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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14D-9
Solicitation/Recommendation Statement Pursuant to
Section 14(d)(4) of the Securities Exchange Act of 1934
SYNTHETIC INDUSTRIES, INC.
(Name of Subject Company)
SYNTHETIC INDUSTRIES, INC.
(Name of Person Filing Statement)
Common Stock, Par Value $1.00 Per Share
(Title of Class of Securities)
871914107
(CUSIP Number of Class of Securities)
Joseph F. Dana
President and Chief Operating Officer
Synthetic Industries, Inc.
309 LaFayette Road
Chickamauga, Georgia 30707
(706) 375-3121
(Name, Address and Telephone Number of Person
Authorized to Receive Notice and Communications
on Behalf of the Person Filing Statement)
Copy to:
Mark Zvonkovic
King & Spalding
1185 Avenue of the Americas
New York, NY 10036
(212) 556-2100
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Item 1. Security and Subject Company
The name of the subject company is Synthetic Industries, Inc., a Delaware
corporation (the "Company"), and the address of its principal executive offices
is 309 LaFayette Road, Chickamauga, Georgia 30707. The title of the equity
securities to which this Statement relates is the Common Stock, par value $1.00
per share, of the Company (the "Shares").
Item 2. Tender Offer of the Bidder
This Statement relates to a tender offer disclosed in the Tender Offer
Statement on Schedule 14D-1, dated November 12, 1999 (the "Schedule 14D-1"), by
SIND Acquisition, Inc., a Delaware corporation ("Purchaser") and a wholly owned
subsidiary of SIND Holdings, Inc. ("Parent"), a corporation formed at the
direction of Investcorp S.A., a Luxembourg corporation, to purchase all the
issued and outstanding Shares at $33.00 per Share (the "Offer Price"), net to
the seller in cash, without interest (the "Offer"), upon the terms and subject
to the conditions set forth in the Offer to Purchase dated November 12, 1999
and the related Letter of Transmittal (which together constitute the "Offer
Documents"). The principal executive offices of Purchaser and Parent are
located at c/o Gibson, Dunn & Crutcher LLP, 200 Park Avenue, New York, New York
10166.
The Offer is being made pursuant to an Agreement and Plan of Merger dated as
of November 5, 1999 among Parent, Purchaser and the Company (the "Merger
Agreement"), which provides, among other things, for the making of the Offer by
Purchaser and, subject to the conditions and upon the terms of the Merger
Agreement, for the subsequent Merger of Purchaser with and into the Company
(the "Merger"). The Company will be the surviving company in the Merger and
will continue as a wholly owned subsidiary of Parent (the "Surviving
Corporation"). A copy of the Merger Agreement is attached hereto as Exhibit
(c)(8) and is incorporated herein by reference.
Item 3. Identity and Background
(a) The name and address of the Company, which is the person filing this
statement, are set forth above in Item 1.
(b) (1) The following describes material contracts, agreements, arrangements
or understandings and any actual or potential conflict of interest between the
Company or its affiliates and the Company, its executive officers, directors or
affiliates:
Certain contracts, agreements, arrangements or understandings between the
Company and certain of its directors, executive officers or affiliates are
described in the information statement attached as Annex I hereto, which is
furnished pursuant to this Item 3.
Certain other contracts, agreements, arrangements or understandings between
the Company and certain of its directors and executive officers are described
below:
Retention Bonus Plan.
The Board of Directors of the Company (the "Company Board") adopted a
retention bonus plan on October 15, 1999, pursuant to which 30 executives of
the Company were eligible to receive bonuses in the aggregate amount of
$2,940,000 as of November 5, 1999 (the "Retention Payment Date"), provided that
such executives did not previously leave the employ of the Company voluntarily
or that such were not terminated by the Company Board for "cause" prior to the
Retention Payment Date.
Success Bonus Plan.
The Company Board also adopted a success bonus plan on October 15, 1999,
pursuant to which certain executive officers will be eligible to receive base
payments in the aggregate amount of $1,865,000, on date of
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consummation of a sale of the Company (the "Success Payment Date") as long as
prior to the Success Payment Date each has not left his respective employ of
the Company voluntarily or has not been terminated by the Company Board for
"cause." Under the success bonus plan the members of the Special Committee may
receive bonus payments on the Success Payment Date. Such bonus payments will
not in the aggregate exceed $300,000. In the event that there is no
consummation of a sale of the Company, the success bonus plan will
automatically terminate.
Copies of the above-referenced employment agreements, the Retention Bonus
Plan and the Success Bonus Plan are filed herewith as Exhibits (c)(1) through
(c)(7), and the above summaries are qualified in their entirety by reference to
the text of such agreements and plans.
Other Company Board Actions
Pursuant to the Company's recommended stock ownership guidelines and in
accordance with the Company's securities compliance procedure, since May 1999,
two of the Company's officers purchased shares in the open market as follows:
Joseph F. Dana, 6,000 Shares; Joseph Sinicropi, 2,000 Shares. Pursuant to an
arrangement adopted by the Company Board, the Company is authorized to
repurchase such Shares immediately prior to the Merger at the Offer Price from
such officers following consummation of the Offer.
Pursuant to another arrangement by the Company Board, the Company is
authorized to purchase all Shares and, as necessary, stock options for Shares,
that are held by persons who are required to file with the Securities and
Exchange Commission (the "Commission") pursuant to Section 16 of the Securities
and Exchange Act of 1934, as amended (the "Exchange Act"), to the extent such
purchases are necessary to prevent such persons from having automatic liability
under Section 16(b) of the Exchange Act as a result of having a non-exempt
purchase or purchases within six months of the time the Merger is effective.
Under this arrangement, the Company will purchase Shares immediately prior to
the Merger at the Offer Price and will purchase options to buy Shares at a
price equal to the Offer Price less the exercise price of such options.
(b)(2) The following describes material contracts, agreements, arrangements
or understandings and any actual or potential conflict of interest between the
Company or its affiliates and Purchaser, its executive officers, directors or
affiliates:
In connection with the Offer, (i) the Company has entered into the Merger
Agreement with Purchaser and Parent, (ii) Synthetic Industries L.P., a Delaware
limited partnership (the "Stockholder"), Parent and Purchaser have entered into
a Stockholder Agreement, dated as of November 5, 1999 (the "Stockholder
Agreement") and (iii) the Company has entered into a confidentiality agreement,
dated June 7, 1999 (the "Confidentiality Agreement"), with Investcorp
International Inc. Summaries of the Merger Agreement, the Stockholder Agreement
and the Confidentiality Agreement are set forth below. Copies of such
agreements are filed herewith as Exhibits (c)(8), (c)(9) and (c)(10),
respectively, and the following summaries are qualified in their entirety by
reference to the text of such agreements.
The Merger Agreement
The Offer. The Merger Agreement provides for the making of the Offer.
Pursuant to the Offer, each tendering stockholder will receive the Offer Price
for each Share tendered in the Offer. Purchaser's obligation to accept for
payment or pay for Shares is subject to the satisfaction of the conditions that
are described below in "Certain Conditions to Offer" including, among other
things, there being validly tendered and not withdrawn by the Expiration Date
(as defined below) a number of shares which would represent at least a majority
of Shares issued and outstanding on a fully-diluted basis (the "Minimum
Condition"). The term "Expiration Date" means 12:00 midnight, New York City
time, on Friday, December 10, 1999, unless and until Purchaser, subject to
restrictions contained in the Merger Agreement, has extended the period of time
during which the Offer is open, in which event the term "Expiration Date" means
the latest time and date at which the Offer, as so extended by Purchaser, will
expire.
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Pursuant to the Merger Agreement, Purchaser expressly reserves the right to
waive any conditions to the Offer, except that, without the consent of the
Company, Purchaser may not waive the Minimum Condition. Purchaser expressly
reserves the right to modify the terms of the Offer, except that, without the
consent of the Company, Purchaser may not, (i) reduce the number of Shares
subject to the Offer; (ii) reduce the Offer Price to be paid pursuant to the
Offer; (iii) modify or add to the conditions to Purchaser's obligation to
purchase Shares set forth in Exhibit A to the Merger Agreement in any manner
materially adverse to the holders of Shares; (iv) extend the Offer; (v) change
the form of consideration payable in the Offer; or (vi) otherwise amend the
Offer in any manner adverse to the holders of Shares. The conditions set forth
in Exhibit A to the Merger Agreement are described below in "--Certain
Conditions to Offer".
Notwithstanding the foregoing, Purchaser may, without the consent of the
Company, (w) extend the Offer, if at the scheduled Expiration Date any of the
conditions to Purchaser's obligation to purchase Shares set forth in the Merger
Agreement or Exhibit A to the Merger Agreement are not satisfied, until such
time as such conditions are satisfied or waived; (x) extend the Offer for a
period of not more than 15 business days beyond the initial Expiration Date, if
on the date of such extension less than 90% of the outstanding Shares have been
validly tendered and not properly withdrawn pursuant to the Offer; (y) extend
the Offer for any period required by applicable law, including any rule,
regulation, interpretation or position of the Commission applicable to the
Offer; and (z) extend the Offer for any reason for a period of not more than
ten business days beyond the latest Expiration Date that would otherwise be
permitted as described in this sentence.
Board Representation. The Merger Agreement provides that promptly upon
Purchaser's acceptance for payment of, and payment for, any Shares tendered
pursuant to the Offer, Purchaser will be entitled to designate, and the Company
will cause to be elected, such number of directors on the Company Board as will
give Purchaser, subject to compliance with Section 14(f) of the Exchange Act,
representation on the Company Board equal to at least that number of directors,
rounded up to the next whole number, which is the product of (a) the total
number of directors on the Company Board (after giving effect to the directors
elected pursuant to this sentence) multiplied by (b) the percentage that (i)
such number of Shares so accepted for payment and paid for by Purchaser plus
the number of Shares otherwise owned by Purchaser or any other subsidiary of
Parent bears to (ii) the total number of Shares outstanding. Notwithstanding
the foregoing, in the event that Purchaser's designees are appointed or elected
to the Company Board, the Merger Agreement provides that until the Effective
Time (as defined below) the Company Board will have at least three directors
who were directors on November 5, 1999 and who are not officers of the Company
(the "Independent Directors"). If the number of Independent Directors is
reduced below three for any reason, any remaining Independent Directors (or
Independent Director, if there is only one remaining) will be entitled to
designate persons to fill such vacancies who will be deemed to be Independent
Directors for purposes of the Merger Agreement or, if no Independent Directors
then remain, the other directors will designate three persons to fill such
vacancies who are not officers, stockholders or affiliates of the Company,
Parent or Purchaser, and such persons will be deemed to be Independent
Directors for purposes of the Merger Agreement. Pursuant to the Merger
Agreement, the Company has agreed to promptly, at the option of Purchaser,
either increase the size of the Company Board or obtain the resignation of such
number of its current directors as is necessary to enable Purchaser's designees
to be elected or appointed to the Company Board, and subject to applicable law,
to take all action requested by Parent necessary to effect any such election,
including mailing to its stockholders an information statement containing the
information required by Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder. Assuming that it accepts for payment and pays for
Shares tendered pursuant to the Offer and that it exercises its rights with
respect to representation on the Company Board, Purchaser will select its
designees from the persons set forth in the Information Statement required by
Rule 14f-1 under the Exchange Act included as Annex I to the Company's
Solicitation/Recommendation Statement on Schedule 14D-9.
The Merger. Pursuant to the Merger Agreement, on the second business day
following the satisfaction (or, to the extent permitted by law, waiver by all
parties) of the conditions to the Merger, or as soon as practicable after all
the conditions to the Merger have been satisfied (or, to the extent permitted
by law, waived by the parties entitled to the benefits thereof), or at such
other date as agreed in writing between Parent and the
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Company, Purchaser will be merged with and into the Company (the "Closing
Date"). Following the Merger, the separate corporate existence of Purchaser
will cease. The Company will be the surviving corporation in the Merger and
will continue as a wholly owned subsidiary of Parent. The Merger will become
effective at such time as Parent files with the Secretary of State of the State
of Delaware a certificate of merger (the "Certificate of Merger") in such form
and manner as required by the Delaware General Corporation Law (the "DGCL"), or
at such other time as Parent and the Company agree and specify in the
Certificate of Merger (the "Effective Time"). The Company, as the surviving
corporation, will continue its corporate existence under the laws of the State
of Delaware. The Merger Agreement provides that the Certificate of
Incorporation of the Company in effect immediately prior to the Effective Time
will be amended in its entirety, and as amended, will be the Certificate of
Incorporation of the Surviving Corporation, and that the bylaws of the Company
in effect immediately prior to the Effective Time will be the bylaws of the
Surviving Corporation until thereafter changed or amended as provided therein
or by applicable law. The Merger Agreement also provides that the directors of
Purchaser at the Effective Time will be the directors of the Surviving
Corporation until they resign or are removed or their respective successors are
duly elected and qualified, and that the officers of the Company at the
Effective Time will be the officers of the Surviving Corporation until they
resign or are removed or their respective successors are duly elected and
qualified.
Parent may elect at any time prior to the Merger, instead of merging
Purchaser with and into the Company as described above, to merge the Company
with and into Purchaser, in which case Purchaser would be the Surviving
Corporation. In such event, the parties will, if required, execute an
appropriate amendment to the Merger Agreement in order to reflect this
election.
Consideration to Be Paid in the Merger. By virtue of the Merger, each
outstanding Share (except for Shares owned by the Company, Parent or Purchaser
or by any subsidiary of the Company or Parent, which will be canceled and
retired and will cease to exist without any payment with respect thereto or in
exchange therefor, and except for Shares held by the Company's stockholders who
have properly exercised appraisal rights under Delaware law) will be converted
into the right to receive the Merger Consideration. Each share of common stock
of Purchaser issued and outstanding immediately prior to the Effective Time
will be converted into one share of common stock of the Surviving Corporation.
Cancellation of Stock Options. Pursuant to the Merger Agreement, immediately
prior to the Effective Time, each outstanding option to purchase shares of the
Company's common stock granted under any of the Company's stock option plans
which is then exercisable or becomes exercisable as a result of the Offer or
the Merger will be canceled by the Company. At the Effective Time or as soon as
practicable thereafter, in consideration for such cancellation, the holder of
such option will be entitled to receive from the Surviving Corporation as of or
as soon as practicable after the Effective Time an amount in cash equal to the
product of (i) the number of shares of the Company's common stock previously
subject to such stock option and (ii) the excess, if any, of the Merger
Consideration over the exercise price per share for such stock option, reduced
by the amount of withholding or other taxes required by law to be withheld.
Except as provided in the Merger Agreement or as otherwise agreed by the
parties, the Company's stock option plans and any other plan, program or
arrangement providing for the issuance or grant of any interest in respect of
the Company's common stock will terminate as of the Effective Time.
The cancellation of stock options pursuant to the Merger may not apply to
stock options held by certain members of management of the Company, who have
indicated an interest in exchanging their options to acquire shares of common
stock of the Company into options to acquire shares of capital stock of Parent
in connection with the closing of the Merger. See the description of the
employment letters of intent set forth below.
Stockholder Meeting. Under the DGCL, the approval of the Company Board and,
under certain circumstances, the affirmative vote of the holders of a majority
of the Shares present at a duly constituted meeting, is required to approve and
adopt the Merger Agreement and the transactions contemplated thereby. If a vote
of the stockholders is required, the Company has agreed, at Parent's request,
as soon as practicable following the expiration of the Offer, to prepare and
file with the Commission a proxy statement in preliminary
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form, to respond as promptly as practicable to the comments, if any, of the
Commission with respect to such proxy statement, and to mail the proxy
statement to the Company's stockholders as promptly as practicable after filing
the proxy statement with the Commission. In the event that a stockholder vote
is required, the Company has also agreed to, at Parent's request, as soon as
practicable following the expiration of the Offer, duly call, give notice of,
convene and hold a meeting of its stockholders for the purpose of seeking the
vote required to approve and adopt the Merger Agreement and the transactions
contemplated thereby. As provided in the Merger Agreement, if a stockholder
vote is required, the Company Board, subject to its fiduciary duties, will
recommend to its stockholders that they vote in favor of the Merger Agreement
and the transactions contemplated thereby. Notwithstanding the foregoing, if
Parent, Purchaser or any other subsidiary of Parent has acquired at least 90%
of the outstanding Shares, the parties will take all necessary and appropriate
actions to cause the Merger to become effective as soon as practicable after
the expiration of the Offer without a stockholder meeting in accordance with
Section 253 of the DGCL.
Representations and Warranties. The Merger Agreement contains customary
representations and warranties of the parties. These include representations
and warranties of the Company with respect to corporate organization, standing
and power, subsidiaries and equity interests, capitalization, corporate
authorityrelative to the Merger Agreement, corporate authority relative to
Section 203 of the DGCL, noncontravention, consents and approvals necessary for
the Offer and the Merger, filings with the Commission, accuracy of financial
statements, absence of undisclosed liabilities, disclosures in offer documents
and proxystatements, absence of certain changes in the Company's business, tax
matters, employee benefit plans and compliance with ERISA, employment and
related matters, litigation, environmental matters, properties and assets,
confidentiality agreements, brokers' fees, fairness opinion, compliance with
laws, governmental permits, material agreements, insurance, intellectual
property, labor relations and related party transactions. The Merger Agreement
also contains representations and warranties of the Company with respect to
compliance of the Offer and the Merger with the Settlement Agreement (as
defined below in Item 4) and certain liabilities with respect to the litigation
resulting in the Settlement Agreement.
The representations and warranties contained in the Merger Agreement also
include representations and warranties of Parent and Purchaser with respect to
corporate organization, standing and power, operations and capitalization of
Purchaser, corporate authority relative to the Merger Agreement,
noncontravention, consents and approvals necessary for the Offer and the
Merger, disclosures in offer documents and proxy statements, brokers' fees,
availability of financing and litigation.
No representations or warranties made by the Company, Parent or Purchaser
will survive beyond the Effective Time.
Conduct of Business Before the Effective Time. Pursuant to the Merger
Agreement, from November 5, 1999 to the Effective Time, the Company has agreed
to conduct, and to cause each of its subsidiaries to conduct, its business in
the usual, regular and ordinary course in substantially the same manner as
previously conducted (subject to the conditions set forth below) and, to the
extent consistent therewith, use its reasonable efforts to preserve intact its
current business organization, keep available the services of its current
officers and key employees and keep its relationships with customers,
suppliers, licensors, licensees, distributors and others having business
dealings with them so that its goodwill and ongoing business will not be
materially impaired at the Effective Time. Without limiting the generality of
the foregoing, except as otherwise contemplated by the Merger Agreement, until
the Effective Time, the Company may not, nor permit any of its subsidiaries to,
do any of the following without the prior written consent of Parent:
(i) (A) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock, other than dividends
and distributions by a direct or indirect wholly owned subsidiary of the
Company to its parent, (B) split, combine or reclassify any of its capital
stock or issue or authorize the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock or (C)
purchase, redeem or otherwise acquire any shares of its capital stock or
any other securities thereof or any rights, warrants or options to acquire
any such shares or other securities;
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(ii) authorize for issuance, issue, deliver, sell, pledge or grant (A)
any shares of its capital stock, (B) any debt securities which have the
right, or are convertible into the right, to vote on matters which the
Company's stockholders may vote, or other voting securities, (C) any
securities convertible into or exchangeable for, or any options, warrants
or rights to acquire, any such shares, voting securities or convertible or
exchangeable securities or (D) any "phantom" stock, "phantom" stock rights,
stock appreciation rights or stock-based performance units, other than the
issuance of the Company's common stock upon the exercise of stock options
outstanding on November 5, 1999 and in accordance with their present terms;
(iii) amend its certificate of incorporation, bylaws or other comparable
charter or organizational documents;
(iv) (A) enter into, or propose or negotiate to enter into, any material
contract, (B) amend, or propose or negotiate to amend, the terms of any
existing material contracts or agreements of the type described in the
foregoing clause, (C) acquire, or propose or negotiate to acquire, any
interest in a corporation, partnership or joint venture arrangement, (D)
sell, transfer, assign, relinquish, terminate or make any other material
change (taken on an individual basis) in, or propose or negotiate to take
any such action with respect to, the Company's material interests (as of
November 5, 1999) in the equity or debt securities of any corporation,
partnership or joint venture arrangement which holds such an interest,
including, without limitation, the imposition of any lien on any of the
foregoing, (E) give, or propose or negotiate to give, any approvals
relating to development plans, work plans, budgets or capital expenditure
commitments in connection with any such interests or (F) make, or propose
to make, any material change in the Company's material interests;
(v) enter into any significant further commitment or arrangement with
respect to the Company's pending SAP project or any other significant
systems project;
(vi) acquire or agree to acquire (A) by merging or consolidating with,
or by purchasing a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, joint venture,
association or other business organization or division thereof or (B) any
assets that are material, individually or in the aggregate, to the Company
and its subsidiaries taken as a whole;
(vii) (A) grant to any officer or director of the Company or any of its
subsidiaries any increase in compensation, except to the extent required
under employment agreements in effect as of September 30, 1998, (B) grant
to any employee, officer or director of the Company or any its subsidiaries
any increase in severance or termination pay, except to the extent required
under any agreement in effect as of September 30, 1998, (C) enter into any
new employment, consulting, indemnification, severance or termination
agreement with any such employee, officer or director, (D) establish,
adopt, enter into or amend in any material respect any collective
bargaining agreement or employee benefit plan or (E) take any action to
accelerate any rights or benefits (including vesting under the Company's
401(k) plan), or make any material determinations not in the ordinary
course of business consistent with prior practice, under any collective
bargaining agreement or employee benefit plan;
(viii) make any change in accounting methods, principles or practices
materially affecting the reported consolidated assets, liabilities or
results of operations of the Company, except insofar as may have been
required by a change in generally accepted accounting principles;
(ix) sell, lease, license or otherwise dispose of or subject to any lien
any properties or assets, except sales of inventory and excess or obsolete
assets in the ordinary course of business consistent with past practice;
(x) (A) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of the Company or
any of its subsidiaries, guarantee any debt securities of another person,
enter into any "keep well" or other agreement to maintain any financial
condition of another person or enter into any arrangement having the
economic effect of any of the foregoing, except for short-term borrowings
incurred in the ordinary course of business consistent with past practice
or (B) make any loans, advances or capital
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contributions to, or investments in, any other person, other than to or in
the Company or any direct or indirect wholly owned subsidiary of the
Company;
(xi) make or agree to make any new capital expenditure or expenditures
other than capital expenditures which do not exceed the amount budgeted
thereto in the Company's annual capital expenditures budget for fiscal year
2000 previously provided to Parent;
(xii) make any material tax election or settle or compromise any
material tax liability or refund, consent to any extension or waiver of the
statute of limitations period applicable to any tax claim or action, if any
such election, settlement, compromise, consent or other action would have
the effect of materially increasing the tax liability or reducing any net
operating loss, foreign tax credit, net capital loss or any other credit or
tax attribute of the Company or any its subsidiaries (including, without
limitation, deductions and credits related to alternative minimum taxes);
(xiii) enter into any hedging agreement or other financial agreement or
arrangement designed to protect the Company against fluctuations in
commodities prices or currency exchange rates, except agreements or
arrangements entered into in the ordinary course of business consistent
with past practice;
(xiv) (A) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the
ordinary course of business consistent with past practice or in accordance
with their terms, of liabilities reflected or reserved against in, or
contemplated by, the most recent consolidated financial statements (or the
notes thereto) of the Company or incurred in the ordinary course of
business consistent with past practice, (B) cancel any material
indebtedness (individually or in the aggregate) or waive any claims or
rights of substantial value or (C) waive the benefits of, or agree to
modify in any manner, any confidentiality, standstill or similar agreement
to which the Company or any of its subsidiaries is a party;
(xv) make any material change (including failing to renew) in the amount
or nature of the insurance policies covering the Company and its
subsidiaries;
(xvi) waive any material claims or rights relating to the Company's or
any of its subsidiaries' business;
(xvii) amend or otherwise modify the Settlement Agreement; or
(xviii) authorize any of, or commit or agree to take any of, the
foregoing actions.
In addition, the Merger Agreement provides that the Company and Parent may
not, nor may they permit any of their respective subsidiaries to, take any
action that would, or that could reasonably be expected to, result in: (x) any
of the representations and warranties of such party set forth in the Merger
Agreement that is qualified as to materiality becoming untrue; (y) any of such
representations and warranties that is not so qualified becoming untrue in any
material respect; or (z) except as otherwise permitted by the provisions of the
Merger Agreement described below in "--No Solicitation", any condition to the
Offer set forth in Exhibit A to the Merger Agreement or any condition to the
Merger not being satisfied. The conditions set forth in Exhibit A to the Merger
Agreement are described below in "--Certain Conditions to Offer", and the
conditions to the Merger are described in"--Conditions to the Merger."
No Solicitation. The Merger Agreement provides that the Company Board will
promptly advise Parent orally and in writing of any Company Takeover Proposal
or Company Superior Proposal. The term "Company Takeover Proposal" means, other
than the transactions contemplated by the Merger Agreement, any of the
following:
. any inquiry, proposal or offer from any person relating to any direct or
indirect acquisition or purchase of a business that constitutes 25% or
more of the net revenues, net income or the assets of the Company and its
subsidiaries taken as a whole, or 25% or more of any class of equity
securities of the Company or any of its subsidiaries.
. any tender offer or exchange offer that if consummated would result in
any person beneficially owning 25% or more of any class of equity
securities of the Company or any company subsidiary.
. any merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving the Company or
any of its subsidiaries.
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The term "Company Superior Proposal" means any bona fide proposal which:
1. is made by a third party to acquire, directly or indirectly,
including pursuant to a tender offer, exchange offer, merger,
consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction, for consideration consisting of cash
and/or securities, 100% of the outstanding Shares or all or substantially
all the assets of the Company;
2. the Company Board determines in its good faith judgment, based on the
written advice of Beacon (as defined below in Item 4), is reasonably
capable of being completed, taking into account all legal, financial,
regulatory and other aspects of the proposal and the third party making
such proposal; and
3. is made on terms that the Company Board determines in its good faith
judgment (based on the written advice of Beacon) provide greater present
value to the Company's stockholders than the cash consideration to be
received by such stockholders pursuant to the Offer and the Merger, as the
Offer and the Merger may be amended from time to time.
The Merger Agreement provides that the Company may not, nor may it permit
any of its subsidiaries to, nor may it authorize or permit any officer,
director or employee of, or any investment banker, attorney or other advisor,
agent or representative of the Company or any of its subsidiaries
(collectively, the "Company Representatives") to: (a) solicit, initiate or
encourage the submission of any Company Takeover Proposal; (b) enter into any
agreement with respect to any Company Takeover Proposal; or (c) participate in
any discussions or negotiations regarding, or furnish to any person any
information with respect to, or take any other action to facilitate any
inquiries or the making of any proposal that constitutes, or may reasonably be
expected to lead to, any Company Takeover Proposal.
Notwithstanding the foregoing, at any time prior to the consummation of the
Offer, in response to a Company Superior Proposal that was not solicited by the
Company or any Company Representative on or after November 5, 1999 and that did
not otherwise result from a breach of the Company's no solicitation covenant
described in the preceding paragraph, the Company Board may participate in
discussions regarding such Company Superior Proposal, subject to its providing
prior written notice of its decision to take such action to Parent and to its
previously advising Parent orally and in writing of any Company Takeover
Proposal or Company Superior Proposal.
The Merger Agreement does not prohibit the Company Board from taking and
disclosing to its stockholders a position contemplated by Rule 14e-2(a)
promulgated under the Exchange Act or from changing its recommendation made
pursuant to Section 251 of the DGCL, or making any disclosure to the Company's
stockholders if, in the good faith judgment of the Company, after consultation
with outside counsel, failure so to disclose would be inconsistent with its
obligations under applicable law.
Access to Information; Confidentiality. The Company has agreed to afford,
and to cause each of its subsidiaries to afford, Parent and its directors,
officers, employees, accountants, counsel, financial advisers, financing
sources and other representatives reasonable access during normal business
hours during the period prior to the Effective Time to all of the Company's and
its subsidiaries' respective properties, books, contracts, commitments,
personnel and records. The Company has also agreed to furnish, and to cause
each of its subsidiaries to furnish, promptly to Parent during the period prior
to the Effective Time (i) a copy of each report, schedule, registration
statement and other document filed by it during such period pursuant to the
requirements of federal or state securities laws and (ii) all other information
concerning its business, properties and personnel as Parent may reasonably
request. The Merger Agreement provides that all nonpublic information so
exchanged will be subject to the Confidentiality Agreement.
Reasonable Efforts. Each of the Company, Parent and Purchaser has agreed,
subject to the terms and conditions of the Merger Agreement, to use all
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with the other parties in doing,
all things necessary, proper or advisable to consummate and make effective, in
the most expeditious manner practicable, the Offer, the Merger and the other
obligations of such party under the Merger Agreement. These things include: (i)
the obtaining of all necessary actions or nonactions, waivers, consents and
approvals from governmental entities
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and the making of all necessary registrations and filings (including filings
with governmental entities, if any) and the taking of all reasonable steps as
may be necessary to obtain an approval or waiver from, or to avoid an action or
proceeding by, any governmental entity; (ii) the obtaining of all necessary
consents, approvals or waivers from third parties; (iii) the defending of any
lawsuits or other legal proceedings, whether judicial or administrative,
challenging the Merger Agreement or the consummation of the Merger Agreement,
including seeking to have any stay or temporary restraining order entered by
any court or other governmental entity vacated or reversed; and (iv) the
execution and delivery of any additional instruments necessary to consummate
the Merger Agreement and to fully carry out the purposes of the Merger
Agreement. Without limiting the foregoing, the Company has also agreed to (x)
take all action necessary to ensure that no state takeover statute or similar
statute or regulation is or becomes applicable to the Merger Agreement and (y)
if any state takeover statute or similar statute or regulation becomes
applicable to the Merger Agreement, take all action necessary to ensure that
the Offer and the Merger may be consummated as promptly as practicable on the
terms contemplated by the Merger Agreement and otherwise to minimize the effect
of such statute or regulation on the Offer and the Merger. The Merger Agreement
provides that none of its provisions may be deemed to require any party to
waive any substantial rights or agree to any substantial limitation on its
operations or to take any action that would result in any of the consequences
referred to in paragraph (a) of Exhibit A to the Merger Agreement. Paragraph
(a) of Exhibit A is described in subparagraph (a) below in "--Certain
Conditions to Offer."
Notification. The Company has agreed to give prompt notice to Parent, and
Parent and Purchaser have agreed to give prompt notice to the Company, of (i)
any representation or warranty made by it contained in the Merger Agreement
that is qualified as to materiality becoming untrue or inaccurate in any
respect or any such representation or warranty that is not so qualified
becoming untrue or inaccurate in any material respect and (ii) any failure by
it to comply with or satisfy in any material respect any covenant, condition or
agreement to be complied with or satisfied by it under the Merger Agreement.
The Merger Agreement provides that no such notification will affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under the Merger Agreement.
Employee Benefit Plans. Parent has agreed, for one year after the Closing
Date, to either (i) cause the Surviving Corporation to continue to sponsor and
maintain the Company's existing employee benefit plans (the "Company Benefit
Plans") or (ii) provide benefits to the employees of the Company who continue
to be employed by the Surviving Corporation (the "Company Employees") under
employee benefit plans, programs, policies or arrangements that in the
aggregate are no less favorable than those benefits provided to the Company
Employees by the Company immediately prior to the Closing Date. With respect
any employee benefit plan, program, policy or arrangement sponsored or
maintained by Parent and offered to the Company Employees in addition to or as
a substitute for the Company Benefit Plans, Parent has agreed to give the
Company Employees service credit for their employment with the Company for
eligibility and vesting purposes under all such employee benefit plans,
programs, policies or arrangements as if such service had been performed with
Parent.
Parent has also agreed, following the Effective Time, to cause the Surviving
Corporation and its subsidiaries to honor, subject to its obligations described
in this section and in "--Indemnification," all obligations under any
contracts, agreements and commitments of the Company and its subsidiaries prior
to November 5, 1999 (or as established or amended in accordance with or
permitted by the Merger Agreement), the existence of which did not constitute a
violation of the terms of the Merger Agreement, and which apply to any current
or former employee or director of the Surviving Corporation or any of its
subsidiaries.
Nothing in the Merger Agreement gives any employee of the Company or of any
of the Company's subsidiaries, except those employees listed in the disclosure
letter to the Merger Agreement, any right to continued employment following the
Effective Time.
Indemnification. Parent has agreed, after the earlier of the Effective Time
or the consummation of the Offer, to indemnify and cause the Surviving
Corporation to indemnify the present and former officers and
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directors of the Company and its subsidiaries (each, an "Indemnified Party")
against all losses, claims, damages, liabilities, fees and expenses (including
reasonable fees and disbursements of counsel and judgments, fines, losses,
claims, liabilities and amounts paid in settlement, provided that any such
settlement is effected with the written consent of Parent or the Surviving
Corporation) incurred by reason of the fact that such person is or was an
officer or director of the Company or any of its subsidiaries and arising out
of actions or omissions occurring on or prior to the Effective Time to the full
extent permitted by law, with each Indemnified Party's right to such
indemnification including the advancement of expenses incurred in the defense
of any action or suit. The Merger Agreement provides that any determination
which is required to be made with respect to whether an Indemnified Party is
entitled to such indemnification, including any determination whether an
Indemnified Party's conduct complies with the standards set forth under the
DGCL, will be made at Parent's expenses by independent counsel mutually
acceptable to Parent and the Indemnified Party. The Merger Agreement further
provides that none of its provisions shall impair any rights or obligations of
any present or former directors or officers of the Company.
Parent has also agreed, to the fullest extent permitted by law, to cause the
Surviving Corporation to honor all of the Company's obligations to indemnify
(including any obligations to advance funds for expenses) the members of the
Special Committee (as defined below in Item 4) and current or former directors
or officers of the Company and its subsidiaries for acts or omissions by such
directors and officers occurring prior to the Effective Time to the extent that
such obligations of the Company exist on November 5, 1999, whether pursuant to
the Company's Certificate of Incorporation, the Company's bylaws, individual
indemnity agreements or otherwise. The Merger Agreement provides that such
indemnification obligations will survive the Merger and will continue in full
force and effect in accordance with the terms of the Company's Certificate of
Incorporation, the Company's bylaws and such individual indemnity agreements
from the Effective Time until the expiration of the applicable statute of
limitations with respect to any claims against such directors or officers
arising out of such acts or omissions.
Insurance. Parent has agreed, for a period of six years after the Effective
Time, to cause to be maintained in effect the current policies of directors'
and officers' liability insurance maintained by the Company with respect to
claims arising from or related to facts or events which occurred at or before
the Effective Time, provided that Parent may substitute for such current
policies new policies with reputable and financially sound carriers of at least
the same coverage and amounts containing terms and conditions which are no less
advantageous. However, Parent will not be obligated to make annual premium
payments for such insurance to the extent such premiums exceed 200% of the
annual premiums paid as of November 5, 1999 by the Company for such insurance
(such 200% amount, the "Maximum Premium"). If such insurance coverage cannot be
obtained at all, or can only be obtained at an annual premium in excess of the
Maximum Premium, Parent must maintain the most advantageous policies of
directors' and officers' insurance obtainable for an annual premium equal to
the Maximum Premium. The Company has represented in the Merger Agreement that
the Maximum Premium is $578,000.
Fees and Expenses. The Merger Agreement provides that all fees and expenses
incurred in connection with the Merger will be paid by the party incurring such
fees or expenses, whether or not the Merger is consummated.
Public Announcements. Parent and Purchaser, on the one hand, and the
Company, on the other hand, have agreed to consult with each other before
issuing, and to provide each other the opportunity to review and comment upon,
any press release or other public statements with respect to the Offer, the
Merger and the other obligations under the Merger Agreement, and have agreed
not to issue any such press release or make any such public statement prior to
such consultation, except as may be required by applicable law, court process
or by obligations pursuant to any listing agreement with any national
securities exchange. The Company has also agreed to give at least 24 hours'
prior written notice to Parent and Purchaser of any proposed press release or
other public statement not relating to the Offer, the Merger or any of the
obligations under the Merger Agreement, which notice is to include the text of
such press release or public statement.
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Transfer Taxes. The Company has agreed to pay any state, local, foreign or
provincial tax which is attributable to the transfer of the beneficial
ownership of the Company's or the Company's subsidiaries' real property
(collectively, the "Transfer Taxes"), if any, and any penalties or interest
with respect to the Transfer Taxes, payable in connection with the consummation
of the Offer or the Merger. Pursuant to the Merger Agreement, Purchaser and the
Company, in their reasonable discretion, will determine the portion of the
consideration to be received by holders of Shares in connection with the Offer
and the Merger that is allocable to the real property of the Company and its
subsidiaries in any jurisdiction imposing such Transfer Taxes. The Merger
Agreement provides that the stockholders of the Company will be deemed to have
agreed to be bound by this allocation in the preparation of any return with
respect to the Transfer Taxes, and that Purchaser may withhold the amount of
the Transfer Taxes payable with respect to any Shares from the amount to be
paid pursuant to the Offer and the Merger with respect to such Shares, unless
the date on which the beneficial owner of such Shares acquired such beneficial
ownership is certified to Purchaser.
The Company has also agreed to pay any state, local, foreign or provincial
tax which is attributable solely to and imposed upon the transfer of the Shares
pursuant to the Merger Agreement (collectively, the "Stock Transfer Taxes") and
any penalties or interest with respect to any such Stock Transfer Taxes.
Debt Offer. Pursuant to the Merger Agreement, the Company has commenced an
offer to purchase for cash (the "Debt Offer") all of the Company's outstanding
9 1/4% Senior Subordinated Notes due 2007 (the "Existing Notes") on the terms
and conditions set forth in the Offer to Purchase and Consent Solicitation
which has been mailed to the holders of the Existing Notes concurrently with
the mailing of this Offer to Purchase to the holders of the Company's Shares.
In conjunction with the Debt Offer, the Company is soliciting consents from the
holders of the Existing Notes relating to proposed amendments which would
eliminate substantially all of the covenants contained in the Indenture, dated
as of February 11, 1997, between the Company and United States Trust Company of
New York, as Trustee, under which the Existing Notes were issued. The Company
has agreed to waive any of the conditions to the Debt Offer and to make any
other changes in the terms and conditions of the Debt Offer as may be
reasonably requested by Purchaser. The Company may not, without Purchaser's
prior written consent: (a) waive any material condition to the Debt Offer; (b)
make any changes to certain terms and conditions of the Debt Offer relating to
(i) the consideration to be paid by the Company for Existing Notes tendered
pursuant to the Debt Offer, (ii) payments to be made to holders of the Existing
Notes who consent to the proposed amendments by a certain time, (iii) payment
of accrued interest on the Existing Notes and (iv) the conditions to the
Company's obligation to accept for payment and pay for Existing Notes tendered
pursuant to the Debt Offer; or (c) make any other material changes in the terms
and conditions of the Debt Offer.
The Company has agreed, subject to the terms and conditions of the Merger
Agreement, including but not limited to the conditions to the Debt Offer, to
accept for payment and pay for the Existing Notes as soon as such conditions to
the Debt Offer are satisfied and the Company is permitted to do so under
applicable law, and to coordinate the timing of any such purchase with
Purchaser in order to obtain the greatest participation in the Debt Offer.
The obligations of Parent and Purchaser to consummate the Offer and to
effect the Merger are not subject to the successful completion of the Debt
Offer.
Cooperation With Financing Efforts. The Company has agreed to provide, and
to cause its subsidiaries and its and their respective officers, employees and
advisors to provide, such reasonable cooperation in connection with the
arrangement of any financing to be consummated contemporaneously with or at or
after the Effective Time in respect of the transactions contemplated by the
Merger Agreement as may be reasonably requested by Purchaser. In addition, in
conjunction with the obtaining of any such financing and in addition to the
Company's obligation with respect to the Debt Offer described above, the
Company has agreed, at the request of Purchaser, to call for prepayment or
redemption, or to repay, redeem and/or renegotiate, any other existing
indebtedness of the Company. No such prepayments or redemptions will actually
be made until contemporaneously with or after the Effective Time, and the
Company is not be required to make any call for
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redemption or prepayment that is irrevocable when made. In addition, the
Company has agreed to use its best efforts to cause its fiscal year end audit
to be completed by December 20, 1999.
Consents. The Merger Agreement provides that from and after November 5, 1999
until the Closing Date, the Company and its subsidiaries will use their
respective best efforts to obtain certain consents.
Conditions to the Merger. The obligation of each of Parent, Purchaser and
the Company to effect the Merger is subject to the satisfaction or waiver on or
prior to the Closing Date of each of the following conditions:
. If required by law, the Merger Agreement shall have been adopted by the
holders of a majority of the outstanding Shares.
. The waiting period (and any extension thereof) applicable to the Merger
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR
Act"), if any, shall have been terminated or shall have expired. Any
consents, approvals and filings under any foreign antitrust law, the
absence of which would prohibit the consummation of Merger, shall have
been obtained or made.
. No temporary restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or other legal
restraint or prohibition preventing the consummation of the Merger shall
be in effect, provided that each of Parent, Purchaser and the Company
shall have used all reasonable efforts to prevent the entry of any such
injunction or other order and to appeal as promptly as possible any such
injunction or other order that may be entered.
. Purchaser shall have previously accepted for payment and paid for Shares
tendered and not withdrawn pursuant to the Offer.
Termination. The Merger Agreement may be terminated at any time prior to the
Effective Time, before or after a majority of the stockholders of the Company
have adopted the Merger Agreement, in the following ways:
1. Parent, Purchaser and the Company agree to terminate the Merger
Agreement by mutual written consent.
2. Either Parent or the Company decides to terminate the Merger
Agreement because:
a. the Merger is not consummated on or before February 28, 2000,
unless the failure to consummate the Merger is the result of a willful
or material breach of the Merger Agreement by the party seeking to
terminate the Merger Agreement, provided that the passage of such
period is to be tolled for any part thereof during which any party is
subject to a nonfinal order, decree, ruling or action restraining,
enjoining or otherwise prohibiting the consummation of the Merger;
b. any governmental entity issues an order, decree or ruling or
takes any other action permanently enjoining, restraining or otherwise
prohibiting the Merger, and such order, decree, ruling or other action
has become final and nonappealable;
c. as the result of the failure of any of the conditions set forth
in Exhibit A to the Merger Agreement, the Offer has terminated or
expired in accordance with its terms without Purchaser having purchased
any Shares pursuant to the Offer; or
d. upon a vote at a duly held meeting to obtain the adoption of the
Merger Agreement by the holders of a majority of the outstanding
Shares, such adoption is not obtained, provided that the Merger
Agreement may not be terminated by Parent if Parent or Purchaser is in
breach of its covenant to vote to adopt and approve the Merger
Agreement and the Merger at such meeting.
3. Parent decides to terminate the Merger Agreement because:
a. the Company breaches or fails to perform in any material respect
any of its covenants contained in the Merger Agreement, which breach or
failure to perform would give rise to the failure of a condition set
forth in Exhibit A to the Merger Agreement; or
b. the Company Board withdraws, modifies or changes in any manner
adverse to Parent and Purchaser its approval or recommendation of the
Offer, the Merger and the Merger Agreement.
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4. The Company decides to terminate the Merger Agreement because Parent
or Purchaser breaches or fails to perform in any material respect any of
their respective covenants contained in the Merger Agreement.
The conditions set forth in Exhibit A to the Merger Agreement are described
below in "--Certain Conditions to Offer."
Effect of Termination. The Merger Agreement provides that it will, upon
termination of the Merger Agreement by either the Company or Parent as
described above, become void and have no effect without any liability or
obligation on the part of the Company, Parent or Purchaser, except to the
extent that such termination results from the willful and material breach by a
party of any representation, warranty or covenant set forth in the Merger
Agreement, and except for: (i) the representation made by each of the Company,
Parent and Purchaser with respect to brokers' fees; (ii) the obligations of
each of the Company, Parent and Purchaser with respect to confidentiality, as
described in "--Access to Information; Confidentiality," and with respect to
fees and expenses, as described in "--Fees and Expenses"; (iii) the provision
of the Merger Agreement described in this paragraph; and (iv) certain
miscellaneous provisions of the Merger Agreement, including provisions relating
to assignment and enforcement.
Extension; Waiver. The Merger Agreement provides that at any time prior to
the Effective Time, the Company, Parent and Purchaser may: (i) extend the time
for the performance of any of the obligations or other acts of the other
parties; (ii) waive any inaccuracies in the representations and warranties
contained in the Merger Agreement or in any document delivered pursuant to the
Merger Agreement; or (iii) subject to the provisions of the Merger Agreement
with respect to amendment described in "--Amendment," waive compliance with any
of the agreements or conditions contained in the Merger Agreement. The Merger
Agreement further provides that the failure of the Company, Parent or Purchaser
to assert any of its rights under the Merger Agreement or otherwise will not
constitute a waiver of such rights.
Amendment. The Merger Agreement provides that it may be amended by the
Company, Parent and Purchaser at any time, before or after a majority of the
stockholders of the Company have adopted the Merger Agreement, provided that
after such adoption, there has been no amendment which by law requires further
approval by such stockholders without such further approval.
Assignment. The Merger Agreement provides that neither it nor any of the
rights, interests or obligations under it may be assigned, in whole or in part,
by operation of law or otherwise by any of the parties without the prior
written consent of the other parties. Notwithstanding the foregoing, Purchaser
may assign, in its sole discretion, any of or all its rights, interests and
obligations under the Merger Agreement to Parent or to any direct or indirect
wholly owned subsidiary of Parent, provided that no such assignment will
relieve Purchaser of any of its obligations under Merger Agreement.
Certain Conditions to Offer. Notwithstanding any other term of the Offer or
the Merger Agreement, Purchaser will not be required to accept for payment or,
subject to any applicable rules and regulations of the Commission, including
Rule 14e-1(c) under the Exchange Act (relating to Purchaser's obligation to pay
for or return tendered Shares promptly after the termination or withdrawal of
the Offer), to pay for any Shares tendered pursuant to the Offer unless there
has been validly tendered and not withdrawn by the Expiration Date a number of
Shares which would represent at least a majority of the Shares on a fully-
diluted basis (the "Minimum Condition" referred to above). Furthermore,
notwithstanding any other term of the Offer or the Merger Agreement, Purchaser
will not be required accept for payment or, subject to the Minimum Condition,
to pay for any Shares not theretofore accepted for payment or paid for, and may
terminate or amend the Offer, (1) with the consent of the Company or (2) if, at
any time after November 5, 1999 and before the acceptance of such Shares for
payment or the payment therefor, any of the following conditions exists:
(a) there has been threatened or pending any suit, action or proceeding
by any governmental entity or any other person: (i) challenging the
acquisition by Parent or Purchaser of any Shares, seeking to restrain or
prohibit the making or consummation of the Offer or the Merger or any other
transaction contemplated by the Merger Agreement, or resulting in a
material delay in or material restriction on the ability of
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Purchaser to consummate the Offer or the Merger or seeking to obtain from
the Company, Parent or Purchaser any damages that could result in a Company
Material Adverse Effect (as defined at the end of this paragraph); (ii)
seeking to prohibit or limit the ownership or operation by the Company,
Parent or any of their respective subsidiaries of any material portion of
the business or assets of the Company, Parent or any of their respective
subsidiaries, or to compel the Company, Parent or any of their respective
subsidiaries to dispose of or hold separate any material portion of their
respective businesses or assets, as a result of the Offer, the Merger or
any other transaction contemplated by the Merger Agreement; (iii) seeking
to impose limitations on the ability of Parent or Purchaser to acquire or
hold, or exercise full rights of ownership of, any Shares, including the
right to vote the Shares purchased by it on all matters properly presented
to the stockholders of the Company; (iv) seeking to prohibit Parent or any
of its subsidiaries from effectively controlling in any material respect
the business or operations of the Company and its subsidiaries; or (v)
which otherwise is reasonably likely to have a Company Material Adverse
Effect;
(b) any statute, rule, regulation, legislation, interpretation,
judgment, order or injunction has been threatened, proposed, sought,
enacted, entered, enforced, promulgated, amended or issued with respect to,
or deemed applicable to, or any consent or approval withheld with respect
to: (i) Parent, the Company or any of their respective subsidiaries; or
(ii) the Offer, the Merger or any other transaction contemplated by the
Merger Agreement, by any governmental entity that is reasonably likely to
result, directly or indirectly, in any of the consequences referred to in
subparagraph (a) above;
(c) there has occurred any event, change, effect or development that,
individually or in the aggregate, has had a Company Material Adverse
Effect;
(d) there has occurred: (i) any general suspension of trading of
securities on any national securities exchange or in the over-the-counter
market in the United States (excluding any coordinated trading halt
triggered solely as a result of a specified decrease in a market index);
(ii) a declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States; (iii) any limitation (whether or not
mandatory) by any governmental entity on, or other event that might
materially affect, the extension of credit by banks or other lending
institutions; (iv) a commencement of a war or armed hostilities or other
national or international calamity directly or indirectly involving the
United States; or (v) in the case of any of the foregoing existing on
November 5, 1999, a material acceleration or worsening thereof;
(e) the representations and warranties by the Company contained in the
Merger Agreement are not true and correct as of November 5, 1999 and at the
scheduled or extended Expiration Date, except to the extent such
representation and warranty expressly relates to an earlier date (in which
case on and as of such earlier date); provided, however, that, other than
with respect to the representations contained in the Merger Agreement as to
the number of issued and outstanding shares of capital stock of the Company
and stock options granted under the Company's stock option plans, the
condition set forth in this subparagraph (e) will be considered satisfied
unless, ignoring for this purpose all qualifications as to materiality and
Company Material Adverse Effect in such representations and warranties, the
inaccuracies in the representations and warranties (with all such
inaccuracies taken in the aggregate) have had or would reasonably be
expected to have a Company Material Adverse Effect.
(f) the Company has failed to perform in any material respect any
obligation or to comply in any material respect with any agreement or
covenant of the Company to be performed or complied with by the Company
under the Merger Agreement;
(g) the Merger Agreement has been terminated in accordance with its
terms; or
(h) the Company Board withdraws, modifies or changes in any manner
adverse to Parent and Purchaser its approval or recommendation of the
Offer, the Merger and the Merger Agreement.
The term "Company Material Adverse Effect" means a material adverse effect that
something has had or could reasonably be expected, individually or in the
aggregate, to have on the business, assets, properties, financial condition,
results of operations or prospects of the Company and its subsidiaries, taken
as a whole, or on the ability of the Company to consummate the transactions
contemplated by the Merger Agreement.
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The foregoing conditions to the Offer are for the benefit of Parent and
Purchaser and may be asserted by Parent or Purchaser regardless of the
circumstances giving rise to any such condition (including any action or
inaction by Parent or Purchaser not inconsistent with the terms the Merger
Agreement).
Appraisal Rights in the Merger
Each Share held by a stockholder exercising appraisal rights with respect to
such Shares pursuant to the DGCL, who has not effectively withdrawn or lost
such rights, will not be converted into or represent a right to receive the
Offer Price, net to the holders in cash, without interest thereon (the "Merger
Consideration"), but such stockholder will be entitled only to such rights as
are granted by the DGCL. Specifically, if the Merger is consummated,
stockholders of the Company have certain rights under the DGCL to dissent and
demand appraisal of, and payment in cash of the fair value of, their Shares. In
the event that appraisal rights are available, an objecting stockholder, upon
exercise of such appraisal rights, shall cease to have any rights as a
stockholder with respect to the Shares except the right to receive payment of
the fair value thereof. The stockholder's rights may be restored only upon (i)
the withdrawal, with the consent of the Company, of the demand for payment,
(ii) the non-filing of a petition for appraisal within the time required, (iii)
a determination of the court that the stockholder is not entitled to an
appraisal or (iv) the abandonment or rescission of the Merger. Each Share held
by a stockholder at the Effective Time who, after the Effective Time, loses his
or her appraisal rights or withdraws such demand for appraisal or payment of
fair market value pursuant to the DGCL, will be deemed to be converted, as of
the Effective Time, into the right to receive the Merger Consideration. The
Merger Agreement requires the Company to give prompt notice to Parent of any
demands received by the Company for appraisal of any Shares, and gives Parent
the right to participate in and direct all negotiations and proceedings with
respect to such demands. Furthermore, the Company may not, except with the
prior written consent of Parent, make any payment with respect to, or settle or
offer to settle, any such demands, or agree to do any of the foregoing.
Appraisal rights, if the statutory procedures set forth in Section 262 of
the DGCL are complied with, could lead to a judicial determination of the fair
value (excluding any element of value arising from the accomplishment or
expectation of the Merger) required to be paid in cash to such dissenting
stockholders for their Shares. Any such judicial determination of the fair
value of Shares could be based upon considerations other than or in addition to
the price paid in the Offer and the market value of the Shares, including asset
values and the investment value of the Shares. The value so determined could be
more or less than the Offer Price or the Merger Consideration.
The foregoing summary of the rights of objecting stockholders does not
purport to be a complete statement of the procedures to be followed by
stockholders desiring to exercise their appraisal rights.
Failure to follow the steps required by the DGCL for perfecting appraisal
rights may result in the loss of such rights. The preservation and exercise of
appraisal rights are conditioned on strict adherence to the applicable
provisions of the DGCL.
The Stockholder Agreement
Tender of Shares. In connection with the execution of the Merger Agreement,
Parent and Purchaser have entered into a Stockholder Agreement with the
Stockholder, who owns 5,699,194 outstanding Shares (the 5,699,194 Shares,
together with any additional Shares which are acquired by the Stockholder prior
to the termination of the Stockholder Agreement, the "Owned Shares")
representing approximately 66% of the issued and outstanding Shares. Pursuant
to the Stockholder Agreement, the Stockholder has agreed to validly tender the
Owned Shares pursuant to and in accordance with the terms of the Offer no later
than the second business day after commencement of the Offer, and has agreed
not to thereafter withdraw such tender, provided that there has been no
modification or amendment to the terms of the Offer which would require the
consent of the Company as described in Section 1 of this Offer to Purchase.
Term. The "Term" shall mean the period from November 5, 1999 until the
earliest to occur of (i) termination of the Stockholder Agreement as described
in "--Termination," (ii) the expiration of the Stock Option which is described
in "--Stock Option" and (iii) the closing of any exercise of such Stock Option.
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Voting of Shares. The Stockholder has agreed, during the Term, at any
meeting of the stockholders of the Company, to vote the Owned Shares (a) in
favor of the Merger and the Merger Agreement; (b) against any Company Takeover
Proposal (as defined in the Merger Agreement) and against any proposal (i) for
action or agreement which would result in a breach of any covenant,
representation or warranty or any other obligation or agreement of the Company
under the Merger Agreement or which is reasonably likely to result in any of
the conditions of the Company's obligations under the Merger Agreement not
being fulfilled or (ii) for any other action which could reasonably be expected
to impede, interfere with, delay, postpone or materially adversely affect the
transactions contemplated by the Merger Agreement or the likelihood of such
transactions being consummated; and (c) in favor of any other matter necessary
for consummation of the transactions contemplated by the Merger Agreement.
Irrevocable Proxy. The Stockholder has appointed Purchaser and Parent, or
any nominee of Purchaser and Parent, with full power of substitution and
resubstitution, at any time during the Term, as its true and lawful attorney
and proxy (the "Proxy") to vote each of the Owned Shares, including the right
to sign its name as stockholder to any consent, certificate or other document
relating to the Company. The Proxy is irrevocable and coupled with an interest.
Stock Option. The Stockholder has granted to Purchaser an irrevocable option
(the "Stock Option") to purchase all, but not less than all, of the Owned
Shares at a purchase price of $33.00 per share (the "Exercise Price").
Purchaser may exercise the Stock Option if the Offer is not consummated due to
the failure by the Stockholder to validly tender and not withdraw the Owned
Shares.
Conditions to Exercise. The Stockholder Agreement provides that the Stock
Option will become exercisable, in whole but not in part, on (a) the date on
which the event described in "--Stock Option" occurs or if later, (b) the date
on which (i) all waiting periods under the HSR Act, if any, required for the
purchase of the Owned Shares upon such exercise have expired or are waived and
(ii) there is not in effect any preliminary or final injunction or other order
issued by any court or governmental, administrative or regulatory agency or
authority prohibiting the exercise of the Stock Option. The Stock Option will
remain exercisable for 30 days following the date on which the Stock Option
became exercisable.
No Solicitation. During the Term, the Stockholder may not, nor permit or
authorize any of its partners, employees, agents or representatives
(collectively, the "Stockholder Representatives") to, (i) solicit, initiate or
encourage, directly or indirectly, any inquiries regarding or the submission of
any Company Takeover Proposal; (ii) participate in any discussions or
negotiations regarding, or furnish to any person any information or data with
respect to, or take any other action to knowingly facilitate the making of any
proposal that constitutes or may reasonably be expected to lead to, any Company
Takeover Proposal; or (iii) enter into any agreement with respect to any
Company Takeover Proposal or approve or resolve to approve any Company Takeover
Proposal. The Stockholder has agreed to cease and cause the Stockholder
Representatives to cease any existing activities, discussions or negotiations
with any parties conducted with respect to any of the prohibited activities
described in the preceding sentence. In addition, the Stockholder has agreed to
promptly notify Parent of the existence of any proposal, discussion,
negotiation or inquiry received by the Stockholder, and to immediately
communicate to Parent the terms of any proposal, discussion, negotiation or
inquiry which it may receive and the identity of the Person making such
proposal or inquiry or engaging in such discussion or negotiation. The
Stockholder Agreement provides that any action taken by the Company or its
directors and officers consistent with the provisions of the Merger Agreement
described in "The Merger Agreement--No Solicitation" will be not deemed to
violate the Stockholder's obligations described in this paragraph.
No Inconsistent Arrangements. During the Term, the Stockholder has agreed
not to: (i) transfer or consent to any transfer of any or all of the Owned
Shares or any interest therein, or create or permit to exist any encumbrance on
the Owned Shares; (ii) enter into any contract, option or other agreement or
understanding with respect to any transfer of any or all of the Owned Shares or
any interest therein; (iii) grant any proxy, power-of-attorney or other
authorization in or with respect to the Owned Shares; (iv) deposit the Owned
Shares into a voting trust or enter into a voting agreement or arrangement with
respect to the Owned Shares; or (v)
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<PAGE>
take any other action that would in any way restrict, limit or interfere with
either the performance of its obligations under the Stockholder Agreement or
the transactions contemplated by the Stockholder Agreement or the Merger
Agreement. The Stockholder has also agreed not to request that the Company
register the transfer (book-entry or otherwise) of any certificate or
uncertificated interest representing any of the Owned Shares, unless such
transfer is made in compliance with the Stockholder Agreement.
Waiver of Appraisal Rights. Pursuant to the Stockholder Agreement, the
Stockholder has waived any rights of appraisal or rights to dissent from the
Merger.
Representations and Warranties. The Stockholder Agreement contains certain
customary representations and warranties of Parent, Purchaser and the
Stockholder, including without limitation representations and warranties by the
Stockholder as to ownership of the Owned Shares, governmental consents and
corporate power and authority.
Termination. The Stockholder Agreement will terminate (i) upon the written
mutual consent of Parent, Purchaser and the Stockholder or (ii) upon the
earlier of the Effective Time and the termination of the Merger Agreement in
accordance with its terms.
Limitation of Liability. The Stockholder Agreement provides (i) that none of
the obligations of the Stockholder under or contemplated by the Stockholder
Agreement will be a personal obligation of the liquidating trustee for the
Stockholder, the former general partner or any limited partner of the
Stockholder or any of their respective officers, directors, stockholders,
limited partners, general partners or owners and (ii) that any monetary
obligation of the Stockholder under the Stockholder Agreement will be satisfied
solely out of the assets of the Stockholder.
The Confidentiality Agreement
On June 7, 1999, the Company and Investcorp International Inc. entered into
the Confidentiality Agreement in contemplation of exchange of information
relating to potential merger negotiations.
Certain other contracts, agreements, arrangements or understandings between
the Company or its affiliates and Purchaser, its executive officers, directors
or affiliates are described below:
Employment Letters of Intent. Parent has entered into letters of intent with
the following six executives of the Company: Joseph Dana, Joseph Sinicropi,
Charles T. Koerner, John Michael Long, Proctor Allen and Louis Ziebold. Each
employee, pursuant to his letter of intent, has indicated his intent to enter
into a new employment agreement that is not materially inconsistent with his
current employment agreement.
Each employee has also indicated his intent, pursuant to his letter of
intent, to enter into definitive documentation implementing an equity
participation by the employee in Parent having a value at least equal to the
sum of (i) 50% of the sum of the employee's net value of existing options to
purchase shares of the Company's capital stock and (ii) 50% of certain after-
tax transaction-related cash payments to be received by the employee. Each
employee's equity investment in Parent will be through either (x) the rollover
of his existing stock options into options to purchase shares of Parent capital
stock or (y) a combination of such rollover of options and the investment of
after-tax transaction-related cash payments into shares of Parent capital stock
at $33.00 per share. The options to purchase Parent capital stock upon rollover
will be granted at a discount from the Offer Price to preserve the aggregate
spread on each such existing rollover option.
In addition, Parent has entered into a letter of intent with Leonard Chill,
the Chief Executive Officer of the Company. Pursuant to the letter of intent,
Mr. Chill has indicated his intent to enter into a new employment agreement
that is not materially inconsistent with his current employment agreement. In
addition, he has indicated his intent to enter into definitive documentation
implementing an equity participation in Parent in an amount no less than $1.6
million. Mr. Chill's equity investment in Parent will be through the rollover
of his existing stock options into options to purchase shares of Parent capital
stock. The options to purchase Parent capital stock upon rollover will be
granted at a discount from the Offer Price to preserve the aggregate spread on
each such existing rollover option.
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Mr. Chill holds options to purchase 72,174 Shares, which options were
granted as "incentive stock options" under federal tax laws ("ISOs") (Mr. Chill
also holds other options which are not ISOs). Parent and Mr. Chill have
discussed the possibility of Mr. Chill exercising such ISOs prior to the Merger
and of making arrangements which would enable him to retain the Shares
purchased upon such exercise after the Merger has been completed. Parent and
Mr. Chill have also discussed the possibility of making arrangements to enable
Mr. Chill to retain the ISOs themselves through and following the Merger. If
either of these alternatives were implemented, Mr. Chill would own following
the Merger an equity interest in the Company of approximately 1% (in addition
to Mr. Chill's expected equity interest in Parent following the Merger) and
Parent would own approximately 99% of the equity interest of the Company.
The employment arrangements with the executives named above will include the
grant of stock options from a reserve of options exercisable for common stock
representing 11% of the common stock of the Company on a fully-diluted basis,
of which approximately 2.5% will be reserved for future grants and
approximately 8.5% will be granted upon or promptly following the Merger. The
options will have seven year terms and vest 20% each year over a five year
period subject to the achievement by the Company of specified EBITDA
performance targets. The options will be subject to additional vesting in
certain circumstances, including time-based vesting following an initial public
offering and, subject to the Investcorp investors' achieving specified rates of
return, vesting upon a sale of the Company.
The foregoing is only a summary of certain provisions of the employment
letters of intent and is qualified in its entirety by reference to the
employment letters of intent. Copies of the employment letters of intent have
been filed with the Commission as Exhibits (c)(11) to (c)(17) hereto. If new
employment agreements are executed prior to the Expiration Date, copies of such
agreements will be filed as exhibits to this Schedule 14D-9.
Item 4. The Solicitation or Recommendation.
(a) The Company Board met to consider the terms of the Offer and the Merger
at a meeting held on November 4, 1999. At this meeting, the Company Board,
after review of (i) the determination by an independent committee of the Board
(the "Special Committee") that the Offer and the Merger are fair and in the
best interests of the Company and its stockholders and (ii) the recommendation
of the Special Committee that the Company Board approve and adopt the Merger
Agreement, authorized, approved and accepted in all respects the Offer and the
Merger, as recommended by the Special Committee, and agreed to recommend that
the Company's stockholders accept and tender their Shares pursuant to the
Offer. A copy of the letter to the stockholders of the Company dated November
12, 1999 from Leonard Chill, Chairman and Chief Executive Officer, containing
the recommendation of the Company Board, is filed as Exhibit (a)(1) hereto and
is incorporated herein by reference.
As set forth in Purchaser's Offer to Purchase, Purchaser will purchase
Shares tendered prior to the close of the Offer if at least a majority of the
outstanding Shares have been tendered by that time and all conditions to the
Offer have been satisfied. Stockholders should note that under the Stockholder
Agreement the Stockholder, which owns approximately 66% of the outstanding
Shares, has agreed, subject to certain conditions, to tender its Shares in the
Offer. The Offer is scheduled to expire at 12:00 midnight, New York City time,
on Friday, December 10, 1999, unless and until Purchaser, subject to
restrictions contained in the Merger Agreement, has extended the period of time
for which the Offer is open. Purchaser may, without the consent of the Company,
(w) extend the Offer, if at the scheduled Expiration Date any of the conditions
to Purchaser's obligation to purchase Shares set forth in the Merger Agreement
or Exhibit A to the Merger Agreement are not satisfied, until such time as such
conditions are satisfied or waived; (x) extend the Offer for a period of not
more than 15 business days beyond the initial Expiration Date, if on the date
of such extension less than 90% of the outstanding Shares have been validly
tendered and not properly withdrawn pursuant to the Offer; (y) extend the Offer
for any period required by applicable law including any rule, regulation,
interpretation or position of the
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Commission applicable to the Offer, and (z) extend the Offer for any reason for
a period of not more than ten business days beyond the latest Expiration Date
that would otherwise be permitted as described in this sentence. A copy of the
press release issued by Parent and the Company announcing the Merger and the
Offer is filed as Exhibit (a)(2) hereto and is incorporated herein by
reference.
(b) Synthetic Industries, L.P. (the "Partnership"), a Delaware limited
partnership and the holder of approximately 66% of the Company's common stock,
was organized in 1986 for the purpose of acquiring the Company. The Partnership
owns no assets other than common stock of the Company. The Company has not paid
a dividend since its acquisition by the Partnership and, consequently, the
Partnership has never made a cash distribution to its partners.
In mid 1996, the Company began considering a primary offering of common
stock to raise capital, prompted by the strength of the stock markets at the
time, as well as expectations of significant growth in the Company's results of
operations in that year. The Company and the General Partner thereafter
commenced discussions with Bear Stearns & Co. Inc. ("Bear Stearns") regarding a
possible combined offering of the common stock held by the Partnership and
newly issued common stock by the Company. As a result of objections made by
several limited partners to the Partnership's sale of its common stock without
offering limited partners a right to receive their underlying portion of the
common stock rather than cash, the general partner of the Partnership (the
"General Partner") determined not to proceed with the Partnership's sale of
common stock. The public offering was consummated by the Company for 2,875,000
newly issued shares on November 1, 1996.
In early 1997, the General Partner and the Company met on several occasions
with Bear Stearns to discuss the prospects of offering limited partners an
opportunity to sell the common stock underlying their investment in the
Partnership or, alternatively, to receive such common stock in a distribution.
As a result of these discussions, the General Partner developed a plan (the
"Plan") for the dissolution of the Partnership under which each limited partner
would be given an option to receive cash for all or a portion of his limited
partner interest based on the standard discount from the market price of the
common stock at the time or, to the extent such option was not chosen by a
limited partner, to receive through an orderly dissolution process the common
stock underlying his limited partner interest. A joint proxy statement and
prospectus (the "Proxy Statement/Propsectus") in connection with the
solicitation of proxies for the vote on the Plan was mailed to limited partners
on September 19, 1997, and the Plan was subsequently approved at a special
meeting of limited partners held on November 7, 1997.
During 1997, the Company, its directors and certain other of the Company's
officers who were affiliated with the General Partner were named in two
putative class and derivative action lawsuits filed by certain limited
partners. The first action was filed on February 11, 1997 in the Delaware Court
of Chancery and the second action was filed in the United States District Court
of the Northern District of California on May 1, 1997. Both actions sought,
among other things, to enjoin the implementation of the Plan and to recover
unspecified damages. On October 23, 1997, the Delaware Court of Chancery
preliminarily enjoined the implementation of the Plan, and 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 19, 1999, preliminary approval of a Stipulation and Agreement of
Settlement (the "Settlement Agreement") in connection with these lawsuits was
granted by the United States District Court for the Northern District of
California. Pursuant to the Settlement Agreement, the parties agreed to
participate cooperatively in a six-month sales process designed to maximize
value for the Company's stockholders, including the Partnership, and to
dissolve the Partnership. The process contemplated an attempt to sell the
Company promptly in a transaction that the Company's independent directors
believed to be in the best interests of the Company's stockholders.
On May 24, 1999, final approval of the Settlement Agreement was granted by
the United States District Court for the Northern District of California and on
July 31, 1999, the Delaware action was dismissed with prejudice by the Delaware
Court of Chancery. On August 31, 1999, in accordance with the terms of the
Settlement Agreement, the General Partner resigned, which caused the
dissolution of the Partnership, and the
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appointment of the liquidating trustee became effective. Pursuant to the terms
of the Settlement Agreement, the Special Committee was empowered to direct and
oversee the process of selling the Company and to approve or reject any
proposed sale after consultation with two members of plaintiffs' counsel (the
"Special Advisory Committee") and the president and chief operating officer of
the Company (the "Special Management Advisor"). Both the non-voting Special
Advisory Committee and the non-voting Special Management Advisor had the right,
pursuant to the terms of the Settlement Agreement, to monitor the sales
process, and to be given full access to all information regarding the sales
process, including the right to attend all meetings of the Special Committee.
On May 27, 1999, the Special Committee and the Special Advisory Committee
met in New York to hear a presentation from representatives of Beacon relating
to their preliminary evaluation of the Company, an overview of and a projected
timetable for the sales process, and a discussion of potential buyers. At this
time, the Company formally retained The Beacon Group Capital Services, LLC
("Beacon") as its financial advisor to structure and implement the sale of the
Company pursuant to the terms of the Settlement Agreement. On June 16, 1999,
the Special Committee formally commenced a broad-based process to explore the
sale of the Company. Thereafter, Beacon made a total of 83 contacts, 30 of
which were potential "strategic buyers" and 53 of which were potential
"financial buyers." Of the parties contacted, 38 of the parties contacted
declined interest. Beacon delivered copies of a confidential memorandum
describing the Company to the remaining 45. Beacon received expressions of
interest from 14 of those parties. On August 5, 1999, a telephonic meeting of
the Special Committee, the Special Advisory Committee and the Special
Management Advisor was held. At that meeting, the Special Committee selected,
from the group of 14, ten potential buyers to be included in the next stage of
the sales process. After further discussion between Beacon and these ten
potential buyers, the Special Committee, through a telephonic meeting held on
September 16, 1999, elected to continue the sales process with seven of them.
The process included detailed tours of, and meetings in, Chickamauga and other
sites, additional meetings with the Company's senior management, access to
additional confidential financial data and the receipt from the Company's legal
advisors of a form of merger agreement. On October 15, 1999, five parties
submitted final round binding offers together with markups of the draft merger
agreement.
During the week of October 18, 1999, Beacon and the Company's legal advisors
worked on analyzing the five proposals. On Friday, October 22, 1999, the
Special Committee, the Special Advisory Committee and the Special Management
Advisor met telephonically with representatives of Beacon to discuss the five
proposals. At this meeting, the Special Committee voted to authorize Beacon to
pursue discussions with all of the bidders in order to solicit their best
offers. Following this meeting, a representative of Beacon telephoned a
representative of Parent and advised him that, while Parent's proposal was
attractive, he was not authorized by the Special Committee to enter into
exclusive negotiations with Parent. During the weeks of October 25, 1999 and
November 1, 1999, the Company and its counsel had discussions with Parent and
its counsel, during the course of which the Merger Agreement and related
documents were revised. During the same period Beacon had discussions with and
received refinements to the offers of three of the other four bidders.
On Thursday, November 4, 1999, the Special Committee, the Special Advisory
Committee and the Special Management Advisor met in New York and received a
report from representatives of Beacon concerning the terms of the potential
transactions with all of the bidders. At this meeting, the Special Committee
received the opinion of Beacon, dated November 4, 1999, that, based upon and
subject to various considerations and assumptions (and the analyses presented
to the Special Committee underlying such opinion) set forth in such opinion, as
of the date of such opinion, the $33 per Share consideration to be received by
the holders of the Shares in the Offer and the Merger was fair from a financial
point of view to such holders. After a discussion of the terms of each of the
potential transactions, a review of the Merger Agreement and receipt of such
opinion, and upon the recommendation of the Special Advisory Committee and the
Special Management Advisor, the Special Committee unanimously decided to
recommend to the Board of Directors the approval of the Offer, the Merger, the
Merger Agreement and other transactions contemplated by the Merger Agreement.
Following the adjournment of the meeting of the Special Committee, the full
Board of Directors met and, pursuant to the terms of the Settlement Agreement,
voted unanimously to take the actions recommended by the Special Committee. The
Merger Agreement was executed and delivered by the parties, and the Company and
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Parent publicly announced the transaction before the opening of trading on the
Nasdaq National Market on Friday, November 5, 1999.
In reaching its conclusions described above, the Special Committee
considered a number of factors, including, without limitation, the following:
(i) that the $33 per Share offer represented a premium of approximately 53%
over the last reported sales price of the Shares on the Nasdaq National Market
on May 24, 1999 of $21.50 per Share (the last trading day prior to the
announcement of the Settlement Agreement), (ii) the absence of any financing
contingency on the part of Parent, (iii) the all cash tender offer structure of
the transaction, including the resulting anticipated timing of the closing
thereof, (iv) the opinion of Beacon, dated November 4, 1999, that, based upon
and subject to various considerations and assumptions, as of that date, the $33
per Share consideration to be received by the holders of the Shares in the
Offer and the Merger was fair from a financial point of view to such holders
and (v) the alternatives to the Offer and the Merger that were available to the
Company, particularly the present value of the per Share Offer Price as
compared to the present values of the per Share offer prices for the other
proposals and the risk and difficulty of consummation of the other proposals.
The Special Committee did not assign relative weights to the foregoing factors
or determine that any factor was of more importance than any other factors.
Rather, the Special Committee viewed its position and recommendation as being
based on the totality of the information presented to and considered by it.
Beacon is an investment banking firm engaged in the evaluation of businesses
and their securities in connection with mergers and acquisitions, private
placements, financings, principal investments and other purposes. Beacon was
selected by the parties to the Settlement Agreement based upon their agreement
that the credentials and experience of Beacon were suitable for the sale of the
Company and other transactions contemplated by the Settlement Agreement.
In analyzing the Offer and Merger and the other proposed transactions, the
Special Committee was assisted and advised at all of its meetings by
representatives of Beacon, who reviewed various financial considerations, and
representatives of the Company's legal counsel, who reviewed various legal and
other considerations, as well as the terms of the Merger Agreement and related
agreements, with the Special Committee.
A copy of the written opinion of Beacon, dated November 4, 1999, describing
the assumptions made, matters considered and the scope of the review undertaken
and procedures followed, is filed as
Exhibit (a)(3) hereto, and is incorporated herein by reference. Stockholders
are encouraged to read such opinion in its entirety.
Based upon the foregoing, at its November 4, 1999 meeting, the Board of
Directors unanimously determined that the terms of the Offer and the Merger
were fair to and in the best interests of the Company and its stockholders,
approved the Offer and the Merger and recommended that stockholders of the
Company accept the Offer as set forth above.
Item 5. Persons Retained, Employed or to be Compensated.
Beacon is acting as the Company's financial advisors in connection with the
Offer and the Merger. Pursuant to an agreement with the Company, dated October
2, 1998, Beacon will be entitled to receive a percentage fee in an amount equal
to 7/8% of the consideration received by the Company upon the consummation of
the Offer and Merger, with the determination of the amount of such
consideration to include the sum of the cash paid to the Company's stockholders
and the aggregate amount of indebtedness of the Company retired, assumed or to
be assumed in connection with the Offer and Merger. In addition, the Company
has agreed to reimburse Beacon for reasonable out-of-pocket expenses incurred
in connection with its services under this agreement, including the fees and
disbursements of its counsel, and to indemnify Beacon against certain
liabilities incurred in connection with its engagement, including any action,
proceeding or investigation in which Beacon becomes involved.
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Except as set forth above, neither the Company nor any person acting on its
behalf has or currently intends to employ, retain or compensate any person to
make solicitations or recommendations to the stockholders of the Company on
its behalf with respect to the Offer.
Item 6. Recent Transactions and Intent with Respect to Securities.
(a) No transactions in the Shares have been effected in the past 60 days by
the Company or any affiliate or subsidiary of the Company, or, to the best
knowledge of the Company, by any executive officer or director of the Company.
(b) To the best knowledge of the Company, each principal executive officer
and director of the Company currently intends to tender, pursuant to the
Offer, all unrestricted Shares which are held of record or beneficially owned
by such person (other than the Shares of the two officers described in Item 3
above), except to the extent, if any, that the tender of Shares would subject
such officers and directors to liability under Section 16 of the Exchange Act.
Item 7. Certain Negotiations and Transactions by the Subject Company.
(a) Except as described under Item 3(b), the Company is not engaged in any
negotiations in response to the Offer which relate to or would result in: (i)
an extraordinary transaction, such as a merger or reorganization, involving
the Company or any subsidiary of the Company; (ii) a purchase, sale or
transfer of a material amount of assets by the Company or any subsidiary of
the Company; (iii) a tender offer for or other acquisition of securities by or
of the Company; or (iv) any material change in the present capitalization or
dividend policy of the Company.
(b) Except as described under Item 4 and other than as described under Item
3(b) of this Statement, there are no transactions, board resolutions,
agreements in principle or signed contracts in response to the Offer which
relate to or would result in one or more of the matters referred to in Item
7(a).
Item 8. Additional Information to be Furnished.
The information statement attached as Annex I hereto is being furnished in
connection with the possible designation by Purchaser, pursuant to the Merger
Agreement, of certain persons to be appointed to the Company Board other than
at a meeting of the Company's stockholders.
Item 9. Material to be Filed as Exhibits.
The following Exhibits are filed herewith:
(a)(1) Recommendation Letter to the Stockholders of the Company, dated
November 12, 1999, from Leonard Chill, Chairman and Chief Executive
Officer.*
(a)(2) Press Release issued jointly by the Company and Purchaser announcing
the Merger and the Offer.
(a)(3) Opinion of The Beacon Group Capital Services, LLC, dated November 4,
1999.*
(b) None.
(c)(1) Retention Bonus Plan.
(c)(2) Success Bonus Plan.
(c)(3) Employment Agreement, as of January 1, 1999 by and among the Company
and Leonard Chill.
(c)(4) Employment Agreement, as of January 1, 1999 by and among the Company
and Joseph Dana.
(c)(5) Employment Agreement, as of January 1, 1999 by and among the Company
and Joseph Sinicropi.
(c)(6) Employment Agreement, as of September 24, 1998 by and among the
Company and Ralph Kenner (incorporated herein by reference to Exhibit 10.13
to the Company's Form 10-K for the fiscal year ended September 30, 1998, as
filed with the Commission on December 24, 1998).
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(c)(7) Employment Agreement, as of September 24, 1998 by and among the
Company and Charles T. Koerner (incorporated herein by reference to Exhibit
10.16 to the Company's Form 10-K for the fiscal year ended September 30,
1998, as filed with the Commission on December 24, 1998).
(c)(8) Agreement and Plan of Merger, dated as of November 5, 1999, by and
among Parent, Purchaser and the Company.
(c)(9) Stockholder Agreement, dated as of November 5, 1999, among Synthetic
Industries, L.P., Parent and Purchaser.
(c)(10) Confidentiality Agreement, dated June 7, 1999, between the Company
and Investcorp International Inc.
(c)(11) Employment Letter of Intent, dated November 5, 1999, between Parent
and Leonard Chill.
(c)(12) Employment Letter of Intent, dated November 5, 1999, between Parent
and Joseph Dana.
(c)(13) Employment Letter of Intent, dated November 5, 1999, between Parent
and Joseph Sinicropi.
(c)(14) Employment Letter of Intent, dated November 5, 1999, between Parent
and Charles T. Koerner.
(c)(15) Employment Letter of Intent, dated November 5, 1999, bewtween
Parent and John Michael Long.
(c)(16) Employment Letter of Intent, dated November 5, 1999, between Parent
and Proctor Allen.
(c)(17) Employment Letter of Intent, dated November 5, 1999, between Parent
and Louis Ziebold.
- --------
* Included in copies mailed to stockholders.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
SYNTHETIC INDUSTRIES, INC.
By: /s/ Joseph F. Dana
-------------------------------
Name:Joseph F. Dana
Title: President and Chief
Operating Officer
Dated: November 12, 1999
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Annex I
SYNTHETIC INDUSTRIES, INC.
309 LaFayette Road
Chickamauga, Georgia 30707
----------------
INFORMATION STATEMENT PURSUANT TO SECTION 14(f) OF THE SECURITIES EXCHANGE ACT
OF 1934 AND RULE 14f-1 THEREUNDER
----------------
NO VOTE OR OTHER ACTION OF THE COMPANY'S STOCKHOLDERS IS REQUIRED IN CONNECTION
WITH THIS INFORMATION STATEMENT. NO PROXIES ARE BEING SOLICITED AND YOU ARE
REQUESTED NOT TO SEND THE COMPANY A PROXY
----------------
This Information Statement, which is being mailed on or about November 12,
1999 to the holders of shares of the Common Stock, par value $1.00 per share
(the "Company Common Stock"), of Synthetic Industries, Inc., a Delaware
corporation (the "Company"), is being furnished in connection with the
designation by SIND Holdings, Inc., a Delaware corporation ("Parent"), and SIND
Acquisitions, Inc., a Delaware corporation and a wholly owned subsidiary of
Parent ("Purchaser"), of persons to the Board of Directors of the Company (the
"Board"). Such designation is to be made pursuant to an Agreement and Plan of
Merger dated as of November 5, 1999 (the "Merger Agreement") among the Company,
Parent and Purchaser. Pursuant to the Merger Agreement, among other things,
Parent commenced a cash tender offer on November 12, 1999 to purchase all of
the issued and outstanding shares of Company Common Stock at $33.00 per share,
net to the seller in cash, as described in Parent's Offer to Purchase dated
November 12, 1999 and the related Letter of Transmittal (which Offer to
Purchase and related Letter of Transmittal together constitute the "Offer").
The Offer is scheduled to expire at 12:00 midnight, New York City time, on
Friday, December 10, 1999, unless extended. The Offer is conditioned on, among
other things, a majority of the outstanding shares of Company Common Stock on a
fully diluted basis being validly tendered prior to the expiration of the Offer
and not withdrawn (the "Minimum Condition"). The Merger Agreement also provides
for the merger (the "Merger") of Purchaser with and into the Company as soon as
practicable after consummation of the Offer. Following the time the Merger
becomes effective (the "Effective Time"), the Company will be the surviving
corporation (the "Surviving Corporation") and a wholly owned subsidiary of
Parent. In the Merger, each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time (other than shares of
Company Common Stock held in the treasury of the Company or by Parent,
Purchaser or any direct or indirect wholly owned subsidiary of Parent or the
Company, all of which will be canceled, and other than shares of Company Common
Stock, if any, held by stockholders who have perfected rights as dissenting
stockholders under Delaware law) will be converted into the right to receive
cash in the amount of $33.00 without interest.
The Merger Agreement provides that promptly upon the purchase by Purchaser
of any of the outstanding shares of Company Common Stock pursuant to the Offer,
Purchaser shall be entitled to designate the number of directors on the Board
as will give Purchaser, subject to compliance with Section 14(f) of the
Securities and Exchange Act of 1934, as amended (the "Exchange Act"),
representation on the Board equal to at least the number of directors, rounded
up to the next whole number, which is the product of the total number of
directors on the Board (giving effect to the directors elected pursuant to this
sentence) multiplied by the percentage that such number of shares of Company
Common Stock so purchased by Purchaser plus the number
of such shares otherwise owned by Purchaser or any other subsidiary of Parent
bears to the number of such shares of Company Common Stock outstanding, and the
Company will, at such time, cause Purchaser's designees to be elected to the
Board.
A-1
<PAGE>
Notwithstanding the above, in the event that Purchaser's designees are
appointed or elected to the Board, until the Effective Time the Board shall
have at least three directors who were directors as of the date of the Merger
Agreement and who are not officers of the Company (the "Independent
Directors"). If the number of Independent Directors falls below three, the
remaining Independent Directors (or if no Independent Directors remain, the
other directors) shall be entitled to designate persons who are not officers,
stockholders or affiliates of the Company, Parent or Purchaser to fill such
vacancies.
The terms of the Merger Agreement, a summary of the events leading up to the
Offer and the execution of the Merger Agreement and other information
concerning the Offer and the Merger are contained in the Offer to Purchase and
in the Solicitation/Recommendation Statement on Schedule 14D-9 of the Company
(the "Schedule 14D-9") with respect to the Offer, copies of which are being
delivered to stockholders of the Company contemporaneously herewith. Certain
other documents (including the Merger Agreement) were filed with the Securities
and Exchange Commission (the "SEC") as exhibits to the Tender Offer Statement
on Schedule 14D-1 (the "Schedule 14D-1") of Purchaser and as exhibits to the
Schedule 14D-9. The exhibits to the Schedule 14D-1 and the Schedule 14D-9 may
be examined at and copies thereof may be obtained from the SEC in the manner
set forth in Section 8 of the Offer to Purchase. To finance the purchase of
Company Common Stock in the Offer and the Merger, the repayment or refinancing
of outstanding indebtedness and to pay certain fees and expenses relating
thereto, Purchaser will receive, indirectly through Parent, funds from
Investcorp, a global investment company, and certain international investors
with whom Investcorp maintains an administrative relationship and one or more
other institutional investors in the form of an equity contribution at least
equal to $190 million. In addition, an affiliate of Investcorp has obtained
financing commitments from third parties in the aggregate amount of
approximately $475 million, consisting of (i) a commitment to provide Purchaser
with approximately $325 million in financing in the form of senior secured
credit facilities, which include approximately $225 million in term loan
facilities and approximately $100 million in a revolving credit facility and
(ii) a commitment to provide Purchaser with approximately $150 million in
financing in the form of an unsecured senior subordinated bridge facility.
No action is required by the stockholders of the Company in connection with
the election of Purchaser's designees to the Board. However, Section 14(f) of
the Exchange Act requires the mailing to the Company's stockholders of the
information set forth in this Information Statement prior to a change in a
majority of the Company's directors otherwise than at a meeting of the
Company's stockholders.
The information contained in this Information Statement concerning Parent,
Purchaser and Purchaser's designees has been furnished to the Company by such
persons, and the Company assumes no responsibility for the accuracy or
completeness of such information. The principal executive offices of Parent and
Purchaser are located at c/o Gibson, Dunn & Crutcher LLP, 200 Park Avenue, New
York, New York 10166.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
At the close of business on September 30, 1999, there were issued and
outstanding 8,664,819 shares of Company Common Stock, excluding Company Common
Stock held by the Company, each share being entitled to one vote upon matters
to be voted upon at a stockholders meeting. There are no other voting
securities outstanding. The table below sets forth certain information as of
September 30, 1999 regarding the beneficial ownership of Company Common Stock,
by (i) each person known by the Company to own beneficially more than 5% of its
outstanding shares of Company Common Stock, (ii) each director of the Company,
(iii) the five
A-2
<PAGE>
executive officers of the Company named in the Summary Compensation Table and
(iv) all executive officers and directors of the Company as a group. Unless
otherwise indicated, the address for each officer, director and 5% stockholder
is c/o Synthetic Industries, Inc., 309 LaFayette Road, Chickamauga, Georgia
30707.
<TABLE>
<CAPTION>
Number of
Name Shares Percent
- ---- --------- -------
<S> <C> <C>
5% Stockholders:
Synthetic Industries, L.P........................... 5,699,194 65.8%
Named Executive Officers:
Leonard Chill....................................... 146,195(1)(2)(3) 1.7%
Joseph F. Dana...................................... 169,506(2) 1.9%
Joseph Sinicropi ................................... 45,440(2) *
Charles T. Koerner ................................. 30,037(2) *
Ralph Kenner........................................ 58,389(1)(2)(3) *
Directors:
Lee J. Seidler...................................... 45,313(2) *
William J. Shortt................................... 19,271(2) *
Robert L. Voigt..................................... 19,271(2) *
All executive officers and directors as a group
(10 persons)....................................... 583,573(3)(4) 6.3%
</TABLE>
- --------
* Less than 1.0%.
(1) Includes 9,632 shares as to which such person may be deemed to have
beneficial ownership as a result of his indirect beneficial ownership of
0.1666% of a partnership interest in Synthetic Industries, L.P. (the
"Partnership").
(2) Includes shares of Common Stock subject to options exercisable within 60
days, as follows: Leonard Chill-236,563 shares; Joseph F. Dana-169,506
shares; Joseph Sinicropi-45,440 shares; Charles T. Koerner- 30,037 shares;
Ralph Kenner-48,757 shares; Lee J. Seidler-45,313 shares; William J.
Shortt-19,271 shares; Robert L. Voigt-19,271 shares.
(3) Does not include 2,781,250 shares (other than the 9,632 shares described in
footnote 1 above) as to which Messrs. Chill, Kenner and other executives
may be deemed to have beneficial ownership by virtue of their indirect
control of the Partnership. See "Executive Officers."
(4) Does not include (i) an aggregate of 158,488 shares of Common Stock subject
to options exercisable within 60 days that are owned by employees of the
Company other than the executive officers and (ii) an aggregate of 108,455
shares of Common Stock subject to options that are not exercisable within
60 days that are owned by directors, officers and employees of the Company.
Includes an aggregate of 38,528 shares as to which Messrs. Chill, Kenner
and other employees may be deemed to have beneficial ownership as a result
of their indirect beneficial ownership of 0.1666% each of a partnership
interest in the Partnership.
A-3
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
The Purchaser Designees
Purchaser has informed the Company that it will choose its designees to the
Company Board (the "Designees") from the persons listed below. Purchaser has
also informed the Company that each of the Designees has consented to act as a
director, if so designated. Biographical information concerning each of the
Designees is presented below. The following biographical information provided
herein has been furnished to the Company by Purchaser, and the Company assumes
no responsibility for the accuracy or completeness of such information.
None of the Designees (i) is currently a director of, or holds any position
with, the Company, (ii) has a familial relationship with any of the directors
or executive officers of the Company or (iii) to Purchaser's knowledge,
beneficially owns any securities (or rights to acquire any securities) of the
Company. The Company has been advised by Purchaser that, to Purchaser's
knowledge, none of the Designees has been involved in any transaction with the
Company or any of its directors, executive officers or affiliates that is
required to be disclosed pursuant to the rules and regulations of the
Commission, except as may be disclosed herein or in the Schedule 14D-9.
Set forth below is the name, age, present principal occupation, five year
employment history and current public directorships, if any, of each Designee.
The principal business address of each Designee is Investcorp International
Inc., 280 Park Avenue, 37th Floor, New York, New York 10017. Each Designee is a
citizen of the United States of America.
<TABLE>
<CAPTION>
Present Principal Occupation, Five Year
Employment History
Name Age and Current Public Directorships
---- --- -------------------------------------------------
<C> <C> <S>
Charles J. Philippin.... 49 Mr. Philippin has been an executive of Investcorp
or one or more of its wholly owned subsidiaries
since July 1994. Prior to joining Investcorp, Mr.
Philippin was a partner in the accounting firm of
Coopers & Lybrand L.L.P. (now
PricewaterhouseCoopers LLP). Mr. Philippin is a
director of Competitive Technologies, Inc., Saks
Incorporated, NationsRent, Inc., CSK Auto
Corporation, Harborside Healthcare Corporation,
Carter Holdings, Inc., The William Carter
Company, Werner Holding Co. (DE), Inc. and Falcon
Building Products, Inc.
Savio W. Tung........... 48 Mr. Tung has been an executive of Investcorp or
one or more of its wholly owned subsidiaries
since September 1984. Mr. Tung is a director of
CSK Auto Corporation and Werner Holding Co. (DE),
Inc.
Christopher J. O'Brien.. 41 Mr. O'Brien has been an executive of Investcorp
or one or more of its wholly owned subsidiaries
since December 1993. Prior to joining Investcorp,
Mr. O'Brien was a Managing Director of Mancuso &
Company, a private New York-based merchant bank.
Mr. O'Brien is a director of NationsRent, Inc.,
CSK Auto Corporation, Harborside Healthcare
Corporation, Carter Holdings, Inc., The William
Carter Company and Falcon Building Products, Inc.
Charles K. Marquis...... 57 Mr. Marquis has been an executive of Investcorp
or one or more of its wholly owned subsidiaries
since January 1999. Prior to joining Investcorp,
Mr. Marquis was a partner in the law firm of
Gibson, Dunn & Crutcher LLP. Mr. Marquis is a
director of Tiffany & Co., CSK Auto Corporation,
Harborside Healthcare Corporation, Werner Holding
Co. (DE), Inc. and Falcon Building Products, Inc.
</TABLE>
A-4
<PAGE>
<TABLE>
<CAPTION>
Present Principal Occupation, Five Year Employment
History
Name Age and Current Public Directorships
---- --- -----------------------------------------------------
<C> <C> <S>
James O. Egan....... 51 Mr. Egan has been an executive officer of Investcorp
or one or its wholly owned subsidiaries since January
1999. Prior to joining Investcorp, Mr. Egan was a
partner in the accounting firm of KPMG from October
1997 to December 1998. Prior to that, Mr. Egan was a
Senior Vice President and Chief Financial Officer of
Riverwood International, a paperboard, packaging and
machinery company, from May 1996 to September 1997.
Prior to that, Mr. Egan was a partner in the
accounting firm of Coopers & Lybrand L.L.P. (now
PricewaterhouseCoopers LLP). Mr. Egan is a director
of CSK Auto Corporation, Harborside Healthcare
Corporation, Werner Holding Co. (DE), Inc. and Falcon
Building Products, Inc.
Edward G. Lord III.. 50 Mr. Lord has been an executive of Investcorp or one
or more of its wholly owned subsidiaries since
November 1994. Prior to joining Investcorp, Mr. Lord
was a Director and Chief Operating Officer of
Kettaneh Group, a real estate investment firm. Mr.
Lord is a director of Harborside Healthcare
Corporation.
George O. Visnyei... 50 Mr. Visnyei has been an executive of Investcorp or
one or more of its wholly owned subsidiaries since
January 1996. Prior to joining Investcorp, Mr.
Visnyei was a partner in the accounting firm of
Coopers & Lybrand L.L.P. (now PricewaterhouseCoopers
LLP).
Sean P. Madden...... 33 Mr. Madden has been an executive of Investcorp or one
or more of its wholly owned subsidiaries since
October 1998. Prior to joining Investcorp, Mr. Madden
was a Vice President of Credit Suisse First Boston
from June 1994 to October 1998.
</TABLE>
Current and Continuing Directors
The following sets forth certain information with respect to the current
directors of the Company:
Leonard Chill, age 67, Chairman and Chief Executive Officer, joined the
Company in December 1973 as President. He has been a Director since 1986. From
1967 until joining the Company, he held a number of positions with Thiokol
Corporation in its Fibers Division, including that of General Manager. Mr.
Chill is also the sole director and sole stockholder of one of the general
partners of Synthetic Management G.P., the entity which is the sole general
partner of the general partner of Synthetic Industries, L.P. (the
"Partnership"), the principal stockholder of the Company. In addition, Mr.
Chill is a director of Synthetic Textiles Ltd.
Joseph F. Dana, age 52, President, Chief Operating Officer and General
Counsel, joined the Company in May 1997. Prior to joining the Company, Mr. Dana
had been engaged in the private practice of law for over twenty years and had
been a member of the law firm Watson, Dana & Gottlieb, LP, LaFayette, Georgia,
since its formation in 1978, serving as general counsel to the Company since
1987. He has been a Director since 1993.
Lee J. Seidler, age 64, was professor of accounting and Price Waterhouse
professor of auditing at New York University. Dr. Seidler was Senior Managing
Director at Bear, Stearns & Co. Inc. from 1981 to 1989. He is presently
associated with Bear, Stearns & Co. Inc. as Managing Director Emeritus. Dr.
Seidler is a director of the Shubert Foundation, The Shubert Organization, and
Players International, Inc. and has been a director of SafeCard Services, Inc.
and Eastbank, N.A. He has been a Director since 1993.
William J. Shortt, age 74, retired from Johnson & Johnson in 1989. From 1977
to 1989, he was Director of Government and Trade Relations, Southeast at
Johnson & Johnson. Mr. Shortt is also a director of First National Bank of
Habersham. He has been a Director since 1993.
Robert L. Voigt, age 81, served as a consultant to Dixie Yarns Inc. from
1985 until his retirement at the end of 1991. Mr. Voigt also served as a
director of Dixie Yarns, Inc. from 1981 to 1987. He has been a Director since
1993.
A-5
<PAGE>
Committees and Meetings of the Board
The Board has established a Compensation Committee, composed of Messrs.
Seidler, Shortt and Voigt, which establishes salary, incentives and other forms
of compensation and administers the Company's 1994 Stock Option Plan, 1996
Stock Option Plan and the Employee Stock Option Plan and other incentive
compensation and benefit plans applicable to the Company's officers. The Board
has also established an Audit Committee, composed of Messrs. Seidler, Shortt
and Voigt, which recommends to the Board the selection of independent auditors,
and reviews the scope and results of the audit and other services provided by
the independent auditors.
During the year ended September 30, 1999, the Board held a total of 5
meetings, the Audit Committee held 2 meetings and the Compensation Committee
held 2 meetings.
Director Compensation
Outside directors receive $15,000 per annum for services as a director and
$800 per meeting attended. Directors who are members of management do not
receive any meeting attendance fees or additional compensation for service as a
director or service on committees of the Board. All directors are reimbursed
for reasonable out-of-pocket expenses incurred in connection with their
attendance at meetings of the Board and its committees on which they serve.
Under the Company's 1994 Stock Option Plan for Non-Employee Directors (the
"Directors' Plan"), Messrs. Dana, Seidler, Shortt and Voigt were granted non-
qualified stock options (the "Directors' Options") to purchase 28,906, 57,813,
19,271 and 19,271 shares of Common Stock, respectively. The Directors' Plan
does not provide for any further grants of options thereunder.
The purchase price of the shares of Common Stock subject to the Directors'
Options was determined by reference to the fair market value of the Common
Stock, as determined by the Compensation Committee, at the time Messrs. Dana,
Seidler, Shortt and Voigt became members of the Board. As of October 1, 1996,
100% of the number of shares of Common Stock subject to each Director Option
are vested and are exercisable. As a Company employee, Mr. Chill is not
eligible to participate in the Directors' Plan. In the event that the
outstanding shares of Common Stock are changed by reason of reorganization,
merger, consolidation, recapitalization, reclassification, stock split,
combination or exchange of shares and the like, or dividends payable in Common
Stock, an appropriate adjustment shall be made by the Committee in the
aggregate number of shares of Common Stock available under the Directors' Plan
and in the number of shares and price per share subject to outstanding
Directors' Options. The term of each Directors' Option is ten years from the
date of grant.
Executive Officers
Set forth below is the age at November 1, 1999 and certain other information
concerning each person, including their principal occupations and positions for
the past five years, currently serving as an executive officer of the Company:
Leonard Chill, age 67, Chairman and Chief Executive Officer, joined the
Company in December 1973 as President. He has been a Director since 1986. From
1967 until joining the Company, he held a number of positions with Thiokol
Corporation in its Fibers Division, including that of General Manager. Mr.
Chill is also the sole director and sole stockholder of one of the general
partners of Synthetic Management G.P., the entity which is the sole general
partner of the general partner of the Partnership. In addition, Mr. Chill is a
director of Synthetic Textiles Ltd.
Joseph F. Dana, age 52, President, Chief Operating Officer and General
Counsel, joined the Company in May 1997. Prior to joining the Company, Mr. Dana
had been engaged in the private practice of law for over twenty years and had
been a member of the law firm Watson, Dana & Gottlieb, LP, LaFayette, Georgia,
since its formation in 1978, serving as general counsel to the Company since
1987. He has been a Director since 1993.
A-6
<PAGE>
Joseph Sinicropi, age 45, joined the Company in 1995 as Chief Accounting
Officer. He was named Chief Financial Officer and Secretary in February 1996.
Prior to joining the Company, he was an audit senior manager in the
international accounting firm of Deloitte & Touche LLP from 1985 to 1995.
Ralph Kenner, age 55, has been Vice President-Manufacturing since 1984. He
joined the Company in 1974 as Director, Industrial Relations and served in that
capacity until 1976. In 1976, he was appointed Plant Manager and served in that
capacity until 1984. Mr. Kenner is also the sole director and sole stockholder
of one of the general partners of Synthetic Management G.P.
Charles T. Koerner, age 50, joined the Company in 1990 and became Vice
President-Construction Materials Division in 1993. He was named Vice President-
General Manager of the Construction-Materials Division in 1995. Prior thereto,
Mr. Koerner was an engineer with the Ohio Department of Transportation; a sales
engineer, product supervisor and regional engineer with Armco Steel
Corporation; and a sales manager with National Seal Corporation.
John Michael Long, age 56, was Vice President-Nonwoven Fabrics from 1991 to
1996 at which time he was named Vice President-General Manager of the Technical
Textiles Group. Prior thereto, he held a variety of managerial positions with
Spartan Mills, a manufacturer of nonwoven geotextile fabrics. During his last
five years at Spartan, he was Vice President and General Manager.
Bobby Callahan, age 56, joined the Company in 1977 and has been Controller
since 1980. Prior thereto, he held a variety of financial management positions
in the carpet industry.
The Company's Bylaws provide that each officer shall hold office until the
officer's successor is elected or appointed or until the officer's death,
resignation or removal by the Board.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Executive Compensation
The following table sets forth information regarding aggregate cash
compensation, stock option awards and other compensation earned by the
Company's Chief Executive Officer and the four other most highly compensated
executive officers for services rendered in all capacities to the Company and
its subsidiaries in the fiscal years 1997 to 1999.
A-7
<PAGE>
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
--------------------------------- ------------
Fiscal Other Securities
Name and Year Ended Annual Underlying All Other
Principal Position September 30, Salary($) Bonus($) Compensation($) Options (#) Compensation($)
------------------ ------------- -------- ------- -------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Leonard Chill 1999 325,738 338,100 14,674 -- 9,424(1)
Chief Executive Officer 1998 280,000 137,058 7,360 -- 10,424(1)
and President 1997 270,163 144,720 2,168 -- 10,174(1)
Joseph F. Dana 1999 269,380 246,300 21,669 -- 4,000(2)
Chief Operating Officer 1998 225,000 77,580 12,932 -- 5,000(2)
and General Counsel 1997(3) 118,100 75,000 6,586 -- --
Joseph Sinicropi 1999 205,433 193,200 17,417 -- 4,000(2)
Chief Financial Officer 1998 170,000 72,408 12,932 -- 5,000(2)
1997 132,500 51,840 5,312 -- 4,750(2)
Ralph Kenner 1999 171,000 80,180 6,320 -- 4,000(2)
Vice President- 1998 171,000 71,546 5,577 -- 4,800(2)
Manufacturing 1997 154,731 69,768 5,771 -- 4,750(2)
Charles T. Koerner 1999 150,750 62,830 14,398 -- 4,000(2)
Vice President-General 1998 140,603 58,240 8,241 -- 4,218(2)
Manager-Construction 1997 135,839 52,577 8,177 -- 4,075(2)
Materials Division
</TABLE>
- --------
(1) These amounts consist of $5,424 of insurance premiums paid by the Company
under a term life insurance policy in each of 1999, 1998, 1997, and $4,000,
$5,000, and $4,750 contributed by the Company under its 401(k) plan in
1999, 1998 and 1997 respectively.
(2) These amounts represent the annual contribution made by the Company under
its 401(k) plan in the respective year.
(3) Mr. Dana assumed his duties as Chief Operating Officer and General Counsel
on May 21, 1997.
Option Grants
There were no grants of options to the executive officers named in the
Summary Compensation Table made under the Company's 1996 Stock Option Plan
during fiscal 1999.
A-8
<PAGE>
Option Exercises and Holdings
The following table sets forth information with respect to the executive
officers named in the Summary Compensation Table concerning the exercise of
options during fiscal 1999 and unexercised options held as of the end of fiscal
1999, which include grants made under the Company's 1994 and 1996 Stock Option
Plans.
Aggregated Option Exercises In Last Fiscal Year
And Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Shares Options at FY-End at FY-End
Acquired on Value ------------------------- ----------------------------
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Leonard Chill........... -- -- 136,563 8,719 $2,274,461(1) $145,211(1)
Joseph F. Dana.......... -- -- 169,506 -- 1,958,611(2) --
Joseph Sinicropi........ -- -- 45,440 7,247 543,809(3) 120,695(1)
Ralph Kenner............ -- -- 48,757 5,115 812,040(1) 85,182(1)
Charles T. Koerner...... -- -- 30,037 12,451 443,238(4) 142,853(5)
</TABLE>
- --------
(1) Based on the September 30, 1999 price ($27.375 per share) less the exercise
price ($10.72 per share) payable for such shares.
(2) Based on the September 30, 1999 price ($27.375 per share) less the exercise
prices of $6.83 for 28,906 shares; $17.875 for 130,500 shares and $15.00
for 10,100 shares.
(3) Based on the September 30, 1999 price ($27.375 per share) less the exercise
prices of $10.72 for 21,740 shares, $21.375 for 17,500 shares and $15.00
for 6,200 shares.
(4) Based on the September 30, 1999 price ($27.375) per share, less the
exercise prices of $10.72 for 24,162 shares, $21.375 for 5,000 shares and
$15.00 for 875 shares.
(5) Based on the September 30, 1999 price ($27.375) per share, less the
exercise prices of $10.72 for 4,862 shares, $21.375 for 5,000 shares and
$15.00 for 2,625 shares.
A-9
<PAGE>
Description of Certain Employment Agreements
Each of Messrs. Chill, Dana and Sinicropi (the "Executives") are employed by
the Company pursuant to individual employment agreements entered into as of
September 24, 1998, as amended. The term of employment under these agreements
is twenty-five months from January 1, 1999 (the "Effective Date") in the case
of Mr. Chill, four years from the Effective Date in the case of Mr. Dana and
three years from the Effective Date in the case of Mr. Sinicropi; provided that
on the first day of the second month following the Effective Date in the case
of Mr. Chill, on each anniversary of the month following the second Effective
Date in the case of Mr. Dana and on each anniversary of the month following the
first Effective Date in the case of Mr. Sinicropi, and in each case each
successive month, the term is automatically extended for one successive month,
providing a minimum remaining term of two years, unless either party terminates
the agreement by written notice. The maximum term of employment under these
agreements is 25 years. The current annual salaries for Messrs. Chill, Dana and
Sinicropi pursuant to these agreements are $325,000, $275,000 and $210,000,
respectively, and are subject to annual review by the Board.
The Company has the right to terminate the Executive's employment for
"cause" or "without cause," in each case as defined in the applicable
employment agreement. In the event that an Executive is terminated by the
Company "without cause," other than following a "Change in Control" (as defined
below), the Executive is entitled to receive (a) his base salary accrued
through the date of termination, (b) any unpaid, accrued amounts under the
annual incentive plan and (c) certain other supplemental insurance coverages in
the case of Mr. Dana, or lump sum payments in lieu thereof in the case of
Messrs. Chill and Sinicropi. Under these employment agreements, a "Change in
Control" occurs when (i) any person or group becomes the beneficial owner of
capital stock of the Company representing 35% or more of all the voting stock,
(ii) the members of the Board on the Effective Date cease to constitute a
majority of the Board, (iii) the Company combines with another entity and a
person holds 35% or more of the voting stock of the surviving entity or 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, (iv) the Company's stockholders approve a merger, consolidation or
share exchange that results in (A) the conversion or exchange of the Company's
voting stock or (B) the Company's stockholders holding less than 50% of the
combined voting power of the surviving entity, or (v) upon the occurrence of
any event that would be required to be reported in response to Item 6(e) of
Regulation 14A of the Securities Act of 1933, as amended.
If an Executive is terminated by the Company "without cause" prior to the
occurrence of a Change in Control and it can be shown such termination occurred
in connection with, prior to or in anticipation of the Change in Control or, if
following a Change in Control, an Executive is terminated by the Company other
than for "cause," or he terminates his employment within 120 days following the
Change in Control or thereafter terminates his employment for "good reason" (as
defined in the applicable employment agreement), he is entitled to (i) all
accrued and unpaid compensation and benefits, (ii) unpaid, accrued amounts
under the annual incentive plan and a payment under the annual incentive plan
equal to the pro rata amount that would have been due in the termination year,
(iii) certain other supplemental insurance coverages in the case of Mr. Dana,
or lump sum payments in lieu thereof in the case of Messrs. Chill and Sinicropi
and (iv) reimbursement of excise taxes, if any, payable in the event that any
compensation be deemed "parachute payments" under the Internal Revenue Code. In
the event of a Change in Control, whether or not an Executive's employment
continues with the Company, all options granted to him under any of the
Company's stock option plans shall vest immediately on the date of the Change
in Control.
In the event that an Executive's employment is terminated for disability or
death, he (or his estate) is to be paid (a) his base salary accrued through the
date of termination and (b) any unpaid, accrued amounts under the annual
incentive plan. In the case of termination by reason of death, the Executive is
also entitled to a payment under the annual incentive plan equal to the pro
rata amount that would have been due in the termination year.
Each of these employment agreements also provides that the Executive is
restricted from soliciting customers or employees or engaging in certain
restricted activities on behalf of any entity which engages in businesses
similar to that of the Company until two years after the date his employment
ends for any reason,
A-10
<PAGE>
for which he will be paid an amount equal to twice his base salary as in effect
on the date of termination of employment plus twice the payment made under the
annual incentive plan in either the termination year or the immediately
preceding year, whichever is greater.
Mr. Kenner is employed by the Company pursuant to an employment agreement
effective as of September 24, 1998 (the "Kenner Effective Date"). The term of
employment under this agreement is twenty-five months from the Kenner Effective
Date; provided that on the first day of the second month following the Kenner
Effective Date, and in each successive month, the term is automatically
extended for one successive month, providing a minimum remaining term of two
years, unless Mr. Kenner terminates the agreement by written notice. The
current annual salary for Mr. Kenner pursuant to this agreement is $171,000,
and is subject to annual review by the Board.
The Company has the right to terminate Mr. Kenner's employment for "cause"
or "without cause," as defined in the employment agreement. In the event that
Mr. Kenner is terminated by the Company "without cause," other than following a
"Change in Control" (as defined below), he is entitled to receive (a) 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, (b) any unpaid,
accrued amounts under the annual incentive plan, (c) a pro rata payment under
the annual incentive plan for the termination year, (d) a payment equal to the
three year average of incentive payments received under the Company's annual
incentive plan and (e) certain other supplemental insurance coverages. Under
Mr. Kenner's employment agreement, a "Change in Control" occurs when (i) any
person or group becomes the beneficial owner of capital stock of the Company
representing 35% of all the voting stock, (ii) the members of the Board on the
Kenner Effective Date cease to constitute a majority of the Board, (iii) the
Company combines with another entity and a person holds more than 35% of the
voting stock of the Company or 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, (iv) the Company's stockholders
approve a merger, consolidation or share exchange that results in the
conversion or exchange of the Company's voting stock or the Company's
stockholders holding less than 50% of the combined voting power of the
surviving entity, (v) any event that would constitute a change of control (as
defined under Regulation 14A of the Securities Act of 1933, as amended) of the
Partnership, (vi) the removal of the general partner of the Partnership or the
appointment of a liquidating trustee not approved by the general partner or the
Board or (vii) any event that would be required to be reported in response to
Item 6(e) of Regulation 14A of the Securities Act of 1933, as amended.
If Mr. Kenner is terminated by the Company "without cause" prior to the
occurrence of a Change in Control and it can be shown such termination occurred
in connection with, prior to or in anticipation of the Change in Control or, if
following a Change in Control, Mr. Kenner is terminated by the Company other
than for "cause," he is entitled to (i) all accrued and unpaid compensation and
benefits, (ii) a lump sum payment equal to one and one-half times his annual
base salary, plus two times the incentive payments under the annual incentive
plan for the year in which the Change in Control occurs or the prior year,
whichever is greater, (iii) unpaid, accrued amounts under the annual incentive
plan and a payment that equals the average of the incentive payment received by
him under the annual incentive plan for the immediately preceding three years
and (iv) certain other supplemental insurance coverages. In the event of a
Change in Control, whether or not Mr. Kenner's employment continues with the
Company, all options granted to him under any of the Company's stock option
plans shall vest immediately on the date of the Change in Control.
In the event that Mr. Kenner's employment is terminated for disability or
death, he (or his estate) is to be paid (a) his base salary accrued through the
date of termination and (b) any unpaid, accrued amounts under the annual
incentive plan. In the case of termination by reason of death, the Executive is
also entitled to a payment under the annual incentive plan equal to the pro
rata amount due for the termination year.
This employment agreement also provides that Mr. Kenner is restricted from
soliciting customers or employees or engaging in certain restricted activities
on behalf of any entity which engages in businesses similar to that of the
Company until two years after the date his employment ends for any reason, for
which he will be paid an amount equal to one-half his base salary as in effect
on the date of termination of employment.
A-11
<PAGE>
Mr. Koerner is employed by the Company pursuant to an employment agreement
effective as of September 24, 1998 (the "Koerner Effective Date"). The term of
employment under this agreement is three years from the Koerner Effective Date;
provided that on the first day of the month following the Koerner Effective
Date, and in each successive month, the term is automatically extended for one
successive month, providing a minimum remaining term of two years, unless Mr.
Koerner terminates the agreement by written notice. The maximum term of
employment under this agreement is 25 years. The current annual salary for Mr.
Koerner pursuant to this agreement is $151,000, and is subject to annual review
by the Board.
The Company has the right to terminate Mr. Koerner's employment for "cause"
or "without cause," as defined in the employment agreement. In the event that
Mr. Koerner is terminated by the Company "without cause," other than following
a "Change in Control" (as defined below), he is entitled to receive (a) 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, (b) any
unpaid, accrued amounts under the annual incentive plan, (c) a pro rata payment
under the annual incentive plan for the termination year and (d) a lump-sum
payment equal to certain supplemental insurance premiums. Under Mr. Koerner's
employment agreement, a "Change in Control" occurs when (i) any person or group
becomes the beneficial owner of capital stock of the Company representing 35%
of all the voting stock, (ii) the members of the Board on the Effective Date
cease to constitute a majority of the Board, (iii) the Company combines with
another entity and a person holds more than 35% of the voting stock of the
Company or 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, (iv) the Company's stockholders approve a merger,
consolidation or share exchange that results in the conversion or exchange of
the Company's voting stock or the Company's stockholders holding less than 50%
of the combined voting power of the surviving entity, (v) any event that would
constitute a change of control (as defined under Regulation 14A of the
Securities Act of 1933, as amended) of the Partnership, (vi) the removal of the
general partner of the Partnership or the appointment of a liquidating trustee
not approved by the general partner or the Board or (vii) any event that would
be required to be reported in response to Item 6(e) of Regulation 14A of the
Securities Act of 1933, as amended.
If Mr. Koerner is terminated by the Company "without cause" prior to the
occurrence of a Change in Control and it can be shown such termination occurred
in connection with, prior to or in anticipation of the Change in Control or, if
following a Change in Control, Mr. Koerner is terminated by the Company other
than for "cause," he is entitled to (i) all accrued compensation and benefits,
(ii) a lump sum payment equal to one and one-half times his annual base salary,
plus two times the incentive payments under the annual incentive plan for
either the year in which the Change in Control occurs or the prior year,
whichever is greater, (iii) unpaid, accrued amounts under the annual incentive
plan, (iv) a payment that equals the average of the incentive payments received
by him under the annual incentive plan for the immediately preceding three
years, (v) certain other supplemental insurance coverages and (vi)
reimbursement of excise taxes, if any, payable in the event that any
compensation be deemed "parachute payments" under the Internal Revenue Code. In
the event of a Change in Control, whether or not Mr. Koerner's employment
continues with the Company, all options granted to him under any of the
Company's stock option plans shall vest immediately on the date of the Change
in Control.
In the event that Mr. Koerner's employment is terminated for disability or
death, he (or his estate) is to be paid (a) his base salary accrued through the
date of termination and (b) any unpaid, accrued amounts under the annual
incentive plan. In the case of termination by reason of death, the Executive is
also entitled to a payment under the annual incentive plan equal to the pro
rata amount due for the termination year.
This employment agreement also provides that Mr. Koerner is restricted from
soliciting customers or employees or engaging in certain restricted activities
on behalf of any entity which engages in businesses similar to that of the
Company until two years after the date his employment ends for any reason, for
which he will be paid an amount equal to one-half his base salary as in effect
on the date of termination of employment.
A-12
<PAGE>
STOCK PRICE PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total stockholder return (change in year-end stock price plus
reinvested dividends) on the Company's Common Stock against the cumulative
total return of the Standard & Poor's Small Cap 600 Index and the Standard &
Poor's Building Materials Industry Index from November 1, 1996 to September 30,
1999.
[LINE CHART]
<TABLE>
<CAPTION>
Company/Index Nov. 1, 1996 Sept. 1997 Sept. 1998 Sept. 1999
---------------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C>
SYNTHETIC
INDUSTRIES INC 100 223.08 125.00 210.58
S&P SMALL CAP
600 INDEX 100 137.92 112.17 131.84
BUILDING
MATERIALS--
SMALL 100 139.79 94.58 101.06
</TABLE>
There can be no assurance that the Company's stock performance will continue
into the future with the same or similar trends depicted in the graph above.
The Company will not make or endorse any predictions as to future stock
performance.
A-13
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE OF
THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
Compensation Program
The Company's compensation program for all executives, including the
executive officers named in the Summary Compensation Table, is administered by
the Compensation Committee (the "Committee") of the Company's Board of
Directors. The Committee currently consists of three members, all of whom are
non-employee directors. Set forth below is a report submitted by the Committee
addressing the Company's executive compensation program for fiscal 1999.
The Committee believes that executive compensation should reward long-term
value created for stockholders and reflect the business strategies and long-
range plans of the Company. The guiding principles with respect to compensation
are (i) to provide a competitive package that enables the Company to attract,
motivate and retain the key executives needed to accomplish its corporate
goals; (ii) to integrate compensation programs with the Company's annual and
long-term business objectives and strategy; and (iii) to provide variable
compensation opportunities that are directly linked with the performance of the
Company and that align executive remuneration with the interests of the
stockholders. In connection with this philosophy, the compensation package of
the executive employees of the Company consists of three components: a base
salary, an annual incentive bonus and long-term incentives in the form of stock
options. The Committee is responsible for reviewing the Company's compensation
program to ensure that pay levels and incentive opportunities are competitive
and reflect the performance of the Company. Each component of the executive
compensation program is described below.
Base Salary
The factors considered in determining the appropriate salary are level of
responsibility, prior experience and accomplishments, and the relative
importance of the job in terms of achieving corporate objectives. Each
executive's salary is reviewed annually. Adjustments may be recommended based
upon individual performance, inflationary and competitive factors and overall
corporate results.
In setting base salaries for fiscal 1999, the Committee attempted to
establish base salary levels consistent with the median base salary for
executives in similar positions within a peer group of approximately 20
companies of similar size and market orientation. The Chief Executive Officer,
after consultation with the senior human resources executive of the Company,
the Chief Operating Officer and the Chief Financial Officer, reviewed with the
Committee a proposed 1999 salary plan for the Company's executive officers,
following which the Committee approved the proposed 1999 plan at the September
24, 1998 meeting.
Annual Incentive Compensation
Cash bonuses are paid annually based upon individual performance and
relevant corporate performance measures, including divisional operating income,
consolidated net income and customer satisfaction. These performance measures
vary depending upon the executive and the related line of business. Bonuses are
paid only if the Company has met certain targets established by the Board at
the beginning of the year. Target awards are established for each position as a
percentage of base salary, based on competitive salary data, and performance is
assessed at the end of the year. Whether or not an executive officer earns a
bonus in any year is based upon actual corporate performance relative to the
targets established at the beginning of the year and on individual performance.
Partial bonuses may be awarded if minimum corporate performance measures are
achieved. For executive officers, the percentage of base salary payable as
bonus ranges from 25% to 100%.
The Committee administers the Company's incentive program, recommends to the
Board the aggregate amount of incentive compensation and approves individual
officer awards. The Board approves the aggregate amount of the incentive
compensation awards to all participants.
A-14
<PAGE>
Stock Options
The Company has, on certain occasions, awarded stock options to executive
officers to provide competitive compensation packages and because the Company
believes it is important that all of its key executive officers have a strong
economic interest in maximizing stock price appreciation, thereby aligning
their interests with the Company's stockholders. Option exercise prices are set
at 100% of fair market value on the date of the grant and options expire after
10 years. The stock options granted by the Committee vest at a rate of 25% per
year beginning one year after the grant date in order to encourage management
continuity and better tie compensation to long-term stock value. In fiscal
1999, the Company granted a total of 7,500 options to 2 employees.
Compensation of Chief Executive Officer
On September 24, 1998, the Board approved a new, twenty-five month
employment contract for Mr. Chill, effective as of September 24, 1998, as
amended on January 1, 1999. Accordingly, Mr. Chill's fiscal 1999 compensation
was largely determined by the terms of that employment agreement. The terms of
Mr. Chill's employment agreement provide for a base salary of $325,000 per
annum and a bonus determined by the Committee with reference to the performance
of Mr. Chill and the performance and results of operations of the Company. The
Committee considered certain performance goals and achievements in determining
the bonus for Mr. Chill for fiscal 1999. The Committee's determination of Mr.
Chill's bonus for fiscal 1999 was based on the factors cited above and such
bonus and his salary reflect the overall responsibilities inherent in his
position as Chairman and Chief Executive Officer.
Other Compensation Policies
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), limits the tax deduction that the Company may take with respect to the
compensation of certain executive officers, unless the compensation is
"performance based" as defined in the Code. The Company has not adopted a
policy with respect to qualifying compensation paid to its executive officers
for deductibility under Section 162(m) since no executive officer currently
receives, or has received, taxable compensation in excess of $1 million per
year.
The report of the Committee shall not be deemed incorporated by reference by
any general statement incorporating by reference this Proxy Statement into any
filing under the Securities Act of 1933, as amended, or under the Securities
Exchange Act of 1934, as amended, except to the extent that the Company
specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts.
Compensation Committee of the Board of Directors:
Robert L. Voigt, Chairman
Lee J. Seidler
William J. Shortt
November 12, 1999
A-15
<PAGE>
SECTION 16(a) BENEFICIAL REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than 10% of a registered class of the
Company's equity securities, to file initial reports of ownership and reports
of changes in ownership (Forms 3, 4 and 5) of Common Stock and other equity
securities of the Company with the SEC and the Nasdaq National Market.
Officers, directors and greater-than-10% beneficial holders are required by SEC
regulation to furnish the Company with copies of all such forms that they file.
To the Company's knowledge, based solely on the Company's review of the
copies of such reports received by the Company and, if applicable, written
representations from certain reporting persons, that no reports on Form 5 were
required. The Company believes that during the fiscal year ended September 30,
1999, its officers, directors and greater-than-10% beneficial owners complied
with all applicable Section 16(a) filing requirements.
A-16
<PAGE>
Exhibit (a)(1)
[SYNTHETIC INDUSTRIES, INC. LETTERHEAD]
November 12, 1999
Dear Stockholder:
On November 5, 1999, Synthetic Industries, Inc. (the "Company") entered into
a merger agreement with SIND Holdings, Inc. ("Parent"), a company organized by
Investcorp, a global investment group, and SIND Acquisition, Inc.
("Purchaser"), a wholly owned subsidiary of Parent.
Pursuant to the merger agreement, Purchaser has today commenced a cash
tender offer for all outstanding shares of common stock, par value $1.00 per
share, of the Company at a price of $33.00 per share net to the seller in cash.
The tender offer is conditioned, among other things, upon a majority of the
outstanding shares being validly tendered. Synthetic Industries, L.P., which
owns approximately 66% of the outstanding shares, has agreed to tender its
shares to Purchaser pursuant to an agreement with Purchaser that was entered
into at the same time as the merger agreement. The merger agreement provides
that, following the tender offer. Purchaser will merge with and into the
Company and any remaining shares of common stock of the Company will be
converted into the right to receive $33.00 per share in cash, without interest.
In arriving at its recommendation, the Board of Directors gave careful
consideration to the factors described in the enclosed Schedule 14D-9,
including, among other things, the opinion of The Beacon Group Capital
Services, LLC, the Company's financial advisor, that the terms of the tender
offer and the merger are fair, from a financial point of view, to the
stockholders of the Company.
At a meeting held on November 4, 1999, the Board of Directors of the Company
unanimously approved the tender offer and the merger and determined, based
upon, among other things, the recommendation of an independent committee of the
Board, that the tender offer and the merger are fair and in the best interests
of the stockholders of the Company. The Board of Directors unanimously
recommends that stockholders accept the offer and tender their shares pursuant
to the offer.
Enclosed for your consideration are copies of the tender offer materials and
the Company's Schedule 14D-9, which are being filed today with the Securities
and Exchange Commission. Theses documents should be read carefully. In
particular, I call your attention to Item 4 of the enclosed Schedule 14D-9,
which describes the reasons for the Board's recommendations.
Sincerely,
/s/ Leonard Chill
------------------------------------
Leonard Chill
Chairman and Chief Executive Officer
<PAGE>
Exhibit (a)(2)
INVESTCORP TO ACQUIRE SYNTHETIC INDUSTRIES, INC.
FOR $33.00 PER SHARE IN CASH
CHICKAMAUGA, GA and NEW YORK, NY - NOVEMBER 5, 1999 - Synthetic Industries,
Inc. (NASDAQ: SIND) today announced that it has entered into a definitive merger
agreement with SIND Holdings, Inc., a company organized by Investcorp, a global
investment group, and certain international co-investors, under which SIND
Holdings will acquire outstanding Synthetic shares for $33 per share in cash,
representing a 13.6 percent premium to the value of the Company's shares at the
close of trading on November 2, 1999, and over a 60 percent premium to the
average trading price of Synthetic shares in the 30 days preceding the public
announcement of the initiation of the sale process. The total value of the
transaction is approximately $535 million, based on 9.2 million fully diluted
shares outstanding, as well as the assumption or repayment of approximately $230
million in Synthetic debt. The acquisition is scheduled to close by mid-December
1999.
The proposed acquisition concludes a sale process commenced in May 1999 by
a committee of independent members of the Company's Board of Directors. The sale
process was initiated in accordance with the terms of a settlement agreement
relating to two civil suits involving the Company and the general partner of
Synthetic Industries, L.P., a limited partnership which currently owns
approximately 65% of the common stock of Synthetic Industries, Inc. Synthetic
Industries, L.P. has agreed to tender its shares in the offer.
The transaction will be structured as a cash tender offer for all
outstanding Synthetic shares followed by a merger in which all nontendering
Synthetic shareholders will receive $33 per share. The tender offer will be made
by a wholly-owned subsidiary of SIND Holdings and will be commenced within the
next several days. The transactions are subject to customary conditions.
Christopher O'Brien, a member of Investcorp's Management Committee, said,
"Synthetic Industries possesses all of the attributes we look for in our
investments: an excellent management team; a sharp focus on customers' needs
supported by strong product development; and exceptional growth prospects. We
look forward to partnering with Synthetic's senior management team as they
continue to grow the Company and its broad offerings of commercially successful
products."
<PAGE>
Leonard Chill, Chairman and Chief Executive Officer of Synthetic
Industries, Inc. said: "We look forward to working with Investcorp as we
continue to grow the Company with new product initiatives that we believe will
increase the Company's presence in a range of its target markets."
Beacon Group Capital Services, LLC acted as the Company's financial advisor
in the sale process.
Synthetic Industries manufactures and markets a wide range of
polypropylene-based woven and non-woven materials designed for support, strength
and stabilization applications. The Company operates in three primary markets:
construction materials, carpet backing and technical textiles. Synthetic's
products replace commonly used materials with efficient, high-performance
products providing support, strength and stabilization in such applications as
construction products, floor covering, erosion control and waste containment.
The Company, which is based in Chickamauga, Georgia, operates from seven
manufacturing facilities and employs over 2,700 people.
Investcorp is a global investment group with offices in New York, London
and Bahrain. It focuses on three lines of business: corporate investment, real
estate investment and asset management. The firm has completed over 50 corporate
acquisitions with an aggregate value of approximately $13 billion. In the U.S.,
Investcorp and its clients currently own 10 corporate investments, including
Stratus Computer, Werner Holdings, Falcon Building Products, NationsRent, Inc.
and The William Carter Company. Several North American investments have been
listed on the New York Stock Exchange, including Prime Service, Tiffany & Co.,
the Circle K Corporation, Saks Fifth Avenue and CSK Auto. In Europe, Investcorp
and its clients currently own seven corporate investments, including Avecia
(formerly Zeneca Specialties), Leica Geosystems, Polestar, Welcome Break and
Helly Hansen. Additional information about Investcorp may be found at
www.Investcorp.com.
- ------------------
# # #
<PAGE>
EXHIBIT (a)(3)
[BEACON LETTERHEAD]
November 4, 1999
Confidential
- ------------
Special Committee of the Board of Directors
Synthetic Industries, Inc.
309 LaFayette Road
Chickamauga, GA 30707
Gentlemen:
You have requested our opinion as to the fairness from a financial point of view
of the consideration to be received by the stockholders of Synthetic Industries,
Inc. (the "Company") for all of the outstanding shares of common stock, par
value $1.00 per share, of the Company (the "Shares") in connection with the
proposed acquisition of the Company by SIND Holdings, Inc. ("Acquiror") pursuant
to a proposed Agreement and Plan of Merger, dated November 4, 1999 (the "Merger
Agreement"), by and among Acquiror, SIND Acquisition, Inc. ("Sub") and the
Company.
As more specifically set forth in the Merger Agreement, Sub will commence an
offer (the "Proposed Tender Offer") to purchase all of the outstanding Shares at
a price in cash of $33.00 per Share. Following consummation of the Proposed
Tender Offer, Sub will be merged with and into the Company (or, at the election
of Acquiror, the Company will be merged with and into Sub) (the "Proposed
Merger" and together with the Proposed Tender Offer, the "Proposed Transaction")
and each then outstanding Share (other than Shares held in the treasury of the
Company, Shares owned by Sub, Acquiror or any wholly-owned subsidiary of
Acquiror or of the Company, and Shares as to which appraisal rights have been
properly exercised under applicable law) will be converted into the right to
receive, in cash, the amount paid for a Share pursuant to the Proposed Tender
Offer.
Consummation of the Proposed Transaction is subject to the execution of the
Merger Agreement by Acquiror, Sub and the Company, approval by the Company's
Board of Directors and other terms and conditions in the Merger Agreement.
As part of our strategic advisory business, we engage in the valuation of
businesses and their securities in connection with mergers and acquisitions,
private placements, financings, principal investments and other purposes. In
this regard we have been serving as financial advisor to the Company and have
participated in certain of the negotiations relating to the Proposed
Transaction.
<PAGE>
Synthetic Industries, Inc.
November 4, 1999
Page 2
In connection with our opinion, we reviewed, among other things, the Merger
Agreement, Annual Reports to stockholders for the three years ended September
30, 1998, Annual Reports on Form 10-K of the Company for the six years ended
September 30, 1998, certain interim reports to stockholders and Quarterly
Reports on Form 10-Q of the Company, certain other communications from the
Company to its stockholders and certain internal financial analyses and
forecasts for the Company prepared by its management. We also held discussions
with members of senior management of the Company regarding the past and current
business, operations, financial condition and future prospects of the Company,
reviewed the reported price and trading activity for the Shares, compared
certain financial and stock market information concerning the Company with
similar information concerning certain other companies the securities of which
are publicly traded, reviewed the financial terms of certain recent business
combinations in the industries and markets we deemed relevant and performed such
other studies and analyses as we considered appropriate.
For purposes of our opinion, we assumed and relied without independent
verification on the accuracy and completeness of the financial and other
information provided to us. We did not make an independent evaluation or
appraisal of assets and liabilities of the Company or any of its subsidiaries
and were not furnished with any such evaluation or appraisal.
Our opinion is provided to you for your information in connection with your
consideration of the Proposed Transaction and does not constitute a
recommendation to any stockholder of the Company. Our opinion is necessarily
based on economic, market, financial and other conditions as they existed on,
and could be evaluated as of, the date hereof.
Based on and subject to the foregoing and such other matters as we consider
relevant, it is our opinion that as of the date hereof the $33.00 per Share cash
consideration to be received in the Proposed Transaction by the stockholders of
the Company is fair to those stockholders from a financial point of view.
Very truly yours,
THE BEACON GROUP CAPITAL SERVICES, LLC
/s/ The Beacon Group Capital Services, LLC
<PAGE>
EXHIBIT (C)(1)
SYNTHETIC INDUSTRIES, INC.
RETENTION BONUS PLAN
A retention bonus plan was first proposed by the Board of Directors of the
Company at the time of the Board's decision to pursue a sale of the Company in
an auction process (a "Sale Transaction"). At the time of such decision, the
Board recognized the danger that many of the Company's executive officers would
consider other employment opportunities on account of the auction process and
that the loss of one or more of these executives would be detrimental to both
the Company's business and prospects and the success of the auction process.
Accordingly, the Board at such time gave the executives of the Company
assurances that their continued employment through the remainder of the
Company's fiscal year would be rewarded by a retention bonus granted under a
plan to be adopted thereafter by the Board.
The Board has recently adopted the Retention Bonus Plan. Each executive
listed on Exhibit A hereto shall be paid, on the first to occur of (i) the date
of execution of a definitive agreement covering a Sale Transaction or (ii)
December 1, 1999 (the "Payment Date"), the bonus amount set forth opposite his
name on Exhibit A, as long as prior to the Payment Date he has not left the
employ of the Company voluntarily or been terminated by the Board for cause.
At any time while the auction process is continuing and prior to the
execution by the Company of a definitive agreement regarding a Sale Transaction,
the Board may award additional bonuses to executives (whether or not listed on
Exhibit A hereto) if in the sole and absolute discretion of the Board such
bonuses are necessary to preserve and protect the Company's management during
the continuation of the auction process. The executives entitled to such
additional bonuses, the amount of such bonuses and the date of payment of such
bonuses, together with such additional conditions and restrictions as the Board
shall deem necessary or advisable, shall be set forth in a resolution of the
Board at the time of the grant of such additional bonuses.
<PAGE>
EXHIBIT A
---------
Synthetic Industries
Retention & Success Bonus Plan
30 executives of the Company were eligible to receive
bonuses in the aggregate amount of $2,940,000.
<PAGE>
EXHIBIT (c)(2)
SYNTHETIC INDUSTRIES, INC.
SUCCESS BONUS PLAN
A success bonus plan was first proposed by the Board of Directors of the
Company at the time of the Board's decision to pursue a sale of the Company in
an auction process (a "Sale Transaction"). At the time of such decision, the
Board recognized that certain senior executive officers of the Company would be
required to devote substantial time and effort to a Sale Transaction that would
be in addition to their normal duties. Additionally, the Board recognized that
the efforts made by such senior executives would substantially affect the
successful consummation of a Sale Transaction and the price that would be
received by the Company's shareholders. Accordingly, the Board at such time
gave these senior executives of the Company assurances that their efforts in
preparing for and implementing such an auction process and in consummating a
Sale Transaction would be rewarded by a success bonus granted under a plan to be
adopted thereafter by the Board.
The Board has recently adopted the Success Bonus Plan. Each Particpant
named in the terms set out below shall be paid on the date of consummation of a
Sale Transaction (the "Payment Date") the Success Bonus Amount determined in
accordance with the terms set out below as long as prior to the Payment Date he
has not left the employ of the Company voluntarily or been terminated by the
Board for cause.
In the event that the auction process described above does not result in
the consummation of a Sale Transaction, this Success Bonus Plan shall
automatically, and without any further action required by the Board, terminate
upon the liquidating distribution of the Company's Common Stock held by
Synthetic Industries, LP to the limited partners of Synthetic Industries, LP.
<PAGE>
Success Bonus Plan Terms
General:
Success Bonus Each Executive Participant shall be entitled to receive a
Amounts Success Bonus in an amount equal to his Base Portion plus his
Incentive Portion (if any). Each Other Participant shall be
entitled to receive a Success Bonus in an amount equal to his
Base Portion (if any).
Executive Leonard Chill, Chief Executive Officer
Participants Joseph F. Dana, President and Chief Operating Officer
Joseph Sinicropi, Secretary and Chief Financial Officer
Other Such other officers or directors of the Company as the Board
Participants in its sole and absolute discretion shall designate by
resolution adopted on or before the date of execution of a
definitive agreement for a Sale Transaction (an "Award
Resolution")
Calculation:
Base Portion Mr. Chill: $ 765,000
Mr. Dana: $ 700,000
Mr. Sinicropi: $ 400,000
Other Participants: The amounts, if any, designated in an
Award Resolution
Awardable Excess For the purpose of determining the Incentive Portion, if
Purchase Price any, Awardable Excess Purchase Price shall mean 1% of the
amount by which the aggregate purchase price of the Sale
Transaction exceeds the aggregate purchase price attributable
to $35 per share
Incentive Portion For each Executive Participant, such portion of the Awardable
Excess Purchase Price (whether all, a percentage thereof or
none) as the Board, in its sole and absolute discretion,
shall award by resolution adopted on or prior to the closing
of the Transaction
<PAGE>
EXHIBIT (c)(3)
Employment Agreement
This Agreement ("Agreement") is made and entered into as of the 1st day of
January, 1999 ("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 term of twenty-four
(24) months. Either party may halt future extension by written notice, in
<PAGE>
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 Executive
Officer of the Corporation and, until August 1, 1999, also President 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 Lee Highway,
Chattanooga, Tennessee.
4. Compensation.
------------
(a) Base Salary. During the term set forth in Section 2 above, the
-----------
Corporation shall pay Executive a b ase salary, payable in accordance with the
Corporation's standard payroll practices, of $325,000 per annum. 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
2
<PAGE>
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.
(d) Life Insurance. For twenty years (or until Executive's death, if
--------------
earlier), the Corporation will pay the premiums on that certain $1,500,000 face
value life insurance policy on Executive's life with Banner Life Insurance
Company. Executive shall be the sole owner of such policy.
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
-----------
3
<PAGE>
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.
(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.
4
<PAGE>
(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 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.
5
<PAGE>
(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. 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
6
<PAGE>
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 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 accrued through 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.
(iii) Executive's rights with respect to stock options, if any,
shall be determined under the Option Plan and any applicable stock option
agreement.
7
<PAGE>
(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
8
<PAGE>
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) "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).
(D) "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
9
<PAGE>
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; or
(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
10
<PAGE>
combined voting power for election of directors of the surviving corporation
following the effective date of such merger, consolidation or share exchange.
(E) "Code" means the Internal Revenue Code of 1986, including
any amendments thereto.
(F) "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
11
<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.
(G) "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.
(H) "Person" or "Group" means a "person" or "group," as defined
in the definition of "Change in Control" above.
(I) "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:
12
<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 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; and
(C) 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.
(D) 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.
13
<PAGE>
(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.
(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
14
<PAGE>
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.
(iii) Executive's rights with respect to stock options, if any,
shall be determined under the Option Plan and any applicable stock option
agreement.
15
<PAGE>
(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:
16
<PAGE>
(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
17
<PAGE>
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
18
<PAGE>
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
19
<PAGE>
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 (i) two times Executive's base salary at the rate in effect on the
date of the termination of employment (or, in the event of a termination for
Good Reason, 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
termination of employment or the immediately preceding Year (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
20
<PAGE>
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
to 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.
21
<PAGE>
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. (S) 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. (S) 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
22
<PAGE>
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 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 Agreements between the parties and, together
with such plans and programs
23
<PAGE>
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 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
9710 Mountainaire Drive
Ooltewah, TN 37363
24
<PAGE>
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.
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.
-------------
25
<PAGE>
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: /s/ Leonard Chill
----------------------------------------
Leonard Chill
Title: President and Chief Executive Officer
Date: October 15, 1999
26
<PAGE>
EXHIBIT (c)(4)
Employment Agreement
This Agreement ("Agreement") is made and entered into as of the 1st day of
January, 1999 ("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 successive one month periods, providing a minimum remaining term of two
years. Either party
<PAGE>
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 and, effective as of August 1, 1999, as President 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 of $275,000 per annum. 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
2
<PAGE>
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. Executive's eligibility to receive health insurance
following a "Change in Control" shall be determined in accordance with Section
7(e)(3).
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.
3
<PAGE>
(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.
4
<PAGE>
(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
5
<PAGE>
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.
6
<PAGE>
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 accrued through
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.
(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 participate in whatever hospital, medical, and dental group benefit
programs the Corporation or its successor makes available to salaried
executives, on the same terms and conditions those
7
<PAGE>
benefits are made available to salaried executives of the Corporation or its
successor, 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 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
8
<PAGE>
securities, by contract or otherwise, and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
(C) "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).
(D) "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
9
<PAGE>
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; or
(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.
10
<PAGE>
(E) "Code" means the Internal Revenue Code of 1986, including
any amendments thereto.
(F) "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 Executive's principal place of employment at the time of such Change
in Control, or the
11
<PAGE>
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.
(G) "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.
(H) "Person" or "Group" means a "person" or "group," as
defined in the definition of "Change in Control" above.
(I) "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:
12
<PAGE>
(A) Executive shall be entitled to all compensation and
benefits accrued through the date of termination of employment; and
(B) 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; and
(C) 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 and Health Insurance upon Change in
------------------------------------------------------
Control.
--------
(A) 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.
(B) In the event of a Change in Control, whether or not
Executive's employment continues with the Corporation, Executive and his covered
dependents shall become entitled to continue to participate in whatever
hospital, medical, and dental group benefit
13
<PAGE>
programs the Corporation or its successor makes available to salaried
executives, on the same terms and conditions those benefits are made available
to salaried executives of the Corporation or its successor, until he reaches
age 65.
(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
14
<PAGE>
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.
(iii) Executive's rights with respect to stock options, if any,
shall be determined under the Option Plan and any applicable stock option
agreement.
15
<PAGE>
(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:
16
<PAGE>
(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
17
<PAGE>
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
18
<PAGE>
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
19
<PAGE>
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 (i) two times Executive's base salary at the rate in effect on
the date of the termination of employment (or, in the event of a termination for
Good Reason, 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
termination of employment or the immediately preceding Year (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
20
<PAGE>
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
to 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.
21
<PAGE>
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. (S) 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. (S) 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
22
<PAGE>
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 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 Agreements between the parties and, together with such
plans and programs as are
23
<PAGE>
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 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
326 Hickory Creek Lane
LaFayette, GA 30728
24
<PAGE>
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.
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.
25
<PAGE>
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: /s/ Joseph Dana
--------------------------
Joseph Dana
Title: Chief Operating Officer
Date: October 15, 1999
26
<PAGE>
EXHIBIT (c)(5)
Employment Agreement
This Agreement ("Agreement") is made and entered into as of the 1st day of
January, 1999 ("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 one month periods, providing a minimum remaining term of two
years. Either party may halt
<PAGE>
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, of $210,000 per annum. 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
2
<PAGE>
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 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 accrued through 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.
(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.
7
<PAGE>
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.
8
<PAGE>
(C) "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).
(D) "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;
9
<PAGE>
(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; or
(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.
(E) "Code" means the Internal Revenue Code of 1986, including any
amendments thereto.
10
<PAGE>
(F) "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 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;
11
<PAGE>
(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.
(G) "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.
(H) "Person" or "Group" means a "person" or "group," as defined in
the definition of "Change in Control" above.
(I) "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.
12
<PAGE>
(B) 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; and
(C) 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.
(D) 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.
13
<PAGE>
(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 pay to or distribute for the benefit of Executive
in the future such amounts as become due to Executive under this Agreement.
14
<PAGE>
(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 participate in such programs, if any, shall be as
determined under the provisions of such benefit programs.
15
<PAGE>
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.
(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.
16
<PAGE>
(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 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
17
<PAGE>
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.
(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
18
<PAGE>
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 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 (i) two times Executive's base salary at the rate in effect on
the date of the termination of employment (or, in the event of a termination for
Good
19
<PAGE>
Reason, 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
termination of employment or the immediately preceding Year (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 to arbitration, to secure specific
performance and to prevent a breach or contemplated breach of the obligations
contained in this Section.
20
<PAGE>
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. (S) 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. (S) 9-9-1, et seq.
-- ---
21
<PAGE>
(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
22
<PAGE>
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 Agreements 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.
23
<PAGE>
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 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
5852 Brookstone Walk
Acworth, GA 30101
24
<PAGE>
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.
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.
25
<PAGE>
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: /s/ Joseph Sinicropi
_____________________________
Joseph Sinicropi
Title: Chief Financial Officer
Date: October 15, 1999
26
<PAGE>
AGREEMENT AND PLAN OF MERGER
Dated as of November 5, 1999,
Among
SIND HOLDINGS, INC.,
SIND ACQUISITION, INC.
and
SYNTHETIC INDUSTRIES, INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE I THE OFFER AND THE MERGER
<S> <C>
SECTION 1.01 The Offer............................................................. 2
SECTION 1.02 Company Actions....................................................... 3
SECTION 1.03 The Merger............................................................ 4
SECTION 1.04 Closing............................................................... 4
SECTION 1.05 Effective Time........................................................ 4
SECTION 1.06 Effects............................................................... 4
SECTION 1.07 Certificate of Incorporation and By-laws.............................. 4
SECTION 1.08 Directors............................................................. 5
SECTION 1.09 Officers.............................................................. 5
ARTICLE II EFFECT ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES
SECTION 2.01 Effect on Capital Stock............................................... 5
SECTION 2.02 Exchange of Certificates.............................................. 6
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.01 Organization, Standing and Power...................................... 8
SECTION 3.02 Company Subsidiaries; Equity Interests................................ 9
SECTION 3.03 Capital Structure..................................................... 9
SECTION 3.04 Authority; Execution and Delivery; Enforceability..................... 10
SECTION 3.05 No Conflicts; Consents................................................ 11
SECTION 3.06 SEC Documents; Undisclosed Liabilities................................ 11
SECTION 3.07 Information Supplied.................................................. 12
SECTION 3.08 Absence of Certain Changes or Events.................................. 13
SECTION 3.09 Taxes................................................................. 13
SECTION 3.10 Employee Benefit Plans................................................ 14
SECTION 3.11 Litigation; Settlement of Stockholder Disputes........................ 16
SECTION 3.12 Environmental Matters; Compliance with Environmental Laws;
Other Applicable Laws................................................. 17
SECTION 3.13 Title to Properties................................................... 18
SECTION 3.14 Confidentiality and Other Agreements.................................. 18
SECTION 3.15 Brokers; Schedule of Fees and Expenses................................ 19
SECTION 3.16 Opinion of Financial Advisor.......................................... 19
SECTION 3.17 Compliance With Laws; Permits......................................... 19
SECTION 3.18 Contracts............................................................. 19
SECTION 3.19 Insurance............................................................. 20
SECTION 3.20 Intellectual Property................................................. 20
SECTION 3.21 Labor Relations....................................................... 21
SECTION 3.22 Transactions With Affiliates.......................................... 21
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
SECTION 4.01 Organization, Standing and Power...................................... 21
SECTION 4.02 Merger Sub............................................................ 21
SECTION 4.03 Authority; Execution and Delivery; Enforceability..................... 22
SECTION 4.04 No Conflicts; Consents................................................ 22
SECTION 4.05 Information Supplied.................................................. 22
SECTION 4.06 Brokers............................................................... 23
SECTION 4.07 Financing............................................................. 23
SECTION 4.08 Litigation............................................................ 23
SECTION 4.09 Copies of Documents................................................... 23
</TABLE>
<PAGE>
<TABLE>
ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS
<S> <C>
SECTION 5.01 Conduct of Business................................................... 23
SECTION 5.02 No Solicitation....................................................... 26
ARTICLE VI ADDITIONAL AGREEMENTS
SECTION 6.01 Preparation of Proxy Statement; Stockholders Meeting.................. 27
SECTION 6.02 Access to Information; Confidentiality................................ 28
SECTION 6.03 Reasonable Efforts; Notification...................................... 28
SECTION 6.04 Benefit Plans......................................................... 29
SECTION 6.05 Indemnification....................................................... 30
SECTION 6.06 Fees and Expenses..................................................... 31
SECTION 6.07 Public Announcements.................................................. 31
SECTION 6.08 Transfer Taxes........................................................ 31
SECTION 6.09 Directors............................................................. 32
SECTION 6.10 Debt Offer............................................................ 32
SECTION 6.11 Cooperation With Financing Efforts.................................... 33
SECTION 6.12 Consents.............................................................. 34
ARTICLE VII CONDITIONS PRECEDENT
SECTION 7.01 Conditions to Each Party's Obligation to Effect the Merger............ 34
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01 Termination........................................................... 34
SECTION 8.02 Effect of Termination................................................. 35
SECTION 8.03 Amendment............................................................. 35
SECTION 8.04 Extension; Waiver..................................................... 36
SECTION 8.05 Procedure for Termination Amendment, Extension or Waiver.............. 36
ARTICLE IX GENERAL PROVISIONS
SECTION 9.01 Nonsurvival of Representations and Warranties......................... 36
SECTION 9.02 Notices............................................................... 36
SECTION 9.03 Definitions........................................................... 37
SECTION 9.04 Interpretation; Disclosure Letters.................................... 38
SECTION 9.05 Severability.......................................................... 38
SECTION 9.06 Counterparts.......................................................... 38
SECTION 9.07 Entire Agreement; No Third-Party Beneficiaries........................ 38
SECTION 9.08 Governing Law......................................................... 38
SECTION 9.09 Assignment............................................................ 38
SECTION 9.10 Enforcement........................................................... 39
</TABLE>
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of November 5, 1999 by and among SIND
HOLDINGS, INC., a Delaware corporation ("Parent"), SIND ACQUISITION, INC., a
Delaware corporation and a wholly owned subsidiary of Parent ("Merger Sub"), and
SYNTHETIC INDUSTRIES, INC., a Delaware corporation (the "Company").
WHEREAS, Parent has formed Merger Sub as a wholly owned subsidiary
corporation of Parent under the Delaware General Corporation Law (the "DGCL")
for the purpose of Merger Sub merging with and into the Company pursuant to the
applicable provisions of the DGCL (the "Merger") so that the Company will
continue as the surviving corporation of the Merger and will become a wholly
owned subsidiary of Parent;
WHEREAS, in furtherance of the Merger, Parent proposes to cause Merger Sub
to make a tender offer (as it may be amended from time to time as permitted
under this Agreement, the "Offer") for the purchase of all the issued and
outstanding shares of common stock of the Company, par value $1.00 per share
(the "Company Common Stock"), at a price per share of $33.00, net cash to each
seller of Company Common Stock, upon the terms and subject to the conditions set
forth in this Agreement;
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and the
Company have determined that the Merger is fair to and in the best interests of
their respective stockholders and have approved the Merger on the terms and
subject to the conditions set forth in this Agreement;
WHEREAS, the Company, Gibraltar, L.P., a Delaware limited partnership (the
"Stockholder"), and the limited partners of the Stockholder are subject to the
terms of the Stipulation and Agreement of Settlement, dated as of April 1, 1999
(the "Stipulation"), among the parties to the action styled Wininger v. SI
Management L.P., et. al., No. C97-1622 CW, United States District Court for the
Northern District of California (the "Wininger Litigation"), which has been
incorporated into a final order of such court pursuant to which such court has
directed and empowered the Special Committee of the Board of Directors (the
"Special Committee") of the Company to take such actions as may be necessary to
negotiate and approve the consummation of the transactions contemplated by this
Agreement consistent with the process set forth in the Stipulation;
WHEREAS, Parent, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger and also to prescribe various conditions to the Offer and
the Merger; and
WHEREAS, concurrently with the execution and delivery of this Agreement,
Parent is entering into an agreement with a certain stockholder of the Company
(the "Stockholder Agreement") pursuant to which, among other things, such
stockholder shall agree to take certain actions to support the transactions
contemplated by this Agreement.
<PAGE>
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
THE OFFER AND THE MERGER
SECTION 1.01 The Offer. (a) Subject to the conditions of this
Agreement, as promptly as practicable, but in no event later than five business
days after the date of the execution and delivery of this Agreement, Merger Sub
shall, and Parent shall cause Merger Sub to, commence the Offer within the
meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). The obligation of Merger Sub to, and of Parent to cause Merger
Sub to, commence the Offer and accept for payment, and pay for, any shares of
Company Common Stock tendered pursuant to the Offer shall be subject to the
conditions set forth in Exhibit A (any of which may be waived by Merger Sub in
---------
its sole discretion, provided that, without the consent of the Company, Merger
Sub may not waive the Minimum Tender Condition (as defined in Exhibit A)) and to
---------
the other conditions in this Agreement. The initial expiration date of the Offer
shall be the 20th business day following the commencement of the Offer. Merger
Sub expressly reserves the right to modify the terms of the Offer, except that,
without the consent of the Company, Merger Sub shall not, except as provided in
the next sentence: (i) reduce the number of shares of Company Common Stock
subject to the Offer; (ii) reduce the price per share of Company Common Stock to
be paid pursuant to the Offer; (iii) modify or add to the conditions set forth
in Exhibit A in any manner materially adverse to the holders of Company Common
---------
Stock; (iv) extend the Offer; (v) change the form of consideration payable in
the Offer; or (vi) otherwise amend the Offer in any manner adverse to the
holders of Company Common Stock. Notwithstanding the foregoing, Merger Sub may,
without the consent of the Company (w) extend the Offer, if at the scheduled
expiration date of the Offer any of the conditions to Merger Sub's obligation to
purchase shares of Company Common Stock set forth herein or in Exhibit A are not
satisfied, until such time as such conditions are satisfied or waived; (x)
extend the Offer for a period of not more than 15 business days beyond the
initial expiration date of the Offer, if on the date of such extension less than
90% of the outstanding shares of Company Common Stock have been validly tendered
and not properly withdrawn pursuant to the Offer; (y) extend the Offer for any
period required by applicable law, including any rule, regulation,
interpretation or position of the SEC applicable to the Offer; and (z) extend
the Offer for any reason for a period of not more than 10 business days beyond
the latest expiration date that would otherwise be permitted under this Section
1.01(a). It is agreed that the conditions to the Offer are for the benefit of
Parent and Merger Sub and may be asserted by Parent or Merger Sub regardless of
the circumstances giving rise to any such condition (including any action or
inaction by Parent or Merger Sub not inconsistent with the terms hereof). On the
terms and subject to the conditions of the Offer and this Agreement, Merger Sub
shall, and Parent shall cause Merger Sub to, pay for all shares of Company
Common Stock validly tendered and not withdrawn pursuant to the Offer that
Merger Sub becomes obligated to purchase pursuant to the Offer as soon as
practicable after the expiration of the Offer.
(b) On the date of commencement of the Offer, Parent and Merger Sub
shall file with the SEC a Tender Offer Statement on Schedule 14D-1 with respect
to the Offer, which shall contain,
<PAGE>
among other things, an offer to purchase and a related letter of transmittal and
other ancillary documents (such Schedule 14D-l and the documents included
therein pursuant to which the Offer will be made, together with any supplements
or amendments thereto, the "Offer Documents"). Each of Parent and Merger Sub on
the one hand, and the Company on the other hand, shall promptly correct any
information provided by it for use in the Offer Documents if and to the extent
that such information is false or misleading in any material respect, and each
of Parent and Merger Sub shall take all steps necessary to amend or supplement
the Offer Documents and to cause the Offer Documents as so amended or
supplemented to be filed with the SEC and to be disseminated to the Company's
stockholders, in each case as and to the extent required by applicable Federal
securities laws. Parent and Merger Sub shall promptly notify the Company and its
counsel regarding any comments that Parent, Merger Sub or their counsel receive
from the SEC or its staff with respect to the Offer Documents and shall promptly
provide to the Company and its counsel copies of such written comments, if any.
The Company shall cooperate with Parent and Merger Sub in responding to any
comments received from the SEC with respect to the Offer Documents.
(c) Subject to the terms and conditions of this Agreement, Parent shall
provide or cause to be provided to Merger Sub on a timely basis the funds
necessary to purchase any shares of Company Common Stock that Merger Sub
becomes obligated to purchase pursuant to the Offer.
SECTION 1.02 Company Actions. (a) The Company hereby approves of and
consents to the Offer, the Merger and the other transactions contemplated by
this Agreement.
(b) In accordance with Rule 14d-9(e) of the Exchange Act, and prior to the
Company Stockholders Approval (as defined in Section 3.04(c)), if any, the
Company shall file with the SEC a Solicitation/ Recommendation Statement on
Schedule 14D-9 with respect to the Offer (such Schedule 14D-9, as amended from
time to time and including the exhibits thereto, the "Schedule 14D-9")
containing the recommendations described in Section 3.04(b) hereof and shall
mail the Schedule 14D-9 to the stockholders of the Company. Each of the Company,
Parent and Merger Sub shall promptly correct any information provided by it for
use in the Schedule 14D-9 if and to the extent that such information is false or
misleading in any material respect, and the Company shall take all steps
necessary to amend or supplement the Schedule 14D-9 and to cause the Schedule
14D-9 as so amended or supplemented to be filed with the SEC and disseminated to
the Company's stockholders, in each case as and to the extent required by
applicable Federal securities laws. The Company shall promptly notify Parent and
its counsel regarding any comments the Company or its counsel may receive from
the SEC or its staff with respect to the Schedule 14D-9 and shall promptly
provide to the Parent and its counsel copies of such written comments, if any.
(c) In connection with the Offer, the Company shall cause its transfer
agent to furnish Merger Sub promptly with mailing labels containing the names
and addresses of the record holders of Company Common Stock as of a recent date
and of those persons becoming record holders subsequent to such date, together
with copies of all lists of stockholders, security position listings and
computer files and all other information in the Company's possession or control
regarding the beneficial owners of Company Common Stock, and shall furnish to
Merger Sub such information and assistance (including updated lists of
stockholders, security position listings and computer files) as Parent may
reasonably request in communicating the Offer to the
<PAGE>
stockholders of the Company. Subject to the requirements of applicable law, and
except for such steps as are necessary to disseminate the Offer Documents and
any other documents necessary to consummate this Agreement, Parent and Merger
Sub shall hold in confidence the information contained in any such labels,
listings and files, shall use such information only in connection with the Offer
and the Merger and, if this Agreement is terminated, shall, upon request,
deliver to the Company or destroy all copies of such information then in their
possession, followed promptly by written certification of copies destroyed, if
any.
SECTION 1.03 The Merger. On the terms and subject to the conditions set
forth in this Agreement, Merger Sub shall be merged with and into the Company at
the Effective Time (as defined in Section 1.05) whereupon the separate corporate
existence of Merger Sub shall cease and the Company shall continue as the
surviving corporation (the "Surviving Corporation"). Notwithstanding the
foregoing, Parent may elect at any time prior to the Merger, instead of merging
Merger Sub into the Company as provided above, to merge the Company with and
into Merger Sub, in which case Merger Sub shall be the Surviving Corporation;
provided, however, that the Company shall not be deemed to have breached any of
its representations, warranties or covenants set forth in this Agreement solely
by reason of such election. In such event, the parties shall, if required,
execute an appropriate amendment to this Agreement in order to reflect the
foregoing. At the election of Parent, any direct or indirect wholly owned
subsidiary of Parent may be substituted for Merger Sub as a constituent
corporation in the Merger. In such event, the parties shall execute an
appropriate amendment to this Agreement in order to reflect the foregoing.
SECTION 1.04 Closing. The closing of the Merger (the "Closing")
shall take place at the offices of Gibson, Dunn & Crutcher, 200 Park Avenue, New
York, New York 10166 at 10:00 a.m. on the second business day following the
satisfaction (or, to the extent permitted by law, waiver by all parties) of the
conditions set forth in Section 7.01, or as soon as practicable after all the
conditions set forth in Section 7.01 have been satisfied (or, to the extent
permitted by law, waived by the parties entitled to the benefits thereof), or at
such other place, time and date as shall be agreed in writing between Parent and
the Company. The date on which the Closing occurs is referred to in this
Agreement as the "Closing Date".
SECTION 1.05 Effective Time. Prior to the Closing, Parent shall prepare,
and on the Closing Date or as soon as practicable thereafter Parent shall file
with the Secretary of State for the State of Delaware, a certificate of merger
or certificate of ownership (in any such case, the "Certificate of Merger")
executed in accordance with the relevant provisions of the DGCL and shall make
all other filings or recordings required under the DGCL. The Merger shall become
effective at such time as the Certificate of Merger is duly filed with such
Secretary of State, or at such other time as Parent and the Company shall agree
and specify in the Certificate of Merger (the time the Merger becomes effective
being the "Effective Time").
SECTION 1.06 Effects. The Merger shall have the effects set forth in
Section 259 of the DGCL.
SECTION 1.07 Certificate of Incorporation and By-laws. (a) The
Certificate of Incorporation of the Company, as in effect immediately prior to
the Effective Time, shall be amended in its entirety to read as set forth on
Exhibit B, and, as so amended, such Certificate of
- ---------
<PAGE>
Incorporation shall be the Certificate of Incorporation of the Surviving
Corporation until thereafter changed or amended as provided therein or by
applicable law. If, pursuant to Section 1.03 hereof, the Merger Sub is the
Surviving Corporation, its Certificate of Incorporation shall not be amended in
the Merger.
(b) The By-Laws of the Company as in effect immediately prior to the
Effective Time shall be the By-Laws of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law. If,
pursuant to Section 1.03 hereof, the Merger Sub is the Surviving Corporation,
its By-Laws shall not be amended in the Merger.
SECTION 1.08 Directors. The directors of Merger Sub immediately prior to
the Effective Time shall become the directors of the Surviving Corporation,
until the earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be.
SECTION 1.09 Officers. The officers of the Company immediately prior
to the Effective Time shall become the officers of the Surviving Corporation,
until the earlier of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may be.
ARTICLE II
EFFECT ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.01 Effect on Capital Stock. At the Effective Time, by virtue
of the Merger and without any action on the part of any holder of Company Common
Stock or any shares of capital stock of Merger Sub:
(a) Capital Stock of Merger Sub. Each issued and outstanding share of
capital stock of Merger Sub shall be converted into and become one fully paid
and nonassessable share of common stock, par value $0.01 per share, of the
Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Stock. Each share of
Company Common Stock that is owned by the Company, Parent or Merger Sub, or any
wholly-owned subsidiary of the Company or Parent, shall no longer be outstanding
and shall automatically be canceled and retired and shall cease to exist, and no
consideration shall be delivered or deliverable in exchange therefor.
(c) Conversion of Company Common Stock. Subject to Sections 2.01(b) and
2.01(d), each issued and outstanding share of Company Common Stock shall be
converted into the right to receive in cash from the Company an amount equal to
the price per share of Company Common Stock paid pursuant to the Offer (the
"Merger Consideration"). As of the Effective Time, all such shares of Company
Common Stock shall no longer be outstanding and shall automatically be canceled
and retired and shall cease to exist, and each holder of a certificate
representing any such shares of Company Common Stock shall cease to have any
rights with
<PAGE>
respect thereto, except the right to receive the Merger Consideration upon
surrender of such certificate in accordance with Section 2.02, without interest.
(d) Appraisal Rights. Notwithstanding anything in this Agreement to the
contrary, shares of Company Common Stock that are issued and outstanding
immediately prior to the Effective Time and that are held by persons who are
entitled to demand and properly demand appraisal of such shares pursuant to, and
who comply in all respects with, Section 262 of the DGCL ("Appraisal Shares")
shall not be converted into the right to receive the Merger Consideration as
provided in Section 2.01(c) hereof, but rather shall be entitled to payment of
the fair market value of such Appraisal Shares in accordance with Section 262 of
the DGCL; provided, however, that if any holder of Appraisal Shares fails to
perfect or otherwise waives, withdraws or loses the right to appraisal under
Section 262 of the DGCL, then the right of such holder to be paid the fair value
of such holder's Appraisal Shares shall cease and such Appraisal Shares shall be
treated as if they had been converted as of the Effective Time into the right to
receive the Merger Consideration as provided in Section 2.01(c). The Company
shall serve prompt notice to Parent of any demands received by the Company for
appraisal of any shares of Company Common Stock, and Parent shall have the right
to participate in and direct all negotiations and proceedings with respect to
such demands. The Company shall not, except with the prior written consent of
Parent, make any payment with respect to, or settle or offer to settle, any such
demands, or agree to do any of the foregoing.
(e) Treatment of Options. Immediately prior to the Effective Time, each
outstanding Company Stock Option (as defined in Section 3.03) granted under any
of the Company Stock Plans (as defined in Section 3.03), which is then
exercisable or becomes exercisable as a result of the consummation of the
transactions contemplated by this Agreement, shall be canceled by the Company,
and at the Effective Time or as soon as practicable thereafter, the holder
thereof shall be entitled to receive from the Surviving Corporation as of or as
soon as practicable after the Effective Time in consideration for such
cancellation an amount in cash equal to the product of (i) the number of shares
of Company Common Stock previously subject to such Company Stock Option and (ii)
the excess, if any, of the Merger Consideration over the exercise price per
share for such Company Stock Option, reduced by the amount of withholding or
other taxes required by law to be withheld.
Except as provided herein or as otherwise agreed by the parties, the
Company Stock Plans and any other plan, program or arrangement providing for
the issuance or grant of any interest in respect of the capital stock of the
Company shall terminate as of the Effective Time.
Prior to the Effective Time, the Company Board (as defined in Section
3.04(b)) and the Compensation Committee of the Company Board shall adopt such
resolutions and the Company shall take such other actions as are necessary to
carry out the terms of this Section 2.01(e).
SECTION 2.02 Exchange of Certificates. (a) Paying Agent. Prior to the
Effective Time, Parent shall select a bank or trust company to act as paying
agent (the "Paying Agent") for the payment of the Merger Consideration upon
surrender of certificates (the "Certificates") representing Company Common
Stock. Parent shall take all steps necessary to enable and cause
<PAGE>
the Surviving Corporation to provide to the Paying Agent immediately following
the Effective Time all the cash necessary to pay for the shares of Company
Common Stock converted into the right to receive the Merger Consideration
pursuant to Section 2.01(c) (such cash being hereinafter referred to as the
"Exchange Fund").
(b) Exchange Procedure. Promptly after the Effective Time, the Paying Agent
shall mail to each holder of record of a Certificate or Certificates that
immediately prior to the Effective Time represented Company Common Stock whose
shares were converted into the right to receive the Merger Consideration
pursuant to Section 2.01: (i) a letter of transmittal which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Paying Agent and shall be in
a form and have such other provisions as Parent may reasonably specify; and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for the Merger Consideration. Upon surrender of a Certificate for cancellation
to the Paying Agent or to such other agent or agents as may be appointed by the
Parent, together with such letter of transmittal, duly executed, and such other
documents as may reasonably be required by the Paying Agent, the holder of such
Certificate shall be entitled to receive in exchange therefor the amount of cash
into which the shares of Company Common Stock theretofore represented by such
Certificate shall have been converted pursuant to Section 2.01, and the
Certificate so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of Company Common Stock which is not registered in the
transfer records of the Company, payment may be made to a person other than the
person in whose name the Certificate so surrendered is registered, if such
Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the person requesting such payment shall pay any transfer or other
taxes required by reason of the payment to a person other than the registered
holder of such Certificate or establish to the satisfaction of the Surviving
Corporation that such tax has been paid or is not applicable. Until surrendered
as contemplated by this Section 2.02, each Certificate shall be deemed at any
time after the Effective Time to represent only the right to receive upon such
surrender the amount of cash, without interest, into which the shares of Company
Common Stock theretofore represented by such Certificate shall have been
converted pursuant to Section 2.01. No interest shall be paid or shall accrue on
the cash payable upon the surrender of any Certificate.
(c) No Further Ownership Rights in Company Common Stock. The Merger
Consideration paid in accordance with the terms of this Article II, upon
conversion of any shares of Company Common Stock, shall be deemed to have been
paid in full satisfaction of all rights pertaining to such shares, and there
shall be no further registration of transfers on the stock transfer books of the
Surviving Corporation of shares of Company Common Stock that were outstanding
immediately prior to the Effective Time. If, after the Effective Time, any
Certificates formerly representing shares of Company Common Stock are presented
to the Surviving Corporation or the Paying Agent for any reason, they shall be
canceled and exchanged as provided in this Article II.
(d) Termination of Exchange Fund. Any portion of the Exchange Fund
(including any interest and other income received by the Paying Agent in
respect of such funds) that remains undistributed to the holders of Certificates
representing Company Common Stock as provided in this Section 2.02 for six
months after the Effective Time shall be delivered to the Surviving Corporation,
upon demand, and any holder of Company Common Stock who has not theretofore
<PAGE>
complied with this Article II shall thereafter look only to the Surviving
Corporation for payment of its claim for the Merger Consideration.
(e) No Liability. None of Parent, Merger Sub, the Company or the
Paying Agent shall be liable to any person in respect of any cash from the
Exchange Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. If any Certificate has not been
surrendered prior to five years after the Effective Time (or immediately prior
to such earlier date on which the Merger Consideration in respect of such
Certificate would otherwise escheat to or become the property of any
Governmental Entity (as defined in Section 3.05), any such shares, cash,
dividends or distributions in respect of such Certificate shall, to the extent
permitted by applicable law, become the property of the Surviving Corporation,
free and clear of all claims or interest of any person previously entitled
thereto.
(f) Investment of Exchange Fund. The Paying Agent shall invest any cash
included in the Exchange Fund as directed by the Surviving Corporation. Any
interest and other income resulting from such investments shall be paid to the
Surviving Corporation.
(g) Withholding Rights. Parent and the Surviving Corporation shall be
entitled to deduct and withhold from the consideration otherwise payable to any
holder of Company Common Stock pursuant to this Agreement such amounts as may be
required to be deducted and withheld with respect to the making of such payment
under any provision of Federal, state, local or foreign tax law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub as follows:
SECTION 3.01 Organization, Standing and Power. Each of the Company
and each Significant Company Subsidiary (as defined below) is duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is organized and has the corporate power and authority to own and
operate its properties and assets and to conduct its businesses as presently
conducted. The Company and each Significant Company Subsidiary is duly qualified
to do business in each jurisdiction where the nature of its business make such
qualification necessary or the failure to so qualify has had or could reasonably
be expected, individually or in the aggregate, to have a material adverse effect
on the business, assets, properties, financial condition, results of operations
or prospects of the Company and the Company Subsidiaries (as defined in Section
3.02), taken as a whole, or on the ability of the Company to consummate the
transactions contemplated by this Agreement (a "Company Material Adverse
Effect"). The Company has made available to Parent true and complete copies of
the Certificate of Incorporation of the Company, as amended to the date of this
Agreement (as so amended, the "Company Charter") and the By-laws of the Company,
as amended to the date of this Agreement (as so amended, the "Company By-laws"),
and the comparable charter and organizational documents of each Significant
Company Subsidiary, in each case as amended through the date of this Agreement.
For purposes of this Agreement, a "Significant Company
<PAGE>
Subsidiary" means any subsidiary of the Company that constitutes a significant
subsidiary within the meaning of Rule 1-02 of Regulation S-X of the SEC.
SECTION 3.02 Company Subsidiaries; Equity Interests. (a) Section
3.02 of the letter, dated as of the date of this Agreement, from the Company to
Parent and Merger Sub (the "Company Disclosure Letter") lists each Significant
Company Subsidiary. All the issued and outstanding shares of capital stock of
each Company Subsidiary have been validly issued and are fully paid and
nonassessable and, except as set forth in the Company Disclosure Letter, are
owned by the Company, by another subsidiary of the Company (a "Company
Subsidiary") or by the Company and another Company Subsidiary, free and clear of
all pledges, liens, charges, mortgages, encumbrances and security interests of
any kind or nature whatsoever (collectively, "Liens").
(b) Except for its interests in the Company Subsidiaries and except for
the ownership interests set forth in Section 3.02 of the Company Disclosure
Letter, the Company does not own, directly or indirectly, any capital stock,
membership interest, partnership interest, joint venture interest or other
ownership or equity interest in any person.
SECTION 3.03 Capital Structure. (a) The authorized capital stock of the
Company consists of 25,000,000 shares of Company Common Stock. At the close of
business on November 1, 1999: (i) 8,664,819 shares of Company Common Stock were
issued and outstanding; (ii) 17,248 shares of Company Common Stock were held by
the Company in its treasury; (iii) 865,848 shares of Company Common stock were
subject to outstanding Company Stock Options (as defined in this Section 3.03);
and (iv) 14,071 additional shares of Company Common Stock were reserved for
issuance pursuant to the Company Stock Plans (as defined in this Section 3.03).
No other shares of capital stock or other voting securities of the Company were
issued, reserved for issuance or outstanding. Since November 1, 1999, no
additional shares of capital stock have been issued by the Company (except such
shares of Company Common Stock, if any, that have been issued pursuant to the
exercise of Company Stock Options so identified in Section 3.03 of the Company
Disclosure Letter) and, except as set forth in Section 3.03 of the Company
Disclosure Letter, no additional Company Stock Options or other stock rights
have been granted. There are no outstanding Company SARs (as defined in this
Section 3.03) that were not granted in tandem with a related Company Stock
Option. All issued and outstanding shares of Company Common Stock are, and all
such shares that may be issued prior to the Effective Time will be (when
issued), duly authorized, validly issued, fully paid and nonassessable and not
subject to or issued in violation of any purchase option, call option, right of
first refusal, preemptive right, subscription right or any similar right to
which the Company is subject. There are no bonds, debentures, notes or other
debts of the Company which have the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on which
stockholders of the Company may vote ("Voting Company Debt"). Except as set
forth above, as of the date of this Agreement, there are no options, warrants,
calls, rights, convertible or exchangeable securities, "phantom" stock rights,
stock appreciation rights, stock-based performance units, commitments,
contracts, arrangements, employee benefit plans or undertakings of any kind to
which the Company or any Company Subsidiary is a party or by which any of them
is bound which: (i) obligate the Company or any Company Subsidiary to issue,
deliver, redeem, repurchase or sell, or cause to be issued, delivered redeemed,
repurchased or sold, additional shares of capital stock or other equity
interests in, or any security convertible
<PAGE>
or exercisable for or exchangeable into any capital stock of or other equity
interest in, the Company or of any Company Subsidiary; (ii) obligate the Company
or any Company Subsidiary to issue, grant, extend or enter into any such option,
warrant, call, right, security, commitment, contract, arrangement, employee
benefit plan or undertaking; or (iii) give any person the right to receive any
economic benefit or right similar to or derived from the economic benefits and
rights accruing to holders of Company Common Stock. As of the date of this
Agreement, there are no outstanding contractual obligations of the Company or
any Company Subsidiary to repurchase, redeem or otherwise acquire any shares of
capital stock of the Company or any Company Subsidiary.
(b) As used herein:
"Company Stock Option" means any option to purchase Company Common
Stock granted under any Company Stock Plan.
"Company SAR" means any stock appreciation right linked to the price
of Company Common Stock and granted under any Company Stock Plan.
"Company Stock Plans" means the plans providing for the grant of
Company Stock Options or any other issuance of Company Capital Stock and
listed in the Company Disclosure Letter.
SECTION 3.04 Authority; Execution and Delivery; Enforceability. (a) The
Company has the requisite corporate power and authority to execute this
Agreement and to consummate the transactions contemplated herein. The execution
and delivery by the Company of this Agreement and the consummation by the
Company of the transactions contemplated herein have been duly authorized by all
necessary corporate action on the part of the Company, subject, in the case of
the Merger, to receipt of the Company Stockholder Approval. The Company has
duly executed and delivered this Agreement, and this Agreement constitutes its
legal, valid and binding obligation, enforceable against it in accordance with
its terms.
(b) The Board of Directors of the Company (the "Company Board"), at a
meeting duly called and held on November 4, 1999, duly and unanimously adopted
resolutions: (i) approving this Agreement, the Offer and the Merger; (ii)
determining that the terms of the Offer and the Merger are fair to and in the
best interests of the Company and its stockholders; (iii) recommending that the
holders of Company Common Stock accept and tender their shares of Company
Common Stock pursuant to the Offer; and (iv) recommending that the Company's
stockholders adopt this Agreement, and assuming that neither Parent nor Merger
Sub is an Interested Stockholder (as such term is defined in Section 203 of the
DGCL) immediately prior to the Company Board taking the actions described in
this Section 3.04(b), taken all other actions necessary to render the
restrictions on business combinations contained in Section 203 of the DGCL
inapplicable to the Offer, the Merger, this Agreement and the Stockholder
Agreement, and the transactions contemplated hereby and thereby.
(c) Assuming that neither Parent nor Merger Sub is an Interested
Stockholder (as such term is defined in Section 203 of the DGCL) immediately
prior to the Company Board taking the actions described in this Section 3.04(b),
the only vote of holders of any class or series of capital
<PAGE>
11
stock of the Company necessary to approve and adopt this Agreement and the
Merger is the adoption of this Agreement by the holders of a majority of the
outstanding Company Common Stock (the "Company Stockholder Approval").
SECTION 3.05 No Conflicts; Consents. Except as set forth in Section 3.05
of the Company Disclosure Letter, the execution and delivery by the Company of
this Agreement does not, and the consummation of the Offer and the Merger and
compliance with the terms hereof will not, conflict with, or result in any
violation of or default (with or without notice or lapse of time, or both)
under, or give rise to a right of recission, termination, cancellation or
acceleration of any obligation or to loss of a material benefit under, or result
in the creation of any Lien upon any of the properties or assets of the Company
or any Company Subsidiary under, any provision of: (i) the Company Charter, the
Company By-Laws or the comparable charter or organizational documents of any
Company Subsidiary; (ii) any material contract, lease, license, indenture, note,
bond, agreement, permit, concession, franchise or other instrument (a
"Contract") to which the Company or any Company Subsidiary is a party; (iii)
subject to the filings and other matters referred to in the following sentence,
any judgment, award, ruling, order or decree ("Judgment") or statute, law,
ordinance, rule or regulation applicable to the Company or any Company
Subsidiary or any of their respective assets ("Applicable Law") including,
without limitation, the Applicable Law of any foreign country, except where such
conflict, violation or default, individually or in the aggregate, has not had
and would not reasonably be expected to have a Company Material Adverse Effect.
No consent, approval, license, permit, order or authorization ("Consent") of, or
registration, declaration or filing with, any Federal, state, local or foreign
government or any court of competent jurisdiction, administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign (a "Governmental Entity") or any other person, is required to be
obtained or made by or with respect to the Company or any Company Subsidiary in
connection with the execution, delivery and performance of this Agreement or the
consummation of the transactions hereunder, other than: (i) compliance with and
filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR
Act"), if applicable; (ii) the filing with the SEC of (A) the Schedule 14D-9,
(B) a proxy or information statement relating to the approval and adoption of
this Agreement and the Merger by the Company's stockholders (the "Proxy
Statement"), if required; (C) any information statement (the "Information
Statement") required under Rule 14f-1 of the Exchange Act, in connection with
the Offer, and (D) such reports under Section 13 of the Exchange Act as may be
required in connection with this Agreement, the Offer and the Merger and the
other transactions contemplated hereby; (iii) the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware and appropriate
documents with the relevant authorities of the other jurisdictions in which the
Company is qualified to do business; (iv) compliance with and such filings as
may be required under applicable Federal, state or local environmental laws; (v)
such filings as may be required in connection with the taxes described in
Section 6.08; (vi) filings under any applicable state takeover law; (vii) such
other items (A) required solely by reason of the participation of Parent (as
opposed to any third party) in the transactions contemplated hereby or (B) as
are set forth in Section 3.05 of the Company Disclosure Letter; and (viii)
Consents the failure of which to obtain, individually or in the aggregate, has
not had and would not reasonably be expected to have a Company Material Adverse
Effect.
SECTION 3.06 SEC Documents; Undisclosed Liabilities. The Company and the
Company Subsidiaries have filed all reports, schedules, forms, statements and
other documents
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12
required to be filed by them with the SEC since November 1, 1996, pursuant to
Sections 13(a) and 15(d) of the Exchange Act (the "Company SEC Documents"). As
of its respective date, each Company SEC Document (a) complied in all material
respects with the requirements of the Exchange Act or the Securities Act of
1933, as amended (the "Securities Act"), as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such Company SEC
Document and (b) did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The consolidated financial statements of the Company
included in the Company SEC Documents comply as to form in all material respects
with applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with U.S.
generally accepted accounting principles ("GAAP") (except, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly present the consolidated financial position of the
Company and its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments) and are in all material respects in accordance with the books of
accounts and records of the Company and the Company Subsidiaries. Except as set
forth in the Company SEC Documents filed and publicly available prior to the
date of this Agreement (the "Filed Company SEC Documents"), and except as set
forth in Section 3.06 of the Company Disclosure Letter, as of the date of this
Agreement neither the Company nor any Company Subsidiary has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
required by GAAP to be set forth on a consolidated balance sheet of the Company
and its consolidated subsidiaries or in the notes thereto and that, individually
or in the aggregate, has had or could reasonably be expected to have a Company
Material Adverse Effect.
SECTION 3.07 Information Supplied. None of the information supplied
or to be supplied by the Company for inclusion or incorporation by reference in:
(i) the Offer Documents, the Schedule 14D-9 or any Information Statement will,
at the time such document is filed with the SEC, at any time it is amended or
supplemented or at the time it is first published, sent or given to the
stockholders of the Company, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading; or (ii) the Proxy Statement, if
required, will, at the date it is first mailed to the Company's stockholders or
at the time of the Company Stockholders Meeting (as defined in Section 6.01) or
at the time of any action by written consent in lieu of a meeting pursuant to
Section 228 of the DGCL with respect to this Agreement and the Merger, as
applicable, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. The Schedule 14D-9, the Information Statement and the Proxy
Statement, if required, will comply as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations thereunder,
except that no representation is made by the Company with respect to statements
made or incorporated by reference therein based solely on information supplied
by Parent or Merger Sub for inclusion or incorporation by reference therein.
<PAGE>
13
SECTION 3.08 Absence of Certain Changes or Events. Except as
disclosed in the Filed Company SEC Documents or in Section 3.08 of the Company
Disclosure Letter, from the date of the most recent audited financial statements
included in the Filed Company SEC Documents to the date of this Agreement, the
Company has conducted its business only in the ordinary course consistent with
past practice, and during such period there has not been:
(i) any event, change, effect or development that, individually or
in the aggregate, has had or could reasonably be expected to have a Company
Material Adverse Effect;
(ii) any acquisition of any interest in a corporation, partnership
or joint venture arrangement, that, individually or in the aggregate,
involves or would involve an investment or expenditure by the Company in
excess of $5,000,000;
(iii) any material change in the Company's business as presently
conducted (as in existence on the date of the Company's most recent audited
financial statements);
(iv) any declaration, setting aside or payment of any dividend or
other distribution (whether in cash, stock or property) with respect to any
Company Common Stock, or any repurchase for value by the Company of any
Company Capital Stock;
(v) any split, combination or reclassification of any Company
Common Stock or any issuance or the authorization of any issuance of any
other securities in respect of, in lieu of or in substitution for shares of
Company Common Stock;
(vi) any agreement by the Company or any Company Subsidiary
authorizing any director or executive officer of the Company or any Company
Subsidiary to receive (A) any increase in compensation, except as was
required under employment agreements in effect as of the date of the most
recent audited financial statements included in the Company SEC Documents,
(B) any increase in severance or termination pay, except as was required
under any employment, severance or termination agreements in effect as of
the date of the most recent audited financial statements included in the
Filed Company SEC Documents, or (C) any new employment, severance or
termination agreement;
(vii) any change in accounting methods, principles or practices by
the Company any Company Subsidiary materially affecting the consolidated
assets, liabilities or results of operations of the Company, except insofar
as may have been required by change in GAAP;
(viii) any action taken by the Company or any Company Subsidiary that
would be prohibited after the date of this Agreement by Section 5.01
hereof.; or
(ix) any agreement by the Company to do any of the foregoing.
SECTION 3.09 Taxes. (a) The Company and each Company Subsidiary have: (i)
filed (or received valid extensions with respect to) all Federal, state and
local and foreign Tax Returns which are required to be filed through the date
hereof, and all such Tax Returns are true, complete and accurate in all material
respects; and (ii) paid all Taxes shown on such returns and
<PAGE>
14
all assessments received by them except where, in the case of state and local
and foreign Tax Returns, the failure to file or extend the due date of or pay
the Taxes due and payable, in the aggregate, has not had and could not
reasonably be expected to have a Company Material Adverse Effect.
(b) The Company has no knowledge of any tax deficiency which has been or
might be asserted against the Company or any of its subsidiaries which has had
or could reasonably be expected to have a Company Material Adverse Effect.
(c) Except as disclosed in Section 3.09 of the Company Disclosure Letter,
there is no material dispute or claim concerning any Tax liability of the
Company or any Company Subsidiary that (i) has been claimed or raised by any
authority in writing or (ii) as to which the directors and officers of the
Company or any Company Subsidiary has any personal knowledge based upon personal
contact with any agent of such authority.
(d) The Company has made available to Parent correct and complete copies
of all Tax Returns filed by the Company and each Company Subsidiary pursuant to
the laws or regulations of any federal, state, local or foreign tax authority
that have been examined or audited by the IRS or any other appropriate authority
during the preceding ten years. Except as disclosed in Section 3.09 of the
Company Disclosure Letter, no tax examination or audit is in progress.
(e) Except as disclosed in Section 3.09 of the Company Disclosure Letter,
neither the Company nor any Company Subsidiary (i) has been a member of an
affiliated group of corporations filing a consolidated federal income Tax Return
(other than a group the common parent of which was the Company) or (ii) has any
liability for the Taxes of any person (other than the Company and any Company
Subsidiary) under Treas. Reg. (S) 1.1502-6 or any similar provision of state,
local or foreign law, as a transferee or successor, by contract or otherwise.
(f) For purposes of this Agreement, the term "Tax" shall mean any federal,
state, local or foreign income or gross receipts tax, alternative or add-on
minimum tax, sales and use tax, customs duty or other tax, charge, fee, levy or
other assessment including without limitation property, transfer, occupation,
service, license, payroll, franchise, excise, withholding, ad valorem,
severance, stamp, premium, windfall profit, employment, rent or other tax,
governmental fee or like assessment or charge of any kind whatsoever, together
with any interest, fine or penalty thereon, and addition to tax, additional
amount, deficiency, assessment or governmental charge, imposed by any federal,
state, local or foreign taxing authority. The term "Tax Return" shall mean any
material report, statement, form, return or other document or information
required to be supplied to a taxing authority in connection with Taxes.
(g) Except as set forth in Section 3.09 of the Company Disclosure Letter,
neither the Company nor any Company Subsidiary has made any payments, is
obligated to make any payments, or is a party to any agreement that could
obligate it to make a payment that will not be deductible under Section 280G of
the Code.
SECTION 3.10 Employee Benefit Plans. (a) Except as disclosed in the Filed
Company SEC Documents or in Section 3.10 of the Company Disclosure Letter, there
are no collective bargaining agreements, any employee benefit plans (within the
meaning of
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15
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) or any bonus, pension, profit sharing, deferred compensation,
incentive compensation, stock ownership, stock purchase, stock option, phantom
stock, retirement, welfare, vacation, severance, disability, death benefit,
hospitalization, medical, life or other plan, arrangement or understanding
(whether or not legally binding) providing benefits to any current or former
employee, officer or director of the Company or any Company Subsidiary
(collectively, "Company Benefit Plans"), and, from the date of the most recent
audited financial statements included in the Filed Company SEC Documents to the
date of this Agreement, there has been no amendment, termination or adoption of
any Company Benefit Plan which would materially increase the Company's liability
thereunder. Except as disclosed in the Filed Company SEC Documents or in Section
3.10 of the Company Disclosure Letter, as of the date of this Agreement there
are no employment, consulting, indemnification, severance or termination
agreements or arrangements between the Company or any Company Subsidiary and any
current or former employee, officer or director of the Company or any Company
Subsidiary.
(b) None of the Company Benefit Plans (i) is a multiemployer plan, within
the meaning of Section 3(37) or 4001(a)(3) of ERISA or a single employer pension
plan, within the meaning of Section 4001(a)(15) of ERISA, for which the Company
could incur liability under Section 4063 or 4064 of ERISA, (ii) is an employee
pension benefit plan that is subject to Title IV of ERISA or the minimum funding
standards of Section 302 of ERISA or Section 412 of the Internal Revenue Code of
1986, as amended (the "Code"), or (iii) provides or promises to provide retiree
medical or life insurance benefits.
(c) All Company Benefit Plans are in compliance in all material respects
with the requirements prescribed by applicable statutes, orders or governmental
rules or regulations currently in effect with respect thereto, and the Company
has performed all material obligations required to be performed by it under, and
is not in any material respect in default under or in violation of, any of the
Company Benefit Plans. Each Company Benefit Plan that is intended to be a tax-
qualified plan is, in both form and operation, in material compliance with the
requirements of Section 401(a) of the Code, has received or has applied for one
or more IRS determination letters to such effect, and the Company is unaware of
any facts that could cause the qualified status of such Company Benefit Plan to
be adversely affected. All benefits due under each Company Benefit Plan have
been timely paid and there is no material lawsuit or claim, other than routine
uncontested claims for benefits, pending, or to the knowledge of Company
threatened, against any Company Benefit Plan or the fiduciaries of any such plan
or otherwise involving or pertaining to any such plan, and no basis exists for
any such lawsuit or claim. No audit or investigation by any governmental
authority is pending, or to the knowledge of Company threatened, regarding any
Company Benefit Plan, and no party dealing with any Company Benefit Plan has
engaged in any prohibited non-exempt transactions (within the meaning of Section
406 of ERISA or Section 4975 of the Code) or any breach of fiduciary duty.
(d) The Company has not incurred any material liability to the Pension
Benefit Guaranty Corporation or any "withdrawal liability" within the meaning of
Section 4201 of ERISA, in either case relating to any Company Benefit Plan or
any pension plan maintained by any company which would be treated as a single
employer with the Company, under Section 4001 of ERISA.
<PAGE>
16
(e) The Company has made available to Parent correct and complete copies
of: (1) each Company Benefit Plan, including all amendments to such plan, and
all summary plan descriptions and other summaries of such plan, (2) each trust
agreement, annuity or insurance contract, or other funding instrument pertaining
to each Company Benefit Plan, (3) the most recent determination letter issued by
the IRS with respect to each Company Benefit Plan that is intended to be tax
qualified and a copy of any pending applications for such IRS letters, (4) the
two most recent actuarial valuation reports for each Company Benefit Plan for
which an actuarial valuation report has been prepared, (5) the two most recent
annual reports (IRS Form 5500 Series), including all schedules to such reports,
if applicable, filed with respect to each Company Benefit Plan, (6) the most
recent plan audits, financial statements, and accountant's opinion (with
footnotes) for each Company Benefit Plan, and (7) all relevant schedules and
reports concerning the administrative costs, benefit payments, employee and
employer contributions, claims experience, financial information, and insurance
premiums for each Company Benefit Plan, and (8) all correspondence with
government authorities concerning any Company Benefit Plan (other than as
previously referenced above).
(f) Each Company Benefit Plan can be amended or terminated at any time
without approval from any person, without advance notice, and without any
liability other than for benefits accrued prior to such amendment or
termination.
(g) Except as disclosed in the Filed Company SEC Documents or in Section
3.10 of the Company Disclosure Letter, no Company Benefit Plan provides for any
severance pay, accelerated payments, deemed satisfaction of goals or conditions,
new or increased benefits, forgiveness or modification of loans, or vesting
conditioned in whole or in part upon a change in control of the Business or any
plant closing.
(h) Except as disclosed in the Filed Company SEC Documents or in Section
3.10 of the Company Disclosure Letter, the Company neither maintains nor
participates in any Voluntary Employees' Beneficiary Association ("VEBA"), under
Code Sections 419 and 419A, which is intended to be exempt from taxation under
section 501(c)(9) of the Code.
(i) The Company does not maintain, participate in, contribute to, or have
any obligation to contribute or any liability with respect to any multiple
employer plan, as defined in 29 C.F.R. (S)2530.210(c)i ii, or has had any
obligation with respect to such a plan during the six years immediately
preceding the date of this Agreement.
SECTION 3.11 Litigation; Settlement of Stockholder Disputes. (a) Except
as disclosed in the Filed Company SEC Documents or in Section 3.11 of the
Company Disclosure Letter, there is no suit, action or proceeding or
governmental investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company or any Company Subsidiary (and the
Company is not aware of any basis for any such suit, action or proceeding) that,
individually or in the aggregate, has had or could reasonably be expected to
have a Company Material Adverse Effect, nor are there any Judgments outstanding
against the Company or any Company Subsidiary that, individually or is the
aggregate, has had or could reasonably be expected to have a Company Material
Adverse Effect.
<PAGE>
17
(b) The Company and the Stockholder have been involved in certain
litigation brought in the United States District Court for the Northern District
of California and in the Chancery Court of Delaware and in connection therewith
have entered into the Stipulation. The Order (as defined in the Stipulation) has
been entered by the United States District Court for the Northern District of
California and is final and nonappealable. The Company does not have, and, to
its knowledge, will not have following the Closing, any liability or obligation
to any person arising out of the Wininger Litigation or the Stipulation, except
as set forth in the Stipulation. The receipt of all approvals and the other
actions required to be taken pursuant to the Stipulation in connection with the
Offer and the Merger have been, or at the time of the Closing will have been,
duly taken.
SECTION 3.12 Environmental Matters; Compliance with Environmental Laws;
Other Applicable Laws. (a) Neither the Company nor any Company Subsidiary has
received any notice or has been threatened with a claim alleging any past or
present violation of, or liability for damages pursuant to any applicable
Federal, state, local or foreign laws, statutes, ordinances, common law rules,
regulations, orders or determinations of any Governmental Entity applicable to
the Company or applicable to any Company Subsidiary, as the case may be, in its
respective jurisdiction of operation relating to the protection of human health
and safety, the environment or Hazardous Substances ("Environmental Laws"), to
the extent that any such violation or liability, or such violations or
liabilities in the aggregate, has had or would reasonably be expected to have a
Company Material Adverse Effect. The Company and all Company Subsidiaries are,
and at all times in the past have been, in compliance with all applicable
Environmental Laws, except where such non-compliance did not have, or would not
reasonably be expected to have, a Company Material Adverse Effect.
(b) No Hazardous Substance has been stored, treated or disposed of by the
Company or any Company Subsidiary or to the knowledge of the Company by any
person on any real estate currently or formerly owned or leased by the Company
or the Company Subsidiaries, respectively, except in compliance with applicable
Environmental Laws; and the Company and the Company Subsidiaries have lawfully
disposed of their Hazardous Substances with respect to the operations of their
businesses except, in each case, where such failure to be in compliance or to
obtain, store, treat or dispose of such Hazardous Substances, individually or in
the aggregate, has not had or would not have a Company Material Adverse Effect.
(c) The Company is not aware of any facts or circumstances that could
reasonably lead the Company or any Company Subsidiary to conclude that the costs
and liabilities, associated with the effect of Environmental Laws on the
business, operations and properties of the Company and the Company Subsidiaries
(including, without limitation, any capital or operating expenditures required
for clean-up, closure of properties or compliance with Environmental Laws or any
permit, license or approval, any related constraints on operating activities and
any potential liabilities to third parties) could, individually or in the
aggregate, have a Company Material Adverse Effect.
(d) "Hazardous Substances" means any substances or materials: (i) the
presence of which requires investigation or remediation under any Environmental
Law; or (ii) the generation, storage, treatment, transportation, disposal,
remediation, removal, handling or management of which is regulated by any
Environmental Law; or (iii) that is defined as a "hazardous waste" or
<PAGE>
18
"hazardous substance" under any Environmental Law; or (iv) that is toxic,
explosive, corrosive, flammable, infectious, radioactive, carcinogenic or
mutagenic or otherwise hazardous and is regulated by any Governmental Entity
having or asserting jurisdiction over the Company or any Company Subsidiary; or
(v) the presence of which poses a hazard to the health or safety of persons; or
(vi) the presence of which constitutes a nuisance, trespass or other tortious
condition for which the Company of any Company Subsidiary could be or is alleged
to be liable; or (vii) without limitation, that contains gasoline, diesel fuel
or other petroleum hydrocarbons, polychlorinated biphenols (PCBs) or asbestos.
SECTION 3.13 Title to Properties. Section 3.13 of the Company Disclosure
Letter contains a true and complete list of all real property owned or leased by
the Company and the Company Subsidiaries except for such real property on which
the failure to hold title or have a valid lease has not had and could not
reasonably be expected to have a Company Material Adverse Effect. Except as set
forth in Section 3.13 of the Company Disclosure Letter, each of the Company and
each Company Subsidiary, as the case may be, has good and marketable title to,
or valid leasehold interests in, all its properties and assets except for such
as are no longer used or useful in the conduct of its businesses or as have been
disposed of in the ordinary course of business and except for defects in title,
easements, restrictive covenants and similar encumbrances or impediments that,
in the aggregate, do not and will not materially interfere with its ability to
conduct its business as currently conducted or have not had and could not
reasonably be expected to have a Company Material Adverse Effect. All such
assets and properties, other than assets and properties in which the Company or
any Company Subsidiary has leasehold interests, are free and clear of all Liens,
claims, imperfections of title, encroachments, easements, rights of way,
covenants and restrictions other than those set forth in Section 3.13 of the
Company Disclosure Letter and except for Liens, claims, imperfections of title,
encroachments, easements, rights of way, covenants and restrictions that, in the
aggregate, do not and will not materially interfere with the ability of the
Company and each Company Subsidiary to conduct business as currently conducted
or have not had and could not reasonably be expected to have a Company Material
Adverse Effect. Except as set forth in Section 3.13 of the Company Disclosure
Letter, the Company and each Company Subsidiary has complied in all material
respects with the terms of all material leases to which it is a party and under
which it is in occupancy, and all such leases are in full force and effect.
Neither the Company nor any Company Subsidiary has received notice that the
buildings and improvements located on any real property owned or leased by the
Company or the Company Subsidiaries or the operation or maintenance thereof as
operated and maintained (i) contravene any zoning or building law or ordinance
or other administrative regulation or (ii) violate any restrictive covenant,
encumbrance, impairment or any provision of any applicable federal, state, local
or foreign law, except for such contraventions or violation that, individually
or in the aggregate, have not had and would not reasonably be expected to have a
Company Material Adverse Effect. There is no pending or, to the knowledge of the
Company, threatened condemnation or eminent domain proceeding with respect to,
or that could affect, any property of the Company or the Company Subsidiaries,
and no casualty has occurred with respect to any such property.
SECTION 3.14 Confidentiality and Other Agreements. (a) The Company has no
confidentiality agreement or standstill agreement with any third party with
respect to a Company Takeover Proposal (as defined in Section 5.02) by such
third party (each, a "Company
<PAGE>
19
Confidentiality Agreement") in effect as of the date of this Agreement that has
not been provided to Parent or Merger Sub.
(b) Except as set forth in the Company Disclosure Letter, neither the
Company nor any Company Subsidiary is subject to any noncompetition or similar
agreement that prohibits or restricts the Company or any of its affiliates from
engaging in any business or other activities.
SECTION 3.15 Brokers; Schedule of Fees and Expenses. No broker, investment
banker, financial advisor or other person, other than The Beacon Group Capital
Services, LLC ("Beacon"), the fees and expenses of which will be paid by the
Company, is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the Offer, the Merger or any of the
other transactions contemplated herein, based upon arrangements made by or on
behalf of the Company or any Company Subsidiary or affiliate of the Company. The
Company has provided to Parent an estimate of all fees and expenses incurred or
to be incurred by the Company in connection with this Agreement and consummation
of the transactions contemplated hereby.
SECTION 3.16 Opinion of Financial Advisor. The Company has received the
opinion of Beacon, dated as of the date of this Agreement, to the effect that,
as of such date, the consideration to be received in the Offer and the Merger by
the Company's stockholders is fair to the Company's stockholders from a
financial point of view, a signed copy of which has been delivered to Parent.
SECTION 3.17 Compliance With Laws; Permits. Except as disclosed in the
Filed Company SEC Documents or in Section 3.17 of the Company Disclosure Letter,
each of the Company and the Company Subsidiaries is in compliance with all
applicable laws, regulations, orders, judgments and decrees, except for such
failures to comply that, individually or in the aggregate, have not had and
would not reasonably be expected to have a Company Material Adverse Effect. The
Company and the Company Subsidiaries hold, own or possess all governmental,
regulatory and other filings, licenses, permits, approvals, registrations,
consents, franchises and concessions (collectively, "Governmental Permits") as
are necessary for the ownership and leasing of the property and conduct of the
businesses of the Company and the Company Subsidiaries as currently conducted,
except for such Governmental Permits which the failure to hold, own or possess,
individually or in the aggregate, has not had and would not reasonably be
expected to have a Company Material Adverse Effect. Except as disclosed in the
Filed Company SEC Documents or set forth in Section 3.17 of the Company
Disclosure Letter, the Company and the Company Subsidiaries are in compliance
with their respective obligations under such Governmental Permits, with such
exceptions as, individually or in the aggregate, have not had and would not
reasonably be expected to have a Company Material Adverse Effect. Except for
matters that, individually or in the aggregate, have not had and would not
reasonably be expected to have a Company Material Adverse Effect, during the
last two years none of such Governmental Permits has been challenged or revoked
and no statement of intention to challenge, revoke or fail to renew any such
Governmental Permit has been received by the Company or any Company Subsidiary.
SECTION 3.18 Contracts. There are no Company Material Agreements (as
hereinafter defined) other than those disclosed in the Filed Company SEC
Documents or set forth in
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20
Section 3.18 of the Company Disclosure Letter. Except as set forth in Section
3.18 of the Company Disclosure Letter, each Company Material Agreement is in
full force and effect and, to the knowledge of the Company, is valid and
enforceable by the Company or a Company Subsidiary, as the case may be, in
accordance with its terms. Except as set forth in Section 3.18 of the Company
Disclosure Letter, neither the Company nor any of the Company Subsidiaries is in
default in the observance or the performance of any term or obligation to be
performed by it under any Company Material Agreement except for such defaults
the effect of which, individually or in the aggregate, has not had and would not
reasonably be expected to have a Company Material Adverse Effect. To the
knowledge of the Company, no other person is in default in the observance or the
performance of any term or obligation to be performed by it under any Company
Material Agreement. As used in this Agreement, "Company Material Agreement"
shall mean each agreement, arrangement, instrument, bond, commitment, franchise,
indemnity, indenture, lease, license or understanding, whether or not in
writing, to which the Company, any of the Company Subsidiaries or any of their
respective properties is subject that (i) obligates the Company or any of the
Company Subsidiaries to pay, or results in the payment to the Company or any
Company Subsidiary of, an amount in excess of $5,000,000 in any twelve-month
period; (ii) provides for the extension of credit by the Company or any Company
Subsidiary outside the ordinary course of business; (iii) provides for a
guaranty by the Company or any of the Company Subsidiaries of obligations of
others for borrowed money in excess of $1,000,000; (iv) represents a contract
upon which the Company and the Company Subsidiaries, taken as a whole, are
substantially dependent or is otherwise material to the business of the Company
and the Company Subsidiaries, taken as a whole; or (v) limits, in any material
respect, the ability of the Company or any of the Company Subsidiaries to engage
in any line of business, compete with any person or expand the nature or
geographic scope of its business.
SECTION 3.19 Insurance. The Company has made available to Parent correct
and complete copies of all material policies and binders of insurance held by or
on behalf of the Company and the Company Subsidiaries or relating to their
respective businesses or properties. Each of these policies and binders is valid
and enforceable in accordance with its terms and is outstanding and duly in
force. Neither the Company nor any of the Company Subsidiaries is in material
default with respect to any provision contained in any such policy or binder,
nor has there been any failure to give notice or to present any claim relating
to the Company or any of the Company Subsidiaries under any such policy or
binder in a timely fashion or in the manner or detail required by the policy or
binder. There are no outstanding unpaid premiums (except premiums not yet due
and payable), and no notice of cancellation or nonrenewal with respect to, or
disallowance of any claim under, any such policy or binder has been received by
the Company or any of the Company Subsidiaries.
SECTION 3.20 Intellectual Property. Except as disclosed in Section 3.20 of
the Company Disclosure Letter, and except for claims which, individually or in
aggregate, would not have a Company Material Adverse Effect, there are no
pending or, to the knowledge of the Company, threatened claims of which the
Company or the Company Subsidiaries have been given notice by any person against
their use of any trademarks, trade names, service marks, service names, mark
registrations, logos, assumed names and copyright registrations, patents and all
applications therefor which are owned by the Company or the Company Subsidiaries
and used in their respective operations as currently conducted (collectively,
the "Company Intellectual Property"). The Company and the Company Subsidiaries
have such ownership of or
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21
such rights by license, lease or other agreement to the Company Intellectual
Property as are necessary to permit them to conduct their respective operations
as currently conducted, except where the failure to have such rights,
individually or in the aggregate, has not had and would not reasonably be
expected to have a Company Material Adverse Effect.
SECTION 3.21 Labor Relations. There are no pending or, to the knowledge
of the Company, threatened labor grievances or unfair labor practice claims or
charges against the Company or any Company Subsidiary which, individually or in
the aggregate, has had or would reasonably be expected to have a Company
Material Adverse Effect. As of the date hereof, except for matters that,
individually or in the aggregate, have not had and would not reasonably be
expected to have a Company Material Adverse Effect, (i) to the knowledge of the
Company there are no organizing efforts by any union or other group seeking to
represent any employees of the Company or any Company Subsidiary and (ii) there
are no strikes or other material labor disputes against the Company or any
Company Subsidiary pending or, to the knowledge of the Company, threatened.
SECTION 3.22 Transactions With Affiliates. As of the date hereof, except
as set forth in Section 3.22 of the Company Disclosure Letter or as disclosed in
the Filed Company SEC Documents, there are no agreements, arrangements or
transactions ("Related Party Agreements") which would be required to be
disclosed pursuant to Rule 404(a) of Regulation S-K under the Securities Act.
Except for those described in Section 3.22 of the Company Disclosure Letter,
there will be no Related Party Agreements in effect after the Effective Time.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub, jointly and severally, represent and warrant to the
Company as follows:
SECTION 4.01 Organization, Standing and Power. Each of Parent and Merger
Sub, is duly organized, validly existing and in good standing under the laws of
the State of Delaware and has full corporate power and authority to own its
properties and to conduct its businesses as presently conducted. Parent is duly
qualified to do business and is in good standing in each jurisdiction in which
the conduct of its business requires such qualification, except for
jurisdictions in which the failure to be so qualified or to be in good standing
would not, individually or in the aggregate, have a material adverse effect on
the business, results of operations or financial condition of Parent.
SECTION 4.02 Merger Sub. (a) Since the date of its incorporation, Merger
Sub has not carried on any business or conducted any operations other than the
execution of the Transaction Documents to which it is a party, the performance
of its obligations hereunder and thereunder and matters ancillary thereto.
(b) The authorized capital stock of Merger Sub consists of 1,000 shares of
common stock, par value $0.01 per share, all of which have been validly
issued, are fully paid and
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22
nonassessable and are owned by Parent free and clear of any Lien. No other
capital stock or equity securities of or interests in Merger Sub are authorized
or outstanding.
SECTION 4.03 Authority; Execution and Delivery; Enforceability. Each of
Parent and Merger Sub has all requisite corporate power and authority to execute
and deliver this Agreement and to perform its obligations hereunder. The
execution and delivery by each of Parent and Merger Sub of this Agreement and
the performance by it of its obligations have been duly authorized by all
necessary corporate action on the part of Parent and Merger Sub. Parent, as sole
stockholder of Merger Sub, has approved and adopted this Agreement. Each of
Parent and Merger Sub has duly executed and delivered this Agreement, and this
Agreement constitutes its legal, valid and binding obligation, enforceable
against it in accordance with its terms and conditions.
SECTION 4.04 No Conflicts; Consents. The execution and delivery of this
Agreement by each of Parent and Merger Sub, does not, and the consummation of
the Offer and the Merger and compliance with the terms hereof and thereof will
not, conflict with, or result in any violation of or default (with or without
notice or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss of a material benefit
under, or result in the creation of any Lien upon any of the properties or
assets of Parent or any of its subsidiaries under, any provision of: (i) the
charter or organizational documents of Parent or any of its subsidiaries; (ii)
any Contract to which Parent or any of its subsidiaries is a party or by or to
which any of their respective properties or assets is bound or subject; or (iii)
subject to the filings and other matters referred to in the following sentence,
any Judgment or Applicable Law applicable to Parent or any of its subsidiaries
or their respective properties or assets, other than, in the case of clauses
(ii) and (iii) above, any such items that, individually or in the aggregate,
have not had and could not reasonably be expected to have a material adverse
effect on the ability of Parent and Merger Sub to consummate the Offer and the
Merger (a "Parent Material Adverse Effect"). No Consent of, notice to, or
registration, declaration or filing with, any Governmental Entity is required to
be obtained or made by or with respect to Parent or any of its subsidiaries in
connection with the execution, delivery and performance of this Agreement or its
obligations hereunder, other than: (i) compliance with and filings under the HSR
Act, if applicable; (ii) the filing with the SEC of (A) the Offer Documents and
(B) such reports under Sections 13 and 16 of the Exchange Act, as may be
required in connection with this Agreement, the Offer and the Merger; (iii) the
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware; (iv) compliance with and such filings as may be required under
applicable environmental laws; (v) such filings as may be required in connection
with the taxes described in Section 6.08; (vi) filings under any applicable
state takeover law; and (vii) such other items (A) required solely by reason of
the participation of the Company (as opposed to any third party) in this
Agreement (B) that, individually or in the aggregate, have not had and could not
reasonably be expected to have a Parent Material Adverse Effect or (C) as are
set forth in the letter, dated as of the date of this Agreement, from Parent to
Merger Sub.
SECTION 4.05 Information Supplied. None of the information supplied or to
be supplied by Parent or Merger Sub for inclusion or incorporation by reference
in the Offer Documents, the Schedule 14D-9 or the Information Statement will, at
the time such document is filed with the SEC, at any time it is amended or
supplemented or at the time it is first published, sent or given to the
Company's stockholders, contain any untrue statement of a material fact or
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23
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading. The Offer Documents will comply as
to form in all material respects with the requirements of the Securities Act and
the rules and regulations thereunder, except that no representation is made by
Parent or Merger Sub with respect to statements made or incorporated by
reference therein based on information supplied by the Company for inclusion or
incorporation by reference therein.
SECTION 4.06 Brokers. No broker, investment banker, financial advisor or
other person is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with this Agreement, the Offer and the
Merger based upon arrangements made by or on behalf of Parent or Merger Sub.
SECTION 4.07 Financing. Parent and Merger Sub have funds available, or
binding commitments to provide funds, in either case sufficient to consummate
the Offer, the Merger and the transactions contemplated by this Agreement on the
terms contemplated by this Agreement, and, at the expiration of the Offer and
the Effective Time, Parent and Merger Sub will have available all of the funds
necessary for the acquisition of all shares of Common Stock pursuant to the
Offer and the Merger, as the case may be, and to perform any other transactions
contemplated hereunder and their respective obligations under this Agreement.
SECTION 4.08 Litigation. There is no action, suit, proceeding or
investigation pending or currently threatened against Parent or Merger Sub that
questions the validity of this Agreement or Parent's or Merger Sub's right to
enter into this Agreement, or to consummate the transactions contemplated hereby
or which, if decided in a manner adverse to Parent or Merger Sub, would
reasonably be expected to have a Parent Material Adverse Effect.
SECTION 4.09 Copies of Documents. Parent and Merger Sub have caused to be
made available for inspection and copying by the Company and its advisers, true,
complete and correct copies of all documents referred to in this Article IV or
in any schedule furnished by Parent and Merger Sub to the Company or reasonably
requested in writing by the Company.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 5.01 Conduct of Business. (a) Business of the Company. Except for
matters set forth in Section 5.01 of the Company Disclosure Letter or otherwise
contemplated by this Agreement, from the date of this Agreement to the Effective
Time, the Company shall, and shall cause each Company Subsidiary to, conduct its
business in the usual, regular and ordinary course in substantially the same
manner as previously conducted (subject to the express restrictions set forth
below) and, to the extent consistent therewith, use its reasonable efforts to
preserve intact its current business organization, keep available the services
of its current officers and key employees and keep its relationships with
customers, suppliers, licensors, licensees, distributors and others having
business dealings with them so that its goodwill and ongoing business shall not
be materially impaired at the Effective Time. In addition, and without limiting
the generality of the foregoing, except for matters set forth in Section 5.01 of
the Company
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24
Disclosure Letter or otherwise contemplated by this Agreement, from
the date of this Agreement to the Effective Time, the Company shall not, and
shall not permit any Company Subsidiary to, do any of the following without the
prior written consent of Parent:
(i) (A) declare, set aside or pay any dividends on, or make any
other distributions in respect of, any of its capital stock, other than
dividends and distributions by a direct or indirect wholly owned subsidiary
of the Company to its parent, (B) split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock,
or (C) purchase, redeem or otherwise acquire any shares of capital stock of
the Company or any Company Subsidiary or any other securities thereof or
any rights, warrants or options to acquire any such shares or other
securities;
(ii) authorize for issuance, issue, deliver, sell, pledge or grant
(A) any shares of its capital stock, (B) any Voting Company Debt or other
voting securities, (C) any securities convertible into or exchangeable for,
or any options, warrants or rights to acquire, any such shares, voting
securities or convertible or exchangeable securities, or (D) any "phantom"
stock, "phantom" stock rights, stock appreciation rights or stock-based
performance units, other than the issuance of Company Common Stock upon the
exercise of Company Stock Options outstanding on the date of this Agreement
and in accordance with their present terms;
(iii) amend its certificate of incorporation, by-laws or other
comparable charter or organizational documents;
(iv) (A) enter into, or propose or negotiate to enter into, any
material contract, (B) amend, or propose or negotiate to amend, the terms
of any existing material contracts or agreements of the type described in
the foregoing clause, (C) acquire, or propose or negotiate to acquire, any
interest in a corporation, partnership or joint venture arrangement (D)
sell, transfer, assign, relinquish, terminate or make any other material
change (taken on an individual basis) in, or propose or negotiate to take
any such action with respect to, the Company's material interests (as of
the date of this Agreement) in the equity or debt securities of any
corporation, partnership or joint venture arrangement which holds such an
interest, including, without limitation, the imposition of any Lien on any
of the foregoing, (E) give, or propose or negotiate to give, any approvals
relating to development plans, work plans, budgets or capital expenditure
commitments in connection with any such interests or (F) make, or propose
to make, any material change in the Company's material interests;
(v) enter into any significant further commitment or arrangement
with respect to the Company's pending SAP project or any other significant
systems project;
(vi) acquire or agree to acquire (A) by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or by any
other manner, any business or any corporation, partnership, joint venture,
association or other business organization or division thereof, or (B) any
assets that are material, individually or in the aggregate, to the Company
and the Company Subsidiaries taken as a whole;
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25
(vii) (A) grant to any officer or director of the Company or any
Company Subsidiary any increase in compensation, except to the extent
required under employment agreements in effect as of the date of the most
recent audited financial statements included in the Company SEC Documents,
(B) grant to any employee, officer or director of the Company or any
Company Subsidiary any increase in severance or termination pay, except to
the extent required under any agreement in effect as of the date of the
most recent audited financial statements, (C) enter into any new
employment, consulting, indemnification, severance or termination agreement
with any such employee, officer or director, (D) establish, adopt, enter
into or amend in any material respect any collective bargaining agreement
or Company Benefit Plan, or (E) take any action to accelerate any rights or
benefits (including vesting under the Company's 401(K) Plan), or make any
material determinations not in the ordinary course of business consistent
with prior practice, under any collective bargaining agreement or Company
Benefit Plan;
(viii) make any change in accounting methods, principles or practices
materially affecting the reported consolidated assets, liabilities or
results of operations of the Company, except insofar as may have been
required by a change in GAAP;
(ix) sell, lease, license or otherwise dispose of or subject to any
Lien any properties or assets, except sales of inventory and excess or
obsolete assets in the ordinary course of business consistent with past
practice;
(x) (A) incur any indebtedness for borrowed money or guarantee any
such indebtedness of another person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of the Company or
any Company Subsidiary, guarantee any debt securities of another person,
enter into any "keep well" or other agreement to maintain any financial
statement condition of another person or enter into any arrangement having
the economic effect of any of the foregoing, except for short-term
borrowings incurred in the ordinary course of business consistent with past
practice, or (B) make any loans, advances or capital contributions to, or
investments in, any other person, other than to or in the Company or any
direct or indirect wholly owned subsidiary of the Company;
(xi) make or agree to make any new capital expenditure or
expenditures other than capital expenditures which do not exceed the amount
budgeted therefor in the Company's annual capital expenditures budget for
fiscal year 2000 previously provided to Parent.
(xii) make any material Tax election or settle or compromise any
material Tax liability or refund, consent to any extension or waiver of the
statute of limitations period applicable to any Tax claim or action, if any
such election, settlement, compromise, consent or other action would have
the effect of materially increasing the Tax liability or reducing any net
operating loss, foreign tax credit, net capital loss or any other credit or
tax attribute of the Company or any of the Company Subsidiaries (including,
without limitation, deductions and credits related to alternative minimum
Taxes);
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26
(xiii) enter into any hedging agreement or other financial agreement
or arrangement designed to protect the Company against fluctuations in
commodities prices or currency exchange rates, except agreements or
arrangements entered into in the ordinary course of business consistent
with past practice;
(xiv) (A) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the
ordinary course of business consistent with past practice or in accordance
with their terms, of liabilities reflected or reserved against in, or
contemplated by, the most recent consolidated financial statements (or the
notes thereto) of the Company or incurred in the ordinary course of
business consistent with past practice, (B) cancel any material
indebtedness (individually or in the aggregate) or waive any claims or
rights of substantial value, or (C) waive the benefits of, or agree to
modify in any manner, any confidentiality, standstill or similar agreement
to which the Company or any Company Subsidiary is a party;
(xv) make any material change (including failing to renew) in the
amount or nature of the insurance policies covering the Company and the
Company Subsidiaries;
(xvi) waive any material claims or rights relating to the Company's
or any of the Company Subsidiaries' business;
(xvii) amend or otherwise modify the Stipulation; or
(xviii) authorize any of, or commit or agree to take any of, the
foregoing actions.
(b) Other Actions. The Company and Parent shall not, and shall not permit
any of their respective subsidiaries to, take any action that would, or that
could reasonably be expected to, result in: (i) any of the representations and
warranties of such party set forth in this Agreement that is qualified as to
materiality becoming untrue; (ii) any of such representations and warranties
that is not so qualified becoming untrue in any material respect; or (iii)
except as otherwise permitted by Section 5.02, any condition to the Offer set
forth in Exhibit A, or any condition to the Merger set forth in Article VII, not
-------
being satisfied.
SECTION 5.02 No Solicitation. (a) The Company shall not, nor shall it
permit any Company Subsidiary to, nor shall it authorize or permit any officer,
director or employee of, or any investment banker, attorney or other advisor,
agent or representative of the Company or any Company Subsidiary (collectively,
"Company Representatives") to: (i) solicit, initiate or encourage the submission
of, any Company Takeover Proposal (as defined below); (ii) enter into any
agreement with respect to any Company Takeover Proposal; or (iii) participate in
any discussions or negotiations regarding, or furnish to any person any
information with respect to, or take any other action to facilitate any
inquiries or the making of any proposal that constitutes, or may reasonably be
expected to lead to, any Company Takeover Proposal; provided, however, that, at
any time prior to the consummation of the Offer (the "Applicable Period"), the
Company Board may, in response to a Company Superior Proposal (as defined below)
that was not solicited by the Company or any Company Representative on or after
the date hereof and that did not otherwise result from a breach of this Section
5.02(a), and subject to providing prior written
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27
notice of its decision to take such action to Parent (the "Company Notice") and
compliance with Section 5.02(b), participate in discussions regarding such
Company Superior Proposal. For purposes of this Agreement, "Company Takeover
Proposal" means any inquiry, proposal or offer from any person relating to any
direct or indirect acquisition or purchase of a business that constitutes 25% or
more of the net revenues, net income or the assets of the Company and the
Company Subsidiaries taken as a whole, or 25% or more of any class of equity
securities of the Company or any Company Subsidiary, any tender offer or
exchange offer that if consummated would result in any person beneficially
owning 25% or more of any class of equity securities of the Company or any
Company Subsidiary, or any merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving the
Company or any Company Subsidiary, other than the transactions contemplated by
this Agreement. For purposes of this Agreement, a "Company Superior Proposal"
means any bona fide proposal made by a third party to acquire, directly or
indirectly, including pursuant to a tender offer, exchange offer, merger,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction, for consideration consisting of cash and/or securities,
100% of the outstanding shares of Company Common Stock or all or substantially
all the assets of the Company and otherwise on terms which the Company Board
determines in its good faith judgment (based on the written advice of Beacon)
(x) is reasonably capable of being completed, taking into account all legal,
financial, regulatory and other aspects of the proposal and the third party
making such proposal, and (y) provides greater present value to the Company's
stockholders than the cash consideration to be received by such stockholder
pursuant to the Offer and the Merger, as the Offer and the Merger may be amended
from time to time.
(b) The Company Board shall promptly advise Parent orally and in writing
of any Company Takeover Proposal or Company Superior Proposal.
(c) Nothing contained in this Section 5.02 shall prohibit the Company
Board from taking and disclosing to its stockholders a position contemplated by
Rule 14e-2(a) promulgated under the Exchange Act or from changing its
recommendation made pursuant to Section 251 of the DGCL, or making any
disclosure to the Company's stockholders if, in the good faith judgment of the
Company, after consultation with outside counsel, failure so to disclose would
be inconsistent with its obligations under applicable law.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01 Preparation of Proxy Statement; Stockholders Meeting. (a) If
the approval and adoption of this Agreement by the Company's stockholders is
required by law, the Company shall, at Parent's request, as soon as practicable
following the expiration of the Offer, prepare and file with the SEC the Proxy
Statement in preliminary form, and the Company shall use its best efforts to
respond as promptly as practicable to any comments of the SEC with respect
thereto. The Company shall notify Parent promptly of the receipt of any comments
from the SEC or its staff and of any request by the SEC or its staff for
amendments or supplements to the Proxy Statement or for additional information
and shall supply Parent with copies of all correspondence between the Company or
any of its representatives, on the one hand, and the
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28
SEC or its staff, on the other hand, with respect to the Proxy Statement. If at
any time prior to receipt of the Company Stockholder Approval there shall occur
any event that should be set forth in an amendment or supplement to the Proxy
Statement, the Company shall promptly prepare and mail to its stockholders such
an amendment or supplement. The Company shall not mail any Proxy Statement, or
any amendment or supplement thereto, to which Parent reasonably objects. The
Company shall use its best efforts to cause the Proxy Statement to be mailed to
the Company's stockholders as promptly as practicable after filing with the SEC.
(b) To the extent that this Agreement requires Company Stockholder
Approval, the Company shall, if requested by Parent and as soon as practicable
following the expiration of the Offer, duly call, give notice of, convene and
hold a meeting of its stockholders (the "Company Stockholders Meeting") for the
purpose of seeking the Company Stockholder Approval (including establishing the
record date, if requested by Parent, to be the date immediately after the date
Merger Sub first purchases any shares of Company Common Stock pursuant to the
Offer). The Company Board, subject to its fiduciary duties, shall recommend to
its stockholders that they give the Company Stockholder Approval. If Merger Sub
or any other subsidiary of Parent shall acquire at least 90% of the outstanding
shares of the Company Common Stock, the parties shall, at the request of Parent,
take all necessary and appropriate action to cause the Merger to become
effective as soon as practicable after the expiration of the Offer without a
stockholders meeting in accordance with Section 253 of the DGCL.
(c) Parent agrees to cause all shares of Common Stock purchased pursuant
to the Offer and all other shares of Common Stock owned by Merger Sub or any
other subsidiary of Parent to vote to adopt and approve this Agreement and the
Merger at the Company Stockholders Meeting or, at the election of Parent, to be
subject to action by written consent in favor of the Company Stockholder
Approval pursuant to Section 228 of the DGCL.
SECTION 6.02 Access to Information; Confidentiality. The Company shall,
and shall cause each of its subsidiaries to, afford to Parent, and to Parent's
directors, officers, employees, accountants, counsel, financial advisers,
financing sources and other representatives, reasonable access during normal
business hours during the period prior to the Effective Time to all their
respective properties, books, contracts, commitments, personnel and records and,
during such period, the Company shall, and shall cause each of its subsidiaries
to, furnish promptly to Parent: (i) a copy of each report, schedule,
registration statement and other document filed by it during such period
pursuant to the requirements of Federal or state securities laws; and (ii) all
other information concerning its business, properties and personnel as Parent
may reasonably request. All nonpublic information exchanged pursuant to this
Section 6.02 shall be subject to the confidentiality agreement dated as of June
7, 1999, as amended and/or supplemented from time to time thereafter, between
the Company and Parent (the "Confidentiality Agreement").
SECTION 6.03 Reasonable Efforts; Notification. (a) Upon the terms and
subject to the conditions set forth in this Agreement, each of the parties shall
use all reasonable efforts to take, or cause to be taken, all actions, and to
do, or cause to be done, and to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Offer, the Merger and
the other obligations of such party hereunder, including: (i) the obtaining of
all necessary actions or nonactions, waivers, consents and approvals from
Governmental Entities and the making of all
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29
necessary registrations and filings (including filings with Governmental
Entities, if any) and the taking of all reasonable steps as may be necessary to
obtain an approval or waiver from, or to avoid an action or proceeding by, any
Governmental Entity; (ii) the obtaining of all necessary consents, approvals or
waivers from third parties; (iii) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Agreement or
the consummation of this Agreement, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed; and (iv) the execution and delivery of any additional
instruments necessary to consummate this Agreement and to fully carry out the
purposes of this Agreement. In connection with and without limiting the
foregoing, the Company shall: (x) take all action necessary to ensure that no
state takeover statute or similar statute or regulation is or becomes applicable
to this Agreement; and (y) if any state takeover statute or similar statute or
regulation becomes applicable to this Agreement, take all action necessary to
ensure that the Offer and the Merger may be consummated as promptly as
practicable on the terms contemplated by this Agreement and otherwise to
minimize the effect of such statute or regulation on the Offer and the Merger.
Nothing in this Agreement shall be deemed to require any party to waive any
substantial rights or agree to any substantial limitation on its operations or
to take any action that would result in any of the consequences referred to in
paragraph (a) of Exhibit A.
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(b) The Company shall give prompt notice to Parent, and Parent or Merger
Sub shall give prompt notice to the Company, of: (i) any representation or
warranty made by it contained in this Agreement that is qualified as to
materiality becoming untrue or inaccurate in any respect or any such
representation or warranty that is not so qualified becoming untrue or
inaccurate in any material respect; or (ii) the failure by it to comply with or
satisfy in any material respect any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement; provided, however, that
no such notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement.
SECTION 6.04 Benefit Plans. (a) For one year after the Closing Date,
Parent shall either (i) cause the Surviving Corporation to continue to sponsor
and maintain the Company Benefit Plans, or (ii) provide benefits to the
employees of the Company who continue to be employed by the Surviving
Corporation (the "Company Employees") under employee benefit plans, programs,
policies or arrangements that in the aggregate are no less favorable than those
benefits provided to the Company Employees by the Company immediately prior to
the Closing Date. With respect any employee benefit plan, program, policy or
arrangement sponsored or maintained by Parent and offered to the Company
Employees in addition to or as a substitute for the Company Benefit Plans,
Parent shall give the Company Employees service credit for their employment with
the Company for eligibility and vesting purposes under all such employee benefit
plans, programs, policies or arrangements as if such service had been performed
with Parent. If Parent offers health benefits to the Company Employees under a
group health plan that is not a Company Benefit Plan, Parent shall waive any
pre-existing condition exclusions under such group health plan to the extent
coverage exists for such condition under the Company Benefit Plan and shall
credit each Company Employee with all deductible payments and co-payments paid
by such Company Employee under the Company's health plan prior to the Closing
Date during the current plan year for purposes of determining the extent to
which any
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30
such Company Employee has satisfied his or her deductible and whether he or she
has reached the out-of-pocket maximum under any health plan for such plan year.
(b) Following the Effective Time, Parent shall cause the Company and its
subsidiaries to honor (subject to this Section 6.04 and Section 6.05) all
obligations under any contracts, agreements and commitments of the Company and
its subsidiaries prior to the date hereof (or as established or amended in
accordance with or permitted by this Agreement) the existence of which does not
constitute a violation of the terms of this Agreement, which apply to any
current or former employee, or current or former director of the parties hereto
or any of their subsidiaries; provided, however, that this undertaking is not
intended to prevent the Company or any subsidiary of the Company from enforcing
such contracts, agreements and commitments in accordance with their terms,
including, any reserved right to amend, modify, suspend, revoke or terminate any
such contract, agreement or commitment.
(c) Nothing herein shall be construed as giving any employee of the
Company or any Company Subsidiary, except those employees set forth in the
Company Disclosure Letter, any right to continued employment following the
Effective Time.
SECTION 6.05 Indemnification. (a) After the earlier of (1) the Effective
Time or (2) the consummation of the Offer, Parent shall and shall cause the
Surviving Corporation (or any successor to the Surviving Corporation) to
indemnify, defend and hold harmless the present and former officers and
directors of the Company and its Subsidiaries (each an "Indemnified Party"),
against all losses, claims, damages, liabilities, fees and expenses (including
reasonable fees and disbursements of counsel and judgments, fines, losses,
claims, liabilities and amounts paid in settlement (provided that any such
settlement is effected with the written consent of the Parent or the Surviving
Corporation, such consent not to be unreasonably withheld)) incurred by reason
of the fact that such person is or was an officer or director of the Company or
any of its Subsidiaries and arising out of actions or omissions occurring at or
prior to the Effective Time to the full extent permitted by law, such right to
include advancement of expenses incurred in the defense of any action or suit;
provided that any determination required to be made with respect to whether such
Indemnified Party is entitled to indemnity hereunder (including without
limitation whether, with respect to the indemnification of such Indemnified
Party by the Surviving Corporation, an Indemnified Party's conduct complies with
the standards set forth under the DGCL), shall be made at Parent's expense by
independent counsel mutually acceptable to Parent and the Indemnified Party;
provided further, that nothing herein shall impair any rights or obligations of
any present or former directors or officers of the Company.
(b) Parent shall, to the fullest extent permitted by law, cause the
Surviving Corporation to honor all the Company's obligations to indemnify
(including any obligations to advance funds for expenses) the members of the
Special Committee and current or former directors or officers of the Company and
Company Subsidiaries for acts or omissions by such directors and officers
occurring prior to the Effective Time to the extent that such obligations of the
Company exist on the date of this Agreement, whether pursuant to the Company
Charter, the Company By-Laws, individual indemnity agreements or otherwise, and
such obligations shall survive the Merger and shall continue in full force and
effect in accordance with the terms of the Company Charter, the Company By-Laws
and such individual indemnity agreements from the Effective Time until the
<PAGE>
31
expiration of the applicable statute of limitations with respect to any claims
against such directors or officers arising out of such acts or omissions.
(c) For a period of six years after the Effective Time, Parent shall cause
to be maintained in effect the current policies of directors' and officers'
liability insurance maintained by the Company (provided that Parent may
substitute therefor policies with reputable and financially sound carriers of at
least the same coverage and amounts containing terms and conditions which are no
less advantageous) with respect to claims arising from or related to facts or
events which occurred at or before the Effective Time; provided, however, that
Parent shall not be obligated to make annual premium payments for such insurance
to the extent such premiums exceed 200% of the annual premiums paid as of the
date hereof by the Company for such insurance (such 200% amount, the "Maximum
Premium"). If such insurance coverage cannot be obtained at all, or can only be
obtained at an annual premium in excess of the Maximum Premium, Parent shall
maintain the most advantageous policies of directors' and officers' insurance
obtainable for an annual premium equal to the Maximum Premium. The Company
represents to Parent that the Maximum Premium is $578,000.
SECTION 6.06 Fees and Expenses. All fees and expenses incurred in
connection with the Merger shall be paid by the party incurring such fees or
expenses, whether or not the Merger is consummated.
SECTION 6.07 Public Announcements. (a) Parent and Merger Sub, on the one
hand, and the Company, on the other hand, shall consult with each other before
issuing, and provide each other the opportunity to review and comment upon, any
press release or other public statements with respect to the Offer, the Merger
and the other obligations under this Agreement and shall not issue any such
press release or make any such public statement relating thereto prior to such
consultation, except as may be required by applicable law, court process or by
obligations pursuant to any listing agreement with any national securities
exchange.
(b) The Company shall give at least 24 hours' prior written notice to
Parent Sub of any proposed press release or other public statement not relating
to the Offer, the Merger or any of the obligations under this Agreement, which
notice shall include the text of such press release or public statement.
SECTION 6.08 Transfer Taxes. The Company shall pay any state, local,
foreign or provincial Tax which is attributable to the transfer of the
beneficial ownership of the Company's or the Company's subsidiaries' real
property (collectively, the "Transfer Taxes"), if any, and any penalties or
interest with respect to the Transfer Taxes, payable in connection with the
consummation of the Offer or the Merger, any state, local, foreign or provincial
Tax which is attributable solely to and imposed upon the transfer of Company
Common Stock pursuant to this Agreement (collectively, "Stock Transfer Taxes")
and any penalties or interest with respect to any such Stock Transfer Taxes.
The Company shall file any returns with respect to the Transfer Taxes, including
supplying in a timely manner a complete list of all real property interests held
by the Company that are located in any jurisdiction imposing such Transfer Taxes
and any information with respect to such property that is reasonably necessary
to complete such returns. The portion of the consideration to be received by
holders of Company Common Stock in connection with the Offer and the Merger that
is allocable to the real property of the Company
<PAGE>
32
and its subsidiaries in any jurisdiction imposing such Transfer Taxes shall be
determined by Merger Sub and the Company in their reasonable discretion. The
stockholders of the Company shall be deemed to have agreed to be bound by the
allocation established pursuant to this Section 6.08 in the preparation of any
return with respect to the Transfer Taxes. The Company acknowledges that the
amount of the Transfer Taxes payable with respect to any shares of Company
Common Stock may be withheld by Merger Sub from the amount to be paid pursuant
to the Offer and the Merger with respect to such shares, unless the date on
which the beneficial owner of such shares acquired beneficial ownership thereof
is certified to Merger Sub.
SECTION 6.09 Directors. Promptly upon the acceptance for payment of, and
payment by Merger Sub for, any shares of Company Common Stock pursuant to the
Offer, Merger Sub shall be entitled to designate such number of directors on the
Company Board as will give Merger Sub, subject to compliance with Section 14(f)
of the Exchange Act, representation on the Company Board equal to at least that
number of directors, rounded up to the next whole number, which is the product
of (a) the total number of directors on the Company Board (giving effect to the
directors elected pursuant to this sentence) multiplied by (b) the percentage
that (i) such number of shares of Company Common Stock so accepted for payment
and paid for by Merger Sub plus the number of shares of Company Common Stock
otherwise owned by Merger Sub or any other subsidiary of Parent bears to (ii)
the number of such shares outstanding, and the Company shall, at such time,
cause Merger Sub's designees to be so elected; provided, however, that in the
event that Merger Sub's designees are appointed or elected to the Company Board,
until the Effective Time the Company Board shall have at least three directors
who are Directors on the date of this Agreement and who are not officers of the
Company (the "Independent Directors"); and provided further that, in such event,
if the number of Independent Directors shall be reduced below three for any
reason whatsoever, any remaining Independent Directors (or Independent Director,
if there shall be only one remaining) shall be entitled to designate persons to
fill such vacancies who shall be deemed to be Independent Directors for purposes
of this Agreement or, if no Independent Directors then remain, the other
directors shall designate three persons to fill such vacancies who shall not be
officers, stockholders or affiliates of the Company, Parent or Merger Sub, and
such persons shall be deemed to be Independent Directors for purposes of this
Agreement. Subject to applicable law, the Company shall take all action
requested by Parent necessary to effect any such election, including mailing to
its stockholders the Information Statement containing the information required
by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, and
the Company shall make such mailing with the mailing of the Schedule 14D-9
(provided that Merger Sub shall have provided to the Company on a timely basis
all information required to be included in the Information Statement with
respect to Merger Sub's designees). In connection with the foregoing, the
Company shall promptly, at the option of Merger Sub, either increase the size of
the Company Board or obtain the resignation of such number of its current
directors as is necessary to enable Merger Sub's designees to be elected or
appointed to the Company Board as provided above.
SECTION 6.10 Debt Offer.
(a) Provided that this Agreement shall not have been terminated, the
Company shall promptly (but in no event later than 5 business days after the
date hereof), commence an offer to purchase, accompanied by a related consent
solicitation regarding covenant amendments, all of the Company's outstanding 9
1/4% Senior Subordinated Notes Due 2007 (the "Senior
<PAGE>
33
Subordinated Notes"), on the terms set forth in Section 6.10 of the Company
Disclosure Letter and such other customary terms and conditions as are
reasonably acceptable to Merger Sub (as amended from time to time, the "Debt
Offer"). The Company shall waive any of the conditions to the Debt Offer and
make any other changes in the terms and conditions of the Debt Offer as may be
reasonably requested by Merger Sub. The Company shall not, without Merger Sub's
prior written consent, waive any material condition to the Debt Offer, make any
changes to the terms and conditions of the Debt Offer set forth in Section 6.10
of the Company Disclosure Letter or make any other material changes in the terms
and conditions of the Debt Offer. The Company covenants and agrees that, subject
to the terms and conditions of this Agreement, including but not limited to the
conditions in the Debt Offer, it will accept for payment and pay for the Senior
Subordinated Notes as soon as such conditions to the Debt Offer are satisfied
and it is permitted to do so under applicable law, provided that the Company
shall coordinate the timing of any such purchase with Merger Sub in order to
obtain the greatest participation in the Debt Offer.
(b) Promptly following the date of this Agreement, Merger Sub shall
prepare, subject to comments of, and reasonable approval by, the Company and its
counsel, an offer to purchase and related documents necessary to consummate the
repurchase of the Senior Subordinated Notes and related consent solicitation (as
amended from time to time, the "Debt Offer Documents"). All mailings to the
holders of Senior Subordinated Notes in connection with the Debt Offer shall be
subject to the prior review of Merger Sub. The Company will use its best efforts
to cause the Debt Offer Documents to be mailed to the holders of the Senior
Subordinated Notes as promptly as practicable following receipt of a request
from Merger Sub to do so. The Company agrees promptly to correct any information
in the Debt Offer Documents that shall be or have become false or misleading in
any material respect.
(c) The obligations of Parent and Merger Sub to consummate the Offer and
to effect the Merger shall not be subject to the successful completion of the
Debt Offer.
SECTION 6.11 Cooperation With Financing Efforts.
(a) The Company agrees to provide, and will cause the Company Subsidiaries
and its and their respective officers, employees and advisors to provide,
reasonable cooperation in connection with the arrangement of any financing to be
consummated contemporaneously with or at or after the Effective Time in respect
of the transactions contemplated by this Agreement, including without
limitation, participation in meetings, due diligence sessions, road shows, the
preparation of offering memoranda, private placement memoranda, prospectuses and
similar documents, the execution and delivery of any commitment letters,
underwriting or placement agreements, pledge and security documents, other
definitive financing documents, or other requested certificates or documents,
including a customary certificate of the chief financial officer of the Company
with respect to solvency matters, comfort letters of accountants, legal opinions
and real estate title documentation as may be reasonably requested by Merger
Sub. In addition, in conjunction with the obtaining of any such financing and in
addition to the Company's obligations pursuant to Section 6.10, the Company
agrees, at the request of Merger Sub, to call for prepayment or redemption, or
to repay, redeem and/or renegotiate, as the case may be, any other existing
indebtedness of the Company; provided that no such prepayments or redemptions
shall themselves actually be made until contemporaneously with or after the
<PAGE>
34
Effective Time and the Company shall not be required to make any call for
redemption or prepayment that is irrevocable when made.
(b) In addition, the Company agrees to use its best efforts to cause its
fiscal year end audit to be completed by December 20, 1999.
SECTION 6.12 Consents. From and after the date of this Agreement and
until the Closing, the Company and the Company Subsidiaries shall use their
respective best efforts to obtain the consents of the parties listed in Section
3.05 of the Company Disclosure Letter.
ARTICLE VII
CONDITIONS PRECEDENT
SECTION 7.01 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Stockholder Approval. If required by law, the Company shall have
obtained the Company Stockholder Approval.
(b) Antitrust. The waiting period (and any extension thereof) applicable
to the Merger under the HSR Act, if any, shall have been terminated or shall
have expired. Any consents, approvals and filings under any foreign antitrust
law, the absence of which would prohibit the consummation of Merger, shall have
been obtained or made.
(c) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect; provided, however, that each of
the parties shall have used all reasonable efforts to prevent the entry of any
such injunction or other order and to appeal as promptly as possible any such
injunction or other order that may be entered.
(d) Purchase of Stock. Merger Sub shall have previously accepted for
payment and paid for the shares of Company Common Stock tendered and not
withdrawn pursuant to the Offer.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after the Company Stockholder
Approval:
(a) By mutual written consent of Parent, Merger Sub and the Company;
(b) By either Parent or the Company if:
<PAGE>
35
(i) the Merger is not consummated on or before February 28,
2000 (the "Outside Date"), unless the failure to consummate the
Merger is the result of a willful or material breach this Agreement
by the party seeking to terminate this Agreement; provided,
however, that the passage of such period shall be tolled for any
part thereof during which any party shall be subject to a nonfinal
order, decree, ruling or action restraining, enjoining or otherwise
prohibiting the consummation of the Merger;
(ii) any Governmental Entity issues an order, decree or ruling
or takes any other action permanently enjoining, restraining or
otherwise prohibiting the Merger and such order, decree, ruling or
other action shall have become final and nonappealable;
(iii) as the result of the failure of any of the conditions set
forth Exhibit A to this Agreement, the Offer shall have terminated
---------
or expired in accordance with its terms without Merger Sub having
purchased any shares of Company Common Stock pursuant to the Offer;
or
(iv) upon a vote at a duly held stockholders meeting to obtain
the Company Stockholder Approval, the Company Stockholder Approval
is not obtained; provided, however, that this Agreement may not be
terminated by Parent pursuant to this clause (iv) if Parent or
Merger Sub is in breach of Section 6.01;
(c) by Parent, if the Company breaches or fails to perform in any material
respect any of its covenants contained in this Agreement, which breach or
failure to perform would give rise to the failure of a condition set forth
in Exhibit A;
---------
(d) by Parent, if the Company Board withdraws, modifies or changes in any
manner adverse to Parent and Merger Sub its approval or recommendation of
the Offer, the Merger and this Agreement; or
(e) by the Company, if Parent or Merger Sub breaches or fails to perform
in any material respect any of their respective covenants contained in this
Agreement.
SECTION 8.02 Effect of Termination. In the event of termination of this
Agreement by either the Company or Parent as provided in Section 8.01, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Parent, Merger Sub or the Company, other than
Section 3.15, Section 4.06, Section 6.02, Section 6.06, this Section 8.02 and
Article IX and except to the extent that such termination results from the
willful and material breach by a party of any representation, warranty or
covenant set forth in this Agreement.
SECTION 8.03 Amendment. This Agreement may be amended by the parties at
any time before or after receipt of the Company Stockholder Approval; provided,
however, that after receipt of the Company Stockholder Approval, there shall be
made no amendment that by law requires further approval by such stockholders
without the further approval of such stockholders.
<PAGE>
36
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties.
SECTION 8.04 Extension; Waiver. At any time prior to the Effective Time,
the parties may: (i) extend the time for the performance of any of the
obligations or other acts of the other parties; (ii) waive any inaccuracies in
the representations and warranties contained in this Agreement or in any
document delivered pursuant to this Agreement; or (iii) subject to the proviso
of Section 8.03, waive compliance with any of the agreements or conditions
contained in this Agreement. Any agreement on the part of a party to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party. The failure of any party to this Agreement to
assert any of its rights under this Agreement or otherwise shall not constitute
a waiver of such rights.
SECTION 8.05 Procedure for Termination Amendment, Extension or Waiver. A
termination of this Agreement pursuant to Section 8.01, an amendment of this
Agreement pursuant to Section 8.03 or an extension or waiver pursuant to Section
8.04 shall, in order to be effective, require in the case of Parent, Merger Sub
or the Company, action by its Board of Directors or the duly authorized designee
of its Board of Directors.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time. This Section 9.01
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
SECTION 9.02 Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given upon receipt by the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
<PAGE>
37
(a) If to Parent or Merger Sub, to:
Attention: SIND HOLDINGS, Inc.
c/o Investcorp Management Services Limited
P.O. Box 5430
Investcorp House
Manama
Bahrain
Telecopier; 011-973-530-816
Attention: H. Richard Lukens, III
with a copy to: Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, NY 10166
Tel: (212) 351-4000
Fax: (212) 351-4035
Attention: E. Michael Greaney
(b) If to the Company, to:
Synthetic Industries, Inc.
309 LaFayette Road
Chickamauga, Georgia 30707
Attention: Joseph P. Dana
Tel: (423) 553-3403
Fax: (706) 375-6953
with a copy to:
King & Spalding
1185 Avenue of the Americas
New York, New York 10036
Attention: Mark Zvonkovic
Tel: (212) 556-2250
Fax: (212) 556-2222
SECTION 9.03 Definitions. For purposes of this Agreement:
An "affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first person.
A "person" means any individual, firm, corporation, partnership, company,
limited liability company, trust, joint venture, association, Governmental
Entity or other entity.
<PAGE>
38
A "subsidiary" of any person means another person, an amount of the voting
securities, other voting ownership or voting partnership interests of which is
sufficient to elect at least a majority of its Board of Directors or other
governing body (or, if there are no such voting interests, 50% or more of the
equity interests of which) is owned directly or indirectly by such first person.
SECTION 9.04 Interpretation; Disclosure Letters. When a reference is
made in this Agreement to a Section, such reference shall be to a Section of
this Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Whenever the words
"include", "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation". Any matter disclosed in
one section of the Company Disclosure Letter shall be deemed disclosed for
another section of the Company Disclosure Letter if and only to the extent that
it is apparent from such disclosure that it is intended for both purposes.
SECTION 9.05 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule or law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that transactions contemplated hereby are fulfilled to the extent
possible.
SECTION 9.06 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
SECTION 9.07 Entire Agreement; No Third-Party Beneficiaries. This
Agreement: (i) constitutes the entire agreement, and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the transactions contemplated hereunder and (ii) except for the
provisions of Article II and Section 6.05, is not intended to confer upon any
person other than the parties any rights or remedies.
SECTION 9.08 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
SECTION 9.09 Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by any of the parties without the prior
written consent of the other parties, except that Merger Sub may assign, in its
sole discretion, any of or all its rights, interests and obligations under this
Agreement to Parent or to any direct or indirect wholly owned subsidiary of
Parent, but no such assignment shall relieve Merger Sub of any of its
obligations under this Agreement.
<PAGE>
39
Any purported assignment without such consent shall be void. Subject to the
preceding sentences, this Agreement will be binding upon, inure to the benefit
of, and be enforceable by, the parties and their respective successors and
assigns.
SECTION 9.10 Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any Delaware state court or any
Federal court located in the State of Delaware, this being in addition to any
other remedy to which they are entitled at law or in equity. In addition, each
of the parties hereto: (i) consents to submit itself to the personal
jurisdiction of any Delaware state court or any Federal court located in the
State of Delaware in the event any dispute arises out of this Agreement or any
transactions contemplated hereunder; (ii) agrees that it will not attempt to
deny or defeat such personal jurisdiction by motion or other request for leave
from any such court; (iii) agrees that it will not bring any action relating to
this Agreement or any transactions contemplated hereunder in any court other
than any Delaware state court or any Federal court sitting in the State of
Delaware; and (iv) waives any right to trial by jury with respect to any action
related to or arising out of this Agreement or any transactions contemplated
hereunder.
[signatures follow on separate page]
<PAGE>
40
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have duly executed
this Agreement, all as of the date first written above.
SIND HOLDINGS, INC.
By________________________________
Name:
Title:
SIND ACQUISITION, INC.
By________________________________
Name:
Title:
SYNTHETIC INDUSTRIES, INC.
By________________________________
Name: Joseph F. Dana
Title: President and Chief Operating
Officer
<PAGE>
EXHIBIT A
Conditions of the Offer
Notwithstanding any other term of the Offer or this Agreement, Merger Sub
shall not be required to accept for payment or, subject to any applicable rules
and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act
(relating to Merger Sub's obligation to pay for or return tendered shares of
Company Common Stock promptly after the termination or withdrawal of the Offer),
to pay for any shares of Common Stock tendered pursuant to the Offer unless
there shall have been validly tendered and not withdrawn prior to the expiration
of the Offer that number of shares of Company Common Stock which would represent
at least a majority of the Fully Diluted Shares (the "Minimum Tender
Condition"). The term "Fully Diluted Shares" means all outstanding securities
entitled generally to vote in the election of directors of the Company on a
fully diluted basis, after giving effect to the exercise or conversion of all
options, rights and securities exercisable or convertible into such voting
securities. Furthermore, notwithstanding any other term of the Offer or this
Agreement, Merger Sub shall not be required to commence the Offer, accept for
payment or, subject as aforesaid, to pay for any shares of Company Common Stock
not theretofore accepted for payment or paid for, and may terminate or amend the
Offer, (i) with the consent of the Company or (ii) if, at any time on or after
the date of this Agreement and before the acceptance of such shares for payment
or the payment therefor, any of the following conditions exists:
(a) there shall be threatened or pending any suit, action or
proceeding by any Governmental Entity or any other person: (i) challenging
the acquisition by Parent or Merger Sub of any Company Common Stock,
seeking to restrain or prohibit the making or consummation of the Offer or
the Merger or any other transaction contemplated by this Agreement, or
resulting in a material delay in or material restriction on the ability of
Merger Sub to consummate the Offer or the Merger or seeking to obtain from
the Company, Parent or Merger Sub any damages that could result in a
Company Material Adverse Effect; (ii) seeking to prohibit or limit the
ownership or operation by the Company, Parent or any of their respective
subsidiaries of any material portion of the business or assets of the
Company, Parent or any of their respective subsidiaries, or to compel the
Company, Parent or any of their respective subsidiaries to dispose of or
hold separate any material portion of their respective businesses or
assets, as a result of the Offer, the Merger or any other Transaction;
(iii) seeking to impose limitations on the ability of Parent or Merger Sub
to acquire or hold, or exercise full rights of ownership of, any shares of
Company Common Stock, including the right to vote the Company Common Stock
purchased by it on all matters properly presented to the stockholders of
the Company; (iv) seeking to prohibit Parent or any of its subsidiaries
from effectively controlling in any material respect the business or
operations of the Company and the Company Subsidiaries; or (v) which
otherwise is reasonably likely to have a Company Material Adverse Effect;
<PAGE>
(b) any statute, rule, regulation, legislation, interpretation,
judgment, order or injunction shall be threatened, proposed, sought,
enacted, entered, enforced, promulgated, amended or issued with respect to,
or deemed applicable to, or any consent or approval withheld with respect
to: (i) Parent, the Company or any of their respective subsidiaries; or
(ii) the Offer, the Merger or any other Transaction, by any Governmental
Entity that is reasonably likely to result, directly or indirectly, in any
of the consequences referred to in subparagraph (a) above;
(c) there shall have occurred any event, change, effect or development
that, individually or in the aggregate, has had a Company Material Adverse
Effect;
(d) there shall have occurred: (i) any general suspension of trading
of securities on any national securities exchange or in the over-the-
counter market in the United States (excluding any coordinated trading halt
triggered solely as a result of a specified decrease in a market index);
(ii) a declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States; (iii) any limitation (whether or not
mandatory) by any Governmental Entity on, or other event that might
materially affect, the extension of credit by banks or other lending
institutions; (iv) a commencement of a war or armed hostilities or other
national or international calamity directly or indirectly involving the
United States; or (v) in the case of any of the foregoing existing on the
date of this Agreement, a material acceleration or worsening thereof;
(e) the representations and warranties by the Company contained in
this Agreement shall not be true and correct as of the date of this
Agreement and at the scheduled or extended expiration of the Offer, except
to the extent such representation and warranty expressly relates to an
earlier date (in which case on and as of such earlier date); provided,
however, that, other than with respect to the representations in Section
3.03 (Capital Structure) as to the number of issued and outstanding shares
of capital stock of the Company and Company Stock Options, the condition
set forth in this subparagraph (e) shall be considered satisfied unless,
ignoring for this purpose all qualifications as to materiality and Company
Material Adverse Effect in such representations and warranties, the
inaccuracies in the representations and warranties (with all such
inaccuracies taken in the aggregate) have had or would reasonably be
expected to have a Company Material Adverse Effect.
(f) the Company shall have failed to perform in any material respect
any obligation or to comply in any material respect with any agreement or
covenant of the Company to be performed or complied with by the Company
under this Agreement;
(g) this Agreement shall have been terminated in accordance with its
terms; or
(h) the Company Board withdraws, modifies or changes in any manner
adverse to Parent and Merger Sub its approval or recommendation of the
Offer, the Merger and this Agreement.
<PAGE>
SCHEDULE I
Definitions
<TABLE>
<CAPTION>
Term Defined in Section
- ---- ------------------
<S> <C>
"affiliate" 9.03
"Applicable Law" 3.05(a)
"Applicable Period" 5.02(a)
"Appraisal Shares" 2.01(d)
"Beacon" 3.15
"Certificate of Merger" 1.05
"Certificates" 2.02(a)
"Closing" 1.04
"Closing Date" 1.04
"Code" 3.10(b)
"Company" Recitals
"Company Benefit Plans" 3.10
"Company Board" 3.04(b)
"Company By-Laws" 3.01
"Company Charter" 3.01
"Company Common Stock" Recitals
"Company Confidentiality Agreement" 3.14(a)
"Company Disclosure Letter" 3.02(a)
"Company Employees" 6.04(a)
"Company Intellectual Property" 3.20
"Company Material Adverse Effect" 3.01
"Company Material Agreement" 3.18
"Company Notice" 5.02(a)
"Company SAR" 3.03(b)
"Company SEC Documents" 3.06
"Company Stock Option" 3.03(b)
"Company Stock Plans" 3.03(b)
"Company Stockholder Approval" 3.04(c)
"Company Stockholders Meeting" 6.01(b)
"Company Subsidiary" 3.02(a)
"Company Superior Proposal" 5.02(a)
"Company Takeover Proposal" 5.02(a)
"Confidentiality Agreement" 6.02(b)
"Contract" 3.05(a)
"Consent" 3.05(a)
"Debt Offer" 6.10(a)
"Debt Offer Documents" 6.10(b)
"DGCL" Recitals
"Effective Time" 1.05
"ERISA" 3.11(a)
"Environmental Laws" 3.13(a)
</TABLE>
<PAGE>
<TABLE>
<S> <C>
"Exchange Act" 1.01(a)
"Exchange Fund" 2.02 (a)
"Filed Company SEC Documents" 3.06
"Fully Diluted Shares" Exhibit A
"GAAP" 3.06
"Governmental Entity" 3.05(a)
"Governmental Permits" 3.17
"Hazardous Substance" 3.12(d)
"HSR Act" 3.05(a)
"Indemnified Party" 6.05
"Independent Directors" 6.09
"Information Statement" 3.05(a)
"Judgment" 3.05(a)
"Liens" 3.02(a)
"Maximum Premium" 6.05(b)
"Merger" Recitals
"Merger Consideration" 2.01(c)
"Merger Sub" Recitals
"Minimum Tender Condition" Exhibit A
"Offer" Recitals
"Offer Documents" 1.01(b)
"Outside Date" 8.01(b)
"Parent" Recitals
"Parent Material Adverse Effect" 4.04(iii)
"Paying Agent" 2.02(a)
"person" 9.03
"Proxy Statement" 3.05(a)
"Related Party Agreement" 3.22
"SEC" 1.01(a)
"Senior Subordinated Notes" 6.20(a)
"Securities Act" 3.06
"Schedule 14D-9" 1.02(b)
"Significant Company Subsidiary" 3.01
"Special Committee" Recitals
"Stipulation" Recitals
"Stock Transfer Taxes" 6.08
"Stockholder" Recitals
"subsidiary" 9.03
"Surviving Corporation" 1.03
"Tax" 3.09(f)
"Tax Return" 3.09(f)
"Transfer Taxes" 6.08
"Voting Company Debt" 3.03
"Wininger Litigation" Recitals
</TABLE>
<PAGE>
Exhibit (c)(2)
EXECUTION COPY
STOCKHOLDER AGREEMENT
THIS STOCKHOLDER AGREEMENT, dated as of November 5, 1999 (the
"Agreement"), among SIND Holdings, Inc., a Delaware corporation ("Parent"), SIND
Acquisition, Inc., a Delaware corporation and a wholly owned subsidiary of
Parent ("Merger Sub"), and Synthetic Industries, L.P., a Delaware limited
partnership (the "Stockholder").
W I T N E S S E T H:
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, Parent, Merger Sub and Synthetic Industries, Inc., a Delaware
corporation (the "Company"), are entering into an Agreement and Plan of Merger,
dated as of the date hereof (the "Merger Agreement"), which provides for, upon
the terms and subject to the conditions set forth therein, (i) the commencement
by Merger Sub of a tender offer (the "Offer") for all of the issued and
outstanding shares of common stock, par value $1.00 per share, of the Company
(the "Shares"), at a price of $33.00 per share, net to the seller in cash, and
(ii) the subsequent merger of Merger Sub with and into the Company (the
"Merger");
WHEREAS, as of the date hereof, the Stockholder owns, beneficially and
of record, 5,699,194 Shares (all such Shares together with any additional Shares
which may hereafter be acquired by the Stockholder prior to the termination of
this Agreement, whether upon the exercise of options or by means of purchase,
dividend, distribution or otherwise, being referred to herein as the "Owned
Shares");
WHEREAS, Frederick S. Wyle, the independent liquidating trustee (the
"Liquidating Trustee") of the Stockholder appointed pursuant to Section 17-
803(a) of the Delaware Revised Uniform Partnership Act, is required to take such
actions as may be necessary or desirable to consummate properly the transactions
contemplated by the Merger Agreement;
WHEREAS, as a condition to their willingness to enter into the Merger
Agreement, Parent and Merger Sub have required that the Stockholder enter into
this Agreement; and
WHEREAS, in order to induce Parent and Merger Sub to enter into the
Merger Agreement, the Stockholder is willing to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Parent, Merger Sub and the Stockholder hereby agree as follows:
<PAGE>
ARTICLE I.
TRANSFER AND VOTING OF SHARES;
OTHER COVENANTS OF THE STOCKHOLDER
SECTION 1.1. Voting of Shares. From the date hereof until the
----------------
earliest to occur of (x) termination of this Agreement pursuant to Section 6.2
hereof, (y) the expiration of the Stock Option (as defined in Section 3.1
hereof) with respect to the Owned Shares and (z) the closing of any exercise of
such Stock Option (the "Term"), at any meeting of the stockholders of the
Company, however called, the Stockholder shall vote the Owned Shares (i) in
favor of the Merger and the Merger Agreement (as amended from time to time),
(ii) against any Company Takeover Proposal and against any proposal for action
or agreement that would result in a breach of any covenant, representation or
warranty or any other obligation or agreement of the Company under the Merger
Agreement or which is reasonably likely to result in any of the conditions of
the Company's obligations under the Merger Agreement, not being fulfilled, or
any other action which could reasonably be expected to impede, interfere with,
delay, postpone or materially adversely affect the transactions contemplated by
the Merger Agreement or the likelihood of such transactions being consummated
and (iii) in favor of any other matter necessary for consummation of the
transactions contemplated by the Merger Agreement.
SECTION 1.2. No Inconsistent Arrangements. Except as contemplated by
----------------------------
this Agreement and the Merger Agreement, the Stockholder shall not during the
Term (i) transfer (which term shall include, without limitation, any sale,
assignment, gift, pledge, hypothecation or other disposition), or consent to any
transfer of, any or all of the Owned Shares or any interest therein, or create
or permit to exist any Encumbrance (as defined in Section 4.3 hereof) on such
Owned Shares, (ii) enter into any contract, option or other agreement or
understanding with respect to any transfer of any or all of the Owned Shares or
any interest therein, (iii) grant any proxy, power-of-attorney or other
authorization in or with respect to the Owned Shares, (iv) deposit the Owned
Shares into a voting trust or enter into a voting agreement or arrangement with
respect to the Owned Shares, or (v) take any other action that would in any way
restrict, limit or interfere with the performance of its obligations hereunder
or the transactions contemplated hereby or by the Merger Agreement.
SECTION 1.3. Proxy. The Stockholder represents that any proxies
-----
heretofore given in respect of the Owned Shares are not irrevocable and hereby
revokes any and all such proxies or powers of attorney. The Stockholder hereby
constitutes and appoints Merger Sub and Parent, or any nominee of Merger Sub and
Parent, with full power of substitution and resubstitution, at any time during
the Term, as its true and lawful attorney and proxy (its "Proxy"), for and in
its name, place and stead, to vote each of the Owned Shares, including the right
to sign its name (as stockholder) to any consent, certificate or other document
relating to the Company, as provided in Section 1.1.
THE FOREGOING PROXY AND POWER OF ATTORNEY ARE IRREVOCABLE AND COUPLED
WITH AN INTEREST THROUGHOUT THE TERM.
2
<PAGE>
SECTION 1.4. Waiver of Appraisal Rights. The Stockholder hereby
--------------------------
waives any rights of appraisal or rights to dissent from the Merger.
SECTION 1.5. Stop Transfer. The Stockholder shall not request that
-------------
the Company register the transfer (book-entry or otherwise) of any certificate
or uncertificated interest representing any of the Owned Shares, unless such
transfer is made in compliance with this Agreement.
SECTION 1.6. No Solicitation. During the Term, the Stockholder shall
---------------
not, nor shall it permit or authorize any of its partners, employees, agents or
representatives (collectively, the "Representatives") to, (i) solicit or
initiate, or encourage, directly or indirectly, any inquiries regarding or the
submission of, any Company Takeover Proposal, (ii) participate in any
discussions or negotiations regarding, or furnish to any Person any information
or data with respect to, or take any other action to knowingly facilitate the
making of any proposal that constitutes, or may reasonably be expected to lead
to, any Company Takeover Proposal or (iii) enter into any agreement with respect
to any Company Takeover Proposal or approve or resolve to approve any Company
Takeover Proposal. Upon execution of this Agreement, the Stockholder shall, and
it shall cause its Representatives to, immediately cease any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any of the foregoing. The Stockholder will promptly notify
Parent of the existence of any proposal, discussion, negotiation or inquiry
received by the Stockholder, and the Stockholder will immediately communicate to
Parent the terms of any proposal, discussion, negotiation or inquiry which it
may receive (and will promptly provide to Parent copies of any written materials
received by it in connection with such proposal, discussion, negotiation or
inquiry) and the identity of the Person making such proposal or inquiry or
engaging in such discussion or negotiation. Any action taken by the Company or
its directors or officers consistent with Section 5.02 of the Merger Agreement
shall not be considered to violate this Section 1.6.
ARTICLE II.
TENDER OF SHARES
SECTION 2.1. Tender. The Stockholder shall validly tender the Owned
------
Shares pursuant to and in accordance with the terms of the Offer, not later than
the second business day after commencement of the Offer pursuant to Section 1.01
of the Merger Agreement and Rule 14d-2 under the Exchange Act, and not
thereafter withdraw such tender; provided that there has been no modification or
amendment to the terms of the Offer which would require the consent of the
Company pursuant to Section 1.01 of the Merger Agreement. The Stockholder
hereby acknowledges and agrees that Parent's and Merger Sub's obligation to
accept for payment and pay for the Owned Shares in the Offer is subject to the
terms and conditions of the Offer.
SECTION 2.2. Certain Warranties. Without limiting the generality or
------------------
effect of any other term or condition of the Offer, the transfer by the
Stockholder of the Owned Shares to Merger Sub pursuant to the Offer shall pass
to and unconditionally vest in Merger Sub good and valid title to the Owned
Shares, free and clear of all Encumbrances whatsoever.
3
<PAGE>
SECTION 2.3. Disclosure. The Stockholder hereby authorizes Parent
----------
and Merger Sub to publish and disclose in the Offer Documents and, if approval
of the Company's stockholders is required under applicable law, the Proxy
Statement (including all documents and schedules filed with the SEC), its
identity and ownership of the Owned Shares and the nature of its commitments,
arrangements and understandings under this Agreement.
ARTICLE III
OPTION
SECTION 3.1. Grant of Option. In order to induce Parent and Merger
---------------
Sub to enter into the Merger Agreement, the Stockholder hereby grants to Merger
Sub an irrevocable option (the "Stock Option") to purchase all, but not less
than all, of the Owned Shares at a purchase price of $33.00 per share (the
"Exercise Price").
SECTION 3.2. Right to Exercise. The Stock Option may be exercised by
-----------------
Merger Sub if the Offer is not consummated due to the failure by the Stockholder
to tender validly and not withdraw the Owned Shares.
SECTION 3.3. Conditions. The Stock Option (i) shall become
----------
exercisable, in whole but not in part, on the date on which the event referred
to in Section 3.2 hereof shall occur or, if later, the date on which (A) all
waiting periods under the HSR Act, if any, required for the purchase of the
Owned Shares upon such exercise shall have expired or been waived and (B) there
shall not be in effect any preliminary or final injunction or other order issued
by any court or governmental, administrative or regulatory agency or authority
prohibiting the exercise of the Stock Option pursuant to this Agreement, and
(ii) shall remain exercisable until the date which is thirty (30) days following
the date on which the Stock Option becomes exercisable.
SECTION 3.4. Payment and Delivery. If Merger Sub wishes to exercise
--------------------
the Stock Option it shall, prior to the expiration thereof, send a written
notice to the Stockholder identifying the time and place for the closing of such
purchase at least three but not more than 10 business days prior to such
closing. On the date of such closing, Parent shall deliver the Exercise Price
multiplied by the total number of Owned Shares being acquired against delivery
by the Stockholder of all certificates representing the Owned Shares, duly
endorsed or accompanied by appropriate instruments of transfer. Upon such
delivery by the Stockholder, good and valid title to the Owned Shares shall pass
to and unconditionally vest in Merger Sub, free and clear of all Encumbrances
whatsoever.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER
The Stockholder hereby represents and warrants to Parent and Merger
Sub as follows:
4
<PAGE>
SECTION 4.1. Due Authorization, etc. The Stockholder has all
----------------------
requisite power and authority to execute, deliver and perform this Agreement, to
appoint Merger Sub and Parent as its Proxy and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement,
the appointment of Merger Sub and Parent as the Stockholder's Proxy and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary action on the part of the Stockholder. This Agreement has been
duly executed and delivered by or on behalf of the Stockholder and constitutes a
legal, valid and binding obligation of such Stockholder, enforceable against the
Stockholder in accordance with its terms, except as enforcement may be limited
by bankruptcy, insolvency, moratorium or other similar laws and except that the
availability of equitable remedies, including specific performance, is subject
to the discretion of the court before which any proceeding for such remedy may
be brought.
SECTION 4.2. No Conflicts; Required Filings and Consents.
-------------------------------------------
(a) Except as would not materially impair or delay the ability of the
Stockholder to consummate the transactions contemplated hereby, the execution
and delivery of this Agreement by the Stockholder does not, and the performance
of this Agreement by the Stockholder will not, (i) subject to the filings
referred to in Section 4.2(b), conflict with or violate any law applicable to
the Stockholder or by which the Stockholder or any of the Stockholder's assets
is bound or affected or (ii) result in any breach of or constitute a default (or
an event that with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, acceleration or cancellation
of, or result in the creation of an Encumbrance on any assets of the
Stockholder, including, without limitation, Owned Shares, pursuant to, any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Stockholder is a party
or by which the Stockholder or any of the Stockholder's assets is bound or
affected.
(b) Except as would not materially impair or delay the ability of the
Stockholder to consummate the transactions contemplated hereby, the execution
and delivery of this Agreement by the Stockholder does not, and the performance
of this Agreement by the Stockholder will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority (other than any necessary filing under the HSR Act or
the Exchange Act).
SECTION 4.3. Title to Shares. The Stockholder is the sole record and
---------------
beneficial owner of the Owned Shares, free and clear of any pledge, lien,
security interest, mortgage, charge, claim, equity, option, proxy, voting
restriction, voting trust or agreement, understanding, arrangement, right of
first refusal, limitation on disposition, adverse claim of ownership or use or
encumbrance of any kind ("Encumbrances"), except for Encumbrances or proxies
arising pursuant to this Agreement, the Stockholder's Partnership Agreement or
the Stipulation. As of the date hereof, the Owned Shares are the only Shares
owned of record or beneficially by Stockholder.
SECTION 4.4. No Finder's Fees. No broker, investment banker,
----------------
financial advisor or other person is entitled to any broker's, finder's,
financial advisor's or other similar fee
5
<PAGE>
or commission in connection with the transactions contemplated hereby based upon
arrangements made by or on behalf of the Stockholder (except as may be reflected
in Section 3.05 of the Merger Agreement or in the Stipulation). The Stockholder,
on behalf of itself and its affiliates, hereby acknowledges that it is not
entitled to receive any broker's, finder's, financial advisor's or other similar
fee or commission in connection with the transactions contemplated hereby or by
the Merger Agreement.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF
PARENT AND MERGER SUB
Parent and Merger Sub hereby, jointly and severally, represent and
warrant to the Stockholder as follows:
SECTION 5.1. Due Organization, Authorization, etc. Merger Sub and
------------------------------------
Parent are duly organized, validly existing and in good standing under the laws
of their jurisdiction of incorporation. Merger Sub and Parent have all
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby by each of Merger Sub and Parent have been duly authorized by all
necessary corporate action on the part of Merger Sub and Parent, respectively.
This Agreement has been duly executed and delivered by each of Merger Sub and
Parent and constitutes a legal, valid and binding obligation of each of Merger
Sub and Parent, enforceable against Merger Sub and Parent in accordance with its
terms, except as enforcement may be limited by bankruptcy, insolvency,
moratorium or other similar laws and except that the availability of equitable
remedies, including specific performance, is subject to the discretion of the
court before which any proceeding for such remedy may be brought.
SECTION 5.2. Investment Intent. Merger Sub is acquiring the Stock
-----------------
Option and, if and when it exercises the Stock Option, will be acquiring the
Owned Shares purchased upon the exercise thereof for its own account and not
with a view to distribution or resale in any manner which would be in violation
of the Securities Act.
ARTICLE VI.
MISCELLANEOUS
SECTION 6.1. Definitions. Terms used but not otherwise defined in
-----------
this Agreement have the meanings ascribed to such terms in the Merger Agreement.
SECTION 6.2. Termination. This Agreement (including the Option)
-----------
shall terminate and be of no further force and effect (i) by the written mutual
consent of the parties hereto or (ii) automatically and without any required
action of the parties hereto upon the earlier of (A) the Effective Time and (B)
the termination of the Merger Agreement in accordance with
6
<PAGE>
its terms. No such termination of this Agreement shall relieve any party hereto
from any liability for any breach of this Agreement prior to termination.
SECTION 6.3. Further Assurance. From time to time, at another
-----------------
party's request and without consideration, each party hereto shall execute and
deliver such additional documents and take all such further action as may be
necessary or desirable to consummate and make effective, in the most expeditious
manner practicable, the transaction contemplated by this Agreement.
SECTION 6.4. Certain Events. The Stockholder agrees that this
--------------
Agreement and the Stockholder's obligations hereunder shall attach to the Owned
Shares and shall be binding upon any person or entity to which legal or
beneficial ownership of the Owned Shares shall pass, whether by operation of law
or otherwise. Notwithstanding any transfer of the Owned Shares, the transferor
shall remain liable for the performance of all its obligations under this
Agreement.
SECTION 6.5. Specific Performance. The Stockholder acknowledges that
--------------------
if the Stockholder fails to perform any of its obligations under this Agreement
immediate and irreparable harm or injury would be caused to Parent and Merger
Sub for which money damages would not be an adequate remedy. In such event, the
Stockholder agrees that each of Parent and Merger Sub shall have the right, in
addition to any other rights it may have, to specific performance of this
Agreement. Accordingly, if Parent or Merger Sub should institute an action or
proceeding seeking specific enforcement of the provisions hereof, the
Stockholder hereby waives the claim or defense that Parent or Merger Sub, as the
case may be, has an adequate remedy at law and hereby agrees not to assert in
any such action or proceeding the claim or defense that such a remedy at law
exists. The Stockholder further agrees to waive any requirements for the
securing or posting of any bond in connection with obtaining any such equitable
relief.
SECTION 6.6. Notice. All notices and other communications given or
------
made pursuant hereto shall be in writing and shall be deemed to have been duly
given or made (i) as of the date delivered or sent by facsimile if delivered
personally or by facsimile, and (ii) on the third business day after deposit in
the U.S. mail, if mailed by registered or certified mail (postage prepaid,
return receipt requested), in each case to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice, except that notices of changes of address shall be effective upon
receipt):
(a) If to Parent or Merger Sub: SIND Holdings, Inc.
c/o Investcorp Management Services
Limited
P.O. Box 5430
Investcorp House
Manama
Bahrain
Telecopier: 011-973-530-816
Attention: H. Richard Lukens, III
7
<PAGE>
with a copy to: Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, NY 10166
Telecopier: 212-351-4065
Attention: E. Michael Greaney, Esq.
(b) If to the Stockholder: Synthetic Industries, L.P.
c/o Frederick S. Wyle
Three Embarcadero Center
San Francisco, CA 94111
Telecopier:
with a copy to: Howard Rice Nemerovski Canady Falk &
Rabin
Three Embarcadero Center, 7th Floor
San Francisco, CA 94111
Telecopier: (415) 217-5910
Attention: James L. Lopes, Esq.
and to: King & Spalding
1185 Avenue of the Americas
New York, NY 10036
Telecopier: 212-556-2222
Attention: Mark Zvonkovic, Esq.
SECTION 6.7. Expenses. Except as otherwise expressly set forth
--------
herein or in the Merger Agreement, all fees, costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such fees, costs and expenses.
SECTION 6.8. Headings. The headings contained in this Agreement are
--------
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 6.9. Severability. If any term or other provision of this
------------
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the maximum extent
possible.
8
<PAGE>
SECTION 6.10. Entire Agreement; No Third-Party Beneficiaries. This
----------------------------------------------
Agreement constitutes the entire agreement and supersede any and all other prior
agreements and undertakings, both written and oral, among the parties, or any of
them, with respect to the subject matter hereof, and this Agreement is not
intended to confer upon any other person any rights or remedies hereunder.
SECTION 6.11. Assignment. This Agreement shall not be assigned by
----------
operation of law or otherwise; provided Parent or Merger Sub may assign, in its
sole discretion, its rights and obligations hereunder to any direct or indirect
wholly owned subsidiary of Parent, but no such assignment shall relieve Parent
or Merger Sub of its obligations hereunder if such assignee does not perform
such obligations.
SECTION 6.12. Governing Law. This Agreement shall be governed by,
-------------
and construed in accordance with, the laws of the State of Delaware applicable
to contracts executed in and to be performed entirely within that State.
SECTION 6.13. Amendment. This Agreement may not be amended except by
---------
an instrument in writing signed by the parties hereto.
SECTION 6.14. Waiver. Any party hereto may (a) extend the time for
------
the performance of any of the obligations or other acts of the other parties
hereto, (b) waive any inaccuracies in the representations and warranties of the
other parties hereto contained herein or in any document delivered pursuant
hereto and (c) waive compliance by the other parties hereto with any of their
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only as against such party
and only if set forth in an instrument in writing signed by such party. The
failure of any party hereto to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of those rights.
SECTION 6.15. Counterparts. This Agreement may be executed in one or
------------
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
shall constitute one and the same agreement.
SECTION 6.16. Limited Liability of Partners. Without limiting the
-----------------------------
obligations of the Stockholder hereunder, (i) none of the obligations of the
Stockholder under or contemplated by this Agreement shall be a personal
obligation of the Liquidating Trustee or the former general partner or any
limited partner of the Stockholder, or any of their respective officers,
directors, stockholders, limited partners, general partners or owners and (ii)
any monetary obligation of the Stockholder under this Agreement shall be
satisfied solely out of the assets of the Stockholder.
9
<PAGE>
IN WITNESS WHEREOF, Parent, Merger Sub and the Stockholder have caused
this Agreement to be executed as of the date first written above.
SIND Holdings, Inc.
By: /s/ Christopher J. O'Brien
--------------------------
Name: Christopher J. O'Brien
Title: President
SIND Acquisition, Inc.
By: /s/ Christopher J. O'Brien
--------------------------
Name: Christopher J. O'Brien
Title: President
Synthetic Industries, L.P.
By: /s/ Frederick S. Wyle
---------------------
Name: Frederick S. Wyle
Title: Liquidating Trustee
10
<PAGE>
Exhibit (c)(3)
SYNTHETIC INDUSTRIES, INC.
309 Lafayette Road
Chicamauga, Georgia 30707
CONFIDENTIAL
- ------------
June 7, 1999
Mr. Sean Madden
Investcorp
280 Park Avenue
37th Floor
New York, NY 10017
Dear Sean:
This Agreement sets forth the terms and conditions pursuant to which Synthetic
Industries, Inc. (the "Company") will furnish to you certain information
concerning the business, financial performance and condition, operations and
liabilities of the Company in connection with your consideration of a possible
negotiated transaction (a "Transaction") involving the Company.
1. All information concerning the Company, whether prepared by the Company,
its advisors or otherwise and irrespective of the form of communication,
which has been or is furnished to you by or on behalf of the Company
(collectively, the "Evaluation Material") shall be treated and handled by
you as provided in this Agreement.
2. The Evaluation Material shall include, without limitation, all financial,
business, operating and other data, reports, interpretations, forecasts and
records that contain or reflect information concerning the Company which
the Company or its affiliates or the directors, partners, officers,
employees, agents or advisors, including attorneys, accountants,
consultants, bankers and financial advisors, (collectively,
"Representatives") of either the Company or its affiliates, furnish to you,
and all notes, analyses, compilations, studies, interpretations or other
documents prepared by you or your Representatives which contain, reflect or
are based, in whole or in part, on that information. The Evaluation
Material shall not include (i) information which is or becomes generally
available to the public other than as a result of a disclosure by you or
your Representatives or (ii) information that you can demonstrate was
either in your possession prior to its being furnished to you by or on
behalf of the Company or becomes available to you on a non-confidential
basis from a source other than the Company or its
<PAGE>
Page 2
Representatives, provided that in either case referred to in this
subparagraph (ii) the source of the information is not bound by a
confidentiality agreement with, or any other contractual, legal or
fiduciary obligation of confidentiality to, the Company or any other party
with respect to the information.
3. The Evaluation Material shall be kept confidential by you and your
Representatives, shall be used by you and your Representatives solely for
the purpose of evaluating a Transaction and shall not be used in any way,
directly or indirectly, that is detrimental to the Company or its
affiliates. You and your Representatives shall not disclose any of the
Evaluation Material to any person in any manner whatsoever, provided that
you may disclose the Evaluation Material (a) to the extent that the Company
gives its prior written consent and (b) to your Representatives that need
to know information in the Evaluation Material for the sole purpose of
evaluating a Transaction, so long as such Representatives agree to keep
that information confidential and are provided with a copy of this
Agreement and agree to be bound by the terms and conditions hereof to the
same extent as if they were parties hereto, provided further, that without
the written consent of the Company, prospective financing sources shall not
be considered Representatives to whom Evaluation Material may be disclosed
in accordance with this paragraph. You shall be responsible for a breach
of this Agreement by your Representatives, and at your sole expense you
shall take all reasonable action, including court proceedings, to restrain
your Representatives from prohibited or unauthorized disclosure or use of
the Evaluation Material.
4. Without the prior written consent of the Company, you and your
Representatives shall not disclose to any other person (a) that the
Evaluation Material has been made available to you or them, (b) that
discussions or negotiations are taking place concerning a Transaction or
(c) any of the terms, conditions or other facts with respect to a
Transaction, including the status thereof, unless and until in the opinion
of your outside legal counsel the disclosure is required by law, and in
that event only after giving as much prior written notice to the Company as
is practicable under the circumstances. For purposes of this Agreement,
the term "person" shall be broadly interpreted to include the media and any
individual, corporation, partnership, group or other entity.
5. Without the prior consent of the Company, all communications by you or your
Representatives regarding a Transaction, requests by you or your
Representatives for additional information in that connection and
discussions or questions by you or your Representatives regarding
procedures with respect thereto shall be submitted or directed only to The
Beacon Group Capital Services, LLC ("Beacon") and not to the Company or its
affiliates or their respective Representatives other than Beacon. Unless
you have been specifically authorized in writing by the Company to do so,
you or your Representatives shall not contact any officer, director,
employee, agent, customer, vendor or affiliate of the Company regarding
this Agreement, the Evaluation Material or any Transaction.
<PAGE>
Page 3
6. If you or your Representatives are requested or required, by deposition,
interrogatories, requests for information or documents in legal
proceedings, subpoena, civil investigative demand or other similar process,
to disclose any of the Evaluation Material, you shall provide the Company
with prompt written notice of the request or requirement so that the
Company may seek a protective order or other appropriate remedy or waive
compliance by you or your Representatives with the provisions of this
Agreement. In the absence of a protective order or other remedy or the
receipt of a waiver from the Company, if you or your Representatives are,
in the opinion of your outside legal counsel, legally compelled to disclose
any of the Evaluation Material to any tribunal or else be held in contempt
or suffer other censure or penalty, you or your Representatives may,
without liability hereunder, disclose to the tribunal only such portion of
the Evaluation Material that your legal counsel advises you is legally
required to be disclosed, provided that in that connection you shall use
your best efforts to preserve the contidentiality thereof, including
cooperating with the Company to obtain an appropriate protective order or
other reliable assurance that confidential treatment will be accorded that
portion of the Evaluation Material by the tribunal.
7. If you decide that you do not wish to participate in a Transaction, you
shall promptly inform the Company of that decision. In that case, or at
any time upon the request of the Company for any reason, you and your
Representatives shall promptly deliver to the Company all documents and
other written information which has been furnished to you or your
Representatives by or on behalf of the Company and all copies, extracts or
other reproductions, in whole or in part, thereof. In the event of such a
decision or request, the original and all copies of any of the Evaluation
Material prepared by you or your Representatives shall be destroyed.
Compliance by you and your Representatives with the preceding provisions
regarding the return or destruction of Evaluation Material shall, upon the
Company's request, be certified in writing to the Company by your
authorized officer supervising such return and destruction.
Notwithstanding the return or destruction of the Evaluation Material, you
and your Representatives shall continue to be bound by your confidentiality
and other obligations hereunder.
8. For a period of two years from the date hereof, (a) you, your affiliates
and your Representatives shall not, without obtaining the prior written
consent of the Company, employ or solicit to employ any of the current
officers or employees of the Company or its affiliates, and (b) none of
you, your affiliates or your Representatives shall knowingly divert or
attempt to divert any business, customer or supplier from the Company or
any of its affiliates. However, you shall not be prohibited from employing
any such person who contacts you on his or her own initiative without
solicitation directly or indirectly by you or an agent of you. Nothing
herein shall preclude generalized searches by you or your affiliates for
employees through the use of advertisement in the media (including trade
media) or through engagement of firms to conduct searches that are not
targeted or focused on the Company or its subsidiaries' employees.
9. For a period of three years from the date hereof, none of you, your
affiliates or your Representatives shall, directly or indirectly, (a)
propose to, or enter into any discussions,
<PAGE>
Page 4
negotiations, arrangements or understanding with, the Company or any other
person concerning a transaction of any kind, including a Transaction,
between you or any of your affiliates and the Company or any of its
affiliates or any of their respective security holders or involving any of
the Company's securities or security holders unless the Company shall have
requested in writing that you make such a proposal, (b) agree to acquire,
acquire or assist, advise or encourage any other person, or otherwise act
in concert with any other person, in acquiring (i) ownership or control of
the Company, any of its affiliates or any of their businesses, assets or
liabilities or (ii) ownership or control, including beneficial ownership
("Beneficial Ownership") as defined in Rule 13d-3 under the Securities
Exchange Act of 1934, as amended (the "1934 Act"), of any of the capital
stock, debt securities, bank debt, including a participation interest
therein, options, warrants or other securities or indebtedness of the
Company or any of its affiliates unless the Company shall have given its
prior written consent to such action, (c) make or participate in any
"solicitation" of "proxies", as those terms are used in the proxy rules
under the 1934 Act, to vote, or seek to advise or influence any person with
respect to the voting of, any voting securities of the Company or any of
its affiliates or form, join or in any way participate in a "group", within
the meaning of Section 13(d) of the 1934 Act, with respect to any voting
securities of the Company or any of its affiliates, (d) seek or propose,
alone or in concert with others, to influence or control the Company's
management or policies, (e) disclose any intention, plan or arrangement
inconsistent with the foregoing, (f) advise, assist, encourage, act as a
financing source for or otherwise invest in any other person in connection
with any of the foregoing or (g) ask the Company or its Representatives to
amend or waive any provision of this paragraph. You shall promptly advise
the Company of any inquiry or proposal made to you with respect to any of
the foregoing.
10. None of the Company, its affiliates or their Representatives, including
Beacon, makes any representation or warranty, express or implied,
concerning the accuracy or completeness of the Evaluation Material or has
any liability to you or your Representatives relating to or resulting from
the use of the Evaluation Material by you or your Representatives. Only
those representations or warranties which are made in a final definitive
agreement regarding a Transaction, when, as and if executed and delivered
by the Company and you, and subject to the limitations and restrictions
contained therein, shall have any such effect.
11. Unless and until a final definitive agreement regarding a Transaction has
been executed and delivered by the Company and you, neither the Company nor
you shall be under any legal obligation of any kind with respect to a
Transaction by virtue of this Agreement except for the matters specifically
provided for herein. The Company reserves the right in its sole
discretion, to reject any proposal made by you, your affiliates or your
Representatives with regard to a Transaction or any other matter and to
terminate discussions and negotiations with you with respect to a
Transaction or any other matter at any time for any reason or no reason.
You understand that (a) the Company and its Representatives shall be free
to conduct any process for any Transaction as they in their sole discretion
shall determine, including negotiating with any of the prospective parties
<PAGE>
Page 5
to such Transaction and entering into a definitive agreement without prior
notice to you or any other person, (b) any procedures relating to such
Transaction may be changed at any time without notice to you or any other
person, and (c) the Company may terminate the process at any time in its
sole discretion.
12. No failure or delay by the Company in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise thereof preclude any other or further exercise thereof
or the exercise of any other right, power or privilege hereunder.
13. Money damages are not an adequate remedy for a breach of this Agreement by
you or your Representatives, and the Company shall be entitled to equitable
relief, including injunction and specific performance, as a remedy for such
a breach. You waive any requirement for the securing or posting of a bond
in connection with such equitable relief and acknowledge that equitable
relief shall not be deemed to be the exclusive remedy for a breach of this
Agreement by you or your Representatives but shall be in addition to all
other remedies available at law or equity to the Company.
14. You hereby acknowledge that you are aware, and you agree to advise your
Representatives who are provided Evaluation Material or who are otherwise
informed as to the matters that are the subject of this Agreement, that any
person who receives from the Company or you, directly or indirectly, any
material, non-public information concerning the Company (including
material, non-public information regarding the matters contemplated by this
Agreement) is subject to applicable United States securities laws that
prohibit the purchase or sale by such person of the Company's securities or
from the communication by such person of any such material, non-public
information to any other person under circumstances in which it is
reasonably foreseeable that such other person will thereaftcr purchase or
sell the Company's securities.
15. If any provision of this Agreement is held to be illegal or contrary to
public policy or otherwise unenforceable, that provision shall be deemed
eliminated herefrom or modified to the extent necessary to make the
provision enforceable. Otherwise, the terms of this Agreement may be
amended, modified, superseded or waived only by a separate written
agreement executed by you and the Company that expressly states that it so
amends, modifies, supersedes or waives a term or terms of this Agreement.
16. You shall not assign any of your rights or delegate any of your duties
under this Agreement, including by operation of law, without the prior
written consent of the Company, and any purported assignment not consented
to shall be absolutely void and of no force and effect.
17. This Agreement shall be governed by and construed in accordance with the
laws of the State of New York without regard to the conflict of law
provisions thereof.
18. This Agreement may be executed by the parties hereto in counterparts, both
of which, taken together, shall constitute one and the same Agreement.
<PAGE>
Page 6
Please confirm your agreement to the foregoing by signing and returning the
accompanying copy of this Agreement, whereupon this Agreement shall become
binding on the parties hereto and on their respective successors and permitted
assignees.
Very truly yours,
SYNTHETIC INDUSTRIES, INC.
By: /s/ Joseph F. Dana
------------------
Agreed as of the date
first written above:
By: /s/ Sean P. Madden
------------------
<PAGE>
Exhibit (c)(4)
November 5, 1999
SIND Holdings, Inc.
c/o Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, New York 10166
Dear Sirs:
This will confirm my current intent to enter into appropriate documentation
implementing (a) the arrangements summarized on the attached term sheets in
connection with the consummation of the transactions contemplated by the
Agreement and Plan of Merger of even date herewith by and among Synthetic
Industries, Inc. (the "Company"), SIND Holdings, Inc. ("Holdings") and SIND
Acquisition, Inc. (the "Agreement") and (b) an equity participation by me in
Holdings at least equal to $1,600,000. The equity investment in Holdings will
be through the rollover of existing stock options into new Holdings stock
options. The new Holdings rollover stock options will be granted at a discount
from the $33 per share Agreement price to preserve the aggregate spread on each
such existing rollover option.
Sincerely,
/s/ Leonard Chill
-----------------
Leonard Chill
Accepted:
SIND Holdings, Inc.
By /s/ Christopher J. O'Brien
--------------------------
<PAGE>
PROJECT POLY
OUTLINE OF KEY COMPENSATION PLANS
Bonus Plan
. Generally keep existing financial opportunity the same (except for
promotions, etc.); provided that the Board shall review with management, on
a case-by-case basis, the competitiveness of the Company's total
compensation (salary, bonus, long-term compensation/ownership plan)
. Bonuses for senior executives generally tied to EBITDA targets -
minimum/maximum ranges consistent with current plan levels, as modified to
the extent necessary as determined on a case-by-case basis by Investcorp
and management
- 75% of bonuses tied to EBITDA targets and based upon a sliding scale
consistent with the Company's current program
- 25% of bonuses tied to alternative performance measures (measurable or
board discretion)
. 50% of eligible bonus earned at 90% of target EBITDA, with the balance up
to 100% earned pro rata up to 100% of target EBITDA; up to 125% of eligible
bonus may be earned if EBITDA is 110% or more of target
. Can be tailored by position
. EBITDA results are exclusive of reserve reversals if not in the budget and
would be adjusted for significant acquisitions or capital infusions or
accounting principle changes
Nonqualified Option Plan
. 11% of the fully diluted ownership
. 2.5% (of the 11%) of the plan left as "dry powder" for future management,
promotions, etc.; going forward, the Board shall have the discretion to
allocate remaining unallocated options
. Allocated to management based upon recommendation of CEO/President in
consultation with Investcorp
. Can be earned in 5 separate ways
- Meeting 100% of EBITDA targets on an annual basis (20%/year); meeting
at least 95% but less than 100% of annual EBITDA targets results in
vesting of one-half of options available for vesting (i.e. 10%/year)
- Cumulative catch-up provision for any prior year misses (applies to
both 95% and 100% thresholds)
- Time-vested after 7 years
- In case of IPO, unvested options convert to time lapse options
- In case of sale of Company, unvested options vest in whole or in part
if Investcorp earns a 20% or greater fully diluted return
. Put/call rights
. Option pool worth a total (net of option exercise cost) of $55 million to
management in year 5 based on management's projections and a 7.5x exit
multiple
Direct Side-by-Side Investment with Investcorp
. Buy-in at Investcorp's purchase price
<PAGE>
. Rollover shares
. Rollover options
- Exchange existing in-the-money options for new in-the-money options
. Loan program to assist in additional share purchases by selected officers
. Loan program also to be available for end of term option exercises
<PAGE>
MANAGEMENT ARRANGEMENTS/1/
--------------------------
New Stock Options
- -----------------
Number: An aggregate of 11% of fully diluted common stock,
of which 2.5% will be reserved for future grants
(as allocated by the Board of Directors in its sole
discretion) with the balance (8.5%) to be granted
at or promptly after closing.
Exercise Price: Per share price paid by Investcorp.
Term: 7 years and 30 days.
Vesting: (a) Up to 20% per year (the "Annual Portion") for 5
years, based upon achievement of specified
EBITDA performance targets. If the Company's
EBITDA performance equals or exceeds 95% of a
target in a given year but is less than 100% of
the target, one-half of the Annual Portion for
that year will vest. Options that do not vest
in any year may vest in any subsequent year
within such five-year period based upon
cumulative results.
(b) Upon an Initial Public Offering ("IPO"),
options that are unvested as of the IPO closing
date shall thereafter vest ratably at the end
of each of the following three anniversaries of
the closing of the IPO. In addition,
historically we have initiated a new option
program (and granted additional options) upon
an IPO at the IPO price.
(c) Upon a sale of the Company prior to an IPO (i)
up to 50% of unvested options will vest if, in
connection with such sale, Investcorp realizes
a 20% annual internal rate of return on a
fully-diluted basis, (ii) up to 75% of
unvested options will vest if, in connection
with such sale, Investcorp realizes a 25%
annual internal rate of return on a fully-
diluted basis, and (iii) up to 100% of
unvested options will vest if, in connection
with such sale, Investcorp realizes a 30%
annual internal rate of return on a fully-
diluted basis.
(d) Any options remaining unvested will vest 7
years from closing (without regard to any
performance targets).
- ----------------------------
/1/ Certain modifications, as described separately, are applicable for Leonard
Chill.
<PAGE>
Effect of Termination Unvested options expire immediately upon
of Employment: termination of employment for any reason, except
if employment is terminated by the Company
without cause, by the employee for good reason
or by reason of employee's death or disability,
in which case a pro rata portion (equal to the
ratio the number of days elapsed in such year
prior to termination bears to 365) of the Annual
Portion for such year will vest at the end of
such year if the performance targets for such
year are met. Vested options expire per Schedule
A.
Rollover Options
- ----------------
The existing stock options that are to be rolled
over into Parent options will preserve the
spread between the strike price and the
acquisition price and will be fully vested.
Vested rollover options will have a term of 7
years and 30 days unless terminated earlier per
Schedule A.
Puts/Calls
- ----------
Applicability: Applies to rollover shares and option shares
(including rollover option shares).
Call: Company may call shares upon any termination of
employment prior to an IPO per Schedule B.
Put: If the call is unexercised, under certain
circumstances the Executive may require the
Company to repurchase the shares per Schedule B.
FMV: Determined in good faith by the Company's board
of directors, based upon a valuation of the
entire Company, without taking into account any
minority or illiquidity discounts, subject to an
appraisal that may be requested by the
Executive. If the Executive seeks an appraisal,
each of the Executive and the board of
director's will select one appraiser, who shall
select a third. If the valuation determined by
the appraisers is less than or equal to 110% of
the board's determination the Executive shall
pay the entire cost of the appraisal. If such
valuation is greater than 110% but less than or
equal to 120%, than cost shall be borne equally
by the Company and by the Executive. If the
valuation is greater than 120% of the board's
determination, the Company shall bear the entire
cost of the appraisal.
Cost: In the case of rollover shares and rollover
option shares, Cost is equal to the per share
price paid by Investcorp. In the case of new
options, Cost is equal to the exercise price of
such options, which shall be equal to the per
share price paid by Investcorp for options
granted at the time of the closing of the
transactions and for a period of six months
thereafter.
Other Provisions
- ----------------
2
<PAGE>
Withholding: Exercise price and tax withholding obligations
may be satisfied by having option shares
withheld.
Tag/Drag Rights: The rollover shares and option shares will have
the right to participate pro rata in a sale of
the Company and Investcorp will have the right
to require such participation. These tag/drag
rights expire upon an IPO.
Restrictions on Prior to an IPO, rollover shares and option
Transfer: shares will be subject to restrictions on
transfer with flexibility for estate planning
purposes.
Access to Trading Following an IPO: (i) The Company will file
Markets Post-IPO: an S-8 registration statement covering stock
option exercises, (ii) Rule 144 would generally
be available and (iii) management holders of
rollover shares would have piggyback
registration rights to participate in secondary
offerings subject to limitations.
IPO and Secondary Management holders of rollover shares, options
Offerings: and option shares will be subject to customary
underwriter lock-up arrangements for the IPO and
secondary offerings. Generally, participation by
senior management in the IPO is not available.
Certain Definitions
- -------------------
Cause: Grounds for termination of executive for
"Cause": (1) conviction of a felony or plea of
guilty or nolo contendere to a felony, (2) act
of fraud or dishonesty which is materially
injurious to the Company, (3) willful and
continual refusal to perform duties or (4) gross
misconduct materially injurious to the Company.
Good Reason: Grounds for termination by executive for "Good
Reason": (1) assignment of duties or position
constituting a material diminution in
executive's role, responsibilities or authority,
(2) reduction in base salary or bonus
participation opportunities, (3) demand by the
Company that Executive relocate to a place more
than a reasonable distance (to be determined)
from current location, or (4) material breach of
executive's employment agreement by the Company.
Employment Each Executive will enter into an employment
---------- agreement with the Company on terms that are
Agreements not materially inconsistent with the current
---------- employment agreements; provided that if the IRS
asserts that any benefit payable under the
Executive's current employment agreement or
otherwise payable as a result of this
transaction (regardless of whether a termination
of employment occurs) is subject to a parachute
excise tax, the Company will indemnify such
Executive on a full gross-up basis. The Company
and each Executive will take all reasonable
steps to avoid the imposition of such tax.
3
<PAGE>
SCHEDULE A
----------
<TABLE>
<CAPTION>
Termination Event Unvested Options Terminate Vested Options Terminate
<S> <C> <C>
Executive terminated by Immediately 30 days after terminating event/(1)/
Company for Cause
Executive quits without Good Immediately 90 days after terminating event/(1)/
Reason
Executive quits with Good Immediately/(2)/ 180 days after terminating event/(1)/
Reason
Executive terminated by the Immediately/(2)/ 180 days after terminating event/(1)/
Company without Cause
Death or disability Immediately/(2)/ One year after terminating event/(1)/
</TABLE>
/(1)/ Subject to (2) below, the options are exercisable only to the extent
exercisable on the day of the terminating event.
/(2)/ A pro rata portion (equal to the ratio the number of days elapsed in such
year prior to termination bears to 365) of the Annual Portion for such
year will vest at the end of such year if the targets for such year are
met.
4
<PAGE>
SCHEDULE B
----------
<TABLE>
<CAPTION>
Call Provision Call Price
---------------------------------------------------------------------------
<S> <C> <C>
If Within 3 Years If After 3 Years
Employee terminated without Cause FMV FMV
Employee leaves with Good Reason FMV FMV
Employee leaves without Good Reason Lower of Cost or FMV/(1)/ FMV
Employee is terminated for Cause Lower of Cost or FMV/(1)/ Lower of Cost or FMV
Death, disability, retirement FMV FMV
</TABLE>
<TABLE>
<CAPTION>
Put Provision Put Price
-----------------------------------------------------------------------------
<S> <C> <C>
If Within 3 Years (2 Years in the If After 3 Years (2 Years in the
case of termination without Cause) case of termination without
Cause)
Employee terminated without Cause Lower of Cost or FMV/(1)/ FMV
Employee leaves with Good Reason FMV FMV
Employee leaves without Good Reason No put FMV
Employee is terminated for Cause No put No put
Death, disability, retirement FMV FMV
</TABLE>
/(1)/ Within the 1st year, it will be at Cost
5
<PAGE>
Modifications to Synthetic Management Arrangements for Leonard Chill
The terms of the attached Management Arrangements shall be modified as they
apply to Leonard Chill as described below:
Options Rollover: All non-qualified options to be rolled into
new seven-year options, aggregating $1.6
million of rolled, in-the-money value; counsel
to discuss potential tax-advantaged approach
to ISOs
New Options Grant: Granted at an exercise price equal to the the
per share price paid by Investcorp in two
pieces and structured to avoid adverse
accounting treatment: (i) three-fifths of
total grant covering years 1-3 ("Grant 1"),
and (ii) two-fifths covering years 4-5 ("Grant
2"); provided, however, that Grant 2 shall be
operative only in the event that Chill's
employment continues beyond three years
Puts/Calls: There shall be no puts or calls applicable to
Chill's shares/options until the expiration of
the term of the options (i.e. seven years);
provided, however, that the Company shall have
a right of first refusal with respect to
Chill's shares
Effect of Death or Disability: Notwithstanding the provisions of the option
plan to the contrary, upon death or disability
of Chill, 50% of Chill's unvested Grant 1
options which are capable of becoming vested
based on achieving EBITDA targets for that
year or a subsequent year (disregarding for
this purpose vesting opportunities with
respect to prior years based on cumulative
results) shall vest immediately
NA993130.122/1
<PAGE>
Exhibit (c)(5)
November 5, 1999
SIND Holdings, Inc.
c/o Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, New York 10166
Dear Sirs:
This will confirm my current intent to enter into appropriate documentation
implementing (a) the arrangements summarized on the attached term sheets in
connection with the consummation of the transactions contemplated by the
Agreement and Plan of Merger of even date herewith by and among Synthetic
Industries, Inc. (the "Company"), SIND Holdings, Inc. ("Holdings") and SIND
Acquisition, Inc. (the "Agreement") and (b) an equity participation by me in
Holdings having a value at least equal to 50% of the sum of my net option value
of existing Company stock options and 50% of the after-tax transaction-related
cash payments to be received by me. The equity investment in Holdings will be
through the rollover of existing stock options into new Holdings stock options
or through a combination of such rollover and investment of after-tax
transaction-related cash payments into new Holdings shares at $33 per new
Holdings share. The new Holdings rollover stock options will be granted at a
discount from the $33 per share Agreement price to preserve the aggregate spread
on each such existing rollover option.
Sincerely,
/s/ Joseph Dana
------------------------
Joseph Dana
Accepted:
SIND Holdings, Inc.
By /s/ Christopher J. O'Brien
--------------------------
<PAGE>
PROJECT POLY
- --------------------------------------------------------------------------------
OUTLINE OF KEY COMPENSATION PLANS
- --------------------------------------------------------------------------------
Bonus Plan
. Generally keep existing financial opportunity the same (except for
promotions, etc.); provided that the Board shall review with
management, on a case-by-case basis, the competitiveness of the
Company's total compensation (salary, bonus, long-term
compensation/ownership plan)
. Bonuses for senior executives generally tied to EBITDA targets -
minimum/maximum ranges consistent with current plan levels, as
modified to the extent necessary as determined on a case-by-case basis
by Investcorp and management
- 75% of bonuses tied to EBITDA targets and based upon a sliding
scale consistent with the Company's current program
- 25% of bonuses tied to alternative performance measures
(measurable or board discretion)
. 50% of eligible bonus earned at 90% of target EBITDA, with the balance
up to 100% earned pro rata up to 100% of target EBITDA; up to 125% of
eligible bonus may be earned if EBITDA is 110% or more of target
. Can be tailored by position
. EBITDA results are exclusive of reserve reversals if not in the budget
and would be adjusted for significant acquisitions or capital
infusions or accounting principle changes
Nonqualified Option Plan
. 11% of the fully diluted ownership
. 2.5% (of the 11%) of the plan left as "dry powder" for future
management, promotions, etc.; going forward, the Board shall have the
discretion to allocate remaining unallocated options
. Allocated to management based upon recommendation of CEO/President in
consultation with Investcorp
. Can be earned in 5 separate ways
- Meeting 100% of EBITDA targets on an annual basis (20%/year);
meeting at least 95% but less than 100% of annual EBITDA
targets results in vesting of one-half of options available
for vesting (i.e. 10%/year)
- Cumulative catch-up provision for any prior year misses
(applies to both 95% and 100% thresholds)
- Time-vested after 7 years
- In case of IPO, unvested options convert to time lapse options
- In case of sale of Company, unvested options vest in whole or
in part if Investcorp earns a 20% or greater fully diluted
return
. Put/call rights
. Option pool worth a total (net of option exercise cost) of $55 million
to management in year 5 based on management's projections and a 7.5x
exit multiple
Direct Side-by-Side Investment with Investcorp
. Buy-in at Investcorp's purchase price
<PAGE>
. Rollover shares
. Rollover options
- Exchange existing in-the-money options for new in-the-money
options
. Loan program to assist in additional share purchases by selected
officers
. Loan program also to be available for end of term option exercises
<PAGE>
MANAGEMENT ARRANGEMENTS/1/
--------------------------
New Stock Options
- -----------------
Number: An aggregate of 11% of fully diluted common stock,
of which 2.5% will be reserved for future grants
(as allocated by the Board of Directors in its sole
discretion) with the balance (8.5%) to be granted
at or promptly after closing.
Exercise Price: Per share price paid by Investcorp.
Term: 7 years and 30 days.
Vesting: (a) Up to 20% per year (the "Annual Portion") for
5 years, based upon achievement of specified
EBITDA performance targets. If the Company's
EBITDA performance equals or exceeds 95% of a
target in a given year but is less than 100%
of the target, one-half of the Annual Portion
for that year will vest. Options that do not
vest in any year may vest in any subsequent
year within such five-year period based upon
cumulative results.
(b) Upon an Initial Public Offering ("IPO"),
options that are unvested as of the IPO
closing date shall thereafter vest ratably at
the end of each of the following three
anniversaries of the closing of the IPO. In
addition, historically we have initiated a new
option program (and granted additional
options) upon an IPO at the IPO price.
(c) Upon a sale of the Company prior to an IPO (i)
up to 50% of unvested options will vest if, in
connection with such sale, Investcorp realizes
a 20% annual internal rate of return on a
fully-diluted basis, (ii) up to 75% of
unvested options will vest if, in connection
with such sale, Investcorp realizes a 25%
annual internal rate of return on a fully-
diluted basis, and (iii) up to 100% of
unvested options will vest if, in connection
with such sale, Investcorp realizes a 30%
annual internal rate of return on a fully-
diluted basis.
(d) Any options remaining unvested will vest 7
years from closing (without regard to any
performance targets).
____________________
/1/ Certain modifications, as described separately, are applicable for Leonard
Chill.
<PAGE>
Effect of Termination of Unvested options expire immediately upon
Employment: termination of employment for any reason,
except if employment is terminated by the
Company without cause, by the employee for
good reason or by reason of employee's death
or disability, in which case a pro rata
portion (equal to the ratio the number of days
elapsed in such year prior to termination
bears to 365) of the Annual Portion for such
year will vest at the end of such year if the
performance targets for such year are met.
Vested options expire per Schedule A.
Rollover Options
- ----------------
The existing stock options that are to be
rolled over into Parent options will preserve
the spread between the strike price and the
acquisition price and will be fully vested.
Vested rollover options will have a term of 7
years and 30 days unless terminated earlier
per Schedule A.
Puts/Calls
- ----------
Applicability: Applies to rollover shares and option shares
(including rollover option shares).
Call: Company may call shares upon any termination
of employment prior to an IPO per Schedule B.
Put: If the call is unexercised, under certain
circumstances the Executive may require the
Company to repurchase the shares per Schedule
B.
FMV: Determined in good faith by the Company's
board of directors, based upon a valuation of
the entire Company, without taking into
account any minority or illiquidity discounts,
subject to an appraisal that may be requested
by the Executive. If the Executive seeks an
appraisal, each of the Executive and the board
of director's will select one appraiser, who
shall select a third. If the valuation
determined by the appraisers is less than or
equal to 110% of the board's determination the
Executive shall pay the entire cost of the
appraisal. If such valuation is greater than
110% but less than or equal to 120%, than cost
shall be borne equally by the Company and by
the Executive. If the valuation is greater
than 120% of the board's determination, the
Company shall bear the entire cost of the
appraisal.
Cost: In the case of rollover shares and rollover
option shares, Cost is equal to the per share
price paid by Investcorp. In the case of new
options, Cost is equal to the exercise price
of such options, which shall be equal to the
per share price paid by Investcorp for options
granted at the time of the closing of the
transactions and for a period of six months
thereafter.
Other Provisions
- ----------------
2
<PAGE>
Withholding: Exercise price and tax withholding obligations
may be satisfied by having option shares
withheld.
Tag/Drag Rights: The rollover shares and option shares will
have the right to participate pro rata in a
sale of the Company and Investcorp will have
the right to require such participation. These
tag/drag rights expire upon an IPO.
Restrictions on Transfer: Prior to an IPO, rollover shares and option
shares will be subject to restrictions on
transfer with flexibility for estate planning
purposes.
Access to Trading Markets Following an IPO: (i) The Company will file
Post-IPO: an S-8 registration statement covering stock
option exercises, (ii) Rule 144 would
generally be available and (iii) management
holders of rollover shares would have
piggyback registration rights to participate
in secondary offerings subject to limitations.
IPO and Secondary Offerings: Management holders of rollover shares, options
and option shares will be subject to customary
underwriter lock-up arrangements for the IPO
and secondary offerings. Generally,
participation by senior management in the IPO
is not available.
Certain Definitions
- -------------------
Cause: Grounds for termination of executive for
"Cause": (1) conviction of a felony or plea of
guilty or nolo contendere to a felony, (2) act
---- ----------
of fraud or dishonesty which is materially
injurious to the Company, (3) willful and
continual refusal to perform duties or (4)
gross misconduct materially injurious to the
Company.
Good Reason: Grounds for termination by executive for "Good
Reason": (1) assignment of duties or position
constituting a material diminution in
executive's role, responsibilities or
authority, (2) reduction in base salary or
bonus participation opportunities, (3) demand
by the Company that Executive relocate to a
place more than a reasonable distance (to be
determined) from current location, or (4)
material breach of executive's employment
agreement by the Company.
Employment Each Executive will enter into an employment
- ---------- agreement with the Company on terms that are
Agreements not materially inconsistent with the current
- ---------- employment agreements; provided that if the
IRS asserts that any benefit payable under the
Executive's current employment agreement or
otherwise payable as a result of this
transaction (regardless of whether a
termination of employment occurs) is subject
to a parachute excise tax, the Company will
indemnify such Executive on a full gross-up
basis. The Company and each Executive will
take all reasonable steps to avoid the
imposition of such tax.
3
<PAGE>
SCHEDULE A
----------
<TABLE>
<CAPTION>
Termination Event Unvested Options Terminate Vested Options Terminate
<S> <C> <C>
Executive terminated by Immediately 30 days after terminating event/(1)/
Company for Cause
Executive quits without Good Immediately 90 days after terminating event/(1)/
Reason
Executive quits with Good Reason Immediately/(2)/ 180 days after terminating event/(1)/
Executive terminated by the Immediately/(2)/ 180 days after terminating event/(1)/
Company without Cause
Death or disability Immediately/(2)/ One year after terminating event/(1)/
</TABLE>
/(1)/ Subject to (2) below, the options are exercisable only to the extent
exercisable on the day of the terminating event.
/(2)/ A pro rata portion (equal to the ratio the number of days elapsed in such
year prior to termination bears to 365) of the Annual Portion for such
year will vest at the end of such year if the targets for such year are
met.
4
<PAGE>
SCHEDULE B
----------
<TABLE>
<CAPTION>
Call Provision Call Price
-------------------------------------------------------------
<S> <C> <C>
If Within 3 Years If After 3 Years
Employee terminated without FMV FMV
Cause
Employee leaves with Good FMV FMV
Reason
Employee leaves without Good Lower of Cost or FMV/(1)/ FMV
Reason
Employee is terminated for Lower of Cost or FMV/(1)/ Lower of Cost or FMV
Cause
Death, disability, retirement FMV FMV
<CAPTION>
Put Provision Put Price
-------------------------------------------------------------------------
<S> <C> <C>
If Within 3 Years (2 Years in the If After 3 Years (2 Years in the
case of termination without Cause) case of termination without
Cause)
Employee terminated without Lower of Cost or FMV/(1)/ FMV
Cause
Employee leaves with Good FMV FMV
Reason
Employee leaves without Good No put FMV
Reason
Employee is terminated for No put No put
Cause
Death, disability, retirement FMV FMV
/(1)/Within the 1st year, it will be at Cost
</TABLE>
5
<PAGE>
Exhibit (c)(6)
November 5, 1999
SIND Holdings, Inc.
c/o Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, New York 10166
Dear Sirs:
This will confirm my current intent to enter into appropriate documentation
implementing (a) the arrangements summarized on the attached term sheets in
connection with the consummation of the transactions contemplated by the
Agreement and Plan of Merger of even date herewith by and among Synthetic
Industries, Inc. (the "Company"), SIND Holdings, Inc. ("Holdings") and SIND
Acquisition, Inc. (the "Agreement") and (b) an equity participation by me in
Holdings having a value at least equal to 50% of the sum of my net option value
of existing Company stock options and 50% of the after-tax transaction-related
cash payments to be received by me. The equity investment in Holdings will be
through the rollover of existing stock options into new Holdings stock options
or through a combination of such rollover and investment of after-tax
transaction-related cash payments into new Holdings shares at $33 per new
Holdings share. The new Holdings rollover stock options will be granted at a
discount from the $33 per share Agreement price to preserve the aggregate spread
on each such existing rollover option.
Sincerely,
/s/ Joseph Sinicropi
--------------------
Joseph Sinicropi
Accepted:
SIND Holdings, Inc.
By /s/ Christopher J. O'Brien
--------------------------
<PAGE>
PROJECT POLY
OUTLINE OF KEY COMPENSATION PLANS
Bonus Plan
. Generally keep existing financial opportunity the same (except for
promotions, etc.); provided that the Board shall review with
management, on a case-by-case basis, the competitiveness of the
Company's total compensation (salary, bonus, long-term
compensation/ownership plan)
. Bonuses for senior executives generally tied to EBITDA targets -
minimum/maximum ranges consistent with current plan levels, as
modified to the extent necessary as determined on a case-by-case basis
by Investcorp and management
- 75% of bonuses tied to EBITDA targets and based upon a
sliding scale consistent with the Company's current program
- 25% of bonuses tied to alternative performance measures
(measurable or board discretion)
. 50% of eligible bonus earned at 90% of target EBITDA, with the balance
up to 100% earned pro rata up to 100% of target EBITDA; up to 125% of
eligible bonus may be earned if EBITDA is 110% or more of target
. Can be tailored by position
. EBITDA results are exclusive of reserve reversals if not in the budget
and would be adjusted for significant acquisitions or capital
infusions or accounting principle changes
Nonqualified Option Plan
. 11% of the fully diluted ownership
. 2.5% (of the 11%) of the plan left as "dry powder" for future
management, promotions, etc.; going forward, the Board shall have the
discretion to allocate remaining unallocated options
. Allocated to management based upon recommendation of CEO/President in
consultation with Investcorp
. Can be earned in 5 separate ways
- Meeting 100% of EBITDA targets on an annual basis (20%/year);
meeting at least 95% but less than 100% of annual EBITDA
targets results in vesting of one-half of options available
for vesting (i.e. 10%/year)
- Cumulative catch-up provision for any prior year misses
(applies to both 95% and 100% thresholds)
- Time-vested after 7 years
- In case of IPO, unvested options convert to time lapse options
- In case of sale of Company, unvested options vest in whole or
in part if Investcorp earns a 20% or greater fully diluted
return
. Put/call rights
. Option pool worth a total (net of option exercise cost) of $55 million
to management in year 5 based on management's projections and a 7.5x
exit multiple
Direct Side-by-Side Investment with Investcorp
. Buy-in at Investcorp's purchase price
<PAGE>
. Rollover shares
. Rollover options
- Exchange existing in-the-money options for new in-the-money
options
. Loan program to assist in additional share purchases by selected
officers
. Loan program also to be available for end of term option exercises
<PAGE>
MANAGEMENT ARRANGEMENTS/1/
--------------------------
New Stock Options
- -----------------
Number: An aggregate of 11% of fully diluted common stock,
of which 2.5% will be reserved for future grants
(as allocated by the Board of Directors in its sole
discretion) with the balance (8.5%) to be granted
at or promptly after closing.
Exercise Price: Per share price paid by Investcorp.
Term: 7 years and 30 days.
Vesting: (a) Up to 20% per year (the "Annual Portion") for 5
years, based upon achievement of specified
EBITDA performance targets. If the Company's
EBITDA performance equals or exceeds 95% of a
target in a given year but is less than 100% of
the target, one-half of the Annual Portion for
that year will vest. Options that do not vest
in any year may vest in any subsequent year
within such five-year period based upon
cumulative results.
(b) Upon an Initial Public Offering ("IPO"),
options that are unvested as of the IPO closing
date shall thereafter vest ratably at the end
of each of the following three anniversaries of
the closing of the IPO. In addition,
historically we have initiated a new option
program (and granted additional options) upon
an IPO at the IPO price.
(c) Upon a sale of the Company prior to an IPO (i)
up to 50% of unvested options will vest if, in
connection with such sale, Investcorp realizes
a 20% annual internal rate of return on a
fully-diluted basis, (ii) up to 75% of unvested
options will vest if, in connection with such
sale, Investcorp realizes a 25% annual internal
rate of return on a fully-diluted basis, and
(iii) up to 100% of unvested options will vest
if, in connection with such sale, Investcorp
realizes a 30% annual internal rate of return
on a fully-diluted basis.
(d) Any options remaining unvested will vest 7
years from closing (without regard to any
performance targets).
________________________
/1/ Certain modifications, as described separately, are applicable for Leonard
Chill.
<PAGE>
Effect of Termination of Unvested options expire immediately upon
Employment: termination of employment for any reason,
except if employment is terminated by the
Company without cause, by the employee for
good reason or by reason of employee's death
or disability, in which case a pro rata
portion (equal to the ratio the number of
days elapsed in such year prior to
termination bears to 365) of the Annual
Portion for such year will vest at the end
of such year if the performance targets for
such year are met. Vested options expire per
Schedule A.
Rollover Options
- ----------------
The existing stock options that are to be
rolled over into Parent options will
preserve the spread between the strike price
and the acquisition price and will be fully
vested. Vested rollover options will have a
term of 7 years and 30 days unless
terminated earlier per Schedule A.
Puts/Calls
- ----------
Applicability: Applies to rollover shares and option shares
(including rollover option shares).
Call: Company may call shares upon any termination
of employment prior to an IPO per Schedule
B.
Put: If the call is unexercised, under certain
circumstances the Executive may require the
Company to repurchase the shares per
Schedule B.
FMV: Determined in good faith by the Company's
board of directors, based upon a valuation
of the entire Company, without taking into
account any minority or illiquidity
discounts, subject to an appraisal that may
be requested by the Executive. If the
Executive seeks an appraisal, each of the
Executive and the board of director's will
select one appraiser, who shall select a
third. If the valuation determined by the
appraisers is less than or equal to 110% of
the board's determination the Executive
shall pay the entire cost of the appraisal.
If such valuation is greater than 110% but
less than or equal to 120%, than cost shall
be borne equally by the Company and by the
Executive. If the valuation is greater than
120% of the board's determination, the
Company shall bear the entire cost of the
appraisal.
Cost: In the case of rollover shares and rollover
option shares, Cost is equal to the per
share price paid by Investcorp. In the case
of new options, Cost is equal to the
exercise price of such options, which shall
be equal to the per share price paid by
Investcorp for options granted at the time
of the closing of the transactions and for a
period of six months thereafter.
Other Provisions
- ----------------
2
<PAGE>
Withholding: Exercise price and tax withholding
obligations may be satisfied by having
option shares withheld.
Tag/Drag Rights: The rollover shares and option shares will
have the right to participate pro rata in a
sale of the Company and Investcorp will have
the right to require such participation.
These tag/drag rights expire upon an IPO.
Restrictions on Transfer: Prior to an IPO, rollover shares and option
shares will be subject to restrictions on
transfer with flexibility for estate
planning purposes.
Access to Trading Markets Following an IPO: (i) The Company will
Post-IPO: file an S-8 registration statement covering
stock option exercises, (ii) Rule 144 would
generally be available and (iii) management
holders of rollover shares would have
piggyback registration rights to participate
in secondary offerings subject to
limitations.
IPO and Secondary Management holders of rollover shares,
Offerings: options and option shares will be subject to
customary underwriter lock-up arrangements
for the IPO and secondary offerings.
Generally, participation by senior
management in the IPO is not available.
Certain Definitions
- -------------------
Cause: Grounds for termination of executive for
"Cause": (1) conviction of a felony or plea
of guilty or nolo contendere to a felony,
---- ----------
(2) act of fraud or dishonesty which is
materially injurious to the Company, (3)
willful and continual refusal to perform
duties or (4) gross misconduct materially
injurious to the Company.
Good Reason: Grounds for termination by executive for
"Good Reason": (1) assignment of duties or
position constituting a material diminution
in executive's role, responsibilities or
authority, (2) reduction in base salary or
bonus participation opportunities, (3)
demand by the Company that Executive
relocate to a place more than a reasonable
distance (to be determined) from current
location, or (4) material breach of
executive's employment agreement by the
Company.
Employment Each Executive will enter into an employment
- ---------- agreement with the Company on terms that
Agreements are not materially inconsistent with the
- ---------- current employment agreements; provided that
if the IRS asserts that any benefit payable
under the Executive's current employment
agreement or otherwise payable as a result
of this transaction (regardless of whether a
termination of employment occurs) is subject
to a parachute excise tax, the Company will
indemnify such Executive on a full gross-up
basis. The Company and each Executive will
take all reasonable steps to avoid the
imposition of such tax.
3
<PAGE>
SCHEDULE A
----------
<TABLE>
<CAPTION>
Termination Event Unvested Options Terminate Vested Options Terminate
<S> <C> <C>
Executive terminated by Immediately 30 days after terminating event/(1)/
Company for Cause
Executive quits without Good Immediately 90 days after terminating event/(1)/
Reason
Executive quits with Good Reason Immediately/(2)/ 180 days after terminating event/(1)/
Executive terminated by the Immediately/(2)/ 180 days after terminating event/(1)/
Company without Cause
Death or disability Immediately/(2)/ One year after terminating event/(1)/
</TABLE>
/(1)/ Subject to (2) below, the options are exercisable only to the extent
exercisable on the day of the terminating event.
/(2)/ A pro rata portion (equal to the ratio the number of days elapsed in such
year prior to termination bears to 365) of the Annual Portion for such
year will vest at the end of such year if the targets for such year are
met.
4
<PAGE>
SCHEDULE B
----------
<TABLE>
<CAPTION>
Call Provision Call Price
--------------------------------------------------------------------
If Within 3 Years If After 3 Years
<S> <C> <C>
Employee terminated without FMV FMV
Cause
Employee leaves with Good FMV FMV
Reason
Employee leaves without Good Lower of Cost or FMV/(1)/ FMV
Reason
Employee is terminated for Cause Lower of Cost or FMV/(1)/ Lower of Cost or FMV
Death, disability, retirement FMV FMV
<CAPTION>
Put Provision Put Price
---------------------------------------------------------------------------
If Within 3 Years (2 Years in the If After 3 Years (2 Years in the
case of termination without Cause) case of termination without Cause)
<S> <C> <C>
Employee terminated without Lower of Cost or FMV/(1)/ FMV
Cause
Employee leaves with Good FMV FMV
Reason
Employee leaves without Good No put FMV
Reason
Employee is terminated for No put No put
Cause
Death, disability, retirement FMV FMV
</TABLE>
/(1)/ Within the 1st year, it will be at Cost
5
<PAGE>
The terms of Schedule B to the Management Arrangements shall be modified as they
apply to Joseph Sinicropi as described below:
<TABLE>
<CAPTION>
Call Provision Call Price
-------------------------------------------------------------
If Within If Within If After
Years 1 - 2 Year 3 3 Years
<S> <C> <C> <C>
Employee leaves without Good Lower of Cost or FMV FMV FMV
Reason
<CAPTION>
Put Provision Put Price
-------------------------------------------------------------
If Within If Within If After
Years 1 - 2 Year 3 3 Years
<S> <C> <C> <C>
Employee leaves without Good None Lower of Cost or FMV
Reason FMV (with an
additional put right
in the first 30 days
of Year 4 at FMV)
</TABLE>
<PAGE>
Exhibit (c)(7)
November 5, 1999
SIND Holdings, Inc.
c/o Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, New York 10166
Dear Sirs:
This will confirm my current intent to enter into appropriate documentation
implementing (a) the arrangements summarized on the attached term sheets in
connection with the consummation of the transactions contemplated by the
Agreement and Plan of Merger of even date herewith by and among Synthetic
Industries, Inc. (the "Company"), SIND Holdings, Inc. ("Holdings") and SIND
Acquisition, Inc. (the "Agreement") and (b) an equity participation by me in
Holdings having a value at least equal to 50% of the sum of my net option value
of existing Company stock options and 50% of the after-tax transaction-related
cash payments to be received by me. The equity investment in Holdings will be
through the rollover of existing stock options into new Holdings stock options
or through a combination of such rollover and investment of after-tax
transaction-related cash payments into new Holdings shares at $33 per new
Holdings share. The new Holdings rollover stock options will be granted at a
discount from the $33 per share Agreement price to preserve the aggregate spread
on each such existing rollover option.
Sincerely,
/s/ C. Ted Koerner
------------------
C. Ted Koerner
Accepted:
SIND Holdings, Inc.
By /s/ Christopher J. O'Brien
--------------------------
<PAGE>
PROJECT POLY
OUTLINE OF KEY COMPENSATION PLANS
Bonus Plan
. Generally keep existing financial opportunity the same (except for
promotions, etc.); provided that the Board shall review with
management, on a case-by-case basis, the competitiveness of the
Company's total compensation (salary, bonus, long-term
compensation/ownership plan)
. Bonuses for senior executives generally tied to EBITDA targets -
minimum/maximum ranges consistent with current plan levels, as
modified to the extent necessary as determined on a case-by-case basis
by Investcorp and management
- 75% of bonuses tied to EBITDA targets and based upon a sliding
scale consistent with the Company's current program
- 25% of bonuses tied to alternative performance measures
(measurable or board discretion)
. 50% of eligible bonus earned at 90% of target EBITDA, with the balance
up to 100% earned pro rata up to 100% of target EBITDA; up to 125% of
eligible bonus may be earned if EBITDA is 110% or more of target
. Can be tailored by position
. EBITDA results are exclusive of reserve reversals if not in the budget
and would be adjusted for significant acquisitions or capital
infusions or accounting principle changes
Nonqualified Option Plan
. 11% of the fully diluted ownership
. 2.5% (of the 11%) of the plan left as "dry powder" for future
management, promotions, etc.; going forward, the Board shall have the
discretion to allocate remaining unallocated options
. Allocated to management based upon recommendation of CEO/President in
consultation with Investcorp
. Can be earned in 5 separate ways
- Meeting 100% of EBITDA targets on an annual basis (20%/year);
meeting at least 95% but less than 100% of annual EBITDA
targets results in vesting of one-half of options available
for vesting (i.e. 10%/year)
- Cumulative catch-up provision for any prior year misses
(applies to both 95% and 100% thresholds)
- Time-vested after 7 years
- In case of IPO, unvested options convert to time lapse options
- In case of sale of Company, unvested options vest in whole or
in part if Investcorp earns a 20% or greater fully diluted
return
. Put/call rights
. Option pool worth a total (net of option exercise cost) of $55 million
to management in year 5 based on management's projections and a 7.5x
exit multiple
Direct Side-by-Side Investment with Investcorp
<PAGE>
. Buy-in at Investcorp's purchase price
. Rollover shares
. Rollover options
- Exchange existing in-the-money options for new in-the-money
options
. Loan program to assist in additional share purchases by selected
officers
. Loan program also to be available for end of term option exercises
<PAGE>
MANAGEMENT ARRANGEMENTS/1/
--------------------------
New Stock Options
- -----------------
Number: An aggregate of 11% of fully diluted common
stock, of which 2.5% will be reserved for
future grants (as allocated by the Board of
Directors in its sole discretion) with the
balance (8.5%) to be granted at or
promptly after closing.
Exercise Price: Per share price paid by Investcorp.
Term: 7 years and 30 days.
Vesting: (a) Up to 20% per year (the "Annual Portion")
for 5 years, based upon achievement of
specified EBITDA performance targets. If
the Company's EBITDA performance equals
or exceeds 95% of a target in a given
year but is less than 100% of the target,
one-half of the Annual Portion for that
year will vest. Options that do not vest
in any year may vest in any subsequent
year within such five-year period based
upon cumulative results.
(b) Upon an Initial Public Offering ("IPO"),
options that are unvested as of the IPO
closing date shall thereafter vest
ratably at the end of each of the
following three anniversaries of the
closing of the IPO. In addition,
historically we have initiated a new
option program (and granted additional
options) upon an IPO at the IPO price.
(c) Upon a sale of the Company prior to an
IPO (i) up to 50% of unvested options
will vest if, in connection with such
sale, Investcorp realizes a 20% annual
internal rate of return on a fully-
diluted basis, (ii) up to 75% of unvested
options will vest if, in connection with
such sale, Investcorp realizes a 25%
annual internal rate of return on a
fully-diluted basis, and (iii) up to 100%
of unvested options will vest if, in
connection with such sale, Investcorp
realizes a 30% annual internal rate of
return on a fully-diluted basis.
(d) Any options remaining unvested will vest
7 years from closing (without regard to
any performance targets).
________________________
/1/ Certain modifications, as described separately, are applicable for Leonard
Chill.
<PAGE>
Effect of Termination of Unvested options expire immediately upon
Employment: termination of employment for any reason,
except if employment is terminated by the
Company without or disability, in which case
a pro rata portion (equal to the ratio the
number of days elapsed in such year prior to
termination bears to 365) of the Annual
Portion for such year will vest at the end
of such year if the performance targets for
such year are met. Vested options expire per
Schedule A.
Rollover Options
- ----------------
The existing stock options that are to be
rolled over into Parent options will
preserve the spread between the strike price
and the acquisition price and will be fully
vested. Vested rollover options will have a
term of 7 years and 30 days unless
terminated earlier per Schedule A.
Puts/Calls
- ----------
Applicability: Applies to rollover shares and option shares
(including rollover option shares).
Call: Company may call shares upon any termination
of employment prior to an IPO per Schedule
B.
Put: If the call is unexercised, under certain
circumstances the Executive may require the
Company to repurchase the shares per
Schedule B.
FMV: Determined in good faith by the Company's
board of directors, based upon a valuation
of the entire Company, without taking into
account any minority or illiquidity
discounts, subject to an appraisal that may
be requested by the Executive. If the
Executive seeks an appraisal, each of the
Executive and the board of director's will
select one appraiser, who shall select a
third. If the valuation determined by the
appraisers is less than or equal to 110% of
the board's determination the Executive
shall pay the entire cost of the appraisal.
If such valuation is greater than 110% but
less than or equal to 120%, than cost shall
be borne equally by the Company and by the
Executive. If the valuation is greater than
120% of the board's determination, the
Company shall bear the entire cost of the
appraisal.
Cost: In the case of rollover shares and rollover
option shares, Cost is equal to the per
share price paid by Investcorp. In the case
of new options, Cost is equal to the
exercise price of such options, which shall
be equal to the per share price paid by
Investcorp for options granted at the time
of the closing of the transactions and for a
period of six months thereafter.
Other Provisions
- ----------------
2
<PAGE>
Withholding: Exercise price and tax withholding
obligations may be satisfied by having
option shares withheld.
Tag/Drag Rights: The rollover shares and option shares will
have the right to participate pro rata in a
sale of the Company and Investcorp will have
the right to require such participation.
These tag/drag rights expire upon an IPO.
Restrictions on Transfer: Prior to an IPO, rollover shares and option
shares will be subject to restrictions on
transfer with flexibility for estate
planning purposes.
Access to Trading Following an IPO: (i) The Company will
Markets Post-IPO: file an S-8 registration statement covering
stock option exercises, (ii) Rule 144 would
generally be available and (iii) management
holders of rollover shares would have
piggyback registration rights to participate
in secondary offerings subject to
limitations.
IPO and Secondary Management holders of rollover shares,
Offerings: options and option shares will be subject to
customary underwriter lock-up arrangements
for the IPO and secondary offerings.
Generally, participation by senior
management in the IPO is not available.
Certain Definitions
- -------------------
Cause: Grounds for termination of executive for
"Cause": (1) conviction of a felony or plea
of guilty or nolo contendere to a felony,
---- ----------
(2) act of fraud or dishonesty which is
materially injurious to the Company, (3)
willful and continual refusal to perform
duties or (4) gross misconduct materially
injurious to the Company.
Good Reason: Grounds for termination by executive for
"Good Reason": (1) assignment of duties or
position constituting a material diminution
in executive's role, responsibilities or
authority, (2) reduction in base salary or
bonus participation opportunities, (3)
demand by the Company that Executive
relocate to a place more than a reasonable
distance (to be determined) from current
location, or (4) material breach of
executive's employment agreement by the
Company.
Employment Each Executive will enter into an
---------- employment agreement with the Company
Agreements on terms that are not materially
---------- inconsistent with the current employment
agreements; provided that if the IRS asserts
that any benefit payable under the
Executive's current employment agreement or
otherwise payable as a result of this
transaction (regardless of whether a
termination of employment occurs) is subject
to a parachute excise tax, the Company will
indemnify such Executive on a full gross-up
basis. The Company and each Executive will
take all reasonable steps to avoid the
imposition of such tax.
3
<PAGE>
SCHEDULE A
----------
<TABLE>
<CAPTION>
Termination Event Unvested Options Terminate Vested Options Terminate
<S> <C> <C>
Executive terminated by Immediately 30 days after terminating event/(1)/
Company for Cause
Executive quits without Good Immediately 90 days after terminating event/(1)/
Reason
Executive quits with Good Immediately/(2)/ 180 days after terminating event/(1)/
Reason
Executive terminated by the Immediately/(2)/ 180 days after terminating event/(1)/
Company without Cause
Death or disability Immediately/(2)/ One year after terminating event/(1)/
</TABLE>
/(1)/ Subject to (2) below, the options are exercisable only to the extent
exercisable on the day of the terminating event.
/(2)/ A pro rata portion (equal to the ratio the number of days elapsed in such
year prior to termination bears to 365) of the Annual Portion for such
year will vest at the end of such year if the targets for such year are
met.
4
<PAGE>
SCHEDULE B
----------
<TABLE>
<CAPTION>
Call Provision Call Price
----------------------------------------------------------
If Within 3 Years If After 3 Years
<S> <C> <C>
Employee terminated without FMV FMV
Cause
Employee leaves with Good FMV FMV
Reason
Employee leaves without Good Lower of Cost or FMV/(1)/ FMV
Reason
Employee is terminated for Lower of Cost or FMV/(1)/ Lower of Cost or FMV
Cause
Death, disability, retirement FMV FMV
<CAPTION>
Put Provision Put Price
-----------------------------------------------------------------------------
If Within 3 Years (2 Years in the If After 3 Years (2 Years in the
case of termination without Cause) case of termination without Cause)
<S> <C> <C>
Employee terminated without Lower of Cost or FMV(1) FMV
Cause
Employee leaves with Good FMV FMV
Reason
Employee leaves without Good No put FMV
Reason
Employee is terminated for No put No put
Cause
Death, disability, retirement FMV FMV
</TABLE>
/(1)/ Within the 1st year, it will be at Cost
5
<PAGE>
Exhibit (c)(8)
November 5, 1999
SIND Holdings, Inc.
c/o Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, New York 10166
Dear Sirs:
This will confirm my current intent to enter into appropriate documentation
implementing (a) the arrangements summarized on the attached term sheets in
connection with the consummation of the transactions contemplated by the
Agreement and Plan of Merger of even date herewith by and among Synthetic
Industries, Inc. (the "Company"), SIND Holdings, Inc. ("Holdings") and SIND
Acquisition, Inc. (the "Agreement") and (b) an equity participation by me in
Holdings having a value at least equal to 50% of the sum of my net option value
of existing Company stock options and 50% of the after-tax transaction-related
cash payments to be received by me. The equity investment in Holdings will be
through the rollover of existing stock options into new Holdings stock options
or through a combination of such rollover and investment of after-tax
transaction-related cash payments into new Holdings shares at $33 per new
Holdings share. The new Holdings rollover stock options will be granted at a
discount from the $33 per share Agreement price to preserve the aggregate spread
on each such existing rollover option.
Sincerely,
/s/ John Michael Long
---------------------
John Michael Long
Accepted:
SIND Holdings, Inc.
By /s/ Christopher J. O'Brien
--------------------------
<PAGE>
PROJECT POLY
OUTLINE OF KEY COMPENSATION PLANS
Bonus Plan
. Generally keep existing financial opportunity the same (except for
promotions, etc.); provided that the Board shall review with
management, on a case-by-case basis, the competitiveness of the
Company's total compensation (salary, bonus, long-term
compensation/ownership plan)
. Bonuses for senior executives generally tied to EBITDA targets -
minimum/maximum ranges consistent with current plan levels, as
modified to the extent necessary as determined on a case-by-case basis
by Investcorp and management
- 75% of bonuses tied to EBITDA targets and based upon a sliding
scale consistent with the Company's current program
- 25% of bonuses tied to alternative performance measures
(measurable or board discretion)
. 50% of eligible bonus earned at 90% of target EBITDA, with the balance
up to 100% earned pro rata up to 100% of target EBITDA; up to 125% of
eligible bonus may be earned if EBITDA is 110% or more of target
. Can be tailored by position
. EBITDA results are exclusive of reserve reversals if not in the budget
and would be adjusted for significant acquisitions or capital
infusions or accounting principle changes
Nonqualified Option Plan
. 11% of the fully diluted ownership
. 2.5% (of the 11%) of the plan left as "dry powder" for future
management, promotions, etc.; going forward, the Board shall have the
discretion to allocate remaining unallocated options
. Allocated to management based upon recommendation of CEO/President in
consultation with Investcorp
. Can be earned in 5 separate ways
- Meeting 100% of EBITDA targets on an annual basis (20%/year);
meeting at least 95% but less than 100% of annual EBITDA
targets results in vesting of one-half of options available
for vesting (i.e. 10%/year)
- Cumulative catch-up provision for any prior year misses
(applies to both 95% and 100% thresholds)
- Time-vested after 7 years
- In case of IPO, unvested options convert to time lapse options
- In case of sale of Company, unvested options vest in whole or
in part if Investcorp earns a 20% or greater fully diluted
return
. Put/call rights
. Option pool worth a total (net of option exercise cost) of $55 million
to management in year 5 based on management's projections and a 7.5x
exit multiple
Direct Side-by-Side Investment with Investcorp
. Buy-in at Investcorp's purchase price
<PAGE>
. Rollover shares
. Rollover options
- Exchange existing in-the-money options for new in-the-money
options
. Loan program to assist in additional share purchases by selected
officers
. Loan program also to be available for end of term option exercises
<PAGE>
MANAGEMENT ARRANGEMENTS/1/
--------------------------
New Stock Options
- -----------------
Number: An aggregate of 11% of fully diluted common
stock, of which 2.5% will be reserved for
future grants (as allocated by the Board of
Directors in its sole discretion) with the
balance (8.5%) to be granted at or promptly
after closing.
Exercise Price: Per share price paid by Investcorp.
Term: 7 years and 30 days.
Vesting: (a) Up to 20% per year (the "Annual
Portion") for 5 years, based upon
achievement of specified EBITDA
performance targets. If the Company's
EBITDA performance equals or exceeds 95%
of a target in a given year but is less
than 100% of the target, one-half of the
Annual Portion for that year will vest.
Options that do not vest in any year may
vest in any subsequent year within such
five-year period based upon cumulative
results.
(b) Upon an Initial Public Offering ("IPO"),
options that are unvested as of the IPO
closing date shall thereafter vest
ratably at the end of each of the
following three anniversaries of the
closing of the IPO. In addition,
historically we have initiated a new
option program (and granted additional
options) upon an IPO at the IPO price.
(c) Upon a sale of the Company prior to an
IPO (i) up to 50% of unvested options
will vest if, in connection with such
sale, Investcorp realizes a 20% annual
internal rate of return on a fully-
diluted basis, (ii) up to 75% of
unvested options will vest if, in
connection with such sale, Investcorp
realizes a 25% annual internal rate of
return on a fully-diluted basis, and
(iii) up to 100% of unvested options
will vest if, in connection with such
sale, Investcorp realizes a 30% annual
internal rate of return on a fully-
diluted basis.
(d) Any options remaining unvested will vest
7 years from closing (without regard to
any performance targets).
_______________
/1/ Certain modifications, as described separately, are applicable for Leonard
Chill.
<PAGE>
Effect of Termination Unvested options expire immediately upon
of Employment: termination of employment for any reason,
except if employment is terminated by the
Company without cause, by the employee for
good reason or by reason of employee's death
or disability, in which case a pro rata
portion (equal to the ratio the number of days
elapsed in such year prior to termination
bears to 365) of the Annual Portion for such
year will vest at the end of such year if the
performance targets for such year are met.
Vested options expire per Schedule A.
Rollover Options
- ----------------
The existing stock options that are to be
rolled over into Parent options will preserve
the spread between the strike price and the
acquisition price and will be fully vested.
Vested rollover options will have a term of 7
years and 30 days unless terminated earlier
per Schedule A.
Puts/Calls
- ----------
Applicability: Applies to rollover shares and option shares
(including rollover option shares).
Call: Company may call shares upon any termination
of employment prior to an IPO per Schedule B.
Put: If the call is unexercised, under certain
circumstances the Executive may require the
Company to repurchase the shares per Schedule
B.
FMV: Determined in good faith by the Company's
board of directors, based upon a valuation of
the entire Company, without taking into
account any minority or illiquidity discounts,
subject to an appraisal that may be requested
by the Executive. If the Executive seeks an
appraisal, each of the Executive and the board
of director's will select one appraiser, who
shall select a third. If the valuation
determined by the appraisers is less than or
equal to 110% of the board's determination the
Executive shall pay the entire cost of the
appraisal. If such valuation is greater than
110% but less than or equal to 120%, than cost
shall be borne equally by the Company and by
the Executive. If the valuation is greater
than 120% of the board's determination, the
Company shall bear the entire cost of the
appraisal.
Cost: In the case of rollover shares and rollover
option shares, Cost is equal to the per share
price paid by Investcorp. In the case of new
options, Cost is equal to the exercise price
of such options, which shall be equal to the
per share price paid by Investcorp for options
granted at the time of the closing of the
transactions and for a period of six months
thereafter.
Other Provisions
- ----------------
2
<PAGE>
Withholding: Exercise price and tax withholding obligations
may be satisfied by having option shares
withheld.
Tag/Drag Rights: The rollover shares and option shares will
have the right to participate pro rata in a
sale of the Company and Investcorp will have
the right to require such participation. These
tag/drag rights expire upon an IPO.
Restrictions on Prior to an IPO, rollover shares and option
Transfer: shares will be subject to restrictions on
transfer with flexibility for estate planning
purposes.
Access to Trading Following an IPO: (i) The Company will file
Markets Post-IPO: an S-8 registration statement covering stock
option exercises, (ii) Rule 144 would
generally be available and (iii) management
holders of rollover shares would have
piggyback registration rights to participate
in secondary offerings subject to limitations.
IPO and Secondary Management holders of rollover shares,
Offerings: options and option shares will be subject to
customary underwriter lock-up arrangements for
the IPO and secondary offerings. Generally,
participation by senior management in the IPO
is not available.
Certain Definitions
- -------------------
Cause: Grounds for termination of executive for
"Cause": (1) conviction of a felony or plea of
guilty or nolo contendere to a felony, (2) act
---- ----------
of fraud or dishonesty which is materially
injurious to the Company, (3) willful and
continual refusal to perform duties or (4)
gross misconduct materially injurious to the
Company.
Good Reason: Grounds for termination by executive for "Good
Reason": (1) assignment of duties or position
constituting a material diminution in
executive's role, responsibilities or
authority, (2) reduction in base salary or
bonus participation opportunities, (3) demand
by the Company that Executive relocate to a
place more than a reasonable distance (to be
determined) from current location, or (4)
material breach of executive's employment
agreement by the Company.
Employment Each Executive will enter into an employment
- ---------- agreement with the Company on terms that are
Agreements not materially inconsistent with the current
- ---------- employment agreements; provided that if the
IRS asserts that any benefit payable under the
Executive's current employment agreement or
otherwise payable as a result of this
transaction (regardless of whether a
termination of employment occurs) is subject
to a parachute excise tax, the Company will
indemnify such Executive on a full gross-up
basis. The Company and each Executive will
take all reasonable steps to avoid the
imposition of such tax.
3
<PAGE>
SCHEDULE A
----------
<TABLE>
<CAPTION>
Termination Event Unvested Options Terminate Vested Options Terminate
<S> <C> <C>
Executive terminated by Immediately 30 days after terminating event/(1)/
Company for Cause
Executive quits without Good Immediately 90 days after terminating event/(1)/
Reason
Executive quits with Good Immediately/(2)/ 180 days after terminating event/(1)/
Reason
Executive terminated by the Immediately/(2)/ 180 days after terminating event/(1)/
Company without Cause
Death or disability Immediately(2) One year after terminating event/(1)/
</TABLE>
/(1)/ Subject to (2) below, the options are exercisable only to the extent
exercisable on the day of the terminating event.
/(2)/ A pro rata portion (equal to the ratio the number of days elapsed in such
year prior to termination bears to 365) of the Annual Portion for such
year will vest at the end of such year if the targets for such year are
met.
4
<PAGE>
SCHEDULE B
----------
<TABLE>
<CAPTION>
Call Provision Call Price
----------------------------------------------------------------
If Within 3 Years If After 3 Years
<S> <C> <C>
Employee terminated without FMV FMV
Cause
Employee leaves with Good FMV FMV
Reason
Employee leaves without Good Lower of Cost or FMV/(1)/ FMV
Reason
Employee is terminated for Lower of Cost or FMV/(1)/ Lower of Cost or FMV
Cause
Death, disability, retirement FMV FMV
<CAPTION>
Put Provision Put Price
---------------------------------------------------------------------------
If Within 3 Years (2 Years in the If After 3 Years (2 Years in the
case of termination without Cause) case of termination without
Cause)
<S> <C> <C>
Employee terminated without Lower of Cost or FMV/(1)/ FMV
Cause
Employee leaves with Good FMV FMV
Reason
Employee leaves without Good Reason No put FMV
Employee is terminated for Cause No put No put
Death, disability, retirement FMV FMV
</TABLE>
/(1)/Within the 1st year, it will be at Cost
5
<PAGE>
Exhibit (c)(9)
November 5, 1999
SIND Holdings, Inc.
c/o Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, New York 10166
Dear Sirs:
This will confirm my current intent to enter into appropriate documentation
implementing (a) the arrangements summarized on the attached term sheets in
connection with the consummation of the transactions contemplated by the
Agreement and Plan of Merger of even date herewith by and among Synthetic
Industries, Inc. (the "Company"), SIND Holdings, Inc. ("Holdings") and SIND
Acquisition, Inc. (the "Agreement") and (b) an equity participation by me in
Holdings having a value at least equal to 50% of the sum of my net option value
of existing Company stock options and 50% of the after-tax transaction-related
cash payments to be received by me. The equity investment in Holdings will be
through the rollover of existing stock options into new Holdings stock options
or through a combination of such rollover and investment of after-tax
transaction-related cash payments into new Holdings shares at $33 per new
Holdings share. The new Holdings rollover stock options will be granted at a
discount from the $33 per share Agreement price to preserve the aggregate spread
on each such existing rollover option.
Sincerely,
/s/ Proctor Allen
--------------------------------
Proctor Allen
Accepted:
SIND Holdings, Inc.
By /s/ Christopher J. O'Brien
-----------------------------------
<PAGE>
PROJECT POLY
OUTLINE OF KEY COMPENSATION PLANS
Bonus Plan
. Generally keep existing financial opportunity the same (except for
promotions, etc.); provided that the Board shall review with
management, on a case-by-case basis, the competitiveness of the
Company's total compensation (salary, bonus, long-term
compensation/ownership plan)
. Bonuses for senior executives generally tied to EBITDA targets -
minimum/maximum ranges consistent with current plan levels, as
modified to the extent necessary as determined on a case-by-case basis
by Investcorp and management
- 75% of bonuses tied to EBITDA targets and based upon a sliding
scale consistent with the Company's current program
- 25% of bonuses tied to alternative performance measures
(measurable or board discretion)
. 50% of eligible bonus earned at 90% of target EBITDA, with the balance
up to 100% earned pro rata up to 100% of target EBITDA; up to 125% of
eligible bonus may be earned if EBITDA is 110% or more of target
. Can be tailored by position
. EBITDA results are exclusive of reserve reversals if not in the budget
and would be adjusted for significant acquisitions or capital
infusions or accounting principle changes
Nonqualified Option Plan
. 11% of the fully diluted ownership
. 2.5% (of the 11%) of the plan left as "dry powder" for future
management, promotions, etc.; going forward, the Board shall have the
discretion to allocate remaining unallocated options
. Allocated to management based upon recommendation of CEO/President in
consultation with Investcorp
. Can be earned in 5 separate ways
- Meeting 100% of EBITDA targets on an annual basis (20%/year);
meeting at least 95% but less than 100% of annual EBITDA
targets results in vesting of one-half of options available
for vesting (i.e. 10%/year)
- Cumulative catch-up provision for any prior year misses
(applies to both 95% and 100% thresholds)
- Time-vested after 7 years
- In case of IPO, unvested options convert to time lapse options
- In case of sale of Company, unvested options vest in whole or
in part if Investcorp earns a 20% or greater fully diluted
return
. Put/call rights
. Option pool worth a total (net of option exercise cost) of $55 million
to management in year 5 based on management's projections and a 7.5x
exit multiple
Direct Side-by-Side Investment with Investcorp
. Buy-in at Investcorp's purchase price
<PAGE>
. Rollover shares
. Rollover options
- Exchange existing in-the-money options for new in-the-money
options
. Loan program to assist in additional share purchases by selected
officers
. Loan program also to be available for end of term option exercises
<PAGE>
MANAGEMENT ARRANGEMENTS/1/
--------------------------
New Stock Options
- -----------------
Number: An aggregate of 11% of fully diluted common stock,
of which 2.5% will be reserved for future grants
(as allocated by the Board of Directors in its
sole discretion) with the balance (8.5%) to be
granted at or promptly after closing.
Exercise Price: Per share price paid by Investcorp.
Term: 7 years and 30 days.
Vesting: (a) Up to 20% per year (the "Annual Portion") for
5 years, based upon achievement of specified
EBITDA performance targets. If the Company's
EBITDA performance equals or exceeds 95% of a
target in a given year but is less than 100%
of the target, one-half of the Annual Portion
for that year will vest. Options that do not
vest in any year may vest in any subsequent
year within such five-year period based upon
cumulative results.
(b) Upon an Initial Public Offering ("IPO"),
options that are unvested as of the IPO
closing date shall thereafter vest ratably at
the end of of the following three
anniversaries of the closing of the IPO. In
addition, historically we have initiated a
new option program (and granted additional
options) upon an IPO at the IPO price. (c)
(c) Upon a sale of the Company prior to an IPO
(i) up to 50% of unvested options will vest
if, in connection with such sale, Investcorp
realizes a 20% annual internal rate of return
on a fully-diluted basis, (ii) up to 75% of
unvested options will vest if, in connection
with such sale, Investcorp realizes a 25%
annual internal rate of return on a fully-
diluted basis, and (iii) up to 100% of
unvested options will vest if, in connection
with such sale, Investcorp realizes a 30%
annual internal rate of return on a fully-
diluted basis.
(d) Any options remaining unvested will vest 7
years from closing (without regard to any
performance targets).
____________________
/1/ Certain modifications, as described separately, are applicable for Leonard
Chill.
<PAGE>
Effect of Termination of Unvested options expire immediately upon
for Employment: termination of employment any reason, except
if employment is terminated by the Company
without cause, by the employee for good
reason or by reason of employee's death or
disability, in which case a pro rata portion
(equal to the ratio the number of days
elapsed in such year prior to termination
bears to 365) of the Annual Portion for such
year will vest at the end of such year if
the performance targets for such year are
met. Vested options expire per Schedule A.
Rollover Options
- ----------------
The existing stock options that are to be
rolled over into Parent options will
preserve the spread between the strike price
and the acquisition price and will be fully
vested. Vested rollover options will have a
term of 7 years and 30 days unless
terminated earlier per Schedule A.
Puts/Calls
- ----------
Applicability: Applies to rollover shares and option shares
(including rollover option shares).
Call: Company may call shares upon any termination
of employment prior to an IPO per Schedule
B.
Put: If the call is unexercised, under certain
circumstances the Executive may require the
Company to repurchase the shares per
Schedule B.
FMV: Determined in good faith by the Company's
board of directors, based upon a valuation
of the entire Company, without taking into
account any minority or illiquidity
discounts, subject to an appraisal that may
be requested by the Executive. If the
Executive seeks an appraisal, each of the
Executive and the board of director's will
select one appraiser, who shall select a
third. If the valuation determined by the
appraisers is less than or equal to 110% of
the board's determination the Executive
shall pay the entire cost of the appraisal.
If such valuation is greater than 110% but
less than or equal to 120%, than cost shall
be borne equally by the Company and by the
Executive. If the valuation is greater than
120% of the board's determination, the
Company shall bear the entire cost of the
appraisal.
Cost: In the case of rollover shares and rollover
option shares, Cost is equal to the per
share price paid by Investcorp. In the case
of new options, Cost is equal to the
exercise price of such options, which shall
be equal to the per share price paid by
Investcorp for options granted at the time
of the closing of the transactions and for a
period of six months thereafter.
Other Provisions
- ----------------
2
<PAGE>
Withholding: Exercise price and tax withholding
obligations may be satisfied by having option
shares withheld.
Tag/Drag Rights: The rollover shares and option shares will
have the right to participate pro rata in a
sale of the Company and Investcorp will have
the right to require such participation.
These tag/drag rights expire upon an IPO.
Restrictions on Transfer: Prior to an IPO, rollover shares and option
shares will be subject to restrictions on
transfer with flexibility for estate planning
purposes.
Access to Trading Markets Following an IPO: (i) The Company will file
Post-IPO: an S-8 registration statement covering stock
option exercises, (ii) Rule 144 would
generally be available and (iii) management
holders of rollover shares would have
piggyback registration rights to participate
in secondary offerings subject to
limitations.
IPO and Secondary Offerings: Management holders of rollover shares,
options and option shares will be subject to
customary underwriter lock-up arrangements
for the IPO and secondary offerings.
Generally, participation by senior management
in the IPO is not available.
Certain Definitions
- -------------------
Cause: Grounds for termination of executive
for"Cause": (1) conviction of a felony or
plea of guilty or nolo contendere to a
---------------
felony, (2) act of fraud or dishonesty which
is materially injurious to the Company, (3)
willful and continual refusal to perform
duties or (4) gross misconduct materially
injurious to the Company.
Good Reason: Grounds for termination by executive for
"Good Reason": (1) assignment of duties or
position constituting a material diminution
in executive's role, responsibilities or
authority, (2) reduction in base salary or
bonus participation opportunities, (3) demand
by the Company that Executive relocate to a
place more than a reasonable distance (to be
determined) from current location, or (4)
material breach of executive's employment
agreement by the Company.
Employment Agreements Each Executive will enter into an employment
- ---------------------
agreement with the Company on terms that are
not materially inconsistent with the current
employment agreements; provided that if the
IRS asserts that any benefit payable under
the Executive's current employment agreement
or otherwise payable as a result of this
transaction (regardless of whether a
termination of employment occurs) is subject
to a parachute excise tax, the Company will
indemnify such Executive on a full gross-up
basis. The Company and each Executive will
take all reasonable steps to avoid the
imposition of such tax.
3
<PAGE>
SCHEDULE A
----------
<TABLE>
<CAPTION>
Termination Event Unvested Options Terminate Vested Options Terminate
<S> <C> <C>
Executive terminated by Company Immediately 30 days after terminating event/(1)/
for Cause
Executive quits without Good Immediately 90 days after terminating event/(1)/
Reason
Executive quits with Good Reason Immediately/(2)/ 180 days after terminating event/(1)/
Executive terminated by the Immediately/(2)/ 180 days after terminating event/(1)/
Company without Cause
Death or disability Immediately/(2)/ One year after terminating event/(1)/
</TABLE>
/(1)/ Subject to (2) below, the options are exercisable only to the extent
exercisable on the day of the terminating event.
/(2)/ A pro rata portion (equal to the ratio the number of days elapsed in such
year prior to termination bears to 365) of the Annual Portion for such
year will vest at the end of such year if the targets for such year are
met.
4
<PAGE>
SCHEDULE B
----------
<TABLE>
<CAPTION>
Call Provision Call Price
---------------------------------------------------------------------------
<S> <C> <C>
If Within 3 Years If After 3 Years
Employee terminated without Cause FMV FMV
Employee leaves with Good Reason FMV FMV
Employee leaves without Good Reason Lower of Cost or FMV/(1)/ FMV
Employee is terminated for Cause Lower of Cost or FMV/(1)/ Lower of Cost or FMV
Death, disability, retirement FMV FMV
</TABLE>
<TABLE>
<CAPTION>
Put Provision Put Price
---------------------------------------------------------------------------
<S> <C> <C>
If Within 3 Years (2 Years in the If After 3 Years (2 Years in the
case of termination without Cause) case of termination without
Cause)
Employee terminated without Cause Lower of Cost or FMV/(1)/ FMV
Employee leaves with Good Reason FMV FMV
Employee leaves without Good Reason No put FMV
Employee is terminated for Cause No put No put
Death, disability, retirement FMV FMV
</TABLE>
(1)Within the 1st year, it will be at Cost
5
<PAGE>
Exhibit (c)(10)
November 5, 1999
SIND Holdings, Inc.
c/o Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, New York 10166
Dear Sirs:
This will confirm my current intent to enter into appropriate documentation
implementing (a) the arrangements summarized on the attached term sheets in
connection with the consummation of the transactions contemplated by the
Agreement and Plan of Merger of even date herewith by and among Synthetic
Industries, Inc. (the "Company"), SIND Holdings, Inc. ("Holdings") and SIND
Acquisition, Inc. (the "Agreement") and (b) an equity participation by me in
Holdings having a value at least equal to 50% of the sum of my net option value
of existing Company stock options and 50% of the after-tax transaction-related
cash payments to be received by me. The equity investment in Holdings will be
through the rollover of existing stock options into new Holdings stock options
or through a combination of such rollover and investment of after-tax
transaction-related cash payments into new Holdings shares at $33 per new
Holdings share. The new Holdings rollover stock options will be granted at a
discount from the $33 per share Agreement price to preserve the aggregate spread
on each such existing rollover option.
Sincerely,
/s/ Louis Ziebold
---------------------------------
Louis Ziebold
Accepted:
SIND Holdings, Inc.
By /s/ Christopher J. O'Brien
--------------------------------
<PAGE>
PROJECT POLY
- --------------------------------------------------------------------------------
OUTLINE OF KEY COMPENSATION PLANS
- --------------------------------------------------------------------------------
Bonus Plan
. Generally keep existing financial opportunity the same (except for
promotions, etc.); provided that the Board shall review with
management, on a case-by-case basis, the competitiveness of the
Company's total compensation (salary, bonus, long-term
compensation/ownership plan)
. Bonuses for senior executives generally tied to EBITDA targets -
minimum/maximum ranges consistent with current plan levels, as
modified to the extent necessary as determined on a case-by-case basis
by Investcorp and management
- 75% of bonuses tied to EBITDA targets and based upon a
sliding scale consistent with the Company's current program
- 25% of bonuses tied to alternative performance measures
(measurable or board discretion)
. 50% of eligible bonus earned at 90% of target EBITDA, with the balance
up to 100% earned pro rata up to 100% of target EBITDA; up to 125% of
eligible bonus may be earned if EBITDA is 110% or more of target
. Can be tailored by position
. EBITDA results are exclusive of reserve reversals if not in the budget
and would be adjusted for significant acquisitions or capital
infusions or accounting principle changes
Nonqualified Option Plan
. 11% of the fully diluted ownership
. 2.5% (of the 11%) of the plan left as "dry powder" for future
management, promotions, etc.; going forward, the Board shall have the
discretion to allocate remaining unallocated options
. Allocated to management based upon recommendation of CEO/President in
consultation with Investcorp
. Can be earned in 5 separate ways
- Meeting 100% of EBITDA targets on an annual basis
(20%/year); meeting at least 95% but less than 100% of
annual EBITDA targets results in vesting of one-half of
options available for vesting (i.e. 10%/year)
- Cumulative catch-up provision for any prior year misses
(applies to both 95% and 100% thresholds)
- Time-vested after 7 years
- In case of IPO, unvested options convert to time lapse
options
- In case of sale of Company, unvested options vest in whole
or in part if Investcorp earns a 20% or greater fully
diluted return
. Put/call rights
. Option pool worth a total (net of option exercise cost) of $55 million
to management in year 5 based on management's projections and a 7.5x
exit multiple
Direct Side-by-Side Investment with Investcorp
. Buy-in at Investcorp's purchase price
<PAGE>
. Rollover shares
. Rollover options
- Exchange existing in-the-money options for new in-the-money
options
. Loan program to assist in additional share purchases by selected
officers
. Loan program also to be available for end of term option exercises
<PAGE>
MANAGEMENT ARRANGEMENTS/1/
--------------------------
New Stock Options
- -----------------
Number: An aggregate of 11% of fully diluted common stock,
of which 2.5% will be reserved for future grants
(as allocated by the Board of Directors in its sole
discretion) with the balance (8.5%) to be granted
at or promptly after closing.
Exercise Price: Per share price paid by Investcorp.
Term: 7 years and 30 days.
Vesting: (a) Up to 20% per year (the "Annual Portion") for
5 years, based upon achievement of specified
EBITDA performance targets. If the Company's
EBITDA performance equals or exceeds 95% of a
target in a given year but is less than 100%
of the target, one-half of the Annual Portion
for that year will vest. Options that do not
vest in any year may vest in any subsequent
year within such five-year period based upon
cumulative results.
(b) Upon an Initial Public Offering ("IPO"),
options that are unvested as of the IPO
closing date shall thereafter vest ratably at
the end of each of the following three
anniversaries of the closing of the IPO. In
addition, historically we have initiated a new
option program (and granted additional
options) upon an IPO at the IPO price.
(c) Upon a sale of the Company prior to an IPO (i)
up to 50% of unvested options will vest if, in
connection with such sale, Investcorp realizes
a 20% annual internal rate of return on a
fully-diluted basis, (ii) up to 75% of
unvested options will vest if, in connection
with such sale, Investcorp realizes a 25%
annual internal rate of return on a fully-
diluted basis, and (iii) up to 100% of
unvested options will vest if, in connection
with such sale, Investcorp realizes a 30%
annual internal rate of return on a fully-
diluted basis.
(d) Any options remaining unvested will vest 7
years from closing (without regard to any
performance targets).
_____________________
/1/ Certain modifications, as described separately, are applicable for Leonard
Chill.
<PAGE>
Effect of Termination of Unvested options expire immediately upon
Employment: termination of employment for any reason,
except if employment is terminated by the
Company without cause, by the employee for
good reason or by reason of employee's death
or disability, in which case a pro rata
portion (equal to the ratio the number of
days elapsed in such year prior to
termination bears to 365) of the Annual
Portion for such year will vest at the end
of such year if the performance targets for
such year are met. Vested options expire per
Schedule A.
Rollover Options
- ----------------
The existing stock options that are to be
rolled over into Parent options will
preserve the spread between the strike price
and the acquisition price and will be fully
vested. Vested rollover options will have a
term of 7 years and 30 days unless
terminated earlier per Schedule A.
Puts/Calls
- ----------
Applicability: Applies to rollover shares and option shares
(including rollover option shares).
Call: Company may call shares upon any termination
of employment prior to an IPO per Schedule
B.
Put: If the call is unexercised, under certain
circumstances the Executive may require the
Company to repurchase the shares per
Schedule B.
FMV: Determined in good faith by the Company's
board of directors, based upon a valuation
of the entire Company, without taking into
account any minority or illiquidity
discounts, subject to an appraisal that may
be requested by the Executive. If the
Executive seeks an appraisal, each of the
Executive and the board of director's will
select one appraiser, who shall select a
third. If the valuation determined by the
appraisers is less than or equal to 110% of
the board's determination the Executive
shall pay the entire cost of the appraisal.
If such valuation is greater than 110% but
less than or equal to 120%, than cost shall
be borne equally by the Company and by the
Executive. If the valuation is greater than
120% of the board's determination, the
Company shall bear the entire cost of the
appraisal.
Cost: In the case of rollover shares and rollover
option shares, Cost is equal to the per
share price paid by Investcorp. In the case
of new options, Cost is equal to the
exercise price of such options, which shall
be equal to the per share price paid by
Investcorp for options granted at the time
of the closing of the transactions and for a
period of six months thereafter.
Other Provisions
- ----------------
2
<PAGE>
Withholding: Exercise price and tax withholding
obligations may be satisfied by having
option shares withheld.
Tag/Drag Rights: The rollover shares and option shares will
have the right to participate pro rata in a
sale of the Company and Investcorp will have
the right to require such participation.
These tag/drag rights expire upon an IPO.
Restrictions on Transfer: Prior to an IPO, rollover shares and option
shares will be subject to restrictions on
transfer with flexibility for estate
planning purposes.
Access to Trading Following an IPO: (i) The Company will file
an S-8 registration Markets Post-IPO:
statement covering stock option exercises,
(ii) Rule 144 would generally be available
and (iii) management holders of rollover
shares would have piggyback registration
rights to participate in secondary offerings
subject to limitations.
IPO and Secondary Management holders of rollover shares,
Offerings: options and option shares will be subject to
customary underwriter lock-up arrangements
for the IPO and secondary offerings.
Generally, participation by senior
management in the IPO is not available.
Certain Definitions
- -------------------
Cause: Grounds for termination of executive for
"Cause": (1) conviction of a felony or plea
of guilty or nolo contendere to a felony,
(2) act of fraud or dishonesty which is
materially injurious to the Company, (3)
willful and continual refusal to perform
duties or (4) gross misconduct materially
injurious to the Company.
Good Reason: Grounds for termination by executive for
"Good Reason": (1) assignment of duties or
position constituting a material diminution
in executive's role, responsibilities or
authority, (2) reduction in base salary or
bonus participation opportunities, (3)
demand by the Company that Executive
relocate to a place more than a reasonable
distance (to be determined) from current
location, or (4) material breach of
executive's employment agreement by the
Company.
Employment Each Executive will enter into an
- ----------
Agreements employment agreement with the Company on
- ----------
terms that are not materially inconsistent
with the current employment agreements;
provided that if the IRS asserts that any
benefit payable under the Executive's
current employment agreement or otherwise
payable as a result of this transaction
(regardless of whether a termination of
employment occurs) is subject to a parachute
excise tax, the Company will indemnify such
Executive on a full gross-up basis. The
Company and each Executive will take all
reasonable steps to avoid the imposition of
such tax.
3
<PAGE>
SCHEDULE A
----------
<TABLE>
<CAPTION>
Termination Event Unvested Options Terminate Vested Options Terminate
<S> <C> <C>
Executive terminated by Immediately 30 days after terminating event/(1)/
Company for Cause
Executive quits without Immediately 90 days after terminating event/(1)/
Good Reason
Executive quits with Good Immediately/(2)/ 180 days after terminating event/(1)/
Reason
Executive terminated by the Immediately/(2)/ 180 days after terminating event/(1)/
Company without Cause
Death or disability Immediately/(2)/ One year after terminating event/(1)/
</TABLE>
/(1)/ Subject to (2) below, the options are exercisable only to the extent
exercisable on the day of the terminating event.
/(2)/ A pro rata portion (equal to the ratio the number of days elapsed in such
year prior to termination bears to 365) of the Annual Portion for such
year will vest at the end of such year if the targets for such year are
met.
4
<PAGE>
SCHEDULE B
----------
<TABLE>
<CAPTION>
Call Provision Call Price
----------------------------------------------------------------
If Within 3 Years If After 3 Years
<S> <C> <C>
Employee terminated without FMV FMV
Cause
Employee leaves with Good FMV FMV
Reason
Employee leaves without Good Lower of Cost or FMV(1) FMV
Reason
Employee is terminated for Lower of Cost or FMV(1) Lower of Cost or FMV
Cause
Death, disability, retirement FMV FMV
<CAPTION>
Put Provision Put Price
-----------------------------------------------------------------------------
If Within 3 Years (2 Years in the If After 3 Years (2 Years in the
case of termination without Cause) case of termination without
Cause)
<S> <C> <C>
Employee terminated without Lower of Cost or FMV/(1)/ FMV
Cause
Employee leaves with Good FMV FMV
Reason
Employee leaves without Good No put FMV
Reason
Employee is terminated for No put No put
Cause
Death, disability, retirement FMV FMV
</TABLE>
/(1)/ Within the 1st year, it will be at Cost
5
