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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
FOR ANNUAL AND TRANSACTION REPORTS PURSUANT TO SECTIONS 13 OR 15(D) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1998
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______________ TO ______________
COMMISSION FILE NUMBER 33-11479
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SYNTHETIC INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 58-1049400
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
309 LAFAYETTE ROAD, CHICKAMAUGA, GEORGIA 30707
(Address of principal executive offices) (Zip Code)
(706) 375-3121
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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<S> <C>
NAME OF EACH EXCHANGE ON WHICH
TITLE OF CLASS REGISTERED
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None
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SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, $1.00 PAR VALUE
(Title of Class)
Indicate by check mark whether Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. /X/
At December 22, 1998, the aggregate market value of the Registrant's Common
Stock held by non-affiliates of the Registrant was approximately $48,851,000.
The number of shares of the Registrant's Common Stock outstanding as of
December 22, 1998 was 8,672,382 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the Annual Meeting of Stockholders to be
held in March 1998 are incorporated by reference in Part III.
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PART I
ITEM 1. BUSINESS
GENERAL
Synthetic Industries, Inc., a Delaware corporation (the "Company"),
manufactures and markets a wide range of primarily polypropylene-based materials
designed for support, strength and stabilization applications. The Company's
products replace commonly used materials in diverse applications including:
floor covering, geotextiles, erosion control, concrete reinforcement and
furniture construction fabrics. The Company manufactures and sells more than
2,000 products in over 65 end-use markets predominantly in North America, Europe
and the Far East.
The Company's products are sold along three principal product lines: carpet
backing, construction and civil engineering products, and technical textiles.
The Company has a worldwide presence in carpet backing, a fabric used in all
modern tufted carpets, and is one of the two leading manufacturers in the U.S.
that produce a broad range of primary and secondary carpet backing. The
Company's construction and civil engineering products include fiber additives
for concrete reinforcement and geosynthetic products used in environmental and
infrastructure applications, with such end uses as landfill waste containment
and soil stabilization. The Company's technical textile products are comprised
of specialty fabrics, industrial yarns and fibers used in furniture and bedding
construction and filtration applications. The Company's products are principally
sold through direct sales to customers by the Company's sales force and through
a broad network of distributors located across North and South America, Europe
and the Pacific Rim.
HISTORY
The Company was founded in 1969 to produce polypropylene-based primary
carpet backing. Following the acquisition of the Company in 1976 by a group of
private investors, the Company diversified into the manufacture and sale of
polypropylene-based industrial fabrics and specialty yarns. Between 1981 and
1983, the Company entered the construction and civil engineering products
market, initially by manufacturing woven geotextiles and later through its
introduction of Fibermesh-Registered Trademark- fibers for concrete
reinforcement. In 1985, the Company added secondary carpet backing to its
product offerings. In fiscal 1991, the Company purchased a technical synthetic
fabrics operation located in Gainesville, Georgia, from Chicopee, a subsidiary
of Johnson & Johnson. In addition to broadening the Company's line of geotextile
products, the acquisition gave the Company access to new markets for high
performance technical textiles. As a result of improved fiber technology and
increased fiber manufacturing capabilities, the Company opened its sixth
facility, the nonwoven geotextile plant in Ringgold, Georgia, in 1992, enabling
the Company to offer a full line of geotextile products. In 1997, the Company
acquired certain assets of the Spartan Technologies division of Spartan Mills
(the "Spartan Acquisition"), to enhance the product offering of its furniture
and bedding construction line and expand the use of polyester materials in its
nonwoven products. On March 18, 1998, as amended November 20, 1998, the Company
acquired all of the outstanding shares of Novocon International, Inc., a
manufacturer and marketer of steel concrete reinforcing fibers, for $7.3 million
(the "Novocon Acquisition").
Synthetic Industries L.P. (the "Partnership") acquired the Company in
December 1986. Immediately prior to the November 1, 1996 completion of the
Offering (as defined below), all of the issued and outstanding capital stock of
the Company (5,781,250 shares), was owned by the Partnership. SI Management L.P.
(the "General Partner") is the sole general partner of the Partnership.
Synthetic Management G.P. is the sole general partner of SI Management L.P. By
virtue of these relationships, Synthetic Management G.P. controls the management
and affairs of the Partnership and, therefore, the Company. See "Security
Ownership of Certain Beneficial Owners and Management" and "Certain
Relationships and Related Transactions".
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On November 1, 1996, the Company sold 2,875,000 shares of common stock in an
underwritten public offering (the "Offering"). The net proceeds to the Company
from the sale (after payment of underwriting discounts and commissions and
expenses) were $33,681,000. Employees, officers and directors have been granted
options to purchase an additional 10% of the Common Stock on a fully diluted
basis.
The Company's principal executive offices are located at 309 LaFayette Road,
Chickamauga, Georgia 30707, and its telephone number is (706) 375-3121.
PRODUCTS
The Company develops, manufactures and sells a wide array of
polypropylene-based industrial fibers and fabrics along its three principal
product lines: carpet backing, construction and civil engineering, which
comprises environmental/geotextile products and concrete reinforcement products,
and technical textiles. The Company manufactures five basic yarn and fiber
types, from which approximately 2,000 products are manufactured to serve in
excess of 65 end-use markets. The following table sets forth the Company's net
sales attributable to each product line, and the percentage of total net sales
represented by each, for the past five fiscal years:
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<CAPTION>
YEAR ENDED SEPTEMBER 30,
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1998 1997 1996 1995
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
(THOUSANDS OF DOLLARS)
Carpet Backing..................... $ 168,998 45.8% $ 166,219 48.1% $ 146,491 48.9% $ 133,025 49.0%
Construction/ Civil Engineering.... 128,318 34.8 114,611 33.2 97,043 32.4 82,933 30.6
Technical Textiles................. 71,680 19.4 64,742 18.7 55,998 18.7 55,469 20.4
--------- --------- --------- --------- --------- --------- --------- ---------
Net Sales.......................... $ 368,996 100.0% $ 345,572 100.0% $ 299,532 100.0% $ 271,427 100.0%
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
<CAPTION>
1994
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<S> <C> <C>
Carpet Backing..................... $ 117,791 50.1%
Construction/ Civil Engineering.... 68,706 29.3
Technical Textiles................. 48,480 20.6
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Net Sales.......................... $ 234,977 100.0%
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CARPET BACKING
Carpet backing is the Company's oldest and largest product line consisting
of primary and secondary fabrics in a variety of styles and widths that are
manufactured from polypropylene raw materials. Primary carpet backing is a
tightly woven material into which carpet yarn is tufted in the manufacture of
broadloom floorcoverings. Secondary carpet backing, which forms the base of the
carpet, is the coarser woven fabric that is laminated to the back of tufted
broadloom to insure both carpet integrity and dimensional stability. In addition
to its broad range of primary and secondary backing, the Company produces
SoftBac-TM-, a revolutionary carpet backing system co-developed with Shaw
Industries, Inc. ("Shaw"), the Company's largest customer. SoftBac is a soft,
flexible carpet backing with a "fleecy" texture that makes it easier to handle
and provides for more efficient installation. Along with the ease of handling,
SoftBac requires fewer seams since it can bend and fold through problem areas
such as tight corners, passageways and closets. The Company entered the modular
carpet tile backing market in February 1997 through the Spartan Acquisition.
CONSTRUCTION/CIVIL ENGINEERING
The Company's construction and civil engineering product line offers two
distinct product lines to the construction industry: geosynthetic products and
concrete reinforcement fibers. Construction and civil engineering has achieved
rapid growth since 1993 when the Company enhanced its channels of distribution
for Fibermesh-Registered Trademark- and expanded into the production of nonwoven
geotextiles. In 1998, the Company introduced high performance polypropylene
fibers and completed the Novocon Acquisition, broadening the polypropylene
product line to include steel fibers for reinforced concrete. Within this
product line, geotextile products principally serve the environmental and
infrastructure markets, with end uses such as landfill waste containment,
erosion control and soil stabilization, separation and reinforcement.
Fibermesh-Registered Trademark- and Novocon provide reinforcement of
conventional and pre-cast concrete.
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GEOSYNTHETIC PRODUCTS. The Company's geosynthetic product line consists of
erosion control fabrics, geotextiles, and soil fibers. These products control
erosion and capture sediment; provide filtration, separation and reinforcement
of soils; improve engineering properties of native soils; protect landfill
liners; and extend pavement life. The specifications of the Company's
geosynthetic fabrics and fibers vary depending on specific site conditions,
including such factors as slope angles, water flow velocities, climate, runoff,
soil profile and ultimate land use. The Company's geosynthetic products
generally comply with state agency guidelines pertaining to geosynthetic
products issued to date.
The Company produces a variety of nonwoven and woven geotextiles for use in
landfill, roadway and mining construction. The Company's
LANDLOK-Registered Trademark- erosion control products are used in storm water
drainage channels, steep slopes and shoreline protection. These products hold
the soil in place, while allowing and supporting vegetative growth.
LANDLOK-Registered Trademark- products are an environmentally friendly and
aesthetically pleasing alternative to rock or concrete erosion control methods.
CONCRETE REINFORCEMENT. The Company pioneered the practical use of
polypropylene fibers as a secondary reinforcement for concrete with the
development and introduction of Fibermesh-Registered Trademark- to the concrete
industry in 1983. With the Novocon Acquisition, the Company now offers both
steel fibers for primary reinforcement and Fibermesh-Registered Trademark-
polypropylene fibers for secondary reinforcement and plastic shrinkage crack
minimization. The addition of Fibermesh-Registered Trademark- polypropylene
fibers to concrete inhibits the formation of early cracking while providing
greater impact, abrasion, and shattering resistance from external forces. The
hardened fibrous concrete has lower permeability and a level of toughness
(residual strength) not found in plain concrete. Primary applications for
Fibermesh-Registered Trademark- are residential and commercial slabs, elevated
decks, pre-cast products, shotcrete tunnels, canals and pools, and whitetopping
restoration of deteriorated asphalt pavements and parking areas. Specific
applications for Novocon's steel fibers include industrial slabs on grade,
airport runways, blast resistant structures, and road and water tunnels.
TECHNICAL TEXTILES
Technical textiles produced by the Company are products and systems that
offer high performance solutions for niche markets consisting primarily of
specialty fabrics, industrial yarns and fibers. The specialty fabrics are
manufactured in a variety of widths, weights, permeability ranges and
dimensional configurations primarily from polypropylene and other synthetic
fibers. Customers use these fabrics to manufacture products used in diverse
applications such as furniture and bedding construction, filtration, and
agriculture. Furniture and bedding construction products consist of woven and
nonwoven decking and padding, mattress ticking, dust covers, spring insulators
and flange materials.
The Company also sells its industrial yarns and fibers directly to weavers,
knitters, and non-woven manufacturers who produce niche market products such as
automobile upholstery and air and water filtration media.
MARKETING AND SALES
CARPET BACKING. The Company sells its carpet backing products to 91
customers in the carpet industry, most of whom are carpet manufacturers located
in the United States. In fiscal 1998, the Company's ten largest carpet backing
customers accounted for approximately 85% of its total net sales to the carpet
industry. In fiscal 1998, sales to Shaw accounted for approximately 53% of net
carpet backing sales and approximately 25% of the Company's total net sales.
Shaw is estimated to have 28% of the United States carpet market.
The Company's carpet backing products are sold primarily through the
Company's sales force that is directed from a central sales office in Calhoun,
Georgia. All of the sales managers have significant industry experience and
monitor ongoing product requirements, styling changes and competitive trends
affecting their customers.
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CONSTRUCTION AND CIVIL ENGINEERING. The Company's broad product line is
marketed in conjunction with its industry expertise in application and material
engineering, as well as expertise in construction design and installation, as
cost effective, longer lasting alternatives to traditional construction methods.
Its ongoing marketing communications program for owners, architects, specifying
agencies, including both the public and private sectors, and the engineering
community as a whole, is designed to continue to build awareness of both product
capabilities and in-house and technical expertise, and to expand interest in and
use of concrete reinforcing fibers and geosynthetics.
The Company's geosynthetic products are sold primarily in North America to
regional and national distributors, installers of landfill liners and various
governmental transportation departments, port authorities and waterway
commissions. International sales, which comprise approximately 8% of
geosynthetic sales, are sold through worldwide distribution networks. In fiscal
1998, the ten largest geosynthetic product customers accounted for approximately
61% of the Company's total net sales in this product line.
Fibermesh-Registered Trademark- and Novocon concrete reinforcing fibers are
sold through a direct sales force to ready-mix concrete companies and precast
concrete product manufacturers located primarily in North America and the United
Kingdom. The sales force operates out of eleven regional offices in the United
States and in Chesterfield, England. In addition,
Fibermesh-Registered Trademark- is sold through a contract with Master Builders,
Inc., a worldwide leader in concrete technology. Internationally, in addition to
the United Kingdom sales force, construction industry product distributors
market concrete reinforcing fibers in over 50 countries. In fiscal 1998, the ten
largest concrete reinforcing fiber customers accounted for approximately 12% of
the Company's total net sales of this product line.
TECHNICAL TEXTILES. The Company sells its specialty fabrics to a diverse
group of approximately 400 manufacturers located primarily in North and Central
America and the Pacific Rim countries. The Company sells its industrial yarns
and fibers to a diverse group of approximately 100 manufacturers located in
North America and Europe. In fiscal 1998, the Company's ten largest technical
textile customers accounted for approximately 25% of the Company's total net
sales of technical textiles. The Company's technical textiles are marketed by
salespersons through sales offices in Gainesville and Calhoun, Georgia, Hickory,
North Carolina, Tupelo, Mississippi and Chesterfield, England.
COMPETITION
The markets for the Company's products are highly competitive. In the
manufacture and sale of carpet backing, which represented approximately 46% and
48% of the Company's total sales in fiscal 1998 and 1997, respectively, the
Company competes primarily with Amoco Fabrics and Fibers Co. ("Amoco") and
certain other companies. Amoco has the dominant position in the carpet backing
market worldwide. In the United States, only the Company and Amoco produce a
broad range of primary and secondary carpet backing in a variety of styles and
widths. The Company competes in the carpet backing market primarily on the basis
of quality, availability, service, price and product line variety, providing
carpet manufacturers with a reliable alternative source of supply to Amoco.
In the manufacture and sale of the Company's other products, the Company
generally competes with a number of other companies, some of which are
significantly larger and have substantially greater resources than the Company.
The Company's primary competitors in the construction and civil engineering
market are Amoco and T.C. Mirafi Corporation with respect to geotextiles, North
American Green, Inc. with respect to environmental and erosion control products,
and W.R. Grace & Co., which markets but does not manufacture concrete
reinforcement fibers, with respect to concrete reinforcement. The Company
competes in the concrete reinforcement fiber market primarily on the basis of
product design and technical service. In some applications,
Fibermesh-Registered Trademark- and Novocon steel fibers also compete with
welded wire fabric on the basis of product performance and cost. The Company
competes in the construction and civil engineering market on the basis of
product line breadth and quality, price, and the custom design, engineering and
other services it provides to customers. With respect to technical textiles,
5
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competitors vary depending upon the specific market niche. The Company competes
in each segment of the technical textiles market primarily on the basis of
service, quality, innovation and product line variety.
MANUFACTURING PROCESS
Polypropylene, a chemically inert plastic derived from petroleum, is the
basic raw material used in the manufacture of primarily all of the Company's
products today. The Company believes it is a technological leader in the
conversion of polypropylene into woven and nonwoven polypropylene products. The
expertise of the Company's research and development and marketing staff has
enabled the Company to develop innovative products, frequently in response to
specific customer needs.
Woven fabrics are produced by interlacing thousands of strands of extruded
yarn at right angles to one another. The manner in which the yarn is interlaced
determines the type of weave. Woven fabrics are characterized by strength and
dimensional stability. The Company's woven fabric products include primary and
secondary carpet backing, geotextiles, erosion control fabrics and specialty
fabrics for the filtration, construction and agricultural markets.
Nonwoven fabrics are produced by first stacking several layers of webbed
short length fibers and then entangling the layers by punching barbed needles
through the layers. The Company's nonwoven fabric products include geotextiles,
erosion control fabrics, furniture and bedding construction fabrics and spill
control fabrics.
The Company believes that it has state-of-the-art manufacturing capability
in both its woven and nonwoven product lines and is one of the most
cost-efficient producers in the markets in which it participates. The Company's
three primary manufacturing processes are extrusion, weaving and needlepunched
nonwovens.
EXTRUSION. Much of the Company's expertise has been developed in its
extrusion processes. Engineering the polymeric raw materials during the
extrusion process creates many of the product's specification properties. In
addition to yarns and fibers for conventional end-uses, the Company has also
developed value-added products through the use of additives including those that
resist sunlight degradation. The Company owns and operates several of the
world's largest polypropylene staple fiber lines. Most of the Company's extruded
products are consumed internally and become value-added woven and nonwoven
fabrics, but some are sold to weavers, knitters, nonwoven producers and
convertors.
WEAVING. The yarns produced in the Company's extrusion and yarn spinning
operations are woven on looms to produce the wide variety of fabrics that the
Company sells through all of its marketing divisions. Fabric properties are
engineered to industry specifications by altering constituent yarns and weave
patterns. Looms are generally interchangeable to weave carpet backing,
geotextiles and certain agricultural fabrics.
NEEDLEPUNCHED NONWOVENS. The Company has a state-of-the-art needlepunched
nonwoven fabric facility. This modern plant produces a new generation of
engineered cost-effective fabrics for the geotextile, furniture and bedding
construction and chemical spill cleanup markets.
The Company maintains a complete rigorous quality control program centered
on statistical process control and customer key measures. Each stage of the
process from the raw material to the final product is monitored using standard
procedures and test methods which satisfy the quality control and consistency
standards of ISO 9002 established by the International Standards Organization.
In 1997, the Company received ISO 14001 certification for complying with
internationally recognized environmental standards-- one of the first companies
in the United States to achieve such certification.
The Company's production equipment is capable of manufacturing a variety of
woven and nonwoven polypropylene products. This versatility enables the Company
to alter the product mix within its woven and
6
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nonwoven product lines in response to market demand or to take advantage of
specific product opportunities.
The Company's plants are run on a continuous 24-hour per day basis, seven
days a week, 350 days per year. Orders are typically filled from inventory.
RESEARCH AND DEVELOPMENT
The Company's research and market development is focused primarily on
development and as such the Company engages in product design, development and
performance validation to improve existing products and to create new products.
The Company expended approximately $8.1 million (approximately 2.2% of sales)
and $4.2 million (approximately 1.2% of sales) on Company-sponsored research and
market development activities in fiscal 1998 and fiscal 1997, respectively.
INTERNATIONAL OPERATIONS
The Company conducts its foreign sales operations through subsidiaries in
Europe and a network of distributors worldwide. The aggregate sales (principally
of construction and civil engineering products) by such foreign subsidiaries and
marketing divisions were approximately $8.0 million, $6.6 million, and $5.5
million in fiscal year 1998, 1997 and 1996, respectively. International sales
from United States operations were approximately $27.0 million, $30.1 and $26.0
in fiscal year 1998, 1997 and 1996, respectively. Total international sales were
approximately 9.4%, 10.6% and 10.5% of net sales for fiscal 1998, 1997 and 1996,
respectively.
RAW MATERIALS
Polypropylene, which is a petroleum derivative, is the basic raw material
used in the manufacture of substantially all of the Company's products. The
Company currently purchases polypropylene in pellet form principally from five
suppliers, with Fina Oil & Chemical Company being the Company's largest supplier
of polypropylene. These purchases are generally made pursuant to long-standing
arrangements.
REGULATION
The Company is subject to federal, state and local laws and regulations
affecting its business, including those promulgated under the Occupational
Safety and Health Act and by the Environmental Protection Agency or similar
state agencies. Many of the Company's construction and civil engineering
products have applications that are subject to building code association
guidelines and specifications and highway department guidelines. Obtaining the
necessary approvals can delay new product introductions in some areas. Moreover,
the enactment of new legislation or the issuance of new guidelines may require
the Company to modify its existing geotextile and erosion control fabric
products and may also delay the Company's introduction of new geotextiles and
erosion control fabric products.
The Company's expenditures to date in connection with such federal, state
and local laws and regulations have not been material to its operations. The
Company believes it is currently in substantial compliance with applicable
governmental regulations.
ENVIRONMENTAL COMPLIANCE
The Company is subject to a broad range of federal, state, and local laws
and regulations relating to the pollution and protection of the environment.
Among the many environmental requirements applicable to the Company are laws
relating to air emissions, wastewater discharges, and the handling, disposal or
release of solid and hazardous substances and wastes. Based on continuing
internal review and advice from independent consultants, the Company believes
that it is currently in substantial compliance with applicable environmental
requirements.
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The Company is also subject to laws, such as the federal Comprehensive
Environmental Response, Compensation, and Liability Act of 1980 ("CERCLA"), that
may impose liability retroactively and without fault for releases or threatened
releases of hazardous substances at on-site or off-site locations. The Company
is not aware of any releases for which it may be liable under CERCLA or any
analogous provision.
Actions by federal, state, and local governments in the United States and
abroad concerning environmental matters could result in laws or regulations that
could increase the cost of producing the products manufactured by the Company or
otherwise adversely affect demand for its products. For example, certain local
governments have adopted ordinances prohibiting or restricting the use or
disposal of certain polypropylene products. Widespread adoption of such
prohibitions or restrictions could adversely affect demand for the Company's
products and thereby have a material adverse effect upon the Company. In
addition, a decline in consumer preference for polypropylene products due to
environmental considerations could have a material adverse effect upon the
Company.
Most of the Company's manufacturing processes are mechanical and are
therefore considered to be environmentally benign. Polypropylene resins are
readily recyclable, and the Company recycles post-industrial waste for certain
of its products. In addition, each of the Company's manufacturing sites has
equipment and procedures for reclaiming a majority of internally generated
scrap, thus reducing the amount of waste sent to local landfills. As a result,
the Company does not currently anticipate any material adverse effect on its
operations, financial condition, or competitive position as a result of its
efforts to comply with environmental requirements. Some risk of environmental
liability is inherent in the nature of the Company's business, and there can be
no assurance that material environmental liabilities will not arise. It is also
possible that future developments in environmental regulation could lead to
material environmental compliance or cleanup costs.
ORDER BACKLOG
The Company generally sells its products pursuant to customer orders that
are either satisfied out of inventory or from the shipment of newly manufactured
products promptly following receipt of an order. Accordingly, the dollar amount
of backlog orders believed to be firm is not significant or indicative of the
Company's future sales and earnings.
EMPLOYEES
As of September 30, 1998, the Company employed 2,663 persons in the United
States, of whom 593 were salaried employees and the remainder were hourly
employees. None of the Company's employees are unionized. The Company has never
experienced any strikes and believes its relations with employees to be
satisfactory. The Company employs 13 individuals in the United Kingdom.
PATENTS AND TRADEMARKS
The Company owns or is licensed under several United States and foreign
patents. While these patents are helpful to the Company's business, it is
believed that a loss of patent exclusivity would not be materially adverse to
the Company's business.
The Company has registered several of its trademarks, including
FIBERGRIDS-Registered Trademark-, FIBERMESH-Registered Trademark-,
LANDLOK-Registered Trademark-, and NOVOCON with the United States Patent and
Trademark office and with several foreign trademark offices.
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ITEM 2. PROPERTIES
The following table sets forth certain information concerning the Company's
manufacturing and distribution facilities. The Company has the option to renew
its leases expiring in 1998 and 1999 for additional periods.
<TABLE>
<CAPTION>
SQUARE ACREAGE OF
LOCATION FEET PRINCIPAL FUNCTION PROPERTY
- - --------------------------------------- ---------- --------------------------------------- ------------------
<S> <C> <C> <C>
Owned Facilities
Chickamauga, Georgia................... 1,419,943 Manufactures carpet backing, certain 88.0
fabrics, geotextiles and fibers
Chattanooga, Tennessee................. 126,432 Manufactures specialty yarns and 10.5
construction products
Dalton, Georgia........................ 216,000 Distribution center and multi-product 13.6
warehouse
Dalton, Georgia........................ 44,945 Needlepunching of carpet backing 5.0
Ringgold, Georgia...................... 312,450 Manufactures geotextiles and certain 68.5
nonwoven fabrics
Alto, Georgia.......................... 117,300 Manufactures certain yarns 42.7
Leased Facilities Leased Through
Chickamauga, Georgia................... 143,736 Manufactures carpet backing, certain January 2009
fabrics, geotextiles and fibers
Gainesville, Georgia................... 200,000 Manufactures and warehouses certain December 2000
fabrics
Westside, Georgia...................... 86,440 Carpet backing warehouse April 1999
Dalton, Georgia 110 Florence........... 36,000 Geosynthetic products warehouse July 1999
Dalton, Georgia 124 Keene.............. 185,000 Woven, nonwoven and geotextile January 1999
warehouse
Dalton, Georgia 1408 Coronet........... 31,500 Geosynthetic products warehouse July 1999
Dalton, Georgia 120 Keene.............. 168,300 Geosynthetic products, fiber warehouse April 2003
Dalton, Georgia
2908 North Dug Gap................... 85,000 Carpet backing warehouse September 1998
Cornelia, Georgia...................... 76,000 Assembly of certain fabrics February 1999
Dalton, Georgia
Cleveland Highway.................... 104,827 Specialty yarn warehouse February 1999
Dalton, Georgia
2640 Lakeland Drive.................. 160,000 Nonwoven fabrics warehouse April 2003
Dalton, Georgia
1505 Coronet......................... 105,000 Nonwoven fabrics warehouse June 1999
Dalton, Georgia 3011 Parquet........... 105,250 Warehouse certain fabrics September 1999
Hickory, North Carolina................ 46,250 Converting operation July 2000
Wellford, South Carolina............... 42,837 Nonwoven fabrics warehouse March 1999
Chattanooga, Tennessee................. 23,000 Corporate support offices December 2000
Claremont, North Carolina.............. 14,000 Nonwoven fabrics warehouse September 1998
Tupelo, Mississippi.................... 13,500 Nonwoven fabrics warehouse September 1998
Spartanburg, South Carolina............ 236,090 Manufactures certain nonwoven fabrics March 2002
</TABLE>
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Indebtedness under the Company's Revolving Credit and Securitization
Agreement, dated as of December 18, 1997, as subsequently amended, is secured by
a lien on, and a security interest in, substantially all of the Company's
assets, including all real estate, plants, equipment, inventory, accounts
receivable and cash. Under the terms of the Credit Facility, the lenders
thereunder may exercise certain remedies, including foreclosure, in the event of
a default.
ITEM 3. CLAIMS AND LEGAL PROCEEDINGS
The Company and its subsidiaries are parties to litigation arising out of
their business operations. Such litigation primarily involves claims for
personal injury, property damage, breach of contract and claims involving
employee relations and certain administrative proceedings. The Company believes
such claims are either adequately covered by insurance or do not involve a risk
of material loss to the Company.
In connection with the proposed dissolution of the Partnership, pursuant to
an Agreement and Plan of Withdrawal and Dissolution (the "Plan"), the Company,
its directors and certain other of the Company's officers who are affiliated
with the General Partner have been named in two putative class and derivative
action lawsuits filed by certain limited partners of the Partnership. In the
first action, filed on February 11, 1997 in the Delaware Court of Chancery and
thereafter amended, the plaintiffs have alleged, among other things, breach of
contract with respect to the Partnership Agreement which governs the
Partnership, breach of the defendants' fiduciary duty to the limited partners
and the Company, that the Plan was unlawfully coercive, that the General Partner
has allegedly failed to satisfy certain conditions precedent to the right of
limited partners to amend the partnership agreement and that certain amendments
necessary to implement the Plan violate the terms of the partnership agreement.
The plaintiffs sought, among other equitable and legal remedies, removal of the
General Partner, dissolution of the Partnership, appointment of a liquidating
trustee, to enjoin the implementation of the Plan and compensatory damages in an
undetermined amount. On October 23, 1997, the Court preliminarily enjoined the
implementation of the Plan, although the Plan was subsequently approved by
limited partners on November 7, 1997. On November 7, 1997, the Delaware Supreme
Court accepted the defendants' petition for an expedited appeal of this
injunction, and briefing and oral argument on the appeal was completed as of
January 6, 1998. On March 19, 1998, the Delaware Supreme Court issued an opinion
affirming the Court of Chancery's grant of a preliminary injunction and remanded
the case for further proceedings. On April 27, 1998, the Court of Chancery
granted the motion of certain pro-Plan intervenors to intervene in the action,
but denied their motion to disqualify plaintiffs' counsel. On May 14, 1998, the
General Partner withdrew the Plan. After the withdrawal of the Plan, plaintiffs,
on June 3, 1998, filed a Consolidated Third Amended and Supplemental Class and
Derivative Complaint (the "Third Amended Complaint"). The Third Amended
Complaint, among other things, eliminated certain requests for relief related to
the Plan and added certain allegations related to the Company's Employee Stock
Purchase Plan and certain options granted to certain directors and officers of
the Company. In addition to the relief sought in prior complaints, the Third
Amended Complaint seeks declaratory relief with respect to certain provisions of
the Partnership Agreement, the invalidation of the Company's Employee Stock
Purchase Plan, the invalidation of certain options granted to the Company's
directors and officers, and the invalidation of certain amendments to the
Company's certificate of incorporation and bylaws relating to voting by consent
and the calling of special meetings. On July 20, 1998, defendants filed a motion
to dismiss the Third Amended Complaint. The defendants have denied any
allegation of wrongdoing.
The second lawsuit was filed in the U.S. District Court of the Northern
District of California on May 1, 1997, and thereafter amended. The plaintiff has
alleged in his amended complaint various federal securities and proxy violations
allegedly arising out of the joint proxy statement and prospectus that was
mailed to limited partners in connection with the solicitation of proxies for
the vote on the Plan and other related documents. The plaintiff also added the
Company as a named defendant, alleging that all defendants acted in concert
with, and as agents of, each other; however the plaintiff made no specific
independent allegations with respect to the Company. The plaintiff sought, among
other equitable and
10
<PAGE>
legal remedies, to enjoin the implementation of the Plan and unspecified
damages. On November 6, 1997, the Court granted in part the plaintiff's motion
for a temporary restraining order enjoining the implementation of the Plan.
After the withdrawal of the Plan, defendants, on June 19, 1998, filed a motion
to dismiss the claims as moot. On July 17, 1998, plaintiff moved to amend his
complaint purportedly to include an additional plaintiff and additional claims
for relief, including permanent injunctive relief for any violations of the
securities laws in the future. The amended complaint also adds the Partnership
as a nominal defendant. On September 24, 1998, the Court denied the defendants'
motion to dismiss and granted plaintiff's motion to amend the complaint. The
defendants have denied any allegation of wrongdoing.
On December 29, 1997, a purported derivative action was filed in the
Delaware Chancery Court by a limited partner of the Partnership against certain
of the Company's officers and directors with regard to certain stock options
plans adopted by the Company in 1994. Both the Partnership and the Company were
named as nominal defendants. The plaintiff alleged that the defendants breached
their fiduciary duties by adoption of the stock option plans. The plaintiff
seeks, among other things, a declaration that the stock options granted under
the plans are invalid, the establishment of a constructive trust over the stock
options, unspecified compensatory damages and reasonable attorneys' fees and
expenses. By order dated June 23, 1998, this action was consolidated with the
Delaware action described above. The defendants deny any allegation of
wrongdoing and intend to vigorously contest the lawsuit.
Based on the Company's review of the allegations made in the above actions
to date, the Company does not believe that the ultimate resolution of these
actions will have a material adverse effect on the Company's results of
operations or financial condition.
The Partnership is a principal stockholder of the Company and certain
members of the Company's management control the General Partner.
By letter dated October 22, 1998, a demand for indemnification was received
from a customer with respect to utilization of Fibermesh-Registered Trademark-
in concrete slabs in the State of California. The demand for indemnification
pertained to any and all damages relating to their use of the
Fibermesh-Registered Trademark- product. No lawsuits have been filed against the
Company and based upon the information provided to the Company, the scope of
liability and potential damages, if any, cannot be ascertained at this time. The
Company has engaged outside counsel to investigate this claim and intends to
vigorously defend its product.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders during
the fourth quarter of the fiscal year covered by this Annual Report.
11
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is listed on the Nasdaq National Market (the
"NNM") under the symbol "SIND". The following table sets forth, for the periods
indicated, the high and low prices per share of Common Stock as reported on the
NNM.
<TABLE>
<CAPTION>
COMMON STOCK
BID PRICE
--------------------
<S> <C> <C>
HIGH LOW
--------- ---------
Year Ended September 30, 1997
First Quarter (From November 1, 1996)..................................................... $ 15.750 $ 12.000
Second Quarter............................................................................ 19.750 15.000
Third Quarter............................................................................. 21.250 17.750
Fourth Quarter............................................................................ 28.000 21.125
Year Ended September 30, 1998
First Quarter............................................................................. $ 30.000 $ 24.500
Second Quarter............................................................................ 26.500 21.000
Third Quarter............................................................................. 25.500 13.375
Fourth Quarter............................................................................ 20.125 13.875
Year Ended September 30, 1999
First Quarter (through December 22, 1998)................................................. 18.000 13.250
</TABLE>
At September 30, 1998, there were approximately 35 holders of record of
Common Stock.
The Company has not declared or paid any cash or other dividends on the
Common Stock and intends for the foreseeable future to retain its earnings to
finance the development of its business and for repayment of debt. The
declaration and payment of dividends by the Company are subject to the
discretion of the Board. Any future determination to pay dividends will depend
on the Company's results of operations, financial condition, capital
requirements, contractual restrictions and other factors deemed relevant by the
Board. In addition, the Credit Facility and the Indenture governing the
Company's 9 1/4% Senior Subordinated Notes due 2007 contain restrictions on the
Company's ability to declare and pay dividends.
ITEM 6. SELECTED FINANCIAL DATA
The selected consolidated financial data presented below for, and as of the
end of, each of the fiscal years in the five year period ended September 30,
1998 have been derived from the Company's audited consolidated financial
statements. The consolidated financial statements of the Company as of September
30, 1998 and 1997 and for the three-year period ended September 30, 1998 and the
accountant's report
12
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA (CONTINUED)
thereon are included in Item 8 of this Form 10-K. Dollars are in thousands,
except share and per share data.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ ------------
Summary of Operations Data:
Net sales.................................. $ 368,996 $ 345,572 $ 299,532 $ 271,427 $ 234,977
Gross profit............................... 122,319 112,385 91,211 76,721 82,672
Operating income........................... 49,317 51,430 38,474 28,687 40,770
Income from continuing operations before
provision for income taxes and
extraordinary item....................... 30,073 30,691 15,002 5,436 20,020
Income from continuing operations before
extraordinary item....................... 18,218 18,150 8,102 1,936 11,420
Extraordinary item--loss from early
extinguishment of debt................... -- (11,950) -- -- --
Net income................................. 18,218 6,200 8,102 1,936 11,420
Diluted income per share from continuing
operations before extraordinary item..... $ 2.03 $ 2.08 $ 1.37 $ 0.33 $ 1.93
Weighted average shares outstanding........ 8,995,314 8,719,458 5,930,502 5,930,502 5,930,502
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
Balance Sheet Data:
Working capital............................................ $ 86,265 $ 89,828 $ 64,077 $ 69,039 $ 44,114
Total assets............................................... 440,514 396,591 324,058 312,300 287,933
Long-term debt............................................. 236,843 220,464 194,353 192,048 172,490
Stockholders' equity....................................... 122,645 105,817 65,844 57,756 55,817
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION OF THE FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF THE COMPANY SHOULD BE READ IN CONJUNCTION WITH THE INFORMATION
CONTAINED IN THE CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO.
THE FOLLOWING DISCUSSION INCLUDES FORWARD-LOOKING STATEMENTS THAT INVOLVE
CERTAIN RISKS AND UNCERTAINTIES. SEE "FORWARD-LOOKING STATEMENTS." DOLLARS ARE
IN THOUSANDS, EXCEPT PER SHARE DATA.
OVERVIEW
The Company's net sales in recent years have increased due to a variety of
factors, including generally increasing sales volumes as a result of growing
demand for the Company's products, the Company's ability to expand its markets
through development of new products and acquisitions.
The Company's gross profit has increased due primarily to increasing sales
volumes, continued diversification of its product line in higher margin business
and lower on average polypropylene costs, partially offset by lower average
selling prices due to decreases in the price of polypropylene. Polypropylene is
the basic raw material used in the manufacture of substantially all of the
Company's products today, accounting for approximately 50% of the Company's cost
of sales. The Company believes
13
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
that the selling prices of many of its products have adjusted over time to
reflect changes in polypropylene prices.
The following table sets forth the percentage relationships to net sales of
certain statements of operations items:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------
<S> <C> <C> <C>
1998 1997 1996
--------- --------- ---------
Net sales............................................................ 100.0% 100.0% 100.0%
Cost of sales........................................................ 66.9 67.5 69.5
--------- --------- ---------
Gross profit....................................................... 33.1 32.5 30.5
Selling expenses..................................................... 10.6 9.2 9.2
General and administrative expenses.................................. 8.3 7.7 7.6
Amortization of intangibles.......................................... 0.8 0.7 0.9
--------- --------- ---------
Operating income................................................... 13.4 14.9 12.8
Interest expense..................................................... 5.1 5.8 7.6
Amortization of deferred financing costs............................. 0.2 0.2 0.2
--------- --------- ---------
Income before provision for income taxes and extraordinary item...... 8.1 8.9 5.0
Provision for income taxes........................................... 3.2 3.6 2.3
--------- --------- ---------
Income before extraordinary item..................................... 4.9% 5.3% 2.7%
--------- --------- ---------
--------- --------- ---------
</TABLE>
RESULTS OF OPERATIONS
FISCAL 1998 COMPARED TO FISCAL 1997
Net sales for fiscal 1998 were $368,996 compared to $345,572 for fiscal
1997, an increase of $23,424, or 6.8%. Carpet backing sales for fiscal 1998 were
$168,998 compared to $166,219 for fiscal 1997, an increase of $2,779, or 1.7%,
reflecting higher unit volume, partially offset by lower average selling prices.
Construction and civil engineering product sales for fiscal 1998 were $128,318
compared to $114,611 for fiscal 1997, an increase of $13,707, or 12.0%,
reflecting increased unit volume in fiber reinforced concrete and geosynthetic
product sales. The Novocon Acquisition contributed approximately $7,000 of this
revenue. Technical textiles sales for fiscal 1998 were $71,680 compared to
$64,742 for fiscal 1997, an increase of $6,938, or 10.7%.
Gross profit for fiscal 1998 was $122,319, compared to $112,385 for fiscal
1997, an increase of $9,934, or 8.8%. As a percentage of sales, gross profit
increased to 33.1% in fiscal 1998 from 32.5% in fiscal 1997. This increase was
primarily due to lower on average polypropylene costs and higher sales volume,
partially offset by lower average selling prices.
The Company's improvement in gross profit performance also reflects its
diversification strategy for its products as well as its primary raw material.
The Company expects that sales of construction and civil engineering products
will continue to be of increasing importance to the Company's overall sales.
Reflecting the success of this strategy, sales of carpet backing, although
growing, continue to decrease as a percentage of total sales and now represent
45.8% of fiscal 1998 total net sales. In addition, the Company continues to
expand its polyester-based product offerings and, with the Novocon Acquisition,
now includes steel fibers in its line of concrete reinforcing fibers.
14
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Selling expenses for fiscal 1998 were $39,358 compared to $31,801 for fiscal
1997, an increase of $7,557, or 23.8%. As a percentage of sales, selling
expenses increased from 9.2% in fiscal 1997 to 10.6% in fiscal 1998. General and
administrative expenses for fiscal 1998 were $30,857 compared to $26,562 for
fiscal 1997, an increase of $4,295, or 16.2%. As a percentage of sales, general
and administrative expenses increased from 7.7% in fiscal 1997 to 8.3% in fiscal
1998. The increase in selling, general and administrative expenses was primarily
due to an increase in research and market development costs from approximately
$4,200 in fiscal 1997 to approximately $8,100 in fiscal 1998, a $2,000 increase
in engineering support staff to continue to educate the marketplace about the
benefits of the Company's products, and a $1,500 increase in advisory and
consulting fees to improve operating efficiencies.
Operating income for fiscal 1998 was $49,317 as compared to $51,430 for
fiscal 1997, a decrease of $2,113, or 4.1%. As a percentage of sales, operating
income decreased to 13.4% in fiscal 1998 from 14.9% in fiscal 1997. This
decrease was primarily due to higher selling, general and administrative costs
which offset improved gross margins.
Interest expense for fiscal 1998 was $18,515 compared to $20,085 for fiscal
1997, a decrease of $1,570, or 7.8%, due to lower average interest rates on an
increased level of outstanding debt and the capitalization of interest related
to machinery and equipment installation. The effective income tax rate was 39%
in fiscal year 1998 and 41% in fiscal 1997 before the effect of the
extraordinary item. The provision for income taxes includes the recognition of
additional state income tax credits of approximately $600 during fiscal 1998.
Income from continuing operations for fiscal 1998 was $18,218 compared to
$18,150 for fiscal 1997, an increase of $68. Earnings before interest, taxes,
depreciation and amortization ("EBITDA") for fiscal 1998 was $69,849 compared to
$69,011 for fiscal 1997, an increase of $838, or 1.2%. The increase in income
before extraordinary item, as well as EBITDA, was primarily due to the factors
discussed above. Income per share on a diluted basis for fiscal 1998 was $2.03
compared to $2.08 before extraordinary item for fiscal 1997 on increased
weighted average shares outstanding of 275,856 or 3.2%.
FISCAL 1997 COMPARED TO FISCAL 1996
Net sales for fiscal 1997 were $345,572 compared to $299,532 for fiscal
1996, an increase of $46,040, or 15.4%. Carpet backing sales for fiscal 1997
were $166,219 compared to $146,491 for fiscal 1996, an increase of $19,728, or
13.5%. This increase was primarily due to higher unit volume in both primary and
secondary carpet backing. Construction and civil engineering product sales for
fiscal 1997 were $114,611 compared to $97,043 for fiscal 1996, an increase of
$17,568, or 18.1%. This increase was primarily due to a 10.5% increase in
Fibermesh-Registered Trademark- sales and a 22.3% increase in geosynthetic
sales. Technical textiles sales for fiscal 1997 were $64,742 compared to $55,998
for fiscal 1996, an increase of $8,744, or 15.6%, of which the Spartan
Acquisition added approximately $8,600.
Gross profit for fiscal 1997 was $112,385, compared to $91,211 for fiscal
1996, an increase of $21,174, or 23.2%. As a percentage of sales, gross profit
increased to 32.5% from 30.5%. This increase was due to increased sales volume
and growth of higher margin business, coupled with slightly lower average
polypropylene costs as compared to the prior year.
Selling expenses for fiscal 1997 were $31,801 compared to $27,488 for fiscal
1996, an increase of $4,313, or 15.7%. As a percentage of sales, selling
expenses remained at 9.2%. General and administrative expenses for fiscal 1997
were $26,562 compared to $22,657 for fiscal 1996, an increase of $3,905, or
17.2%. As a percentage of sales, general and administrative expenses increased
from 7.6% to 7.7%. The increase in selling, general and administrative expenses
was primarily due to infrastructure expenditures, to support
15
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
anticipated Company growth, coupled with an increase in research and market
development costs from $2,940 in fiscal 1996 to $4,200 in fiscal 1997.
Operating income for fiscal 1997 was $51,430 as compared to $38,474 for
fiscal 1996, an increase of $12,956, or 33.7%. As a percentage of sales,
operating income increased to 14.9% in fiscal 1997 from 12.8% in fiscal 1996.
This increase was primarily due to improved gross profits, partially offset by
slightly higher selling, general and administrative costs.
Interest expense for fiscal 1997 was $20,084 compared to $22,773 for fiscal
1996, a decrease of $2,689, or 11.8%, due to lower average interest rates on the
outstanding debt.
The effective income tax rate before the effect of the extraordinary item
was 41% and 46% in fiscal 1997 and 1996, respectively. The higher rate for 1996
was due primarily to the effect of nondeductible expenses, including the
amortization of goodwill, on lower income in fiscal 1996.
Income before extraordinary item for fiscal 1997 was $18,150 compared to
$8,102 for fiscal 1996, an increase of $10,048. Earnings before interest, taxes,
depreciation and amortization ("EBITDA") for fiscal 1997 was $69,011 compared to
$54,074 for fiscal 1996, an increase of $14,937, or 27.6%. The increase in
income before extraordinary item, as well as EBITDA, was primarily due to the
factors discussed above.
Income per share on a diluted basis before extraordinary item for fiscal
1997 was $2.08 compared to $1.37 for fiscal 1996 on increased weighted average
shares outstanding of 2,788,956 or 47.0%, resulting from the Offering. Pro forma
income per share before extraordinary item, assuming the net proceeds from the
Offering and the issuance of the Notes (as defined hereunder) were used to
reduce outstanding indebtedness and the shares issued in the Offering were
outstanding as of the beginning of each respective period, would have been $2.10
and $1.28 for fiscal 1997 and 1996, respectively.
LIQUIDITY AND CAPITAL RESOURCES
To finance its capital expenditures program and fund its operational needs,
the Company has relied upon cash provided by operations, supplemented as
necessary by bank lines of credit and long-term indebtedness. Net cash provided
by operating activities was $42,344, $25,129, and $31,421 for the fiscal years
ended September 30, 1998, 1997 and 1996, respectively.
Net cash provided by operating activities in fiscal 1998 consisted primarily
of net income of $18,218 and noncash charges of $26,225. Net cash provided by
operating activities in fiscal 1997 and 1996 resulted primarily from net income
of $6,200 and $8,102, respectively, after deducting $19,431 for the
extraordinary loss on early extinguishment of debt for fiscal 1997 and deducting
non-cash charges of $21,026, and $20,723 and net working capital changes of
approximately ($21,528) and $2,596 for each respective period. In fiscal 1997
the changes included increased inventory and accounts payable balances resulting
primarily from higher inventory quantities and slightly higher on average
polypropylene costs.
The net proceeds from financing and operating activities in fiscal 1998 were
utilized to fund capital expenditures and an acquisition of approximately
$46,100 and $6,000, respectively. The remaining balance due for the Novocon
Acquisition of $1,302 was paid on December 11, 1998. Capital expenditures
planned for fiscal 1999 are approximately $25,000, primarily to expand the
capacity of the Company's manufacturing facilities, subject to prevailing market
conditions. Capital expenditures in fiscal 1997, including an acquisition, and
1996 were approximately $63,000 and $29,000, respectively.
On April 7, 1998, the Company entered into an eight-year capital lease
agreement to finance additional equipment of approximately $7,500 with an
interest rate of 7.25%. On October 4, 1998, the Company entered into an
eight-year capital lease for the acquisition of equipment of $5,300 at an
interest
16
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
rate of 7.03%. The proceeds were primarily used to repay the balance of the May
15, 1996 capital lease of $3,416.
On February 11, 1997, the Company issued $170,000 aggregate principal amount
of 9 1/4% Senior Subordinated Notes due February 15, 2007 (the "Notes"), which
represent unsecured obligations of the Company. The Notes are redeemable at the
option of the Company at any time on or after February 15, 2002, at an initial
redemption price of 104.625% of their principal amount together with accrued
interest, with declining redemption prices thereafter. Interest on the Notes are
payable semi-annually on February 15 and August 15 in the amount of $7,863.
On November 1, 1996, the Company received net proceeds of approximately
$34,000 (after payment of underwriting discounts and commissions and expenses)
from the sale of 2,875,000 shares of Common Stock in an underwritten public
offering. These proceeds, together with the proceeds received from the issuance
of the Notes, were utilized primarily to retire approximately $133,000 of the
Company's 12 3/4% Senior Subordinated Debentures due 2002 (the "Debentures"),
pay the related call premium and prepayment costs and fees associated with the
refinancing of $15,920, pay debt issuance costs of $5,525 and to repay
approximately $21,900 of certain outstanding indebtedness under the Company's
Fourth Amended and Restated Revolving Credit and Security Agreement, dated as of
October 20, 1995, as subsequently amended, among the Company, the lenders party
thereto and BankBoston, as agent. In connection therewith, the Company recorded
an extraordinary loss of $11,950 during the second quarter of fiscal 1997.
On December 1, 1997, the Company redeemed the remaining $7,403 aggregate
principal amount of the Debentures at a redemption price of 106.375% of the
principal amount thereof, together with accrued interest as of the redemption
date.
On December 18, 1997, the Company and its lenders, with BankBoston as agent,
entered into a new five year credit facility (the "Credit Facility"). The Credit
Facility consists of up to a $40 million asset based securitization program,
with amounts borrowed through a newly formed subsidiary, Synthetic Industries
Funding Corporation, (the "Securitization"), and a $60 million senior secured
revolver facility (the "Revolver"). Securitization and Revolver borrowings are
collateralized by the Company's accounts receivables and substantially all of
the assets of the Company, excluding real property, respectively.
Interest on the Securitization is based on the applicable commercial paper
rate in effect plus a spread. The Revolver permits borrowings which bear
interest, at the Company's option, (i) for domestic borrowings based on the
lender's base rate or (ii) for Eurodollar borrowings based on a spread over the
Interbank Eurodollar rate at the time of conversion. Spreads for the
Securitization and the Revolver borrowings are determined by the operational
performance of the Company. At September 30, 1998, the balances under the
Securitization and Revolver were $29,162 and $30,022, respectively, at interest
rates ranging from 6.27% to 8.5%.
The Revolver provides for borrowings under letters of credit of up to
$10,000, which borrowings reduce amounts available under the Revolver. At
September 30, 1998, letters of credit of $402 were outstanding.
The Credit Facility contains covenants related to the maintenance of certain
operating ratios and limitations as to the amount of capital expenditures. The
Company's ability to pay dividends on its Common Stock is restricted by both the
New Credit Facility and the Notes. At September 30, 1998, the availability under
the Credit Facility was approximately $30,800.
At September 30, 1998, the Company's total outstanding indebtedness amounted
to $242,343. Such indebtedness consists of borrowings under the Credit Facility
of $59,184, $170,000 aggregate principal
17
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
amount of the Notes, outstanding capital lease obligations, mortgage, and a
short-term note of $13,159. Cash interest paid during fiscal 1998, 1997 and 1996
was $21,232, $23,642, and $23,176, respectively.
On November 18, 1998, the Company announced its plans to combine its
non-woven manufacturing facilities in the first half of fiscal 1999. The move is
expected to increase operating efficiencies by reducing overhead costs and
centralizing production in a modern facility. The Company estimates that $5,000
to $6,000 of pre-tax costs will be incurred relating to the plant combination.
The combination is expected to be completed in June 1999, and the Company
expects pre-tax savings will be approximately $1,500 to $2,000 annually.
Based on current levels of operations and anticipated growth, the Company's
management expects net cash from operations to provide sufficient cash flow to
satisfy the debt service requirements of the Company's long-term debt
obligations, including the New Credit Facility and lease agreements, permit
anticipated capital expenditures and fund the Company's working capital
requirements for the next twelve months.
INFLATION AND SEASONALITY
The Company does not believe that its operations have been materially
affected by inflation during the three most recent fiscal years. While the
Company does not expect that inflation will have a material impact upon
operating results, there is no assurance that its business will not be affected
by inflation in the future.
The Company's sales and income have historically been higher in the third
and fourth quarters of its fiscal year. While sales and income in the carpet
backing and technical textile product lines are not greatly affected by seasonal
trends, sales of construction and civil engineering products are lower in the
first and second quarters of any given fiscal year due to the impact of adverse
weather conditions on the construction and civil engineering markets.
Consequently, as sales from construction and civil engineering products continue
to increase as a percentage of the Company's total sales, the seasonality of
these products' sales will affect total sales and income of the Company to a
greater degree.
Presented below is a summary of the unaudited consolidated quarterly
financial information for the years ended September 30, 1998 and 1997:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------------
<S> <C> <C> <C> <C>
FISCAL 1998 DECEMBER 31 MARCH 31 JUNE 30 SEPTEMBER 30
- - ---------------------------------------------------------- ------------ ---------- ---------- ------------
Net sales................................................. $ 76,581 $79,271 $104,531 $108,613
Operating income.......................................... 7,221 6,967 17,755 17,374
Net income................................................ 1,345 1,238 7,755 7,880
Income per share.......................................... 0.15 0.14 0.87 0.89
Weighted average shares outstanding....................... 9,117,809 9,080,922 8,940,674 8,841,851
Fiscal 1997
Net sales................................................. $ 70,857 $75,358 $99,112 $100,245
Operating income.......................................... 7,347 9,331 17,823 16,929
Income before extraordinary item.......................... 904 2,160 7,676 7,410
Net income (loss)......................................... 904 (9,790 (a) 7,676 7,410
Income (loss) per share................................... 0.12 (1.09 (a) 0.86 0.82
Weighted average shares outstanding....................... 7,847,168 8,957,155 8,969,031 9,080,956
</TABLE>
- - ------------------------
(a) Includes an extraordinary loss of $11,950, or $1.37 per share, from the
early extinguishment of debt. See Note 9.
18
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
YEAR 2000 READINESS DISCLOSURES
The Company is preparing its computer systems and hardware to deal with the
issues related to the year 2000. This is necessary because certain computer
programs have been written using two digits rather than four to define the
applicable year. As a result, software may recognize a date using the two digits
"00" as the year 1900 rather than the year 2000. Computer programs that do not
recognize the proper date could generate erroneous data or cause systems to
fail. In addition, many of the Company's vendors and service providers are also
faced with similar issues related to the year 2000.
In January 1998, the Company formally implemented a plan to become year 2000
compliant. The Company is evaluating and testing business and technical
information system hardware and software as to year 2000 compliance and
functionality. Planned application testing is 66% complete. The Company's basic
integrated software applications, Infinium and CAMS, are represented to be year
2000 compliant by their respective vendors and testing to date has verified
vendor representations. Minimal code renovations were necessary in CAMS and have
been completed. The last phase of testing is scheduled to be completed on or
before March 1999, although test validation processes will be ongoing, thereby
providing sufficient time to handle unforeseen contingencies and respond to
external year 2000 issues that affect the Company and the Company's business
partners. The inventory process and assigning priorities are complete for
manufacturing process control, instrumentation and embedded systems.
Documentation from respective equipment manufacturers and resources is
approximately 85% complete. The Company believes that the repair of this
equipment is approximately 95% complete, with all testing of this equipment to
be scheduled and completed by mid 1999. Contingency planning for this equipment
is in process and scheduled for completion by fiscal year-end 1999. The Company
has also been proactive in contact with external business partners to
communicate and exchange status information.
In fiscal 1998 the costs for addressing year 2000 issues were approximately
$225 and have been expensed as incurred. The Company does not believe that
future costs will have a material adverse effect on the Company's results of
operations or financial condition.
In the event that the efforts of this program do not address all potential
system problems, the Company is developing contingency plans to ensure that it
will be able to operate the critical areas of its business. This process
includes developing alternative plans to engage in business activities with
customers and suppliers who may not be year 2000 compliant. These plans will be
monitored for completion as we approach the year 2000. There can be no assurance
that the efforts or the contingency plans related to the Company's systems or
those of third parties relied upon will be successful or that any failure to
convert, upgrade, or appropriately plan for contingencies would not have a
material adverse effect on the Company's results of operations or financial
condition.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" ("SFAS 130"), which must be adopted for fiscal years beginning after
December 15, 1997. SFAS 130 establishes standards for reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements. SFAS 130 will not have a material effect on the Company's
results of operations or financial condition.
Also in June 1997, the FASB issued Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and Related
Information" ("SFAS 131"), which must be adopted for fiscal years beginning
after December 15, 1997. Under the new standard, companies will be required to
19
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
report certain information about operating segments in consolidated financial
statements. Operating segments will be determined based on the method that
management organizes its businesses for making operating decisions and assessing
performance. SFAS 131 also requires companies to report certain information
about their products and services, the geographic areas in which they operate,
and their major customers. The Company is currently evaluating the effect SFAS
131 will have on its financial statement presentation.
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"), which must be adopted for fiscal quarters of fiscal years beginning after
June 15,1999. SFAS 133 requires the recognition of all derivatives as either
assets or liabilities in the statement of financial position and measurement of
those instruments at fair value. SFAS 133 will not have a material effect on the
Company's results of operations or financial condition
FORWARD LOOKING STATEMENTS
The discussion of the Company's business and operations in this report
includes in several instances forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, which are based upon management's
good faith assumptions relating to the financial, market, operating, and other
relevant environments that will exist and affect the Company's business and
operations in the future. No assurance can be made that the assumptions upon
which management based its forward-looking statements will prove to be correct,
or that the Company's business and operations will not be affected in any
substantial manner by other factors not currently foreseeable by management or
beyond the Company's control. All forward-looking statements involve risks and
uncertainties, including those described in this report, and such statements
shall be deemed in the future to be modified in their entirety by the Company's
public pronouncements, including those contained in all future reports and other
documents filed by the Company with the Securities and Exchange Commission.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risks relating to the Company's operations result primarily from
changes in interest rates and commodity prices.
INTEREST RATE RISK
The Company faces minimal interest rate risk exposure in relation to its
outstanding debt of $242,343 at September 30, 1998. Of this amount $59,184,
under the Credit Facility, is subject to interest rate fluctuations. A
hypothetical 10% change in interest rates applied to the fair value of debt
would not have a material impact on earnings or cash flows of the Company.
COMMODITY PRICE RISK
The Company is a purchaser of certain commodities, primarily polypropylene.
The Company does not use commodity futures for hedging purposes. Polypropylene
is the basic raw material used in the manufacture of substantially all of the
Company's products today, accounting for approximately 50% of the Company's cost
of goods sold.
The price of polypropylene is determined by the supply and demand for the
product. Historically, the creation of additional capacity has helped to relieve
supply and pricing pressures although there can be no
20
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (CONTINUED)
assurance that this will continue to be the case. According to a September 1998
report by Chemical Data Inc., a monthly petrochemical and plastics analysis
publication, annual polypropylene capacity in North America is expected to rise
from 12.6 billion pounds per year for 1996 to 15.0 billion pounds per year for
1998, and to 19.3 billion pounds per year by the year 2000, a 10.8% compounded
growth rate. Although in fiscal 1998 supply increased faster than demand, the
Company expects polypropylene prices to remain basically unchanged in fiscal
year 1999 as supply and demand stabilize.
An increase in the price of polypropylene for a prolonged period without an
increase in the selling prices of the Company's products could have a material
effect on the Company's earnings and cash flows. The Company believes that the
selling prices of many of its products have adjusted over time to reflect
changes in polypropylene prices.
CURRENCY RISK
The Company faces currency risk exposure that arises from translating the
results of its United Kingdom operations to the U.S. dollar. The currency risk
exposure is not material as the United Kingdom division's operations do not have
a material impact on the Company's earnings.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information with respect to this Item is contained in the Company's
consolidated financial statements indicated in the Index in Part IV, Item 14 of
this Annual Report on Form 10-K and is incorporated herein by reference.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
21
<PAGE>
PART III
ITEM 10. EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY
The information required by this item is incorporated herein by reference to
the material appearing in the Company's definitive proxy statement for the
annual meeting of stockholders to be held in 1999 (the "Proxy Statement") under
the captions "Election of Directors" and "Executive Officers."
ITEM 11. REMUNERATION OF DIRECTORS AND OFFICERS
The information required by this item is incorporated herein by reference to
the material appearing in the Proxy Statement under the captions "Election of
Directors--Director Compensation" and "Executive Compensation and Other
Information."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated herein by reference to
the material appearing in the Proxy Statement under the caption "Voting
Securities and Certain Beneficial Owners".
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
SI Management L.P. is the sole general partner of the Partnership. Synthetic
Management G.P. is the sole general partner of SI Management L.P. By virtue of
these relationships, Synthetic Management G.P. controls the management and
affairs of the Partnership and therefore, the Company. The Partnership owns
5,699,194 shares of Common Stock, or approximately 66% of the issued and
outstanding shares of Common Stock, and therefore, holds the voting power to
determine the outcome of all matters upon which stockholders vote.
The partners of Synthetic Management G.P. are the following five Delaware
corporations: Chill Investments, Inc., Beckman Investments, Inc., Freed
Investments, Inc., Kenner Investments, Inc. and W.G. Wright Investments, Inc.
Each of Messrs. Chill, Beckman, Freed, Kenner and Wright is the sole director
and the sole stockholder of one of Synthetic Management G.P.'s partners. For
further information concerning Messrs. Chill, Freed, Kenner and Wright, see
"Executive Officers and Directors of the Company."
The Company and the Partnership have entered into a Registration Rights
Agreement pursuant to which the Company has agreed that upon request of the
Partnership the Company will register under the Securities Act and applicable
state securities laws the sale of the Common Stock owned by the Partnership and
as to which registration has been requested. The Company's obligation is subject
to certain limitations relating to a minimum amount required for registration,
the timing of a registration and other similar matters. The Company is obligated
to pay any registration expenses incidental to such registration, excluding
underwriters' commissions and discounts. In connection with the Company's
initial public offering of Common Stock in November 1996, the Company incurred
approximately $650,000 of such incidental registration expenses on the behalf of
the Partnership. The above description is qualified in its entirety by reference
to the Registration Rights Agreement, a copy of which has been filed as an
exhibit to Amendment No. 1 to the Company's Registration Statement on Form S-1
(File No. 333-9377), filed with the Securities and Exchange Commission on
September 13, 1996.
On September 19, 1997, the Company and the Partnership entered into the
Agreement and Plan of Withdrawal and Dissolution of the Partnership (the
"Plan"). Pursuant to the Plan, the Partnership was to be dissolved in two
separate phases. The first phase was to be an underwritten public offering of
the number of shares of Common Stock that limited partners have elected to sell,
and the second phase is to be one to three liquidating distributions of the
unsold portions of the Partnership's shares of Common Stock, beginning 180 days
after the completion of the public offering. On November 7, 1997, the limited
22
<PAGE>
partners approved the adoption of the Plan. However, the implementation of the
Plan has been enjoined by courts in Delaware and California in connection with
two lawsuits filed by certain limited partners of the Partnership against the
Partnership and its general partner (the "General Partner"), among others. See
"Claims and Legal Proceedings." Among other equitable and legal remedies, the
plaintiff is seeking the removal of the General Partner and the liquidation of
the Partnership. The Company is only a nominal defendant in these proceedings
and does not presently possess any contractual rights with respect to their
ultimate resolution. If, in connection with these lawsuits, the General Partner
is removed or resigns, or the Partnership is liquidated under a court-appointed
receiver, there can be no assurance that the resulting sale and/or distribution
of the Partnership's shares of Common Stock will be made in the same or similar
manner as that contemplated by the Plan. The General Partner has denied the
allegations of the plaintiff and is vigorously contesting the lawsuits; however,
in the event of an adverse ruling, the Company cannot predict the volume and
price at which the Common Stock trades might be affected.
Lee J. Seidler, a director of the Company, is presently associated with
Bear, Stearns & Co. Inc. as Managing Director Emeritus and from time to time
receives fees in connection with consulting and referral services to Bear,
Stearns & Co. Inc., including the initial public offering and the offering of
$170,000,000 aggregate principal amount of the Notes. Dr. Seidler has received
from Bear, Stearns & Co. Inc., in connection with such services, approximately
$200,000 in fiscal 1997.
Jon P. Beckman, a former executive officer of the Company and an affiliate
of the General Partner, is being retained as a consultant to the Company.
Pursuant to his consulting agreement with the Company, Mr. Beckman will receive,
until January 31, 2000, or upon earlier termination of his consulting agreement,
$125,000 per year and various insurance coverages, and will be authorized to
exercise all stock options awarded to him, subject to applicable vesting
provisions. Under this agreement, Mr. Beckman is required to provide the Company
with 20 hours of consultation per month, has released the Company from any
liability resulting from his employment and has also agreed not to compete
against the Company.
The Company leases office space under a five-year lease with William Gardner
Wright, Jr., one of the Company's executive officers. The term of the lease
expires on September 30, 2003 and the rent is approximately $4,300 per month,
which the Company believes is within prevailing market rates.
Pursuant to a licensing agreement with the Company, W. Wayne Freed, an
executive officer of the Company, receives royalties related to the manufacture
and sale of a certain product for which Mr. Freed owns all of the U.S. and
foreign patents. Under this agreement, Mr. Freed received royalties of $9,900
and $12,646 in fiscal 1998 and 1997, respectively, and will continue to receive
such royalties until 2012 or the earlier termination of the licensing agreement.
In May 1998, the Company acquired 82,056 shares of Common Stock from the
Partnership in exchange for $1,759,085 of amounts receivable from the
Partnership in partial settlement of expenses incurred by the Company on behalf
of the Partnership during the last several years. The shares were acquired at
their fair market value and are held in treasury for issuance under the Employee
Stock Purchase Plan (see Note 15 to the financial statements). At September 30,
1998, the remaining balance due the Company from the Partnership was $663,443.
23
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Index to Consolidated Financial Statements:
<TABLE>
<CAPTION>
PAGE NO. OF
FINANCIAL STATEMENT
-----------------------
<S> <C>
(1) Financial Statements:
Independent Auditors' Report.......................................................... F-1
Consolidated Balance Sheets........................................................... F-2
Consolidated Statements of Operations................................................. F-3
Consolidated Statements of Changes in Stockholders' Equity............................ F-4
Consolidated Statements of Cash Flows................................................. F-5
Notes to Consolidated Financial Statements............................................ F-6
</TABLE>
(b) The Company did not file a Current Report on Form 8-K during the last
quarter of the fiscal year covered by this Annual Report.
(c) Exhibits: See Exhibit Index immediately following Item 14.
(d) No additional financial statements are required to be filed.
24
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Synthetic Industries, Inc.
Chickamauga, Georgia
We have audited the accompanying consolidated balance sheets of Synthetic
Industries, Inc. and subsidiaries as of September 30, 1998 and 1997, and the
related consolidated statements of operations, changes in stockholders' equity
and cash flows for each of the three years in the period ended September 30,
1998. 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, such consolidated financial statements present fairly, in
all material respects, the financial position of Synthetic Industries, Inc. and
subsidiaries at September 30, 1998 and 1997, and the results of their operations
and their cash flows for each of the three years in the period ended September
30, 1998 in conformity with generally accepted accounting principles.
/S/ Deloitte & Touche LLP
Deloitte & Touche LLP
New York, New York
November 20, 1998
F-1
<PAGE>
SYNTHETIC INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------------
<S> <C> <C>
1998 1997
---------- ----------
ASSETS
CURRENT ASSETS:
Cash.................................................................................... $ 285 $ 338
Accounts receivable (Note 4)............................................................ 64,251 60,031
Inventory (Note 5)...................................................................... 52,450 54,139
Other current assets (Note 6)........................................................... 17,309 17,200
---------- ----------
TOTAL CURRENT ASSETS................................................................ 134,295 131,708
PROPERTY, PLANT AND EQUIPMENT, net (Note 7)............................................... 218,449 182,102
OTHER ASSETS (Note 8)..................................................................... 87,770 82,781
---------- ----------
$ 440,514 $ 396,591
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable........................................................................ $ 26,438 $ 27,030
Accrued expenses and other current liabilities.......................................... 13,653 11,613
Income taxes payable (Note 10).......................................................... 285 52
Interest payable........................................................................ 2,154 2,467
Current maturities of long-term debt (Note 9)........................................... 5,500 718
---------- ----------
TOTAL CURRENT LIABILITIES........................................................... 48,030 41,880
LONG-TERM DEBT (Note 9)................................................................... 236,843 220,464
DEFERRED INCOME TAXES (Note 10)........................................................... 32,996 28,430
COMMITMENTS AND CONTINGENCIES (Note 16)
STOCKHOLDERS' EQUITY (Note 14)
Common stock (par value $1.00 per share, authorized 25,000,000, issued 8,668,750 and
8,656,250, respectively).............................................................. 8,669 8,656
Treasury stock (71,546 and 0 shares, respectively) (Notes 12 and 15).................... (1,534) --
Additional paid-in capital.............................................................. 94,392 94,325
Cumulative translation adjustments...................................................... 171 107
Retained earnings....................................................................... 20,947 2,729
---------- ----------
TOTAL STOCKHOLDERS' EQUITY.......................................................... 122,645 105,817
---------- ----------
$ 440,514 $ 396,591
---------- ----------
---------- ----------
</TABLE>
See notes to consolidated financial statements
F-2
<PAGE>
SYNTHETIC INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------
<S> <C> <C> <C>
1998 1997 1996
---------- ---------- ----------
Net sales.................................................................... $ 368,996 $ 345,572 $ 299,532
Costs and expenses:
Cost of sales.............................................................. 246,677 233,187 208,321
Selling expenses........................................................... 39,358 31,801 27,488
General and administrative expenses........................................ 30,857 26,562 22,657
Amortization of excess of purchase price over net assets acquired and other
intangibles.............................................................. 2,787 2,592 2,592
---------- ---------- ----------
319,679 294,142 261,058
---------- ---------- ----------
Operating income............................................................. 49,317 51,430 38,474
---------- ---------- ----------
Other expenses:
Interest expense, net...................................................... 18,515 20,085 22,773
Amortization of deferred financing costs................................... 729 654 699
---------- ---------- ----------
19,244 20,739 23,472
Income before provision for income taxes and extraordinary item.............. 30,073 30,691 15,002
Provision for income taxes (Note 10)......................................... 11,855 12,541 6,900
---------- ---------- ----------
Income before extraordinary item............................................. 18,218 18,150 8,102
Extraordinary item--Loss from early extinguishment of debt (net of tax
benefit of $7,481) (Note 9)................................................ -- 11,950 --
---------- ---------- ----------
NET INCOME................................................................... $ 18,218 $ 6,200 $ 8,102
---------- ---------- ----------
---------- ---------- ----------
Basic earnings per share (Note 13):
Income before extraordinary item........................................... $ 2.11 $ 2.10 $ 1.37
Net income per share....................................................... $ 2.11 $ 0.72 $ 1.37
Diluted earnings per share (Note 13):
Income before extraordinary item........................................... $ 2.03 $ 2.08 $ 1.37
Net income per share....................................................... $ 2.03 $ 0.71 $ 1.37
</TABLE>
See notes to consolidated financial statements
F-3
<PAGE>
SYNTHETIC INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
ADDITIONAL CUMULATIVE RETAINED
COMMON TREASURY PAID-IN TRANSLATION EARNINGS
STOCK STOCK CAPITAL ADJUSTMENTS (DEFICIT) TOTAL
----------- --------- ----------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance, October 1, 1995............................. $ 5,781 -- $ 63,519 $ 29 $ (11,573) $ 57,756
Net income........................................... -- -- -- -- 8,102 8,102
Foreign currency translation......................... -- -- -- (14) -- (14)
----------- --------- ----------- ----- ---------- ----------
Balance, September 30, 1996.......................... $ 5,781 -- 63,519 15 (3,471) 65,844
Net income........................................... -- -- -- -- 6,200 6,200
Issuance of common stock............................. 2,875 -- 30,806 -- -- 33,681
Foreign currency translation......................... -- -- -- 92 -- 92
----------- --------- ----------- ----- ---------- ----------
Balance, September 30, 1997.......................... 8,656 -- 94,325 107 2,729 105,817
Net income........................................... -- -- -- -- 18,218 18,218
Exercise of stock options............................ 13 -- 72 -- -- 85
Treasury stock acquired (Note 15).................... -- (1,759) -- -- -- (1,759)
Treasury stock sold (Note 12)........................ -- 225 (95) -- -- 130
Tax benefit from exercise of options................. -- -- 90 -- -- 90
Foreign currency translation......................... -- -- -- 64 -- 64
----------- --------- ----------- ----- ---------- ----------
Balance, September 30, 1998.......................... $ 8,669 $ (1,534) $ 94,392 $ 171 $ 20,947 $ 122,645
----------- --------- ----------- ----- ---------- ----------
----------- --------- ----------- ----- ---------- ----------
</TABLE>
See notes to consolidated financial statements
F-4
<PAGE>
SYNTHETIC INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------
<S> <C> <C> <C>
1998 1997 1996
--------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income....................................................................... $ 18,218 $ 6,200 $ 8,102
Adjustments to reconcile net income to cash provided by operations:
Extraordinary loss on early extinguishment of debt............................. -- 19,431 --
Depreciation and amortization.................................................. 21,261 18,236 16,299
Deferred income taxes.......................................................... 4,977 2,270 3,400
(Recoveries of) provision for bad debts........................................ (13) 520 1,024
Change in operating assets and liabilities, net of acquisition:
Accounts receivable............................................................ (2,478) (9,687) (1,247)
Inventory...................................................................... 3,343 (13,634) 6,451
Other assets................................................................... (1,854) (1,566) (647)
Accounts payable................................................................. (3,166) 6,803 (3,801)
Accrued expenses and other current liabilities................................. 2,046 1,468 2,291
Income taxes payable........................................................... 323 (1,355) (48)
Interest payable............................................................... (313) (3,557) (403)
--------- --------- ---------
Net cash provided by operating activities.................................... 42,344 25,129 31,421
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment....................................... (46,112) (53,980) (29,253)
Acquisition of business, net of cash acquired.................................... (6,000) (9,354) --
--------- --------- ---------
Net cash used in investing activities............................................ (52,112) (63,334) (29,253)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments) borrowings under term loan...................................... (25,000) (20,000) 19,000
Net borrowings (repayments) under the credit facility............................ 43,607 9,427 (20,734)
Issuance of 9 1/4% Senior subordinated notes..................................... -- 170,000 --
Redemption of 12 3/4% Senior subordinated debentures............................. (7,403) (132,597) --
Prepayment costs on early extinguishment of debt................................. -- (15,920) --
Proceeds from underwritten public offering....................................... -- 33,681 --
Proceeds from exercise of stock options.......................................... 85 -- --
Proceeds from sale of treasury stock under the Employee Stock
Purchase Plan.................................................................. 130 -- --
Repayments of capital lease obligation and other long-term debt.................. (1,002) (660) (342)
Debt issuance costs.............................................................. (792) (5,525) (101)
--------- --------- ---------
Net cash provided by (used in) financing activities............................ 9,625 38,406 (2,177)
Effect of exchange rate changes on cash...................................... 90 36 2
--------- --------- ---------
NET (DECREASE) INCREASE IN CASH.................................................... (53) 237 (7)
CASH AT BEGINNING OF PERIOD........................................................ 338 101 108
--------- --------- ---------
CASH AT END OF PERIOD.............................................................. $ 285 $ 338 $ 101
--------- --------- ---------
--------- --------- ---------
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest......................................................................... $ 21,232 $ 23,642 $ 23,176
Income taxes..................................................................... 5,927 4,145 3,548
SUPPLEMENTAL SCHEDULE OF NONCASH ACTIVITY
Capital lease obligation incurred for purchase of equipment........................ $ 7,500 $ -- $ 5,000
Treasury stock acquired from Synthetic Industries L.P. in exchange for note
receivable....................................................................... 1,759 -- --
Payable incurred for acquisition of business....................................... 1,302 -- --
</TABLE>
See notes to consolidated financial statements
F-5
<PAGE>
SYNTHETIC INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE INFORMATION)
1. ORGANIZATION
Synthetic Industries, Inc., a Delaware corporation (the "Company") was a
wholly owned subsidiary of Synthetic Industries L.P. (the "Partnership") until
November 1, 1996. On that day, the Company completed an underwritten public
offering (the "Offering") of an additional 2,875,000 shares of its common stock
("Common Stock").
The Company manufactures and markets a wide range of primarily
polypropylene-based materials designed for support, strength and stabilization
applications. The Company's products replace commonly used materials in diverse
applications including: floor covering, geotextiles, erosion control, concrete
reinforcement and furniture construction fabrics. The Company manufactures and
sells more than two thousand products in over 65 end-use markets predominately
in North America, Europe and the Far East.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries, all of which are wholly owned. All significant
intercompany transactions and balances have been eliminated.
REVENUE RECOGNITION
Revenue from product sales is recognized at the time of shipment.
FOREIGN CURRENCY TRANSLATION
The assets and liabilities of foreign subsidiaries are translated at the
fiscal year-end rates of exchange, and the results of operations are translated
at the average rates of exchange for the years presented. Gains or losses
resulting from translating foreign currency financial statements are accumulated
in the cumulative translation adjustments account in the stockholders' equity
section of the accompanying consolidated balance sheets. Foreign currency
transaction gains and losses are included in results of operations. Foreign
currency realized and unrealized gains and losses for the years presented were
not material.
INVENTORY
Inventory is stated at the lower of cost, determined using the first-in,
first-out method, or market.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost less accumulated
depreciation and amortization. Depreciation is provided on the straight-line
method based on estimated useful lives, as follows:
<TABLE>
<S> <C>
Building and improvements......................................... 25 years
Machinery and equipment........................................... 14 years
</TABLE>
Leasehold improvements are amortized over the shorter of the useful life of
the asset or the term of the lease. Expenses for repairs, maintenance and
renewals are charged to operations as incurred. Expenditures which improve an
asset or extend its useful life are capitalized. When properties are retired
F-6
<PAGE>
SYNTHETIC INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE INFORMATION)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
or otherwise disposed of, the related cost and accumulated depreciation and
amortization are removed from the accounts and any gain or loss is included in
the results of operations.
Capitalized interest is charged to machinery and equipment and amortized
over the lives of the related assets. Interest capitalized during fiscal 1998,
1997 and 1996 was $2,404, $838 and $392, respectively.
INCOME TAXES
The Company accounts for income taxes using an asset and liability approach
in accordance with Statement of Financial Accounting Standards No. 109 ("SFAS
109"). Under SFAS 109, deferred income taxes are recognized for the tax
consequences of temporary differences by applying enacted statutory tax rates
applicable to future years to differences between the financial statement
carrying amounts and the tax bases of existing assets and liabilities. The
effect on deferred taxes of a change in tax rates is recognized in the statement
of operations for the period that includes the enactment date.
EXCESS OF PURCHASE PRICE OVER NET ASSETS ACQUIRED
The excess of purchase price over net assets acquired is amortized on a
straight-line basis over a period of 20 to 40 years. Excess of purchase price
over net assets acquired is assessed for recoverability on a regular basis. In
evaluating the value and future benefits of goodwill, its carrying value would
be reduced by the excess, if any, of the balance over management's best estimate
of undiscounted future cash flows before amortization of the related intangible
assets over the remaining amortization period.
DEFERRED FINANCING AND INTANGIBLE ASSETS
Deferred financing costs are amortized over periods from 5 to 12 years.
Intangible assets consist primarily of a Fibermesh-Registered Trademark-
trademark and patents on civil engineering products, which are amortized on a
straight-line basis over 40 and 15 years, respectively.
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 reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" ("SFAS 130"), which must be adopted for fiscal years beginning after
December 15, 1997. SFAS 130 establishes standards for reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements. SFAS 130 will not have a material effect on the Company's
results of operations or financial condition.
F-7
<PAGE>
SYNTHETIC INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE INFORMATION)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Also in June 1997, the FASB issued Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and Related
Information" ("SFAS 131"), which must be adopted for fiscal years beginning
after December 15, 1997. Under the new standard, companies will be required to
report certain information about operating segments in consolidated financial
statements. Operating segments will be determined based on the method that
management organizes its businesses for making operating decisions and assessing
performance. SFAS 131 also requires companies to report certain information
about their products and services, the geographic areas in which they operate,
and their major customers. The Company is currently evaluating the effect SFAS
131 will have on its financial statement presentation.
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"), which must be adopted for fiscal quarters of fiscal years beginning after
June 15,1999. SFAS 133 requires the recognition of all derivatives as either
assets or liabilities in the statement of financial position and measurement of
those instruments at fair value. SFAS 133 will not have a material effect on the
Company's results of operations or financial condition.
RESEARCH AND DEVELOPMENT
The Company's research and market development is focused primarily on
development and as such the Company engages in product design, development and
performance validation to improve existing products and to create new products.
The Company expended $8,100, $4,208, and $2,942 in fiscal 1998, 1997, and 1996,
respectively. Research and market development costs are expensed as incurred and
included in general and administrative expenses.
RECLASSIFICATION OF PRIOR FINANCIAL STATEMENTS
Certain reclassifications have been made to previous years' financial
statements to conform with 1998 classifications.
3. BUSINESS ACQUISITIONS
On March 18, 1998, pursuant to a Stock Purchase Agreement, as subsequently
amended, the Company acquired all of the outstanding shares of Novocon
International, Inc. (the "Novocon Acquisition"), a manufacturer and marketer of
steel concrete reinforcing fibers, for $7,302. The acquisition has been
accounted for using the purchase method of accounting and, accordingly, the
purchase price has been allocated to the assets acquired of $5,293 (primarily
accounts receivable and inventory of $1,731 and $1,654, respectively), and the
liabilities assumed of $4,880 (primarily accounts payable and other debt of
$2,545 and $2,335, respectively), based upon the fair market value at the date
of acquisition. The excess purchase price over the fair values of the net assets
acquired has been recorded as goodwill, which is being amortized on a
straight-line basis over 20 years. The operating results of the acquired
business have been included in the consolidated statement of operations from the
date of acquisition.
On February 27, 1997, the Company acquired certain assets of the Spartan
Technologies division of Spartan Mills (the "Spartan Acquisition") for
approximately $9,400. The Spartan Acquisition has been
F-8
<PAGE>
SYNTHETIC INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE INFORMATION)
3. BUSINESS ACQUISITIONS (CONTINUED)
accounted for using the purchase method of accounting, and, accordingly, the
purchase price has been allocated to the net assets acquired (accounts
receivable, inventory, and property, plant and equipment) based on the fair
market value (which approximated cost) at the date of acquisition. The operating
results of the acquired business have been included in the consolidated
statement of operations from the date of acquisition.
4. ACCOUNTS RECEIVABLE
Accounts receivable are presented net of the doubtful allowances of $2,714,
$2,707 and $3,036 for fiscal 1998, 1997 and 1996, respectively. The Company had
net recoveries for the year ended September 30, 1998 of $20 and amounts written
off against established allowances of $849 and $2,041 for the years ended
September 30, 1997 and 1996, respectively.
The Company grants uncollateralized trade terms to most U.S. customers. A
majority of the Company's carpet backing sales are with customers located in the
state of Georgia. As of September 30, 1998 and 1997, $27,766 and $26,126,
respectively of the Company's accounts receivable balances were due from
customers located in this state. Net sales to one customer represented
approximately 25%, 20% and 18% of consolidated net sales for 1998, 1997 and
1996, respectively.
5. INVENTORY
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------
<S> <C> <C>
1998 1997
--------- ---------
Finished goods.......................................................... $ 37,689 $ 33,572
Work in process......................................................... 7,107 7,427
Raw materials........................................................... 7,654 13,140
--------- ---------
$ 52,450 $ 54,139
--------- ---------
--------- ---------
</TABLE>
6. OTHER CURRENT ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------
<S> <C> <C>
1998 1997
--------- ---------
Prepaid supplies........................................................ $ 9,603 $ 9,003
Deferred tax assets (Note 10)........................................... 4,639 5,050
Receivable from Synthetic
Industries L.P........................................................ 663 1,800
Insurance receivable.................................................... 1,110 191
Other................................................................... 1,294 1,156
--------- ---------
$ 17,309 $ 17,200
--------- ---------
--------- ---------
</TABLE>
F-9
<PAGE>
SYNTHETIC INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE INFORMATION)
7. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------------
<S> <C> <C>
1998 1997
---------- ----------
Land.................................................................. $ 4,585 $ 4,585
Buildings and improvements............................................ 42,588 35,398
Equipment under capital leases........................................ 12,500 4,973
Machinery and equipment and leasehold improvements.................... 266,972 227,304
---------- ----------
326,645 272,260
Accumulated depreciation.............................................. 108,196 90,158
---------- ----------
$ 218,449 $ 182,102
---------- ----------
---------- ----------
</TABLE>
Depreciation expense on property, plant and equipment was $17,745, $14,990
and $13,008 in fiscal 1998, 1997 and 1996, respectively.
8. OTHER ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------------
<S> <C> <C>
1998 1997
---------- ----------
Excess of purchase price over net assets acquired..................... $ 107,379 $ 99,818
Intangible assets..................................................... 3,698 3,546
Deferred financing costs.............................................. 12,443 11,651
---------- ----------
123,520 115,015
Accumulated amortization.............................................. 35,750 32,234
---------- ----------
$ 87,770 $ 82,781
---------- ----------
---------- ----------
</TABLE>
Amortization expense was $3,516, $3,246 and $3,291 in fiscal 1998, 1997 and
1996, respectively.
F-10
<PAGE>
SYNTHETIC INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE INFORMATION)
9. LONG-TERM DEBT
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------------
<S> <C> <C>
1998 1997
---------- ----------
Credit facility:
Securitization.......................................................................... $ 29,162 $ --
Revolver................................................................................ 30,022 13,420
Term loan portion....................................................................... -- 25,000
9 1/4% senior subordinated notes, due 2007................................................ 170,000 170,000
12 3/4% senior subordinated debentures, due 2002.......................................... -- 7,403
Capital lease obligation (Note 16)........................................................ 10,647 4,083
Other..................................................................................... 2,512 1,276
---------- ----------
242,343 221,182
Less current portion...................................................................... 5,500 718
---------- ----------
Total long-term portion................................................................... $ 236,843 $ 220,464
---------- ----------
---------- ----------
</TABLE>
CREDIT FACILITY
On December 18, 1997, the Company and its lenders, with BankBoston as agent,
entered into a new five-year credit facility (the "Credit Facility"). Proceeds
from the Credit Facility were used to repay the Fourth Amended and Restated
Revolving Credit Agreement dated October 20, 1995. The Credit Facility consists
of up to a $40 million asset based securitization program (the
"Securitization"), with amounts borrowed through a wholly owned subsidiary,
Synthetic Funding Corporation, and a $60 million senior secured revolver
facility (the "Revolver"). In conjunction with the Securitization, the Company
entered into a five-year agreement with its subsidiary providing for the sale of
substantially all of its receivables on a revolving basis. Securitization and
Revolver borrowings are collateralized by the Company's accounts receivable and
substantially all of the assets of the Company, excluding real property,
respectively.
Interest on the Securitization is based on the applicable commercial paper
rate in effect plus a spread. The Revolver permits borrowings which bear
interest, at the Company's option, (i) for domestic borrowings based on the
lender's base rate or (ii) for Eurodollar borrowings based on a spread over the
Interbank Eurodollar rate at the time of conversion. Spreads for the
Securitization and the Eurodollar borrowings are determined by the operational
performance of the Company. At September 30, 1998, the balances under the
Securitization and Revolver were $29,162 and $30,022, respectively, at interest
rates ranging from 6.27% to 8.5%.
The Revolver provides for borrowings under letters of credit of up to
$10,000, which borrowings reduce amounts available under the Revolver. At
September 30, 1998, letters of credit of $402 were outstanding.
The Credit Facility contains covenants related to the maintenance of certain
operating ratios and limitations as to the amount of capital expenditures. The
Company's ability to pay dividends on Common Stock is prohibited under the
Credit Facility.
F-11
<PAGE>
SYNTHETIC INDUSTRIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE INFORMATION)
9. LONG-TERM DEBT (CONTINUED)
SENIOR SUBORDINATED DEBENTURES AND NOTES
On February 11, 1997, the Company issued $170,000 in aggregate principal
amount of 9 1/4% Senior Subordinated Notes due 2007 (the "Notes"), which
represent unsecured obligations of the Company. The Notes are redeemable at the
option of the Company at any time on or after February 15, 2002, initially at
104.625% of their amount, together with accrued interest, with declining
redemption prices thereafter. Interest on the Notes is payable semi-annually on
February 15 and August 15.
In connection with the issuance of the Notes, the Company redeemed
approximately $132,600 principal amount of its 12 3/4% Senior Subordinated
Debentures due 2002 (the "Debentures") at a redemption price of 111.07% of the
principal amount thereof. In addition, the Company repaid $20,000 of its
outstanding term loan borrowings as of March 5, 1997. In connection with the
early extinguishment of debt, the Company recorded an extraordinary loss of
$11,950 (representing call premium and prepayment fees of $15,920 and write off
of deferred financing costs of $3,511, net of an income tax benefit of $7,481)
during the second quarter of fiscal 1997.
On December 1, 1997 the Company redeemed the remaining $7,403 aggregate
principal amount of Debentures outstanding at a redemption price of 106.375% of
the principal amount thereof, together with accrued interest as of the
redemption date.
AGGREGATE MINIMUM PAYMENTS AND FAIR VALUE
Approximate aggregate minimum annual payments due on long term debt and
capital leases (see Note 16), for the subsequent five years, are as follows:
1999, $2,549; 2000, $1,408; 2001, $1,516; 2002, $1,631; 2003, $60,940; and
thereafter, $176,212.
The fair value of the Company's Notes is estimated to be $169,150 and
$176,375 at September 30, 1998 and 1997, respectively. The fair value of the
Debentures were estimated to be $7,875 at September 30, 1997. The fair values
are based on quoted market prices for the Notes and Debentures in the
over-the-counter market.
F-12
<PAGE>
SYNTHETIC INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CONTINUED)
(IN THOUSANDS OF DOLLARS)
10. INCOME TAXES
The sources of income before provision for income taxes are as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------
<S> <C> <C> <C>
1998 1997 1996
--------- --------- ---------
United States................................................ $ 28,575 $ 29,609 $ 14,083
Foreign...................................................... 1,498 1,082 919
--------- --------- ---------
Earnings before income taxes................................. $ 30,073 $ 30,691 $ 15,002
--------- --------- ---------
--------- --------- ---------
</TABLE>
The provision for income taxes contributable to the amounts shown above
consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------
<S> <C> <C> <C>
1998 1997 1996
--------- --------- ---------
Current:
Federal..................................................... $ 4,875 $ 8,796 $ 2,600
State....................................................... 591 1,120 600
Foreign..................................................... 500 355 300
--------- --------- ---------
5,966 10,271 3,500
--------- --------- ---------
Deferred:
Federal..................................................... 6,594 1,900 3,200
State....................................................... (705) 370 200
--------- --------- ---------
5,889 2,270 3,400
--------- --------- ---------
Total......................................................... $ 11,855 $ 12,541 $ 6,900
--------- --------- ---------
--------- --------- ---------
</TABLE>
As described in Note 9, the Company recorded a current tax benefit of $7,481
in fiscal 1997 as a result of the early extinguishment of debt.
A reconciliation of US income tax computed at the statutory rate and actual
tax expense is as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------
<S> <C> <C> <C>
1998 1997 1996
--------- --------- ---------
Amount computed at statutory rate............................. $ 10,526 $ 10,742 $ 5,250
State and local taxes less applicable federal income tax
benefit..................................................... 978 998 550
Amortization of goodwill...................................... 942 873 873
Tax credits................................................... (991) (405) --
Other nondeductible expenses.................................. 202 181 115
Other, net.................................................... 198 152 112
--------- --------- ---------
$ 11,855 $ 12,541 $ 6,900
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-13
<PAGE>
SYNTHETIC INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CONTINUED)
(IN THOUSANDS OF DOLLARS)
10. INCOME TAXES (CONTINUED)
The tax effects of significant items comprising the Company's net deferred
tax liability are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------
<S> <C> <C>
1998 1997
--------- ---------
Property, plant and equipment........................................... $ 31,754 $ 27,345
Trademarks and patents.................................................. 1,242 1,085
--------- ---------
Total deferred tax liabilities.......................................... 32,996 28,430
--------- ---------
Accounts receivable..................................................... 968 1,018
Inventory............................................................... 749 815
Accrued expenses........................................................ 1,869 2,013
AMT credit carryforward................................................. -- 1,204
State tax credit carryforward........................................... 1,053 --
--------- ---------
Total deferred tax assets............................................... 4,639 5,050
--------- ---------
Net deferred tax liability.............................................. $ 28,357 $ 23,380
--------- ---------
--------- ---------
</TABLE>
At September 30, 1998 the Company has available state income tax credits of
approximately $1,053 which are available to reduce future state income taxes,
subject to statutory limitations, which will expire in 2007.
11. RETIREMENT PROGRAMS
For US employees, the Company maintains a trusteed profit-sharing plan
("Plan") which is qualified under Section 401(k) of the Internal Revenue Code.
All full-time employees over the age of 21 who have been employed continuously
for at least one year are eligible for participation in the Plan. The Company
may, but has not elected to, contribute a portion of its profits to the Plan, as
determined by the Board of Directors. Employer contributions vest over 1 to 5
years. The Company has elected to match employee contributions to the Plan on a
50% basis but not to exceed 3% of the employee's annual compensation. During
fiscal years 1998, 1997 and 1996, the Company contributed $1,117, $1,098 and
$999, respectively. The Plan provides for the Company to bear the expense of the
administration of the Plan. Pension expense on the foreign plans is not
significant.
12. EMPLOYEE STOCK PURCHASE PLAN
On February 25, 1998, the stockholders approved the Synthetic Industries,
Inc. Employee Stock Purchase Plan (the "Stock Purchase Plan"), reserving 325,000
shares of Common Stock for issuance under this Plan. The Company adopted the
Stock Purchase Plan with an initial option period commencing effective April 1,
1998, and continuing in three-month option periods thereafter. The Stock
Purchase Plan permits eligible employees to purchase Common Stock through
payroll deductions or lump sum contributions, which may not exceed $25 in a
calendar year, at a price equal to 85% of the Common Stock price as reported by
NASDAQ at the beginning or end of each option period, whichever is lower. As of
September 30, 1998, 10,510shares were purchased out of treasury stock under the
Stock Purchase Plan.
F-14
<PAGE>
SYNTHETIC INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CONTINUED)
(IN THOUSANDS OF DOLLARS)
13. EARNINGS PER SHARE
During fiscal year 1998, the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings per Share" (SFAS 128). The following
table reflects the calculation of basic and diluted earnings per share (in
thousands of dollars, except share and per share amounts):
<TABLE>
<CAPTION>
FISCAL 1998 FISCAL 1997 FISCAL 1996
---------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
BASIC DILUTED BASIC DILUTED BASIC DILUTED
---------- ---------- ---------- ---------- ---------- ----------
Income before extraordinary item............. $ 18,218 $ 18,218 $ 18,150 $ 18,150 $ 8,102 $ 8,102
Weighted average shares outstanding.......... 8,640,901 8,640,901 8,656,250 8,656,250 5,930,502 5,930,502
Affect of stock options using treasury stock
method..................................... -- 354,413 -- 63,208 -- --
---------- ---------- ---------- ---------- ---------- ----------
Total average equivalent shares.............. 8,640,901 8,995,314 8,656,250 8,719,458 5,930,502 5,930,502
Income before extraordinary item per share... $2.11 $2.03 $2.10 $2.08 $1.37 $1.37
</TABLE>
Options to purchase 175,500 shares at prices ranging from $17.875 to $21.375
per share were outstanding during 1998 but were not included in the computation
of diluted earnings per share, because the options' exercise price was greater
than the average market price of the common stock.
14. STOCK OPTIONS
DIRECTOR'S PLAN
In August 1994, the Company adopted a stock option plan (the "Director's
Plan") pursuant to which non-qualified stock options to purchase an aggregate of
125,261 shares of Common Stock were granted to the four non-employee Directors
of the Company at an exercise price of $6.83 per share which was determined by
reference to the fair market value of the Company's equity at the time such
Directors joined the Board. The stock options were fully vested as of October 1,
1996 and have a term which expires on August 4, 2004. The Director's Plan does
not provide for any further grants or options thereunder.
MANAGEMENT PLAN
The Company's 1994 and 1996 Stock Option Plans (collectively, the
"Management Plans") for its key employees, provides for the granting of
incentive stock options ("ISOs"), as provided in Section 422A of the Internal
Revenue Code, and non-qualified stock options. The maximum aggregate number of
shares of Common Stock that may be issued under the 1994 Plan and the 1996 Plan
is 491,413 and 289,062, respectively.
F-15
<PAGE>
SYNTHETIC INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CONTINUED)
(IN THOUSANDS OF DOLLARS)
14. STOCK OPTIONS (CONTINUED)
Stock option transactions during 1998, 1997 and 1996 are summarized as
follows:
<TABLE>
<CAPTION>
SHARES RESERVED
FOR ISSUANCE SHARES
UNDER AVAILABLE
THE MANAGEMENT SHARES FOR WEIGHTED
PLANS GRANTED GRANT PRICE AVERAGE PRICE
----------------- --------- ----------- ------------------ -------------
<S> <C> <C> <C> <C> <C>
Balance at September
30, 1995............. 491,413 316,697 174,716 $10.72 $ 10.72
Options granted........ 289,062 194,439 -- $10.72 $ 10.72
------- --------- ----------- ------------------ ------
Balance at September
30, 1996............. 780,475 513,136 267,339 $10.72 $ 10.72
Options granted........ -- 175,500 -- $17.875-$21.375 $ 18.77
------- --------- ----------- ------------------ ------
Balance at September
30, 1997............. 780,475 688,636 91,839 $10.72-$21.375 $ 12.77
Options granted........ -- 80,900 -- $15.00 $ 15.00
------- --------- ----------- ------------------ ------
Balance at September
30, 1998............. 780,475 769,536 10,939 $10.72-$21.375 $ 13.01
</TABLE>
At September 30, 1998, 506,917 options were exercisable at exercise prices
ranging from $10.72 to 21.375 per share.
The purchase price of the shares of Common Stock subject to options under
the Management Plans must be no less than the fair market value of the Common
stock at the date of grant; provided, however, that the purchase price of shares
of Common Stock subject to ISOs granted to any optionee who owns shares
possessing more than 10% of the combined voting power of the Company ("Ten
Percent Shareholder') must not be less that 110% of the fair market value of the
Common Stock at the date of the grant. The maximum term of an option may not
exceed ten years from the date of the grant, except with respect to ISOs granted
to Ten Percent Shareholders which must expire within five years of the date of
grant.
The Company has elected to continue measuring stock-based compensation using
the intrinsic value approach under APB Opinion No. 25 and has adopted the
disclosure-only provision of Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" ("SFAS 123"). Accordingly, no
compensation expense has been recognized for the options described above. Had
compensation costs for the options been determined based on the fair value on
the grant date consistent with the provisions of SFAS 123, the Company's net
income and diluted income per share would have been changed to the following pro
forma amounts:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Pro forma net income............................................ $ 17,640 $ 6,009 $ 8,012
Pro forma income per share...................................... 1.96 0.69 1.35
</TABLE>
F-16
<PAGE>
SYNTHETIC INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CONTINUED)
(IN THOUSANDS OF DOLLARS)
14. STOCK OPTIONS (CONTINUED)
The fair values for the years presented were determined using a
Black-Scholes option-pricing model with the following weighted average
assumptions:
<TABLE>
<CAPTION>
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
Dividend yield............................................... None None None
Volatility................................................... 64% 33% 33%
Risk-free interest rate...................................... 5.5% to 6.8% 6.4% to 6.8% 5.8% to 6.7%
Expected life................................................ 4 years 4 years 4 years
</TABLE>
The weighted average fair value of options granted in 1998, 1997 and 1996
was $8.04, $10.30 and $5.78, respectively.
For options outstanding and exercisable at September 30, 1998, the
exercisable price ranges and average remaining lives were:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
----------------------------------------------- OPTIONS EXERCISABLE
WEIGHTED --------------------------
SHARES AVERAGE AVERAGE SHARES AVERAGE
OUTSTANDING REMAINING EXERCISE OUTSTANDING EXERCISE
EXERCISE PRICES AT 9/30/98 CONTRACTUAL LIFE PRICE AT 9/30/98 PRICE
- - ------------------ ----------- ------------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
$10.72............ 513,136 7.4 $ 10.72 335,743 $ 10.72
$15.00............ 80,900 9.8 15.00 16,300 15.00
$17.875........... 130,500 8.6 17.875 130,500 17.875
$21.375........... 45,000 8.75 21.375 24,375 21.375
</TABLE>
15. RELATED PARTY TRANSACTIONS
SI Management L.P. is the sole general partner of the Partnership. Synthetic
Management G.P. is the sole general partner of SI Management L.P. By virtue of
these relationships, Synthetic Management G.P. controls the management and
affairs of the Partnership and therefore, the Company. The Partnership owns
5,699,194 shares of Common Stock, or approximately 66% of the issued and
outstanding shares of Common Stock, and therefore, holds the voting power to
determine the outcome of all matters upon which stockholders vote.
The partners of Synthetic Management G.P. are the following five Delaware
corporations: Chill Investments, Inc., Beckman Investments, Inc., Freed
Investments, Inc., Kenner Investments, Inc. and W.G. Wright Investments, Inc.
Each of Messrs. Chill, Beckman, Freed, Kenner and Wright is the sole director
and the sole stockholder of one of Synthetic Management G.P.'s partners. For
further information concerning Messrs. Chill, Freed, Kenner and Wright, see
"Executive Officers and Directors of the Company."
The Company and the Partnership have entered into a Registration Rights
Agreement pursuant to which the Company has agreed that upon request of the
Partnership the Company will register under the Securities Act and applicable
state securities laws the sale of the Common Stock owned by the Partnership and
as to which registration has been requested. The Company's obligation is subject
to certain limitations relating to a minimum amount required for registration,
the timing of a registration and other similar
F-17
<PAGE>
SYNTHETIC INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CONTINUED)
(IN THOUSANDS OF DOLLARS)
15. RELATED PARTY TRANSACTIONS (CONTINUED)
matters. The Company is obligated to pay any registration expenses incidental to
such registration, excluding underwriters' commissions and discounts. In
connection with the Company's initial public offering of Common Stock in
November 1996, the Company incurred approximately $650 of such incidental
registration expenses on the behalf of the Partnership. The above description is
qualified in its entirety by reference to the Registration Rights Agreement, a
copy of which has been filed as an exhibit to Amendment No. 1 to the Company's
Registration Statement on Form S-1 (File No. 333-9377), filed with the
Securities and Exchange Commission on September 13, 1996.
On September 19, 1997, the Company and the Partnership entered into the
Agreement and Plan of Withdrawal and Dissolution of the Partnership (the
"Plan"). Pursuant to the Plan, the Partnership was to be dissolved in two
separate phases. The first phase was to be an underwritten public offering of
the number of shares of Common Stock that limited partners have elected to sell,
and the second phase is to be one to three liquidating distributions of the
unsold portions of the Partnership's shares of Common Stock, beginning 180 days
after the completion of the public offering. On November 7, 1997, the limited
partners approved the adoption of the Plan. However, the implementation of the
Plan has been enjoined by courts in Delaware and California in connection with
two lawsuits filed by certain limited partners of the Partnership against the
Partnership and its general partner (the "General Partner"), among others. See
"Claims and Legal Proceedings." Among other equitable and legal remedies, the
plaintiff is seeking the removal of the General Partner and the liquidation of
the Partnership. The Company is only a nominal defendant in these proceedings
and does not presently possess any contractual rights with respect to their
ultimate resolution. If, in connection with these lawsuits, the General Partner
is removed or resigns, or the Partnership is liquidated under a court-appointed
receiver, there can be no assurance that the resulting sale and/or distribution
of the Partnership's shares of Common Stock will be made in the same or similar
manner as that contemplated by the Plan. The General Partner has denied the
allegations of the plaintiff and is vigorously contesting the lawsuits; however,
in the event of an adverse ruling, the Company cannot predict the volume and
price at which the Common Stock trades might be affected.
A former executive officer of the Company and an affiliate of the
Partnership, is being retained as a consultant to the Company. Pursuant to his
consulting agreement with the Company, the former executive officer will
receive, until January 31, 2000, or upon earlier termination of his consulting
agreement, $125 per year and various insurance coverages, and will be authorized
to exercise all stock options awarded to him, subject to applicable vesting
provisions. Under this agreement, the former executive officer is required to
provide the Company with 20 hours of consultation per month, has released the
Company from any liability resulting from his employment and has also agreed not
to compete against the Company.
The Company leases office space under a five-year lease with one of the
Company's executive officers. The term of the lease expires on September 30,
2003 and the rent is approximately $52 per year, which the Company believes is
within prevailing market rates.
Pursuant to a licensing agreement with the Company, an executive officer of
the Company, receives royalties related to the manufacture and sale of a certain
product for which the executive officer owns all of the U.S. and foreign
patents. Under this agreement, the Company paid royalties of approximately $9
and $13 in fiscal 1998 and 1997, respectively, and will continue to pay such
royalties until 2012 or the earlier termination of the licensing agreement.
F-18
<PAGE>
SYNTHETIC INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CONTINUED)
(IN THOUSANDS OF DOLLARS)
15. RELATED PARTY TRANSACTIONS (CONTINUED)
During fiscal 1998 and 1997 the Company paid fees of approximately $125 and
$241, respectively, to a law firm in which Mr. Joseph Dana, a director of the
Company was a member until May 21, 1997. Effective May 21, 1997, Mr. Dana became
employed as Chief Operating Officer and General Counsel of the Company.
In May 1998, the Company acquired 82,056 shares of Common Stock from the
Partnership in exchange for $1,759 of amounts receivable from the Partnership,
in partial settlement of expenses incurred by the Company on behalf of the
Partnership during the last several years. The shares were acquired at their
fair market value and are held in treasury for issuance under the Employee Stock
Purchase Plan. At September 30, 1998, the remaining balance due the Company was
$663.
16. COMMITMENTS AND CONTINGENCIES
A. LEASE COMMITMENTS
On April 7, 1998, the Company entered into an eight-year capital lease
agreement to finance $7,500 of equipment at 7.25%. On October 4, 1998, the
Company entered into an eight-year capital lease for the acquisition of
equipment of $5,300 at an interest rate of 7.03%. The proceeds were primarily
used to repay the balance of the May 15, 1996 capital lease of $3,416. The
Company also leases certain factory and warehouse buildings and equipment under
long-term operating leases expiring periodically through 2009.
Future minimum lease payments under noncancelable lease obligations at
September 30, 1998, including the October 4, 1998 capital lease are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
YEAR LEASES LEASES
- - ------------------------------------------------------------------------ --------- -----------
<S> <C> <C>
1999.................................................................... $ 2,111 $ 4,836
2000.................................................................... 2,111 3,319
2001.................................................................... 2,111 1,901
2002.................................................................... 2,111 1,198
2003.................................................................... 2,111 557
Thereafter.............................................................. 5,816 603
--------- -----------
Total minimum lease payments............................................ $ 16,371 $ 12,414
-----------
-----------
Less amount representing interest....................................... 3,841
---------
Present value of net minimum lease payments............................. 12,530
Less current maturities of capital lease obligation..................... 1,207
---------
Long-term capital lease obligation...................................... $ 11,323
---------
---------
</TABLE>
Total rental expense for the above operating leases and other short-term
leases for the fiscal years 1998, 1997 and 1996 was $5,813, $4,112 and $4,499,
respectively.
F-19
<PAGE>
SYNTHETIC INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CONTINUED)
(IN THOUSANDS OF DOLLARS)
16. COMMITMENTS AND CONTINGENCIES (CONTINUED)
B. CAPITAL EXPENDITURES
In fiscal 1999, the Company plans to incur approximately $25,000 in
connection with an expansion of its existing manufacturing facilities, primarily
to increase capacity, subject to prevailing market conditions.
17. LITIGATION
The Company and its subsidiaries are parties to litigation arising out of
their business operations. Such litigation primarily involves claims for
personal injury, property damage, breach of contract and claims involving
employee relations and certain administrative proceedings. The Company believes
such claims are either adequately covered by insurance or do not involve a risk
of material loss to the Company.
In connection with the proposed dissolution of the Partnership, pursuant to
an Agreement and Plan of Withdrawal and Dissolution (the "Plan"), the Company,
its directors and certain other of the Company's officers who are affiliated
with the General Partner have been named in two putative class and derivative
action lawsuits filed by certain limited partners of the Partnership. In the
first action, filed on February 11, 1997 in the Delaware Court of Chancery and
thereafter amended, the plaintiffs have alleged, among other things, breach of
contract with respect to the Partnership Agreement which governs the
Partnership, breach of the defendants' fiduciary duty to the limited partners
and the Company, that the Plan was unlawfully coercive, that the General Partner
has allegedly failed to satisfy certain conditions precedent to the right of
limited partners to amend the partnership agreement and that certain amendments
necessary to implement the Plan violate the terms of the partnership agreement.
The plaintiffs sought, among other equitable and legal remedies, removal of the
General Partner, dissolution of the Partnership, appointment of a liquidating
trustee, to enjoin the implementation of the Plan and compensatory damages in an
undetermined amount. On October 23, 1997, the Court preliminarily enjoined the
implementation of the Plan, although the Plan was subsequently approved by
limited partners on November 7, 1997. On November 7, 1997, the Delaware Supreme
Court accepted the defendants' petition for an expedited appeal of this
injunction, and briefing and oral argument on the appeal was completed as of
January 6, 1998. On March 19, 1998, the Delaware Supreme Court issued an opinion
affirming the Court of Chancery's grant of a preliminary injunction and remanded
the case for further proceedings. On April 27, 1998, the Court of Chancery
granted the motion of certain pro-Plan intervenors to intervene in the action,
but denied their motion to disqualify plaintiffs' counsel. On May 14, 1998, the
General Partner withdrew the Plan. After the withdrawal of the Plan, plaintiffs,
on June 3, 1998, filed a Consolidated Third Amended and Supplemental Class and
Derivative Complaint (the "Third Amended Complaint"). The Third Amended
Complaint, among other things, eliminated certain requests for relief related to
the Plan and added certain allegations related to the Company's Employee Stock
Purchase Plan and certain options granted to certain directors and officers of
the Company. In addition to the relief sought in prior complaints, the Third
Amended Complaint seeks declaratory relief with respect to certain provisions of
the Partnership Agreement, the invalidation of the Company's Employee Stock
Purchase Plan, the invalidation of certain options granted to the Company's
directors and officers, and the invalidation of certain amendments to the
Company's certificate of incorporation and bylaws relating to voting by consent
and the calling of special meetings. On July 20, 1998, defendants filed a motion
to dismiss the Third Amended Complaint. The defendants have denied any
allegation of wrongdoing.
F-20
<PAGE>
SYNTHETIC INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CONTINUED)
(IN THOUSANDS OF DOLLARS)
17. LITIGATION (CONTINUED)
The second lawsuit was filed in the U.S. District Court of the Northern
District of California on May 1, 1997, and thereafter amended. The plaintiff has
alleged in his amended complaint various federal securities and proxy violations
allegedly arising out of the joint proxy statement and prospectus that was
mailed to limited partners in connection with the solicitation of proxies for
the vote on the Plan and other related documents. The plaintiff also added the
Company as a named defendant, alleging that all defendants acted in concert
with, and as agents of, each other; however the plaintiff made no specific
independent allegations with respect to the Company. The plaintiff sought, among
other equitable and legal remedies, to enjoin the implementation of the Plan and
unspecified damages. On November 6, 1997, the Court granted in part the
plaintiff's motion for a temporary restraining order enjoining the
implementation of the Plan. After the withdrawal of the Plan, defendants, on
June 19, 1998, filed a motion to dismiss the claims as moot. On July 17, 1998,
plaintiff moved to amend his complaint purportedly to include an additional
plaintiff and additional claims for relief, including permanent injunctive
relief for any violations of the securities laws in the future. The amended
complaint also adds the Partnership as a nominal defendant. On September 24,
1998, the Court denied the defendants' motion to dismiss and granted plaintiff's
motion to amend the complaint. The defendants have denied any allegation of
wrongdoing.
On December 29, 1997, a purported derivative action was filed in the
Delaware Chancery Court by a limited partner of the Partnership against certain
of the Company's officers and directors with regard to certain stock options
plans adopted by the Company in 1994. Both the Partnership and the Company were
named as nominal defendants. The plaintiff alleged that the defendants breached
their fiduciary duties by adoption of the stock option plans. The plaintiff
seeks, among other things, a declaration that the stock options granted under
the plans are invalid, the establishment of a constructive trust over the stock
options, unspecified compensatory damages and reasonable attorneys' fees and
expenses. By order dated June 23, 1998, this action was consolidated with the
Delaware action described above. The defendants deny any allegation of
wrongdoing and intend to vigorously contest the lawsuit.
Based on the Company's review of the allegations made in the above actions
to date, the Company does not believe that the ultimate resolution of these
actions will have a material adverse effect on the Company's results of
operations or financial condition.
The Partnership is a principal stockholder of the Company and certain
members of the Company's management control the General Partner.
By letter dated October 22, 1998, a demand for indemnification was received
from a customer with respect to utilization of Fibermesh in concrete slabs in
the State of California. The demand for indemnification pertained to any and all
damages relating to their use of the Fibermesh product. No lawsuits have been
filed against the Company and based upon the information provided to the
Company, the scope of liability and potential damages, if any, cannot be
ascertained at this time. The Company has engaged outside counsel to investigate
this claim and intends to vigorously defend its product.
F-21
<PAGE>
Exhibit 10.11
Employment Agreement
This Agreement ("Agreement") is made and entered into as of the 24th
of September, 1998 ("Effective Date"), by and among Synthetic Industries,
Inc. ("the Corporation") and Leonard Chill (the "Executive").
WITNESSETH:
WHEREAS, the Corporation currently employs Executive as the
President and Chief Executive Officer; and
WHEREAS, both the Corporation and Executive (the "Parties") desire to
state certain terms and conditions of Executive's employment and wish to
substitute this agreement for their previous employment agreements;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, the Parties agree as follows:
1. Employment.
The Corporation agrees to continue to employ Executive and Executive
agrees to continue to serve the Corporation upon the terms and conditions
hereinafter set forth.
2. Term.
Except as otherwise provided in Section 7 below, the term of employment
under this Agreement shall continue from the Effective Date for a period
twenty-five (25) months; provided, however, that on the first day of the second
calendar month following the Effective Date, and on the first day of each
successive month, such term of employment shall automatically be extended for
successive one month periods, providing a minimum remaining
1
<PAGE>
term of twenty-four (24) months. Either party may halt future extension by
written notice, in which case such term of employment shall be the term in
effect when such written notice was given. Notwithstanding the foregoing, this
Agreement shall automatically terminate on the twenty-fifth (25th) anniversary
of the Effective Date if it is not terminated earlier pursuant to Section 7.
3. Duties and Extent of Services; Location of Principal Office.
During the term set forth in Section 2 above, the Corporation shall
employ Executive and Executive shall serve the Corporation as President and
Chief Executive Officer of the Corporation. During the period of his employment,
Executive shall devote his full business time and attention to the business and
affairs of the Corporation. During such term, Executive's principal office shall
be located at 309 Lafayette Road, Chickamauga, Georgia.
4. Compensation.
(a) Base Salary. During the term set forth in Section 2 above, the
Corporation shall pay Executive a base salary, payable in accordance with the
Corporation's standard payroll practices, as follows: $280,000 per annum for the
period from the Effective Date through September 30, 1998, and $300,000 per
annum, thereafter. Executive's salary may be reviewed from time to time by the
Board, to increase the amount of such salary. Executive's salary shall not be
reduced during the term of this Agreement. Any increased salary shall become
Executive's base salary for purposes of this Agreement.
(b) Annual Incentive. During the term set forth in Section 2, above,
Executive shall be eligible to participate in the Executive Incentive Plan, or
in such successor plan as may be adopted for the provision of annual incentive
compensation for senior executives (the "Annual
2
<PAGE>
Incentive Plan"). Executive shall be entitled to an incentive payment applicable
under the Annual Incentive Plan if the Corporation meets its business plan for
the year ("Making Plan").
(c) Stock Options. Executive shall have such rights to stock options
under either the Synthetic Industries, Inc. 1994 Stock Option Plan, the
Synthetic Industries, Inc. 1996 Stock Option Plan, or any successor stock option
plan, or any combination of such plans (collectively, the "Option Plan") as
shall be set forth in any applicable stock option agreement.
5. Benefits.
During the term set forth in Section 2 above, Executive shall be
eligible to participate in all group life insurance, health insurance,
disability insurance, survivor income insurance and similar programs maintained
by the Corporation and covering executive employees. Participation in any
retirement plans maintained by the Corporation shall be as determined under the
provisions of such plans.
6. Reimbursement for Expenses.
The Corporation shall reimburse Executive for all reasonable business
expenses incurred by him on behalf of the Corporation in the performance of his
duties hereunder, provided Executive shall account therefore in accordance with
the Corporation's business expense policies and procedures.
7. Termination
Executive's employment may be terminated prior to the end of the
term described in Section 2 only as provided in this Section 7.
(a) Termination for Disability. If the Executive becomes unable to
substantially perform his duties due to permanent physical or mental disability,
as determined by
3
<PAGE>
a physician agreed upon by the Corporation and the Executive, his employment
pursuant to this Agreement shall terminate. If Executive's employment is
terminated on account of disability under this Section 7(a), Executive's rights
to compensation and benefits shall be as follows:
(i) Executive (or in the event of his death, his estate) shall
be paid his base salary accrued through the date of termination of employment.
(ii) Executive shall be entitled to any unpaid amount previously
fully accrued under the Annual Incentive Plan.
(iii) Executive's rights with respect to stock options, if any,
shall be determined under the Option Plan and any applicable stock option
agreement.
(iv) Following his termination, Executive's right to participate
in the benefit programs described in Section 5 above, including the rights of
Executive's dependents to participate in such programs, if any, shall be as
determined under the provisions of such benefit programs.
(b) Termination on Executive's Death. In the event of termination of
employment by reason of the death of Executive, payment of compensation and
benefits shall be as set forth below. Payment shall be made to the executor or
administrator of Executive's estate, or, in the case of a payment made under a
benefit program, to the person or persons who have been designated pursuant to
the terms of such program to receive such payments.
(i) Executive's base salary accrued through the date of
termination of employment.
(ii) Executive shall be entitled to any unpaid amount previously
fully accrued under the Annual Incentive Plan. In addition, Executive shall be
entitled to an incentive
4
<PAGE>
payment, in lieu of an incentive payment under the Annual Incentive Plan for the
plan year in which his employment terminates, in an amount equal to the payment
otherwise determined under the Annual Incentive Plan, as if the Executive were
employed by the Corporation to the end of the year of his termination,
multiplied by a fraction the numerator of which is the number of weeks Executive
was employed during such year, and the denominator of which is 52.
(iii) Executive's rights with respect to stock options, if any,
shall be determined under the Option Plan and any applicable stock option
agreement.
(iv) Following his death, Executive's rights under the benefit
programs described in Section 5 above, including the rights of Executive's
dependents to participate in such programs, if any, shall be as determined under
such programs.
(c) Termination for Cause. The Corporation shall have the right to
terminate Executive's employment for "Cause." If Executive's employment is
terminated for Cause, Executive's rights to compensation and benefits shall be
as follows:
(i) Executive shall be paid his base salary accrued through the
date of termination of employment.
(ii) Executive's rights with respect to stock options, if any,
shall be determined under the Option Plan and any applicable stock option
agreements.
(iii) Following his termination, Executive's right to
participate in the benefit programs described in Section 5, above, including the
rights of Executive's dependents to participate in such programs, if any, shall
be as determined under the provisions of such benefit programs.
5
<PAGE>
For purposes of this Subsection, "Cause" shall mean (1) Executive's
conviction of, or plea of, guilty or nolo contendere to a felony (unless
committed in the good faith belief that Executive's actions were in the best
interests of the Corporation and would not violate criminal law); or (2) gross
neglect or gross misconduct in the performance of Executive's duties. Executive
shall be given written notice that the Corporation intends to terminate his
employment for Cause under this Subsection. Such notice shall specify the
particular acts, or failures to act, that give rise to the decision to so
terminate employment.
In the case of termination for Cause under definition (1), Executive's
employment shall be terminated effective as of the date such notice is given,
provided, however, that Executive shall be given the opportunity to meet with
the Board of Directors of the Corporation within 30 days of the date such notice
is given, to be heard with regard to whether he, in good faith, believed that
his actions or inactions were both in the best interests of the Corporation and
would not violate criminal law.
In the case of termination for Cause under definition (2), Executive
shall be given the opportunity within 20 days of the receipt of such notice to
meet with the Board to defend such acts or failures to act. Executive shall be
given seven days after such meeting to correct any particular acts or failures
to act, and upon failure of Executive, within such seven day period, to correct
such acts or failures to act, Executive's employment by the Corporation shall be
terminated.
Termination on account of disability, as provided in Section 7(a)
above, shall not be considered a termination for Cause under this Section 7(c).
6
<PAGE>
(d) Termination Without Cause.
(1) The Corporation shall have the right to terminate
Executive's employment without Cause as defined in Section 7(c) above. In the
event of a termination by the Corporation without Cause, other than (A)
following a Change in Control, as defined in Section 7(e) below, or (B) as
described in Subsection (2) below, Executive's rights to compensation and
benefits shall be as follows:
(i) Executive shall be paid his base salary at the rate in
effect on the date of termination of employment for a period of one and one-half
years from the date of termination.
(ii) Executive shall be entitled to any unpaid amount previously
fully accrued under the Annual Incentive Plan. In addition, Executive shall be
entitled to an incentive payment, in lieu of an incentive payment under the
Annual Incentive Plan for the plan year in which his employment terminates, in
an amount equal to the payment otherwise determined under the Annual Incentive
Plan, as if the Executive were employed by the Corporation to the end of the
year of his termination, multiplied by a fraction the numerator of which is the
number of weeks Executive was employed during such year, and the denominator of
which is 52. In addition, in lieu of future payments under the Annual Incentive
Plan, Executive shall be entitled to a payment that equals the average of the
incentive payments received by Executive (or fully accrued by him) under the
Annual Incentive Plan for the three full plan years immediately preceding his
termination of employment.
7
<PAGE>
(iii) Executive's rights with respect to stock options, if any,
shall be determined under the Option Plan and any applicable stock option
agreement.
(iv) Executive shall be entitled to a lump sum payment equal to
the estimated sum of the premiums that Executive would have to pay to continue
to cover Executive and his eligible dependents under the Corporation's group
health plans, including medical and dental plans, in effect at the time of
termination for a period of 18 months following termination of employment.
Termination on account of disability, as provided in Section 7(a)
above, shall not be considered a termination without Cause under this Section
7(d).
(2) If Executive's employment is terminated by the Corporation without
Cause, as defined in Subsection (e) above, prior to the occurrence of a Change
in Control of the Corporation (as defined below), and if it can be shown that
Executive's termination (i) was at the direction or request of a third party
that had taken steps reasonably calculated to effect the Change in Control of
the Corporation thereafter, or (ii) otherwise occurred in connection with, or in
anticipation of, the Change in Control of the Corporation, then Executive shall
have the rights described in Section 7(e) below, as if a Change in Control of
the Corporation had occurred on the date immediately preceding such termination.
(e) Termination Following a Change in Control.
(1) Definitions.
(A) "Act" means the Securities Exchange Act of 1934, as amended.
(B) "Affiliate of any specified persons" means any other person
that, directly or indirectly, through one or more intermediaries, controls, or
is controlled by, or is
8
<PAGE>
under direct or indirect common control with such specified person. For the
purposes of this definition, "control" means the possession, direct or indirect,
of the power to direct or cause the direction of the management and policies of
a person, whether through the ownership of voting securities, by contract or
otherwise, and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
(C) "Termination Payment" means the sum of:
(i) One and one-half times Executive's base salary at the rate
in effect on the date of a termination of employment (or, in the event of a
termination for Good Reason below, the base salary as in effect immediately
before the actions giving rise to Good Reason); plus
(ii) Two times the greatest of the incentive payments under the
Annual Incentive Plan either paid or accrued in either the Year of the Change in
Control or the immediately preceding Year.
(D) "Base Amount" means an amount equal to Executive's Annualized
Includable Compensation for the Base Period as defined in Section 280(G)(d)(1)
and (2) of the Code (as hereinafter defined).
(E) "Change in Control" of the Corporation means a Change in Control
of a nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Act or any successor
thereto, provided that without limiting the foregoing, a Change in Control of
the Corporation also shall be deemed to have occurred if:
9
<PAGE>
(i) any "person" (as defined under Section 3(a)(9) of the
Act) or "group" of persons (as provided under Rule 13d-3 of the Act) (other
than Synthetic Industries, LP (the "Partnership") is or becomes the
"beneficial owner" (as defined in Rule 13d-3 or otherwise under the Act),
directly or indirectly (including as provided in Rule 13d-3(d)(1) of the
Act), of capital stock of the Corporation the holders of which are entitled
to vote ("voting stock") representing that percentage of the Corporation's
then outstanding voting stock (giving effect to the deemed ownership of
securities by such person or group, as provided in Rule 13d-3(d)(1) of the
Act, but not giving effect to any such deemed ownership of securities by
another person or group) equal to or greater than thirty-five percent (35%)
of all such voting stock;
(ii) individuals who constitute the Board on the date hereof
(the "Incumbent Board") cease for any reason to constitute at least a majority
thereof. Any person becoming a director subsequent to such date whose election,
or nomination for election, is, at any time, approved by a vote of at least
two-thirds of the directors comprising the Incumbent Board shall be considered
as though he were a member of the Incumbent Board;
(iii) the Corporation combines with another person or entity,
whether through a merger, asset sale, reorganization or otherwise, and (a) any
person or group of persons (other than the Partnership) holds at any time after
such combination, voting stock equal to or greater than thirty-five percent
(35%) of all such voting stock determined by reference to the voting securities
of the surviving entity, or (b) the Corporation's Directors, as of the date
immediately before such combination, constitute less than a majority of the
Board of Directors of the combined entity;
10
<PAGE>
(iv) the shareholders of the Corporation approve any merger,
consolidation or share exchange as a result of which the voting stock of the
Corporation shall be changed, converted or exchanged (other than a merger solely
with a wholly owned subsidiary of the Corporation), or any dissolution or
liquidation of the Corporation or any sale or the disposition of 50% or more of
the assets or business of the Corporation in a single transaction or in a series
of transactions;
(v) the shareholders of the Corporation approve any merger or
consolidation to which the Corporation is a party or a share exchange in which
the Corporation shall exchange its shares for shares of another corporation as a
result of which the persons who were shareholders of the Corporation immediately
prior to the effective date of the merger, consolidation or share exchange shall
have beneficial ownership of less than 50% of the combined voting power for
election of directors of the surviving corporation following the effective date
of such merger, consolidation or share exchange;
(vi) any event that would constitute a Change in Control of the
Partnership within the meaning of Item 6(e) of the Schedule 14A of Regulation
14A promulgated under the Act or any successor thereto or under any of clauses
(1), (2), (3), (4) or (5) above if the term "Partnership" were substituted for
the term "Corporation," "partner" were substituted for "shareholder" and
"interest" were substituted for "stock," "capital stock" or "securities," or
(vii) the removal of the entity that constitutes the general
partner of the Partnership on the date hereof (the "Incumbent General Partner")
or the appointment in a dissolution of the Partnership of a liquidating trustee
that is not the Incumbent General Partner
11
<PAGE>
unless such appointment was approved by either the Incumbent General Partner or
the individuals who constitute the Incumbent Board.
(F) "Code" means the Internal Revenue Code of 1986, including any
amendments thereto.
(G) "Good Reason" means:
(i) any breach of this Agreement by the Corporation, including
without limitation (a) any reduction during the employment period in the amount
of Executive's base salary or aggregate benefits as in effect from time to time,
(b) failure to provide Executive with the same fringe benefits that were
provided to Executive immediately prior to a Change in Control of the
Corporation, or with a package of fringe benefits (including paid vacations)
that, though one or more of such benefits may vary from those in effect
immediately prior to such a Change in Control, is substantially comparable in
all material respects to such fringe benefits taken as a whole, or (c) any other
breach by the Corporation of its obligations to pay compensation under this
Agreement;
(ii) without Executive's express written consent, the assignment
to Executive of any duties which are materially inconsistent with Executive's
positions, duties, responsibilities and status immediately prior to the Change
in Control of the Corporation, a material change in Executive's reporting
responsibilities, titles or offices as an employee and as in effect immediately
prior to the Change in Control, or a significant reduction in Executive's title,
duties or responsibilities, or in the level of his support services;
(iii) the relocation of Executive's principal place of
employment, without Executive's written consent, to a location more than 50
miles from
12
<PAGE>
Executive's principal place of employment at the time of such Change in Control,
or the imposition of any requirement that Executive spend more than 60 business
days per year at a location other than such principal place of employment;
(iv) any purported termination of Executive's employment for
Cause, Disability or Retirement which is not effected pursuant to a Notice of
Termination satisfying the requirements defined below;
Upon the occurrence of any of the events described in (i), (ii), (iii),
or (iv) above, Executive shall give the Corporation written notice that such
event constitutes Good Reason, and the Corporation shall thereafter have 30 days
in which to cure. If the Corporation has not cured in that time, the event shall
constitute Good Reason.
(H) "Notice of Termination" means a notice which shall indicate the
specific termination provision relied upon in this Agreement and shall set forth
in reasonable detail the facts and circumstances claimed to provide a basis for
termination of Executive's employment under the provision so indicated.
(I) "Person" or "Group" means a "person" or "group," as defined in
the definition of "Change in Control" above.
(J) "Year" means a calendar year unless otherwise specifically
provided.
(2) Payments for Termination Following Change in Control. If, following
a Change in Control, Executive's employment with the Corporation is terminated
by the Corporation other than for Cause, or by Executive on or before 120 days
following the date of the Change in Control or, if later, for Good Reason, then:
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(A) Executive shall be entitled to all compensation and benefits
accrued through the date of termination of employment;
(B) Executive shall be entitled to the Termination Payment made in a
lump sum payment;
(C) Executive shall be entitled to any unpaid amount previously
fully accrued under the Annual Incentive Plan. In addition, in lieu of future
payments under the Annual Incentive Plan, Executive shall be entitled to a
payment that equals the average of the incentive payments received by Executive
(or fully accrued by him) under the Annual Incentive Plan for the three plan
years immediately preceding his termination of employment; and
(D) Executive shall be entitled to a lump sum payment equal to the
estimated sum of the premiums that Executive would have to pay to continue to
cover Executive and his eligible dependents under the Corporation's group health
plans, including medical and dental plans and to purchase life insurance,
accidental death and dismemberment insurance and disability insurance coverage
substantially equivalent to the coverage in effect at the time of termination
for a period of 18 months following termination of employment.
(E) The payments described above shall be made within 2 business
days after termination in the event termination is by the Corporation or
Executive gives at least 5 business days notice of termination by the Executive.
In the case of termination by the Executive without 5 business days notice, the
payments shall be made within 10 business days after the termination. Any
payments not timely made will accrue interest at 8.5% per annum until made.
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(3) Vesting of Options upon Change in Control. In the event of a Change
in Control, whether or not Executive's employment continues with the
Corporation, all options under the Option Plan shall immediately vest on the
date of the Change in Control.
(4) Certain Supplemental Provisions. Notwithstanding anything herein to
the contrary, in the event that any payment received or to be received by
Executive in connection with a Change in Control of the Corporation or the
termination of Executive's employment (whether payable pursuant to the terms of
this Agreement or any other plan, arrangement or agreement) (all such payment
being referred to in the aggregate as "Total Payment") would not be deductible
(in whole or in part) as a result of Section 280G of the Code, the payments
otherwise due to Executive pursuant to Section 7(e)(2) above ("Severance
Payments") shall be reduced until no portion of the Total Payments is not
deductible as a result of Section 280G of the Code, or the Severance Payments
are reduced to zero. For purposes of this limitation (i) no portion of the Total
Payments, the receipt or enjoyment of which Executive shall have effectively
waived in writing prior to the date of payment of the Severance Payments, shall
be taken into account, (ii) no portion of the Total Payments shall be taken into
account which, in the opinion of the tax counsel selected by the Corporation's
independent auditors and reasonably acceptable to Executive ("Tax Counsel"),
does not constitute a "parachute payment" within the meaning of Section
280G(b)(2) of the Code, (iii) the Severance Payments shall be reduced only to
the extent necessary so that the Total Payments (other than those referred to in
clause (i) or (ii)) in their entirety constitute reasonable compensation for
services actually rendered within the meaning of Section 280G(b)(4) of the Code,
in the opinion of Tax Counsel,
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and (iv) the value of any non-cash benefit or any deferred payment or benefit
included in the Total Payments shall be determined by the Corporation's
independent auditors in accordance with the principles of Sections 280G(d)(3)
and (4) of the Code.
(5) Expenses and Interest. If, after a Change in Control of the
Corporation, a good faith dispute arises with respect to the enforcement of the
Executive's rights under this Subsection 7(e), or if any legal or arbitration
proceeding shall be brought in good faith to enforce or interpret any rights
provided under this Subsection 7(e), Executive shall recover from the
Corporation any reasonable attorney's fees and necessary costs and disbursements
incurred as a result of such dispute, and prejudgment interest on any money
judgment or arbitration obtained by Executive calculated at 8.5% per annum from
the date that payments to him should have been made under this Subsection.
(f) Voluntary Termination. Executive may terminate his employment
voluntarily at any time by giving the Corporation two weeks written notice. In
the event Executive terminates his employment voluntarily, other than as
provided in Subsection 7(e) above, Executive's rights to compensation and
benefits shall be as follows:
(i) Executive shall be paid salary accrued through the date of
termination of employment.
(ii) Executive's rights to annual incentive, if any, shall be as
determined under the Annual Incentive Plan.
(iii) Executive's rights with respect to stock options, if any,
shall be determined under the Option Plan and any applicable stock option
agreement.
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(iv) Following his termination, Executive's right to participate
in the benefit programs described in Section 5 above, including the rights of
Executive's dependents to participate in such programs, if any, shall be as
determined under the provisions of such benefit programs.
8. Payment Obligations Absolute.
The Corporation's obligation to pay the Executive the compensation and
to make the arrangements provided herein shall be absolute and unconditional and
shall not be affected by any circumstances, including, without limitation, any
set-off, counterclaim, recoupment, defense or other right which the Corporation
may have against him or anyone else. All amounts payable by the Corporation
hereunder shall be paid without notice or demand. Each and every payment made
hereunder by the Corporation shall be final and the Corporation will not seek to
recover all or any part of such payment from the Executive or from whomsoever
may be entitled thereto, for any reason whatever provided that if the Executive
is convicted of, or pleads guilty or nolo contendere to, a felony or misdemeanor
involving acts or omissions of the Executive in connection with his employment
by the Corporation, the Corporation shall be allowed to recover any actual
damages it has incurred from such action or omission out of amounts paid or
owing him hereunder.
9. Further Obligations of Executive.
(a) Definitions.
For purposes of this Section, the following definitions apply:
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(i) "Restricted Activities" means the rendering of any
advertising, marketing, sales, administrative, financial planning or accounting,
supervisory, or consulting services.
(ii) "Territory" means the continental United States and Canada.
(iii) "Restricted Businesses" means the manufacture,
distribution, and/or sale of fabrics and fibers manufactured from polypropylene
resin.
(iv) "Confidential Information" means any data or information,
other than Trade Secrets, that is valuable to the Corporation and not generally
known to the public or to competitors of the Corporation.
(v) "Nondisclosure Period" means the period beginning on the
date of this Agreement and ending two years after the date Executive's
employment with the Corporation ends or is terminated for any reason.
(vi) "Nonsolicitation Period" means the period beginning on the
date of this Agreement and ending two years after the date Executive's
employment with the Corporation ends or is terminated for any reason.
(vii) "Trade Secret" means information including, but not
limited to, any technical or nontechnical data, formula, pattern, compilation,
program, device, method, technique, drawing, process, financial data, financial
plan, product plan, list of actual or potential customers or suppliers or other
information similar to any of the foregoing, which (i) derives economic value,
actual or potential, from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can derive economic value
from its
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disclosure or use and (ii) is the subject of efforts that are reasonable under
the circumstances to maintain its secrecy.
(b) Trade Secrets and Confidential Information.
(i) Trade Secrets. Executive hereby covenants and agrees that he
shall hold in confidence all Trade Secrets of the Corporation, its direct and
indirect subsidiaries, and/or its customers (the "Associated Companies") that
came into his knowledge during his employment by the Corporation and shall not
disclose, publish or make use of at any time after the date hereof such Trade
Secrets without the prior written consent of the Corporation for as long as the
information remains a Trade Secret.
(ii) Confidential Information. Executive hereby covenants and
agrees that, during the Non-Disclosure Period, he will hold in confidence all
Confidential Information of the Corporation or of the Associated Companies that
came into his knowledge during his employment by the Corporation and will not
disclose, publish or make use of such Confidential Information without the prior
written consent of the Corporation.
(iii) Return of Materials. Upon the request of the Corporation
and, in any event, upon the termination of Executive's employment with the
Corporation, Executive shall deliver to the Corporation all memoranda, notes,
records, manuals or other documents (including, but not limited to, written
instruments, voice or data recordings, or computer tapes, disks or files of any
nature), including all copies of such materials and all documentation prepared
or produced in connection therewith, pertaining to the performance of
Executive's services for the Corporation, the business of the Corporation, or
containing Trade Secrets or Confidential Information regarding the Corporation's
business, whether made or compiled by
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Executive or furnished to Executive by virtue of his employment with the
Corporation. Executive shall also deliver to the Corporation all computers,
credit cards, telephones, office equipment, software, and other property the
Corporation furnished to Executive by virtue of his employment with the
Corporation.
(c) Nonsolicitation.
(i) Nonsolicitation of Customers. Executive hereby covenants and
agrees that he will not, during the Nonsolicitation Period, without the prior
written consent of the Corporation, solicit, directly or indirectly, any
business related to the Restricted Businesses from any of the Corporation's
customers, including actively sought prospective customers, with whom Executive
had contact during his employment with the Corporation.
(ii) Nonsolicitation of Employees. Executive hereby covenants
that he will not, during the Nonsolicitation Period, without the prior written
consent of the Corporation, solicit or attempt to solicit for employment for or
on behalf of any corporation, partnership, venture or other business entity any
person who, on the last day of Executive's employment with the Corporation or
within 12 months prior to that date, was employed by the Corporation or its
direct or indirect subsidiaries and with whom Executive had contact during the
course of his employment with the Corporation (whether or not such person would
commit a breach of contract).
(f) Non-competition.
(i) Noncompete. Executive hereby covenants that he will not,
within the Territory and during the Nonsolicitation Period, without the prior
written consent of the
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Corporation, engage in any Restricted Activities for or on behalf of any
corporation, partnership, venture or other business entity which engages in any
of the Restricted Businesses.
(e) Noncompete Payment. Notwithstanding any other provision of this
Agreement, the Parties agree that in consideration of and as an inducement to
Executive's undertaking the obligations contained in this Section 9, the
Corporation shall pay Executive (or in the event of his death, his estate),
within 5 business days after the date of termination of employment, a lump sum
payment equal to one-half Executive's annual base salary, as in effect on the
date of termination of employment (the "Noncompete Payment"). The parties
further acknowledge and agree that should Executive breach any of the covenants
contained in this Section 9, the Corporation will suffer material damages,
including but not limited to lost business revenues, sales, and customers.
Because of the difficulty in quantifying these damages, Executive hereby agrees
that, in addition to any other rights the Corporation may have at law or in
equity, he shall forfeit the Noncompete Payment upon any breach of the covenants
contained in this Section 9. In the event a breach of covenant occurs after the
termination of employment, Employee agrees to immediately return the Noncompete
Payment to the Corporation.
(f) Specific Performance. Executive acknowledges that the
obligations undertaken by him pursuant to this Section 9 are unique and that the
Corporation likely will have no adequate remedy at law if he fails to perform
any of his obligations. Executive therefore confirms that the Corporation's
right to specific performance of the terms of this Agreement is essential to
protect the rights and interests of the Corporation. Accordingly, in addition to
any other remedies that the Corporation may have pursuant to Subsection 9(e), at
law, or in equity, the Corporation shall have the right to have all obligations,
covenants, agreements and other
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provisions of this Agreement specifically performed by Executive and the
Corporation shall have the right to obtain preliminary and permanent injunctive
relief from any court with proper jurisdiction, without having to first submit
arbitration, to secure specific performance and to prevent a breach or
contemplated breach of the obligations contained in this Section.
10. Arbitration.
(a) Except as provided in Subsection 9(f) above, any dispute,
controversy, or claim between the parties arising out of, relating to, or
concerning this Agreement; the breach, termination, or invalidity of this
Agreement; and the scope of this arbitration clause, shall be settled by
arbitration at the American Arbitration Association ("AAA") in Atlanta, Georgia,
in accordance with the Employment Dispute Resolution Rules of the AAA then in
effect. Any award rendered shall be final and binding on the parties hereto, and
judgment may be entered in any court having jurisdiction thereof. Nothing in
this section, however, shall prevent the Corporation from seeking immediate
relief from a court of competent jurisdiction to enforce the obligations
undertaken in Section 9 above without first having to undergo arbitration.
(b) The arbitrator shall be mutually acceptable to the parties, or
failing agreement, selected pursuant to the Employment Dispute Arbitration Rules
of the AAA. The arbitration award shall be in writing and shall specify the
factual and legal bases for the award. In rendering the award, the arbitrator
shall determine the respective rights and obligations of the parties according
the laws of the State of Georgia or, if applicable, federal law.
(c) All costs and expenses of the arbitration shall be paid for by
the Corporation. Except as provided in Subsection 7(e)(5), each party shall pay
its own attorneys' fees.
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(d) It is the specific intent of the parties that this
arbitration clause be governed by the Federal Arbitration Act, 9 U.S.C.
Section 1, et seq. ("FAA"); however, if this clause is unenforceable for any
reason under the FAA, then the parties intend that it be governed by the
provisions of the Georgia Arbitration Code, O.C.G.A. Section 9-9-1, et seq.
(e) Both Executive and the Corporation represent and warrant they
have read this Section, have had an opportunity to consult with and receive
advice from legal counsel regarding this Section, and hereby forever waive all
rights to assert that this Section was a result of duress, coercion, or mistake
of law of fact.
_____________ (Initialed by Executive)
_____________ (Initialed by the Corporation)
11. Withholding.
Payments required to be made by the Corporation to Executive, his
spouse, his estate or beneficiaries, will be subject to withholding of such
amounts relating to taxes as the Corporation may reasonably determine it should
withhold pursuant to any applicable law or regulation. In lieu of withholding
such amounts, in whole or in part, the Corporation may, in its sole discretion,
accept other provision for payment of taxes as required by law, provided it is
satisfied that all requirements of law affecting its responsibilities to
withhold such taxes have been satisfied.
12. Assignability; Binding Nature.
This Agreement is binding upon, and will inure to the benefit of,
the parties and their respective successors, heirs, administrators, executors
and assigns. No rights or obligations of Executive hereunder may be assigned or
transferred by Executive except that (a) rights to
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compensation and benefits hereunder, which rights will remain subject to the
limitations hereunder, may be transferred by will or operation of law, and (b)
rights under employee benefit plans or programs described in Section 5, above,
may be assigned or transferred in accordance with such plans, programs or
regular practices thereunder. No rights or obligations of the Corporation under
this Agreement may be assigned or transferred except that rights or obligations
may be assigned or transferred by operation of law or otherwise pursuant to this
Section 12. The Corporation shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business assets of the Corporation by written agreement
in form and substance satisfactory to the Executive, as a condition to such
transaction, expressly to assume and agree to perform this Agreement in the same
manner and to the same extent as the Corporation would be required to perform if
no such succession had occurred.
13. Entire Agreement.
This Agreement supersedes any prior agreements, including but not
limited to the prior Employment Agreement between the parties and, together with
such plans and programs as are specifically referred to herein, contains the
entire agreement between the parties concerning the subject matter hereof.
14. Amendments and Waivers.
This Agreement may not be modified or amended, except by a writing
signed by both parties. A party may waive compliance by the other party with any
term or provision of this Agreement, or any part thereof, provided that the term
or provision, or part thereof, is for the benefit of the waiving party. Any
waiver will be limited to the facts or circumstances giving rise
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to the non-compliance and will not be deemed either a general waiver or
modification with respect to the term or provision, or part thereof, being
waived, or as to any other term or provision of this Agreement, nor will it be
deemed a waiver of compliance with respect to any other facts or circumstances
then or thereafter occurring.
15. Notices.
Any notice given hereunder will be in writing and will be deemed
given when delivered personally or by courier, or five days after being mailed,
certified or registered mail, duly addressed to the party concerned at the
address indicated below or at such other address as such party may subsequently
provide, in accordance with the notice and delivery provisions of this Section:
To the Corporation: Attn: Corporate Secretary
Synthetic Industries, Inc.
309 Lafayette Road
Chickamauga, GA 30707
To Executive: Leonard Chill
Synthetic Industries, Inc.
309 Lafayette Road
Chickamauga, GA 30707
16. Severability.
If fulfillment of any provision of this Agreement, at the time such
fulfillment shall be due, shall transcend the limit of validity prescribed by
law, then the obligation to be fulfilled shall be deemed reduced to the limit of
such validity; and if any clause or provision contained in this Agreement
operates or would operate to invalidate this Agreement, in whole or in part,
then such clause or provision only shall be held ineffective to the extent of
such invalidity, as though
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not herein contained, and the remainder of this Agreement shall remain operative
and in full force and effect.
17. Survivorship.
The respective rights and obligations of the parties hereunder will
survive any termination of this Agreement to the extent necessary to the
intended preservation of such rights and obligations.
18. References.
In the event of Executive's death or a judicial determination of his
incompetence, reference in this Agreement to Executive will be deemed, where
appropriate, to refer to his legal representative or, where appropriate, to his
beneficiary or beneficiaries.
19. Headings.
The headings of paragraphs contained in this Agreement are for
convenience only and will not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
20. Governing Law.
Except to the extent governed by the FAA as provided in Section 10
above, this Agreement, the rights and obligations of the parties, and any claims
or disputes relating thereto shall be governed by and construed in accordance
with the laws of the State of Georgia, not including the choice-of-law rules
thereof.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
SYNTHETIC INDUSTRIES, INC.
By:
- - ---------------------------
Leonard Chill
Title:
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Exhibit 10.12
Employment Agreement
This Agreement ("Agreement") is made and entered into as of the 24th of
September, 1998 ("Effective Date"), by and among Synthetic Industries, Inc.
("the Corporation") and W. Wayne Freed (the "Executive").
WITNESSETH:
WHEREAS, the Corporation currently employs Executive as Vice President
of Market Development; and
WHEREAS, both the Corporation and Executive (the "Parties") desire to
state certain terms and conditions of Executive's employment and wish to
substitute this agreement for their previous employment agreements;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, the Parties agree as follows:
1. Employment.
The Corporation agrees to continue to employ Executive and Executive
agrees to continue to serve the Corporation upon the terms and conditions
hereinafter set forth.
2. Term.
Except as otherwise provided in Section 7 below, the term of
employment under this Agreement shall continue from the Effective Date for a
period of five (5) years.
3. Duties and Extent of Services; Location of Principal Office.
During the term set forth in Section 2 above, the Corporation shall
employ Executive and Executive shall serve the Corporation as Vice President of
Market Development.
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During the period of his employment, Executive shall devote his full business
time and attention to the business and affairs of the Corporation. During such
term, Executive's principal office shall be located at 309 Lafayette Road,
Chickamauga, Georgia.
4. Compensation.
(a) Base Salary. During the term set forth in Section 2 above, the
Corporation shall pay Executive a base salary, payable in accordance with the
Corporation's standard payroll practices, as follows: $168,000 per annum for the
period from the Effective Date through September 30, 1998, and $175,000 per
annum, thereafter. Executive's salary may be reviewed from time to time by the
Board, to increase the amount of such salary. Executive's salary shall not be
reduced during the term of this Agreement. Any increased salary shall become
Executive's base salary for purposes of this Agreement.
(b) Annual Incentive. During the term set forth in Section 2, above,
Executive shall be eligible to participate in the Executive Incentive Plan, or
in such successor plan as may be adopted for the provision of annual incentive
compensation for senior executives (the "Annual Incentive Plan"). Executive
shall be entitled to an incentive payment applicable under the Annual Incentive
Plan if the Corporation meets its business plan for the year ("Making Plan").
(c) Stock Options. Executive shall have such rights to stock options
under either the Synthetic Industries, Inc. 1994 Stock Option Plan, the
Synthetic Industries, Inc. 1996 Stock Option Plan, or any successor stock option
plan, or any combination of such plans (collectively, the "Option Plan") as
shall be set forth in any applicable stock option agreement.
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5. Benefits.
During the term set forth in Section 2 above, Executive shall be
eligible to participate in all group life insurance, health insurance,
disability insurance, survivor income insurance and similar programs maintained
by the Corporation and covering executive employees. Participation in any
retirement plans maintained by the Corporation shall be as determined under the
provisions of such plans.
6. Reimbursement for Expenses.
The Corporation shall reimburse Executive for all reasonable
business expenses incurred by him on behalf of the Corporation in the
performance of his duties hereunder, provided Executive shall account therefore
in accordance with the Corporation's business expense policies and procedures.
7. Termination
Executive's employment may be terminated prior to the end of the
term described in Section 2 only as provided in this Section 7.
(a) Termination for Disability. If the Executive becomes unable to
substantially perform his duties due to permanent physical or mental disability,
as determined by a physician agreed upon by the Corporation and the Executive,
his employment pursuant to this Agreement shall terminate. If Executive's
employment is terminated on account of disability under this Section 7(a),
Executive's rights to compensation and benefits shall be as follows:
(i) Executive (or in the event of his death, his estate) shall
be paid his base salary accrued through the date of termination of employment.
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(ii) Executive shall be entitled to any unpaid amount
previously fully accrued under the Annual Incentive Plan.
(iii) Executive's rights with respect to stock options, if
any, shall be determined under the Option Plan and any applicable stock option
agreement.
(iv) Following his termination, Executive's right to
participate in the benefit programs described in Section 5 above, including the
rights of Executive's dependents to participate in such programs, if any, shall
be as determined under the provisions of such benefit programs.
(b) Termination on Executive's Death. In the event of termination of
employment by reason of the death of Executive, payment of compensation and
benefits shall be as set forth below. Payment shall be made to the executor or
administrator of Executive's estate, or, in the case of a payment made under a
benefit program, to the person or persons who have been designated pursuant to
the terms of such program to receive such payments.
(i) Executive's base salary accrued through the date of
termination of employment.
(ii) Executive shall be entitled to any unpaid amount
previously fully accrued under the Annual Incentive Plan. In addition, Executive
shall be entitled to an incentive payment, in lieu of an incentive payment under
the Annual Incentive Plan for the plan year in which his employment terminates,
in an amount equal to the payment otherwise determined under the Annual
Incentive Plan, as if the Executive were employed by the Corporation to the
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end of the year of his termination, multiplied by a fraction the numerator of
which is the number of weeks Executive was employed during such year, and the
denominator of which is 52.
(iii) Executive's rights with respect to stock options, if
any, shall be determined under the Option Plan and any applicable stock option
agreement.
(iv) Following his death, Executive's rights under the benefit
programs described in Section 5 above, including the rights of Executive's
dependents to participate in such programs, if any, shall be as determined under
such programs.
(c) Termination for Cause. The Corporation shall have the right to
terminate Executive's employment for "Cause." If Executive's employment is
terminated for Cause, Executive's rights to compensation and benefits shall be
as follows:
(i) Executive shall be paid his base salary accrued through
the date of termination of employment.
(ii) Executive's rights with respect to stock options, if any,
shall be determined under the Option Plan and any applicable stock option
agreements.
(iii) Following his termination, Executive's right to
participate in the benefit programs described in Section 5, above, including the
rights of Executive's dependents to participate in such programs, if any, shall
be as determined under the provisions of such benefit programs.
For purposes of this Subsection, "Cause" shall mean (1) Executive's
conviction of, or plea of, guilty or nolo contendere to a felony (unless
committed in the good faith belief that Executive's actions were in the best
interests of the Corporation and would not violate criminal law); or (2) gross
neglect or gross misconduct in the performance of Executive's duties.
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Executive shall be given written notice that the Corporation intends to
terminate his employment for Cause under this Subsection. Such notice shall
specify the particular acts, or failures to act, that give rise to the decision
to so terminate employment.
In the case of termination for Cause under definition (1), Executive's
employment shall be terminated effective as of the date such notice is given,
provided, however, that Executive shall be given the opportunity to meet with
the Board of Directors of the Corporation within 30 days of the date such notice
is given, to be heard with regard to whether he, in good faith, believed that
his actions or inactions were both in the best interests of the Corporation and
would not violate criminal law.
In the case of termination for Cause under definition (2), Executive shall
be given the opportunity within 20 days of the receipt of such notice to meet
with the Board to defend such acts or failures to act. Executive shall be given
seven days after such meeting to correct any particular acts or failures to act,
and upon failure of Executive, within such seven day period, to correct such
acts or failures to act, Executive's employment by the Corporation shall be
terminated.
Termination on account of disability, as provided in Section 7(a) above,
shall not be considered a termination for Cause under this Section 7(c).
(d) Termination Without Cause.
(1) The Corporation shall have the right to terminate
Executive's employment without Cause as defined in Section 7(c) above. In the
event of a termination by the Corporation without Cause, other than (A)
following a Change in Control, as defined in
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Section 7(e) below, or (B) as described in Subsection (2) below, Executive's
rights to compensation and benefits shall be as follows:
(i) Executive shall be paid his base salary at the rate in
effect on the date of termination of employment for a period of one and one-half
years from the date of termination.
(ii) Executive shall be entitled to any unpaid amount
previously fully accrued under the Annual Incentive Plan. In addition, Executive
shall be entitled to an incentive payment, in lieu of an incentive payment under
the Annual Incentive Plan for the plan year in which his employment terminates,
in an amount equal to the payment otherwise determined under the Annual
Incentive Plan, as if the Executive were employed by the Corporation to the end
of the year of his termination, multiplied by a fraction the numerator of which
is the number of weeks Executive was employed during such year, and the
denominator of which is 52. In addition, in lieu of future payments under the
Annual Incentive Plan, Executive shall be entitled to a payment that equals the
average of the incentive payments received by Executive (or fully accrued by
him) under the Annual Incentive Plan for the three full plan years immediately
preceding his termination of employment.
(iii) Executive's rights with respect to stock options, if
any, shall be determined under the Option Plan and any applicable stock option
agreement.
(iv) Executive shall be entitled to a lump sum payment equal
to the estimated sum of the premiums that Executive would have to pay to
continue to cover Executive and his eligible dependents under the Corporation's
group health plans, including medical and
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dental plans, in effect at the time of termination for a period of 18 months
following termination of employment.
Termination on account of disability, as provided in Section 7 (a) above,
shall not be considered a termination without Cause under this Section 7(d).
(2) If Executive's employment is terminated by the Corporation
without Cause, as defined in Subsection (e) above, prior to the occurrence of a
Change in Control of the Corporation (as defined below), and if it can be shown
that Executive's termination (i) was at the direction or request of a third
party that had taken steps reasonably calculated to effect the Change in Control
of the Corporation thereafter, or (ii) otherwise occurred in connection with, or
in anticipation of, the Change in Control of the Corporation, then Executive
shall have the rights described in Section 7(e) below, as if a Change in Control
of the Corporation had occurred on the date immediately preceding such
termination.
(e) Termination Following a Change in Control.
(1) Definitions.
(A) "Act" means the Securities Exchange Act of 1934, as
amended.
(B) "Affiliate of any specified persons" means any other
person that, directly or indirectly, through one or more intermediaries,
controls, or is controlled by, or is under direct or indirect common control
with such specified person. For the purposes of this definition, "control" means
the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a person, whether through the
ownership of voting securities, by contract or otherwise, and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
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(C) "Termination Payment" means the sum of:
(i) One and one-half times Executive's base salary at
the rate in effect on the date of a termination of employment (or, in the event
of a termination for Good Reason below, the base salary as in effect immediately
before the actions giving rise to Good Reason); plus
(ii) Two times the greatest of the incentive
payments under the Annual Incentive Plan either paid or accrued in either the
Year of the Change in Control or the immediately preceding Year.
(D) "Base Amount" means an amount equal to Executive's
Annualized Includable Compensation for the Base Period as defined in Section
280(G)(d)(1) and (2) of the Code (as hereinafter defined).
(E) "Change in Control" of the Corporation means a Change in
Control of a nature that would be required to be reported in response to Item
6(e) of Schedule 14A of Regulation 14A promulgated under the Act or any
successor thereto, provided that without limiting the foregoing, a Change in
Control of the Corporation also shall be deemed to have occurred if:
(i) any "person" (as defined under Section 3(a)(9)
of the Act) or "group" of persons (as provided under Rule 13d-3 of the Act)
(other than Synthetic Industries, LP (the "Partnership") is or becomes the
"beneficial owner" (as defined in Rule 13d-3 or otherwise under the Act),
directly or indirectly (including as provided in Rule 13d-3(d)(1) of the Act),
of capital stock of the Corporation the holders of which are entitled to vote
("voting stock") representing that percentage of the Corporation's then
outstanding voting stock (giving effect to
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the deemed ownership of securities by such person or group, as provided in Rule
13d-3(d)(1) of the Act, but not giving effect to any such deemed ownership of
securities by another person or group) equal to or greater than thirty-five
percent (35%) of all such voting stock;
(ii) individuals who constitute the Board on the
date hereof (the "Incumbent Board") cease for any reason to constitute at least
a majority thereof. Any person becoming a director subsequent to such date whose
election, or nomination for election, is, at any time, approved by a vote of at
least two-thirds of the directors comprising the Incumbent Board shall be
considered as though he were a member of the Incumbent Board;
(iii) the Corporation combines with another person or
entity, whether through a merger, asset sale, reorganization or otherwise, and
(a) any person or group of persons (other than the Partnership) holds at any
time after such combination, voting stock equal to or greater than thirty-five
percent (35%) of all such voting stock determined by reference to the voting
securities of the surviving entity, or (b) the Corporation's Directors, as of
the date immediately before such combination, constitute less than a majority of
the Board of Directors of the combined entity;
(iv) the shareholders of the Corporation approve any
merger, consolidation or share exchange as a result of which the voting stock of
the Corporation shall be changed, converted or exchanged (other than a merger
solely with a wholly owned subsidiary of the Corporation), or any dissolution or
liquidation of the Corporation or any sale or the disposition of 50% or more of
the assets or business of the Corporation in a single transaction or in a series
of transactions;
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(v) the shareholders of the Corporation approve any
merger or consolidation to which the Corporation is a party or a share exchange
in which the Corporation shall exchange its shares for shares of another
corporation as a result of which the persons who were shareholders of the
Corporation immediately prior to the effective date of the merger, consolidation
or share exchange shall have beneficial ownership of less than 50% of the
combined voting power for election of directors of the surviving corporation
following the effective date of such merger, consolidation or share exchange;
(vi) any event that would constitute a Change in
Control of the Partnership within the meaning of Item 6(e) of the Schedule 14A
of Regulation 14A promulgated under the Act or any successor thereto or under
any of clauses (1), (2), (3), (4) or (5) above if the term "Partnership" were
substituted for the term "Corporation," "partner" were substituted for
"shareholder" and "interest" were substituted for "stock," "capital stock" or
"securities," or
(vii) the removal of the entity that constitutes the
general partner of the Partnership on the date hereof (the "Incumbent General
Partner") or the appointment in a dissolution of the Partnership of a
liquidating trustee that is not the Incumbent General Partner unless such
appointment was approved by either the Incumbent General Partner or the
individuals who constitute the Incumbent Board.
(F) "Code" means the Internal Revenue Code of 1986, including
any amendments thereto.
(G) "Good Reason" means:
(i) any breach of this Agreement by the
Corporation, including without limitation (a) any reduction during the
employment period in the amount of Executive's
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base salary or aggregate benefits as in effect from time to time, (b) failure to
provide Executive with the same fringe benefits that were provided to Executive
immediately prior to a Change in Control of the Corporation, or with a package
of fringe benefits (including paid vacations) that, though one or more of such
benefits may vary from those in effect immediately prior to such a Change in
Control, is substantially comparable in all material respects to such fringe
benefits taken as a whole, or (c) any other breach by the Corporation of its
obligations to pay compensation under this Agreement;
(ii) without Executive's express written consent,
the assignment to Executive of any duties which are materially inconsistent with
Executive's positions, duties, responsibilities and status immediately prior to
the Change in Control of the Corporation, a material change in Executive's
reporting responsibilities, titles or offices as an employee and as in effect
immediately prior to the Change in Control, or a significant reduction in
Executive's title, duties or responsibilities, or in the level of his support
services;
(iii) the relocation of Executive's principal place
of employment, without Executive's written consent, to a location more than 50
miles from Executive's principal place of employment at the time of such Change
in Control, or the imposition of any requirement that Executive spend more than
60 business days per year at a location other than such principal place of
employment;
(iv) any purported termination of Executive's
employment for Cause, Disability or Retirement which is not effected pursuant
to a Notice of Termination satisfying the requirements defined below;
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Upon the occurrence of any of the events described in
(i), (ii), (iii), or (iv) above, Executive shall give the Corporation written
notice that such event constitutes Good Reason, and the Corporation shall
thereafter have 30 days in which to cure. If the Corporation has not cured in
that time, the event shall constitute Good Reason.
(H) "Notice of Termination" means a notice which shall
indicate the specific termination provision relied upon in this Agreement and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the provision so
indicated.
(I) "Person" or "Group" means a "person" or "group," as
defined in the definition of "Change in Control" above.
(J) "Year" means a calendar year unless otherwise specifically
provided.
(2) Payments for Termination Following Change in Control. If,
following a Change in Control, Executive's employment with the Corporation is
terminated by the Corporation other than for Cause, or by Executive for Good
Reason, then:
(A) Executive shall be entitled to all compensation and
benefits accrued through the date of termination of employment;
(B) Executive shall be entitled to the Termination Payment
made in a lump sum payment;
(C) Executive shall be entitled to any unpaid amount
previously fully accrued under the Annual Incentive Plan. In addition, in lieu
of future payments under the Annual Incentive Plan, Executive shall be entitled
to a payment that equals the average of the
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incentive payments received by Executive (or fully accrued by him) under the
Annual Incentive Plan for the three plan years immediately preceding his
termination of employment; and
(D) Executive shall be entitled to a lump sum payment equal to
the estimated sum of the premiums that Executive would have to pay to continue
to cover Executive and his eligible dependents under the Corporation's group
health plans, including medical and dental plans and to purchase life insurance,
accidental death and dismemberment insurance and disability insurance coverage
substantially equivalent to the coverage in effect at the time of termination
for a period of 18 months following termination of employment.
(E) The payments described above shall be made within 2
business days after termination in the event termination is by the Corporation
or Executive gives at least 5 business days notice of termination by the
Executive. In the case of termination by the Executive without 5 business days
notice, the payments shall be made within 10 business days after the
termination. Any payments not timely made will accrue interest at 8.5% per annum
until made.
(3) Vesting of Options upon Change in Control. In the event of
a Change in Control, whether or not Executive's employment continues with the
Corporation, all options under the Option Plan shall immediately vest on the
date of the Change in Control.
(4) Certain Supplemental Provisions. Notwithstanding anything
herein to the contrary, in the event that any payment received or to be received
by Executive in connection with a Change in Control of the Corporation or the
termination of Executive's employment (whether payable pursuant to the terms of
this Agreement or any other plan, arrangement or agreement) (all such payment
being referred to in the aggregate as "Total Payment") would not be deductible
(in whole or in part) as a result of Section 280G of the Code,
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the payments otherwise due to Executive pursuant to Section 7(e)(2) above
("Severance Payments") shall be reduced until no portion of the Total Payments
is not deductible as a result of Section 280G of the Code, or the Severance
Payments are reduced to zero. For purposes of this limitation (i) no portion
of the Total Payments, the receipt or enjoyment of which Executive shall have
effectively waived in writing prior to the date of payment of the Severance
Payments, shall be taken into account, (ii) no portion of the Total Payments
shall be taken into account which, in the opinion of the tax counsel selected
by the Corporation's independent auditors and reasonably acceptable to
Executive ("Tax Counsel"), does not constitute a "parachute payment" within
the meaning of Section 280G(b)(2) of the Code, (iii) the Severance Payments
shall be reduced only to the extent necessary so that the Total Payments (other
than those referred to in clause (i) or (ii)) in their entirety constitute
reasonable compensation for services actually rendered within the meaning of
Section 280G(b)(4) of the Code, in the opinion of Tax Counsel, and (iv) the
value of any non-cash benefit or any deferred payment or benefit included in
the Total Payments shall be determined by the Corporation's independent
auditors in accordance with the principles of Sections 280G(d)(3) and (4) of
the Code.
(5) Expenses and Interest. If, after a Change in Control of
the Corporation, a good faith dispute arises with respect to the enforcement of
the Executive's rights under this Subsection 7(e), or if any legal or
arbitration proceeding shall be brought in good faith to enforce or interpret
any rights provided under this Subsection 7(e), Executive shall recover from the
Corporation any reasonable attorney's fees and necessary costs and disbursements
incurred as a result of such dispute, and prejudgment interest on any money
judgment or
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arbitration obtained by Executive calculated at 8.5% per annum from
the date that payments to him should have been made under this Subsection.
(f) Voluntary Termination. Executive may terminate his
employment voluntarily at any time by giving the Corporation two weeks written
notice. In the event Executive terminates his employment voluntarily, other than
as provided in Subsection 7(e) above, Executive's rights to compensation and
benefits shall be as follows:
(i) Executive shall be paid salary accrued through the date of
termination of employment.
(ii) Executive's rights to annual incentive, if any, shall be
as determined under the Annual Incentive Plan.
(iii) Executive's rights with respect to stock options, if
any, shall be determined under the Option Plan and any applicable stock option
agreement.
(iv) Following his termination, Executive's right to
participate in the benefit programs described in Section 5 above, including the
rights of Executive's dependents to participate in such programs, if any, shall
be as determined under the provisions of such benefit programs.
8. Payment Obligations Absolute.
The Corporation's obligation to pay the Executive the compensation
and to make the arrangements provided herein shall be absolute and unconditional
and shall not be affected by any circumstances, including, without limitation,
any set-off, counterclaim, recoupment, defense or other right which the
Corporation may have against him or anyone else. All amounts payable by the
Corporation hereunder shall be paid without notice or demand. Each and every
payment
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made hereunder by the Corporation shall be final and the Corporation will not
seek to recover all or any part of such payment from the Executive or from
whomsoever may be entitled thereto, for any reason whatever provided that if the
Executive is convicted of, or pleads guilty or nolo contendere to, a felony or
misdemeanor involving acts or omissions of the Executive in connection with his
employment by the Corporation, the Corporation shall be allowed to recover any
actual damages it has incurred from such action or omission out of amounts paid
or owing him hereunder.
9. Further Obligations of Executive.
(a) Definitions.
For purposes of this Section, the following definitions apply:
(i) "Restricted Activities" means the rendering of any
advertising, marketing, sales, administrative, financial planning or accounting,
supervisory, or consulting services.
(ii) "Territory" means the continental United States and
Canada.
(iii) "Restricted Businesses" means the manufacture,
distribution, and/or sale of fabrics and fibers manufactured from polypropylene
resin.
(iv) "Confidential Information" means any data or information,
other than Trade Secrets, that is valuable to the Corporation and not generally
known to the public or to competitors of the Corporation.
(v) "Nondisclosure Period" means the period beginning on the
date of this Agreement and ending two years after the date Executive's
employment with the Corporation ends or is terminated for any reason.
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(vi) "Nonsolicitation Period" means the period beginning on
the date of this Agreement and ending two years after the date Executive's
employment with the Corporation ends or is terminated for any reason.
(vii) "Trade Secret" means information including, but not
limited to, any technical or nontechnical data, formula, pattern, compilation,
program, device, method, technique, drawing, process, financial data, financial
plan, product plan, list of actual or potential customers or suppliers or other
information similar to any of the foregoing, which (i) derives economic value,
actual or potential, from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can derive economic value
from its disclosure or use and (ii) is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy.
(b) Trade Secrets and Confidential Information.
(i) Trade Secrets. Executive hereby covenants and agrees
that he shall hold in confidence all Trade Secrets of the Corporation, its
direct and indirect subsidiaries, and/or its customers (the "Associated
Companies") that came into his knowledge during his employment by the
Corporation and shall not disclose, publish or make use of at any time after the
date hereof such Trade Secrets without the prior written consent of the
Corporation for as long as the information remains a Trade Secret.
(ii) Confidential Information. Executive hereby covenants and
agrees that, during the Non-Disclosure Period, he will hold in confidence all
Confidential Information of the Corporation or of the Associated Companies that
came into his knowledge during his
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employment by the Corporation and will not disclose, publish or make use of such
Confidential Information without the prior written consent of the Corporation.
(iii) Return of Materials. Upon the request of the Corporation
and, in any event, upon the termination of Executive's employment with the
Corporation, Executive shall deliver to the Corporation all memoranda, notes,
records, manuals or other documents (including, but not limited to, written
instruments, voice or data recordings, or computer tapes, disks or files of any
nature), including all copies of such materials and all documentation prepared
or produced in connection therewith, pertaining to the performance of
Executive's services for the Corporation, the business of the Corporation, or
containing Trade Secrets or Confidential Information regarding the Corporation's
business, whether made or compiled by Executive or furnished to Executive by
virtue of his employment with the Corporation. Executive shall also deliver to
the Corporation all computers, credit cards, telephones, office equipment,
software, and other property the Corporation furnished to Executive by virtue of
his employment with the Corporation.
(c) Nonsolicitation.
(i) Nonsolicitation of Customers. Executive hereby covenants
and agrees that he will not, during the Nonsolicitation Period, without the
prior written consent of the Corporation, solicit, directly or indirectly, any
business related to the Restricted Businesses from any of the Corporation's
customers, including actively sought prospective customers, with whom Executive
had contact during his employment with the Corporation.
(ii) Nonsolicitation of Employees. Executive hereby covenants
that he will not, during the Nonsolicitation Period, without the prior written
consent of the Corporation,
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solicit or attempt to solicit for employment for or on behalf of any
corporation, partnership, venture or other business entity any person who, on
the last day of Executive's employment with the Corporation or within 12 months
prior to that date, was employed by the Corporation or its direct or indirect
subsidiaries and with whom Executive had contact during the course of his
employment with the Corporation (whether or not such person would commit a
breach of contract).
(d) Non-competition.
(i) Noncompete. Executive hereby covenants that he will not,
within the Territory and during the Nonsolicitation Period, without the prior
written consent of the Corporation, engage in any Restricted Activities for or
on behalf of any corporation, partnership, venture or other business entity
which engages in any of the Restricted Businesses.
(e) Noncompete Payment. Notwithstanding any other provision of this
Agreement, the Parties agree that in consideration of and as an inducement to
Executive's undertaking the obligations contained in this Section 9, the
Corporation shall pay Executive (or in the event of his death, his estate),
within 5 business days after the date of termination of employment, a lump sum
payment equal to one-half Executive's annual base salary, as in effect on the
date of termination of employment (the "Noncompete Payment"). The parties
further acknowledge and agree that should Executive breach any of the covenants
contained in this Section 9, the Corporation will suffer material damages,
including but not limited to lost business revenues, sales, and customers.
Because of the difficulty in quantifying these damages, Executive hereby agrees
that, in addition to any other rights the Corporation may have at law or in
equity, he shall forfeit the Noncompete Payment upon any breach of the covenants
contained
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in this Section 9. In the event a breach of covenant occurs after the
termination of employment, Employee agrees to immediately return the Noncompete
Payment to the Corporation.
(f) Specific Performance. Executive acknowledges that the
obligations undertaken by him pursuant to this Section 9 are unique and that the
Corporation likely will have no adequate remedy at law if he fails to perform
any of his obligations. Executive therefore confirms that the Corporation's
right to specific performance of the terms of this Agreement is essential to
protect the rights and interests of the Corporation. Accordingly, in addition to
any other remedies that the Corporation may have pursuant to Subsection 9(e), at
law, or in equity, the Corporation shall have the right to have all obligations,
covenants, agreements and other provisions of this Agreement specifically
performed by Executive and the Corporation shall have the right to obtain
preliminary and permanent injunctive relief from any court with proper
jurisdiction, without having to first submit arbitration, to secure specific
performance and to prevent a breach or contemplated breach of the obligations
contained in this Section.
10. Arbitration.
(a) Except as provided in Subsection 9(f) above, any dispute,
controversy, or claim between the parties arising out of, relating to, or
concerning this Agreement; the breach, termination, or invalidity of this
Agreement; and the scope of this arbitration clause, shall be settled by
arbitration at the American Arbitration Association ("AAA") in Atlanta, Georgia,
in accordance with the Employment Dispute Resolution Rules of the AAA then in
effect. Any award rendered shall be final and binding on the parties hereto, and
judgment may be entered in any court having jurisdiction thereof. Nothing in
this section, however, shall prevent the
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Corporation from seeking immediate relief from a court of competent jurisdiction
to enforce the obligations undertaken in Section 9 above without first having to
undergo arbitration.
(b) The arbitrator shall be mutually acceptable to the parties, or
failing agreement, selected pursuant to the Employment Dispute Arbitration Rules
of the AAA. The arbitration award shall be in writing and shall specify the
factual and legal bases for the award. In rendering the award, the arbitrator
shall determine the respective rights and obligations of the parties according
the laws of the State of Georgia or, if applicable, federal law.
(c) All costs and expenses of the arbitration shall be paid for by
the Corporation. Except as provided in Subsection 7(e)(5), each party shall pay
its own attorneys' fees.
(d) It is the specific intent of the parties that this arbitration
clause be governed by the Federal Arbitration Act, 9 U.S.C. Section 1, et seq.
("FAA"); however, if this clause is unenforceable for any reason under the FAA,
then the parties intend that it be governed by the provisions of the Georgia
Arbitration Code, O.C.G.A. Section 9-9-1, et seq.
(e) Both Executive and the Corporation represent and warrant they
have read this Section, have had an opportunity to consult with and receive
advice from legal counsel regarding this Section, and hereby forever waive all
rights to assert that this Section was a result of duress, coercion, or mistake
of law of fact.
(Initialed by Executive)
-------------
(Initialed by the Corporation)
-------------
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11. Withholding.
Payments required to be made by the Corporation to Executive, his
spouse, his estate or beneficiaries, will be subject to withholding of such
amounts relating to taxes as the Corporation may reasonably determine it should
withhold pursuant to any applicable law or regulation. In lieu of withholding
such amounts, in whole or in part, the Corporation may, in its sole discretion,
accept other provision for payment of taxes as required by law, provided it is
satisfied that all requirements of law affecting its responsibilities to
withhold such taxes have been satisfied.
12. Assignability; Binding Nature.
This Agreement is binding upon, and will inure to the benefit of,
the parties and their respective successors, heirs, administrators, executors
and assigns. No rights or obligations of Executive hereunder may be assigned or
transferred by Executive except that (a) rights to compensation and benefits
hereunder, which rights will remain subject to the limitations hereunder, may be
transferred by will or operation of law, and (b) rights under employee benefit
plans or programs described in Section 5, above, may be assigned or transferred
in accordance with such plans, programs or regular practices thereunder. No
rights or obligations of the Corporation under this Agreement may be assigned or
transferred except that rights or obligations may be assigned or transferred by
operation of law or otherwise pursuant to this Section 12. The Corporation shall
require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business assets
of the Corporation by written agreement in form and substance satisfactory to
the Executive, as a
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condition to such transaction, expressly to assume and agree to perform this
Agreement in the same manner and to the same extent as the Corporation would be
required to perform if no such succession had occurred.
13. Entire Agreement.
This Agreement supersedes any prior agreements, including but not
limited to the prior Employment Agreement between the parties and, together with
such plans and programs as are specifically referred to herein, contains the
entire agreement between the parties concerning the subject matter hereof.
14. Amendments and Waivers.
This Agreement may not be modified or amended, except by a writing
signed by both parties. A party may waive compliance by the other party with any
term or provision of this Agreement, or any part thereof, provided that the term
or provision, or part thereof, is for the benefit of the waiving party. Any
waiver will be limited to the facts or circumstances giving rise to the
non-compliance and will not be deemed either a general waiver or modification
with respect to the term or provision, or part thereof, being waived, or as to
any other term or provision of this Agreement, nor will it be deemed a waiver of
compliance with respect to any other facts or circumstances then or thereafter
occurring.
15. Notices.
Any notice given hereunder will be in writing and will be deemed
given when delivered personally or by courier, or five days after being
mailed, certified or registered mail, duly addressed to the party concerned
at the address indicated below or at such other address as
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such party may subsequently provide, in accordance with the notice and delivery
provisions of this Section:
To the Corporation: Attn: Corporate Secretary
Synthetic Industries, Inc.
309 Lafayette Road
Chickamauga, GA 30707
To Executive: W. Wayne Freed
Synthetic Industries, Inc.
309 Lafayette Road
Chickamauga, GA 30707
16. Severability.
If fulfillment of any provision of this Agreement, at the time such
fulfillment shall be due, shall transcend the limit of validity prescribed by
law, then the obligation to be fulfilled shall be deemed reduced to the limit of
such validity; and if any clause or provision contained in this Agreement
operates or would operate to invalidate this Agreement, in whole or in part,
then such clause or provision only shall be held ineffective to the extent of
such invalidity, as though not herein contained, and the remainder of this
Agreement shall remain operative and in full force and effect.
17. Survivorship.
The respective rights and obligations of the parties hereunder will
survive any termination of this Agreement to the extent necessary to the
intended preservation of such rights and obligations.
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18. References.
In the event of Executive's death or a judicial determination of his
incompetence, reference in this Agreement to Executive will be deemed, where
appropriate, to refer to his legal representative or, where appropriate, to his
beneficiary or beneficiaries.
19. Headings.
The headings of paragraphs contained in this Agreement are for
convenience only and will not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
20. Governing Law.
Except to the extent governed by the FAA as provided in Section 10
above, this Agreement, the rights and obligations of the parties, and any claims
or disputes relating thereto shall be governed by and construed in accordance
with the laws of the State of Georgia, not including the choice-of-law rules
thereof.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
SYNTHETIC INDUSTRIES, INC.
By:
- - --------------------------- --------------------------------
W. Wayne Freed
Title:
-------------------------------
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Exhibit 10.13
Employment Agreement
This Agreement ("Agreement") is made and entered into as of the 24th
of September, 1998 ("Effective Date"), by and among Synthetic Industries,
Inc. ("the Corporation") and Ralph Kenner (the "Executive").
WITNESSETH:
WHEREAS, the Corporation currently employs Executive as Vice
President of Manufacturing; and
WHEREAS, both the Corporation and Executive (the "Parties") desire to
state certain terms and conditions of Executive's employment and wish to
substitute this agreement for their previous employment agreements;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, the Parties agree as follows:
1. Employment.
The Corporation agrees to continue to employ Executive and Executive
agrees to continue to serve the Corporation upon the terms and conditions
hereinafter set forth.
2. Term.
Except as otherwise provided in Section 7 below, the term of
employment under this Agreement shall continue from the Effective Date for a
period twenty-five (25) months; provided, however, that on the first day of the
second calendar month following the Effective Date, and on the first day of each
successive month, such term of employment shall automatically be extended for
successive one month periods, providing
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a minimum remaining term of twenty-four (24) months. Either party may halt
future extension by written notice, in which case such term of employment shall
be the term in effect when such written notice was given. Notwithstanding the
foregoing, this Agreement shall automatically terminate on the twenty-fifth
(25th) anniversary of the Effective Date if it is not terminated earlier
pursuant to Section 7.
3. Duties and Extent of Services; Location of Principal Office.
During the term set forth in Section 2 above, the Corporation shall
employ Executive and Executive shall serve the Corporation as Vice President of
Manufacturing. During the period of his employment, Executive shall devote his
full business time and attention to the business and affairs of the Corporation.
During such term, Executive's principal office shall be located at 309 Lafayette
Road, Chickamauga, Georgia.
4. Compensation.
(a) Base Salary. During the term set forth in Section 2 above, the
Corporation shall pay Executive a base salary, payable in accordance with the
Corporation's standard payroll practices, as follows: $171,000 per annum for the
period from the Effective Date through September 30, 1998, and $171,000 per
annum, thereafter. Executive's salary may be reviewed from time to time by the
Board, to increase the amount of such salary. Executive's salary shall not be
reduced during the term of this Agreement. Any increased salary shall become
Executive's base salary for purposes of this Agreement.
(b) Annual Incentive. During the term set forth in Section 2, above,
Executive shall be eligible to participate in the Executive Incentive Plan, or
in such successor plan as may be adopted for the provision of annual incentive
compensation for senior executives (the "Annual
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Incentive Plan"). Executive shall be entitled to an incentive payment applicable
under the Annual Incentive Plan if the Corporation meets its business plan for
the year ("Making Plan").
(c) Stock Options. Executive shall have such rights to stock options
under either the Synthetic Industries, Inc. 1994 Stock Option Plan, the
Synthetic Industries, Inc. 1996 Stock Option Plan, or any successor stock option
plan, or any combination of such plans (collectively, the "Option Plan") as
shall be set forth in any applicable stock option agreement.
5. Benefits.
During the term set forth in Section 2 above, Executive shall be
eligible to participate in all group life insurance, health insurance,
disability insurance, survivor income insurance and similar programs maintained
by the Corporation and covering executive employees. Participation in any
retirement plans maintained by the Corporation shall be as determined under the
provisions of such plans.
6. Reimbursement for Expenses.
The Corporation shall reimburse Executive for all reasonable
business expenses incurred by him on behalf of the Corporation in the
performance of his duties hereunder, provided Executive shall account therefore
in accordance with the Corporation's business expense policies and procedures.
7. Termination
Executive's employment may be terminated prior to the end of the
term described in Section 2 only as provided in this Section 7.
(a) Termination for Disability. If the Executive becomes unable to
substantially perform his duties due to permanent physical or mental disability,
as determined by
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a physician agreed upon by the Corporation and the Executive, his employment
pursuant to this Agreement shall terminate. If Executive's employment is
terminated on account of disability under this Section 7(a), Executive's rights
to compensation and benefits shall be as follows:
(i) Executive (or in the event of his death, his estate) shall
be paid his base salary accrued through the date of termination of employment.
(ii) Executive shall be entitled to any unpaid amount previously
fully accrued under the Annual Incentive Plan.
(iii) Executive's rights with respect to stock options, if any,
shall be determined under the Option Plan and any applicable stock option
agreement.
(iv) Following his termination, Executive's right to participate
in the benefit programs described in Section 5 above, including the rights of
Executive's dependents to participate in such programs, if any, shall be as
determined under the provisions of such benefit programs.
(b) Termination on Executive's Death. In the event of termination of
employment by reason of the death of Executive, payment of compensation and
benefits shall be as set forth below. Payment shall be made to the executor or
administrator of Executive's estate, or, in the case of a payment made under a
benefit program, to the person or persons who have been designated pursuant to
the terms of such program to receive such payments.
(i) Executive's base salary accrued through the date of
termination of employment.
(ii) Executive shall be entitled to any unpaid amount previously
fully accrued under the Annual Incentive Plan. In addition, Executive shall be
entitled to an incentive
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payment, in lieu of an incentive payment under the Annual Incentive Plan for the
plan year in which his employment terminates, in an amount equal to the payment
otherwise determined under the Annual Incentive Plan, as if the Executive were
employed by the Corporation to the end of the year of his termination,
multiplied by a fraction the numerator of which is the number of weeks Executive
was employed during such year, and the denominator of which is 52.
(iii) Executive's rights with respect to stock options, if any,
shall be determined under the Option Plan and any applicable stock option
agreement.
(iv) Following his death, Executive's rights under the benefit
programs described in Section 5 above, including the rights of Executive's
dependents to participate in such programs, if any, shall be as determined under
such programs.
(c) Termination for Cause. The Corporation shall have the right to
terminate Executive's employment for "Cause." If Executive's employment is
terminated for Cause, Executive's rights to compensation and benefits shall be
as follows:
(i) Executive shall be paid his base salary accrued through the
date of termination of employment.
(ii) Executive's rights with respect to stock options, if any,
shall be determined under the Option Plan and any applicable stock option
agreements.
(iii) Following his termination, Executive's right to
participate in the benefit programs described in Section 5, above, including the
rights of Executive's dependents to participate in such programs, if any, shall
be as determined under the provisions of such benefit programs.
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For purposes of this Subsection, "Cause" shall mean (1) Executive's
conviction of, or plea of, guilty or nolo contendere to a felony (unless
committed in the good faith belief that Executive's actions were in the best
interests of the Corporation and would not violate criminal law); or (2) gross
neglect or gross misconduct in the performance of Executive's duties. Executive
shall be given written notice that the Corporation intends to terminate his
employment for Cause under this Subsection. Such notice shall specify the
particular acts, or failures to act, that give rise to the decision to so
terminate employment.
In the case of termination for Cause under definition (1), Executive's
employment shall be terminated effective as of the date such notice is given,
provided, however, that Executive shall be given the opportunity to meet with
the Board of Directors of the Corporation within 30 days of the date such notice
is given, to be heard with regard to whether he, in good faith, believed that
his actions or inactions were both in the best interests of the Corporation and
would not violate criminal law.
In the case of termination for Cause under definition (2), Executive
shall be given the opportunity within 20 days of the receipt of such notice to
meet with the Board to defend such acts or failures to act. Executive shall be
given seven days after such meeting to correct any particular acts or failures
to act, and upon failure of Executive, within such seven day period, to correct
such acts or failures to act, Executive's employment by the Corporation shall be
terminated.
Termination on account of disability, as provided in Section 7(a)
above, shall not be considered a termination for Cause under this Section 7(c).
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(d) Termination Without Cause.
(1) The Corporation shall have the right to terminate
Executive's employment without Cause as defined in Section 7(c) above. In the
event of a termination by the Corporation without Cause, other than (A)
following a Change in Control, as defined in Section 7(e) below, or (B) as
described in Subsection (2) below, Executive's rights to compensation and
benefits shall be as follows:
(i) Executive shall be paid his base salary at the rate in
effect on the date of termination of employment for a period of one and one-half
years from the date of termination.
(ii) Executive shall be entitled to any unpaid amount previously
fully accrued under the Annual Incentive Plan. In addition, Executive shall be
entitled to an incentive payment, in lieu of an incentive payment under the
Annual Incentive Plan for the plan year in which his employment terminates, in
an amount equal to the payment otherwise determined under the Annual Incentive
Plan, as if the Executive were employed by the Corporation to the end of the
year of his termination, multiplied by a fraction the numerator of which is the
number of weeks Executive was employed during such year, and the denominator of
which is 52. In addition, in lieu of future payments under the Annual Incentive
Plan, Executive shall be entitled to a payment that equals the average of the
incentive payments received by Executive (or fully accrued by him) under the
Annual Incentive Plan for the three full plan years immediately preceding his
termination of employment.
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(iii) Executive's rights with respect to stock options, if any,
shall be determined under the Option Plan and any applicable stock option
agreement.
(iv) Executive and his covered dependents shall be entitled to
continue to be covered at the expense of the Corporation by the same or
equivalent hospital, medical, and dental insurance coverage as in effect for
Executive immediately prior to termination of his employment, until the earlier
of (i) age 65, or (ii) the date Executive has commenced new employment and has
thereby become eligible for comparable benefits.
Termination on account of disability, as provided in Section 7 (a)
above, shall not be considered a termination without Cause under this Section
7(d).
(2) If Executive's employment is terminated by the Corporation
without Cause, as defined in Subsection (e) above, prior to the occurrence of a
Change in Control of the Corporation (as defined below), and if it can be shown
that Executive's termination (i) was at the direction or request of a third
party that had taken steps reasonably calculated to effect the Change in Control
of the Corporation thereafter, or (ii) otherwise occurred in connection with, or
in anticipation of, the Change in Control of the Corporation, then Executive
shall have the rights described in Section 7(e) below, as if a Change in Control
of the Corporation had occurred on the date immediately preceding such
termination.
(e) Termination Following a Change in Control.
(1) Definitions.
(A) "Act" means the Securities Exchange Act of 1934, as amended.
(B) "Affiliate of any specified persons" means any other person
that, directly or indirectly, through one or more intermediaries, controls, or
is controlled by, or is
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under direct or indirect common control with such specified person. For the
purposes of this definition, "control" means the possession, direct or indirect,
of the power to direct or cause the direction of the management and policies of
a person, whether through the ownership of voting securities, by contract or
otherwise, and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
(C) "Termination Payment" means the sum of:
(i) One and one-half times Executive's base salary at the
rate in effect on the date of a termination of employment (or, in the event of a
termination for Good Reason below, the base salary as in effect immediately
before the actions giving rise to Good Reason); plus
(ii) Two times the greatest of the incentive payments under
the Annual Incentive Plan either paid or accrued in either the Year of the
Change in Control or the immediately preceding Year.
(D) "Base Amount" means an amount equal to Executive's
Annualized Includable Compensation for the Base Period as defined in Section
280(G)(d)(1) and (2) of the Code (as hereinafter defined).
(E) "Change in Control" of the Corporation means a Change in
Control of a nature that would be required to be reported in response to Item
6(e) of Schedule 14A of Regulation 14A promulgated under the Act or any
successor thereto, provided that without limiting the foregoing, a Change in
Control of the Corporation also shall be deemed to have occurred if:
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(i) any "person" (as defined under Section 3(a) (9) of the
Act) or "group" of persons (as provided under Rule 13d-3 of the Act) (other than
Synthetic Industries, LP (the "Partnership") is or becomes the "beneficial
owner" (as defined in Rule 13d-3 or otherwise under the Act), directly or
indirectly (including as provided in Rule 13d-3(d) (1) of the Act), of capital
stock of the Corporation the holders of which are entitled to vote ("voting
stock") representing that percentage of the Corporation's then outstanding
voting stock (giving effect to the deemed ownership of securities by such person
or group, as provided in Rule 13d-3(d)(1) of the Act, but not giving effect to
any such deemed ownership of securities by another person or group) equal to or
greater than thirty-five percent (35%) of all such voting stock;
(ii) individuals who constitute the Board on the date hereof
(the "Incumbent Board") cease for any reason to constitute at least a majority
thereof. Any person becoming a director subsequent to such date whose election,
or nomination for election, is, at any time, approved by a vote of at least
two-thirds of the directors comprising the Incumbent Board shall be considered
as though he were a member of the Incumbent Board;
(iii) the Corporation combines with another person or
entity, whether through a merger, asset sale, reorganization or otherwise, and
(a) any person or group of persons (other than the Partnership) holds at any
time after such combination, voting stock equal to or greater than thirty-five
percent (35%) of all such voting stock determined by reference to the voting
securities of the surviving entity, or (b) the Corporation's Directors, as of
the date immediately before such combination, constitute less than a majority of
the Board of Directors of the combined entity;
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(iv) the shareholders of the Corporation approve any merger,
consolidation or share exchange as a result of which the voting stock of the
Corporation shall be changed, converted or exchanged (other than a merger solely
with a wholly owned subsidiary of the Corporation), or any dissolution or
liquidation of the Corporation or any sale or the disposition of 50% or more of
the assets or business of the Corporation in a single transaction or in a series
of transactions;
(v) the shareholders of the Corporation approve any merger
or consolidation to which the Corporation is a party or a share exchange in
which the Corporation shall exchange its shares for shares of another
corporation as a result of which the persons who were shareholders of the
Corporation immediately prior to the effective date of the merger, consolidation
or share exchange shall have beneficial ownership of less than 50% of the
combined voting power for election of directors of the surviving corporation
following the effective date of such merger, consolidation or share exchange;
(vi) any event that would constitute a Change in Control of
the Partnership within the meaning of Item 6(e) of the Schedule 14A of
Regulation 14A promulgated under the Act or any successor thereto or under any
of clauses (1), (2), (3), (4) or (5) above if the term "Partnership" were
substituted for the term "Corporation," "partner" were substituted for
"shareholder" and "interest" were substituted for "stock," "capital stock" or
"securities," or
(vii) the removal of the entity that constitutes the general
partner of the Partnership on the date hereof (the "Incumbent General Partner")
or the appointment in a dissolution of the Partnership of a liquidating trustee
that is not the Incumbent General Partner
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unless such appointment was approved by either the Incumbent General Partner or
the individuals who constitute the Incumbent Board.
(F) "Code" means the Internal Revenue Code of 1986, including
any amendments thereto.
(G) "Good Reason" means:
(i) any breach of this Agreement by the Corporation,
including without limitation (a) any reduction during the employment period in
the amount of Executive's base salary or aggregate benefits as in effect from
time to time, (b) failure to provide Executive with the same fringe benefits
that were provided to Executive immediately prior to a Change in Control of the
Corporation, or with a package of fringe benefits (including paid vacations)
that, though one or more of such benefits may vary from those in effect
immediately prior to such a Change in Control, is substantially comparable in
all material respects to such fringe benefits taken as a whole, or (c) any other
breach by the Corporation of its obligations to pay compensation under this
Agreement;
(ii) without Executive's express written consent, the
assignment to Executive of any duties which are materially inconsistent with
Executive's positions, duties, responsibilities and status immediately prior to
the Change in Control of the Corporation, a material change in Executive's
reporting responsibilities, titles or offices as an employee and as in effect
immediately prior to the Change in Control, or a significant reduction in
Executive's title, duties or responsibilities, or in the level of his support
services;
(iii) the relocation of Executive's principal place of
employment, without Executive's written consent, to a location more than 50
miles from
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Executive's principal place of employment at the time of such Change in Control,
or the imposition of any requirement that Executive spend more than 60 business
days per year at a location other than such principal place of employment;
(iv) any purported termination of Executive's employment for
Cause, Disability or Retirement which is not effected pursuant to a Notice of
Termination satisfying the requirements defined below;
Upon the occurrence of any of the events described in (i),
(ii), (iii), or (iv) above, Executive shall give the Corporation written notice
that such event constitutes Good Reason, and the Corporation shall thereafter
have 30 days in which to cure. If the Corporation has not cured in that time,
the event shall constitute Good Reason.
(H) "Notice of Termination" means a notice which shall indicate
the specific termination provision relied upon in this Agreement and shall set
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of Executive's employment under the provision so
indicated.
(I) "Person" or "Group" means a "person" or "group," as defined
in the definition of "Change in Control" above.
(J) "Year" means a calendar year unless otherwise specifically
provided.
(2) Payments for Termination Following Change in Control. If,
following a Change in Control, Executive's employment with the Corporation is
terminated by the Corporation other than for Cause, or by Executive for Good
Reason, then:
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(A) Executive shall be entitled to all compensation and benefits
accrued through the date of termination of employment;
(B) Executive shall be entitled to the Termination Payment made
in a lump sum payment;
(C) Executive shall be entitled to any unpaid amount previously
fully accrued under the Annual Incentive Plan. In addition, in lieu of future
payments under the Annual Incentive Plan, Executive shall be entitled to a
payment that equals the average of the incentive payments received by Executive
(or fully accrued by him) under the Annual Incentive Plan for the three plan
years immediately preceding his termination of employment;
(D) Executive and his covered dependents shall be entitled to
continue to be covered at the expense of the Corporation by the same or
equivalent hospital, medical, dental, accident, disability and life insurance
coverage as in effect for Executive immediately prior to termination of his
employment, until the earlier of (i) age 65, or (ii) the date Executive has
commenced new employment and has thereby become eligible for comparable
benefits; and
(E) The payments described above shall be made within 2 business
days after termination in the event termination is by the Corporation or
Executive gives at least 5 business days notice of termination by the Executive.
In the case of termination by the Executive without 5 business days notice, the
payments shall be made within 10 business days after the termination. Any
payments not timely made will accrue interest at 8.5% per annum until made.
(3) Vesting of Options upon Change in Control. In the event of a
Change in Control, whether or not Executive's employment continues with the
Corporation, all options under the Option Plan shall immediately vest on the
date of the Change in Control.
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(4) Certain Supplemental Provisions. Notwithstanding anything
herein to the contrary, in the event that any payment received or to be received
by Executive in connection with a Change in Control of the Corporation or the
termination of Executive's employment (whether payable pursuant to the terms of
this Agreement or any other plan, arrangement or agreement) (all such payment
being referred to in the aggregate as "Total Payment") would not be deductible
(in whole or in part) as a result of Section 280G of the Code, the payments
otherwise due to Executive pursuant to Section 7(e)(2) above ("Severance
Payments") shall be reduced until no portion of the Total Payments is not
deductible as a result of Section 280G of the Code, or the Severance Payments
are reduced to zero. For purposes of this limitation (i) no portion of the Total
Payments, the receipt or enjoyment of which Executive shall have effectively
waived in writing prior to the date of payment of the Severance Payments, shall
be taken into account, (ii) no portion of the Total Payments shall be taken into
account which, in the opinion of the tax counsel selected by the Corporation's
independent auditors and reasonably acceptable to Executive ("Tax Counsel"),
does not constitute a "parachute payment" within the meaning of Section
280G(b)(2) of the Code, (iii) the Severance Payments shall be reduced only to
the extent necessary so that the Total Payments (other than those referred to in
clause (i) or (ii)) in their entirety constitute reasonable compensation for
services actually rendered within the meaning of Section 280G(b)(4) of the Code,
in the opinion of Tax Counsel, and (iv) the value of any non-cash benefit or any
deferred payment or benefit included in the Total Payments shall be determined
by the Corporation's independent auditors in accordance with the principles of
Sections 280G(d)(3) and (4) of the Code.
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(5) Expenses and Interest. If, after a Change in Control of the
Corporation, a good faith dispute arises with respect to the enforcement of the
Executive's rights under this Subsection 7(e), or if any legal or arbitration
proceeding shall be brought in good faith to enforce or interpret any rights
provided under this Subsection 7(e), Executive shall recover from the
Corporation any reasonable attorney's fees and necessary costs and disbursements
incurred as a result of such dispute, and prejudgment interest on any money
judgment or arbitration obtained by Executive calculated at 8.5% per annum from
the date that payments to him should have been made under this Subsection.
(f) Voluntary Termination. Executive may terminate his employment
voluntarily at any time by giving the Corporation two weeks written notice. In
the event Executive terminates his employment voluntarily, other than as
provided in Subsection 7(e) above, Executive's rights to compensation and
benefits shall be as follows:
(i) Executive shall be paid salary accrued through the date of
termination of employment.
(ii) Executive's rights to annual incentive, if any, shall be as
determined under the Annual Incentive Plan.
(iii) Executive's rights with respect to stock options, if any,
shall be determined under the Option Plan and any applicable stock option
agreement.
(iv) Following his termination, Executive's right to participate
in the benefit programs described in Section 5 above, including the rights of
Executive's dependents to
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participate in such programs, if any, shall be as determined under the
provisions of such benefit programs.
8. Payment Obligations Absolute.
The Corporation's obligation to pay the Executive the compensation
and to make the arrangements provided herein shall be absolute and unconditional
and shall not be affected by any circumstances, including, without limitation,
any set-off, counterclaim, recoupment, defense or other right which the
Corporation may have against him or anyone else. All amounts payable by the
Corporation hereunder shall be paid without notice or demand. Each and every
payment made hereunder by the Corporation shall be final and the Corporation
will not seek to recover all or any part of such payment from the Executive or
from whomsoever may be entitled thereto, for any reason whatever provided that
if the Executive is convicted of, or pleads guilty or nolo contendere to, a
felony or misdemeanor involving acts or omissions of the Executive in connection
with his employment by the Corporation, the Corporation shall be allowed to
recover any actual damages it has incurred from such action or omission out of
amounts paid or owing him hereunder.
9. Further Obligations of Executive.
(a) Definitions.
For purposes of this Section, the following definitions apply:
(i) "Restricted Activities" means the rendering of any
administrative, supervisory, or consulting services.
(ii) "Territory" means the continental United States and Canada.
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(iii) "Restricted Businesses" means the manufacture,
distribution, and/or sale of fabrics and fibers manufactured from polypropylene
resin.
(iv) "Confidential Information" means any data or information,
other than Trade Secrets, that is valuable to the Corporation and not generally
known to the public or to competitors of the Corporation.
(v) "Nondisclosure Period" means the period beginning on the
date of this Agreement and ending two years after the date Executive's
employment with the Corporation ends or is terminated for any reason.
(vi) "Nonsolicitation Period" means the period beginning on the
date of this Agreement and ending two years after the date Executive's
employment with the Corporation ends or is terminated for any reason.
(vii) "Trade Secret" means information including, but not
limited to, any technical or nontechnical data, formula, pattern, compilation,
program, device, method, technique, drawing, process, financial data, financial
plan, product plan, list of actual or potential customers or suppliers or other
information similar to any of the foregoing, which (i) derives economic value,
actual or potential, from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can derive economic value
from its disclosure or use and (ii) is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy.
(b) Trade Secrets and Confidential Information.
(i) Trade Secrets. Executive hereby covenants and agrees that he
shall hold in confidence all Trade Secrets of the Corporation, its direct and
indirect subsidiaries, and/or
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its customers (the "Associated Companies") that came into his knowledge during
his employment by the Corporation and shall not disclose, publish or make use of
at any time after the date hereof such Trade Secrets without the prior written
consent of the Corporation for as long as the information remains a Trade
Secret.
(ii) Confidential Information. Executive hereby covenants and
agrees that, during the Non-Disclosure Period, he will hold in confidence all
Confidential Information of the Corporation or of the Associated Companies that
came into his knowledge during his employment by the Corporation and will not
disclose, publish or make use of such Confidential Information without the prior
written consent of the Corporation.
(iii) Return of Materials. Upon the request of the Corporation
and, in any event, upon the termination of Executive's employment with the
Corporation, Executive shall deliver to the Corporation all memoranda, notes,
records, manuals or other documents (including, but not limited to, written
instruments, voice or data recordings, or computer tapes, disks or files of any
nature), including all copies of such materials and all documentation prepared
or produced in connection therewith, pertaining to the performance of
Executive's services for the Corporation, the business of the Corporation, or
containing Trade Secrets or Confidential Information regarding the Corporation's
business, whether made or compiled by Executive or furnished to Executive by
virtue of his employment with the Corporation. Executive shall also deliver to
the Corporation all computers, credit cards, telephones, office equipment,
software, and other property the Corporation furnished to Executive by virtue of
his employment with the Corporation.
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(c) Nonsolicitation.
(i) Nonsolicitation of Customers. Executive hereby covenants and
agrees that he will not, during the Nonsolicitation Period, without the prior
written consent of the Corporation, solicit, directly or indirectly, any
business related to the Restricted Businesses from any of the Corporation's
customers, including actively sought prospective customers, with whom Executive
had contact during his employment with the Corporation.
(ii) Nonsolicitation of Employees. Executive hereby covenants that
he will not, during the Nonsolicitation Period, without the prior written
consent of the Corporation, solicit or attempt to solicit for employment for or
on behalf of any corporation, partnership, venture or other business entity any
person who, on the last day of Executive's employment with the Corporation or
within 12 months prior to that date, was employed by the Corporation or its
direct or indirect subsidiaries and with whom Executive had contact during the
course of his employment with the Corporation (whether or not such person would
commit a breach of contract).
(d) Non-competition.
(i) Noncompete. Executive hereby covenants that he will not, within
the Territory and during the Nonsolicitation Period, without the prior written
consent of the Corporation, engage in any Restricted Activities for or on behalf
of any corporation, partnership, venture or other business entity which engages
in any of the Restricted Businesses.
(e) Noncompete Payment. Notwithstanding any other provision of this
Agreement, the Parties agree that in consideration of and as an inducement to
Executive's
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undertaking the obligations contained in this Section 9, the Corporation shall
pay Executive (or in the event of his death, his estate), within 5 business days
after the date of termination of employment, a lump sum payment equal to
one-half Executive's annual base salary, as in effect on the date of termination
of employment (the "Noncompete Payment"). The parties further acknowledge and
agree that should Executive breach any of the covenants contained in this
Section 9, the Corporation will suffer material damages, including but not
limited to lost business revenues, sales, and customers. Because of the
difficulty in quantifying these damages, Executive hereby agrees that, in
addition to any other rights the Corporation may have at law or in equity, he
shall forfeit the Noncompete Payment upon any breach of the covenants contained
in this Section 9. In the event a breach of covenant occurs after the
termination of employment, Employee agrees to immediately return the Noncompete
Payment to the Corporation.
(f) Specific Performance. Executive acknowledges that the obligations
undertaken by him pursuant to this Section 9 are unique and that the Corporation
likely will have no adequate remedy at law if he fails to perform any of his
obligations. Executive therefore confirms that the Corporation's right to
specific performance of the terms of this Agreement is essential to protect the
rights and interests of the Corporation. Accordingly, in addition to any other
remedies that the Corporation may have pursuant to Subsection 9(e), at law, or
in equity, the Corporation shall have the right to have all obligations,
covenants, agreements and other provisions of this Agreement specifically
performed by Executive and the Corporation shall have the right to obtain
preliminary and permanent injunctive relief from any court with proper
jurisdiction, without having to first submit arbitration, to secure specific
performance and to prevent a breach or contemplated breach of the obligations
contained in this Section.
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P
10. Arbitration.
(a) Except as provided in Subsection 9(f) above, any dispute,
controversy, or claim between the parties arising out of, relating to, or
concerning this Agreement; the breach, termination, or invalidity of this
Agreement; and the scope of this arbitration clause, shall be settled by
arbitration at the American Arbitration Association ("AAA") in Atlanta, Georgia,
in accordance with the Employment Dispute Resolution Rules of the AAA then in
effect. Any award rendered shall be final and binding on the parties hereto, and
judgment may be entered in any court having jurisdiction thereof. Nothing in
this section, however, shall prevent the Corporation from seeking immediate
relief from a court of competent jurisdiction to enforce the obligations
undertaken in Section 9 above without first having to undergo arbitration.
(b) The arbitrator shall be mutually acceptable to the parties, or
failing agreement, selected pursuant to the Employment Dispute Arbitration Rules
of the AAA. The arbitration award shall be in writing and shall specify the
factual and legal bases for the award. In rendering the award, the arbitrator
shall determine the respective rights and obligations of the parties according
the laws of the State of Georgia or, if applicable, federal law.
(c) All costs and expenses of the arbitration shall be paid for by
the Corporation. Except as provided in Subsection 7(e)(5), each party shall pay
its own attorneys' fees.
(d) It is the specific intent of the parties that this arbitration
clause be governed by the Federal Arbitration Act, 9 U.S.C. ' 1, et seq.
("FAA"); however, if this clause is
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unenforceable for any reason under the FAA, then the parties intend that it be
governed by the provisions of the Georgia Arbitration Code, O.C.G.A. ' 9-9-1, et
seq.
(e) Both Executive and the Corporation represent and warrant they
have read this Section, have had an opportunity to consult with and receive
advice from legal counsel regarding this Section, and hereby forever waive all
rights to assert that this Section was a result of duress, coercion, or mistake
of law of fact.
_____________ (Initialed by Executive)
_____________ (Initialed by the Corporation)
11. Withholding.
Payments required to be made by the Corporation to Executive, his
spouse, his estate or beneficiaries, will be subject to withholding of such
amounts relating to taxes as the Corporation may reasonably determine it should
withhold pursuant to any applicable law or regulation. In lieu of withholding
such amounts, in whole or in part, the Corporation may, in its sole discretion,
accept other provision for payment of taxes as required by law, provided it is
satisfied that all requirements of law affecting its responsibilities to
withhold such taxes have been satisfied.
12. Assignability; Binding Nature.
This Agreement is binding upon, and will inure to the benefit of,
the parties and their respective successors, heirs, administrators, executors
and assigns. No rights or obligations of Executive hereunder may be assigned or
transferred by Executive except that (a) rights to compensation and benefits
hereunder, which rights will remain subject to the limitations hereunder, may be
transferred by will or operation of law, and (b) rights under employee benefit
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plans or programs described in Section 5, above, may be assigned or transferred
in accordance with such plans, programs or regular practices thereunder. No
rights or obligations of the Corporation under this Agreement may be assigned or
transferred except that rights or obligations may be assigned or transferred by
operation of law or otherwise pursuant to this Section 12. The Corporation shall
require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business assets
of the Corporation by written agreement in form and substance satisfactory to
the Executive, as a condition to such transaction, expressly to assume and agree
to perform this Agreement in the same manner and to the same extent as the
Corporation would be required to perform if no such succession had occurred.
13. Entire Agreement.
This Agreement supersedes any prior agreements, including but not
limited to the prior Employment Agreement between the parties and, together with
such plans and programs as are specifically referred to herein, contains the
entire agreement between the parties concerning the subject matter hereof.
14. Amendments and Waivers.
This Agreement may not be modified or amended, except by a writing
signed by both parties. A party may waive compliance by the other party with any
term or provision of this Agreement, or any part thereof, provided that the term
or provision, or part thereof, is for the benefit of the waiving party. Any
waiver will be limited to the facts or circumstances giving rise to the
non-compliance and will not be deemed either a general waiver or modification
with respect to the term or provision, or part thereof, being waived, or as to
any other term or
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provision of this Agreement, nor will it be deemed a waiver of compliance with
respect to any other facts or circumstances then or thereafter occurring.
15. Notices.
Any notice given hereunder will be in writing and will be deemed
given when delivered personally or by courier, or five days after being mailed,
certified or registered mail, duly addressed to the party concerned at the
address indicated below or at such other address as such party may subsequently
provide, in accordance with the notice and delivery provisions of this Section:
To the Corporation: Attn: Corporate Secretary
Synthetic Industries, Inc.
309 Lafayette Road
Chickamauga; GA 30707
To Executive: Ralph Kenner
Synthetic Industries, Inc.
309 Lafayette Road
Chickamauga, GA 30707
16. Severability.
If fulfillment of any provision of this Agreement, at the time such
fulfillment shall be due, shall transcend the limit of validity prescribed by
law, then the obligation to be fulfilled shall be deemed reduced to the limit of
such validity; and if any clause or provision contained in this Agreement
operates or would operate to invalidate this Agreement, in whole or in part,
then such clause or provision only shall be held ineffective to the extent of
such invalidity, as though not herein contained, and the remainder of this
Agreement shall remain operative and in full force and effect.
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17. Survivorship.
The respective rights and obligations of the parties hereunder will
survive any termination of this Agreement to the extent necessary to the
intended preservation of such rights and obligations.
18. References.
In the event of Executive's death or a judicial determination of his
incompetence, reference in this Agreement to Executive will be deemed, where
appropriate, to refer to his legal representative or, where appropriate, to his
beneficiary or beneficiaries.
19. Headings.
The headings of paragraphs contained in this Agreement are for
convenience only and will not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
20. Governing Law.
Except to the extent governed by the FAA as provided in Section 10
above, this Agreement, the rights and obligations of the parties, and any claims
or disputes relating thereto shall be governed by and construed in accordance
with the laws of the State of Georgia, not including the choice-of-law rules
thereof.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
SYNTHETIC INDUSTRIES, INC.
By:
- - ---------------------------
Ralph Kenner
Title:
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<PAGE>
Exhibit 10.16
Employment Agreement
This Agreement ("Agreement") is made and entered into as of the 24th of
September, 1998 ("Effective Date"), by and among Synthetic Industries, Inc.
("the Corporation") and Charles T. Koerner (the "Executive").
WITNESSETH:
WHEREAS, the Corporation currently employs Executive as Vice
President-Construction/Civil Engineering Division; and
WHEREAS, both the Corporation and Executive (the "Parties") desire to
state certain terms and conditions of Executive's employment and wish to
substitute this agreement for their previous employment agreements;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, the Parties agree as follows:
1. Employment.
The Corporation agrees to continue to employ Executive and Executive
agrees to continue to serve the Corporation upon the terms and conditions
hereinafter set forth.
2. Term.
Except as otherwise provided in Section 7 below, the term of
employment under this Agreement shall continue from the Effective Date for a
period that ends on the date that is the third anniversary of the Effective
Date; provided, however, that on the first day of the calendar month next
following the first anniversary of the Effective Date, and on the first day of
each successive month, such term of employment shall automatically be extended
for successive
<PAGE>
one month periods, providing a minimum remaining term of two years. Either party
may halt future extension by written notice, in which case such term of
employment shall be the term in effect when such written notice was given.
Notwithstanding the foregoing, this Agreement shall automatically terminate on
the twenty-fifth (25th) anniversary of the Effective Date if it is not
terminated earlier pursuant to Section 7.
3. Duties and Extent of Services; Location of Principal Office.
During the term set forth in Section 2 above, the Corporation shall
employ Executive and Executive shall serve the Corporation as Vice
President-Construction/Civil Engineering Division. During the period of his
employment, Executive shall devote his full business time and attention to the
business and affairs of the Corporation. During such term, Executive's principal
office shall be located at 309 Lafayette Road, Chickamauga, Georgia.
4. Compensation.
(a) Base Salary. During the term set forth in Section 2 above, the
Corporation shall pay Executive a base salary, payable in accordance with the
Corporation's standard payroll practices, as follows: $141,000 per annum for the
period from the Effective Date through September 30, 1998, and $151,000 per
annum, thereafter. Executive's salary may be reviewed from time to time by the
Board, to increase the amount of such salary. Executive's salary shall not be
reduced during the term of this Agreement. Any increased salary shall become
Executive's base salary for purposes of this Agreement.
(b) Annual Incentive. During the term set forth in Section 2, above,
Executive shall be eligible to participate in the Executive Incentive Plan, or
in such successor plan as may be adopted for the provision of annual incentive
compensation for senior executives (the "Annual
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Incentive Plan"). Executive shall be entitled to an incentive payment applicable
under the Annual Incentive Plan if the Corporation meets its business plan for
the year ("Making Plan").
(c) Stock Options. Executive shall have such rights to stock options
under either the Synthetic Industries, Inc. 1994 Stock Option Plan, the
Synthetic Industries, Inc. 1996 Stock Option Plan, or any successor stock option
plan, or any combination of such plans (collectively, the "Option Plan") as
shall be set forth in any applicable stock option agreement.
5. Benefits.
During the term set forth in Section 2 above, Executive shall be
eligible to participate in all group life insurance, health insurance,
disability insurance, survivor income insurance and similar programs maintained
by the Corporation and covering executive employees. Participation in any
retirement plans maintained by the Corporation shall be as determined under the
provisions of such plans.
6. Reimbursement for Expenses.
The Corporation shall reimburse Executive for all reasonable
business expenses incurred by him on behalf of the Corporation in the
performance of his duties hereunder, provided Executive shall account therefore
in accordance with the Corporation's business expense policies and procedures.
7. Termination
Executive's employment may be terminated prior to the end of the
term described in Section 2 only as provided in this Section 7.
(a) Termination for Disability. If the Executive becomes unable to
substantially perform his duties due to permanent physical or mental disability,
as determined by
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a physician agreed upon by the Corporation and the Executive,
his employment pursuant to this Agreement shall terminate. If Executive's
employment is terminated on account of disability under this Section 7(a),
Executive's rights to compensation and benefits shall be as follows:
(i) Executive (or in the event of his death, his estate) shall
be paid his base salary accrued through the date of termination of employment.
(ii) Executive shall be entitled to any unpaid amount
previously fully accrued under the Annual Incentive Plan.
(iii) Executive's rights with respect to stock options, if
any, shall be determined under the Option Plan and any applicable stock option
agreement.
(iv) Following his termination, Executive's right to
participate in the benefit programs described in Section 5 above, including the
rights of Executive's dependents to participate in such programs, if any, shall
be as determined under the provisions of such benefit programs.
(b) Termination on Executive's Death. In the event of termination of
employment by reason of the death of Executive, payment of compensation and
benefits shall be as set forth below. Payment shall be made to the executor or
administrator of Executive's estate, or, in the case of a payment made under a
benefit program, to the person or persons who have been designated pursuant to
the terms of such program to receive such payments.
(i) Executive's base salary accrued through the date of
termination of employment.
(ii) Executive shall be entitled to any unpaid amount
previously fully accrued under the Annual Incentive Plan. In addition, Executive
shall be entitled to an incentive
4
<PAGE>
payment, in lieu of an incentive payment under the Annual Incentive Plan for the
plan year in which his employment terminates, in an amount equal to the payment
otherwise determined under the Annual Incentive Plan, as if the Executive were
employed by the Corporation to the end of the year of his termination,
multiplied by a fraction the numerator of which is the number of weeks Executive
was employed during such year, and the denominator of which is 52.
(iii) Executive's rights with respect to stock options, if
any, shall be determined under the Option Plan and any applicable stock option
agreement.
(iv) Following his death, Executive's rights under the benefit
programs described in Section 5 above, including the rights of Executive's
dependents to participate in such programs, if any, shall be as determined under
such programs.
(c) Termination for Cause. The Corporation shall have the right to
terminate Executive's employment for "Cause." If Executive's employment is
terminated for Cause, Executive's rights to compensation and benefits shall be
as follows:
(i) Executive shall be paid his base salary accrued through
the date of termination of employment.
(ii) Executive's rights with respect to stock options, if any,
shall be determined under the Option Plan and any applicable stock option
agreements.
(iii) Following his termination, Executive's right to
participate in the benefit programs described in Section 5, above, including the
rights of Executive's dependents to participate in such programs, if any, shall
be as determined under the provisions of such benefit programs.
5
<PAGE>
For purposes of this Subsection, "Cause" shall mean (1)
Executive's conviction of, or plea of, guilty or nolo contendere to a felony
(unless committed in the good faith belief that Executive's actions were in the
best interests of the Corporation and would not violate criminal law); or (2)
gross neglect or gross misconduct in the performance of Executive's duties.
Executive shall be given written notice that the Corporation intends to
terminate his employment for Cause under this Subsection. Such notice shall
specify the particular acts, or failures to act, that give rise to the decision
to so terminate employment.
In the case of termination for Cause under definition (1), Executive's
employment shall be terminated effective as of the date such notice is given,
provided, however, that Executive shall be given the opportunity to meet with
the Board of Directors of the Corporation within 30 days of the date such notice
is given, to be heard with regard to whether he, in good faith, believed that
his actions or inactions were both in the best interests of the Corporation and
would not violate criminal law.
In the case of termination for Cause under definition (2), Executive shall
be given the opportunity within 20 days of the receipt of such notice to meet
with the Board to defend such acts or failures to act. Executive shall be given
seven days after such meeting to correct any particular acts or failures to act,
and upon failure of Executive, within such seven day period, to correct such
acts or failures to act, Executive's employment by the Corporation shall be
terminated.
Termination on account of disability, as provided in Section 7(a) above,
shall not be considered a termination for Cause under this Section 7(c).
6
<PAGE>
(d) Termination Without Cause.
(1) The Corporation shall have the right to terminate
Executive's employment without Cause as defined in Section 7(c) above. In the
event of a termination by the Corporation without Cause, other than (A)
following a Change in Control, as defined in Section 7(e) below, or (B) as
described in Subsection (2) below, Executive's rights to compensation and
benefits shall be as follows:
(i) Executive shall be paid his base salary at the rate in
effect on the date of termination of employment for a period of one and one-half
years from the date of termination.
(ii) Executive shall be entitled to any unpaid amount
previously fully accrued under the Annual Incentive Plan. In addition, Executive
shall be entitled to an incentive payment, in lieu of an incentive payment under
the Annual Incentive Plan for the plan year in which his employment terminates,
in an amount equal to the payment otherwise determined under the Annual
Incentive Plan, as if the Executive were employed by the Corporation to the end
of the year of his termination, multiplied by a fraction the numerator of which
is the number of weeks Executive was employed during such year, and the
denominator of which is 52. In addition, in lieu of future payments under the
Annual Incentive Plan, Executive shall be entitled to a payment that equals the
average of the incentive payments received by Executive (or fully accrued by
him) under the Annual Incentive Plan for the three full plan years immediately
preceding his termination of employment.
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<PAGE>
(iii) Executive's rights with respect to stock options, if
any, shall be determined under the Option Plan and any applicable stock option
agreement.
(iv) Executive shall be entitled to a lump sum payment equal
to the estimated sum of the premiums that Executive would have to pay to
continue to cover Executive and his eligible dependents under the Corporation's
group health plans, including medical and dental plans, in effect at the time of
termination for a period of 18 months following termination of employment.
Termination on account of disability, as provided in Section 7 (a) above,
shall not be considered a termination without Cause under this Section 7(d).
(2) If Executive's employment is terminated by the Corporation
without Cause, as defined in Subsection (e) above, prior to the occurrence of a
Change in Control of the Corporation (as defined below), and if it can be shown
that Executive's termination (i) was at the direction or request of a third
party that had taken steps reasonably calculated to effect the Change in Control
of the Corporation thereafter, or (ii) otherwise occurred in connection with, or
in anticipation of, the Change in Control of the Corporation, then Executive
shall have the rights described in Section 7(e) below, as if a Change in Control
of the Corporation had occurred on the date immediately preceding such
termination.
(e) Termination Following a Change in Control.
(1) Definitions.
(A) "Act" means the Securities Exchange Act of 1934, as
amended.
(B) "Affiliate of any specified persons" means any other
person that, directly or indirectly, through one or more intermediaries,
controls, or is
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<PAGE>
controlled by, or is under direct or indirect common control with such specified
person. For the purposes of this definition, "control" means the possession,
direct or indirect, of the power to direct or cause the direction of the
management and policies of a person, whether through the ownership of voting
securities, by contract or otherwise, and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
(C) "Termination Payment" means the sum of:
(i) One and one-half times Executive's base salary at
the rate in effect on the date of a termination of employment (or, in the event
of a termination for Good Reason below, the base salary as in effect immediately
before the actions giving rise to Good Reason); plus
(ii) Two times the greatest of the incentive
payments under the Annual Incentive Plan either paid or accrued in either the
Year of the Change in Control or the immediately preceding Year.
(D) "Base Amount" means an amount equal to Executive's
Annualized Includable Compensation for the Base Period as defined in Section
280(G)(d)(1) and (2) of the Code (as hereinafter defined).
(E) "Change in Control" of the Corporation means a Change in
Control of a nature that would be required to be reported in response to Item
6(e) of Schedule 14A of Regulation 14A promulgated under the Act or any
successor thereto, provided that without limiting the foregoing, a Change in
Control of the Corporation also shall be deemed to have occurred if:
9
<PAGE>
(i) any "person" (as defined under Section 3(a) (9)
of the Act) or "group" of persons (as provided under Rule 13d-3 of the Act)
(other than Synthetic Industries, LP (the "Partnership") is or becomes the
"beneficial owner" (as defined in Rule 13d-3 or otherwise under the Act),
directly or indirectly (including as provided in Rule 13d-3(d) (1) of the Act),
of capital stock of the Corporation the holders of which are entitled to vote
("voting stock") representing that percentage of the Corporation's then
outstanding voting stock (giving effect to the deemed ownership of securities by
such person or group, as provided in Rule 13d-3(d)(1) of the Act, but not giving
effect to any such deemed ownership of securities by another person or group)
equal to or greater than thirty-five percent (35%) of all such voting stock;
(ii) individuals who constitute the Board on the
date hereof (the "Incumbent Board") cease for any reason to constitute at least
a majority thereof. Any person becoming a director subsequent to such date whose
election, or nomination for election, is, at any time, approved by a vote of at
least two-thirds of the directors comprising the Incumbent Board shall be
considered as though he were a member of the Incumbent Board;
(iii) the Corporation combines with another person or
entity, whether through a merger, asset sale, reorganization or otherwise, and
(a) any person or group of persons (other than the Partnership) holds at any
time after such combination, voting stock equal to or greater than thirty-five
percent (35%) of all such voting stock determined by reference to the voting
securities of the surviving entity, or (b) the Corporation's Directors, as of
the date immediately before such combination, constitute less than a majority of
the Board of Directors of the combined entity;
10
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(iv) the shareholders of the Corporation approve any
merger, consolidation or share exchange as a result of which the voting stock of
the Corporation shall be changed, converted or exchanged (other than a merger
solely with a wholly owned subsidiary of the Corporation), or any dissolution or
liquidation of the Corporation or any sale or the disposition of 50% or more of
the assets or business of the Corporation in a single transaction or in a series
of transactions;
(v) the shareholders of the Corporation approve any
merger or consolidation to which the Corporation is a party or a share exchange
in which the Corporation shall exchange its shares for shares of another
corporation as a result of which the persons who were shareholders of the
Corporation immediately prior to the effective date of the merger, consolidation
or share exchange shall have beneficial ownership of less than 50% of the
combined voting power for election of directors of the surviving corporation
following the effective date of such merger, consolidation or share exchange;
(vi) any event that would constitute a Change in
Control of the Partnership within the meaning of Item 6(e) of the Schedule 14A
of Regulation 14A promulgated under the Act or any successor thereto or under
any of clauses (1), (2), (3), (4) or (5) above if the term "Partnership" were
substituted for the term "Corporation," "partner" were substituted for
"shareholder" and "interest" were substituted for "stock," "capital stock" or
"securities," or
(vii) the removal of the entity that constitutes the
general partner of the Partnership on the date hereof (the "Incumbent General
Partner") or the appointment in a dissolution of the Partnership of a
liquidating trustee that is not the Incumbent General Partner
11
<PAGE>
unless such appointment was approved by either the Incumbent General Partner or
the individuals who constitute the Incumbent Board.
(F) "Code" means the Internal Revenue Code of 1986, including
any amendments thereto.
(G) "Good Reason" means:
(i) any breach of this Agreement by the
Corporation, including without limitation (a) any reduction during the
employment period in the amount of Executive's base salary or aggregate benefits
as in effect from time to time, (b) failure to provide Executive with the same
fringe benefits that were provided to Executive immediately prior to a Change in
Control of the Corporation, or with a package of fringe benefits (including paid
vacations) that, though one or more of such benefits may vary from those in
effect immediately prior to such a Change in Control, is substantially
comparable in all material respects to such fringe benefits taken as a whole, or
(c) any other breach by the Corporation of its obligations to pay compensation
under this Agreement;
(ii) without Executive's express written consent,
the assignment to Executive of any duties which are materially inconsistent with
Executive's positions, duties, responsibilities and status immediately prior to
the Change in Control of the Corporation, a material change in Executive's
reporting responsibilities, titles or offices as an employee and as in effect
immediately prior to the Change in Control, or a significant reduction in
Executive's title, duties or responsibilities, or in the level of his support
services;
(iii) the relocation of Executive's principal place
of employment, without Executive's written consent, to a location more than 50
miles from
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Executive's principal place of employment at the time of such Change
in Control, or the imposition of any requirement that Executive spend more than
60 business days per year at a location other than such principal place of
employment;
(iv) any purported termination of Executive's
employment for Cause, Disability or Retirement which is not effected pursuant
to a Notice of Termination satisfying the requirements defined below;
Upon the occurrence of any of the events described in
(i), (ii), (iii), or (iv) above, Executive shall give the Corporation written
notice that such event constitutes Good Reason, and the Corporation shall
thereafter have 30 days in which to cure. If the Corporation has not cured in
that time, the event shall constitute Good Reason.
(H) "Notice of Termination" means a notice which shall
indicate the specific termination provision relied upon in this Agreement and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the provision so
indicated.
(I) "Person" or "Group" means a "person" or "group," as
defined in the definition of "Change in Control" above.
(J) "Year" means a calendar year unless otherwise specifically
provided.
(2) Payments for Termination Following Change in Control. If,
following a Change in Control, Executive's employment with the Corporation is
terminated by the Corporation other than for Cause, or by Executive for Good
Reason, then:
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<PAGE>
(A) Executive shall be entitled to all compensation and
benefits accrued through the date of termination of employment;
(B) Executive shall be entitled to the Termination Payment
made in a lump sum payment;
(C) Executive shall be entitled to any unpaid amount
previously fully accrued under the Annual Incentive Plan. In addition, in lieu
of future payments under the Annual Incentive Plan, Executive shall be entitled
to a payment that equals the average of the incentive payments received by
Executive (or fully accrued by him) under the Annual Incentive Plan for the
three plan years immediately preceding his termination of employment; and
(D) Executive shall be entitled to a lump sum payment equal to
the estimated sum of the premiums that Executive would have to pay to continue
to cover Executive and his eligible dependents under the Corporation's group
health plans, including medical and dental plans and to purchase life insurance,
accidental death and dismemberment insurance and disability insurance coverage
substantially equivalent to the coverage in effect at the time of termination
for a period of 18 months following termination of employment.
(E) The payments described above shall be made within 2
business days after termination in the event termination is by the Corporation
or Executive gives at least 5 business days notice of termination by the
Executive. In the case of termination by the Executive without 5 business days
notice, the payments shall be made within 10 business days after the
termination. Any payments not timely made will accrue interest at 8.5% per annum
until made.
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(3) Vesting of Options upon Change in Control. In the event of
a Change in Control, whether or not Executive's employment continues with the
Corporation, all options under the Option Plan shall immediately vest on the
date of the Change in Control.
(4) Certain Supplemental Provisions. Notwithstanding anything
herein to the contrary, in the event that any payment received or to be received
by Executive in connection with a Change in Control of the Corporation or the
termination of Executive's employment (whether payable pursuant to the terms of
this Agreement or any other plan, arrangement or agreement) (all such payment
being referred to in the aggregate as "Total Payment") would not be deductible
(in whole or in part) as a result of Section 280G of the Code, the payments
otherwise due to Executive pursuant to Section 7(e)(2) above ("Severance
Payments") shall be reduced until no portion of the Total Payments is not
deductible as a result of Section 280G of the Code, or the Severance Payments
are reduced to zero. For purposes of this limitation (i) no portion of the Total
Payments, the receipt or enjoyment of which Executive shall have effectively
waived in writing prior to the date of payment of the Severance Payments, shall
be taken into account, (ii) no portion of the Total Payments shall be taken into
account which, in the opinion of the tax counsel selected by the Corporation's
independent auditors and reasonably acceptable to Executive ("Tax Counsel"),
does not constitute a "parachute payment" within the meaning of Section
280G(b)(2) of the Code, (iii) the Severance Payments shall be reduced only to
the extent necessary so that the Total Payments (other than those referred to in
clause (i) or (ii)) in their entirety constitute reasonable compensation for
services actually rendered within the meaning of Section 280G(b)(4) of the Code,
in the opinion of Tax Counsel,
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and (iv) the value of any non-cash benefit or any deferred payment or benefit
included in the Total Payments shall be determined by the Corporation's
independent auditors in accordance with the principles of Sections 280G(d)(3)
and (4) of the Code.
(5) Expenses and Interest. If, after a Change in Control of
the Corporation, a good faith dispute arises with respect to the enforcement of
the Executive's rights under this Subsection 7(e), or if any legal or
arbitration proceeding shall be brought in good faith to enforce or interpret
any rights provided under this Subsection 7(e), Executive shall recover from the
Corporation any reasonable attorney's fees and necessary costs and disbursements
incurred as a result of such dispute, and prejudgment interest on any money
judgment or arbitration obtained by Executive calculated at 8.5% per annum from
the date that payments to him should have been made under this Subsection.
(f) Voluntary Termination. Executive may terminate his employment
voluntarily at any time by giving the Corporation two weeks written notice. In
the event Executive terminates his employment voluntarily, other than as
provided in Subsection 7(e) above, Executive's rights to compensation and
benefits shall be as follows:
(i) Executive shall be paid salary accrued through the date of
termination of employment.
(ii) Executive's rights to annual incentive, if any, shall be
as determined under the Annual Incentive Plan.
(iii) Executive's rights with respect to stock options, if
any, shall be determined under the Option Plan and any applicable stock option
agreement.
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(iv) Following his termination, Executive's right to
participate in the benefit programs described in Section 5 above, including the
rights of Executive's dependents to participate in such programs, if any, shall
be as determined under the provisions of such benefit programs.
8. Payment Obligations Absolute.
The Corporation's obligation to pay the Executive the compensation
and to make the arrangements provided herein shall be absolute and unconditional
and shall not be affected by any circumstances, including, without limitation,
any set-off, counterclaim, recoupment, defense or other right which the
Corporation may have against him or anyone else. All amounts payable by the
Corporation hereunder shall be paid without notice or demand. Each and every
payment made hereunder by the Corporation shall be final and the Corporation
will not seek to recover all or any part of such payment from the Executive or
from whomsoever may be entitled thereto, for any reason whatever provided that
if the Executive is convicted of, or pleads guilty or nolo contendere to, a
felony or misdemeanor involving acts or omissions of the Executive in connection
with his employment by the Corporation, the Corporation shall be allowed to
recover any actual damages it has incurred from such action or omission out of
amounts paid or owing him hereunder.
9. Further Obligations of Executive.
(a) Definitions.
For purposes of this Section, the following definitions apply:
(i) "Restricted Activities" means the rendering of any
advertising, marketing, sales, administrative, supervisory, or consulting
services.
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(ii) "Territory" means the continental United States and
Canada.
(iii) "Restricted Businesses" means the manufacture,
distribution, and/or sale of geosynthetic or fiber reinforced concrete fabrics
and fibers.
(iv) "Confidential Information" means any data or information,
other than Trade Secrets, that is valuable to the Corporation and not generally
known to the public or to competitors of the Corporation.
(v) "Nondisclosure Period" means the period beginning on the
date of this Agreement and ending two years after the date Executive's
employment with the Corporation ends or is terminated for any reason.
(vi) "Nonsolicitation Period" means the period beginning on
the date of this Agreement and ending two years after the date Executive's
employment with the Corporation ends or is terminated for any reason.
(vii) "Trade Secret" means information including, but not
limited to, any technical or nontechnical data, formula, pattern, compilation,
program, device, method, technique, drawing, process, financial data, financial
plan, product plan, list of actual or potential customers or suppliers or other
information similar to any of the foregoing, which (i) derives economic value,
actual or potential, from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can derive economic value
from its disclosure or use and (ii) is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy.
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(b) Trade Secrets and Confidential Information.
(i) Trade Secrets. Executive hereby covenants and agrees
that he shall hold in confidence all Trade Secrets of the Corporation, its
direct and indirect subsidiaries, and/or its customers (the "Associated
Companies") that came into his knowledge during his employment by the
Corporation and shall not disclose, publish or make use of at any time after the
date hereof such Trade Secrets without the prior written consent of the
Corporation for as long as the information remains a Trade Secret.
(ii) Confidential Information. Executive hereby covenants and
agrees that, during the Non-Disclosure Period, he will hold in confidence all
Confidential Information of the Corporation or of the Associated Companies that
came into his knowledge during his employment by the Corporation and will not
disclose, publish or make use of such Confidential Information without the prior
written consent of the Corporation.
(iii) Return of Materials. Upon the request of the Corporation
and, in any event, upon the termination of Executive's employment with the
Corporation, Executive shall deliver to the Corporation all memoranda, notes,
records, manuals or other documents (including, but not limited to, written
instruments, voice or data recordings, or computer tapes, disks or files of any
nature), including all copies of such materials and all documentation prepared
or produced in connection therewith, pertaining to the performance of
Executive's services for the Corporation, the business of the Corporation, or
containing Trade Secrets or Confidential Information regarding the Corporation's
business, whether made or compiled by Executive or furnished to Executive by
virtue of his employment with the Corporation.
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Executive shall also deliver to the Corporation all computers, credit cards,
telephones, office equipment, software, and other property the Corporation
furnished to Executive by virtue of his employment with the Corporation.
(c) Nonsolicitation.
(i) Nonsolicitation of Customers. Executive hereby covenants
and agrees that he will not, during the Nonsolicitation Period, without the
prior written consent of the Corporation, solicit, directly or indirectly, any
business related to the Restricted Businesses from any of the Corporation's
customers, including actively sought prospective customers, with whom Executive
had contact during his employment with the Corporation.
(ii) Nonsolicitation of Employees. Executive hereby covenants
that he will not, during the Nonsolicitation Period, without the prior written
consent of the Corporation, solicit or attempt to solicit for employment for or
on behalf of any corporation, partnership, venture or other business entity any
person who, on the last day of Executive's employment with the Corporation or
within 12 months prior to that date, was employed by the Corporation or its
direct or indirect subsidiaries and with whom Executive had contact during the
course of his employment with the Corporation (whether or not such person would
commit a breach of contract).
(d) Non-competition.
(i) Noncompete. Executive hereby covenants that he will not,
within the Territory and during the Nonsolicitation Period, without the prior
written consent of the Corporation, engage in any Restricted Activities for or
on behalf of any corporation, partnership, venture or other business entity
which engages in any of the Restricted Businesses.
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(e) Noncompete Payment. Notwithstanding any other provision of this
Agreement, the Parties agree that in consideration of and as an inducement to
Executive's undertaking the obligations contained in this Section 9, the
Corporation shall pay Executive (or in the event of his death, his estate),
within 5 business days after the date of termination of employment, a lump sum
payment equal to one-half Executive's annual base salary, as in effect on the
date of termination of employment (the "Noncompete Payment"). The parties
further acknowledge and agree that should Executive breach any of the covenants
contained in this Section 9, the Corporation will suffer material damages,
including but not limited to lost business revenues, sales, and customers.
Because of the difficulty in quantifying these damages, Executive hereby agrees
that, in addition to any other rights the Corporation may have at law or in
equity, he shall forfeit the Noncompete Payment upon any breach of the covenants
contained in this Section 9. In the event a breach of covenant occurs after the
termination of employment, Employee agrees to immediately return the Noncompete
Payment to the Corporation.
(f) Specific Performance. Executive acknowledges that the
obligations undertaken by him pursuant to this Section 9 are unique and that the
Corporation likely will have no adequate remedy at law if he fails to perform
any of his obligations. Executive therefore confirms that the Corporation's
right to specific performance of the terms of this Agreement is essential to
protect the rights and interests of the Corporation. Accordingly, in addition to
any other remedies that the Corporation may have pursuant to Subsection 9(e), at
law, or in equity, the Corporation shall have the right to have all obligations,
covenants, agreements and other provisions of this Agreement specifically
performed by Executive and the Corporation shall have
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the right to obtain preliminary and permanent injunctive relief from any court
with proper jurisdiction, without having to first submit arbitration, to secure
specific performance and to prevent a breach or contemplated breach of the
obligations contained in this Section.
10. Arbitration.
(a) Except as provided in Subsection 9(f) above, any dispute,
controversy, or claim between the parties arising out of, relating to, or
concerning this Agreement; the breach, termination, or invalidity of this
Agreement; and the scope of this arbitration clause, shall be settled by
arbitration at the American Arbitration Association ("AAA") in Atlanta, Georgia,
in accordance with the Employment Dispute Resolution Rules of the AAA then in
effect. Any award rendered shall be final and binding on the parties hereto, and
judgment may be entered in any court having jurisdiction thereof. Nothing in
this section, however, shall prevent the Corporation from seeking immediate
relief from a court of competent jurisdiction to enforce the obligations
undertaken in Section 9 above without first having to undergo arbitration.
(b) The arbitrator shall be mutually acceptable to the parties, or
failing agreement, selected pursuant to the Employment Dispute Arbitration Rules
of the AAA. The arbitration award shall be in writing and shall specify the
factual and legal bases for the award. In rendering the award, the arbitrator
shall determine the respective rights and obligations of the parties according
the laws of the State of Georgia or, if applicable, federal law.
(c) All costs and expenses of the arbitration shall be paid for by
the Corporation. Except as provided in Subsection 7(e)(5), each party shall pay
its own attorneys' fees.
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(d) It is the specific intent of the parties that this
arbitration clause be governed by the Federal Arbitration Act, 9 U.S.C.
Section 1, et seq. ("FAA"); however, if this clause is unenforceable for any
reason under the FAA, then the parties intend that it be governed by the
provisions of the Georgia Arbitration Code, O.C.G.A. Section 9-9-1, et seq.
(e) Both Executive and the Corporation represent and warrant they
have read this Section, have had an opportunity to consult with and receive
advice from legal counsel regarding this Section, and hereby forever waive all
rights to assert that this Section was a result of duress, coercion, or mistake
of law of fact.
(Initialed by Executive)
-------------
(Initialed by the Corporation)
-------------
11. Withholding.
Payments required to be made by the Corporation to Executive, his
spouse, his estate or beneficiaries, will be subject to withholding of such
amounts relating to taxes as the Corporation may reasonably determine it should
withhold pursuant to any applicable law or regulation. In lieu of withholding
such amounts, in whole or in part, the Corporation may, in its sole discretion,
accept other provision for payment of taxes as required by law, provided it is
satisfied that all requirements of law affecting its responsibilities to
withhold such taxes have been satisfied.
12. Assignability; Binding Nature.
This Agreement is binding upon, and will inure to the benefit of,
the parties and their respective successors, heirs, administrators, executors
and assigns. No rights or obligations
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of Executive hereunder may be assigned or transferred by Executive except that
(a) rights to compensation and benefits hereunder, which rights will remain
subject to the limitations hereunder, may be transferred by will or operation of
law, and (b) rights under employee benefit plans or programs described in
Section 5, above, may be assigned or transferred in accordance with such plans,
programs or regular practices thereunder. No rights or obligations of the
Corporation under this Agreement may be assigned or transferred except that
rights or obligations may be assigned or transferred by operation of law or
otherwise pursuant to this Section 12. The Corporation shall require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business assets of the Corporation
by written agreement in form and substance satisfactory to the Executive, as a
condition to such transaction, expressly to assume and agree to perform this
Agreement in the same manner and to the same extent as the Corporation would be
required to perform if no such succession had occurred.
13. Entire Agreement.
This Agreement supersedes any prior agreements, including but not
limited to the prior Employment Agreement between the parties and, together with
such plans and programs as are specifically referred to herein, contains the
entire agreement between the parties concerning the subject matter hereof.
14. Amendments and Waivers.
This Agreement may not be modified or amended, except by a writing
signed by both parties. A party may waive compliance by the other party with any
term or provision of this Agreement, or any part thereof, provided that the term
or provision, or part thereof, is for the
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benefit of the waiving party. Any
waiver will be limited to the facts or circumstances giving rise to the
non-compliance and will not be deemed either a general waiver or modification
with respect to the term or provision, or part thereof, being waived, or as to
any other term or provision of this Agreement, nor will it be deemed a waiver of
compliance with respect to any other facts or circumstances then or thereafter
occurring.
15. Notices.
Any notice given hereunder will be in writing and will be deemed
given when delivered personally or by courier, or five days after being
mailed, certified or registered mail, duly addressed to the party concerned
at the address indicated below or at such other address as such party may
subsequently provide, in accordance with the notice and delivery provisions
of this Section:
To the Corporation: Attn: Corporate Secretary
Synthetic Industries, Inc.
309 Lafayette Road
Chickamauga, GA 30707
To Executive: Charles T. Koerner
Synthetic Industries, Inc.
309 Lafayette Road
Chickamauga, GA 30707
16. Severability.
If fulfillment of any provision of this Agreement, at the time such
fulfillment shall be due, shall transcend the limit of validity prescribed by
law, then the obligation to be fulfilled shall be deemed reduced to the limit of
such validity; and if any clause or provision contained in this Agreement
operates or would operate to invalidate this Agreement, in whole or in part,
then
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such clause or provision only shall be held ineffective to the extent of such
invalidity, as though not herein contained, and the remainder of this Agreement
shall remain operative and in full force and effect.
17. Survivorship.
The respective rights and obligations of the parties hereunder will
survive any termination of this Agreement to the extent necessary to the
intended preservation of such rights and obligations.
18 References.
In the event of Executive's death or a judicial determination of his
incompetence, reference in this Agreement to Executive will be deemed, where
appropriate, to refer to his legal representative or, where appropriate, to his
beneficiary or beneficiaries.
19. Headings.
The headings of paragraphs contained in this Agreement are for
convenience only and will not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
20. Governing Law.
Except to the extent governed by the FAA as provided in Section 10
above, this Agreement, the rights and obligations of the parties, and any claims
or disputes relating thereto shall be governed by and construed in accordance
with the laws of the State of Georgia, not including the choice-of-law rules
thereof.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
SYNTHETIC INDUSTRIES, INC.
By:
- - ---------------------------
Charles T. Koerner
Title:
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Exhibit 10.17
Employment Agreement
This Agreement ("Agreement") is made and entered into as of the 24th
day of September, 1998 ("Effective Date"), by and among Synthetic Industries,
Inc. ("the Corporation") and Joseph Sinicropi (the "Executive").
WITNESSETH:
WHEREAS, the Corporation currently employs Executive as the Chief
Financial Officer; and
WHEREAS, both the Corporation and Executive (the "Parties") desire to
state certain terms and conditions of Executive's employment and wish to
substitute this agreement for their previous employment agreements;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, the Parties agree as follows:
1. Employment.
The Corporation agrees to continue to employ Executive and Executive
agrees to continue to serve the Corporation upon the terms and conditions
hereinafter set forth.
2. Term.
Except as otherwise provided in Section 7 below, the term of
employment under this Agreement shall continue from the Effective Date for a
period that ends on the date that is the third anniversary of the Effective
Date; provided, however, that on the first day of the calendar month next
following the first anniversary of the Effective Date, and on the first day of
each successive month, such term of employment shall automatically be extended
for successive
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one month periods, providing a minimum remaining term of two years. Either party
may halt future extension by written notice, in which case such term of
employment shall be the term in effect when such written notice was given.
Notwithstanding the foregoing, this Agreement shall automatically terminate on
the twenty-fifth (25th) anniversary of the Effective Date if it is not
terminated earlier pursuant to Section 7.
3. Duties and Extent of Services; Location of Principal Office.
During the term set forth in Section 2 above, the Corporation shall
employ Executive and Executive shall serve the Corporation as Chief Financial
Officer of the Corporation. During the period of his employment, Executive shall
devote his full business time and attention to the business and affairs of the
Corporation. During such term, Executive's principal office shall be located at
309 Lafayette Road, Chickamauga, Georgia.
4. Compensation.
(a) Base Salary. During the term set forth in Section 2 above, the
Corporation shall pay Executive a base salary, payable in accordance with the
Corporation's standard payroll practices, as follows: $170,000 per annum for the
period from the Effective Date through September 30, 1998, and $182,000 per
annum, thereafter. Executive's salary may be reviewed from time to time by the
Board, to increase the amount of such salary. Executive's salary shall not be
reduced during the term of this Agreement. Any increased salary shall become
Executive's base salary for purposes of this Agreement.
(b) Annual Incentive. During the term set forth in Section 2, above,
Executive shall be eligible to participate in the Executive Incentive Plan, or
in such successor plan as may be adopted for the provision of annual incentive
compensation for senior executives (the "Annual
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Incentive Plan"). Executive shall be entitled to an incentive payment applicable
under the Annual Incentive Plan if the Corporation meets its business plan for
the year ("Making Plan").
(c) Stock Options. Executive shall have such rights to stock options
under either the Synthetic Industries, Inc. 1994 Stock Option Plan, the
Synthetic Industries, Inc. 1996 Stock Option Plan or any successor stock option
plan, or any combination of such plans (collectively, the "Option Plan") as
shall be set forth in any applicable stock option agreement.
5. Benefits.
During the term set forth in Section 2 above, Executive shall be
eligible to participate in all group life insurance, health insurance,
disability insurance, survivor income insurance and similar programs maintained
by the Corporation and covering executive employees. Participation in any
retirement plans maintained by the Corporation shall be as determined under the
provisions of such plans.
6. Reimbursement for Expenses.
The Corporation shall reimburse Executive for all reasonable
business expenses incurred by him on behalf of the Corporation in the
performance of his duties hereunder, provided Executive shall account therefore
in accordance with the Corporation's business expense policies and procedures.
7. Termination
Executive's employment may be terminated prior to the end of the
term described in Section 2 only as provided in this Section 7.
(a) Termination for Disability. If the Executive becomes unable to
substantially perform his duties due to permanent physical or mental disability,
as determined by
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a physician agreed upon by the Corporation and the Executive,
his employment pursuant to this Agreement shall terminate. If Executive's
employment is terminated on account of disability under this Section 7(a),
Executive's rights to compensation and benefits shall be as follows:
(i) Executive (or in the event of his death, his estate) shall
be paid his base salary accrued through the date of termination of employment.
(ii) Executive shall be entitled to any unpaid amount
previously fully accrued under the Annual Incentive Plan.
(iii) Executive's rights with respect to stock options, if
any, shall be determined under the Option Plan and any applicable stock option
agreement.
(iv) Following his termination, Executive's right to
participate in the benefit programs described in Section 5 above, including the
rights of Executive's dependents to participate in such programs, if any, shall
be as determined under the provisions of such benefit programs.
(b) Termination on Executive's Death. In the event of termination of
employment by reason of the death of Executive, payment of compensation and
benefits shall be as set forth below. Payment shall be made to the executor or
administrator of Executive's estate, or, in the case of a payment made under a
benefit program, to the person or persons who have been designated pursuant to
the terms of such program to receive such payments.
(i) Executive's base salary accrued through the date of
termination of employment.
(ii) Executive shall be entitled to any unpaid amount
previously fully accrued under the Annual Incentive Plan. In addition, Executive
shall be entitled to an incentive
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payment, in lieu of an incentive payment under the Annual Incentive Plan for the
plan year in which his employment terminates, in an amount equal to the payment
otherwise determined under the Annual Incentive Plan, as if the Executive were
employed by the Corporation to the end of the year of his termination,
multiplied by a fraction the numerator of which is the number of weeks Executive
was employed during such year, and the denominator of which is 52.
(iii) Executive's rights with respect to stock options, if
any, shall be determined under the Option Plan and any applicable stock option
agreement.
(iv) Following his death, Executive's rights under the benefit
programs described in Section 5 above, including the rights of Executive's
dependents to participate in such programs, if any, shall be as determined under
such programs.
(c) Termination for Cause. The Corporation shall have the right to
terminate Executive's employment for "Cause." If Executive's employment is
terminated for Cause, Executive's rights to compensation and benefits shall be
as follows:
(i) Executive shall be paid his base salary accrued through
the date of termination of employment.
(ii) Executive's rights with respect to stock options, if any,
shall be determined under the Option Plan and any applicable stock option
agreements.
(iii) Following his termination, Executive's right to
participate in the benefit programs described in Section 5, above, including the
rights of Executive's dependents to participate in such programs, if any, shall
be as determined under the provisions of such benefit programs.
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For purposes of this Subsection, "Cause" shall mean (1) Executive's
conviction of, or plea of, guilty or nolo contendere to a felony (unless
committed in the good faith belief that Executive's actions were in the best
interests of the Corporation and would not violate criminal law); or (2) gross
neglect or gross misconduct in the performance of Executive's duties. Executive
shall be given written notice that the Corporation intends to terminate his
employment for Cause under this Subsection. Such notice shall specify the
particular acts, or failures to act, that give rise to the decision to so
terminate employment.
In the case of termination for Cause under definition (1), Executive's
employment shall be terminated effective as of the date such notice is given,
provided, however, that Executive shall be given the opportunity to meet with
the Board of Directors of the Corporation within 30 days of the date such notice
is given, to be heard with regard to whether he, in good faith, believed that
his actions or inactions were both in the best interests of the Corporation and
would not violate criminal law.
In the case of termination for Cause under definition (2), Executive shall
be given the opportunity within 20 days of the receipt of such notice to meet
with the Board to defend such acts or failures to act. Executive shall be given
seven days after such meeting to correct any particular acts or failures to act,
and upon failure of Executive, within such seven day period, to correct such
acts or failures to act, Executive's employment by the Corporation shall be
terminated.
Termination on account of disability, as provided in Section 7(a) above,
shall not be considered a termination for Cause under this Section 7(c).
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(d) Termination Without Cause.
(1) The Corporation shall have the right to terminate
Executive's employment without Cause as defined in Section 7(c) above. In the
event of a termination by the Corporation without Cause, other than (A)
following a Change in Control, as defined in Section 7(e) below, or (B) as
described in Subsection (2) below, Executive's rights to compensation and
benefits shall be as follows:
(i) Executive shall be paid his base salary at the rate in
effect on the date of termination of employment for a period of one and one-half
years from the date of termination.
(ii) Executive shall be entitled to any unpaid amount
previously fully accrued under the Annual Incentive Plan. In addition, Executive
shall be entitled to an incentive payment, in lieu of an incentive payment under
the Annual Incentive Plan for the plan year in which his employment terminates,
in an amount equal to the payment otherwise determined under the Annual
Incentive Plan, as if the Executive were employed by the Corporation to the end
of the year of his termination, multiplied by a fraction the numerator of which
is the number of weeks Executive was employed during such year, and the
denominator of which is 52. In addition, in lieu of future payments under the
Annual Incentive Plan, Executive shall be entitled to a payment that equals the
average of the incentive payments received by Executive (or fully accrued by
him) under the Annual Incentive Plan for the three full plan years immediately
preceding his termination of employment.
(iii) Executive's rights with respect to stock options, if
any, shall be determined under the Option Plan and any applicable stock option
agreement.
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(iv) Executive shall be entitled to a lump sum payment equal
to the estimated sum of the premiums that Executive would have to pay to
continue to cover Executive and his eligible dependents under the Corporation's
group health plans, including medical and dental plans, in effect at the time of
termination for a period of 18 months following termination of employment.
Termination on account of disability, as provided in Section 7 (a) above,
shall not be considered a termination without Cause under this Section 7(d).
(2) If Executive's employment is terminated by the Corporation
without Cause, as defined in Subsection (e) above, prior to the occurrence of a
Change in Control of the Corporation (as defined below), and if it can be shown
that Executive's termination (i) was at the direction or request of a third
party that had taken steps reasonably calculated to effect the Change in Control
of the Corporation thereafter, or (ii) otherwise occurred in connection with, or
in anticipation of, the Change in Control of the Corporation, then Executive
shall have the rights described in Section 7(e) below, as if a Change in Control
of the Corporation had occurred on the date immediately preceding such
termination.
(e) Termination Following a Change in Control.
(1) Definitions.
(A) "Act" means the Securities Exchange Act of 1934, as
amended.
(B) "Affiliate of any specified persons" means any other
person that, directly or indirectly, through one or more intermediaries,
controls, or is controlled by, or is under direct or indirect common control
with such specified person. For the purposes of this definition, "control" means
the possession, direct or indirect, of the power to direct or cause the
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direction of the management and policies of a person, whether through the
ownership of voting securities, by contract or otherwise, and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
(C) "Termination Payment" means the sum of:
(i) Two and one-half times Executive's base salary at
the rate in effect on the date of a termination of employment (or, in the event
of a termination for Good Reason below, the base salary as in effect immediately
before the actions giving rise to Good Reason); plus
(ii) Two times the greatest of the incentive
payments under the Annual Incentive Plan either paid or accrued in either the
Year of the Change in Control or the immediately preceding Year.
(D) "Base Amount" means an amount equal to Executive's
Annualized Includable Compensation for the Base Period as defined in Section
280(G)(d)(1) and (2) of the Code (as hereinafter defined).
(E) "Change in Control" of the Corporation means a Change in
Control of a nature that would be required to be reported in response to Item
6(e) of Schedule 14A of Regulation 14A promulgated under the Act or any
successor thereto, provided that without limiting the foregoing, a Change in
Control of the Corporation also shall be deemed to have occurred if:
(i) any "person" (as defined under Section 3(a) (9)
of the Act) or "group" of persons (as provided under Rule 13d-3 of the Act)
(other than Synthetic Industries, LP (the "Partnership") is or becomes the
"beneficial owner" (as defined in Rule 13d-3 or
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otherwise under the Act), directly or indirectly (including as provided in Rule
13d-3(d) (1) of the Act), of capital stock of the Corporation the holders of
which are entitled to vote ("voting stock") representing that percentage of the
Corporation's then outstanding voting stock (giving effect to the deemed
ownership of securities by such person or group, as provided in Rule 13d-3(d)(1)
of the Act, but not giving effect to any such deemed ownership of securities by
another person or group) equal to or greater than thirty-five percent (35%) of
all such voting stock;
(ii) individuals who constitute the Board on the
date hereof (the "Incumbent Board") cease for any reason to constitute at least
a majority thereof. Any person becoming a director subsequent to such date whose
election, or nomination for election, is, at any time, approved by a vote of at
least two-thirds of the directors comprising the Incumbent Board shall be
considered as though he were a member of the Incumbent Board;
(iii) the Corporation combines with another person or
entity, whether through a merger, asset sale, reorganization or otherwise, and
(a) any person or group of persons (other than the Partnership) holds at any
time after such combination, voting stock equal to or greater than thirty-five
percent (35%) of all such voting stock determined by reference to the voting
securities of the surviving entity, or (b) the Corporation's Directors, as of
the date immediately before such combination, constitute less than a majority of
the Board of Directors of the combined entity;
(iv) the shareholders of the Corporation approve any
merger, consolidation or share exchange as a result of which the voting stock of
the Corporation shall be changed, converted or exchanged (other than a merger
solely with a wholly owned subsidiary of the Corporation), or any dissolution or
liquidation of the Corporation or any sale or the
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disposition of 50% or more of the assets or business of the Corporation in a
single transaction or in a series of transactions;
(v) the shareholders of the Corporation approve any
merger or consolidation to which the Corporation is a party or a share exchange
in which the Corporation shall exchange its shares for shares of another
corporation as a result of which the persons who were shareholders of the
Corporation immediately prior to the effective date of the merger, consolidation
or share exchange shall have beneficial ownership of less than 50% of the
combined voting power for election of directors of the surviving corporation
following the effective date of such merger, consolidation or share exchange;
(vi) any event that would constitute a Change in
Control of the Partnership within the meaning of Item 6(e) of the Schedule 14A
of Regulation 14A promulgated under the Act or any successor thereto or under
any of clauses (1), (2), (3), (4) or (5) above if the term "Partnership" were
substituted for the term "Corporation," "partner" were substituted for
"shareholder" and "interest" were substituted for "stock," "capital stock" or
"securities," or
(vii) the removal of the entity that constitutes the
general partner of the Partnership on the date hereof (the "Incumbent General
Partner") or the appointment in a dissolution of the Partnership of a
liquidating trustee that is not the Incumbent General Partner unless such
appointment was approved by either the Incumbent General Partner or the
individuals who constitute the Incumbent Board.
(F) "Code" means the Internal Revenue Code of 1986, including
any amendments thereto.
(G) "Good Reason" means:
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(i) any breach of this Agreement by the
Corporation, including without limitation (a) any reduction during the
employment period in the amount of Executive's base salary or aggregate benefits
as in effect from time to time, (b) failure to provide Executive with the same
fringe benefits that were provided to Executive immediately prior to a Change in
Control of the Corporation, or with a package of fringe benefits (including paid
vacations) that, though one or more of such benefits may vary from those in
effect immediately prior to such a Change in Control, is substantially
comparable in all material respects to such fringe benefits taken as a whole, or
(c) any other breach by the Corporation of its obligations to pay compensation
under this Agreement;
(ii) without Executive's express written consent,
the assignment to Executive of any duties which are materially inconsistent with
Executive's positions, duties, responsibilities and status immediately prior to
the Change in Control of the Corporation, a material change in Executive's
reporting responsibilities, titles or offices as an employee and as in effect
immediately prior to the Change in Control, or a significant reduction in
Executive's title, duties or responsibilities, or in the level of his support
services;
(iii) the relocation of Executive's principal place
of employment, without Executive's written consent, to a location more than 50
miles from Executive's principal place of employment at the time of such Change
in Control, or the imposition of any requirement that Executive spend more than
60 business days per year at a location other than such principal place of
employment;
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(iv) any purported termination of Executive's
employment for Cause, Disability or Retirement which is not effected pursuant
to a Notice of Termination satisfying the requirements defined below;
Upon the occurrence of any of the events described in
(i), (ii), (iii), or (iv) above, Executive shall give the Corporation written
notice that such event constitutes Good Reason, and the Corporation shall
thereafter have 30 days in which to cure. If the Corporation has not cured in
that time, the event shall constitute Good Reason.
(H) "Notice of Termination" means a notice which shall
indicate the specific termination provision relied upon in this Agreement and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the provision so
indicated.
(I) "Person" or "Group" means a "person" or "group," as
defined in the definition of "Change in Control" above.
(J) "Year" means a calendar year unless otherwise specifically
provided.
(2) Payments for Termination Following Change in Control. If,
following a Change in Control, Executive's employment with the Corporation is
terminated by the Corporation other than for Cause, or by Executive on or before
120 days following the date of the Change in Control or, if later, for Good
Reason, then:
(A) Executive shall be entitled to all compensation and
benefits accrued through the date of termination of employment;
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(B) Executive shall be entitled to the Termination Payment
made in a lump sum payment;
(C) Executive shall be entitled to any unpaid amount
previously fully accrued under the Annual Incentive Plan. In addition, in lieu
of future payments under the Annual Incentive Plan, Executive shall be entitled
to a payment that equals the average of the incentive payments received by
Executive (or fully accrued by him) under the Annual Incentive Plan for the
three plan years immediately preceding his termination of employment; and
(D) Executive shall be entitled to a lump sum payment equal to
the estimated sum of the premiums that Executive would have to pay to continue
to cover Executive and his eligible dependents under the Corporation's group
health plans, including medical and dental plans and to purchase life insurance,
accidental death and dismemberment insurance and disability insurance coverage
substantially equivalent to the coverage in effect at the time of termination
for a period of 18 months following termination of employment.
(E) The payments described above shall be made within 2
business days after termination in the event termination is by the Corporation
or Executive gives at least 5 business days notice of termination by the
Executive. In the case of termination by the Executive without 5 business days
notice, the payments shall be made within 10 business days after the
termination. Any payments not timely made will accrue interest at 8.5% per annum
until made.
(3) Vesting of Options upon Change in Control. In the event
of a Change in Control, whether or not Executive's
employment continues with the Corporation, all options
under the Option Plan shall immediately vest on the date
of the Change in Control.
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(4) Certain Supplemental Payments by the Corporation.
(A) In the event Executive's employment is terminated
pursuant to this Subsection, and if in connection therewith it is determined
that (i) part or all of the compensation and benefits to be paid to Executive
constitute "parachute payments" under Section 280G of the Code, and (ii) the
payment thereof will cause Executive to incur excise tax under Section 4999 of
the Code, the Corporation, on or before the date for payment of such excise tax,
shall pay Executive, in a lump sum, an amount (the "Gross-Up Amount") such that,
after payment of all federal, state and local income tax and any additional
excise tax under Section 4999 of the Code in respect of the Gross-Up Amount
payment, Executive will be fully reimbursed for the amount of such excise tax.
(B) The determination of the Parachute Amount, the Base Amount
and the Gross-Up Amount, as well as any other calculations necessary to
implement this Subsection shall be made by a nationally recognized accounting or
benefits consulting firm ("Consultant") selected by Executive and reasonably
satisfactory to the Corporation and which has not performed services , other
than minor indirect or incidental services, for either the Corporation or
Executive for three years prior to the date the Consultant is retained for this
purpose. The Consultant's fee shall be paid by the Corporation.
(C) As promptly as practicable following such determination
and the elections hereunder, the Corporation shall pay to or distribute to or
for the benefit of the Executive such amounts as are then due to Executive under
this Agreement and shall promptly
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pay to or distribute for the benefit of Executive in the future such amounts as
become due to Executive under this Agreement.
(5) Expenses and Interest. If, after a Change in Control
of the Corporation, a good faith dispute arises with respect to the
enforcement of the Executive's rights under this Subsection 7(e), or if
any legal or arbitration proceeding shall be brought in good faith to
enforce or interpret any rights provided under this Subsection 7(e),
Executive shall recover from the Corporation any reasonable attorney's
fees and necessary costs and disbursements incurred as a result of such
dispute, and prejudgment interest on any money judgment or arbitration
obtained by Executive calculated at 8.5% per annum from the date that
payments to him should have been made under this Subsection.
(f) Voluntary Termination. Executive may terminate his employment
voluntarily at any time by giving the Corporation two weeks written notice. In
the event Executive terminates his employment voluntarily, other than as
provided in Subsection 7(e) above, Executive's rights to compensation and
benefits shall be as follows:
(i) Executive shall be paid salary accrued through the date of
termination of employment.
(ii) Executive's rights to annual incentive, if any, shall be
as determined under the Annual Incentive Plan.
(iii) Executive's rights with respect to stock options, if
any, shall be determined under the Option Plan and any applicable stock option
agreement.
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(iv) Following his termination, Executive's right to
participate in the benefit programs described in Section 5 above, including the
rights of Executive's dependents to participate in such programs, if any, shall
be as determined under the provisions of such benefit programs.
8. Payment Obligations Absolute.
The Corporation's obligation to pay the Executive the compensation
and to make the arrangements provided herein shall be absolute and unconditional
and shall not be affected by any circumstances, including, without limitation,
any set-off, counterclaim, recoupment, defense or other right which the
Corporation may have against him or anyone else. All amounts payable by the
Corporation hereunder shall be paid without notice or demand. Each and every
payment made hereunder by the Corporation shall be final and the Corporation
will not seek to recover all or any part of such payment from the Executive or
from whomsoever may be entitled thereto, for any reason whatever provided that
if the Executive is convicted of, or pleads guilty or nolo contendere to, a
felony or misdemeanor involving acts or omissions of the Executive in connection
with his employment by the Corporation, the Corporation shall be allowed to
recover any actual damages it has incurred from such action or omission out of
amounts paid or owing him hereunder.
9. Further Obligations of Executive.
(a) Definitions.
For purposes of this Section, the following definitions apply:
(i) "Restricted Activities" means the rendering of any
financial planning or accounting services.
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(ii) "Territory" means the States of Georgia, Tennessee,
Alabama, Mississippi, North Carolina, South Carolina, Florida, Louisiana,
Kentucky, and West Virginia.
(iii) "Restricted Businesses" means the manufacture,
distribution, and/or sale of fabrics and fibers manufactured from polypropylene
resin.
(iv) "Confidential Information" means any data or information,
other than Trade Secrets, that is valuable to the Corporation and not generally
known to the public or to competitors of the Corporation.
(v) "Nondisclosure Period" means the period beginning on the
date of this Agreement and ending two years after the date Executive's
employment with the Corporation ends or is terminated for any reason.
(vi) "Nonsolicitation Period" means the period beginning on
the date of this Agreement and ending two years after the date Executive's
employment with the Corporation ends or is terminated for any reason.
(vii) "Trade Secret" means information including, but not
limited to, any technical or nontechnical data, formula, pattern, compilation,
program, device, method, technique, drawing, process, financial data, financial
plan, product plan, list of actual or potential customers or suppliers or other
information similar to any of the foregoing, which (i) derives economic value,
actual or potential, from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can derive economic value
from its disclosure or use and (ii) is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy.
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(b) Trade Secrets and Confidential Information.
(i) Trade Secrets. Executive hereby covenants and agrees
that he shall hold in confidence all Trade Secrets of the Corporation, its
direct and indirect subsidiaries, and/or its customers (the "Associated
Companies") that came into his knowledge during his employment by the
Corporation and shall not disclose, publish or make use of at any time after the
date hereof such Trade Secrets without the prior written consent of the
Corporation for as long as the information remains a Trade Secret.
(ii) Confidential Information. Executive hereby covenants and
agrees that, during the Non-Disclosure Period, he will hold in confidence all
Confidential Information of the Corporation or of the Associated Companies that
came into his knowledge during his employment by the Corporation and will not
disclose, publish or make use of such Confidential Information without the prior
written consent of the Corporation.
(iii) Return of Materials. Upon the request of the Corporation
and, in any event, upon the termination of Executive's employment with the
Corporation, Executive shall deliver to the Corporation all memoranda, notes,
records, manuals or other documents (including, but not limited to, written
instruments, voice or data recordings, or computer tapes, disks or files of any
nature), including all copies of such materials and all documentation prepared
or produced in connection therewith, pertaining to the performance of
Executive's services for the Corporation, the business of the Corporation, or
containing Trade Secrets or Confidential Information regarding the Corporation's
business, whether made or compiled by Executive or furnished to Executive by
virtue of his employment with the Corporation.
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Executive shall also deliver to the Corporation all computers, credit cards,
telephones, office equipment, software, and other property the Corporation
furnished to Executive by virtue of his employment with the Corporation.
(c) Nonsolicitation.
(i) Nonsolicitation of Customers. Executive hereby covenants
and agrees that he will not, during the Nonsolicitation Period, without the
prior written consent of the Corporation, solicit, directly or indirectly, any
business related to the Restricted Businesses from any of the Corporation's
customers, including actively sought prospective customers, with whom Executive
had contact during his employment with the Corporation.
(ii) Nonsolicitation of Employees. Executive hereby covenants
that he will not, during the Nonsolicitation Period, without the prior written
consent of the Corporation, solicit or attempt to solicit for employment for or
on behalf of any corporation, partnership, venture or other business entity any
person who, on the last day of Executive's employment with the Corporation or
within 12 months prior to that date, was employed by the Corporation or its
direct or indirect subsidiaries and with whom Executive had contact during the
course of his employment with the Corporation (whether or not such person would
commit a breach of contract).
(d) Non-competition.
(i) Noncompete. Executive hereby covenants that he will not,
within the Territory and during the Nonsolicitation Period, without the prior
written consent of the Corporation, engage in any Restricted Activities for or
on behalf of any corporation, partnership, venture or other business entity
which engages in any of the Restricted Businesses.
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(e) Noncompete Payment. Notwithstanding any other provision of this
Agreement, the Parties agree that in consideration of and as an inducement to
Executive's undertaking the obligations contained in this Section 9, the
Corporation shall pay Executive (or in the event of his death, his estate),
within 5 business days after the date of termination of employment, a lump sum
payment equal to one-half Executive's annual base salary, as in effect on the
date of termination of employment (the "Noncompete Payment"). The parties
further acknowledge and agree that should Executive breach any of the covenants
contained in this Section 9, the Corporation will suffer material damages,
including but not limited to lost business revenues, sales, and customers.
Because of the difficulty in quantifying these damages, Executive hereby agrees
that, in addition to any other rights the Corporation may have at law or in
equity, he shall forfeit the Noncompete Payment upon any breach of the covenants
contained in this Section 9. In the event a breach of covenant occurs after the
termination of employment, Employee agrees to immediately return the Noncompete
Payment to the Corporation.
(f) Specific Performance. Executive acknowledges that the
obligations undertaken by him pursuant to this Section 9 are unique and that the
Corporation likely will have no adequate remedy at law if he fails to perform
any of his obligations. Executive therefore confirms that the Corporation's
right to specific performance of the terms of this Agreement is essential to
protect the rights and interests of the Corporation. Accordingly, in addition to
any other remedies that the Corporation may have pursuant to Subsection 9(e), at
law, or in equity, the Corporation shall have the right to have all obligations,
covenants, agreements and other provisions of this Agreement specifically
performed by Executive and the Corporation shall have the right to obtain
preliminary and permanent injunctive relief from any court with proper
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jurisdiction, without having to first submit arbitration, to secure specific
performance and to prevent a breach or contemplated breach of the obligations
contained in this Section.
10 Arbitration.
(a) Except as provided in Subsection 9(f) above, any dispute,
controversy, or claim between the parties arising out of, relating to, or
concerning this Agreement; the breach, termination, or invalidity of this
Agreement; and the scope of this arbitration clause, shall be settled by
arbitration at the American Arbitration Association ("AAA") in Atlanta, Georgia,
in accordance with the Employment Dispute Resolution Rules of the AAA then in
effect. Any award rendered shall be final and binding on the parties hereto, and
judgment may be entered in any court having jurisdiction thereof. Nothing in
this section, however, shall prevent the Corporation from seeking immediate
relief from a court of competent jurisdiction to enforce the obligations
undertaken in Section 9 above without first having to undergo arbitration.
(b) The arbitrator shall be mutually acceptable to the parties, or
failing agreement, selected pursuant to the Employment Dispute Arbitration Rules
of the AAA. The arbitration award shall be in writing and shall specify the
factual and legal bases for the award. In rendering the award, the arbitrator
shall determine the respective rights and obligations of the parties according
the laws of the State of Georgia or, if applicable, federal law.
(c) All costs and expenses of the arbitration shall be paid for by
the Corporation. Except as provided in Subsection 7(e)(5), each party shall pay
its own attorneys' fees.
(d) It is the specific intent of the parties that this
arbitration clause be governed by the Federal Arbitration Act, 9 U.S.C.
Section 1, et seq. ("FAA"); however, if this clause is
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unenforceable for any reason under the FAA, then the parties intend that it
be governed by the provisions of the Georgia Arbitration Code, O.C.G.A.
Section 9-9-1, et seq.
(e) Both Executive and the Corporation represent and warrant they
have read this Section, have had an opportunity to consult with and receive
advice from legal counsel regarding this Section, and hereby forever waive all
rights to assert that this Section was a result of duress, coercion, or mistake
of law of fact.
(Initialed by Executive)
-------------
(Initialed by the Corporation)
-------------
11. Withholding.
Payments required to be made by the Corporation to Executive, his
spouse, his estate or beneficiaries, will be subject to withholding of such
amounts relating to taxes as the Corporation may reasonably determine it should
withhold pursuant to any applicable law or regulation. In lieu of withholding
such amounts, in whole or in part, the Corporation may, in its sole discretion,
accept other provision for payment of taxes as required by law, provided it is
satisfied that all requirements of law affecting its responsibilities to
withhold such taxes have been satisfied.
12. Assignability; Binding Nature.
This Agreement is binding upon, and will inure to the benefit of,
the parties and their respective successors, heirs, administrators, executors
and assigns. No rights or obligations of Executive hereunder may be assigned or
transferred by Executive except that (a) rights to compensation and benefits
hereunder, which rights will remain subject to the limitations hereunder, may be
transferred by will or operation of law, and (b) rights under employee benefit
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plans or programs described in Section 5, above, may be assigned or transferred
in accordance with such plans, programs or regular practices thereunder. No
rights or obligations of the Corporation under this Agreement may be assigned or
transferred except that rights or obligations may be assigned or transferred by
operation of law or otherwise pursuant to this Section 12. The Corporation shall
require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business assets
of the Corporation by written agreement in form and substance satisfactory to
the Executive, as a condition to such transaction, expressly to assume and agree
to perform this Agreement in the same manner and to the same extent as the
Corporation would be required to perform if no such succession had occurred.
13. Entire Agreement.
This Agreement supersedes any prior agreements, including but not
limited to the Employment Agreement between the parties dated September 6, 1996,
and, together with such plans and programs as are specifically referred to
herein, contains the entire agreement between the parties concerning the subject
matter hereof.
14. Amendments and Waivers.
This Agreement may not be modified or amended, except by a writing
signed by both parties. A party may waive compliance by the other party with any
term or provision of this Agreement, or any part thereof, provided that the term
or provision, or part thereof, is for the benefit of the waiving party. Any
waiver will be limited to the facts or circumstances giving rise to the
non-compliance and will not be deemed either a general waiver or modification
with respect to the term or provision, or part thereof, being waived, or as to
any other term or
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provision of this Agreement, nor will it be deemed a waiver of compliance with
respect to any other facts or circumstances then or thereafter occurring.
15. Notices.
Any notice given hereunder will be in writing and will be deemed
given when delivered personally or by courier, or five days after being
mailed, certified or registered mail, duly addressed to the party concerned
at the address indicated below or at such other address as such party may
subsequently provide, in accordance with the notice and delivery provisions
of this Section:
To the Corporation: Attn: Corporate Secretary
Synthetic Industries, Inc.
309 Lafayette Road
Chickamauga, GA 30707
To Executive: Joseph Sinicropi
Synthetic Industries, Inc.
309 Lafayette Road
Chickamauga, GA 30707
16. Severability.
If fulfillment of any provision of this Agreement, at the time such
fulfillment shall be due, shall transcend the limit of validity prescribed by
law, then the obligation to be fulfilled shall be deemed reduced to the limit of
such validity; and if any clause or provision contained in this Agreement
operates or would operate to invalidate this Agreement, in whole or in part,
then such clause or provision only shall be held ineffective to the extent of
such invalidity, as though not herein contained, and the remainder of this
Agreement shall remain operative and in full force and effect.
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17. Survivorship.
The respective rights and obligations of the parties hereunder will
survive any termination of this Agreement to the extent necessary to the
intended preservation of such rights and obligations.
18. References.
In the event of Executive's death or a judicial determination of his
incompetence, reference in this Agreement to Executive will be deemed, where
appropriate, to refer to his legal representative or, where appropriate, to his
beneficiary or beneficiaries.
19. Headings.
The headings of paragraphs contained in this Agreement are for
convenience only and will not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
20. Governing Law.
Except to the extent governed by the FAA as provided in Section 10
above, this Agreement, the rights and obligations of the parties, and any claims
or disputes relating thereto shall be governed by and construed in accordance
with the laws of the State of Georgia, not including the choice-of-law rules
thereof.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
SYNTHETIC INDUSTRIES, INC.
By:
- - ---------------------------
Joseph Sinicropi
Title:
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Exhibit 10.18
Employment Agreement
This Agreement ("Agreement") is made and entered into as of the 24th of
September, 1998 ("Effective Date"), by and among Synthetic Industries, Inc.
("the Corporation") and Bobby Callahan (the "Executive").
WITNESSETH:
WHEREAS, the Corporation currently employs Executive as the Corporate
Controller; and
WHEREAS, both the Corporation and Executive (the "Parties") desire to state
certain terms and conditions of Executive's employment and wish to substitute
this agreement for their previous employment agreements;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, the Parties agree as follows:
1. Employment.
The Corporation agrees to continue to employ Executive and
Executive agrees to continue to serve the Corporation upon the terms and
conditions hereinafter set forth.
2. Term.
Except as otherwise provided in Section 7 below, the term of
employment under this Agreement shall continue from the Effective Date for a
period of five (5) years.
3. Duties and Extent of Services; Location of Principal Office.
During the term set forth in Section 2 above, the Corporation shall
employ Executive and Executive shall serve the Corporation as the Corporate
Controller. During
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the period of his employment, Executive shall devote his full business time
and attention to the business and affairs of the Corporation. During such
term, Executive's principal office shall be located at 309 Lafayette Road,
Chickamauga, Georgia.
4. Compensation.
(a) Base Salary. During the term set forth in Section 2 above, the
Corporation shall pay Executive a base salary, payable in accordance with the
Corporation's standard payroll practices, as follows: $95,000 per annum for the
period from the Effective Date through September 30, 1998, and $103,000 per
annum, thereafter. Executive's salary may be reviewed from time to time by the
Board, to increase the amount of such salary. Executive's salary shall not be
reduced during the term of this Agreement. Any increased salary shall become
Executive's base salary for purposes of this Agreement.
(b) Annual Incentive. During the term set forth in Section 2, above,
Executive shall be eligible to participate in the Executive Incentive Plan, or
in such successor plan as may be adopted for the provision of annual incentive
compensation for senior executives (the "Annual Incentive Plan"). Executive
shall be entitled to an incentive payment applicable under the Annual Incentive
Plan if the Corporation meets its business plan for the year ("Making Plan").
(c) Stock Options. Executive shall have such rights to stock options
under either the Synthetic Industries, Inc. 1994 Stock Option Plan, the
Synthetic Industries, Inc. 1996 Stock Option Plan, or any successor stock option
plan, or any combination of such plans (collectively, the "Option Plan") as
shall be set forth in any applicable stock option agreement.
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5. Benefits.
During the term set forth in Section 2 above, Executive shall be
eligible to participate in all group life insurance, health insurance,
disability insurance, survivor income insurance and similar programs maintained
by the Corporation and covering executive employees. Participation in any
retirement plans maintained by the Corporation shall be as determined under the
provisions of such plans.
6. Reimbursement for Expenses.
The Corporation shall reimburse Executive for all reasonable business
expenses incurred by him on behalf of the Corporation in the performance of his
duties hereunder, provided Executive shall account therefore in accordance with
the Corporation's business expense policies and procedures.
7. Termination
Executive's employment may be terminated prior to the end of the term
described in Section 2 only as provided in this Section 7.
(a) Termination for Disability. If the Executive becomes unable to
substantially perform his duties due to permanent physical or mental disability,
as determined by a physician agreed upon by the Corporation and the Executive,
his employment pursuant to this Agreement shall terminate. If Executive's
employment is terminated on account of disability under this Section 7(a),
Executive's rights to compensation and benefits shall be as follows:
(i) Executive (or in the event of his death, his estate) shall be
paid his base salary accrued through the date of termination of employment.
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(ii) Executive shall be entitled to any unpaid amount previously
fully accrued under the Annual Incentive Plan.
(iii) Executive's rights with respect to stock options, if any,
shall be determined under the Option Plan and any applicable stock option
agreement.
(iv) Following his termination, Executive's right to participate
in the benefit programs described in Section 5 above, including the rights of
Executive's dependents to participate in such programs, if any, shall be as
determined under the provisions of such benefit programs.
(b) Termination on Executive's Death. In the event of termination of
employment by reason of the death of Executive, payment of compensation and
benefits shall be as set forth below. Payment shall be made to the executor or
administrator of Executive's estate, or, in the case of a payment made under a
benefit program, to the person or persons who have been designated pursuant to
the terms of such program to receive such payments.
(i) Executive's base salary accrued through the date of
termination of employment.
(ii) Executive shall be entitled to any unpaid amount previously
fully accrued under the Annual Incentive Plan. In addition, Executive shall be
entitled to an incentive payment, in lieu of an incentive payment under the
Annual Incentive Plan for the plan year in which his employment terminates, in
an amount equal to the payment otherwise determined under the Annual Incentive
Plan, as if the Executive were employed by the Corporation to the
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end of the year of his termination, multiplied by a fraction the numerator of
which is the number of weeks Executive was employed during such year, and the
denominator of which is 52.
(iii) Executive's rights with respect to stock options, if any,
shall be determined under the Option Plan and any applicable stock option
agreement.
(iv) Following his death, Executive's rights under the benefit
programs described in Section 5 above, including the rights of Executive's
dependents to participate in such programs, if any, shall be as determined under
such programs.
(c) Termination for Cause. The Corporation shall have the right to
terminate Executive's employment for "Cause." If Executive's employment is
terminated for Cause, Executive's rights to compensation and benefits shall be
as follows:
(i) Executive shall be paid his base salary accrued through the
date of termination of employment.
(ii) Executive's rights with respect to stock options, if any,
shall be determined under the Option Plan and any applicable stock option
agreements.
(iii) Following his termination, Executive's right to participate
in the benefit programs described in Section 5, above, including the rights of
Executive's dependents to participate in such programs, if any, shall be as
determined under the provisions of such benefit programs.
For purposes of this Subsection, "Cause" shall mean (1) Executive's
conviction of, or plea of, guilty or nolo contendere to a felony (unless
committed in the good faith belief that Executive's actions were in the best
interests of the Corporation and would not violate criminal law); or (2) gross
neglect or gross misconduct in the performance of Executive's duties.
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Executive shall be given written notice that the Corporation intends to
terminate his employment for Cause under this Subsection. Such notice shall
specify the particular acts, or failures to act, that give rise to the decision
to so terminate employment.
In the case of termination for Cause under definition (1), Executive's
employment shall be terminated effective as of the date such notice is given,
provided, however, that Executive shall be given the opportunity to meet with
the Board of Directors of the Corporation within 30 days of the date such notice
is given, to be heard with regard to whether he, in good faith, believed that
his actions or inactions were both in the best interests of the Corporation and
would not violate criminal law.
In the case of termination for Cause under definition (2), Executive shall
be given the opportunity within 20 days of the receipt of such notice to meet
with the Board to defend such acts or failures to act. Executive shall be given
seven days after such meeting to correct any particular acts or failures to act,
and upon failure of Executive, within such seven day period, to correct such
acts or failures to act, Executive's employment by the Corporation shall be
terminated.
Termination on account of disability, as provided in Section 7(a) above,
shall not be considered a termination for Cause under this Section 7(c).
(d) Termination Without Cause.
(1) The Corporation shall have the right to terminate Executive's
employment without Cause as defined in Section 7(c) above. In the event of a
termination by the Corporation without Cause, other than (A) following a Change
in Control, as defined in
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Section 7(e) below, or (B) as described in Subsection (2) below, Executive's
rights to compensation and benefits shall be as follows:
(i) Executive shall be paid his base salary at the rate in effect
on the date of termination of employment for a period of one and one-half years
from the date of termination.
(ii) Executive shall be entitled to any unpaid amount previously
fully accrued under the Annual Incentive Plan. In addition, Executive shall be
entitled to an incentive payment, in lieu of an incentive payment under the
Annual Incentive Plan for the plan year in which his employment terminates, in
an amount equal to the payment otherwise determined under the Annual Incentive
Plan, as if the Executive were employed by the Corporation to the end of the
year of his termination, multiplied by a fraction the numerator of which is the
number of weeks Executive was employed during such year, and the denominator of
which is 52. In addition, in lieu of future payments under the Annual Incentive
Plan, Executive shall be entitled to a payment that equals the average of the
incentive payments received by Executive (or fully accrued by him) under the
Annual Incentive Plan for the three full plan years immediately preceding his
termination of employment.
(iii) Executive's rights with respect to stock options, if any,
shall be determined under the Option Plan and any applicable stock option
agreement.
(iv) Executive shall be entitled to a lump sum payment equal to
the estimated sum of the premiums that Executive would have to pay to continue
to cover Executive and his eligible dependents under the Corporation's group
health plans, including medical and
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dental plans, in effect at the time of termination for a period of 18 months
following termination of employment.
Termination on account of disability, as provided in Section 7 (a) above,
shall not be considered a termination without Cause under this Section 7(d).
(2) If Executive's employment is terminated by the Corporation
without Cause, as defined in Subsection (e) above, prior to the occurrence of a
Change in Control of the Corporation (as defined below), and if it can be shown
that Executive's termination (i) was at the direction or request of a third
party that had taken steps reasonably calculated to effect the Change in Control
of the Corporation thereafter, or (ii) otherwise occurred in connection with, or
in anticipation of, the Change in Control of the Corporation, then Executive
shall have the rights described in Section 7(e) below, as if a Change in Control
of the Corporation had occurred on the date immediately preceding such
termination.
(e) Termination Following a Change in Control.
(1) Definitions.
(A) "Act" means the Securities Exchange Act of 1934, as amended.
(B) "Affiliate of any specified persons" means any other person
that, directly or indirectly, through one or more intermediaries, controls, or
is controlled by, or is under direct or indirect common control with such
specified person. For the purposes of this definition, "control" means the
possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of a person, whether through the ownership of voting
securities, by contract or otherwise, and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
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(C) "Termination Payment" means the sum of:
(i) One and one-half times Executive's base salary at the
rate in effect on the date of a termination of employment (or, in the event of a
termination for Good Reason below, the base salary as in effect immediately
before the actions giving rise to Good Reason); plus
(ii) Two times the greatest of the incentive payments under
the Annual Incentive Plan either paid or accrued in either the Year of the
Change in Control or the immediately preceding Year.
(D) "Base Amount" means an amount equal to Executive's Annualized
Includable Compensation for the Base Period as defined in Section 280(G)(d)(1)
and (2) of the Code (as hereinafter defined).
(E) "Change in Control" of the Corporation means a Change in
Control of a nature that would be required to be reported in response to Item
6(e) of Schedule 14A of Regulation 14A promulgated under the Act or any
successor thereto, provided that without limiting the foregoing, a Change in
Control of the Corporation also shall be deemed to have occurred if:
(i) any "person" (as defined under Section 3(a) (9) of the
Act) or "group" of persons (as provided under Rule 13d-3 of the Act) (other than
Synthetic Industries, LP (the "Partnership") is or becomes the "beneficial
owner" (as defined in Rule 13d-3 or otherwise under the Act), directly or
indirectly (including as provided in Rule 13d-3(d) (1) of the Act), of capital
stock of the Corporation the holders of which are entitled to vote ("voting
stock")
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representing that percentage of the Corporation's then outstanding
voting stock (giving effect to the deemed ownership of securities by such person
or group, as provided in Rule 13d-3(d)(1) of the Act, but not giving effect to
any such deemed ownership of securities by another person or group) equal to or
greater than thirty-five percent (35%) of all such voting stock;
(ii) individuals who constitute the Board on the date hereof
(the "Incumbent Board") cease for any reason to constitute at least a majority
thereof. Any person becoming a director subsequent to such date whose election,
or nomination for election, is, at any time, approved by a vote of at least
two-thirds of the directors comprising the Incumbent Board shall be considered
as though he were a member of the Incumbent Board;
(iii) the Corporation combines with another person or
entity, whether through a merger, asset sale, reorganization or otherwise, and
(a) any person or group of persons (other than the Partnership) holds at any
time after such combination, voting stock equal to or greater than thirty-five
percent (35%) of all such voting stock determined by reference to the voting
securities of the surviving entity, or (b) the Corporation's Directors, as of
the date immediately before such combination, constitute less than a majority of
the Board of Directors of the combined entity;
(iv) the shareholders of the Corporation approve any merger,
consolidation or share exchange as a result of which the voting stock of the
Corporation shall be changed, converted or exchanged (other than a merger solely
with a wholly owned subsidiary of the Corporation), or any dissolution or
liquidation of the Corporation or any sale or the disposition of 50% or more of
the assets or business of the Corporation in a single transaction or in a series
of transactions;
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(v) the shareholders of the Corporation approve any merger
or consolidation to which the Corporation is a party or a share exchange in
which the Corporation shall exchange its shares for shares of another
corporation as a result of which the persons who were shareholders of the
Corporation immediately prior to the effective date of the merger, consolidation
or share exchange shall have beneficial ownership of less than 50% of the
combined voting power for election of directors of the surviving corporation
following the effective date of such merger, consolidation or share exchange;
(vi) any event that would constitute a Change in Control of
the Partnership within the meaning of Item 6(e) of the Schedule 14A of
Regulation 14A promulgated under the Act or any successor thereto or under any
of clauses (1), (2), (3), (4) or (5) above if the term "Partnership" were
substituted for the term "Corporation," "partner" were substituted for
"shareholder" and "interest" were substituted for "stock," "capital stock" or
"securities," or
(vii) the removal of the entity that constitutes the general
partner of the Partnership on the date hereof (the "Incumbent General Partner")
or the appointment in a dissolution of the Partnership of a liquidating trustee
that is not the Incumbent General Partner unless such appointment was approved
by either the Incumbent General Partner or the individuals who constitute the
Incumbent Board.
(F) "Code" means the Internal Revenue Code of 1986, including any
amendments thereto.
(G) "Good Reason" means:
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(i) any breach of this Agreement by the Corporation,
including without limitation (a) any reduction during the employment period in
the amount of Executive's base salary or aggregate benefits as in effect from
time to time, (b) failure to provide Executive with the same fringe benefits
that were provided to Executive immediately prior to a Change in Control of the
Corporation, or with a package of fringe benefits (including paid vacations)
that, though one or more of such benefits may vary from those in effect
immediately prior to such a Change in Control, is substantially comparable in
all material respects to such fringe benefits taken as a whole, or (c) any other
breach by the Corporation of its obligations to pay compensation under this
Agreement;
(ii) without Executive's express written consent, the
assignment to Executive of any duties which are materially inconsistent with
Executive's positions, duties, responsibilities and status immediately prior to
the Change in Control of the Corporation, a material change in Executive's
reporting responsibilities, titles or offices as an employee and as in effect
immediately prior to the Change in Control, or a significant reduction in
Executive's title, duties or responsibilities, or in the level of his support
services;
(iii) the relocation of Executive's principal place of
employment, without Executive's written consent, to a location more than 50
miles from Executive's principal place of employment at the time of such Change
in Control, or the imposition of any requirement that Executive spend more than
60 business days per year at a location other than such principal place of
employment;
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(iv) any purported termination of Executive's employment for
Cause, Disability or Retirement which is not effected pursuant to a Notice of
Termination satisfying the requirements defined below;
Upon the occurrence of any of the events described in (i), (ii), (iii), or
(iv) above, Executive shall give the Corporation written notice that such event
constitutes Good Reason, and the Corporation shall thereafter have 30 days in
which to cure. If the Corporation has not cured in that time, the event shall
constitute Good Reason.
(H) "Notice of Termination" means a notice which shall indicate the
specific termination provision relied upon in this Agreement and shall set forth
in reasonable detail the facts and circumstances claimed to provide a basis for
termination of Executive's employment under the provision so indicated.
(I) "Person" or "Group" means a "person" or "group," as defined in the
definition of "Change in Control" above.
(J) "Year" means a calendar year unless otherwise specifically
provided.
(2) Payments for Termination Following Change in Control. If,
following a Change in Control, Executive's employment with the Corporation is
terminated by the Corporation other than for Cause, or by Executive for Good
Reason, then:
(A) Executive shall be entitled to all compensation and benefits
accrued through the date of termination of employment;
(B) Executive shall be entitled to the Termination Payment made in a
lump sum payment;
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(C) Executive shall be entitled to any unpaid amount previously fully
accrued under the Annual Incentive Plan. In addition, in lieu of future payments
under the Annual Incentive Plan, Executive shall be entitled to a payment that
equals the average of the incentive payments received by Executive (or fully
accrued by him) under the Annual Incentive Plan for the three plan years
immediately preceding his termination of employment; and
(D) Executive shall be entitled to a lump sum payment equal to the
estimated sum of the premiums that Executive would have to pay to continue to
cover Executive and his eligible dependents under the Corporation's group health
plans, including medical and dental plans and to purchase life insurance,
accidental death and dismemberment insurance and disability insurance coverage
substantially equivalent to the coverage in effect at the time of termination
for a period of 18 months following termination of employment.
(E) The payments described above shall be made within 2 business days
after termination in the event termination is by the Corporation or Executive
gives at least 5 business days notice of termination by the Executive. In the
case of termination by the Executive without 5 business days notice, the
payments shall be made within 10 business days after the termination. Any
payments not timely made will accrue interest at 8.5% per annum until made.
(3) Vesting of Options upon Change in Control. In the event of a
Change in Control, whether or not Executive's employment continues with the
Corporation, all options under the Option Plan shall immediately vest on the
date of the Change in Control.
(4) Certain Supplemental Provisions. Notwithstanding anything herein
to the contrary, in the event that any payment received or to be received by
Executive in
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connection with a Change in Control of the Corporation or the termination of
Executive's employment (whether payable pursuant to the terms of this Agreement
or any other plan, arrangement or agreement) (all such payment being referred to
in the aggregate as "Total Payment") would not be deductible (in whole or in
part) as a result of Section 280G of the Code, the payments otherwise due to
Executive pursuant to Section 7(e)(2) above ("Severance Payments") shall be
reduced until no portion of the Total Payments is not deductible as a result of
Section 280G of the Code, or the Severance Payments are reduced to zero. For
purposes of this limitation (i) no portion of the Total Payments, the receipt or
enjoyment of which Executive shall have effectively waived in writing prior to
the date of payment of the Severance Payments, shall be taken into account, (ii)
no portion of the Total Payments shall be taken into account which, in the
opinion of the tax counsel selected by the Corporation's independent auditors
and reasonably acceptable to Executive ("Tax Counsel"), does not constitute a
"parachute payment" within the meaning of Section 280G(b)(2) of the Code, (iii)
the Severance Payments shall be reduced only to the extent necessary so that the
Total Payments (other than those referred to in clause (i) or (ii)) in their
entirety constitute reasonable compensation for services actually rendered
within the meaning of Section 280G(b)(4) of the Code, in the opinion of Tax
Counsel, and (iv) the value of any non-cash benefit or any deferred payment or
benefit included in the Total Payments shall be determined by the Corporation's
independent auditors in accordance with the principles of Sections 280G(d)(3)
and (4) of the Code.
(6) Expenses and Interest. If, after a Change in Control of the
Corporation, a good faith dispute arises with respect to the enforcement of the
Executive's rights under this Subsection 7(e), or if any legal or arbitration
proceeding shall be brought in good faith
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to enforce or interpret any rights provided under this Subsection 7(e),
Executive shall recover from the Corporation any reasonable attorney's fees and
necessary costs and disbursements incurred as a result of such dispute, and
prejudgment interest on any money judgment or arbitration obtained by Executive
calculated at 8.5% per annum from the date that payments to him should have been
made under this Subsection.
(f) Voluntary Termination. Executive may terminate his employment
voluntarily at any time by giving the Corporation two weeks written notice. In
the event Executive terminates his employment voluntarily, other than as
provided in Subsection 7(e) above, Executive's rights to compensation and
benefits shall be as follows:
(i) Executive shall be paid salary accrued through the date
of termination of employment.
(ii) Executive's rights to annual incentive, if any, shall
be as determined under the Annual Incentive Plan.
(iii) Executive's rights with respect to stock options, if
any, shall be determined under the Option Plan and any applicable stock option
agreement.
(iv) Following his termination, Executive's right to
participate in the benefit programs described in Section 5 above, including the
rights of Executive's dependents to participate in such programs, if any, shall
be as determined under the provisions of such benefit programs.
8. Payment Obligations Absolute.
The Corporation's obligation to pay the Executive the compensation and
to make the arrangements provided herein shall be absolute and unconditional and
shall not be affected by
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any circumstances, including, without limitation, any set-off, counterclaim,
recoupment, defense or other right which the Corporation may have against him or
anyone else. All amounts payable by the Corporation hereunder shall be paid
without notice or demand. Each and every payment made hereunder by the
Corporation shall be final and the Corporation will not seek to recover all or
any part of such payment from the Executive or from whomsoever may be entitled
thereto, for any reason whatever provided that if the Executive is convicted of,
or pleads guilty or nolo contendere to, a felony or misdemeanor involving acts
or omissions of the Executive in connection with his employment by the
Corporation, the Corporation shall be allowed to recover any actual damages it
has incurred from such action or omission out of amounts paid or owing him
hereunder.
9. Further Obligations of Executive.
(a) Definitions.
For purposes of this Section, the following definitions apply:
(i) "Restricted Activities" means the rendering of any financial
planning or accounting services.
(ii) "Territory" means the States of Georgia, Tennessee, Alabama,
Mississippi, North Carolina, South Carolina, Florida, Louisiana, Kentucky, and
West Virginia.
(iii) "Restricted Businesses" means the manufacture,
distribution, and/or sale of fabrics and fibers manufactured from polypropylene
resin.
(iv) "Confidential Information" means any data or information,
other than Trade Secrets, that is valuable to the Corporation and not generally
known to the public or to competitors of the Corporation.
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(v) "Nondisclosure Period" means the period beginning on the date
of this Agreement and ending two years after the date Executive's employment
with the Corporation ends or is terminated for any reason.
(vi) "Nonsolicitation Period" means the period beginning on the
date of this Agreement and ending two years after the date Executive's
employment with the Corporation ends or is terminated for any reason.
(vii) "Trade Secret" means information including, but not limited
to, any technical or nontechnical data, formula, pattern, compilation, program,
device, method, technique, drawing, process, financial data, financial plan,
product plan, list of actual or potential customers or suppliers or other
information similar to any of the foregoing, which (i) derives economic value,
actual or potential, from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can derive economic value
from its disclosure or use and (ii) is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy.
(b) Trade Secrets and Confidential Information.
(i) Trade Secrets. Executive hereby covenants and agrees that he
shall hold in confidence all Trade Secrets of the Corporation, its direct and
indirect subsidiaries, and/or its customers (the "Associated Companies") that
came into his knowledge during his employment by the Corporation and shall not
disclose, publish or make use of at any time after the date hereof such Trade
Secrets without the prior written consent of the Corporation for as long as the
information remains a Trade Secret.
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(ii) Confidential Information. Executive hereby covenants and
agrees that, during the Non-Disclosure Period, he will hold in confidence all
Confidential Information of the Corporation or of the Associated Companies that
came into his knowledge during his employment by the Corporation and will not
disclose, publish or make use of such Confidential Information without the prior
written consent of the Corporation.
(iii) Return of Materials. Upon the request of the Corporation and, in
any event, upon the termination of Executive's employment with the Corporation,
Executive shall deliver to the Corporation all memoranda, notes, records,
manuals or other documents (including, but not limited to, written instruments,
voice or data recordings, or computer tapes, disks or files of any nature),
including all copies of such materials and all documentation prepared or
produced in connection therewith, pertaining to the performance of Executive's
services for the Corporation, the business of the Corporation, or containing
Trade Secrets or Confidential Information regarding the Corporation's business,
whether made or compiled by Executive or furnished to Executive by virtue of his
employment with the Corporation. Executive shall also deliver to the Corporation
all computers, credit cards, telephones, office equipment, software, and other
property the Corporation furnished to Executive by virtue of his employment with
the Corporation.
(c) Nonsolicitation.
(i) Nonsolicitation of Customers. Executive hereby covenants and
agrees that he will not, during the Nonsolicitation Period, without the prior
written consent of the Corporation, solicit, directly or indirectly, any
business related to the Restricted Businesses from
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any of the Corporation's customers, including actively sought prospective
customers, with whom Executive had contact during his employment with the
Corporation.
(ii) Nonsolicitation of Employees. Executive hereby covenants
that he will not, during the Nonsolicitation Period, without the prior written
consent of the Corporation, solicit or attempt to solicit for employment for or
on behalf of any corporation, partnership, venture or other business entity any
person who, on the last day of Executive's employment with the Corporation or
within 12 months prior to that date, was employed by the Corporation or its
direct or indirect subsidiaries and with whom Executive had contact during the
course of his employment with the Corporation (whether or not such person would
commit a breach of contract).
(d) Non-competition.
(i) Noncompete. Executive hereby covenants that he will not,
within the Territory and during the Nonsolicitation Period, without the prior
written consent of the Corporation, engage in any Restricted Activities for or
on behalf of any corporation, partnership, venture or other business entity
which engages in any of the Restricted Businesses.
(e) Noncompete Payment. Notwithstanding any other provision of this
Agreement, the Parties agree that in consideration of and as an inducement to
Executive's undertaking the obligations contained in this Section 9, the
Corporation shall pay Executive (or in the event of his death, his estate),
within 5 business days after the date of termination of employment, a lump sum
payment equal to one-half Executive's annual base salary, as in effect on the
date of termination of employment (the "Noncompete Payment"). The parties
further
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acknowledge and agree that should Executive breach any of the covenants
contained in this Section 9, the Corporation will suffer material damages,
including but not limited to lost business revenues, sales, and customers.
Because of the difficulty in quantifying these damages, Executive hereby agrees
that, in addition to any other rights the Corporation may have at law or in
equity, he shall forfeit the Noncompete Payment upon any breach of the covenants
contained in this Section 9. In the event a breach of covenant occurs after the
termination of employment, Employee agrees to immediately return the Noncompete
Payment to the Corporation.
(f) Specific Performance. Executive acknowledges that the obligations
undertaken by him pursuant to this Section 9 are unique and that the Corporation
likely will have no adequate remedy at law if he fails to perform any of his
obligations. Executive therefore confirms that the Corporation's right to
specific performance of the terms of this Agreement is essential to protect the
rights and interests of the Corporation. Accordingly, in addition to any other
remedies that the Corporation may have pursuant to Subsection 9(e), at law, or
in equity, the Corporation shall have the right to have all obligations,
covenants, agreements and other provisions of this Agreement specifically
performed by Executive and the Corporation shall have the right to obtain
preliminary and permanent injunctive relief from any court with proper
jurisdiction, without having to first submit arbitration, to secure specific
performance and to prevent a breach or contemplated breach of the obligations
contained in this Section.
10. Arbitration.
(a) Except as provided in Subsection 9(f) above, any dispute,
controversy, or claim between the parties arising out of, relating to, or
concerning this Agreement; the breach, termination, or invalidity of this
Agreement; and the scope of this arbitration clause, shall be
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settled by arbitration at the American Arbitration Association ("AAA") in
Atlanta, Georgia, in accordance with the Employment Dispute Resolution Rules of
the AAA then in effect. Any award rendered shall be final and binding on the
parties hereto, and judgment may be entered in any court having jurisdiction
thereof. Nothing in this section, however, shall prevent the Corporation from
seeking immediate relief from a court of competent jurisdiction to enforce the
obligations undertaken in Section 9 above without first having to undergo
arbitration.
(b) The arbitrator shall be mutually acceptable to the parties, or
failing agreement, selected pursuant to the Employment Dispute Arbitration Rules
of the AAA. The arbitration award shall be in writing and shall specify the
factual and legal bases for the award. In rendering the award, the arbitrator
shall determine the respective rights and obligations of the parties according
the laws of the State of Georgia or, if applicable, federal law.
(c) All costs and expenses of the arbitration shall be paid for by the
Corporation. Except as provided in Subsection 7(e)(5), each party shall pay its
own attorneys' fees.
(d) It is the specific intent of the parties that this arbitration
clause be governed by the Federal Arbitration Act, 9 U.S.C. Section 1, et seq.
("FAA"); however, if this clause is unenforceable for any reason under the FAA,
then the parties intend that it be governed by the provisions of the Georgia
Arbitration Code, O.C.G.A. Section 9-9-1, et seq.
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(e) Both Executive and the Corporation represent and warrant they have
read this Section, have had an opportunity to consult with and receive advice
from legal counsel regarding this Section, and hereby forever waive all rights
to assert that this Section was a result of duress, coercion, or mistake of law
of fact.
________________ (Initialed by Executive)
________________ (Initialed by the Corporation)
11. Withholding.
Payments required to be made by the Corporation to Executive, his
spouse, his estate or beneficiaries, will be subject to withholding of such
amounts relating to taxes as the Corporation may reasonably determine it should
withhold pursuant to any applicable law or regulation. In lieu of withholding
such amounts, in whole or in part, the Corporation may, in its sole discretion,
accept other provision for payment of taxes as required by law, provided it is
satisfied that all requirements of law affecting its responsibilities to
withhold such taxes have been satisfied.
12. Assignability; Binding Nature.
This Agreement is binding upon, and will inure to the benefit of, the
parties and their respective successors, heirs, administrators, executors and
assigns. No rights or obligations of Executive hereunder may be assigned or
transferred by Executive except that (a) rights to compensation and benefits
hereunder, which rights will remain subject to the limitations hereunder, may be
transferred by will or operation of law, and (b) rights under employee benefit
plans or programs described in Section 5, above, may be assigned or transferred
in accordance with such plans, programs or regular practices thereunder. No
rights or obligations of the
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Corporation under this Agreement may be assigned or transferred except that
rights or obligations may be assigned or transferred by operation of law or
otherwise pursuant to this Section 12. The Corporation shall require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business assets of the Corporation
by written agreement in form and substance satisfactory to the Executive, as a
condition to such transaction, expressly to assume and agree to perform this
Agreement in the same manner and to the same extent as the Corporation would be
required to perform if no such succession had occurred.
13. Entire Agreement.
This Agreement supersedes any prior agreements, including but not
limited to the prior Employment Agreement between the parties and, together with
such plans and programs as are specifically referred to herein, contains the
entire agreement between the parties concerning the subject matter hereof.
14. Amendments and Waivers.
This Agreement may not be modified or amended, except by a writing
signed by both parties. A party may waive compliance by the other party with any
term or provision of this Agreement, or any part thereof, provided that the term
or provision, or part thereof, is for the benefit of the waiving party. Any
waiver will be limited to the facts or circumstances giving rise to the
non-compliance and will not be deemed either a general waiver or modification
with respect to the term or provision, or part thereof, being waived, or as to
any other term or provision of this Agreement, nor will it be deemed a waiver of
compliance with respect to any other facts or circumstances then or thereafter
occurring.
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15. Notices.
Any notice given hereunder will be in writing and will be deemed given
when delivered personally or by courier, or five days after being mailed,
certified or registered mail, duly addressed to the party concerned at the
address indicated below or at such other address as such party may subsequently
provide, in accordance with the notice and delivery provisions of this Section:
To the Corporation: Attn: Corporate Secretary
Synthetic Industries, Inc.
309 Lafayette Road
Chickamauga, GA 30707
To Executive: Bobby Callahan
Synthetic Industries, Inc.
309 Lafayette Road
Chickamauga, GA 30707
16. Severability.
If fulfillment of any provision of this Agreement, at the time such
fulfillment shall be due, shall transcend the limit of validity prescribed by
law, then the obligation to be fulfilled shall be deemed reduced to the limit of
such validity; and if any clause or provision contained in this Agreement
operates or would operate to invalidate this Agreement, in whole or in part,
then such clause or provision only shall be held ineffective to the extent of
such invalidity, as though not herein contained, and the remainder of this
Agreement shall remain operative and in full force and effect.
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17. Survivorship.
The respective rights and obligations of the parties hereunder will
survive any termination of this Agreement to the extent necessary to the
intended preservation of such rights and obligations.
18. References.
In the event of Executive's death or a judicial determination of his
incompetence, reference in this Agreement to Executive will be deemed, where
appropriate, to refer to his legal representative or, where appropriate, to his
beneficiary or beneficiaries.
19. Headings.
The headings of paragraphs contained in this Agreement are for
convenience only and will not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
20. Governing Law.
Except to the extent governed by the FAA as provided in Section 10
above, this Agreement, the rights and obligations of the parties, and any claims
or disputes relating thereto shall be governed by and construed in accordance
with the laws of the State of Georgia, not including the choice-of-law rules
thereof.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
SYNTHETIC INDUSTRIES, INC.
- - -------------------------- By:
Bobby Callahan
Title:
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Exhibit 10.19
Employment Agreement
This Agreement ("Agreement") is made and entered into as of the 24th
day of September, 1998 ("Effective Date"), by and among Synthetic Industries,
Inc. ("the Corporation") and Joseph Dana (the "Executive").
WITNESSETH:
WHEREAS, the Corporation currently employs Executive as the Chief
Operating Officer; and
WHEREAS, both the Corporation and Executive (the "Parties") desire to
state certain terms and conditions of Executive's employment and wish to
substitute this agreement for their previous employment agreements;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, the Parties agree as follows:
1. Employment.
The Corporation agrees to continue to employ Executive and Executive
agrees to continue to serve the Corporation upon the terms and conditions
hereinafter set forth.
2. Term.
Except as otherwise provided in Section 7 below, the term of
employment under this Agreement shall continue from the Effective Date for a
period that ends on the date that is the fourth anniversary of the Effective
Date; provided, however, that on the first day of the calendar month next
following the second anniversary of the Effective Date, and on the first day of
each successive month, such term of employment shall automatically be extended
for
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successive one month periods, providing a minimum remaining term of two years.
Either party may halt future extension by written notice, in which case such
term of employment shall be the term in effect when such written notice was
given. Notwithstanding the foregoing, this Agreement shall automatically
terminate on the twenty-fifth (25th) anniversary of the Effective Date if it is
not terminated earlier pursuant to Section 7.
3. Duties and Extent of Services; Location of Principal Office.
During the term set forth in Section 2 above, the Corporation shall
employ Executive and Executive shall serve the Corporation as Chief Operating
Officer of the Corporation. During the period of his employment, Executive shall
devote his full business time and attention to the business and affairs of the
Corporation. During such term, Executive's principal office shall be located at
309 Lafayette Road, Chickamauga, Georgia.
4. Compensation.
(a) Base Salary. During the term set forth in Section 2 above, the
Corporation shall pay Executive a base salary, payable in accordance with the
Corporation's standard payroll practices, as follows: $225,000 per annum for the
period from the Effective Date through September 30, 1998, and $240,000 per
annum, thereafter. Executive's salary may be reviewed from time to time by the
Board, to increase the amount of such salary. Executive's salary shall not be
reduced during the term of this Agreement. Any increased salary shall become
Executive's base salary for purposes of this Agreement.
(b) Annual Incentive. During the term set forth in Section 2, above,
Executive shall be eligible to participate in the Executive Incentive Plan, or
in such successor plan as may be adopted for the provision of annual incentive
compensation for senior executives (the "Annual
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Incentive Plan"). Executive shall be entitled to an incentive payment applicable
under the Annual Incentive Plan if the Corporation meets its business plan for
the year ("Making Plan").
(c) Stock Options. Executive shall have such rights to stock options
under either the Synthetic Industries, Inc. 1994 Stock Option Plan, the
Synthetic Industries, Inc. 1996 Stock Option Plan, the Synthetic Industries,
Inc. 1994 Stock Option Plan for Non-employee Directors, or any successor stock
option plan, or any combination of such plans (collectively, the "Option Plan")
as shall be set forth in any applicable stock option agreement.
5. Benefits.
During the term set forth in Section 2 above, Executive shall be
eligible to participate in all group life insurance, health insurance,
disability insurance, survivor income insurance and similar programs maintained
by the Corporation and covering executive employees. Participation in any
retirement plans maintained by the Corporation shall be as determined under the
provisions of such plans.
6. Reimbursement for Expenses.
The Corporation shall reimburse Executive for all reasonable
business expenses incurred by him on behalf of the Corporation in the
performance of his duties hereunder, provided Executive shall account therefore
in accordance with the Corporation's business expense policies and procedures.
7. Termination
Executive's employment may be terminated prior to the end of the
term described in Section 2 only as provided in this Section 7.
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(a) Termination for Disability. If the Executive becomes unable to
substantially perform his duties due to permanent physical or mental disability,
as determined by a physician agreed upon by the Corporation and the Executive,
his employment pursuant to this Agreement shall terminate. If Executive's
employment is terminated on account of disability under this Section 7(a),
Executive's rights to compensation and benefits shall be as follows:
(i) Executive (or in the event of his death, his estate) shall
be paid his base salary accrued through the date of termination of employment.
(ii) Executive shall be entitled to any unpaid amount previously
fully accrued under the Annual Incentive Plan.
(iii) Executive's rights with respect to stock options, if any,
shall be determined under the Option Plan and any applicable stock option
agreement.
(iv) Following his termination, Executive's right to participate
in the benefit programs described in Section 5 above, including the rights of
Executive's dependents to participate in such programs, if any, shall be as
determined under the provisions of such benefit programs.
(b) Termination on Executive's Death. In the event of termination of
employment by reason of the death of Executive, payment of compensation and
benefits shall be as set forth below. Payment shall be made to the executor or
administrator of Executive's estate, or, in the case of a payment made under a
benefit program, to the person or persons who have been designated pursuant to
the terms of such program to receive such payments.
(i) Executive's base salary accrued through the date of
termination of employment.
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(ii) Executive shall be entitled to any unpaid amount previously
fully accrued under the Annual Incentive Plan. In addition, Executive shall be
entitled to an incentive payment, in lieu of an incentive payment under the
Annual Incentive Plan for the plan year in which his employment terminates, in
an amount equal to the payment otherwise determined under the Annual Incentive
Plan, as if the Executive were employed by the Corporation to the end of the
year of his termination, multiplied by a fraction the numerator of which is the
number of weeks Executive was employed during such year, and the denominator of
which is 52.
(iii) Executive's rights with respect to stock options, if any,
shall be determined under the Option Plan and any applicable stock option
agreement.
(iv) Following his death, Executive's rights under the benefit
programs described in Section 5 above, including the rights of Executive's
dependents to participate in such programs, if any, shall be as determined under
such programs.
(c) Termination for Cause. The Corporation shall have the right to
terminate Executive's employment for "Cause." If Executive's employment is
terminated for Cause, Executive's rights to compensation and benefits shall be
as follows:
(i) Executive shall be paid his base salary accrued through the
date of termination of employment.
(ii) Executive's rights with respect to stock options, if any,
shall be determined under the Option Plan and any applicable stock option
agreements.
(iii) Following his termination, Executive's right to
participate in the benefit programs described in Section 5, above, including the
rights of Executive's dependents to
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participate in such programs, if any, shall be as determined under the
provisions of such benefit programs.
For purposes of this Subsection, "Cause" shall mean (1) Executive's
conviction of, or plea of, guilty or nolo contendere to a felony (unless
committed in the good faith belief that Executive's actions were in the best
interests of the Corporation and would not violate criminal law); or (2) gross
neglect or gross misconduct in the performance of Executive's duties. Executive
shall be given written notice that the Corporation intends to terminate his
employment for Cause under this Subsection. Such notice shall specify the
particular acts, or failures to act, that give rise to the decision to so
terminate employment.
In the case of termination for Cause under definition (1), Executive's
employment shall be terminated effective as of the date such notice is given,
provided, however, that Executive shall be given the opportunity to meet with
the Board of Directors of the Corporation within 30 days of the date such notice
is given, to be heard with regard to whether he, in good faith, believed that
his actions or inactions were both in the best interests of the Corporation and
would not violate criminal law.
In the case of termination for Cause under definition (2), Executive
shall be given the opportunity within 20 days of the receipt of such notice to
meet with the Board to defend such acts or failures to act. Executive shall be
given seven days after such meeting to correct any particular acts or failures
to act, and upon failure of Executive, within such seven day period, to correct
such acts or failures to act, Executive's employment by the Corporation shall be
terminated.
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Termination on account of disability, as provided in Section 7(a)
above, shall not be considered a termination for Cause under this Section 7(c).
(d) Termination Without Cause.
(1) The Corporation shall have the right to terminate
Executive's employment without Cause as defined in Section 7(c) above. In the
event of a termination by the Corporation without Cause, other than (A)
following a Change in Control, as defined in Section 7(e) below, or (B) as
described in Subsection (2) below, Executive's rights to compensation and
benefits shall be as follows:
(i) Executive shall be paid his base salary at the rate in
effect on the date of termination of employment for a period of one and one-half
years from the date of termination.
(ii) Executive shall be entitled to any unpaid amount previously
fully accrued under the Annual Incentive Plan. In addition, Executive shall be
entitled to an incentive payment, in lieu of an incentive payment under the
Annual Incentive Plan for the plan year in which his employment terminates, in
an amount equal to the payment otherwise determined under the Annual Incentive
Plan, as if the Executive were employed by the Corporation to the end of the
year of his termination, multiplied by a fraction the numerator of which is the
number of weeks Executive was employed during such year, and the denominator of
which is 52. In addition, in lieu of future payments under the Annual Incentive
Plan, Executive shall be entitled to a payment that equals the average of the
incentive payments received by Executive (or fully accrued by him) under the
Annual Incentive Plan for the three full plan years immediately preceding his
termination of employment.
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(iii) Executive's rights with respect to stock options, if any,
shall be determined under the Option Plan and any applicable stock option
agreement.
(iv) Executive and his covered dependents shall be entitled to
continue to be covered at the expense of the Corporation by the same or
equivalent hospital, medical, and dental insurance coverage as in effect for
Executive immediately prior to termination of his employment, until the earlier
of (i) age 65, or (ii) the date Executive has commenced new employment and has
thereby become eligible for comparable benefits.
Termination on account of disability, as provided in Section 7 (a)
above, shall not be considered a termination without Cause under this Section
7(d).
(2) If Executive's employment is terminated by the Corporation
without Cause, as defined in Subsection (e) above, prior to the occurrence of a
Change in Control of the Corporation (as defined below), and if it can be shown
that Executive's termination (i) was at the direction or request of a third
party that had taken steps reasonably calculated to effect the Change in Control
of the Corporation thereafter, or (ii) otherwise occurred in connection with, or
in anticipation of, the Change in Control of the Corporation, then Executive
shall have the rights described in Section 7(e) below, as if a Change in Control
of the Corporation had occurred on the date immediately preceding such
termination.
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(e) Termination Following a Change in Control.
(1) Definitions.
(A) "Act" means the Securities Exchange Act of 1934, as amended.
(B) "Affiliate of any specified persons" means any other person
that, directly or indirectly, through one or more intermediaries, controls, or
is controlled by, or is under direct or indirect common control with such
specified person. For the purposes of this definition, "control" means the
possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of a person, whether through the ownership of voting
securities, by contract or otherwise, and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
(C) "Termination Payment" means the sum of:
(i) Two and one-half times Executive's base salary at the
rate in effect on the date of a termination of employment (or, in the event of a
termination for Good Reason below, the base salary as in effect immediately
before the actions giving rise to Good Reason); plus
(ii) Two times the greatest of the incentive payments under
the Annual Incentive Plan either paid or accrued in either the Year of the
Change in Control or the immediately preceding Year.
(D) "Base Amount" means an amount equal to Executive's
Annualized Includable Compensation for the Base Period as defined in Section
280(G)(d)(1) and (2) of the Code (as hereinafter defined).
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(E) "Change in Control" of the Corporation means a Change in
Control of a nature that would be required to be reported in response to Item
6(e) of Schedule 14A of Regulation 14A promulgated under the Act or any
successor thereto, provided that without limiting the foregoing, a Change in
Control of the Corporation also shall be deemed to have occurred if:
(i) any "person" (as defined under Section 3(a) (9) of the
Act) or "group" of persons (as provided under Rule 13d-3 of the Act) (other than
Synthetic Industries, LP (the "Partnership") is or becomes the "beneficial
owner" (as defined in Rule 13d-3 or otherwise under the Act), directly or
indirectly (including as provided in Rule 13d-3(d) (1) of the Act), of capital
stock of the Corporation the holders of which are entitled to vote ("voting
stock") representing that percentage of the Corporation's then outstanding
voting stock (giving effect to the deemed ownership of securities by such person
or group, as provided in Rule 13d-3(d)(1) of the Act, but not giving effect to
any such deemed ownership of securities by another person or group) equal to or
greater than thirty-five percent (35%) of all such voting stock;
(ii) individuals who constitute the Board on the date hereof
(the "Incumbent Board") cease for any reason to constitute at least a majority
thereof. Any person becoming a director subsequent to such date whose election,
or nomination for election, is, at any time, approved by a vote of at least
two-thirds of the directors comprising the Incumbent Board shall be considered
as though he were a member of the Incumbent Board;
(iii) the Corporation combines with another person or
entity, whether through a merger, asset sale, reorganization or otherwise, and
(a) any person or group of persons (other than the Partnership) holds at any
time after such combination, voting stock equal
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to or greater than thirty-five percent (35%) of all such voting stock determined
by reference to the voting securities of the surviving entity, or (b) the
Corporation's Directors, as of the date immediately before such combination,
constitute less than a majority of the Board of Directors of the combined
entity;
(iv) the shareholders of the Corporation approve any merger,
consolidation or share exchange as a result of which the voting stock of the
Corporation shall be changed, converted or exchanged (other than a merger solely
with a wholly owned subsidiary of the Corporation), or any dissolution or
liquidation of the Corporation or any sale or the disposition of 50% or more of
the assets or business of the Corporation in a single transaction or in a series
of transactions;
(v) the shareholders of the Corporation approve any merger
or consolidation to which the Corporation is a party or a share exchange in
which the Corporation shall exchange its shares for shares of another
corporation as a result of which the persons who were shareholders of the
Corporation immediately prior to the effective date of the merger, consolidation
or share exchange shall have beneficial ownership of less than 50% of the
combined voting power for election of directors of the surviving corporation
following the effective date of such merger, consolidation or share exchange;
(vi) any event that would constitute a Change in Control of
the Partnership within the meaning of Item 6(e) of the Schedule 14A of
Regulation 14A promulgated under the Act or any successor thereto or under any
of clauses (1), (2), (3), (4) or (5) above if the term "Partnership" were
substituted for the term "Corporation," "partner" were substituted for
"shareholder" and "interest" were substituted for "stock," "capital stock" or
"securities," or
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(vii) the removal of the entity that constitutes the general
partner of the Partnership on the date hereof (the "Incumbent General Partner")
or the appointment in a dissolution of the Partnership of a liquidating trustee
that is not the Incumbent General Partner unless such appointment was approved
by either the Incumbent General Partner or the individuals who constitute the
Incumbent Board.
(F) "Code" means the Internal Revenue Code of 1986, including
any amendments thereto.
(G) "Good Reason" means:
(i) any breach of this Agreement by the Corporation,
including without limitation (a) any reduction during the employment period in
the amount of Executive's base salary or aggregate benefits as in effect from
time to time, (b) failure to provide Executive with the same fringe benefits
that were provided to Executive immediately prior to a Change in Control of the
Corporation, or with a package of fringe benefits (including paid vacations)
that, though one or more of such benefits may vary from those in effect
immediately prior to such a Change in Control, is substantially comparable in
all material respects to such fringe benefits taken as a whole, or (c) any other
breach by the Corporation of its obligations to pay compensation under this
Agreement;
(ii) without Executive's express written consent, the
assignment to Executive of any duties which are materially inconsistent with
Executive's positions, duties, responsibilities and status immediately prior to
the Change in Control of the Corporation, a material change in Executive's
reporting responsibilities, titles or offices as an employee and as
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in effect immediately prior to the Change in Control, or a significant reduction
in Executive's title, duties or responsibilities, or in the level of his support
services;
(iii) the relocation of Executive's principal place of
employment, without Executive's written consent, to a location more than 50
miles from Executive's principal place of employment at the time of such Change
in Control, or the imposition of any requirement that Executive spend more than
60 business days per year at a location other than such principal place of
employment;
(iv) any purported termination of Executive's employment for
Cause, Disability or Retirement which is not effected pursuant to a Notice of
Termination satisfying the requirements defined below;
Upon the occurrence of any of the events described in (i),
(ii), (iii), or (iv) above, Executive shall give the Corporation written notice
that such event constitutes Good Reason, and the Corporation shall thereafter
have 30 days in which to cure. If the Corporation has not cured in that time,
the event shall constitute Good Reason.
(H) "Notice of Termination" means a notice which shall indicate
the specific termination provision relied upon in this Agreement and shall set
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of Executive's employment under the provision so
indicated.
(I) "Person" or "Group" means a "person" or "group," as defined
in the definition of "Change in Control" above.
(J) "Year" means a calendar year unless otherwise specifically
provided.
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(2) Payments for Termination Following Change in Control. If,
following a Change in Control, Executive's employment with the Corporation is
terminated by the Corporation other than for Cause, or by Executive on or before
120 days following the date of the Change in Control or, if later, for Good
Reason, then:
(A) Executive shall be entitled to all compensation and benefits
accrued through the date of termination of employment;
(B) Executive shall be entitled to the Termination Payment made
in a lump sum payment;
(C) Executive shall be entitled to any unpaid amount previously
fully accrued under the Annual Incentive Plan. In addition, in lieu of future
payments under the Annual Incentive Plan, Executive shall be entitled to a
payment that equals the average of the incentive payments received by Executive
(or fully accrued by him) under the Annual Incentive Plan for the three plan
years immediately preceding his termination of employment;
(D) Executive and his covered dependents shall be entitled to
continue to be covered at the expense of the Corporation by the same or
equivalent hospital, medical, dental, accident, disability and life insurance
coverage as in effect for Executive immediately prior to termination of his
employment, until the earlier of (i) age 65, or (ii) the date Executive has
commenced new employment and has thereby become eligible for comparable
benefits; and
(E) The payments described above shall be made within 2 business
days after termination in the event termination is by the Corporation or
Executive gives at least 5 business days notice of termination by the Executive.
In the case of termination by the Executive
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without 5 business days notice, the payments shall be made within 10 business
days after the termination. Any payments not timely made will accrue interest at
8.5% per annum until made.
(3) Vesting of Options upon Change in Control. In the event of a
Change in Control, whether or not Executive's employment continues with the
Corporation, all options under the Option Plan shall immediately vest on the
date of the Change in Control.
(4) Certain Supplemental Payments by the Corporation.
(A) In the event Executive's employment is terminated pursuant
to this Subsection, and if in connection therewith it is determined that (i)
part or all of the compensation and benefits to be paid to Executive constitute
"parachute payments" under Section 280G of the Code, and (ii) the payment
thereof will cause Executive to incur excise tax under Section 4999 of the Code,
the Corporation, on or before the date for payment of such excise tax, shall pay
Executive, in a lump sum, an amount (the "Gross-Up Amount") such that, after
payment of all federal, state and local income tax and any additional excise tax
under Section 4999 of the Code in respect of the Gross-Up Amount payment,
Executive will be fully reimbursed for the amount of such excise tax.
(B) The determination of the Parachute Amount, the Base Amount
and the Gross-Up Amount, as well as any other calculations necessary to
implement this Subsection shall be made by a nationally recognized accounting or
benefits consulting firm ("Consultant") selected by Executive and reasonably
satisfactory to the Corporation and which has not performed services , other
than minor indirect or incidental services, for either the Corporation or
Executive for three years prior to the date the Consultant is retained for this
purpose. The Consultant's fee shall be paid by the Corporation.
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(C) As promptly as practicable following such determination and
the elections hereunder, the Corporation shall pay to or distribute to or for
the benefit of the Executive such amounts as are then due to Executive under
this Agreement and shall promptly pay to or distribute for the benefit of
Executive in the future such amounts as become due to Executive under this
Agreement.
(5) Expenses and Interest. If, after a Change in Control of the
Corporation, a good faith dispute arises with respect to the enforcement of the
Executive's rights under this Subsection 7(e), or if any legal or arbitration
proceeding shall be brought in good faith to enforce or interpret any rights
provided under this Subsection 7(e), Executive shall recover from the
Corporation any reasonable attorney's fees and necessary costs and disbursements
incurred as a result of such dispute, and prejudgment interest on any money
judgment or arbitration obtained by Executive calculated at 8.5% per annum from
the date that payments to him should have been made under this Subsection.
(f) Voluntary Termination. Executive may terminate his employment
voluntarily at any time by giving the Corporation two weeks written notice. In
the event Executive terminates his employment voluntarily, other than as
provided in Subsection 7(e) above, Executive's rights to compensation and
benefits shall be as follows:
(i) Executive shall be paid salary accrued through the date of
termination of employment.
(ii) Executive's rights to annual incentive, if any, shall be as
determined under the Annual Incentive Plan.
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(iii) Executive's rights with respect to stock options, if any,
shall be determined under the Option Plan and any applicable stock option
agreement.
(iv) Following his termination, Executive's right to participate
in the benefit programs described in Section 5 above, including the rights of
Executive's dependents to participate in such programs, if any, shall be as
determined under the provisions of such benefit programs.
8. Payment Obligations Absolute.
The Corporation's obligation to pay the Executive the
compensation and to make the arrangements provided herein shall be absolute and
unconditional and shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right which
the Corporation may have against him or anyone else. All amounts payable by the
Corporation hereunder shall be paid without notice or demand. Each and every
payment made hereunder by the Corporation shall be final and the Corporation
will not seek to recover all or any part of such payment from the Executive or
from whomsoever may be entitled thereto, for any reason whatever provided that
if the Executive is convicted of, or pleads guilty or nolo contendere to, a
felony or misdemeanor involving acts or omissions of the Executive in connection
with his employment by the Corporation, the Corporation shall be allowed to
recover any actual damages it has incurred from such action or omission out of
amounts paid or owing him hereunder.
9. Further Obligations of Executive.
(a) Definitions.
For purposes of this Section, the following definitions apply:
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(i) "Restricted Activities" means the rendering of any
advertising, marketing, sales, administrative, financial planning or accounting,
supervisory, or consulting services.
(ii) "Territory" means the continental United States and Canada.
(iii) "Restricted Businesses" means the manufacture,
distribution, and/or sale of fabrics and fibers manufactured from polypropylene
resin.
(iv) "Confidential Information" means any data or information,
other than Trade Secrets, that is valuable to the Corporation and not generally
known to the public or to competitors of the Corporation.
(v) "Nondisclosure Period" means the period beginning on the
date of this Agreement and ending two years after the date Executive's
employment with the Corporation ends or is terminated for any reason.
(vi) "Nonsolicitation Period" means the period beginning on the
date of this Agreement and ending two years after the date Executive's
employment with the Corporation ends or is terminated for any reason.
(vii) "Trade Secret" means information including, but not
limited to, any technical or nontechnical data, formula, pattern, compilation,
program, device, method, technique, drawing, process, financial data, financial
plan, product plan, list of actual or potential customers or suppliers or other
information similar to any of the foregoing, which (i) derives economic value,
actual or potential, from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can derive economic value
from its
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disclosure or use and (ii) is the subject of efforts that are reasonable under
the circumstances to maintain its secrecy.
(b) Trade Secrets and Confidential Information.
(i) Trade Secrets. Executive hereby covenants and agrees that he
shall hold in confidence all Trade Secrets of the Corporation, its direct and
indirect subsidiaries, and/or its customers (the "Associated Companies") that
came into his knowledge during his employment by the Corporation and shall not
disclose, publish or make use of at any time after the date hereof such Trade
Secrets without the prior written consent of the Corporation for as long as the
information remains a Trade Secret.
(ii) Confidential Information. Executive hereby covenants and
agrees that, during the Non-Disclosure Period, he will hold in confidence all
Confidential Information of the Corporation or of the Associated Companies that
came into his knowledge during his employment by the Corporation and will not
disclose, publish or make use of such Confidential Information without the prior
written consent of the Corporation.
(iii) Return of Materials. Upon the request of the Corporation
and, in any event, upon the termination of Executive's employment with the
Corporation, Executive shall deliver to the Corporation all memoranda, notes,
records, manuals or other documents (including, but not limited to, written
instruments, voice or data recordings, or computer tapes, disks or files of any
nature), including all copies of such materials and all documentation prepared
or produced in connection therewith, pertaining to the performance of
Executive's services for the Corporation, the business of the Corporation, or
containing Trade Secrets or Confidential Information regarding the Corporation's
business, whether made or compiled by
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Executive or furnished to Executive by virtue of his employment with the
Corporation. Executive shall also deliver to the Corporation all computers,
credit cards, telephones, office equipment, software, and other property the
Corporation furnished to Executive by virtue of his employment with the
Corporation.
(c) Nonsolicitation.
(i) Nonsolicitation of Customers. Executive hereby covenants and
agrees that he will not, during the Nonsolicitation Period, without the prior
written consent of the Corporation, solicit, directly or indirectly, any
business related to the Restricted Businesses from any of the Corporation's
customers, including actively sought prospective customers, with whom Executive
had contact during his employment with the Corporation.
(ii) Nonsolicitation of Employees. Executive hereby covenants
that he will not, during the Nonsolicitation Period, without the prior written
consent of the Corporation, solicit or attempt to solicit for employment for or
on behalf of any corporation, partnership, venture or other business entity any
person who, on the last day of Executive's employment with the Corporation or
within 12 months prior to that date, was employed by the Corporation or its
direct or indirect subsidiaries and with whom Executive had contact during the
course of his employment with the Corporation (whether or not such person would
commit a breach of contract).
(d) Non-competition.
(i) Noncompete. Executive hereby covenants that he will not,
within the Territory and during the Nonsolicitation Period, without the prior
written consent of the
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Corporation, engage in any Restricted Activities for or
on behalf of any corporation, partnership, venture or other business entity
which engages in any of the Restricted Businesses.
(e) Noncompete Payment. Notwithstanding any other provision of this
Agreement, the Parties agree that in consideration of and as an inducement to
Executive's undertaking the obligations contained in this Section 9, the
Corporation shall pay Executive (or in the event of his death, his estate),
within 5 business days after the date of termination of employment, a lump sum
payment equal to one-half Executive's annual base salary, as in effect on the
date of termination of employment (the "Noncompete Payment"). The parties
further acknowledge and agree that should Executive breach any of the covenants
contained in this Section 9, the Corporation will suffer material damages,
including but not limited to lost business revenues, sales, and customers.
Because of the difficulty in quantifying these damages, Executive hereby agrees
that, in addition to any other rights the Corporation may have at law or in
equity, he shall forfeit the Noncompete Payment upon any breach of the covenants
contained in this Section 9. In the event a breach of covenant occurs after the
termination of employment, Employee agrees to immediately return the Noncompete
Payment to the Corporation.
(f) Specific Performance. Executive acknowledges that the
obligations undertaken by him pursuant to this Section 9 are unique and that the
Corporation likely will have no adequate remedy at law if he fails to perform
any of his obligations. Executive therefore confirms that the Corporation's
right to specific performance of the terms of this Agreement is essential to
protect the rights and interests of the Corporation. Accordingly, in addition to
any other remedies that the Corporation may have pursuant to Subsection 9(e), at
law, or in equity, the Corporation shall have the right to have all obligations,
covenants, agreements and other
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provisions of this Agreement specifically performed by Executive and the
Corporation shall have the right to obtain preliminary and permanent injunctive
relief from any court with proper jurisdiction, without having to first submit
arbitration, to secure specific performance and to prevent a breach or
contemplated breach of the obligations contained in this Section.
10. Arbitration.
(a) Except as provided in Subsection 9(f) above, any dispute,
controversy, or claim between the parties arising out of, relating to, or
concerning this Agreement; the breach, termination, or invalidity of this
Agreement; and the scope of this arbitration clause, shall be settled by
arbitration at the American Arbitration Association ("AAA") in Atlanta, Georgia,
in accordance with the Employment Dispute Resolution Rules of the AAA then in
effect. Any award rendered shall be final and binding on the parties hereto, and
judgment may be entered in any court having jurisdiction thereof. Nothing in
this section, however, shall prevent the Corporation from seeking immediate
relief from a court of competent jurisdiction to enforce the obligations
undertaken in Section 9 above without first having to undergo arbitration.
(b) The arbitrator shall be mutually acceptable to the parties, or
failing agreement, selected pursuant to the Employment Dispute Arbitration Rules
of the AAA. The arbitration award shall be in writing and shall specify the
factual and legal bases for the award. In rendering the award, the arbitrator
shall determine the respective rights and obligations of the parties according
the laws of the State of Georgia or, if applicable, federal law.
(c) All costs and expenses of the arbitration shall be paid for by
the Corporation. Except as provided in Subsection 7(e)(5), each party shall pay
its own attorneys' fees.
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(d) It is the specific intent of the parties that this arbitration
clause be governed by the Federal Arbitration Act, 9 U.S.C. Section 1, et seq.
("FAA"); however, if this clause is unenforceable for any reason under the FAA,
then the parties intend that it be governed by the provisions of the Georgia
Arbitration Code, O.C.G.A. Section 9-9-1, et seq.
(e) Both Executive and the Corporation represent and warrant they
have read this Section, have had an opportunity to consult with and receive
advice from legal counsel regarding this Section, and hereby forever waive all
rights to assert that this Section was a result of duress, coercion, or mistake
of law of fact.
_____________ (Initialed by Executive)
_____________ (Initialed by the Corporation)
11. Withholding.
Payments required to be made by the Corporation to Executive, his
spouse, his estate or beneficiaries, will be subject to withholding of such
amounts relating to taxes as the Corporation may reasonably determine it should
withhold pursuant to any applicable law or regulation. In lieu of withholding
such amounts, in whole or in part, the Corporation may, in its sole discretion,
accept other provision for payment of taxes as required by law, provided it is
satisfied that all requirements of law affecting its responsibilities to
withhold such taxes have been satisfied.
12. Assignability; Binding Nature.
This Agreement is binding upon, and will inure to the benefit of,
the parties and their respective successors, heirs, administrators, executors
and assigns. No rights or obligations of Executive hereunder may be assigned or
transferred by Executive except that (a) rights to
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compensation and benefits hereunder, which rights will remain subject to the
limitations hereunder, may be transferred by will or operation of law, and (b)
rights under employee benefit plans or programs described in Section 5, above,
may be assigned or transferred in accordance with such plans, programs or
regular practices thereunder. No rights or obligations of the Corporation under
this Agreement may be assigned or transferred except that rights or obligations
may be assigned or transferred by operation of law or otherwise pursuant to this
Section 12. The Corporation shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business assets of the Corporation by written agreement
in form and substance satisfactory to the Executive, as a condition to such
transaction, expressly to assume and agree to perform this Agreement in the same
manner and to the same extent as the Corporation would be required to perform if
no such succession had occurred.
13. Entire Agreement.
This Agreement supersedes any prior agreements, including but not
limited to the Employment Agreement between the parties dated May 21, 1997, and,
together with such plans and programs as are specifically referred to herein,
contains the entire agreement between the parties concerning the subject matter
hereof.
14. Amendments and Waivers.
This Agreement may not be modified or amended, except by a writing
signed by both parties. A party may waive compliance by the other party with any
term or provision of this Agreement, or any part thereof, provided that the term
or provision, or part thereof, is for the benefit of the waiving party. Any
waiver will be limited to the facts or circumstances giving rise
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to the non-compliance and will not be deemed either a general waiver or
modification with respect to the term or provision, or part thereof, being
waived, or as to any other term or provision of this Agreement, nor will it be
deemed a waiver of compliance with respect to any other facts or circumstances
then or thereafter occurring.
15. Notices.
Any notice given hereunder will be in writing and will be deemed
given when delivered personally or by courier, or five days after being mailed,
certified or registered mail, duly addressed to the party concerned at the
address indicated below or at such other address as such party may subsequently
provide, in accordance with the notice and delivery provisions of this Section:
To the Corporation: Attn: Corporate Secretary
Synthetic Industries, Inc.
309 Lafayette Road
Chickamauga, GA 30707
To Executive: Joseph Dana
Synthetic Industries, Inc.
309 Lafayette Road
Chickamauga, GA 30707
16. Severability.
If fulfillment of any provision of this Agreement, at the time
such fulfillment shall be due, shall transcend the limit of validity prescribed
by law, then the obligation to be fulfilled shall be deemed reduced to the limit
of such validity; and if any clause or provision contained in this Agreement
operates or would operate to invalidate this Agreement, in whole or in part,
then such clause or provision only shall be held ineffective to the extent of
such invalidity, as though
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not herein contained, and the remainder of this Agreement shall remain operative
and in full force and effect.
17. Survivorship.
The respective rights and obligations of the parties hereunder will
survive any termination of this Agreement to the extent necessary to the
intended preservation of such rights and obligations.
18. References.
In the event of Executive's death or a judicial determination of his
incompetence, reference in this Agreement to Executive will be deemed, where
appropriate, to refer to his legal representative or, where appropriate, to his
beneficiary or beneficiaries.
19. Headings.
The headings of paragraphs contained in this Agreement are for
convenience only and will not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
20. Governing Law.
Except to the extent governed by the FAA as provided in Section 10
above, this Agreement, the rights and obligations of the parties, and any claims
or disputes relating thereto shall be governed by and construed in accordance
with the laws of the State of Georgia, not including the choice-of-law rules
thereof.
26
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
SYNTHETIC INDUSTRIES, INC.
By:
- - ---------------------------
Joseph Dana
Title:
27
<PAGE>
Exhibit 10.26
PROPOSED
INCENTIVE COMPENSATION PLAN
SYNTHETIC INDUSTRIES, INC.
EXECUTIVE DIVISION
FISCAL YEAR 1996/97
Administration:
Compensation Committee of the Board of Directors.
Qualification to Participate:
1. Employment by participant throughout the fiscal year.
2. Operating Profit must be 80% of Plan. If the planned profit
objective;
a) is exceeded, then the bonus shall be raised by the ratio
that actual profits are to plan, except that a maximum bonus
shall not exceed 100% of base salary.
b) fails to be reached, but is at least 80% achieved, then
the bonus shall be lowered by the ratio that actual profit
is to planned profit. If profit falls below 80%, no bonus is
earned or payable.
Definition:
Operating Profit for the 1996/97 Plan is $50,000,000
Compensation Amount:
For achieving Planned Operating Profit: $567,100
<PAGE>
PROPOSED
INCENTIVE COMPENSATION PLAN
SYNTHETIC INDUSTRIES, INC.
GP, FM, PN, SY DIVISIONS
FISCAL YEAR 1996/97
Administration:
Compensation Committee of the Board of Directors.
Qualification to Participate:
1. Employment by participant throughout the fiscal year.
2. Operating Profit must be 80% of Plan. If the planned profit
objective;
a) is exceeded, then the bonus shall be raised by the ratio that
actual profits are to plan, except that a maximum bonus shall not
exceed 100% of base salary.
b) fails to be reached, but is at least 80% achieved, then the
bonus shall be lowered by the ratio that actual profit is to
planned profit. If profit falls below 80%, no bonus is earned or
payable.
Definition:
Operating Profit for the 1996/97 Plan is $22,154,000
Compensation Amount:
For achieving Planned Operating Profit: $10,000.
<PAGE>
PROPOSED
INCENTIVE COMPENSATION PLAN
SYNTHETIC INDUSTRIES, INC.
WOVEN FABRICS DIVISION
FISCAL YEAR 1996/97
Administration:
Compensation Committee of the Board of Directors.
Qualification to Participate:
1. Employment by participant throughout the fiscal year.
2. Operating Profit must be 80% of Plan. If the planned profit
objective;
a) is exceeded, then the bonus shall be raised by the ratio that
actual profits are to plan, except that a maximum bonus shall not
exceed 100% of base salary.
b) fails to be reached, but is at least 80% achieved, then the
bonus shall be lowered by the ratio that actual profit is to
planned profit. If profit falls below 80%, no bonus is earned or
payable.
Definition:
Operating Profit for the 1996/97 Plan is $37,879,000
Compensation Amount:
For achieving Planned Operating Profit: $14,500
<PAGE>
PROPOSED
INCENTIVE COMPENSATION PLAN
SYNTHETIC INDUSTRIES, INC.
PERFORMANCE FABRICS DIVISION
FISCAL YEAR 1996/97
Administration:
Compensation Committee of the Board of Directors.
Qualification to Participate:
1. Employment by participant throughout the fiscal year.
2. Operating Profit must be 80% of Plan. If the planned profit
objective;
a) is exceeded, then the bonus shall be raised by the ratio that
actual profits are to plan, except that a maximum bonus shall not
exceed 100% of base salary.
b) fails to be reached, but is at least 80% achieved, then the
bonus shall be lowered by the ratio that actual profit is to
planned profit. If profit falls below 80%, no bonus is earned or
payable.
Definition:
Operating Profit for the 1996/97 Plan is $1,998,000
Compensation Amount:
For achieving Planned Operating Profit: $30,000.
<PAGE>
INCENTIVE COMPENSATION PLAN
SYNTHETIC INDUSTRIES, INC.
PERFORMANCE NONWOVEN DIVISION
FISCAL YEAR 1996/97
Administration:
Compensation Committee of the Board of Directors.
Qualification to Participate:
1. Employment by participant throughout the fiscal year.
2. Operating Profit must be 80% of Plan. If the planned profit
objective;
a) is exceeded, then the bonus shall be raised by the ratio that
actual profits are to plan, except that a maximum bonus shall not
exceed 100% of base salary.
b) fails to be reached, but is at least 80% achieved, then the
bonus shall be lowered by the ratio that actual profit is to
planned profit. If profit falls below 80%, no bonus is earned or
payable.
Definition:
Adjusted Profit for the 1996/97 Plan is $110,660
Compensation Amount:
For achieving Planned Operating Profit: $7,500
<PAGE>
INCENTIVE COMPENSATION PLAN
SYNTHETIC INDUSTRIES, INC.
CONSTRUCTION/CIVIL ENGINEERING DIVISION
FISCAL YEAR 1996/97
Administration:
Compensation Committee of the Board of Directors.
Qualification to Participate:
1. Employment by participant throughout the fiscal year.
2. Operating Profit must be 80% of Plan. If the planned profit
objective;
a) is exceeded, then the bonus shall be raised by the ratio that
actual profits are to plan, except that a maximum bonus shall not
exceed 100% of base salary.
b) fails to be reached, but is at least 80% achieved, then the
bonus shall be lowered by the ratio that actual profit is to
planned profit. If profit falls below 80%, no bonus is earned or
payable.
Definition:
Adjusted Profit for the 1996/97 Plan is $18,256,000
Compensation Amount:
For achieving Planned Operating Profit: $121,800
<PAGE>
INCENTIVE COMPENSATION PLAN
SYNTHETIC INDUSTRIES, INC.
FIBERMESH DIVISION
FISCAL YEAR 1996/97
Administration:
Compensation Committee of the Board of Directors.
Qualification to Participate:
1. Employment by participant throughout the fiscal year.
2. Operating Profit must be 80% of Plan. If the planned profit
objective;
a) is exceeded, then the bonus shall be raised by the ratio that
actual profits are to plan, except that a maximum bonus shall not
exceed 100% of base salary.
b) fails to be reached, but is at least 80% achieved, then the
bonus shall be lowered by the ratio that actual profit is to
planned profit. If profit falls below 80%, no bonus is earned or
payable.
Definition:
Operating Profit for the 1996/97 Plan is $ 9,709,000
Compensation Amount:
For achieving Planned Operating Profit: $64,000.
<PAGE>
INCENTIVE COMPENSATION PLAN
SYNTHETIC INDUSTRIES, INC.
GEOSYNTHETIC PRODUCTS DIVISION
FISCAL YEAR 1996/97
Administration:
Compensation Committee of the Board of Directors.
Qualification to Participate:
1. Employment by participant throughout the fiscal year.
2. Operating Profit must be 80% of Plan. If the planned profit
objective;
a) is exceeded, then the bonus shall be raised by the ratio that
actual profits are to plan, except that a maximum bonus shall not
exceed 100% of base salary.
b) fails to be reached, but is at least 80% achieved, then the
bonus shall be lowered by the ratio that actual profit is to
planned profit. If profit falls below 80%, no bonus is earned or
payable.
Definition:
Adjusted Profit for the 1996/97 Plan is $8,547,000
Compensation Amount:
For achieving Planned Operating Profit: $98,000.
<PAGE>
INCENTIVE COMPENSATION PLAN
SYNTHETIC INDUSTRIES, INC.
SPECIALTY YARNS DIVISION
FISCAL YEAR 1996/97
Administration:
Compensation Committee of the Board of Directors.
Qualification to Participate:
1. Employment by participant throughout the fiscal year.
2. Operating Profit must be 80% of Plan. If the planned profit
objective;
a) is exceeded, then the bonus shall be raised by the ratio that
actual profits are to plan, except that a maximum bonus shall not
exceed 100% of base salary.
b) fails to be reached, but is at least 80% achieved, then the
bonus shall be lowered by the ratio that actual profit is to
planned profit. If profit falls below 80%, no bonus is earned or
payable.
Definition:
Adjusted Profit for the 1996/97 Plan is $245,200
Compensation Amount:
For achieving Planned Operating Profit: $10,000
<PAGE>
INCENTIVE COMPENSATION PLAN
SYNTHETIC INDUSTRIES, INC.
NEW BUSINESS OPPORTUNITIES
FISCAL YEAR 1996/97
Administration:
Compensation Committee of the Board of Directors.
Qualification to Participate:
1. Employment by participant throughout the fiscal year.
2. Operating Profit must be 80% of Plan. If the planned profit
objective;
a) is exceeded, then the bonus shall be raised by the ratio that
actual profits are to plan, except that a maximum bonus shall not
exceed 100% of base salary.
b) fails to be reached, but is at least 80% achieved, then the
bonus shall be lowered by the ratio that actual profit is to
planned profit. If profit falls below 80%, no bonus is earned or
payable.
Definition:
Adjusted Profit for the 1996/97 Plan is $252,000
Compensation Amount:
For achieving Planned Operating Profit: $60,000.
<PAGE>
INCENTIVE COMPENSATION PLAN
SYNTHETIC INDUSTRIES, INC.
NBO TECHNICAL
FISCAL YEAR 1996/97
Administration:
Compensation Committee of the Board of Directors.
Qualification to Participate:
1. Employment by participant throughout the fiscal year.
2. Operating Profit must be 80% of Plan. If the planned profit
objective;
a) is exceeded, then the bonus shall be raised by the ratio that
actual profits are to plan, except that a maximum bonus shall not
exceed 100% of base salary.
b) fails to be reached, but is at least 80% achieved, then the
bonus shall be lowered by the ratio that actual profit is to
planned profit. If profit falls below 80%, no bonus is earned or
payable.
Definition:
Adjusted Profit for the 1996/97 Plan is $981,000
Compensation Amount:
For achieving Planned Operating Profit: $12,500.
<PAGE>
Exhibit 10.27
PROPOSED
INCENTIVE COMPENSATION PLAN
SYNTHETIC INDUSTRIES, INC.
CORPORATE DIVISION
FISCAL YEAR 1997/98
Administration:
Compensation Committee of the Board of Directors.
Qualification to Participate:
1. Employment by participant throughout the fiscal year.
2. Operating Profit must be 80% of Plan. If the planned profit
objective;
a) is exceeded, then the bonus shall be raised by the ratio that
actual profits are to plan, except that a maximum bonus shall not
exceed 100% of base salary.
b) fails to be reached, but is at least 80% achieved, then the
bonus shall be lowered by the ratio that actual profit is to
planned profit. If profit falls below 80%, no bonus is earned or
payable.
Definition:
Net Income Plan for the 1997/98 Plan is $21,141,000
Compensation Amount:
For achieving Planned Operating Profit: $970,688
<PAGE>
PROPOSED
INCENTIVE COMPENSATION PLAN
SYNTHETIC INDUSTRIES, INC.
CARPET BACKING DIVISION
FISCAL YEAR 1997/98
Administration:
Compensation Committee of the Board of Directors.
Qualification to Participate:
1. Employment by participant throughout the fiscal year.
2. Operating Profit must be 80% of Plan. If the planned profit
objective;
a) is exceeded, then the bonus shall be raised by the ratio that
actual profits are to plan, except that a maximum bonus shall not
exceed 100% of base salary.
b) fails to be reached, but is at least 80% achieved, then the
bonus shall be lowered by the ratio that actual profit is to
planned profit. If profit falls below 80%, no bonus is earned or
payable.
Definition:
Operating Profit for the 1997/98 Plan is $42,564,000
Compensation Amount:
For achieving Planned Operating Profit: $72,333
<PAGE>
PROPOSED
INCENTIVE COMPENSATION PLAN
SYNTHETIC INDUSTRIES, INC.
TECHNICAL TEXTILES DIVISION
FISCAL YEAR 1997/98
Administration:
Compensation Committee of the Board of Directors.
Qualification to Participate:
1. Employment by participant throughout the fiscal year.
2. Operating Profit must be 80% of Plan. If the planned profit
objective;
a) is exceeded, then the bonus shall be raised by the ratio that
actual profits are to plan, except that a maximum bonus shall not
exceed 100% of base salary.
b) fails to be reached, but is at least 80% achieved, then the
bonus shall be lowered by the ratio that actual profit is to
planned profit. If profit falls below 80%, no bonus is earned or
payable.
Definition:
Operating Profit for the 1997/98 Plan is $9,633,000
Compensation Amount:
For achieving Planned Operating Profit: $31,500
<PAGE>
PROPOSED
INCENTIVE COMPENSATION PLAN
SYNTHETIC INDUSTRIES, INC.
PERFORMANCE FABRICS DIVISION
FISCAL YEAR 1997/98
Administration:
Compensation Committee of the Board of Directors.
Qualification to Participate:
1. Employment by participant throughout the fiscal year.
2. Operating Profit must be 80% of Plan. If the planned profit
objective;
a) is exceeded, then the bonus shall be raised by the ratio that
actual profits are to plan, except that a maximum bonus shall not
exceed 100% of base salary.
b) fails to be reached, but is at least 80% achieved, then the
bonus shall be lowered by the ratio that actual profit is to
planned profit. If profit falls below 80%, no bonus is earned or
payable.
Definition:
Operating Profit for the 1997/98 Plan is $2,826,000
Compensation Amount:
For achieving Planned Operating Profit: $21,083
<PAGE>
PROPOSED
INCENTIVE COMPENSATION PLAN
SYNTHETIC INDUSTRIES, INC.
PERFORMANCE NONWOVEN DIVISION
FISCAL YEAR 1997/98
Administration:
Compensation Committee of the Board of Directors.
Qualification to Participate:
1. Employment by participant throughout the fiscal year.
2. Operating Profit must be 80% of Plan. If the planned profit
objective;
a) is exceeded, then the bonus shall be raised by the ratio
that actual profits are to plan, except that a maximum bonus
shall not exceed 100% of base salary.
b) fails to be reached, but is at least 80% achieved, then
the bonus shall be lowered by the ratio that actual profit
is to planned profit. If profit falls below 80%, no bonus is
earned or payable.
Definition:
Adjusted Profit for the 1997/98 Plan is $2,248,000
Compensation Amount:
For achieving Planned Operating Profit: $2,750
<PAGE>
PROPOSED
INCENTIVE COMPENSATION PLAN
SYNTHETIC INDUSTRIES, INC.
CONSTRUCTION/CIVIL ENGINEERING DIVISION
FISCAL YEAR 1997/98
Administration:
Compensation Committee of the Board of Directors.
Qualification to Participate:
1. Employment by participant throughout the fiscal year.
2. Operating Profit must be 80% of Plan. If the planned profit
objective;
a) is exceeded, then the bonus shall be raised by the ratio that
actual profits are to plan, except that a maximum bonus shall not
exceed 100% of base salary.
b) fails to be reached, but is at least 80% achieved, then the
bonus shall be lowered by the ratio that actual profit is to
planned profit. If profit falls below 80%, no bonus is earned or
payable.
Definition:
Adjusted Profit for the 1997/98 Plan is $24,838,000
Compensation Amount:
For achieving Planned Operating Profit: $99,750
<PAGE>
PROPOSED
INCENTIVE COMPENSATION PLAN
SYNTHETIC INDUSTRIES, INC.
FIBERMESH DIVISION
FISCAL YEAR 1997/98
Administration:
Compensation Committee of the Board of Directors.
Qualification to Participate:
1. Employment by participant throughout the fiscal year.
2. Operating Profit must be 80% of Plan. If the planned profit
objective;
a) is exceeded, then the bonus shall be raised by the ratio that
actual profits are to plan, except that a maximum bonus shall not
exceed 100% of base salary.
b) fails to be reached, but is at least 80% achieved, then the
bonus shall be lowered by the ratio that actual profit is to
planned profit. If profit falls below 80%, no bonus is earned or
payable.
Definition:
Operating Profit for the 1997/98 Plan is $ 9,548,000
Compensation Amount:
For achieving Planned Operating Profit: $30,250
<PAGE>
PROPOSED
INCENTIVE COMPENSATION PLAN
SYNTHETIC INDUSTRIES, INC.
GEOSYNTHETIC PRODUCTS DIVISION
FISCAL YEAR 1997/98
Administration:
Compensation Committee of the Board of Directors.
Qualification to Participate:
1. Employment by participant throughout the fiscal year.
2. Operating Profit must be 80% of Plan. If the planned profit
objective;
a) is exceeded, then the bonus shall be raised by the ratio that
actual profits are to plan, except that a maximum bonus shall not
exceed 100% of base salary.
b) fails to be reached, but is at least 80% achieved, then the
bonus shall be lowered by the ratio that actual profit is to
planned profit. If profit falls below 80%, no bonus is earned or
payable.
Definition:
Adjusted Profit for the 1997/98 Plan is $15,290,000
Compensation Amount:
For achieving Planned Operating Profit: $99,583
<PAGE>
PROPOSED
INCENTIVE COMPENSATION PLAN
SYNTHETIC INDUSTRIES, INC.
SPECIALTY YARNS DIVISION
FISCAL YEAR 1997/98
Administration:
Compensation Committee of the Board of Directors.
Qualification to Participate:
1. Employment by participant throughout the fiscal year.
2. Operating Profit must be 80% of Plan. If the planned profit
objective;
a) is exceeded, then the bonus shall be raised by the ratio that
actual profits are to plan, except that a maximum bonus shall not
exceed 100% of base salary.
b) fails to be reached, but is at least 80% achieved, then the
bonus shall be lowered by the ratio that actual profit is to
planned profit. If profit falls below 80%, no bonus is earned or
payable.
Definition:
Adjusted Profit for the 1997/98 Plan is $3,172,000
Compensation Amount:
For achieving Planned Operating Profit: $3,333
<PAGE>
PROPOSED
INCENTIVE COMPENSATION PLAN
SYNTHETIC INDUSTRIES, INC.
NEW BUSINESS OPPORTUNITIES
FISCAL YEAR 1997/98
Administration:
Compensation Committee of the Board of Directors.
Qualification to Participate:
1. Employment by participant throughout the fiscal year.
2. Operating Profit must be 80% of Plan. If the planned profit
objective;
a) is exceeded, then the bonus shall be raised by the ratio that
actual profits are to plan, except that a maximum bonus shall not
exceed 100% of base salary.
b) fails to be reached, but is at least 80% achieved, then the
bonus shall be lowered by the ratio that actual profit is to
planned profit. If profit falls below 80%, no bonus is earned or
payable.
Definition:
Adjusted Profit for the 1997/98 Plan is ($810,000)
Compensation Amount:
For achieving Planned Operating Profit: $112,250
<PAGE>
Exhibit 10.35
AMENDMENT NO. 4 AND CONSENT
to
LOAN AND SECURITY AGREEMENT
dated as of December 18, 1997
THIS AMENDMENT NO. 4 dated as of December , 1998 is made by and among
SYNTHETIC INDUSTRIES, INC., a Delaware corporation (the "Borrower"), the Lenders
parties from time to time to the Loan Agreement (as hereinafter defined), and
BANKBOSTON, N.A. ("BankBoston"), as the agent (the "Agent") for the Lenders.
Preliminary Statements
The Borrower, the Lenders and the Agent are parties to a Loan and
Security Agreement dated as of December 18, 1997, as amended by Amendment No. 1
dated as of March 11, 1998, Amendment No. 2 dated as of April 15, 1998 and
Amendment No. 3 dated as of June 30, 1998 (as so amended and in effect, the
"Loan Agreement"; terms defined therein and not otherwise defined herein being
used herein as therein defined). The Borrower has requested that the Loan
Agreement be amended to permit a conveyance of portions of the real property and
improvements included in the Borrower's Ringgold plant and certain of the
Equipment therein to the Catoosa County [Georgia] Development Authority, the
Borrower's lease back of all such real and personal property and the Borrower's
purchase of certain bonds issued by said Authority, and the Lenders and the
Agent have agreed, upon and subject to the terms, conditions and provisions of
this Amendment, to such requests.
Accordingly, in consideration of the Loan Agreement, the Loans made by
the Lenders and outstanding thereunder, the mutual promises hereinafter set
forth and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as follows:
Section 1. Amendments to Loan Agreement. From and after the Amendment
Effective Date, subject to satisfaction of the conditions set forth in Section
2, the Loan Agreement is hereby amended as follows:
(a) by amending the provisions of SECTION 1.1 Definitions thereof by
adding thereto in appropriate alphabetical order the following additional
definitions:
CCDA means Catoosa County Development Authority, a public body
corporate and politic created and existing under the laws of the State
of Georgia.
CCDA Bond Property means Real Estate and Equipment described
on Schedule 1.1 - CCDA Bond Property and such additional property as
may become subject to the CCDA Lease from time to time as a result of a
Permitted CCDA Transaction.
<PAGE>
CCDA Lease means the Lease Agreement dated as of December 1,
1998 between CCDA as lessor and the Borrower as lessee.
Catoosa County Bond Indenture means the Indenture of Trust
dated as of December 1, 1998 between CCDA and SunTrust Bank, Atlanta
with respect to bonds issued by CCDA and repayable solely out of rental
payments and other payments made by the Borrower under the CCDA Lease.
Catoosa County Bonds means up to $85,000,000 original
principal amount of Catoosa County Development Authority Taxable
Revenue Bonds (Synthetic Industries, Inc. Project), Series 1998 and any
Additional Bonds issued pursuant to (and as defined in) the Catoosa
County Bond Indenture.
Permitted CCDA Transaction means (a) in one transaction or a
series of substantially simultaneous transactions, (i) the sale to CCDA
of the Real Estate and Equipment described on Part A of Schedule 1.1 -
CCDA Bond Property hereto, subject to the Security Interest, (ii) the
lease by the Borrower of such CCDA Bond Property pursuant to the CCDA
Lease, (iii) the purchase by the Borrower of [$14,000,000] original
principal amount (or such lesser principal amount as CCDA shall issue
in connection with its purchase of such CCDA Bond Property) of Catoosa
County Bonds and (iv) consummation of the related transactions
contemplated by the Catoosa County Bond Indenture in connection with
the sale and purchase of such CCDA Bond Property, and (b) any
subsequent transaction approved by the Required Lenders in which the
Borrower leases property from CCDA (whether or not the property was
first conveyed by the Borrower to CCDA) pursuant to the CCDA Lease and
substantially contemporaneously purchases Catoosa County Bonds.
(b) by amending Section 12.3 Guaranties to add, immediately before the
period at the end thereof, the following:
or to the Borrower's Guaranty in favor of the Trustee under the Catoosa
County Bond Indenture, in respect of the Borrower's obligations under
the CCDA Lease
(c) by amending Section 12.4 Investments by inserting immediately
following the phrase "except that this Section 12.4 shall not apply to
Investments in" the following:
(a) Catoosa County Bonds issued in connection with Permitted CCDA
Transactions or (b)
(d) by amending Section 12.7 Merger, Consolidation and Sale of Assets
by redesignating clause (f) thereof as clause (g) and inserting a new clause (f)
immediately after clause (e) thereof to read as follows:
(f) sales of Real Estate and Equipment (including Collateral)
to the CCDA in connection with a Permitted CCDA Transaction,
2
<PAGE>
(e) by amending Section 12.9 Liens by inserting immediately after the
phrase "apply to Liens" the phrase "in favor of the Trustee under the Catoosa
County Bond Indenture arising out of Permitted CCDA Transactions, or to Liens";
(f) by amending Section 12.11 Amendments to Other Agreements by
inserting immediately after the phrase "Amend in any material respect" the
phrase "the Catoosa County Bond Indenture, the CCDA Lease or any document
executed and delivered in connection with a Permitted CCDA Transaction, "
(g) by amending Section 13.1 Events of Default by adding at the end
thereof a new subsection (q) to read as follows:
(q) Catoosa County Bonds; Permitted CCDA Transactions. The
Borrower shall sell, transfer or otherwise dispose of any Catoosa
County Bonds at any time owned by it, other than to a wholly owned
Subsidiary; or any conveyance or reconveyance documents (e.g., deeds,
bills of sale) executed by CCDA in connection with the consummation of
any Permitted CCDA Transaction shall prove to be ineffective for any
reason to vest in the Borrower title to the property leased by it as
part of such Permitted CCDA Transaction, free of any claim of CCDA or
any Person claiming through CCDA.
(h) by amending subsection Section 13.2(c) (Other Remedies) by amending
clause (vi) thereof in its entirety to read as follows:
(vi) at the expense of the Borrower, (i) deliver or cause to
be delivered and recorded or filed any conveyance or reconveyance
documents executed by CCDA in connection with the consummation of any
Permitted CCDA Transaction and (ii) cause any of Inventory or Equipment
to be placed in a public or field warehouse, and the Agent shall not be
liable to the Borrower on account of any loss, damage or depreciation
that may occur as a result thereof, so long as the Agent shall act
reasonably and in good faith;
(i) by adding thereto a new Schedule 1.1 - Catoosa Bond Property in the
form of Annex 1 hereto.
Section 2. Consent. Subject to the provisions of Section 3, the
Required Lenders hereby consent to the transaction described in clause (a) of
the definition "Permitted CCDA Transaction" contained in the Loan Agreement as
amended by this Amendment (the "First Ringgold Transaction").
Section 3. Effectiveness of Amendment. This Amendment shall become
effective on the first date (the "Amendment Effective Date") on which (a) the
Agent has received each of the following, each in form and substance
satisfactory to the Agent and the Required Lenders (and in sufficient copies for
each Lender):
(i) this Amendment duly executed and delivered by the Borrower and each
Lender;
3
<PAGE>
(ii) a Consent and Confirmation of Guarantor in the form attached
hereto as Annex 2 duly executed and delivered by the Subsidiary Guarantor;
(iii) a certificate of the Secretary of the Borrower as to the articles
or certificate of incorporation and bylaws of the Borrower, corporate
resolutions authorizing the transactions contemplated by this Amendment and the
incumbency of officers of the Borrower, all as in effect on the Amendment
Effective Date;
(iv) an amendment to the Pledge Agreement the effect of which is to add
as Pledged Collateral thereunder, the Catoosa County Bonds (as defined in the
Loan Agreement, as amended by this Amendment), as and when acquired by the
Borrower;
(v) an irrevocable written instruction to the Trustee under the Catoosa
County Bond Indenture (as defined in the Loan Agreement, as amended by this
Amendment) to deliver to the Agent, upon presentation of such instruction and
tender of the Catoosa County Bonds issued in connection with the First Ringgold
Transaction, the Quitclaim Deed, Bill of Sale and any other conveyance or
reconveyance documents executed by the CCDA in connection with the First
Ringgold Transaction and held by said Trustee pursuant to (and as such items are
defined in) the Catoosa County Bond Indenture;
(vi) a landlord's lien subordination and waiver in substantially the
form attached hereto as Annex 3, executed on behalf of the Catoosa County
Development Authority;
(vii) a certificate of the Chief Operating Officer or the Chief
Financial Officer of the Borrower to the effect that both before and after
giving effect to this Amendment, the representations and warranties of the
Borrower set forth in the Loan Agreement are true and correct in all material
respects, and that, after giving effect to this Amendment and consummation of
the First Ringgold Transaction, no Default or Event of Default exists;
(viii) an opinion of counsel for the Borrower as to the due
authorization, execution and delivery of this Amendment and the other Loan
Documents contemplated hereby to be delivered in connection with the
effectiveness hereof by the Borrower as to the enforceability of this Amendment,
the Loan Agreement as amended hereby and such other Loan Documents, and such
other matters as any Lender through the Agent may reasonably request; and
(ix) such other agreements, certificates, instruments and other
documents as any Lender through the Agent may reasonably request in connection
with the transactions contemplated hereby; and
(b) the First Ringgold Transaction shall have been consummated strictly
in accordance with the terms of the Catoosa County Bond Indenture and the other
documents referred to therein required to be executed and delivered as a
condition to the initial issuance of Catoosa County Bonds thereunder.
4
<PAGE>
Section 4. Representations and Warranties. The Borrower hereby
represents and warrants to the Agent and the Lenders that: (1) it has the
corporate power and has taken all actions necessary to authorize it to execute
and deliver this Amendment and the other documents contemplated to be delivered
by it pursuant to this Amendment and to perform its obligations under the Loan
Agreement as amended by this Amendment and under such other documents; (2) this
Amendment has been and each such other document when executed and delivered by
the Borrower will have been, duly executed and delivered by the Borrower; (3)
the Loan Agreement as amended hereby and each such other document, constitute
the legal, valid and binding obligations of the Borrower, enforceable against
the Borrower in accordance with their respective terms; and (4) the
representations and warranties of the Borrower contained in the Catoosa County
Bond Indenture and the related documents executed and delivered by the Borrower
pursuant thereto and in connection with the First Ringgold Transaction, are true
and correct in all material respects on and as of the Amendment Effective Date.
Section 5. Effect of Amendment. From and after the effectiveness of
this Amendment, all references in the Loan Agreement and in any other Loan
Document to "this Agreement," "the Loan Agreement," "hereunder," "hereof" and
words of like import referring to the Loan Agreement, shall mean and be
references to the Loan Agreement as amended by this Amendment. Except as
expressly amended hereby, the Loan Agreement and all terms, conditions and
provisions thereof remain in full force and effect and are hereby ratified and
confirmed. The execution, delivery and effectiveness of this Amendment shall
not, except as expressly provided herein, operate as a waiver of any right,
power or remedy of any Lender or the Agent under any of the Loan Documents, nor
constitute a waiver of any provision of any of the Loan Documents.
Section 6. Counterpart Execution; Governing Law.
(a) Execution in Counterparts. This Amendment may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original
and all of which taken together shall constitute but one and the same agreement.
(b) Governing Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of Georgia.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
SYNTHETIC INDUSTRIES, INC.
[Corporate Seal] By:
------------------------------------------
Name:
ATTEST: Title:
- - ------------------------------
[Assistant] Secretary
BANKBOSTON, N.A., as the Agent and as a Lender
By:
------------------------------------------
Stephen Y. McGehee
Managing Director
SANWA BUSINESS CREDIT
CORPORATION
By
------------------------------------------
Name:
Title:
SOUTHTRUST BANK, NATIONAL
ASSOCIATION
By:
------------------------------------------
Name:
Title:
<PAGE>
ANNEX 1
To Amendment No. 4
[SEE FILE COPY FOR INSERTION OF LEGAL DESCRIPTIONS]
<PAGE>
ANNEX 2
To Amendment No. 4
CONSENT AND CONFIRMATION OF GUARANTOR
The undersigned, in its capacity as a Guarantor under the Guaranty
(Subsidiary) dated as of March 11, 1998 (as modified or amended to date, the
"Guaranty"), in favor of the Lender, hereby expressly acknowledges and confirms,
for the benefit of the Borrower and the Lender, that (1) the Guarantor has an
economic interest in the financial success of the Borrower and the transactions
contemplated by the Loan Agreement and the Amendment, and hereby confirms to the
Lender the benefits to the Guarantor by reason of such transactions, (2) such
Guarantor has received a copy of Amendment No. 4 and Consent dated as of
December , 1998 to the Loan Agreement (the "Amendment") and consents thereto and
(3) the Guaranty of which such Guarantor is the maker constitutes a continuing,
unconditional guaranty of the Guaranteed Obligations under and as defined in the
Guaranty. The undersigned is and continues to be liable under its Guaranty in
accordance with the terms thereof, notwithstanding the execution and delivery of
the Amendment.
Dated: December ___, 1998
NOVOCON INTERNATIONAL, INC.
By:
------------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
Address:
-------------------------------------
-------------------------------------
-------------------------------------
-------------------------------------
<PAGE>
ANNEX 3
To Amendment No. 4
COUNTY OF CATOOSA)
STATE OF GEORGIA)
LANDLORD'S WAIVER
WHEREAS, BankBoston, N.A., as agent (the "Agent"), for itself and
certain other financial institutions (collectively, the "Lenders") and the
Lenders have entered into a loan transaction with Synthetic Industries, Inc.
(the "Debtor"), the obligations of the Debtor thereunder being secured in part
by all equipment and/or inventory of the Debtor (the "Personal Property") found
on the premises of the Catoosa County Development Authority located on real
estate located at Ringgold, Catoosa County, Georgia, and more particularly
described in Exhibit A hereto (the "Premises");
WHEREAS, the undersigned (the "Landlord") has an interest in the
Premises as lessor;
NOW, THEREFORE, in consideration of the financial accommodations
extended by the Lenders to the Debtor which have been applied, in part, to the
payment of the purchase price of certain of the Personal Property located on the
Premises on the date hereof, and for other good and valuable consideration, the
undersigned agrees as follows:
(a) That the Personal Property may be located, stored or installed in
the Premises from time to time and shall not be deemed a fixture or part of the
real estate but shall at all times be considered personal property;
(b) That it disclaims any interest in the Personal Property and agrees
to assert no claim to the Personal Property while Debtor is indebted to the
Lenders or the Agent;
(c) That the Agent or its representatives may enter upon the Premises
upon notice to but without the consent of Landlord to inspect or remove the
Personal Property, and may advertise and conduct a public auction or private
sale thereon;
(d) That at the option of the Agent said Personal Property may remain
upon (without the Agent or the Lenders being deemed to be taking possession of)
said Premises after the receipt by the Agent of written notice by the
undersigned directing removal thereof for a period of up to 90 days at the
rental provided under any lease covering the Premises then in effect to which
the Debtor is a party (or, if no such lease is then in effect, at a rental to be
agreed upon by the Agent and the undersigned), prorated on a per diem basis to
be determined on the basis of a 30-day month, without incurring any other
obligations of Debtor; provided that the Agent shall pay the cost of utilities
and, to the extent required to be paid by the Debtor, real property taxes during
the occupation of the Premises by the Agent; and
6
<PAGE>
(e) The Agent and the Lenders agree that, upon a default under any such
lease, the undersigned may set-off any security deposit or other rent paid by
the Debtor and held by the undersigned in satisfaction of any obligations owing
by the Debtor under any such lease.
This waiver is binding upon the undersigned and the heirs, personal
representatives, successors and assigns of the undersigned and inures to the
benefit of the Agent and the Lenders and their respective successors and
assigns.
Dated as of this _____ day of December, 1998.
LANDLORD:
CATOOSA COUNTY DEVELOPMENT AUTHORITY
By:
-------------------------------------
Name:
Title:
Address:
--------------------------------
--------------------------------
--------------------------------
<PAGE>
Exhibit A
Legal Description of Premises
<PAGE>
ACKNOWLEDGEMENT
STATE OF
------------------
COUNTY OF
------------------
I hereby certify that on this day before me, an officer duly authorized
in the state aforesaid and in the county aforesaid to take acknowledgments,
personally appeared ___________________________, to me known and known to be the
person described in and who executed the foregoing instrument and acknowledged
before me that he/she executed the same for the purposes therein contained.
Witness my hand and official seal in the county and state last
aforesaid this _____ day of _______________, 199__.
------------------------------
Notary Public
My commission expires:
------------------------------
[NOTARIAL SEAL]
<PAGE>
Exhibit 10.36
Exhibit A
SYNTHETIC INDUSTRIES, INC.
SUPPLEMENTAL SAVINGS PLAN
<PAGE>
SYNTHETIC INDUSTRIES, INC.
SUPPLEMENTAL SAVINGS PLAN
Table of Contents
ARTICLE I. PURPOSE
1.1 Purpose
ARTICLE II. DEFINITIONS
2.1 Account
2.2 Annual Bonus
2.3 Beneficiary
2.4 Change-in-Control
2.5 Code
2.6 Committee
2.7 Company
2.8 Company Matching Account
2.9 Compensation
2.10 Deferral Account
2.11 Deferral Election
2.12 Effective Date
2.13 Employee
2.14 Eligible Employee
2.15 Employer
2.16 Enrollment Period
2.17 401(k) Plan
2.18 Participant
2.19 Plan
2.20 Plan Year
2.21 Subsidiary
2.22 Year of Service
ARTICLE III. ELIGIBILITY
3.1 Conditions on Eligibility
3.2 Deferral Election
3.3 Time of Election
3.4 Change of Election
ARTICLE IV. ACCRUAL OF BENEFITS
4.1 Participants' Accounts
4.2 Vesting of Accounts
<PAGE>
4.3 Company Matching Account Forfeitures
4.4 Death, Disability, or Retirement
4.5 Change-in-Control
ARTICLE V. DISTRIBUTIONS
5.1 Commencement of Distribution
5.2 Manner of Distribution
5.3 Form of Payment of Account
5.4 Distributions on Account of Death
5.5 Distributions on Account of Financial Hardship
5.6 Distributions on Demand
ARTICLE VI. ADMINISTRATION
6.1 Plan Administration
6.2 Committee Action
6.3 Rights and Duties
6.4 Compensation, Indemnity, and Liability
6.5 Taxes
ARTICLE VII. CLAIMS PROCEDURE
7.1 Claims for Benefits
7.2 Appeals
ARTICLE VIII. AMENDMENT AND TERMINATION
8.1 Amendment
8.2 Termination of the Plan
ARTICLE IV. MISCELLANEOUS
9.1 Limitation on Participant's Rights
9.2 Benefits Unfunded
9.3 Other Plans
9.4 Governing Law
9.5 Gender, Number, and Headings
9.6 Successors and Assigns; Nonalienation of Benefits
<PAGE>
SYNTHETIC INDUSTRIES, INC.
SUPPLEMENTAL SAVINGS PLAN
ARTICLE I
PURPOSE
1.1 Purpose. The purpose of the Synthetic Industries, Inc. Supplemental
Savings Plan is to provide a select group of management employees with the
opportunity to enhance their retirement security by deferring any portion of
their Compensation that is ineligible for deferral under the Synthetic
Industries Inc. 401(k) Retirement Savings Plan (the 401(k) Plan), the Company's
qualified retirement plan, due to limits under the law and under the terms or
operation of the 401(k) Plan.
ARTICLE II
DEFINITIONS
2.1 "Account" means the records maintained by the Supplemental Savings Plan
Committee that represent each Participant's interest under the Plan. Such
interest may be reflected as a book reserve entry in the Company's accounting
records, or as a separate account under a trust, or as a combination of both.
Each Participant's Account shall consist of at least two subaccounts: a Deferral
Account and a Company Matching Account.
2.2 "Annual Bonus" means any bonus paid on an annual basis to the
Participant by the Company.
2.3 "Beneficiary" means the person or persons last designated by the
Participant, in writing, as entitled to receive such Participant's interest
under the Plan in the event of his death. If all designated Beneficiaries
predecease the Participant or the Participant fails to designate a Beneficiary,
the Beneficiary shall be the estate of the Participant.
2.4 "Change-in-Control" of the Company means a change in control of a
nature that would be required to be reported in response to Item 5(f) of
Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of
1934 ("Act") or any successor thereto, provided that without limiting the
foregoing, a Change-in-Control of the Company also shall be deemed to have
occurred if:
(i) any "person" (as defined under Section 3(a)(9) of the Act) or "group"
of persons (as provided under Rule 13d-3 of the Act) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 or otherwise under the Act),
directly or indirectly (including as provided in Rule 13d-3(d)(1) of the Act),
of capital stock of the Company the holders of which are entitled to vote for
the election of
1
<PAGE>
directors ("voting stock") representing that percentage of the Company's then
outstanding voting stock (giving effect to the deemed ownership of securities by
such person or group, as provided in Rule 13d-3(d)(1) of the Act, but not giving
effect to any such deemed ownership of securities by another person or group)
equal to or greater than thirty-five percent (35%) of all such voting stock;
(ii) individuals who constitute the Board on the date hereof (the
"Incumbent Board") cease for any reason to constitute at least a majority
thereof. Any person becoming a director subsequent to such date whose election,
or nomination for election, is, at any time, approved by a vote of at least a
majority of the directors comprising the Incumbent Board shall be considered as
though he were a member of the Incumbent Board;
(iii) the Company combines with another person or entity, whether through a
merger, asset sale, reorganization or otherwise, and (a) any person or group of
persons holds at any time after such combination, voting stock equal to or
greater than thirty-five percent (35%) determined by reference to the voting
securities of the surviving entity, or (b) the Company's directors, as of the
date immediately before such combination, constitute less than a majority of the
Board of Directors of the combined entity.
2.5 "Code" means the Internal Revenue Code of 1986, as amended.
2.6 "Committee" means the committee appointed to administer the Plan
pursuant to Section 6.1.
2.7 "Company" means Synthetic Industries Inc., a corporation with its
principal place of business in Georgia, or its successor or successors, and any
Subsidiary of the Company that has not been expressly excluded from
participation by the Company's Board of Directors and that has been a Subsidiary
of the Company for at least 3 months.
2.8 "Company Matching Account" means that portion of each Participant's
Account that represents his interest in the Plan that is credited pursuant to
Section 4.1(b).
2.9 "Compensation" means those amounts included in the definition of
Compensation under the 401(k) Plan (except the amount of a Participant's Annual
Bonus) plus any amounts deferred by the Participant under this Plan. For
purposes of this Plan, Compensation shall be determined without regard to the
limits of Section 401(a)(17) of the Code.
2.10 "Deferral Account" means that portion of each Participant's Account
that represents his interest in the Plan that is credited pursuant to Section
4.1(a).
2
<PAGE>
2.11 "Deferral Election" means a Participant's election to defer a portion
of his Compensation and/or his Annual Bonus, which election must be made in a
manner authorized by and within an applicable Enrollment Period.
2.12 "Effective Date" means the date on which the Company or the Committee
designates as the date on which any Deferral Election may first become effective
under this Plan.
2.13 "Employee" means any common-law employee of the Employer.
2.14 "Eligible Employee" means any Employee who satisfies the criteria for
participation in the Plan, as established from time to time by the Committee. An
Employee's status as an Eligible Employee will be reviewed by the Committee
prior to each Enrollment Period, and an Employee who no longer satisfies the
criteria for participation shall not be permitted to make a Deferral Election
under this Plan during the next Plan Year.
2.15 "Employer" means the Company or a participating Subsidiary.
2.16 "Enrollment Period" means the following:
(a) For the 1998 Plan Year only and with respect to payroll periods
occurring on or after the Plan's Effective Date, the thirty (30) day
period preceding the Effective Date;
(b) For all subsequent Plan Years and with respect to payroll periods
occurring on or after January 1, the month of December; and
(c) For a new Employee who is an Eligible Employee as of his date of hire
and with respect to the payroll periods occurring on or immediately
after the date thirty (30) days from his date of hire, the thirty
(30) day period following his date of hire.
(d) For an existing Employee who is an Eligible Employee for a Plan Year
but who did not make a Deferral Election under this Plan for that
Plan Year because of a mistake of fact by the Committee in
determining the Employee's eligibility for that Plan Year, with
respect to the payroll periods occurring on or immediately after the
date thirty (30) days from the date of his notification by the
Committee in writing of his eligibility, the thirty (30) day period
following his notification in writing by the Committee.
3
<PAGE>
2.17 "401(k) Plan" means the Synthetic Industries, Inc. 401(k) Retirement
Plan, as it may be amended from time to time.
2.18 "Participant" means any Eligible Employee who makes a Deferral
Election pursuant to Section 3.2. Any Employee who has an interest under the
Plan shall also be considered a Participant, even though such Employee is, for
any particular Plan Year, ineligible to make a Deferral Election.
2.19 "Plan" means the Synthetic Industries, Inc. Supplemental Savings Plan,
as it may be amended from time to time.
2.20 "Plan Year" means the twelve (12) month period beginning January 1st
and ending on December 31st.
2.21 "Subsidiary" means any corporation in which the Company owns a
majority of the voting or capital interest.
2.22 "Year of Service" means a Plan Year in which an Employee has at least
1,000 hours of service, including periods prior to the effective date of the
Plan. Hours of service shall be credited in the same manner as under the 401(k)
Plan.
ARTICLE III
ELIGIBILITY
3.1 Conditions on Eligibility. An Eligible Employee shall become a
Participant in the Plan as of the date he makes an effective Deferral Election.
3.2 Deferral Election. Each Participant may elect to defer any whole
percentage of his Compensation and/or Annual Bonus. A Participant's Deferral
Election under this Plan shall be effective with respect to his Compensation
and/or Annual Bonus without regard to whether such Compensation and/or Annual
Bonus are subject to a Deferral Election under the 401(k) Plan.
3.3 Time of Election. A Participant's Deferral Election with respect to his
Compensation shall be effective only if made during the applicable Enrollment
Period. Further, a Participant's Deferral Election with respect to his Annual
Bonus shall be effective only if made prior to each Plan Year for which the
Annual Bonus is payable.
3.4 Change of Election.
(a) A Participant's most recent Deferral Election with respect to his
Compensation shall remain in effect for all Plan Years subsequent to
the Plan Year for which such Deferral
4
<PAGE>
Election was made until the Participant makes a new Deferral
Election. A Participant's Deferral Election with respect to his
Annual Bonus shall, however, only be effective for the one Plan Year
for which such Deferral Election was made.
(b) A Participant may increase or decrease the percentage of his
Compensation and/or Annual Bonus subject to his Deferral Election for
a Plan Year during the Enrollment Period for a subsequent Plan Year,
provided, however, such increase or decrease is made with respect to
Compensation not yet due and payable to the Participant.
(c) A Participant may, during a Plan Year, discontinue his Deferral
Election with respect to his Compensation (but not his Annual Bonus)
by providing notice to the Committee prior to the commencement of the
next payroll period. In such event, Compensation earned subsequent to
such notice of discontinuance will be paid directly to the
Participant and will not be subject to his prior Deferral Election. A
Participant who elects to discontinue his Deferral Election prior to
or during a Plan Year may not recommence deferral under the Plan
during that same Plan Year, but may again make a Deferral Election
during the Enrollment Period for a subsequent Plan Year.
ARTICLE IV
ACCRUAL OF BENEFITS
4.1 Participants' Accounts.
(a) Deferral Account. Each Participant's Deferral Account shall be
credited with an amount equal to the Compensation deferred by the
Participant as soon as practicable after such amount would otherwise
be payable to the Participant.
(b) Company Matching Account. The Company Matching Account of each
Participant shall be credited with an amount equal to 50% of each
such Participant's Compensation and/or Annual Bonus deferred pursuant
to his Deferral Election under this Plan. Except, however, the amount
of the Company Match shall be limited to the amount described in
subparagraph (1) minus the amount described in subparagraph (2):
(1) 3% of such Participant's Compensation.
(2) The amount actually contributed by the Company to the
Participant's Matching Contribution Account under the 401(k)
Plan for the Plan Year.
5
<PAGE>
(c) The Deferral and Company Matching Accounts of each Participant shall
be invested or shall be deemed to be invested, in accordance with the
elections of the Participant, in the investment funds made available
from time to time by the Committee. The earnings rates of such funds
shall be credited to the Participant's Deferral Account and Company
Matching Account, as appropriate.
4.2 Vesting of Accounts. A Participant's interest in the value of his
Deferral Account shall at all times be 100% nonforfeitable. A Participant's
interest in the value of his Company Matching Account shall become
nonforfeitable (i.e., vested) in accordance with the following schedule:
<TABLE>
<CAPTION>
Years of Service Percentage Vested
---------------- -----------------
<S> <C>
Less than 1 0%
1 20%
2 40%
3 60%
4 80%
5 100%
</TABLE>
4.3 Company Matching Account Forfeitures. If a Participant terminates prior
to becoming 100% vested in his Company Matching Account, any portion of such
account that is not vested shall be forfeited as of the date of the
Participant's termination. Any such forfeited amounts, and any earnings thereon,
shall be used to reduce the Company's future contribution obligations.
4.4 Death, Disability, or Retirement. Notwithstanding the foregoing
Sections 4.2 and 4.3, a Participant's interest in the value of his Company
Matching Account shall become 100% vested upon his death, his Total and
Permanent Disability as defined in the 401(k) Plan, or his attainment of Normal
Retirement Age as defined in the 401(k) Plan.
4.5 Change-in-Control. In the event of a Change-in-Control of the Company,
all Participants shall become 100% vested in their Company Matching Accounts
upon the date of such Change-in-Control.
6
<PAGE>
ARTICLE V
DISTRIBUTIONS
5.1 Commencement of Distribution. Prior to commencement of participation in
the Plan, a Participant shall elect whether distribution of his Account shall
begin (i) in the year of his termination, (ii) as of a specified age, or (iii)
as of the later of the year of his termination or a specified age. A Participant
may change, at any time, his election regarding the commencement of the
distribution of his Account; however, any subsequent election will not become
effective for two years or more after the date of such subsequent election. In
the event a Participant fails to make an election with respect to the
commencement of payment of his Account, distribution to such Participant shall
be made in the year of his termination of employment.
Notwithstanding the foregoing, if the total balance of the Participant's Account
is equal to or less than $10,000 at the time of his termination of employment,
such Participant's Account shall be distributed in the year of such termination.
5.2 Manner of Distribution. Prior to commencement of participation in the
Plan, a Participant shall elect whether to receive distributions under the Plan
as (i) a single-sum payment, or (ii) in a series of substantially equal
quarterly, semiannual, or annual installments over a stated period of time not
to exceed ten (10) years. A Participant may change, at any time, his election
regarding the commencement of the distribution of his Account; however, any
subsequent election will not become effective for two years or more after the
date of such subsequent election. In the event a Participant fails to make an
election with respect to the manner of distribution, payment will be made in the
manner determined by the Committee.
Notwithstanding the foregoing, if the total balance of the Participant's Account
is equal to or less than $10,000 at the time of his distribution is to commence,
such Participant's Account shall be distributed in a single-sum payment.
5.3 Form of Payment of Account. Distributions from the Plan shall be made
in cash.
5.4 Distributions on Account of Death. In the event of the death of a
Participant prior to distribution of the total balance of his Account,
distribution of the balance of such Account shall be made to the Participant's
Beneficiary, as determined in accordance with Section 2.4, in a single-sum
payment as soon as practicable following the death of such Participant.
5.5 Distributions on Account of Financial Hardship. In the event a
Participant has a financial hardship (as determined by the Committee), the
Committee, in its sole discretion, may
7
<PAGE>
distribute all or any portion of the Participant's Deferral Account and/or all
or any vested portion of the Company Matching Account. Financial hardships shall
be limited to unforeseeable emergencies beyond the Participant's control which
result in a severe financial hardship. Amounts shall be limited to those needed
to satisfy the hardship need.
5.6 Distributions on Demand. Notwithstanding the foregoing, a Participant
shall have the right to demand, upon thirty (30) days written notice to the
Committee, the distribution of the total amount of the Participant's Deferral
Account plus the vested portion of his Company Matching Account at any time not
provided in the preceding sections of this Article. The demanding Participant
shall receive a distribution of the total amount of the Participant's Deferral
Account plus the vested portion of his Company Matching Account, less 10% of
that total amount, which shall be forfeited. A Distribution on Demand shall
operate to discontinue the Participant's current Deferral Election and such
Participant shall be precluded from deferring under the Plan until the second
Plan Year following the Plan Year in which the distribution is made.
ARTICLE VI
ADMINISTRATION
6.1 Plan Administration. The Plan shall be administered by the Supplemental
Savings Plan Committee, which shall consist of at least three members appointed
by the Company.
6.2 Committee Action. Action of the Committee may be taken with or without
a meeting of its members; provided, however, that any action shall be taken only
upon the vote or other affirmative expression of a majority of committee members
qualified to vote with respect to such action. If a member of the Committee is a
Participant in the Plan, he shall not participate in any decision which solely
affects his own Account under the Plan.
6.3 Rights and Duties. The Committee shall administer the Plan and shall
have all powers necessary to accomplish that purpose, including, but not limited
to, the following:
(a) to construe, interpret, and administer the Plan with its decisions to
be final and binding on all parties;
(b) to make allocations and determinations required by the Plan, and to
maintain all necessary records of the Plan, including Participants' Accounts;
(c) to compute and certify to the Company the amount of benefits payable to
Participants or their Beneficiaries, and to determine the time and manner in
which such benefits are to be paid.
8
<PAGE>
6.4 Compensation, Indemnity, and Liability. The Committee shall serve as
such without bond and without Compensation for services hereunder. All expenses
of the Plan and the Committee shall be paid by the Company. No member of the
Committee shall be liable for any act or omission of any other member, nor any
act or omission on his own part, except his own willful misconduct. The Company
shall indemnify and hold harmless each member of the Committee against any and
all expenses and liabilities, including reasonable legal fees and expenses
arising out of his membership on the Administrative Committee, except for
expenses or liabilities arising out of his own willful misconduct.
6.5 Taxes. If all or any portion of a Participant's Account shall become
liable for the payment of any estate, inheritance, or other tax which the
Company shall be required to pay or withhold, the Company shall have the full
power and authority to withhold and pay such tax out of any monies or other
property credited to the Account of such Participant at the time the Account is
distributable to the Participant under the terms of the Plan or any other such
monies as may be owed by the Company to the Participant.
ARTICLE VII
CLAIMS PROCEDURE
7.1 Claims for Benefits. If a Participant or Beneficiary does not receive
payment of any benefits which he believes are due and payable under the Plan, he
may make a claim for benefits to the Committee. The claim for benefits must be
in writing and addressed to the Committee or to the Company. If the claim for
benefits is denied, the Committee shall notify the Participant or Beneficiary in
writing within ninety (90) days after receipt of the claim. However, if special
circumstances require an extension of time for processing the claim, the
Committee shall provide notice of the extension to the Participant or
Beneficiary prior to the termination of the initial ninety (90) day period, and
such extension shall not exceed one additional, consecutive ninety (90) day
period. Any notice of a denial of benefit shall inform the Participant or
Beneficiary of the basis for the denial, any additional material or information
necessary to perfect such claim, and the steps which must be taken to have such
claim reviewed.
7.2 Appeals. Each Participant or Beneficiary whose claim for benefits has
been denied may file a written request for review of his claim with the
Committee. The request for review must be filed within sixty (60) days after the
Participant or Beneficiary received the written notice denying his claim. The
final decision of the Committee will be made within sixty (60) days after
receipt of the request for review and shall be communicated in writing, setting
forth the basis for the Committee's decision. If there are special circumstances
which require an extension of time for completing the review, the Committee's
decision shall be rendered not later than one-hundred twenty (120) days after
the receipt of the request for review.
9
<PAGE>
ARTICLE VIII
AMENDMENT AND TERMINATION
8.1 Amendment. The Company or Committee shall have the right to amend the
Plan in whole or in part at any time; provided, however, that no amendment shall
reduce the amounts credited to any Participant's Account as of the effective
date of such amendment. Any amendment shall be in writing and executed by a duly
authorized officer of the Company or a majority of members of the Committee.
8.2 Termination of the Plan. The Company reserves the right to discontinue
and terminate the Plan at any time, in whole or in part, for any reason. In the
event of termination of the Plan, the amounts credited to any Participant's
Account shall become fully vested, and such amounts, as of the effective date of
such termination, shall not be reduced and shall be distributed at a time and in
the manner determined by the Committee.
ARTICLE IV
MISCELLANEOUS
9.1 Limitation on Participant's Rights. Participation in this Plan shall
not give any Participant the right to be retained in the Company's employ or any
rights or interest in this Plan or any assets of the Company other than as
herein provided. The Company reserves the right to terminate the employment of
any Participant without any liability for any claim against the Company under
this Plan, except to the extent provided herein.
9.2 Benefits Unfunded. The benefits provided by this Plan shall be
unfunded. All amounts payable under the Plan to Participants shall be paid from
the general assets of the Company, and nothing contained herein shall require
the Company to set aside or hold in trust any amounts or assets for the purpose
of paying benefits. Participants shall have the status of general unsecured
creditors of the Company with respect to amounts of Compensation they defer
under the Plan or any other obligation of the Company to pay benefits pursuant
hereto. Any funds of the Company available to pay benefits under the Plan shall
be subject to the claims of general creditors of the Company and may be used for
any purpose by the Company.
Notwithstanding the preceding paragraph, the Company may at any time
transfer assets to a trust for purposes of paying all or any part of its
obligations under this Plan. However, to the extent provided in the trust
agreement only, such transferred amounts shall remain subject to the claims of
general creditors of the Company. To the extent that assets are held in a trust
when a Participant's benefits under the Plan become payable, the Committee shall
direct the trustee to pay such benefits to the Participant from the assets of
the trust.
10
<PAGE>
9.3 Other Plans. This Plan shall not affect the right of any Eligible
Employee or Participant to participate in and receive benefits under any
employee benefit plans which are now or hereafter maintained by the Company,
unless the terms of such other employee benefit plan or plans specifically
provide otherwise.
9.4 Governing Law. This Plan shall be construed, administered, and governed
in all respects in accordance with applicable federal law and, to the extent not
preempted by federal law, in accordance with the laws of the State of Georgia.
If any provisions of this instrument shall be held by a court of competent
jurisdiction to be invalid or unenforceable, the remaining provisions hereof
shall continue to be fully effective.
9.5 Gender, Number, and Headings. In this Plan, whenever the context so
indicates, the singular or plural number and the masculine, feminine, or neuter
gender shall be deemed to include the other. Headings and subheadings in this
Plan are inserted for convenience of reference only and are not considered in
the construction of the provisions hereof.
9.6 Successors and Assigns; Nonalienation of Benefits. This Plan shall
inure to the benefit of and be binding upon the parties hereto and their
successors and assigns; provided, however, that the amounts credited to the
Account of a Participant shall not be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, charge,
garnishment, execution or levy of any kind, either voluntary or involuntary, and
any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber,
charge or otherwise dispose of any right to any benefits payable hereunder shall
be void, including, without limitation, any assignment or alienation in
connection with a separation, divorce, child support or similar arrangement.
IN WITNESS WHEREOF, the Company has caused this amendment and restatement
of the Plan to be executed by its duly authorized officer this _____ day
of_______________, 1998.
SYNTHETIC INDUSTRIES, INC.
By: /s/ Illegible
-----------------------------------
Title: Dir Human Resources
--------------------------------
Attest:/s/ Illegible
---------------------------
Title: Corproate Tax Manager
----------------------------
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET OF SYNTHETIC INDUSTRIES, INC. AS OF
SEPTEMBER 30, 1998, AND THE RELATED CONDENSED CONSOLIDATED STATEMENT OF INCOME
AND CASH FLOWS FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS.
</LEGEND>
<CIK> 0000809803
<NAME> SYNTHETIC INDUSTRIES, INC.
<MULTIPLIER> 1,000
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 285
<SECURITIES> 0
<RECEIVABLES> 66,965
<ALLOWANCES> 2,714
<INVENTORY> 52,450
<CURRENT-ASSETS> 134,295
<PP&E> 326,645
<DEPRECIATION> 108,196
<TOTAL-ASSETS> 440,514
<CURRENT-LIABILITIES> 48,030
<BONDS> 170,000
0
0
<COMMON> 8,669
<OTHER-SE> 113,976
<TOTAL-LIABILITY-AND-EQUITY> 440,514
<SALES> 368,996
<TOTAL-REVENUES> 368,996
<CGS> 246,677
<TOTAL-COSTS> 246,677
<OTHER-EXPENSES> 73,731
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,515
<INCOME-PRETAX> 30,073
<INCOME-TAX> 11,855
<INCOME-CONTINUING> 18,218
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,218
<EPS-PRIMARY> 2.11
<EPS-DILUTED> 2.03
</TABLE>
