater extent than is required by this Section 9.
10. Non-competition; Non-solicitation.
(a) In consideration of this Agreement, the Executive agrees that, for
the period ending one year after the termination of the Executive's employment
with the Company by the Company for Cause or by the Executive without Good
Reason (the "Non-Competition Period"), the Executive will not, directly or
indirectly (whether as a sole proprietor, partner or venturer, stockholder,
director, officer, employee, consultant or in any other capacity as principal or
agent or through any Person, subsidiary or employee acting as nominee or agent):
(i) conduct or engage in or be interested in or associated with
any Person which conducts or engages in the Triarco Business within the
United States;
(ii) take any action, directly or indirectly, to finance,
guarantee or provide any other material assistance to any Person engaged in
the Triarco Business;
(iii) solicit, contact or accept business of any client or
counterparty whom the Company served or conducted business with or whose
name became known to the Executive as a potential client or counterparty
while in the employ of the Company or during the Non-Competition Period; or
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(iv) influence or attempt to influence any Person that is a
contracting party with the Company at any time during the Non-Competition
Period to terminate any written or oral agreement with the Company.
(b) The Executive shall neither, either on the Executive's own account
or in conjunction with or on behalf of any other Person, solicit or entice away
from the Company any officer, employee or customer of the Company during the
term hereof or the Non-Competition Period nor engage, hire, employ, or induce
the employment of any such Person whether or not such officer, employee or
customer would commit a breach of contract by reason of leaving service or
transferring business.
(c) The restrictive provisions hereof shall not prohibit the Executive
from (i) having an equity interest in the securities of any entity engaged in
the Triarco Business or any business with respect to which the Executive
obtained confidential or proprietary data or information, which entity's
securities are listed on a nationally-recognized securities exchange or
quotation system or traded in the over-the-counter market, to the extent that
such interest does not exceed 5% of the outstanding equity interests of such
entity, (ii) investing as a passive investor in an entity engaging in the
Triarco Business that is not so listed or traded, so long as such interest does
not exceed 5% of the outstanding equity interests of such entity or (iii) with
the prior written consent of the Company, serving as a director or other advisor
to any other Person.
(d) The Executive agrees that the covenants contained in this Section
10 are reasonable covenants under the circumstances, and further agrees that if
in the opinion of a court of competent jurisdiction, such restraint is not
reasonable in any respect, such court shall have the right, power and authority
to excise or modify such provision or provisions of these covenants which as to
such court shall appear not reasonable and to enforce the remainder thereof as
so amended.
11. Successors; Binding Agreement.
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the extent
that the Company would be required to perform it if no such succession had taken
place; provided that no such agreement with a successor shall release the
Company without the Executive's express written consent. Failure of the Company
to obtain such agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement and shall entitle the Executive to compensation
from the Company in the same amount and on the same terms as the Executive would
be entitled to hereunder if the Executive's employment were terminated by the
Company other than pursuant to Section 7(b), except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination.
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(b) If the Executive should die while any amounts are due and payable
to the Executive hereunder, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of the Agreement to the Executive's
devisees, legatee, or other designee or, if there be no such designee, to the
Executive's estate.
(c) Except as to withholding of any tax under the laws of the United
States or any state or locality, neither this Agreement nor any right or
interest hereunder nor any amount payable at any time hereunder shall be subject
in any manner to alienation, sale, transfer, assignment, pledge, attachment, or
other legal process, or encumbrance of any kind by the Executive or the
beneficiaries of the Executive or by legal representatives without the Company's
prior written consent, nor shall there be any right of set-off or counterclaim
in respect of any debts or liabilities of the Executive, the Executive's
beneficiaries or legal representatives against any right or interest hereunder
or any amount payable at any time hereunder to the Executive, the Executive's
beneficiaries or legal representatives; provided, however, that nothing in this
Section 11 shall preclude the Executive from designating a beneficiary to
receive any benefit payable on the Executive's death, or the legal
representatives of the Executive from assigning any rights hereunder to the
Person or Persons entitled thereto under the Executive's will or, in case of
intestacy, to the Person or Persons entitled thereto under the laws of intestacy
applicable to the Executive's estate.
12. Parties. This Agreement shall be binding upon and shall inure to
the benefit of the Company and the Executive, the Executive's heirs,
beneficiaries and legal representatives.
13. Entire Agreement; Amendment.
(a) This Agreement contains the entire understanding of the parties
with respect to the subject matter hereof and supersedes any and all other
agreements between the parties with respect to the subject matter hereof.
(b) Any amendment of this Agreement shall not be binding unless in
writing and signed by both (i) an officer or director of the Company duly
authorized to do so and (ii) the Executive.
14. Enforceability. In the event that any provision of this
Agreement is determined to be invalid or unenforceable, the remaining terms and
conditions of this Agreement shall be unaffected and shall remain in full force
and effect, and any such determination of invalidity or enforceability shall not
affect the validity or enforceability of any other provision of this Agreement.
15. Notices. All notices which may be necessary or proper for either
the Company or the Executive to give to the other shall be in writing and shall
be sent by hand delivery, registered or certified mail, return receipt
requested, overnight courier or facsimile, if to the Executive, at 8 Custer
Drive, Ringwood, New Jersey 07456 or, if to the Company, at its principal
executive offices at 400 Hamburg Turnpike, Wayne, New Jersey 07470, Attention:
Secretary, facsimile: (973) 942-5429, and shall be deemed given when sent,
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provided that any Notice of Termination or other notice given pursuant to
Section 7 shall be deemed given only when received. Either party may by like
notice to the other party change the address at which the Executive or it is to
receive notices hereunder.
16. Governing Law. THIS AGREEMENT IS EXECUTED IN THE STATE OF NEW
JERSEY AND SHALL BE GOVERNED BY, AND BE ENFORCEABLE IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW JERSEY WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS
OF LAWS THEREOF.
17. Legal Fees and Expenses. To induce the Executive to execute this
Agreement and to provide the Executive with reasonable assurance that the
purposes of this Agreement will not be frustrated by the cost of its enforcement
should the Company fail to perform its obligations under this Agreement, the
Company shall pay and be solely responsible for any reasonable attorneys' fees
and expenses and court costs incurred by the Executive and any of the
Executive's beneficiaries, heirs or legal representatives as a result of the
Company's failure to perform this Agreement or any provision hereof to be
performed by the Company.
18. Definitions. The following terms, when capitalized in this
Agreement, shall have the meanings set forth or incorporated by reference in
this Section 18.
(a) "Base Salary" shall have the meaning set forth in Section 6(a).
(b) "Board of Directors" means the Board of Directors of the Company,
as constituted from time to time.
(c) "Cause" shall have the meaning set forth in Section 7(b)(i).
(d) "Change in Control" means a change in control of the Company of a
nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A under the Exchange Act, whether or not the
Company is subject to the Exchange Act at such time; provided, however, that
without limiting the generality of the foregoing, such a Change in Control shall
in any event be deemed to occur if and when:
(i) any person (as such term is used in Sections 13(d) and
14(d)(2) of the Exchange Act), other than the Rohde Family Members, the
Company, its subsidiaries and affiliates (as defined in Rule 12b-2 under
the Exchange Act), becomes the beneficial owner (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Company representing (A) more than 15% of the combined voting power of the
Company's then outstanding securities, and (B) more than the percentage of
the combined voting power of the Company's then outstanding securities
beneficially owned, directly or indirectly, at that time by the Rohde
Family Members;
(ii) stockholders approve a merger or consolidation as a result
of which securities representing less than 70% of the combined voting power
of the outstanding voting securities of the surviving or resulting
corporation will be
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beneficially owned, directly or indirectly, in the aggregate by the former
stockholders of the Company;
(iii) stockholders approve either (A) an agreement for the sale
or disposition of all or substantially all of the Company's assets to an
entity which is not a subsidiary of the Company, or (B) a plan of complete
liquidation; or
(iv) the Persons who were members of the Board of Directors
immediately before a tender offer by any Person other than the Company or a
subsidiary or affiliate of the Company, or before a merger, consolidation,
or contested election, or before any combination of such transactions,
cease to constitute a majority of the Board of Directors as a result of
such transaction or transactions.
(e) "Code" means the Internal Revenue Code of 1986, as amended.
(f) "Company" means Triarco Industries, Inc., a Delaware corporation,
and any successors to its business and/or assets, which executes and delivers an
agreement provided for in Section 11(a) or which otherwise becomes bound by all
the terms and conditions of this Agreement by operation of law.
(g) "Date of Termination" shall have the meaning set forth in Section
7(g).
(h) "Disability" shall have the meaning set forth in Section 7(b)(ii).
(i) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(j) "Fair Market Value" means Fair Market Value as defined in the
Stock Incentive Plan.
(k) "Good Reason" shall have the meaning set forth in Section 7(c).
(l) "Non-Competition Period" shall have the meaning set forth in
Section 10(a).
(m) "Notice of Termination" shall have the meaning set forth in
Section 7(f).
(n) "Person" means any individual, corporation, partnership, limited
liability company, limited duration company, trust or other entity of any nature
whatsoever.
(o) "Rohde Family Members" means, collectively, Rodger R. Rohde, Sr.,
Roger R. Rohde, Jr., Christopher J. Rohde, Cynthia J. Rohde and the Rohde Trust.
(p) "Triarco Business" means a business involving the supply of goods
or services substantially the same as or capable of use in substitution for any
goods or services supplied or proposed to be supplied by the Company at the time
of the termination of the Executive's employment.
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In WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first written above.
Triarco Industries, Inc.
By:
---------------------------------------
Name:
Title:
------------------------------------------
Christopher J. Rohde
<PAGE>
EXHIBIT 10.1.6
EMPLOYMENT AGREEMENT
This Employment Agreement, dated as of __________, 1998 (this
"Agreement"), is by and between Triarco Industries, Inc., a Delaware corporation
having its principal executive offices at 400 Hamburg Turnpike, Wayne, New
Jersey 07470 (the "Company"), and Cynthia J. Rohde (the "Executive").
Whereas, the Company wishes to assure itself of the continued services
of the Executive, and the Executive is willing to continue in the employ of the
Company, upon the terms and conditions hereinafter set forth.
Now, Therefore, the Company and the Executive hereby agree as follows:
1. Definitions. Unless defined elsewhere in this Agreement,
capitalized terms contained herein shall have the meanings set forth or
incorporated by reference in Section 18.
2. Employment. The Company agrees to continue to employ the
Executive, and the Executive agrees to continue to be employed by the Company
and/or any subsidiary of the Company, during the term set forth in Section 3 and
on the other terms and conditions of this Agreement.
3. Term.
(a) The term of this Agreement shall commence as of the date hereof,
and, subject to Section 3(b), shall terminate at the close of business on the
third anniversary of that date.
(b) The term of this Agreement set forth in Section 3(a) shall be
extended or further extended, as the case may be, without any action by the
Company or the Executive, on the third anniversary of the date hereof and on
each subsequent anniversary of the date hereof, for an additional period of one
year, until either party gives written notice to the other party in advance of
any anniversary of the date hereof, in the manner set forth in Section 15, that
the term in effect when such notice is given is not to be extended or further
extended, as the case may be, beyond the year following the next anniversary.
If the Executive shall continue in the full-time employment of the Company after
the term of this Agreement, such continued employment shall be at will, and
otherwise subject to the terms and conditions of this Agreement.
4. Position, Duties and Responsibilities, Rights.
(a) During the term of this Agreement, the Executive shall serve as,
and be elected to and hold the office and title of Vice President--Corporate
Communication of the Company. As such, the Executive shall report only to the
Board of Directors, Chairman of the Board and President of the Company, and
shall have all of the powers and duties usually
<PAGE>
incident to the office of Vice President--Corporate Communication, and shall
have powers to perform such other reasonable additional duties as may from time
to time be lawfully assigned to the Executive by the Board of Directors.
(b) During the term of this Agreement, the Board of Directors and the
stockholders of the Company may cause the Executive to be elected and re-elected
to the Board of Directors of the Company or its subsidiaries (and to be
appointed to any committees thereof), and the Executive agrees, if elected, to
serve on such Board(s) of Directors and committee(s) during the term of this
Agreement, without any additional compensation beyond that provided in this
Agreement.
(c) During the term of this Agreement, the Executive agrees to devote
substantially all the Executive's time, efforts and skills to the affairs of the
Company during the Company's normal business hours, except for vacations,
illness and incapacity, but nothing in this Agreement shall preclude the
Executive from devoting reasonable periods to (i) manage the Executive's
personal investments, (ii) participate in professional, educational, public
interest, charitable, civic or community activities, including activities
sponsored by trade organizations, and (iii) serve as a director or member of an
advisory committee of any corporation not in competition with the Company or any
of its subsidiaries, or as an officer, trustee or director of any charitable,
educational, philanthropic, civic, social or industry organizations, or as a
speaker or arbitrator, provided that the performance of the Executive's duties
or responsibilities in any of such capacities does not materially interfere with
the regular performance of the Executive's duties and responsibilities
hereunder.
5. Place of Performance. In connection with the Executive's
employment by the Company, the Executive shall be based at the Company's
principal executive offices, and shall not be required to be absent therefrom on
travel status or otherwise for more than a reasonable time each year as
necessary or appropriate for the performance of the Executive's duties
hereunder.
6. Compensation.
(a) During the term of this Agreement, the Company, shall pay the
Executive, and the Executive agrees to accept a base salary at the rate of not
less than $125,000.00 per year, with increases in such rate in accordance with
the Company's regular administrative practices of salary increases applicable to
senior officers from time to time during the term of this Agreement (the annual
base salary as increased from time to time during the term of this Agreement
being hereinafter referred to as the "Base Salary"). The Base Salary shall be
paid in installments no less frequently than monthly. Any increase in Base
Salary or other compensation shall not limit or reduce any other obligation of
the Company hereunder, and once established at an increased specified rate, the
Executive's Base Salary hereunder shall not thereafter be reduced.
(b) During the term of this Agreement, the Executive shall be a full
participant in any and all of the Company's short and long-term incentive plans
and equity
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compensation plans in which senior officers of the Company participate that are
in effect on the date hereof or that may hereafter be adopted, including,
without limitation, the Company's 1998 Omnibus Stock Incentive Plan (the "Stock
Incentive Plan"), with at least the same reward opportunities, if any, that are
provided to other senior officers of the Company from time to time during the
term of this Agreement, and with at least the same reward opportunities that
have heretofore been provided to the Executive under any such plans, provided
that in no event shall the Executive be granted stock options, restricted stock
awards or other stock-based long-term incentives after a Change in Control less
often than annually, nor on terms and conditions (including performance goals)
less favorable to the Executive than those which (a) are granted to officers or
employees of similar position and status in the Company, or (b) were granted to
the Executive during the term of this Agreement prior to such Change in Control
(or, if shorter, during the three years preceding the Change in Control), nor on
fewer than the following number of shares:
(i) the average annual number of shares awarded (in the case of
restricted stock awards), or underlying options granted, to the Executive
during the term of this Agreement prior to such Change in Control (or, if
shorter, during the two years preceding the Change in Control); or
(ii) if greater than the number described in clause (i) above,
the number of shares whose Fair Market Value on the date the shares are
optioned or awarded to the Executive equals the average annual Fair Market
Value (determined on the respective grant or award date) of the shares that
were optioned or awarded to the Executive during the term of this Agreement
prior to such Change in Control (or, if shorter, during the two years
preceding the Change in Control).
(c) During the term of this Agreement, the Executive shall be entitled
to (i) perquisites, including, without limitation, an office and secretarial and
clerical staff, and (ii) fringe benefits, including, without limitation, parking
and health insurance, in each case at least equal to, and on the same terms and
conditions as, those attached to the Executive's office on the date hereof, as
the same may be improved from time to time during the term of this Agreement, as
well as to reimbursement, upon proper accounting, of all reasonable expenses and
disbursements incurred by the Executive in the course of the Executive's duties.
(d) The Executive, the Executive's dependents and beneficiaries shall
be entitled to all benefits and service credit for benefits during the term of
this Agreement to which senior officers of the Company and their dependents and
beneficiaries are entitled as the result of the employment of such officers
during the term of this Agreement under the terms of employee plans and
practices of the Company and its subsidiaries, including, without limitation,
any pension plans, profit sharing plans, any non-qualified deferred compensation
plans and related "rabbi" trusts, the Company's life insurance plans, its
disability benefit plans, its vacation and holiday pay plans, its medical,
dental and welfare plans, and other present or successor plans and practices of
the company and its subsidiaries for which senior officers, their dependents and
beneficiaries are eligible, and to all payments and other benefits under any
such plan or practice subsequent to the term of this Agreement as a result of
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participation in such plan or practice during the term of this Agreement. In
addition, the Executive shall be entitled to take up to six consecutive months
of leave, or such longer period as may be required by applicable law,
("Maternity Leave") in connection with the birth of a child. During any
Maternity Leave, the Executive shall be entitled to all benefits; provided,
however, that the Executive shall only be entitled to receive the base salary
for the first three months of the Maternity Leave and no Base Salary shall be
paid or shall accrue during any period of the Maternity Leave in excess of three
months.
7. TERMINATION OF EMPLOYMENT.
(a) The term of this Agreement shall terminate upon the death of the
Executive.
(b) The Company may terminate the Executive's employment during the
term of this Agreement for Cause as provided in Section 7(b)(i) or in the event
of Disability as provided in Section 7(b)(ii).
(i) This Agreement shall be considered terminated for "Cause"
only:
(A) if the Executive willfully and repeatedly fails to
substantially perform the Executive's duties hereunder, other than by
reason of a Disability;
(B) if the Executive is grossly negligent or engages in
gross misconduct in the performance of the Executive's duties
hereunder;
(C) if the Executive knowingly engages in an act of
dishonesty intended to result in substantial personal enrichment at
the expense of the Company, an act of fraud or embezzlement, or any
conduct resulting in a felony conviction;
and, in the case of each of clauses (A), (B) and (C) above, the applicable
conditions set forth in Section 7(e) are satisfied.
Anything in this Section 7(b) to the contrary notwithstanding,
the Executive's employment shall in no event be considered terminated by
the Company for Cause if termination takes place (I) as the result of bad
judgment or negligence on the part of the Executive other than gross
negligence or willful or reckless misconduct, (II) for any act or omission
in respect of which a determination could properly be made that the
Executive met the applicable standard of conduct prescribed for
indemnification or reimbursement or payment of expenses of an officer or
director under the Bylaws or Certificate of Incorporation of the Company or
the laws of the State of Delaware or the directors' or officers' liability
insurance of the Company in each case as in effect at the time of such act
or omission, (III) as the result of an act or omission which occurred more
than three calendar months prior to the Executive's having been given
Notice of Termination for such act or such
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omission unless the commission of such act or such omission was not or
could not reasonably have been, at the time of such commission or omission,
known to a member of the Board of Directors (other than the Executive), in
which case more than three calendar months from the date the commission of
such act or such omission was or could reasonably have been so known, (IV)
as the result of a continuing course of action which commenced and was or
could reasonably have been known to a member of the Board of Directors
(other than the Executive) more than three calendar months prior to Notice
of Termination having been given to the Executive for such course of
action, or (V) because of an act or omission believed by the Executive in
good faith to have been in, or not opposed to, the interests of the
Company.
(ii) The term "Disability" as used in this Agreement means an
accident or physical or mental illness which prevents the Executive from
substantially performing the Executive's duties hereunder for six
consecutive months. The term of this Agreement shall end as of the close
of business on the last day of such six month period but without prejudice
to any payments due to the Executive in respect of disability under this
Agreement or any plan or practice of the Company. The amount of any
payments payable under Section 6(a) during such six month period shall be
reduced by any payments to which the Executive may be entitled for the same
period because of disability under any disability or pension plan or
arrangement of the Company or any subsidiary or affiliate thereof.
(c) The Executive may terminate the Executive's employment during the
term of this Agreement for Good Reason. For purposes of this Agreement, "Good
Reason" shall mean (i) any assignment to the Executive without the Executive's
express written consent of any duties, functions, authority or responsibilities
other than those contemplated by, or any material limitation or expansion
without the Executive's express written consent of the duties, functions,
authority or responsibilities of the Executive in any respect not contemplated
by, Section 4(a), including, without limitation, a change in reporting
relationships, any such assignment, limitation or expansion being deemed a
continuing breach of this Agreement, (ii) a reduction of the Executive's rate of
compensation or any other failure by the Company to comply with Section 6, (iii)
failure by the Company to comply with Section 5, (iv) failure by the Company to
obtain the assumption of, and the agreement to perform, this Agreement by any
successor as contemplated in Section 11(a), (v) such assignment, limitation or
expansion described in the foregoing clause (i), reduction described in the
foregoing clause (ii) or failure described in the foregoing clauses (ii), (iii)
or (iv), as the case may be, is not cured within 30 days after receipt by the
Company of written notice from the Executive describing such event or (vi) a
determination by the Executive made in good faith that, as a result of a
detrimental change in circumstances after a Change in Control significantly
affecting the Executive's position, the Executive is unable properly to carry
out all of the authorities, powers, functions, duties and responsibilities
attached to the Executive's position and contemplated by Section 4(a), and the
situation is not remedied within 30 days after receipt by the Company of written
notice from the Executive of such determination.
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(d) Notwithstanding anything to the contrary set forth herein, subject
to the Bylaws of the Company, the Board of Directors shall have the right by
majority vote of the entire membership of the Board of Directors to terminate
the Executive's employment for any reason other than Cause at any time, subject
to the consequences of such termination as set forth in Section 8.
(e) In no event shall the Company be entitled to terminate the
Executive's employment during the term of this Agreement for Cause pursuant to
Section 7(b), unless and until all of the following take place, provided that
Sections 7(e)(i) through (iii) shall not apply to any termination for Cause
pursuant to Section 7(b)(i)(C):
(i) the Secretary of the Company, pursuant to a resolution duly
adopted by the affirmative vote of not less than a majority of the entire
membership of the Board of Directors at a meeting called for that purpose,
gives written notice to the Executive (the "Warning Notice") setting forth
with particularity (A) the specific provision of this Agreement that the
Executive is alleged to have failed to satisfy, (B) the acts or omissions
alleged to constitute such failure, (C) the date on which the Executive
shall be given a reasonable opportunity to appear before and be heard by
the Board of Directors concerning the allegations, which date shall be not
less than 30 nor more than 90 days after the Executive's receipt of the
Warning Notice, and (D) the loss of rights under this Agreement that shall
occur unless the Executive diligently and in good faith takes reasonable
steps to remedy such failure within 30 days after the Executive's receipt
of the Warning Notice; and
(ii) the Executive does not diligently and in good faith take all
reasonable steps to remedy such failure within 30 days after the
Executive's receipt of the Warning Notice; and
(iii) the Executive is given a reasonable opportunity to appear
before and be heard by the Board of Directors concerning the allegations,
in accordance with the Warning Notice; and
(iv) the Secretary of the Company gives the Executive a certified
copy of a resolution duly adopted by the affirmative vote of not less than
a majority of the entire membership of the Board of Directors after any
opportunity to appear before the Board of Directors required by Section
7(e)(iii), at a meeting called for that purpose, that sets forth the Board
of Director's finding that the Executive both (A) failed to satisfy the
specific provision of this Agreement set forth in the Warning Notice
previously given, or if no such Warning Notice is required pursuant to this
Section 7(c), the specific provision of the Agreement set forth in such
resolution, and (B) if Sections 7(e)(i) through (iii) apply, did not
diligently and in good faith take all reasonable steps to remedy such
failure within 30 days after the Executive's receipt of the Warning Notice,
and that in all cases specifies the particulars thereof in detail.
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(f) Any termination by the Company pursuant to Section 7(b) or by the
Executive pursuant to Section 7(c) shall be communicated by a written Notice of
Termination to the other party hereto. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice which indicates the specific
termination provision in this Agreement relied upon and sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provisions so indicated.
(g) "Date of Termination" shall mean (i) if the Executive's employment
is terminated by the Executive's death, the date of the Executive's death, (ii)
if the Executive's employment is terminated pursuant to Section 7(b)(ii), 30
days after Notice of Termination is given (provided that the Executive shall not
have returned to the performance of the Executive's duties on a full-time basis
during such 30 day period), and (iii) if the Executive's employment is
terminated for any other reason, the date on which a Notice of Termination is
given.
8. Compensation on Termination. The parties recognize and agree
that, if the Company terminates the Executive's employment during the term of
this Agreement other than pursuant to Section 7(b) or if the Executive
terminates the Executive's employment during the term of this Agreement for Good
Reason pursuant to Section 7(c), the actual damages to the Executive would be
difficult if not impossible to ascertain and agree that the Executive's sole
remedy shall be a right to receive amounts determined and paid in accordance
with the provisions of this Section 8. The Executive shall not be required to
mitigate the amount of any payment provided for in this Section 8 by seeking
other employment or otherwise, nor shall any compensation earned by the
Executive in other employment or otherwise reduce the amount of any payment
provided for in this Section 8.
(a) If the Company shall terminate the Executive's employment during
the term of this Agreement other than pursuant to Section 7(b) or if the
Executive shall terminate the Executive's employment during the term of this
Agreement for Good Reason pursuant to Section 7(c), then, as severance pay or
liquidated damages or both:
(i) the Company shall pay the Executive the Executive's full Base
Salary through the Date of Termination at the rate in effect at the time
Notice of Termination is given, together with any other amounts payable to
the Executive under Section 6 for periods prior to the Date of Termination
and all outstanding stock options shall become immediately vested and
exercisable;
(ii) the Company shall pay the Executive a lump sum payment, on
the tenth day after the Date of Termination, equal to 299% of (A) the Base
Salary at the rate in effect as of the Date of Termination, plus (B) the
average annual incentive award awarded to the Executive by the Company or
any subsidiary of the Company for any of the five most recent fiscal years
for which annual incentive award determinations were made before the Date
of Termination, except as limited by applicable law; provided, however,
that notwithstanding the foregoing, under no circumstances shall the
Company pay the Executive a payment that would result in an
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"Excess Parachute Payment," as defined in Section 280G(b) of the Code;
provided, further, that in the event any payment under this clause (ii)
would constitute an Excess Parachute Payment, such payment shall be reduced
to the extent necessary so that the payment does not constitute an Excess
Parachute Payment; and
(iii) the Company shall pay any amounts payable under Section
17.
(b) If the Executive's employment terminates under any circumstance
that does not entitle the Executive to payments under Section 8(a) (including a
termination by reason of the death or Disability of the Executive, or by reason
of the Company or the Executive electing not to extend or further extend the
term of this Agreement pursuant to Section 3(b)), the Executive shall not be
entitled to receive any compensation under Section 6 accruing after the date of
such termination, or any payment under Section 8(a) (other than Section 9).
(c) Nothing in Section 8(a) or 8(b) shall deprive the Executive of any
rights, payments, benefits or service credit for benefits after termination of
employment which were earned pursuant to any provision of this Agreement or any
plan or practice of the Company on or prior to such termination including,
without limitation, any pension or welfare benefits and any rights under the
Company's pension, deferred compensation or stock option or other benefit plans
and any legal fees and expenses payable pursuant to Section 17.
9. Indemnification. The Company shall indemnify the Executive to the
fullest extent permitted by the General Corporation Law of the State of
Delaware, as amended from time to time, for all amounts (including, without
limitation, judgments, fines, settlement payments, expenses and attorneys' fees)
incurred or paid by the Executive in connection with any action, suit,
investigation or proceeding arising out of or relating to the performance by the
Executive of services for, or the acting by the Executive as a director, officer
or employee of, the Company, or any subsidiary of the Company or any other
Person at the Company's request. Nothing in this Section 9 or elsewhere in this
Agreement is intended to prevent the Company from indemnifying the Executive to
any greater extent than is required by this Section 9.
10. Non-competition; Non-solicitation.
(a) In consideration of this Agreement, the Executive agrees that, for
the period ending one year after the termination of the Executive's employment
with the Company by the Company for Cause or by the Executive without Good
Reason (the "Non-Competition Period"), the Executive will not, directly or
indirectly (whether as a sole proprietor, partner or venturer, stockholder,
director, officer, employee, consultant or in any other capacity as principal or
agent or through any Person, subsidiary or employee acting as nominee or agent):
(i) conduct or engage in or be interested in or associated with
any Person which conducts or engages in the Triarco Business within the
United States;
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(ii) take any action, directly or indirectly, to finance,
guarantee or provide any other material assistance to any Person engaged in
the Triarco Business;
(iii) solicit, contact or accept business of any client or
counterparty whom the Company served or conducted business with or whose
name became known to the Executive as a potential client or counterparty
while in the employ of the Company or during the Non-Competition Period; or
(iv) influence or attempt to influence any Person that is a
contracting party with the Company at any time during the Non-Competition
Period to terminate any written or oral agreement with the Company.
(b) The Executive shall neither, either on the Executive's own account
or in conjunction with or on behalf of any other Person, solicit or entice away
from the Company any officer, employee or customer of the Company during the
term hereof or the Non-Competition Period nor engage, hire, employ, or induce
the employment of any such Person whether or not such officer, employee or
customer would commit a breach of contract by reason of leaving service or
transferring business.
(c) The restrictive provisions hereof shall not prohibit the Executive
from (i) having an equity interest in the securities of any entity engaged in
the Triarco Business or any business with respect to which the Executive
obtained confidential or proprietary data or information, which entity's
securities are listed on a nationally-recognized securities exchange or
quotation system or traded in the over-the-counter market, to the extent that
such interest does not exceed 5% of the outstanding equity interests of such
entity, (ii) investing as a passive investor in an entity engaging in the
Triarco Business that is not so listed or traded, so long as such interest does
not exceed 5% of the outstanding equity interests of such entity or (iii) with
the prior written consent of the Company, serving as a director or other advisor
to any other Person.
(d) The Executive agrees that the covenants contained in this Section
10 are reasonable covenants under the circumstances, and further agrees that if
in the opinion of a court of competent jurisdiction, such restraint is not
reasonable in any respect, such court shall have the right, power and authority
to excise or modify such provision or provisions of these covenants which as to
such court shall appear not reasonable and to enforce the remainder thereof as
so amended.
11. Successors; Binding Agreement.
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the extent
that the Company would be required to perform it if no such succession had taken
place; provided that no such agreement with a successor shall release the
Company without the Executive's express written consent. Failure of the Company
to obtain such agreement prior to the effectiveness of any such succession shall
be a breach of this
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Agreement and shall entitle the Executive to compensation from the Company in
the same amount and on the same terms as the Executive would be entitled to
hereunder if the Executive's employment were terminated by the Company other
than pursuant to Section 7(b), except that for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination.
(b) If the Executive should die while any amounts are due and payable
to the Executive hereunder, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of the Agreement to the Executive's
devisees, legatee, or other designee or, if there be no such designee, to the
Executive's estate.
(c) Except as to withholding of any tax under the laws of the United
States or any state or locality, neither this Agreement nor any right or
interest hereunder nor any amount payable at any time hereunder shall be subject
in any manner to alienation, sale, transfer, assignment, pledge, attachment, or
other legal process, or encumbrance of any kind by the Executive or the
beneficiaries of the Executive or by legal representatives without the Company's
prior written consent, nor shall there be any right of set-off or counterclaim
in respect of any debts or liabilities of the Executive, the Executive's
beneficiaries or legal representatives against any right or interest hereunder
or any amount payable at any time hereunder to the Executive, the Executive's
beneficiaries or legal representatives; provided, however, that nothing in this
Section 11 shall preclude the Executive from designating a beneficiary to
receive any benefit payable on the Executive's death, or the legal
representatives of the Executive from assigning any rights hereunder to the
Person or Persons entitled thereto under the Executive's will or, in case of
intestacy, to the Person or Persons entitled thereto under the laws of intestacy
applicable to the Executive's estate.
12. Parties. This Agreement shall be binding upon and shall inure to
the benefit of the Company and the Executive, the Executive's heirs,
beneficiaries and legal representatives.
13. Entire Agreement; Amendment.
(a) This Agreement contains the entire understanding of the parties
with respect to the subject matter hereof and supersedes any and all other
agreements between the parties with respect to the subject matter hereof.
(b) Any amendment of this Agreement shall not be binding unless in
writing and signed by both (i) an officer or director of the Company duly
authorized to do so and (ii) the Executive.
14. Enforceability. In the event that any provision of this
Agreement is determined to be invalid or unenforceable, the remaining terms and
conditions of this Agreement shall be unaffected and shall remain in full force
and effect, and any such determination of invalidity or enforceability shall not
affect the validity or enforceability of any other provision of this Agreement.
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15. Notices. All notices which may be necessary or proper for either
the Company or the Executive to give to the other shall be in writing and shall
be sent by hand delivery, registered or certified mail, return receipt
requested, overnight courier or facsimile, if to the Executive, at 401 East
Ontario, No. 4005, Chicago, Illinois 60611 or, if to the Company, at its
principal executive offices at 400 Hamburg Turnpike, Wayne, New Jersey 07470,
Attention: Secretary, facsimile: (973) 942-5429, and shall be deemed given
when sent, provided that any Notice of Termination or other notice given
pursuant to Section 7 shall be deemed given only when received. Either party
may by like notice to the other party change the address at which the Executive
or it is to receive notices hereunder.
16. Governing Law. THIS AGREEMENT IS EXECUTED IN THE STATE OF NEW
JERSEY AND SHALL BE GOVERNED BY, AND BE ENFORCEABLE IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW JERSEY WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS
OF LAWS THEREOF.
17. Legal Fees and Expenses. To induce the Executive to execute this
Agreement and to provide the Executive with reasonable assurance that the
purposes of this Agreement will not be frustrated by the cost of its enforcement
should the Company fail to perform its obligations under this Agreement, the
Company shall pay and be solely responsible for any reasonable attorneys' fees
and expenses and court costs incurred by the Executive and any of the
Executive's beneficiaries, heirs or legal representatives as a result of the
Company's failure to perform this Agreement or any provision hereof to be
performed by the Company.
18. Definitions. The following terms, when capitalized in this
Agreement, shall have the meanings set forth or incorporated by reference in
this Section 18.
(a) "Base Salary" shall have the meaning set forth in Section 6(a).
(b) "Board of Directors" means the Board of Directors of the Company,
as constituted from time to time.
(c) "Cause" shall have the meaning set forth in Section 7(b)(i).
(d) "Change in Control" means a change in control of the Company of a
nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A under the Exchange Act, whether or not the
Company is subject to the Exchange Act at such time; provided, however, that
without limiting the generality of the foregoing, such a Change in Control shall
in any event be deemed to occur if and when:
(i) any person (as such term is used in Sections 13(d) and
14(d)(2) of the Exchange Act), other than the Rohde Family Members, the
Company, its subsidiaries and affiliates (as defined in Rule 12b-2 under
the Exchange Act), becomes the beneficial owner (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Company representing (A) more than 15% of the combined voting power of the
Company's then outstanding securities, and (B) more than the percentage of
the combined voting power of the Company's then outstanding
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securities beneficially owned, directly or indirectly, at that time by the
Rohde Family Members;
(ii) stockholders approve a merger or consolidation as a result
of which securities representing less than 70% of the combined voting power
of the outstanding voting securities of the surviving or resulting
corporation will be beneficially owned, directly or indirectly, in the
aggregate by the former stockholders of the Company;
(iii) stockholders approve either (A) an agreement for the sale
or disposition of all or substantially all of the Company's assets to an
entity which is not a subsidiary of the Company, or (B) a plan of complete
liquidation; or
(iv) the Persons who were members of the Board of Directors
immediately before a tender offer by any Person other than the Company or a
subsidiary or affiliate of the Company, or before a merger, consolidation,
or contested election, or before any combination of such transactions,
cease to constitute a majority of the Board of Directors as a result of
such transaction or transactions.
(e) "Code" means the Internal Revenue Code of 1986, as amended.
(f) "Company" means Triarco Industries, Inc., a Delaware corporation,
and any successors to its business and/or assets, which executes and delivers an
agreement provided for in Section 11(a) or which otherwise becomes bound by all
the terms and conditions of this Agreement by operation of law.
(g) "Date of Termination" shall have the meaning set forth in Section
7(g).
(h) "Disability" shall have the meaning set forth in Section 7(b)(ii).
(i) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(j) "Fair Market Value" means Fair Market Value as defined in the
Stock Incentive Plan.
(k) "Good Reason" shall have the meaning set forth in Section 7(c).
(l) "Non-Competition Period" shall have the meaning set forth in
Section 10(a).
(m) "Notice of Termination" shall have the meaning set forth in
Section 7(f).
(n) "Person" means any individual, corporation, partnership, limited
liability company, limited duration company, trust or other entity of any nature
whatsoever.
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(o) "Rohde Family Members" means, collectively, Rodger R. Rohde, Sr.,
Roger R. Rohde, Jr., Christopher J. Rohde, Cynthia J. Rohde and the Rohde Trust.
(p) "Triarco Business" means a business involving the supply of goods
or services substantially the same as or capable of use in substitution for any
goods or services supplied or proposed to be supplied by the Company at the time
of the termination of the Executive's employment.
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In WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first written above.
Triarco Industries, Inc.
By:
----------------------------------
Name:
Title:
-------------------------------------
Cynthia J. Rohde
<PAGE>
EXHIBIT 10.2
TRIARCO INDUSTRIES, INC.
1998 OMNIBUS STOCK INCENTIVE PLAN
1. Purpose. The purpose of the Triarco Industries, Inc. 1998 Omnibus
Stock Incentive Plan (the "Plan") is to maintain the ability of Triarco
Industries, Inc. (the "Company") and its subsidiaries to attract and retain
highly qualified and experienced employees and directors and to give such
employees and directors a continued proprietary interest in the success of the
Company and its subsidiaries. Pursuant to the Plan, such employees and
directors will be offered the opportunity to acquire the Company's Common Stock,
par value $.01 per share (the "Common Stock"), through the grant of options,
stock appreciation rights in tandem with such options, the award of restricted
stock under the Plan, bonuses payable in stock or a combination thereof. Unless
the context clearly indicates otherwise, references herein to "option" or
"options" shall include any tandem stock appreciation right that may be granted
in connection with such option or options in accordance with Section 6(f). As
used herein, the term "subsidiary" shall mean any present or future corporation
which is or would be a "subsidiary corporation" of the Company as the term is
defined in Section 424(f) of the Internal Revenue Code of 1986, as amended from
time to time (the "Code").
2. Administration of the Plan. The Plan shall be administered by a
compensation committee (the "Committee") as appointed from time to time by the
Board of Directors of the Company (the "Board"), which Committee shall consist
of not less than two members of the Board; provided, however, that with respect
to members of the Committee and any other directors who (i) are not employees of
the Company or any of its subsidiaries or affiliates and (ii) are otherwise not
eligible for selection to participate in any other plan of the Company or any of
its subsidiaries or affiliates that entitles the participant therein to acquire
securities or derivative securities of the Company ("Nonemployee Directors"),
the Plan shall be administered by the entire Board, and accordingly, with
respect to Committee members and other Nonemployee Directors, references herein
to "Committee" shall mean the entire Board. A majority of the members of the
Committee shall constitute a quorum. The vote of a majority of a quorum shall
constitute action by the Committee.
In administering the Plan, the Committee may adopt rules and
regulations for carrying out the Plan. The interpretation and decision with
regard to any question arising under the Plan made by the Committee shall be
final and conclusive on all employees and directors of the Company and its
subsidiaries participating or eligible to participate in the Plan. The
Committee may consult with counsel, who may be counsel to the Company, and shall
not incur any liability for any action taken in good faith in reliance upon the
advice of counsel. The Committee shall determine the employees and directors to
whom, and the time or times at which, grants or awards shall be made and the
number of shares to be included in the grants or awards. Within the limitations
of the Plan, the number of shares for which options will be granted from time to
time and the periods for which the options will be outstanding will be
determined by the Committee.
<PAGE>
Each option or stock or other awards granted pursuant to the Plan
shall be evidenced by an option agreement or award agreement (an "Agreement").
An Agreement shall not be a precondition to the granting of options or stock or
other awards; however, no person shall have any rights under any option or stock
or other awards granted under the Plan unless and until the person to whom such
option or stock or other award shall have been granted shall have executed and
delivered to the Company an Agreement. The Committee shall prescribe the form of
all Agreements. A fully executed original of the Agreement shall be provided to
both the Company and the recipient of the grant or award.
3. Shares of Stock Subject to the Plan. The total number of shares
that may be optioned or awarded under the Plan is 1,400,000 shares of Common
Stock except that said number of shares shall be adjusted as provided in Section
14. Any shares subject to an option which for any reason expires or is
terminated unexercised and any restricted stock which is forfeited may again be
optioned or awarded under the Plan. Shares subject to the Plan may be either
authorized and unissued shares or issued shares acquired by the Company or its
subsidiaries.
4. Eligibility. Key salaried employees, including officers, and
directors of the Company and its subsidiaries are eligible to be granted options
and awarded restricted stock under the Plan and to have their bonuses payable in
stock. The employees and directors who shall receive awards or options under
the Plan shall be selected from time to time by the Committee, in its sole
discretion, from among those eligible, which may be based upon information
furnished to the Committee by the Company's management, and the Committee shall
determine, in its sole discretion, the number of shares to be covered by the
award or awards and by the option or options granted to each such employee or
director selected. Such key salaried employees and directors who are selected
to participate in the Plan shall be referred to collectively herein as
"Participants."
5. Duration of the Plan. No award or option may be granted under the
Plan more than ten years from the date the Plan is adopted by the Board or the
date the Plan receives shareholder approval, whichever is earlier, but awards or
options theretofore granted may extend beyond that date.
6. Terms and Conditions of Stock Options. All options granted under
this Plan shall be either incentive stock options, as defined in Section 422 of
the Code, or options other than incentive stock options; provided, however, that
all options granted to Nonemployee Directors shall be nonstatutory stock options
not intended to qualify as incentive stock options entitled to special tax
treatment under Section 422 of the Code. Each such option shall be subject to
all the applicable provisions of the Plan, including the following terms and
conditions, and to such other terms and conditions not inconsistent therewith as
the Committee shall determine.
(a) The option price per share shall be determined by the Committee.
However, subject to Section 6(k), the option price of incentive stock options
shall not be less than 100% of the Fair Market Value of a share of Common Stock
at the time the option is
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granted. For purposes of the Plan, the "Fair Market Value" on any date, means
(i) if the Common Stock is listed on a national securities exchange or quotation
system, the closing sales price on such exchange or quotation system on such
date or, in the absence of reported sales on such date, the closing sales price
on the immediately preceding date on which sales were reported, (ii) if the
Common Stock is not listed on a national securities exchange or quotation
system, the mean between the bid and offered prices as quoted by the National
Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ")
for such date or (iii) if the Common Stock is neither listed on a national
securities exchange or quotation system nor quoted by NASDAQ, the fair value as
determined by such other method as the Committee determines in good faith to be
reasonable.
(b) Each option shall be exercisable pursuant to the attainment of
such performance goals and/or during and over such period ending not later than
ten years from the date it was granted, as may be determined by the Committee
and stated in the Agreement. In no event may an option be exercised more than
ten years from the date the option was granted.
(c) Unless otherwise provided in the Agreement, no option shall be
exercisable within six months from the date of the granting of the option. An
option shall not be exercisable with respect to a fractional share of Common
Stock or with respect to the lesser of 50 shares or the full number of shares
then subject to the option. No fractional shares of Common Stock shall be
issued upon the exercise of an option. If a fractional share of Common Stock
shall become subject to an option by reason of a stock dividend or otherwise,
the optionee shall not be entitled to exercise the option with respect to such
fractional share.
(d) Each Agreement shall state whether the option(s) evidenced thereby
will or will not be treated as incentive stock option(s).
(e) Each option may be exercised by giving written notice to the
Company specifying the number of shares to be purchased, which shall be
accompanied by payment in full including, if required by applicable law, taxes,
if any. Payment, except as provided in the Agreement, shall be
(i) in United States dollars by check or bank draft; or
(ii) by tendering to the Company shares of Common Stock already
owned for at least six months by the person exercising the option, which
may include shares received as the result of a prior exercise of an option,
and having a Fair Market Value on the date on which the option is exercised
equal to the cash exercise price applicable to such option; or
(iii) by a combination of United States dollars and shares of
Common Stock as aforesaid; or
(iv) in accordance with a cashless exercise program established
by the Committee in its sole discretion under which either (A) if so
instructed by the optionee, shares may be issued directly to the optionee's
broker or dealer upon receipt of the
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purchase price in cash from the broker or dealer, or (B) shares may be
issued by the Company to an optionee's broker or dealer in consideration of
such broker's or dealer's irrevocable commitment to pay to the Company that
portion of the proceeds from the sale of such shares that is equal to the
exercise price of the option(s) relating to such shares; or
(v) in such other manner as permitted by the Committee at the
time of grant or thereafter.
No optionee shall have any rights to dividends or other rights of a
shareholder with respect to shares of Common Stock subject to such optionee's
option until such optionee has given written notice of exercise of such
optionee's option and paid in full for such shares.
(f) Notwithstanding the foregoing, the Committee may, in its sole
discretion, grant to a grantee of an option a right (a "stock appreciation
right") to elect, in the manner described below, in lieu of exercising such
grantee's option for all or a portion of the shares of Common Stock covered by
such option, to relinquish such grantee's option with respect to any or all of
such shares and to receive from the Company a payment having a value equal to
the amount by which (a) the Fair Market Value of a share of Common Stock on the
date of such election, multiplied by the number of shares as to which the
grantee shall have made such election, exceeds (b) the total exercise price for
that number of shares of Common Stock under the terms of such option; provided,
however, that to the extent that a stock appreciation right is exercised by a
Participant who is or may be subject to Section 16 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), during the ten-day election period
described in Rule 16b-3(e) of the Exchange Act, the amount described in clause
(a) above shall be equal to the highest Fair Market Value of the shares of
Common Stock during such ten-day election period. A stock appreciation right
shall be exercisable at the time the tandem option is exercisable, and the
"expiration date" for the stock appreciation right shall be the expiration date
for the tandem option. A grantee who makes such an election shall receive
payment in the sole discretion of the Committee (i) in cash equal to such excess
or (ii) in the nearest whole number of shares of Common Stock of the Company
having an aggregate Fair Market Value, which is not greater than the cash amount
calculated in clause (i) above; or (iii) a combination of the forms of payment
described in clauses (i) and (ii) above. A stock appreciation right may be
exercised only when the amount described in clause (a) above exceeds the amount
described in clause (b) above. An election to exercise stock appreciation
rights shall be deemed to have been made on the day written notice of such
election, addressed to the Committee, is received at the Company's offices. An
option or any portion thereof with respect to which a grantee has elected to
exercise the stock appreciation rights described above shall be surrendered to
the Company and such option shall thereafter remain exercisable according to its
terms only with respect to the number of shares as to which it would otherwise
be exercisable, less the number of shares with respect to which stock
appreciation rights have been exercised. The grant of a stock appreciation
right shall be evidenced by such form of Agreement as the Committee may
prescribe. The Agreement evidencing stock appreciation rights shall be personal
and will provide that the stock appreciation rights will not be transferable by
the grantee otherwise than by will or the laws of
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descent and distribution and that they will be exercisable, during the lifetime
of the grantee, only by the grantee.
(g) Except as provided in the Agreement, an option may be exercised
only if at all times during the period beginning with the date of the granting
of the option and ending on the date of such exercise, the grantee was an
employee or director of either the Company or of a subsidiary of the Company or
of another corporation referred to in Section 421(a)(2) of the Code. The
Agreement shall provide whether, and if so, to what extent, an option may be
exercised after termination of continuous employment, but any such exercise
shall in no event be later than the termination date of the option. If the
grantee should die, or become permanently disabled as determined by the
Committee in accordance with the Agreement, at any time when the option, or any
portion thereof, shall be exercisable by such grantee, the option will be
exercisable within a period provided for in the Agreement, by the optionee or
person or persons to whom such optionee's rights under the option shall have
passed by will or by the laws of descent and distribution, but in no event at a
date later than the termination of the option. The Committee may require medical
evidence of permanent disability, including medical examinations by physicians
selected by it.
(h) The option by its terms shall be personal and shall not be
transferable by the optionee otherwise than by will or by the laws of descent
and distribution as provided in Section 6(g). During the lifetime of an
optionee, the option shall be exercisable only by the optionee. In the event
any option is exercised by the executors, administrators, heirs or distributees
of the estate of a deceased optionee as provided in Section 6(g), the Company
shall be under no obligation to issue Common Stock thereunder unless and until
the Company is satisfied that the person or persons exercising the option are
the duly appointed legal representative of the deceased optionee's estate or the
proper legatees or distributees thereof.
(i) Notwithstanding any intent to grant incentive stock options, an
option granted will not be considered an incentive stock option to the extent
that it together with any earlier incentive stock options permits the exercise
for the first time in any calendar year of more than $100,000 in Fair Market
Value of Common Stock (determined at the time of grant).
(j) The Committee may, but need not, require such consideration from
an optionee at the time of granting an option as it shall determine, either in
lieu of, or in addition to, the limitations on exercisability provided in
Section 6(e).
(k) No incentive stock option shall be granted to an employee who owns
or would own immediately before the grant of such option, directly or
indirectly, stock possessing more than 10% of the total combined voting power of
all classes of stock of the Company. This restriction does not apply if, at the
time such incentive stock option is granted, the option price is at least 110%
of the Fair Market Value of one share of Common Stock, as determined in
accordance with Paragraph 6(a), on the date of grant and the incentive stock
option by its terms is not exercisable after the expiration of five years from
the date of grant.
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(l) An option and any Common Stock received upon the exercise of an
option shall be subject to such other transfer restrictions and/or legending
requirements that are specified in the Agreement.
7. Option Grants to Nonemployee Directors. Each Nonemployee Director
shall (i) on the date of the Annual or Special Meeting of Stockholders of the
Company at which the Nonemployee Director is first elected to the Board by vote
of the stockholders, or (ii) on the date of appointment to the Board with
respect to a Nonemployee Director appointed to the Board by the Board to fill a
vacancy on the Board, however occurring, whether by the death, resignation or
removal of any director, any increase in the number of directors comprising the
Board, or otherwise, shall, by reason of such election or appointment and
without further action by the Board, be granted as of the close of business on
said date an option to purchase, in the manner and subject to the terms and
conditions of the Plan and the Agreement and to the extent such number of shares
remain available for such purpose hereunder, 7,500 shares of Common Stock. In
the event that the number of shares available for grants under the Plan is
insufficient to make all grants hereby specified on the applicable date, then
all those who become entitled to a grant on such date shall share ratably in the
number of shares then available for grant under the Plan.
8. Terms and Conditions of Restricted Stock Awards. All awards of
restricted stock under the Plan shall be subject to all the applicable
provisions of the Plan, including the following terms and conditions, and to
such other terms and conditions not inconsistent therewith, as the Committee
shall determine.
(a) Awards of restricted stock may be in addition to or in lieu of
option grants.
(b) During a period set by, and/or until the attainment of particular
performance goals based upon criteria established by, the Committee at the time
of each award of restricted stock (the "restriction period") as specified in the
Agreement, the recipient shall not be permitted to sell, transfer, pledge, or
otherwise encumber the shares of restricted stock; except that such shares may
be used, if the Agreement permits, to pay the option price of any option granted
under the Plan, provided an equal number of shares delivered to the recipient
shall carry the same restrictions as the shares so used.
(c) If so provided in the Agreement, shares of restricted stock shall
become free of all restrictions if (i) the recipient dies, (ii) the recipient's
employment terminates by reason of permanent disability, as determined by the
Committee, (iii) the recipient retires under specific circumstances set forth in
the Agreement, or (iv) there is a Change in Control (as defined) of the Company.
The Committee may require medical evidence of permanent disability, including
medical examinations by physicians selected by it. If the Committee determines
that any such recipient is not permanently disabled, the restricted stock held
by such recipient shall be forfeited and revert to the Company.
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(d) Unless and to the extent otherwise provided in the Agreement in
accordance with Section 8(c), shares of restricted stock shall be forfeited and
revert to the Company upon the recipient's termination of employment or
directorship during the restriction period, except to the extent the Committee,
in its sole discretion, finds that such forfeiture might not be in the best
interest of the Company and, therefore, waives all or part of the application of
this provision to the restricted stock held by such recipient.
(e) Stock certificates for restricted stock shall be registered in the
name of the recipient but shall be appropriately legended and returned to the
Company by the recipient, together with a stock power, endorsed in blank by the
recipient. The recipient shall be entitled to vote shares of restricted stock
and shall be entitled to all dividends paid thereon, except that dividends paid
in Common Stock or other property shall also be subject to the same
restrictions.
(f) Restricted stock shall become free of the foregoing restrictions
upon expiration of the applicable restriction period, and the Company shall then
deliver Common Stock certificates evidencing such stock to the recipient.
(g) Restricted stock and any Common Stock received upon the expiration
of the restriction period shall be subject to such other transfer restrictions
and/or legending requirements that are specified in the Agreement.
9. Bonuses Payable in Stock. In lieu of cash bonuses otherwise
payable under the Company's or applicable subsidiary's compensation practices to
employees and directors eligible to participate in the Plan, the Committee, in
its sole discretion, may determine that such bonuses shall be payable in Common
Stock or partly in Common Stock and partly in cash. Such bonuses shall be in
consideration of services previously performed and as an incentive toward future
services and shall consist of shares of Common Stock subject to such terms as
the Committee may determine in its sole discretion. The number of shares of
Common Stock payable in lieu of a bonus otherwise payable shall be determined by
dividing such amount by the Fair Market Value of one share of Common Stock on
the date the bonus is payable.
10. Change in Control.
(a) In the event of a Change in Control of the Company, the Committee
may, in its sole discretion, provide that any of the following applicable
actions be taken as a result, or in anticipation, of any such event to assure
fair and equitable treatment of Participants:
(i) accelerate restriction periods for purposes of vesting in, or
realizing gain from, any outstanding option or shares of restricted stock
awarded pursuant to this Plan;
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(ii) offer to purchase any outstanding option or shares of
restricted stock made pursuant to this Plan from the holder for its
equivalent cash value, as determined by the Committee, as of the date of
the Change in Control; or
(iii) make adjustments or modifications to outstanding options
or with respect to restricted stock as the Committee deems appropriate to
maintain and protect the rights and interests of the Participants following
such Change in Control.
Any such action approved by the Committee shall be conclusive and
binding on the Company, its subsidiaries and all Participants; provided,
however, that notwithstanding the foregoing, under no circumstances shall the
Committee take or approve any action that would result in an "Excess Parachute
Payment," as defined in Section 280G(b) of the Code.
For purposes hereof, "Change in Control" means a change in control of
the Company of a nature that would be required to be reported in response to
Item 6(e) of Schedule 14A of Regulation 14A under the Exchange Act, whether or
not the Company is subject to the Exchange Act at such time; provided, however,
that without limiting the generality of the foregoing, such a Change in Control
shall in any event be deemed to occur if and when:
(i) any person (as such term is used in Sections 13(d) and
14(d)(2) of the Exchange Act), other than Rodger R. Rohde, Sr., Rodger R.
Rohde, Jr., Christopher Rohde, Cynthia Rohde and the Rohde Trust
(collectively, the "Rohde Family Members"), the Company, its subsidiaries
and affiliates (as defined in Rule 12b-2 under the Exchange Act), becomes
the beneficial owner (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing (A) more
than 15% of the combined voting power of the Company's then outstanding
securities, and (B) more than the percentage of the combined voting power
of the Company's then outstanding securities beneficially owned, directly
or indirectly, at that time by the Rohde Family Members;
(ii) stockholders approve a merger or consolidation as a result
of which securities representing less than 70% of the combined voting power
of the outstanding voting securities of the surviving or resulting
corporation will be beneficially owned, directly or indirectly, in the
aggregate by the former stockholders of the Company;
(iii) stockholders approve either (A) an agreement for the sale
or disposition of all or substantially all of the Company's assets to an
entity which is not a subsidiary of the Company, or (B) a plan of complete
liquidation;
(iv) the persons who were members of the Board immediately before
a tender offer by any person other than the Company or a subsidiary or
affiliate of the Company, or before a merger, consolidation, or contested
election, or before any combination of such transactions, cease to
constitute a majority of the Board as a result of such transaction or
transactions; or
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(v) a change in control of the Company occurs of a nature that
would be required to be reported in response to Item 6(e) of Schedule 14A
of Regulation 14A under the Exchange Act if the Company were subject to the
provisions of the Exchange Act at the time such change in control occurs
(whether or not the Company is subject to the Exchange Act at that time),
and at the time such change in control occurs the Company is the beneficial
owner (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing (A) more than 30% of
the combined voting power of the Company's then outstanding securities, and
(B) more than the percentage of the combined voting power of the Company's
outstanding securities beneficially owned, directly or indirectly, at that
time by any other person.
(b) In no event, however, may (i) any option be exercised prior to the
expiration of six months from the date of grant (unless otherwise provided for
in the Agreement), or (ii) any option be exercised after ten years from the date
it was granted.
11. Transfer, Leave of Absence. For the purpose of the Plan: (a) a
transfer of an employee from the Company to a subsidiary or affiliate of the
Company, whether or not incorporated, or vice versa, or from one subsidiary or
affiliate of the Company to another, and (b) a leave of absence, duly authorized
in writing by the Company or a subsidiary or affiliate of the Company, shall not
be deemed a termination of employment.
12. Rights of Employees and Directors.
(a) No person shall have any rights or claims under the Plan except in
accordance with the provisions of the Plan and the Agreement.
(b) Nothing contained in the Plan or Agreement shall be deemed to give
any employee or director the right to be retained in the service of the Company
or its subsidiaries.
13. Tax Withholding Obligations.
(a) If required by applicable law, the payment of taxes, upon the
exercise of an option pursuant to Section 6(e) or a stock appreciation right
pursuant to Section 6(f), shall be in cash at the time of exercise or on the
applicable tax date under Section 83 of the Code, if later; provided, however,
tax withholding obligations may be met by the withholding of Common Stock
otherwise deliverable to the optionee pursuant to procedures approved by the
Committee; provided, further, however, the amount of Common Stock so withheld
shall not exceed the minimum required withholding obligation.
(b) If required by applicable law, recipients of restricted stock,
pursuant to Section 8, shall be required to pay taxes to the Company upon the
expiration of restriction periods or such earlier dates as elected pursuant to
Section 83 of the Code; provided, however, tax withholding obligations may be
met by the withholding of Common Stock otherwise deliverable to the recipient
pursuant to procedures approved by the Committee. If tax withholding is
required by applicable law, in no event shall Common Stock be delivered to any
awardee until such awardee has paid to the Company in cash the amount of such
tax required
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to be withheld by the Company or has elected to have such awardee's withholding
obligations met by the withholding of Common Stock in accordance with the
procedures approved by the Committee or otherwise entered into an agreement
satisfactory to the Company providing for payment of withholding tax.
(c) The Company shall first withhold from any cash bonus described in
Section 9, an amount of cash sufficient to meet its tax withholding obligations
before the amount of Common Stock paid in accordance with Section 9 is
determined.
14. Changes in Capital; Reorganization.
(a) Upon changes in the outstanding Common Stock by reason of a stock
dividend, stock split, reverse split, subdivision, recapitalization, an
extraordinary dividend payable in cash or property, combination or exchange of
shares, separation, reorganization or liquidation, and the like, the aggregate
number and class of shares available under the Plan as to which stock options
and restricted stock may be awarded, the number and class of shares under (i)
each option and the option price per share and (ii) each award of restricted
stock shall, in each case, be correspondingly adjusted by the Committee, such
adjustments to be made in the case of outstanding options without change in the
total price applicable to such options.
(b) In the event (i) the Company is merged or consolidated with
another entity and the Company is not the surviving corporation, or the Company
shall be the surviving corporation and there shall be any change in the Common
Stock of the Company by reason of such merger or consolidation, or (ii) all or
substantially all of the assets of the Company are acquired by another
corporation, or (iii) there is a reorganization or liquidation of the Company
(each, a "Reorganization Event"), or (iv) the Board shall propose that the
Company enter into a Reorganization Event, then the Board (acting solely through
members of the Board who were members of the Board prior to the occurrence of
the Reorganization Event) may in its discretion take any or all of the following
actions:
(i) by written notice to the holders of stock options or
restricted stock awards, provide that the stock options or restricted stock
awards shall be terminated unless exercised within 30 days (or such longer
period as the Board shall determine in its discretion) after the date of
such notice; and
(ii) advance the dates upon which (A) any or all outstanding
stock options and stock appreciation rights shall be exercisable or (B)
restrictions applicable to restricted stock awards shall lapse.
Whenever deemed appropriate by the Board, any action referred to in
this Section 14(b) may be made conditional upon the consummation of the
applicable Reorganization Event.
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(c) Any adjustments or other action pursuant to this Section 14 shall
be made by the Board and the Board's determination as to what adjustments shall
be made or actions taken, and the extent thereof, shall be final and binding.
15. Miscellaneous Provisions.
(a) The Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other segregation of
assets to assure the issuance of shares or the payment of cash upon exercise of
any option or stock appreciation right under the Plan. Proceeds from the sale
of shares of Common Stock pursuant to options granted under this Plan shall
constitute general funds of the Company. The expenses of the Plan shall be
borne by the Company.
(b) It is understood that the Committee may, at any time and from time
to time after the granting of an option or the award of restricted stock or
bonuses payable in Common Stock hereunder, specify such additional terms,
conditions and restrictions with respect to such option or stock as may be
deemed necessary or appropriate to ensure compliance with any and all applicable
laws, including, without limitation, terms, restrictions and conditions for
compliance with federal and state securities laws and methods of withholding or
providing for the payment of required taxes.
(c) If at any time the Committee shall determine, in its discretion,
that the listing, registration or qualification of shares of Common Stock upon
any national securities exchange or quotation system or under any state or
federal law, or the consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection with, the sale or
purchase of shares of Common Stock hereunder, no option may be exercised or
restricted stock or stock bonus may be transferred in whole or in part unless
and until such listing, registration, qualification, consent or approval shall
have been effected or obtained, or otherwise provided for, free of any
conditions not acceptable to the Committee.
(d) By accepting any benefit under the Plan, each Participant and each
person claiming under or through such Participant shall be conclusively deemed
to have indicated such Participant's or person's acceptance and ratification,
and consent to, any action taken under the Plan by the Committee, the Company or
the Board.
(e) THE PLAN SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW JERSEY WITHOUT GIVING EFFECT TO THE PRINCIPLES OF
CONFLICTS OF LAWS THEREOF.
16. Limits of Liability.
(a) Any liability of the Company or any of its subsidiaries to any
Participant with respect to any option or award shall be based solely upon
contractual obligations created by the Plan and the Agreement.
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(b) None of the Company or any of its subsidiaries, or any member of
the Committee or the Board, or any other person participating in any
determination of any question under the Plan, or in the interpretation,
administration or application of the Plan, shall have any liability to any party
for any action taken or not taken in connection with the Plan, except as may
expressly be provided by statute.
17. Amendments and Termination. The Board may, at any time, amend,
alter or discontinue the Plan; provided, however, no amendment, alteration or
discontinuation shall be made which, without the approval of the stockholders,
would:
(a) except as is provided in Section 14, increase the maximum number
of shares of Common Stock reserved for the purpose of the Plan;
(b) except as is provided in Section 14, decrease the option price of
an option to less than 100% of the Fair Market Value of a share of Common Stock
on the date of the granting of the option;
(c) change the class of persons eligible to receive an award of
restricted stock, options or bonuses payable in Common Stock under the Plan; or
(d) extend the duration of the Plan.
The Committee may amend the terms of any award of restricted stock or
option theretofore granted, retroactively or prospectively, but no such
amendment shall impair the rights of any holder without such holder's written
consent.
18. Duration. The Plan shall be adopted by the Board as of the date
on which it is approved by a majority of the Company's stockholders, which
approval must occur within the period ending 12 months after the date the Plan
is adopted. The Plan shall terminate upon the earliest of the following dates
or events to occur:
(a) the adoption of a resolution of the Board, terminating the Plan;
or
(b) the date all shares of Common Stock subject to the Plan are
purchased according to the Plan's provisions; or
(c) ten years from the date hereof.
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Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated March 6, 1998 (except Note 10, as to which the date is
July 20, 1998), in Amendment No. 1 to the Registration Statement (Form S-1 No.
333-59565) and related Prospectus of Triarco Industries, Inc. for the
registration of 3,300,000 shares of its common stock.
/s/ Ernst & Young LLP
Hackensack, New Jersey
September 2, 1998
