UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
FOR ANNUAL AND TRANSACTION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended September 30, 1998
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to _________________
Commission File Number 33-11479
SYNTHETIC INDUSTRIES, INC.
- -------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 58-1049400
- ---------------------------------- ---------------- ------------------
(State or other jurisdiction (I.R.S.Employer
of incorporation or organization) Identification No.)
309 LaFayette Road, Chickamauga, Georgia 30707
- ------------------------------------------------------------ ----------
(Address of principal executive offices) (Zip Code)
(706) 375-3121
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Securities registered pursuant to Section
12(b) of the Act:
Name of each exchange on which
Title of class registered
None
Securities registered pursuant to Section
12(g) of the Act:
Common Stock, $1.00 par value
(Title of Class)
Indicate by check mark whether Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The number of shares of the Registrant's Common Stock outstanding as of
February 17, 1999 was 8,672,382 shares.
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K
1 10.20 Agreement dated August 10, 1998 between Richard Hingson and
Synthetic Industries, Inc.
1 10.31 Loan and Security Agreement dated as of December 18, 1997.
1 10.32 Amendment No.1 to the Loan and Security Agreement dated as of
December 18, 1997.
1 21. List of Subsidiaries of Synthetic Industries, Inc.
- --------------
1 Filed herewith.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
SYNTHETIC INDUSTRIES, INC.
By: /s/ Leonard Chill
Leonard Chill
President
Dated: February 17, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this report has been signed below by the following persons on the behalf of the
Registrant and in the capacities and on the dates indicated.
By: /s/ Leonard Chill
Leonard Chill President, Chief Executive Officer and Director
Dated: February 17, 1999
By: /s/ Joseph F. Dana
Joseph F. Dana Chief Operating Officer, General Counsel and
Dated: February 17, 1999 Director
By:/s/ Joseph Sinicropi
Joseph Sinicropi Secretary and Chief Financial Officer
Dated: February 17, 1999 (Principal Financial and Accounting Officer)
By: /s/ Lee J. Seidler
Lee J. Seidler Director
Dated: February 17, 1999
By:/s/ William J. Shortt
William J. Shortt Director
Dated: February 17, 1999
By:/s/ Robert L. Voigt
Robert L. Voigt Director
Dated: February 17, 1999
<PAGE>
Employment Agreement
This agreement ("Agreement") is made and entered into as of the August
10, 1998 (the "Effective Date"), by and among Synthetic Industries, Inc. ("the
Corporation") and Richard E. Hingson (the "Executive").
WITNESSETH:
WHEREAS, both the Corporation and Executive (the "Parties") desire to state
certain terms and conditions of Executive's employment;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, the Parties agree as follows:
1. Employment.
The Corporation agrees to employ Executive and Executive
agrees 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 future extension by written notice, in which case
such term of employment shall be the term in effect when such written notice was
given. Executive shall notify the Corporation's Compensation Committee sixty
(60) days prior to the first anniversary of the Effective Date that the
"evergreen" feature of the within Agreement will be in effect on a given date.
3. Duties and Extent of Services: Location of Principal Office.
During the term set forth in Section 2 above, the Corporation
shall employ Executive and Executive shall serve the Corporation as Vice
President Technical Services 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 6025 Lee Highway, Suite 413, Chattanooga, Tennessee.
<PAGE>
-35-
4. Compensation.
(1)......Base Salary. The Corporation shall pay Executive a base salary, payable
in accordance with the Corporation's standard payroll practices, as follows:
$120,900 per annum. Executive's salary may be increased from time to time by the
Board. 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 upon the date such increase commences. (2) Annual
Incentive. During the term set forth in Section 2 above, Executive shall be
eligible to participate in the Executive Incentive Plan, or in such successor
plan as may be adopted for the provision of annual incentive compensation for
senior executives (the "Annual Incentive Plan"). Executive shall be entitled to
an incentive payment applicable under the Annual Incentive Plan if the
Corporation meets its business plan for the year ("Making Plan"). During the
first year of employment Executive's annual incentive compensation for the
Corporation's Making Plan will be $41,000. To the extent Annual Incentive Plans
for senior executives of the Corporation are modified then Executive's Annual
Incentive Plan shall be modified to correspond with the plans of other senior
executives.
(3) Stock Options. Executive shall be entitled to participate
in stock option plans or their equivalent based upon the Corporation's success
and the Executive's performance, duties, responsibilities and compensation.
(d) Long term incentive compensation. Executive shall be
entitled to participate in all long term incentive compensation programs
established by the Corporation for senior executive employees. Participation in
any such plans shall be determined under the provisions of such plans.
Executive's participation in any such plans shall be commensurate with his
performance, duties, responsibilities and compensation.
5. Benefits.
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 shall be entitled to
vacation benefits enjoyed by other senior executives.
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.
The Corporation shall reimburse reasonable expenses incurred by the Executive to
maintain professional certifications and licenses including mandatory continuing
education courses and required professional memberships.
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.
<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 or Executive's representative, his employment pursuant to this
Agreement shall terminate. In the event 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 at the rate in effect on the date of
termination of employment until the earlier of (A) the date six months following
termination of employment, or (B) the date of commencement of long term
disability payments under the Corporation's long term disability plan as then in
effect.
(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 applicable
stock option agreement.
(iv) Executive shall be entitled to participate in
any and all benefit programs described in Section 5,above, during the period
Executive is continuing to receive salary pursuant to Clause (i), above.
(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 written plan, to the person or persons who have been
designated pursuant to the terms of the plan to receive such payments.
(i) Executive's base salary at the rate in effect
on the date of Executive's death shall be paid for a period of six months. Such
salary may, in the Corporation's discretion, be paid in a lump-sum promptly
following the date of Executive's death.
(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 applicable stock option agreement.
(iv) 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". In the event 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 applicable stock option
agreement.
(iii) Executive's rights to participate in benefit
programs described in Section 5, above, if any, shall be as determined under
such 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.
<PAGE>
In the case of termination for Cause under definition (1), Executive's
employment shall be terminated effective as of the date such notice is given,
provided, however, that Executive shall be given the opportunity to meet with
the Board of Directors of the Corporation within 30 days of the date such notice
is given, to be heard with regard to whether he, in good faith, believed that
his actions or inactions were both in the best interests of the Corporation and
would not violate criminal law.
In the case of termination for Cause under definition (2), Executive
shall be given the opportunity within 20 days of the receipt of such notice to
meet with the Board to defend such acts or failures to act. Executive shall be
given seven days after such meeting to correct any particular acts or failures
to act, and upon failure of Executive, within such seven day period, to correct
such acts or failures to act, Executive's employment by the Corporation shall be
terminated.
Termination on account of disability, as provided in Section 7(a)
above, shall not be considered a termination for Cause under this Section 7(c).
(d) Termination Without Cause.
(1) The Corporation shall have the right to terminate
Executive's employment without Cause as defined in Section 7(c) above. In the
event of a termination by the Corporation without Cause, other than (A)
following a Change in Control, as defined in Section 7(e), below, or (B) as
described in Subsection (2) below, Executive's rights to compensation and
benefits shall be as follows:
(i) Executive shall be paid his base salary at
the rate in effect on the date of termination of employment for a period of two
years from the date of termination.
(ii) Executive shall be entitled to any unpaid
amount previously fully accrued under the Annual Incentive Plan. In addition,
Executive shall be entitled to an incentive payment, in lieu of an incentive
payment under the Annual Incentive Plan for the plan year in which his
employment terminates, in an amount equal to the payment otherwise determined
under the Annual Incentive Plan, as if the Executive were employed by the
Corporation to the end of the year of his termination, multiplied by a fraction
the numerator of which is the number of weeks Executive was employed during such
year, and the denominator of which is 52. In addition, in lieu of future
payments under the Annual Incentive Plan, Executive shall be entitled to a
payment that equals the average of the incentive payments received by Executive
(or fully accrued by him) under the Annual Incentive Plan for the three full
plan years immediately preceding his termination of employment.
(iii) Executive's rights with respect to stock
options, if any, shall be determined under the applicable stock option
agreement.
(1)
<PAGE>
(iv) To the extent allowed by applicable law,
Executive shall be entitled
to participate in any and all benefit programs described in Section 5, above,
during the period Executive is continuing to receive salary pursuant to Clause
(i), above, provided that Executive's right to any such benefit shall terminate
on the date Executive becomes entitled to the same or any similar benefit as a
result of Executive's entering into subsequent employment; any other rights in
regard thereto, if any, shall be determined under each of such programs,
respectively. Executive agrees promptly to notify the Corporation of any
subsequent employment which may cause the cessation of benefits under this
Subsection.
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 (c) 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.
(C) "Annual Compensation" means the sum of:
(1)
<PAGE>
(i) Executive's annual salary at the rate in
effect on the date of a termination of employment (or, in the event of a
termination for Good Reason below, the annual salary as in effect immediately
before the actions giving rise to Good Reason); plus
(ii) the greatest of the incentive payments under
the Annual Incentive Plan either paid or accrued in either the Year of the
Change in Control or the immediately preceding Year.
(D) "Base Amount" means an
amount equal to Executive's Annualized Includable Compensation for the Base
Period as defined in Section 280G(d)(1) and (2) of the Code (as hereinafter
defined).
(E) "Change in Control" of the Corporation means a Change
in Control of a nature that would be required to be reported in response to Item
5(f) 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, L.P., 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 for the election of
directors ("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 a majority of the directors comprising the Incumbent Board shall be
considered as though he were a member of the Incumbent Board; (1)
<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 holds at any
time after such combination, voting stock equal to or greater than thirty-five
percent (35%) determined by reference to the voting securities of the surviving
entity, or (b) the 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.
(F) "Code" means the Internal Revenue Code of 1986, including
any amendments thereto.
(G) "Good Reason" means:
(i) any breach of this Agreement by the
Corporation, including without limitation (a) any reduction during the
employment period in the amount of Executive's base salary or aggregate benefits
as in effect from time to time, (b) failure to provide Executive with the same
fringe benefits that were provided to Executive immediately prior to a Change in
Control of the Corporation, or with a package of fringe benefits (including paid
vacations) that, though one or more of such benefits may vary from those in
effect immediately prior to such a Change in Control, is substantially
comparable in all material respects to such fringe benefits taken as a whole, or
(c) any other breach by the Corporation of its obligations to pay compensation
under this Agreement;
(ii) without Executive's express written consent
the assignment to Executive of any duties which are materially inconsistent with
Executive's positions, duties, responsibilities and status immediately prior to
the Change in Control of the Corporation, a material change in Executive's
reporting responsibilities, titles or offices as an employee and as in effect
immediately prior to the Change in Control, or a significant reduction in
Executive's title, duties or responsibilities, or in the level of his support
services;
(iii) the relocation of Executive's principal
place of employment, without Executive's written consent, to a location outside
the same metropolitan area in which Executive was employed at the time of such
Change in Control, or the imposition of any requirement that Executive spend
more than 90 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; (1)
<PAGE>
Upon the occurrence of any of the events described in
(i), (ii), (iii), or (iv) above, Executive shall give
the Corporation written notice that such event constitutes Good Reason, and the
Corporation shall thereafter have 30 days in which to cure. If the Corporation
has not cured in that time, the event shall constitute Good Reason.
(H) "Notice of Termination" means a notice which shall
indicate the specific
termination provision relied upon in this Agreement and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of Executive's employment under the provision so indicated.
(I) "Person or Group" means a "person" or "group," as defined
in the definition of "Change in Control" above.
(J) "Year" means a calendar year unless otherwise specifically
provided.
(2) Payments for Termination Following Change in Control. If, following a Change
in Control, Executive's employment with the Corporation is terminated by the
Corporation other than for Cause, or by Executive for Good Reason, then:
(A) Executive shall be entitled to all compensation and
benefits accrued through the date of termination of employment;
(B) Executive shall receive from the Corporation, no less than
ten days following
termination of his employment, a lump sum payment (the "Termination
Payment") equal to two times Executive's Annual Compensation;
(C) Executive shall be entitled to any unpaid amount
previously fully accrued
under the Annual Incentive Plan. In addition, in lieu of future payments under
the Annual Incentive Plan, Executive shall be entitled to a payment that equals
the average of the incentive payments received by Executive (or fully accrued by
him) under the Annual Incentive Plan for the three plan years immediately
preceding his termination of employment.
(D) Executive's rights, if any, to supplemental pension
shall be fully vested; and
(1)
<PAGE>
(E) Executive shall continue to be covered at the expense of
the Corporation by
the same or equivalent hospital, medical, dental, accident, disability and life
insurance coverage as in effect for Executive immediately prior to termination
of his employment, until the earlier of (i) 18 months following termination of
employment, or (ii) the date Executive has commenced new employment and has
thereby become eligible for comparable benefits.
(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 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 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. (1)
<PAGE>
(D) Notwithstanding anything herein to the contrary, in the
event that any
payment received or to be received by Executive in connection with a Change in
Control of the Corporation or the termination of Executive's employment (whether
payable pursuant to the terms of this Agreement or any other plan, arrangement
or agreement) (all such payment being referred to in the aggregate as "Total
Payment") would not be deductible (in whole or in part) as a result of Section
280G of the Code, the payments otherwise due to Executive pursuant to Section
7(e)(2) above ("Severance Payments") shall be reduced until no portion of the
Total Payments is not deductible as a result of Section 280G of the Code, or the
Severance Payments are reduced to zero. For purposes of this limitation (i) no
portion of the Total Payments, the receipt or enjoyment of which Executive shall
have effectively waived in writing prior to the date of payment of the Severance
Payments , shall be taken into account, (ii) no portion of the Total Payments
shall be taken into account which, in the opinion of tax counsel selected by the
Corporation's independent auditors and reasonably acceptable to Executive ("Tax
Counsel"), does not constitute a "parachute payment" within the meaning of
Section 280G (b)(2) of the Code, (iii) the Severance Payments shall be reduced
only to the extent necessary so that the Total Payments (other than those
referred to in clause (i) or (ii)) in their entirety constitute reasonable
compensation for services actually rendered within the meaning of Section 280G
(b)(4) of the Code, in the opinion of Tax Counsel, and (iv) the value of any
non-cash benefit or any deferred payment or benefit included in the Total
Payments shall be determined by the Corporation's independent auditors in
accordance with the principles of Sections 280G (d)(3) and (4) of the Code.
(5) Expenses and Interest. If, after a Change in Control
of the Corporation, a good faith dispute arises with respect to the
enforcement of the Executive's rights under this Agreement, or if any legal or
arbitration proceeding shall be brought in good faith to enforce or interpret
any provision contained herein, or to recover damages for breach hereof,
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 award obtained by
Executive calculated at the legal rate of interest from the date that payments
to him should have been made under this Agreement.
(f) Voluntary Termination. Executive may terminate his
employment voluntarily at any time. In the event Executive terminates his
employment voluntarily, other than for Good Reason following a Change in Control
as provided in Section 7(e), above, Executive's rights to compensation and
benefits shall be as follows:
(1)
<PAGE>
(i) Executive shall be paid salary accrued
through the date of termination of employment.
(ii) Executive's rights to annual incentive
compensation, 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) Executive's rights to participate in any
and all benefit programs described in Section 5, above, if any, shall be as
determined under such 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 setoff, 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.
<PAGE>
During and following Executive's employment by the
Corporation, Executive shall hold in confidence and not directly or indirectly
disclose or use or copy or make lists of any confidential information or
proprietary data of the Corporation, except to the extent authorized by the
Board of Directors of the Corporation or required by any court or administrative
agency, other than to an employee of the Corporation or a person to whom
disclosure is reasonably necessary or appropriate in connection with the
performance by Executive of duties as an executive of the Corporation.
Confidential information shall not include any information known generally to
the public or any information of a type not otherwise considered confidential by
persons engaged in the same business or a business similar to that of the
Corporation. All records, files, documents and materials or copies thereof,
relating to the Corporation's business which the Executive shall prepare, or
use, or come into contact with, shall be and remain the sole property of the
Corporation and shall be promptly returned to the Corporation upon termination
of employment with the Corporation.
10. Non-Competition.
(a) To induce the Corporation to enter into this Agreement,
and in consideration thereof, the Executive agrees that, during the term of this
Agreement and for a period of one year after the termination of this Agreement
(the "Restricted Period"), he shall not, directly or indirectly, for his own
account or for the account of others, as an officer, director, stockholder,
owner, partner, employee, promoter, consultant, manager or otherwise,
participate in the promotion, financing, ownership, operation, or management of,
or assist in or carry on through a proprietorship, corporation, partnership or
other form of business entity or otherwise, any business which competes with the
Corporation in any area in which the Corporation is engaged in or is actively
planning to engage in related to the production of polypropylene fabrics and
fibers activities as of the date of such termination.
Nothing in this Section 10 shall prohibit Executive from
acquiring or holding any issue of stock or securities of any person that has any
securities registered under Section 12 of the Exchange Act, listed on a national
securities exchange or quoted on the automated quotation system of the National
Association of Securities Dealers, Inc. so long as (i) Executive is not deemed
to be an "affiliate" of such person as such term is used in paragraphs (c) and
(d) of Rule 145 under the Securities Act of 1933, as amended, and (ii) Executive
and/or members of his immediate family or persons under his control do not own
or hold more than 5% of any voting securities of any such person.
<PAGE>
(b) To induce the Corporation to enter into this Agreement,
and in consideration thereof, the Executive agrees that during the Restricted
Period, the Executive shall not, whether for his own account or for the account
of any other person (excluding the Corporation), (a) solicit or contact in an
effort to do business with any person who was a customer of the Corporation
during the term of this Agreement, or any affiliate of any such person, if such
solicitation or contact is in competition with the Corporation, (b) solicit or
induce any of the employees of the Corporation or its affiliates to leave their
employment with the Corporation or such affiliate or accept employment with
anyone else or hire any such employees or (c) interfere in a similar manner with
the business of the Corporation or its affiliates. Nothing herein shall prohibit
or preclude the Executive from performing any other types of services that are
not precluded by Section 10(a) for any other person.
(c) Executive has carefully read and considered the
provisions of this Section 10 and, having done so, agrees that the restrictions
set forth in this Section 10 (including the Restricted Period, scope of activity
to be restrained and the geographical scope) are fair and reasonable and are
reasonably required for the protection of the interests of the Corporation, its
officers, directors, employees, creditors and shareholders. Executive
understands that the restrictions contained in this Section 10 may limit his
ability to engage in a business similar to the Corporation's business, but
acknowledges that he will receive sufficiently high remuneration and other
benefits from the Corporation hereunder to justify such restrictions.
11. Arbitration.
Any controversy or claim arising under, out of or relating to
this Agreement, or the breach thereof, shall be determined and settled by
arbitration at the American Arbitration Association in Chattanooga, Tennessee,
in accordance with the rules of procedure of the Association. Any award rendered
shall be final and binding on the parties hereto, and judgment may be entered in
any court having jurisdiction thereof.
12. 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.
13. Assignability; Binding Nature.
<PAGE>
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 in the event of a merger or
consolidation in which the Corporation is not the continuing entity, or the sale
or liquidation of all or substantially all of the assets of the Corporation,
provided that the assignee or transferee is the successor to all or
substantially all of the assets of the Corporation and such assignee or
transferee assumes the liabilities, obligations and duties of the Corporation,
as contained in this Agreement, either contractually or as a matter of law.
14. Entire Agreement.
This Agreement supersedes any prior agreements 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.
15. 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.
16. 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:
<PAGE>
To the Corporation: Attn. Corporate Secretary
Synthetic Industries, Inc.
6025 Lee Highway, Suite 413
Chattanooga, TN 37421
To Executive: Richard E. Hingson
414 Donna Lane
Ringgold, Georgia 30736
17. Severability.
In the event that any provision or portion of this Agreement
will be determined to be invalid or unenforceable for any reason the remaining
provisions or portions of this Agreement will be unaffected thereby and will
remain in full force and effect to the fullest extent permitted by law.
18. 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.
19. 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.
20. 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.
21. Applicable Law.
This agreement shall be construed and enforced in accordance with the
laws of the State of Tennessee.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement in Hamilton County, Tennessee as of the day and year first above
written.
SYNTHETIC INDUSTRIES, INC.
By:
Leonard Chill
President
EMPLOYEE
---------------------------
Richard E. Hingson
SECURITY AGREEMENT
THIS SECURITY AGREEMENT, dated as of March 11, 1998, made by a
Novocon International, Inc., a Delaware corporation (the "Grantor"), to
BankBoston, N.A., a national banking association in its capacity as the Agent
under the Loan Agreement (as hereinafter defined) (the "Secured Party").
Preliminary Statement
Synthetic Industries, Inc., a Delaware corporation (the
"Borrower"), the financial institutions parties thereto from time to time as
lenders (the "Lenders") and the Secured Party are parties to a Loan and Security
Agreement dated as of December 18, 1997 (the same as it may be amended,
modified, supplemented or restated from time to time being referred to as the
"Loan Agreement"; terms defined therein and not otherwise defined herein being
used herein as therein defined). In connection with the Borrower's acquisition
of all of the voting stock of the Grantor and in accordance with the provisions
of Section 12.4 of the Loan Agreement, the obligations of the Borrower under the
Loan Agreement have been guaranteed by the Grantor pursuant to a Guaranty, dated
as of even date herewith (the principal, interest, fees, expenses and other
indebtedness, obligations and liabilities of Grantor under said Guaranty,
(including, without being limited to, the Guaranteed Obligations as defined
therein) and this Agreement and all other indebtedness, obligations and
liabilities of the Grantor to the Secured Party and the Lenders, whether direct
or indirect, absolute or contingent, due or to become due, now existing or
hereafter arising under the Loan Documents (as defined in the Loan Agreement),
being hereinafter referred to collectively as the "Secured Obligations"). The
Loan Agreement further requires that the Grantor shall have granted the security
interest contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and in order
to induce the Lender to continue to make loans and other financial
accommodations to the Borrower, the Grantor hereby agrees as follows:
SECTION 1. Grant of Security. As security for payment and
performance of the Secured Obligations, the Grantor hereby conveys, mortgages,
pledges, assigns, transfers, sets over, grants and delivers to the Secured Party
a continuing security interest in all of the Grantor's right, title and interest
in and to the following property, wherever located, whether now owned or
existing or hereafter acquired or arising (hereinafter referred to as the
"Collateral"):
(a) all machinery, apparatus, equipment, fittings, fixtures
and other tangible personal property (other than Inventory, as hereinafter
defined) of every kind and description, and all parts, accessories and special
tools and all increases and accessions thereto (hereinafter referred to
collectively as the "Equipment");
(b) all inventory of every kind and description, including,
but not limited to, (i) all finished goods and all raw materials, work in
process, and materials used or consumed in the manufacture or production of
finished goods, (ii) all goods in which the Grantor has an interest in mass or a
joint or other interest of any kind, and (iii) all goods which are returned to
or repossessed by the Grantor, and all accessions and products of all of the
foregoing (hereinafter referred to collectively as the "Inventory");
(c) all rights to the payment of money or other forms of
consideration (including such rights under contracts whether or not at the time
earned by performance), including, without limitation, accounts, contract
rights, chattel paper, instruments, documents, letters of credit, tax refunds,
general intangibles, insurance proceeds and other obligations of every kind and
description arising out of or in connection with the sale or lease of goods or
the rendering of services or otherwise (hereinafter "Receivables") and all
rights in and to all security agreements, leases and other contracts securing or
otherwise relating to any such Receivables (hereinafter "Related Contracts");
(d) all general intangibles, choses in action and causes of
action and all other intangible personal property of every kind and nature,
including, without being limited to, patents, patent applications, trademarks,
tradenames, copyrights, corporate or other business records, inventions,
designs, blueprints, trade secrets, goodwill, computer software, customer lists,
licenses, rights to licenses, letters of credit, quarantees and any security
interests ("General Intangibles" and
(e) all products and proceeds of any and all of the foregoing
and to the extent not otherwise included, all payments under insurance (whether
or not the Secured Party is the loss payee thereof), or any indemnity, warranty
or guaranty, payable by reason of loss or damage to or otherwise with respect to
any of the foregoing.
SECTION 2. Grantor Remains Liable. Anything contained herein
to the contrary notwithstanding, (a) the Grantor shall remain liable under the
contracts and agreements included in the Collateral to the extent set forth
therein to perform all of its duties and obligations thereunder to the same
extent as if this Agreement had not been executed, (b) the exercise by the
Secured Party of any of the rights hereunder shall not release the Grantor from
any of its duties or obligations under the contracts and agreements included in
the Collateral, and (c) the Secured Party shall not have any obligation or
liability under the contracts and agreements included in the Collateral by
reason of this Agreement, nor shall the Secured Party be obligated to perform
any of the obligations or duties of the Grantor thereunder or to take any action
to collect or enforce any claim for payment assigned hereunder.
SECTION 3. Representations and Warranties.
The Grantor represents and warrants as follows:
(a) The Grantor is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, has the
power and authority to own its properties and to carry on its business as now
being and as hereafter proposed to be conducted and is duly qualified and
authorized to do business in each jurisdiction in which the character of its
properties or the nature of its business requires such qualification or
authorization.
(b) The Grantor has the right and power, and has taken all
necessary action to authorize it, to execute, deliver and perform this Agreement
in accordance with its terms. This Agreement has been duly executed and
delivered by the duly authorized officers of the Grantor and is a legal, valid
and binding obligation of the Grantor, enforceable in accordance with its terms.
(c) The execution, delivery and performance of this Agreement
in accordance with its terms does not and will not, by the passage of time, the
giving of notice or otherwise,
(i) require any governmental approval or violate
any applicable law relating to the Grantor,
(ii) conflict with, result in a breach of or
constitute a default under the articles of incorporation or by-laws of
the Grantor, any indenture, agreement or other instrument to which the
Grantor is a party or by which it or any of its property may be bound
or any governmental approval relating to the Grantor or
(iii) result in or require the creation or imposition
of any Lien upon or with respect to any property now owned or hereafter
acquired by the Grantor other than the security interest contemplated
by this Agreement.
(d) There is no pending or threatened action or proceeding
affecting the Grantor before any court, governmental agency or arbitrator, which
may materially adversely affect the financial condition or operations of the
Grantor.
(e) All of the Equipment and Inventory are located at the
address(es) set forth in Part I of Exhibit A hereto. Additional locations of the
Equipment and Inventory during the year preceding the date hereof are set forth
in Part II of Exhibit A hereto.
(f) The address of the chief executive office of the Grantor
is set forth in Part III of Exhibit A hereto. The address(es) of such chief
executive office has not been changed within the last five years. The address of
the principal place of business of the Grantor in each state in which Collateral
is located is set forth in Part IV of Exhibit A hereto.
(g) The office(s) where the Grantor keeps its records
concerning the Receivables and originals of chattel paper, if any, which
evidences Receivables is located at the address set forth in Part IV of Exhibit
A hereto and except as otherwise indicated in said Part IV of Exhibit A, such
office(s) has (have) been located at such address(es) continuously for the past
five years. None of the Receivables is evidenced by a promissory note or other
instrument, not in the possession of the Secured Party.
(h) If the business of the Grantor has been conducted under a
different name or names during the last five years, such name(s) is (are) set
forth in Part V of Exhibit A hereto.
(i) The Grantor owns the Collateral free and clear of any
lien, security interest, charge or encumbrance except for the security interest
created by this Agreement and except as may be set forth in Exhibit B attached
hereto and made a part hereof. Except as may be set forth on Exhibit B, no
effective financing statement or other instrument similar in effect covering all
or any part of the Collateral is on file in any recording office, except such as
may have been filed in favor of the Secured Party relating to this Agreement.
(j) This Agreement creates a valid security interest in the
Collateral, securing the payment of the Secured Obligations, and upon completion
of the filings and other actions set forth on Exhibit B, all actions necessary
or desirable to perfect such security interest as a first priority security
interest will have been duly taken.
(k) No authorization, approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body is
required either (i) for the grant by the Grantor of the security interest
granted hereby or for the execution, delivery or performance of this Agreement
by the Grantor or (ii) for the exercise by the Secured Party of its rights and
remedies hereunder.
SECTION 4. Further Assurances. (a) The Grantor agrees that
from time to time, at the expense of the Grantor, the Grantor shall promptly
execute and deliver all further instruments and documents, and take all further
action, that may be necessary or desirable, or that the Secured Party may
reasonably request, in order to perfect and protect any security interest
granted or purported to be granted hereby or to enable the Secured Party to
exercise and enforce its rights and remedies hereunder with respect to any
Collateral. Without limiting the generality of the foregoing, the Grantor shall:
(i) mark conspicuously each chattel paper included in the Receivables and each
Related Contract and, at the request of the Secured Party, each of its records
pertaining to the Collateral, with a legend, in form and substance satisfactory
to the Secured Party, indicating that such chattel paper, Related Contract or
Collateral is subject to the security interest granted hereby; (ii) if any
Receivable shall be evidenced by a promissory note or other instrument or
chattel paper deliver and pledge to the Secured Party such note, instrument or
chattel paper duly endorsed and accompanied by duly executed instruments of
transfer or assignment, all in form and substance satisfactory to the Secured
Party; and (iii) execute and file such financing or continuation statements, or
amendments thereto, and such other instruments or notices, as may be necessary
or desirable, or as the Secured Party may reasonably request, in order to
perfect and preserve the security interests granted or purported to be granted
hereby.
(b) The Grantor hereby authorizes the Secured Party to file
one or more financing or continuation statements, and amendments thereto,
relative to all or any part of the Collateral without the signature of the
Grantor where permitted by law and agrees that a photographic or other
reproduction of this Agreement of this may be used and filed as a financing
statement.
(c) The Grantor shall furnish to the Secured Party from time
to time statements and schedules further identifying and describing the
Collateral and such other reports in connection with the Collateral as the
Secured Party may reasonably request, all in reasonable detail.
SECTION 5. As to Equipment and Inventory. The Grantor shall:
(a) Keep the Equipment and Inventory (other than Inventory
sold in the ordinary course of business) at the places therefor specified in
Section 3(e) or, with the prior consent of the Secured Party, at such other
places in jurisdictions where all action required by Section 4 shall have been
taken with respect to the Equipment and Inventory.
(b) Cause the Equipment to be maintained and preserved in good
condition, repair and working order, ordinary wear and tear excepted, and in
accordance with any manufacturer's manual, and shall forthwith, or in the case
of any loss or damage to any of the Equipment as quickly as practicable after
the occurrence thereof and make or cause to be made all repairs, replacements,
and other improvements in connection therewith which are necessary or desirable
to such end. The Grantor shall promptly furnish to the Secured Party a statement
respecting any material loss or damage to any of the Equipment.
(c) Pay promptly when due all property and other taxes,
assessments and governmental charges or levies imposed upon, and all claims
(including claims for labor, materials and supplies) against, the Equipment and
Inventory, except to the extent the validity thereof is being contested in good
faith by appropriate proceedings.
SECTION 6. Insurance. (a) The Grantor shall, at its own
expense, maintain insurance with respect to the Equipment and Inventory in such
amounts, against such risks, in such form and with such insurers, as shall be
satisfactory to the Secured Party from time to time. Each policy for (i)
liability insurance shall provide for all losses to be paid on behalf of the
Secured Party and the Grantor as their respective interests may appear and (ii)
property damage insurance shall provide for all losses to be paid directly to
the Secured Party. Each such policy shall in addition (i) name the Grantor and
the Secured Party as insured parties thereunder (without any representation or
warranty by or obligation upon the Secured Party) as their interests may appear,
(ii) contain the agreement by the insurer that any loss thereunder shall be
payable to the Secured Party notwithstanding any action, inaction or breach of
representation or warranty by the Grantor, (iii) provide that there shall be no
recourse against the Secured Party for payment of premiums or other amounts with
respect thereto, and (iv) provide that at least 10 days' prior written notice of
cancellation or of lapse shall be given to the Secured Party by the insurer. The
Grantor shall, if so requested by the Secured Party, deliver to the Secured
Party original or duplicate policies of such insurance and, as often as the
Secured Party may reasonably request, a report of a reputable insurance broker
with respect to such insurance. Further, the Grantor shall, at the request of
the Secured Party, duly execute and deliver instruments of assignment of such
insurance policies to comply with the requirements of Section 4 and cause the
respective insurers to acknowledge notice of such assignment.
(b) Reimbursement under any liability insurance maintained by
the Grantor pursuant to this Section 6 may be paid directly to the person who
shall have incurred liability covered by such insurance. In case of any loss
involving damage to Equipment or Inventory when subsection (c) of this Section 6
is not applicable, the Grantor shall make or cause to be made the necessary
repairs to or replacements of such Equipment or Inventory, and any proceeds of
insurance maintained by the Grantor pursuant to this Section 6 shall be paid to
the Grantor as reimbursement for the costs of such repairs or replacements.
(c) Upon (i) the occurrence and during the continuance of any
Event of Default, or (ii) the actual or constructive total loss of any Equipment
and Inventory, all insurance payments in respect of such Equipment or Inventory
shall be paid to and applied by the Secured Party as specified in Section 13(b).
SECTION 7. As to Receivables. (a) the Grantor shall keep its
chief place of business and chief executive office and the office(s) where it
keeps its records concerning the Receivables, and all originals of all chattel
paper which evidence Receivables, at the location(s) therefor specified in
Exhibit A or, upon 60 days' prior written notice to the Secured Party, at such
other location(s) in a jurisdiction where all action required by Section 4 shall
have been taken with respect to the Receivables. The Grantor will hold and
preserve such records and chattel paper and will permit representatives of the
Secured Party at any time during normal business hours to inspect and make
abstracts from such records and chattel paper.
(b) Except as otherwise provided in this subsection (b), the
Grantor shall continue to collect, at its own expense, all amounts due or to
become due the Grantor under the Receivables. In connection with such
collections, the Grantor may take (and, at the Secured Party's direction, shall
take) such action as the Grantor or the Secured Party may deem necessary or
advisable to enforce collection of the Receivables; provided, however, that the
Secured Party shall have the right at any time, upon the occurrence and during
the continuation of an Event of Default, to notify the account debtors or
obligors under any Receivables of the assignment of such Receivables to the
Secured Party and to direct such account debtors or obligors to make payment of
all amounts due or to become due to the Grantor thereunder directly to the
Secured Party and, upon such notification and at the expense of the Grantor, to
enforce collection of any such Receivables, and to adjust, settle or compromise
the amount or payment thereof, in the same manner and to the same extent as the
Grantor might have done. After receipt by the Grantor of the notice from the
Secured Party referred to in the proviso to the preceding sentence, (i) all
amounts and proceeds (including instruments) received by the Grantor in respect
of the Receivables shall be received in trust for the benefit of the Secured
Party hereunder, shall be segregated from other funds of the Grantor and shall
be forthwith paid over to the Secured Party in the same form as so received
(with any necessary endorsement) to be held as cash collateral and either (A)
released to the Grantor so long as no Event of Default shall have occurred and
be continuing or (B) if any Event of Default shall have occurred and be
continuing, applied as provided by Section 13(b), and (ii) the Grantor shall not
adjust, settle or compromise the amount or payment of any Receivable, or release
wholly or partly any account debtor or obligor thereof, or allow any credit or
discount thereon.
(c) The Secured Party agrees that the Grantor may arrange to
sell its Receivables by executing and delivering amendments to the
Securitization Documents to which the Borrower is a party or by entering into
additional agreements that are identical to the Securitization Documents or
otherwise in form and substance satisfactory to the Required Lenders and in
connection with consummation of any such transaction, the Secured Party will
execute and deliver such amendment to the Intercreditor Agreement and to this
Agreement or such additional Intercreditor Agreement as may be requested by the
purchaser of the Grantor's Receivables and is acceptable to the Required
Lenders.
SECTION 8. Transfers and Other Liens.
The Grantor shall not without the prior written consent of the Secured Party:
(a) Sell, assign (by operation of law or otherwise) or
otherwise dispose of any of the Collateral except Inventory in the ordinary
course of business and Equipment no longer used or deemed useful in the
business, subject to the limitations set forth in Section 12.7 of the Loan
Agreement.
(b) Create or suffer to exist any Lien upon or with respect to
any of the Collateral to secure Indebtedness of any person or entity, except for
the security interest created by this Agreement and Permitted Liens.
SECTION 9. Secured Party Appointed Attorney-in-Fact. The
Grantor hereby irrevocably appoints the Secured Party the Grantor's
attorney-in-fact, with full authority in the place and stead of the Grantor and
in the name of the Grantor, the Secured Party or otherwise, from time to time in
the Secured Party's discretion, to take any action and to execute any instrument
which the Secured Party may deem necessary or advisable to accomplish the
purposes of this Agreement (subject to the rights of the Grantor under Section
7), including, without limitation:
(i) to obtain and adjust insurance required to be
paid to the Secured Party pursuant to Section 6,
(ii) to ask demand, collect, sue for, recover,
compound, receive and give acquittance and receipts for moneys due and
to become due under or in respect of any of the Collateral,
(iii) to receive, endorse, and collect any drafts or
other instruments, documents and chattel paper, in connection with
clause (i) or (ii) above, and
(iv) to file any claims or take any action or
institute any proceedings which the Secured Party may deem necessary or
desirable for the collection of any of the Collateral or otherwise to
enforce the rights of the Secured Party with respect to any of the
Collateral.
SECTION 10. Secured Party May Perform. If the Grantor fails to
perform any agreement contained herein, the Secured Party may itself perform, or
cause performance of, such agreement, and the expenses of the Secured Party
incurred in connection therewith shall be payable by the Grantor under Section
14(b).
SECTION 11. The Secured Party's Duties. The powers conferred
on the Secured Party hereunder are solely to protect its interest (for the
benefit of the Lenders), in the Collateral and shall not impose any duty upon it
to exercise any such powers. Except for the safe custody of any Collateral in
its possession and the accounting for moneys actually received by it hereunder,
the Secured Party shall have no duty as to any Collateral or as to the taking of
any necessary steps to preserve rights against prior parties or any other rights
pertaining to any Collateral.
SECTION 12. Events of Default.
The occurrence of any one or more of the following shall constitute an Event
of Default hereunder:
(a) The occurrence of an Event of Default as defined in
the Loan Agreement;
(b) The failure of the Grantor to pay, as and when the
same shall become due and payable, any of the
Secured Obligations; or
(c) If the Grantor is liquidated or dissolved or its
articles of incorporation are revoked;
SECTION 13. Remedies.
If any Event of Default shall have occurred and be continuing:
(a) The Secured Party may exercise in respect of the
Collateral, in addition to other rights and remedies provided for herein or
otherwise available to it under applicable law or in equity or otherwise, all
the rights and remedies of a secured party on default under the applicable
Uniform Commercial Code (the "Code") (whether or not the Code applies to the
affected Collateral) and also may do any or all of the following:
(i) Declare any or all of the Secured Obligations
then existing to be immediately due and payable and they shall
thereupon become forthwith due and payable, without notice of any kind
to the Grantor and without any other presentment, demand, protest, or
notice of any kind, all of which are hereby expressly waived;
(ii) Terminate the Lenders' obligations, if any, to
make or to permit the Borrower to make further loans or extensions of
credit or other financial accommodations to the Grantor;
(iii) In the name of the Secured Party or in the name
of the Grantor or otherwise, demand, sue for, collect or receive any
money or property at any time payable or receivable on account of or in
exchange for, or make any compromise or settlement deemed desirable
with respect to, any of the Collateral, but the Secured Party shall be
under no obligation so to do, and the Secured Party may extend the time
of payment, arrange for payment installments, or otherwise modify the
terms of, or release, any of the Collateral without thereby incurring
responsibility to, or discharging or otherwise affecting any liability
of, the Grantor;
(iv) Enter upon the premises, or wherever the
Collateral may be, and take possession thereof, and demand and receive
such possession from any Person who has possession thereof;
(v) Require the Grantor to, and the Grantor hereby
agrees that it will at its expense and upon request of the Secured
Party forthwith, assemble all or part of the Collateral as directed by
the Secured Party and make it available to the Secured Party at a place
to be designated by the Secured Party which is reasonably convenient to
both parties;
(vi) Without notice except as specified below and
with or without taking the possession thereof, sell the Collateral or
any part thereof in one or more parcels at public or private sale, at
any location chosen by the Secured Party, for cash, on credit or for
future delivery, and at such price or prices and upon such other terms
as the Secured Party may deem commercially reasonable. The Grantor
agrees that, to the extent notice of sale shall be required by law, at
least ten days' notice to the Grantor of the time and place of any
public sale or the time after which any private sale is to be made
shall constitute reasonable notification, but notice given in any other
reasonable manner or at any other reasonable time shall constitute
reasonable notification. The Secured Party shall not be obligated to
make any sale of Collateral regardless of notice of sale having been
given. The Secured Party may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and
such sale may, without further notice, be made at the time and place to
which it was so adjourned;
(vii) In any action hereunder, the Secured Party
shall be entitled to the appointment of a receiver, without notice, to
take possession of all or any portion of the Collateral and to exercise
such power as the court shall confer upon the receiver; and
(viii) Apply, without notice, any cash or cash items
constituting Collateral in the Secured Party's possession to payment of
any of the Secured Obligations.
The undersigned waives, to the extent permitted by applicable
law, all rights it has to prior notice and hearing under the Constitution of the
United States and the Uniform Commercial Codes and constitutions of the States
of Georgia, Illinois, and under any other applicable statute or constitution.
(b) All cash proceeds received by the Secured Party in respect
of any sale of, collection from, or other realization upon all or any part of
the Collateral may, in the discretion of the Secured Party, be held by the
Secured Party as collateral for, and/or then or at any time thereafter applied
(after payment of any amounts payable to the Secured Party pursuant to Section
14) in whole or in part by the Secured Party against, all or any part of the
Secured Obligations in accordance with the provisions of Section 13.3 of the
Loan Agreement. Any surplus of such cash or cash proceeds held by the Secured
Party and remaining after payment in full of all the Secured Obligations shall
be paid over to the Grantor or to whomsoever may be lawfully entitled to receive
such surplus. The Grantor shall remain liable for any deficiency.
SECTION 14. Indemnity and Expenses. (a) The Grantor agrees to
indemnify the Secured Party from and against any and all claims, losses and
liabilities growing out of or resulting from this Agreement (including, without
limitation, enforcement of this Agreement), except claims, losses or liabilities
resulting from the Secured Party's gross negligence or willful misconduct.
(b) The Grantor will upon demand pay to the Secured Party the
amount of any and all reasonable expenses, including the reasonable fees and
disbursements of its counsel and of any experts and agents, which the Secured
Party may incur in connection with (i) the perfection of any security interest
granted hereunder, (ii) the administration of this Agreement, (iii) the custody,
preservation, use or operation of, or the sale of, collection from, or other
realization upon, any of the Collateral, (iv) the exercise or enforcement of any
of the rights of the Secured Party hereunder, or (v) the failure by the Grantor
to perform or observe any of the provisions hereof.
SECTION 15. Amendments; Etc. No amendment or waiver of any
provision of this Agreement, nor consent to any departure by the Grantor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by the Secured Party, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
SECTION 16. Notices. All notices and other communications
hereunder shall be given in accordance with the provisions of Section 16.1 of
the Loan Agreement, to the Grantor at its address set forth on the signature
pages hereof (with a copy to the Borrower), to the Secured Party at its address
set forth on the signature pages hereof, or as to either party at such other
address as shall be designated by such party in a written notice to each other
party complying as to delivery with the terms of this Section.
SECTION 17. Continuing Security Interest; Transfer of
Obligations. This Agreement shall create a continuing security interest in the
Collateral and shall (i) remain in full force and effect until payment in full
of the Secured Obligations, (ii) be binding upon the Grantor, its successors and
assigns, and (iii) inure to the benefit of the Secured Party and its successors,
transferees and assigns. Without limiting the generality of the foregoing clause
(iii), any Lender may assign or otherwise transfer the Secured Obligations to
another Person in accordance with the provisions of the Loan Agreement and such
Person shall thereupon become vested with all the benefits in respect thereof
granted to the Secured Party herein or otherwise. Upon the payment in full of
the Secured Obligations, the security interest granted hereby shall terminate
and all rights to the Collateral shall revert to the Grantor. Upon any such
termination, the Secured Party will, at the Grantor's expense, execute and
deliver to the Grantor such documents as the Grantor shall reasonably request to
evidence such termination.
SECTION 18. Governing Law; Terms. This Agreement shall be
governed by and construed in accordance with the laws of the State of Georgia,
except as required by mandatory provisions of law and except to the extent that
the validity or perfection of the security interest hereunder, or remedies
hereunder, in respect of any particular Collateral are governed by the laws of a
jurisdiction other than the State of Georgia. Unless otherwise defined herein,
terms used in Article 9 of the Uniform Commercial Code of the State of Georgia
are used herein as therein defined.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their respective duly authorized
officer(s) as of the date first above written.
SECURED PARTY: GRANTOR:
BANKBOSTON, N.A. NOVOCON INTERNATIONAL, INC.
By: By:
Name: Name:
Title: Title:
Address: Address:
<PAGE>
EXHIBIT A
To Security Agreement
Novocon International, Inc. - Grantor
BankBoston, N.A. - Secured Party
Part I - Present Location of Equipment and Inventory
Part II - Location of Equipment and Inventory During Past Five Years
Part III - Chief Executive Office of Grantor
Part IV - Location of Receivables Records
Part V - Names Used During Last Five Years
Part VI - Names of General Partners
<PAGE>
EXHIBIT B
To Security Agreement
Novocon International, Inc. - Grantor
BankBoston, N.A. - Secured Party
Prior Liens
Subordinated Liens
AMENDMENT NO. 1
to
LOAN AND SECURITY AGREEMENT
dated as of December 18, 1997
THIS AMENDMENT NO. 1 dated as of March 11, 1998 is made by and among
SYNTHETIC INDUSTRIES, INC., a Delaware corporation (the "Borrower"), the Lenders
parties from time to time to the Loan Agreement (as hereinafter defined), and
BANKBOSTON, N.A. ("BankBoston"), as the agent (the "Agent") for the Lenders.
Preliminary Statements
The Borrower, the Lenders and the Agent are parties to a Loan
and Security Agreement dated as of December 18, 1997, (as amended and in effect,
the "Loan Agreement"; terms defined therein and not otherwise defined herein
being used herein as therein defined). The Borrower has acquired the outstanding
capital stock of Novocon International, Inc., a Delaware corporation, pursuant
to a Stock Purchase Agreement dated February 20, 1998 (the "Stock Purchase
Agreement"), between the Borrower and the stockholders of Novocon International,
Inc. ("Novocon") named therein, and in accordance with the provisions of
Sections 10.11 and 12.4 of the Loan Agreement. The Borrower has requested, and
the Lenders and the Agent have agreed, upon and subject to the terms, conditions
and provisions of this Amendment, that the definition "Permitted Investments" be
amended to permit intercompany loans to be made by the Borrower to certain
Subsidiary Guarantors and certain other changes.
Accordingly, in consideration of the Loan Agreement, the Loans
made by the Lenders and outstanding thereunder, the mutual promises hereinafter
set forth and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto hereby agree as follows:
Section 1. Amendments to Loan Agreement. From and after the
date hereof, subject to satisfaction of the conditions set forth in Section 2,
Schedule 1.1B - Permitted Investments of the Loan Agreement shall be deleted and
replaced by Schedule 1.1B - Permitted Investments in the form attached hereto as
Annex A.
Section 2. Effectiveness of Amendment. This Amendment shall
become effective on the first date (the "Amendment Effective Date") on which the
Agent has received each of the following, each in form and substance
satisfactory to the Agent and the Required Lenders:
(a) seven copies of this Amendment duly executed and delivered
by the Borrower and each Lender;
(b) the Subsidiary Guaranty duly executed and delivered by the
Subsidiary Guarantor;
(c) a Subsidiary Security Agreement (the "Subsidiary Security
Agreement") duly executed and delivered by the Subsidiary Guarantor;
(d) an amendment to the Pledge Agreement duly executed and
delivered by the Borrower, together with any and all deliveries
contemplated thereby;
(e) results of UCC, tax, and judgment lien searches in respect
of the Subsidiary Guarantor and evidence, satisfactory to the Agent,
that any Liens reflected therein have been discharged or that the Agent
is in possession of appropriate releases permitting it to effect such
discharge;
(f) Financing Statements signed by the Subsidiary Guarantor in
appropriate form for filing in each jurisdiction in which such a filing
is required to perfect the security interests purported to be created
by the Subsidiary Security Agreement;
(g) any landlord or mortgagee Lien subordination or waiver
agreements as the Agent may request, duly executed and delivered by the
respective landlords or mortgagees;
(h) a copy of the opinion letter of Sellers' counsel delivered
pursuant to the provisions of the Stock Purchase Agreement, addressed
to the Agent and the Lenders or accompanied by a letter of such counsel
expressly permitting the Agent and the Lenders to rely on the opinions
expressed therein;
(i) a Subordination Agreement with respect to the obligations
of the Borrower pursuant to Section 2.5 of the Stock Purchase
Agreement, duly executed by the Borrower and The Sellers'
Representative (as defined in the Stock Purchase Agreement);
(j) an opinion of counsel for the Borrower as to the due
authorization, execution and delivery of this Amendment and the other
Loan Documents contemplated hereby to be delivered in connection with
the effectiveness hereof by the Borrower or the Subsidiary Guarantor,
as to the enforceability of this Amendment, the Loan Agreement as
amended hereby and such other Loan Documents, and such other matters
related to the Acquisition of the Subsidiary Guarantor or such Loan
Document as any Lender through the Agent may reasonably request;
(k) a certificate of the Secretary of the Borrower having
attached thereto true and correct copies of the Stock Purchase
Agreement and each other agreement, instrument, certificate and other
document contemplated thereby to be delivered in connection with the
consummation of the transactions contemplated thereby;
(l) a certificate of the Chief Operating Officer or the Chief
Financial Officer of the Borrower to the effect that the Acquisition of
the Subsidiary Guarantor has been consummated substantially in
accordance with the terms of the Stock Purchase Agreement, without any
waiver or modification of any material provision thereof, that after
giving effect thereto and to this Amendment, the representations and
warranties of the Borrower set forth in the Loan Agreement are true and
correct in all material respects and that no Default or Event of
Default exists; and
(m) such other agreements, certificates, instruments and other
documents as any Lender through the Agent may reasonably request in
connection with the transactions contemplated hereby.
Section 3. Representations and Warranties. The Borrower hereby
represents and warrants to the Agent and the Lenders that it has the corporate
power and has taken all actions necessary to authorize it to execute and deliver
this Amendment and the other documents contemplated to be delivered by it
pursuant to this Amendment and to perform its obligations under the Loan
Agreement as amended by this Amendment and under such other documents; that this
Amendment has been and each such other document when executed and delivered by
the Borrower will have been, duly executed and delivered by the Borrower; and
that the Loan Agreement as amended hereby and each such other document,
constitute the legal, valid and binding obligations of the Borrower, enforceable
against the Borrower in accordance with their respective terms.
Section 4. Effect of Amendment. From and after the
effectiveness of this Amendment, all references in the Loan Agreement and in any
other Loan Document to "this Agreement," "the Loan Agreement," "hereunder,"
"hereof" and words of like import referring to the Loan Agreement, shall mean
and be references to the Loan Agreement as amended by this Amendment. Except as
expressly amended hereby, the Loan Agreement and all terms, conditions and
provisions thereof remain in full force and effect and are hereby ratified and
confirmed. The execution, delivery and effectiveness of this Amendment shall
not, except as expressly provided herein, operate as a waiver of any right,
power or remedy of any Lender or the Agent under any of the Loan Documents, nor
constitute a waiver of any provision of any of the Loan Documents.
Section 5. Counterpart Execution; Governing Law.
(a) Execution in Counterparts. This Amendment may be executed
in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered
shall be deemed to be an original and all of which taken together shall
constitute but one and the same agreement.
(b) Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of Georgia.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
SYNTHETIC INDUSTRIES, INC.
[Corporate Seal] By:
Name:
ATTEST: Title:
- ------------------------------
[Assistant] Secretary
BANKBOSTON, N.A., as the Agent and as a Lender
By:
Stephen Y. McGehee
Managing Director
SANWA BUSINESS CREDIT
CORPORATION
By
Name:
Title:
SOUTHTRUST BANK, NATIONAL
ASSOCIATION
By:
Name:
Title:
<PAGE>
Schedule 1.1B - Permitted Investments
1. Investments by the Borrower in Debt of any Subsidiary Guarantor,
provided that the capital stock of such Subsidiary Guarantor has been
pledged to the Agent pursuant to the Pledge Agreement and such
Subsidiary Guarantor has granted to the Agent a first priority security
interest in substantially all of its assets (other than real property),
which security interest is perfected.
2. Investments of Novocon International, Inc., a Delaware corporation, as
in effect on the date its capital stock is acquired by the Borrower.
List of subsidiaries of Synthetic Industries, Inc:
Synthetic Industries International, Inc.
Synthetic Industries Europe, Ltd.
Synthetic Funding Corp.
Novocon International, Inc.
