<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Synetic, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
<PAGE>
[SYNETIC LOGO]
SYNETIC, INC.
669 RIVER DRIVE
ELMWOOD PARK, NEW JERSEY 07407-1361
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 25, 1998
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Meeting") of Synetic, Inc. (the "Company") will be held at 9:30 A.M., local
time, on Wednesday, March 25, 1998, at the St. Regis Hotel, Two East 55th
Street, Versailles Room, New York, New York 10022, for the following purposes:
1. To elect four members to the Company's Board of Directors.
2. To consider and act upon a proposal to adopt an amendment to the
Company's Certificate of Incorporation to eliminate the Company's
classified Board of Directors and to provide for annual election of
all directors commencing at next year's Annual Meeting of Stockholders
of the Company.
3. To consider and act upon a proposal to adopt an amendment to the
Company's Certificate of Incorporation to eliminate the requirement
that provisions of the Certificate of Incorporation relating to the
classification of the Board of Directors and the election of one-third
of the Board of Directors at each annual meeting may only be amended
with the affirmative vote of the holders of two-thirds of the shares
entitled to vote in the election of directors.
4. To consider and act upon a proposal to adopt an amendment to the
Company's Certificate of Incorporation to eliminate cumulative voting
in the election of directors.
5. To consider and act upon a proposal to adopt an amendment to the
Company's Certificate of Incorporation to eliminate the requirement
that provisions of the Certificate of Incorporation relating to
cumulative voting may only be amended with the affirmative vote of the
holders of two-thirds of the shares entitled to vote in the election
of directors.
6. To consider and act upon a proposal to adopt an amendment to the
Company's Certificate of Incorporation to provide that any director
may be removed, either with or without cause, at any time, by the
affirmative vote of a majority of the outstanding shares entitled to
vote.
7. To consider and act upon a proposal to adopt an amendment to the
Company's Certificate of Incorporation to eliminate the requirement
that provisions of the Certificate of Incorporation relating to the
power to remove directors or to fill vacancies on the Board of
Directors may only be amended with the affirmative vote of the holders
of two-thirds of the shares entitled to vote in the election of
directors.
8. To consider and act upon a proposal to adopt an amendment to the
Company's Certificate of Incorporation to eliminate the requirement
that the provision of the Company's By-laws setting the maximum number
of directors may only be amended with the affirmative vote of the
holders of two-thirds of the shares entitled to vote in the election
of directors.
9. To consider and act upon a proposal to adopt an amendment to the
Company's Certificate of Incorporation to increase the number of
authorized shares of Common Stock from 50 million to 100 million.
10. To consider and act upon a proposal to ratify and approve the
Company's Amended and Restated 1989 Class A Stock Option Plan to,
among other things, increase the number of shares issuable thereunder
by 1,000,000 to 2,200,000, extend the term of the plan through the
tenth
<PAGE>
2
anniversary of the date on which stockholders approve the plan and
comply with Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code").
11. To consider and act upon a proposal to ratify and approve the
Company's Amended and Restated 1989 Class B Stock Option Plan to,
among other things, increase the number of shares issuable
thereunder by 2,000,000 to 3,600,000, extend the term of the
plan through the tenth anniversary of the date on which stockholders
approve the plan and comply with Section 162(m) of the Code.
12. To consider and act upon a proposal to ratify and approve the
Company's Amended and Restated 1991 Special Nonqualified Stock Option
Plan to, among other things, increase the number of shares issuable
thereunder by 500,000 to 2,750,000, extend the term of the plan
through the tenth anniversary of the date on which stockholders
approve the plan and comply with Section 162(m) of the Code.
13. To consider and act upon a proposal to ratify and approve the grant,
on June 23, 1997, of a nonqualified option to acquire 250,000 shares
of Common Stock to an officer of the Company.
14. To ratify the appointment of Arthur Andersen LLP as independent
auditors of the Company for the fiscal year ending June 30, 1998.
15. To consider and transact such other business as may properly be
brought before the Meeting or any adjournment or postponement thereof.
Only stockholders of record at the close of business on February 19, 1998
will be entitled to vote at the Meeting. The stock transfer books will not be
closed.
By Order of the Board of Directors
Charles A. Mele
Secretary
Elmwood Park, New Jersey
February 26, 1998
____________________________
A proxy card and the Annual Report of the Company for the fiscal year ended June
30, 1997 are enclosed.
YOUR VOTE IS IMPORTANT
To ensure that your interests will be represented at the Meeting,
whether or not you plan to attend the Meeting, please complete, date, sign and
mail your proxy promptly in the enclosed postage-paid envelope. Stockholders
who attend the Meeting in person may revoke their proxies and vote in person if
they desire.
<PAGE>
SYNETIC, INC.
669 RIVER DRIVE
ELMWOOD PARK, NEW JERSEY 07407-1361
---------------
PROXY STATEMENT
---------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH 25, 1998
---------------
This Proxy Statement and the enclosed form of proxy are furnished to
stockholders of Synetic, Inc., a Delaware corporation (the "Company"), in
connection with the solicitation of proxies by the Board of Directors of the
Company from holders of outstanding shares of its common stock, par value $.01
per share ("Common Stock"), for use at the Annual Meeting of Stockholders (the
"Meeting") to be held on Wednesday, March 25, 1998 and at any adjournment or
postponement thereof. The approximate date on which this Proxy Statement and
the related form of proxy are first being sent to stockholders is [February 26],
1998.
If the enclosed proxy is properly signed and returned, and if the
stockholder specifies a choice on the proxy, the shares of Common Stock
represented by the proxy will be voted (or withheld from voting) in accordance
with the stockholder's choice. If the proxy is signed and returned but no
specification is made, the proxy will be voted as follows:
. FOR the election of each of the nominees for director listed below
("Proposal One"), allocating that stockholder's votes evenly among the
four nominees;
. FOR the proposal ("Proposal Two") to amend the Certificate of
Incorporation of the Company (the "Charter") to eliminate the
Company's classified Board of Directors and to provide for annual
election of all directors;
. FOR the proposal ("Proposal Three") to amend the Charter to eliminate
the requirement that provisions of the Charter relating to the
classification of the Board of Directors and the election of one-third
of the Board of Directors at each annual meeting may only be amended
with the affirmative vote of the holders of two-thirds of the shares
entitled to vote in the election of directors;
. FOR the proposal ("Proposal Four") to amend the Charter to eliminate
cumulative voting;
. FOR the proposal ("Proposal Five") to amend the Charter to delete the
requirement that provisions of the Charter relating to cumulative
voting may only be amended with the affirmative vote of the holders of
two-thirds of the shares entitled to vote in the election of
directors;
. FOR the proposal ("Proposal Six") to amend the Charter to provide that
any director may be removed, either with or without cause, at any
time, by the affirmative vote of a majority of the outstanding shares
entitled to vote;
<PAGE>
. FOR the proposal ("Proposal Seven") to amend the Charter to delete the
requirement that provisions of the Charter relating to the power to
remove directors or to fill vacancies on the Board of Directors may
only be amended with the affirmative vote of the holders of two-thirds
of the shares entitled to vote in the election of directors;
. FOR the proposal ("Proposal Eight") to amend the Charter to delete the
requirement that the provision of the By-laws of the Company (the "By-
Laws") setting the maximum number of directors may only be amended
with the affirmative vote of the holders of two-thirds of the shares
entitled to vote in the election of directors;
. FOR the proposal ("Proposal Nine") to amend the Charter to increase
the number of authorized shares of Common Stock from 50 million to 100
million;
. FOR the proposal ("Proposal Ten") to approve the Company's Amended and
Restated 1989 Class A Stock Option Plan (the "Amended Class A Plan");
. FOR the proposal ("Proposal Eleven") to approve the Company's Amended
and Restated 1989 Class B Stock Option Plan (the "Amended Class B
Plan");
. FOR the proposal ("Proposal Twelve") to approve the Company's Amended
and Restated 1991 Special Nonqualified Stock Option Plan (the "Amended
1991 Plan"; and, collectively with the Amended Class A Plan and the
Amended Class B Plan, the "Plans");
. FOR the proposal ("Proposal Thirteen") to approve the grant to Roger
C. Holstein, an officer of the Company, of a nonqualified option to
purchase 250,000 shares of Common Stock (the "Individual Option"); and
. FOR the proposal ("Proposal Fourteen") to ratify the appointment of
independent auditors.
The Board of Directors of the Company (the "Board") knows of no business
that will be presented for consideration at the Meeting other than the matters
described in this Proxy Statement. If any other matters are presented at the
Meeting, the proxy holders will vote the proxies in accordance with their
judgment.
Any proxy may be revoked by the stockholder giving it, at any time prior to
its being voted, by filing with the Secretary of the Company at its address set
forth above, a notice of revocation or a duly executed proxy bearing a later
date. Any proxy may also be revoked by the stockholder's attendance at the
Meeting and voting in person. A notice of revocation need not be on any specific
form.
This solicitation is being made on behalf of the Board, and its cost
(including preparing and mailing of the notice, this Proxy Statement and the
form of proxy) will be paid by the Company. The Company will also make
arrangements with brokerage houses and other custodians, nominees and
fiduciaries to send the proxy materials to their principals and will reimburse
them for their reasonable expenses in so doing. To the extent necessary in order
to ensure sufficient representation at the Meeting, officers and regular
employees of the Company may solicit the return of proxies by mail, telephone,
telegram, telex and personal interview. No compensation in addition to regular
salary and benefits will be paid to any officer or regular employee for such
solicitation. In addition, the Company has retained Innisfree M&A Incorporated
to assist in the solicitation of proxies from beneficial owners of shares held
of record by brokerage houses, banks and other custodians, nominees or
fiduciaries, at a cost not to exceed $[____] plus reasonable out-of-pocket
expenses.
2
<PAGE>
RECORD DATE AND VOTING AT THE MEETING
The Board has fixed the close of business on February 19, 1998 as the
record date for the determination of the stockholders of the Company entitled to
notice of, and to vote at, the Meeting. At that date, there were outstanding
[___________] shares of Common Stock, the holders of which will be entitled to
one vote per share on each matter submitted to the Meeting, except that the
Charter provides for cumulative voting with respect to the election of
directors. See "Proposal One: Election of Directors". No other voting
securities of the Company are outstanding.
The presence at the Meeting, in person or by proxy, of the holders of
a majority of the shares entitled to vote at the Meeting constitutes a quorum
for the transaction of business at the Meeting. If a quorum should not be
present, the Meeting may be adjourned from time to time until a quorum is
obtained. Shares of Common Stock present in person or represented by proxy
(including shares which abstain or do not vote with respect to one or more
matters presented for stockholder approval) will be counted for purposes of
determining whether a quorum exists at the meeting.
The following considerations apply to the voting of stockholders with
respect to each of the respective proposals:
. PROPOSAL ONE: ELECTION OF DIRECTORS. Under the By-laws, the four
nominees receiving the greatest number of votes cast shall be elected
directors of the Company. Only votes cast FOR a nominee will be
counted, except that if a stockholder who signs and returns a proxy
fails to designate an allocation of votes or to withhold authority to
vote, the persons acting under the proxy will allocate that
stockholder's votes evenly among the respective director nominees.
Abstentions, broker non-votes and instructions on the accompanying
proxy card to withhold authority to vote for one or more of the
nominees will result in the respective nominees receiving fewer votes.
. PROPOSAL TWO: AMENDMENT TO THE CHARTER ELIMINATING THE CLASSIFICATION
OF THE BOARD. The affirmative vote of the holders of at least two-
thirds of the outstanding shares of Common Stock entitled to vote at
the Meeting is required to approve Proposal Two. An abstention or
broker non-vote with respect to Proposal Two will have the same effect
as a vote against Proposal Two because it is one less vote for
approval.
. PROPOSAL THREE: AMENDMENT TO THE CHARTER ELIMINATING THE SUPERMAJORITY
VOTE REQUIREMENT FOR CHARTER AMENDMENTS RELATING TO THE CLASSIFICATION
OF THE BOARD. The affirmative vote of the holders of two-thirds of the
outstanding shares of Common Stock entitled to vote at the Meeting is
required to approve Proposal Three. An abstention or broker non-vote
with respect to Proposal Three will have the same effect as a vote
against Proposal Three because it is one less vote for approval.
. PROPOSAL FOUR: AMENDMENT TO THE CHARTER ELIMINATING CUMULATIVE VOTING.
The affirmative vote of the holders of at least two-thirds of the
outstanding shares of Common Stock entitled to vote at the Meeting is
required to approve Proposal Four. An abstention or broker non-vote
with respect to Proposal Four will have the same effect as a vote
against Proposal Four because it is one less vote for approval.
. PROPOSAL FIVE: AMENDMENT TO THE CHARTER ELIMINATING THE SUPERMAJORITY
VOTE REQUIREMENT FOR CHARTER AMENDMENTS RELATING TO CUMULATIVE VOTING.
The affirmative vote of the holders of two-thirds of the outstanding
shares of Common Stock entitled to vote at the Meeting is required to
approve Proposal Five. An abstention or broker non-vote with respect
to Proposal
3
<PAGE>
Five will have the same effect as a vote against Proposal Five because
it will be one less vote for approval.
. PROPOSAL SIX: AMENDMENT TO THE CHARTER TO PROVIDE FOR REMOVAL OF
DIRECTORS BY A MAJORITY OF STOCKHOLDERS. The affirmative vote of the
holders of at least two-thirds of the outstanding shares of Common
Stock entitled to vote at the Meeting is required to approve Proposal
Six. An abstention or broker non-vote with respect to Proposal Six
will have the same effect as a vote against Proposal Six because it
will be one less vote for approval.
. PROPOSAL SEVEN: AMENDMENT TO THE CHARTER ELIMINATING THE SUPERMAJORITY
VOTE REQUIREMENT FOR CHARTER AMENDMENTS RELATING TO THE REMOVAL OF
DIRECTORS. The affirmative vote of the holders of at least two-thirds
of the outstanding shares of Common Stock entitled to vote at the
Meeting is required to approve Proposal Seven. An abstention or broker
non-vote with respect to Proposal Seven will have the same effect as a
vote against Proposal Seven because it will be one less vote for
approval.
. PROPOSAL EIGHT: AMENDMENT TO THE CHARTER ELIMINATING THE SUPERMAJORITY
VOTE REQUIREMENT FOR BY-LAW AMENDMENTS SETTING THE MAXIMUM NUMBER OF
DIRECTORS. The affirmative vote of the holders of at least two-thirds
of the outstanding shares of Common Stock entitled to vote at the
Meeting is required to approve Proposal Eight. An abstention or broker
non-vote with respect to Proposal Eight will have the same effect as a
vote against Proposal Eight because it will be one less vote for
approval.
. PROPOSAL NINE: AMENDMENT TO THE CHARTER TO INCREASE THE NUMBER OF
AUTHORIZED SHARES FROM 50 MILLION TO 100 MILLION. The affirmative
vote of the holders of a majority of the outstanding shares of Common
Stock entitled to vote at the Meeting is required to approve Proposal
Nine. An abstention or broker non-vote with respect to Proposal Nine
will have the same effect as a vote against Proposal Nine because it
is one less vote for approval.
. PROPOSALS TEN, ELEVEN, TWELVE AND THIRTEEN: APPROVAL OF PROPOSALS
RELATING TO THE PLANS AND THE INDIVIDUAL OPTION. The affirmative vote
of the holders of a majority of the shares of Common Stock present or
represented at the Meeting and entitled to vote is required to approve
the proposals to ratify and approve Proposals Ten, Eleven, Twelve and
Thirteen. Abstentions with respect to each such proposal will be
treated as shares that are present or represented at the Meeting and
entitled to vote, but will not be counted as a vote in favor of such
proposal. Accordingly, an abstention from voting on any such proposal
will have the same legal effect as a vote against any such proposal.
Broker non-votes with respect to any such proposal will not be
considered as present or represented at the Meeting and entitled to
vote with respect to such proposal and, thus, will have no impact on
the outcome of the vote with respect to such proposal.
. PROPOSAL FOURTEEN: RATIFICATION OF INDEPENDENT AUDITORS. The
affirmative vote of the holders of a majority of the votes cast at the
Meeting is required to ratify the appointment of Arthur Andersen LLP
as the Company's independent auditors. Abstentions and broker non-
votes with respect to Proposal Fourteen will not be considered as
votes cast and, accordingly, will have no effect on the outcome of the
vote with respect to Proposal Fourteen.
As more fully described below under "Certain Relationships and Related
Transactions--Investment Agreement", pursuant to an Investment Agreement between
Mr. Martin J. Wygod, Chairman of the Board of the Company, and the Company,
dated as of September 13, 1994 (the "Investment Agreement"), until the earlier
of
4
<PAGE>
December 14, 1998, the death or adjudication of incompetency of Mr. Wygod or a
Change of Control (as defined in the Investment Agreement) of the Company, Mr.
Wygod and SN Investors, L.P. ("SN Investors"), a limited partnership the general
partner of which is SYNC, Inc. (the "General Partner"), whose sole stockholder
is Mr. Wygod, are required to vote the 5,061,857 shares purchased from Merck &
Co., Inc. ("Merck") by SN Investors (the "Wygod Shares") or cause the Wygod
Shares to be voted (a) with respect to election of directors, for the nominees
who would have been elected based on the vote of all shares of Common Stock
other than the Wygod Shares in proportion to the votes that such nominees
received and (b) on all other matters to come before the stockholders of the
Company, in the same manner as a majority of the shares of Common Stock (other
than the Wygod Shares) are voted.
5
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as of January 1, 1998
(except as otherwise indicated) concerning the beneficial ownership of the
Company's Common Stock by each person known by the Company to own more than 5%
of its Common Stock.
AMOUNT
NAME AND ADDRESS OF AND NATURE OF PERCENT
BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS (1)
------------------- -------------------- ------------
Martin J. Wygod................... 5,396,959(2)(3) 30.1%
c/o Synetic, Inc.
669 River Drive
Center 2
Elmwood Park, New Jersey 07407
SN Investors, L.P................. 5,061,857(2) 28.7%
P.O. Box 616
Fair Lawn, New Jersey 07410
FMR Corp.......................... 1,157,582(4) 6.6%
82 Devonshire Street
Boston, Massachusetts 02107
The Prudential Insurance Company.. 1,019,743(5) 5.8%
of America ("Prudential")
Prudential Plaza
Newark, New Jersey 07102
James R. Buell.................... 1,010,916(6) 5.7%
Star Route Box 129
Orovada, Nevada 89425
- ------------------------
(1) The number of shares of Common Stock deemed outstanding includes: (i)
17,661,456 shares of Common Stock outstanding as of January 1, 1998, (ii)
the number of shares, if any, of Common Stock that the respective persons
named in the above table have the right to acquire presently or within 60
days of January 1, 1998 upon exercise of stock options and (iii) the number
of shares, if any, of Common Stock, that the respective persons named in the
above table have the right to acquire upon conversion of the Company's 5%
Convertible Subordinated Debentures due 2007 ("Convertible Debentures").
(2) SN Investors, the general partner of which is controlled by Mr. Wygod, is
the record and beneficial owner of 5,061,857 shares of Common Stock. Mr.
Wygod is an indirect beneficial owner of such shares and they are included
in the total of 5,396,959 shares listed as beneficially owned by Mr. Wygod.
See "Certain Relationships and Related Transactions--Purchase and Sale
Agreement; Divestiture" and "--Investment Agreement" for additional
information regarding SN Investors.
(3) Includes 256,000 shares of Common Stock that Mr. Wygod has the right to
acquire presently or within 60 days of January 1, 1998 upon exercise of
stock options or upon conversion of Convertible Debentures. Includes 2,000
shares of Common Stock beneficially owned by Mr. Wygod's spouse, as to which
shares Mr. Wygod disclaims beneficial ownership. Does not include 3,500
shares of Common Stock and shares of
6
<PAGE>
Common Stock issuable upon conversion of $1,500,000 principal amount of
Convertible Debentures owned by Medco Containment Services Foundation, Inc.,
a charitable foundation of which Mr. Wygod is a trustee and shares voting
and dispositive power, nor 129,859 shares of Common Stock and shares of
Common Stock issuable upon conversion of $500,000 principal amount of
Convertible Debentures owned by the Rose Foundation, a private charitable
foundation of which Mr. Wygod is a trustee and shares voting and dispositive
power.
(4) The information shown is as of December 31, 1996 and is based upon
information disclosed by FMR Corp., Fidelity Management and Research
Company, Fidelity VIP Equity-Income Fund, Abigail P. Johnson and Edward C.
Johnson, 3d, the controlling stockholder of FMR Corp., in a Schedule 13G
filed with the Securities and Exchange Commission (the "Commission"). Such
persons reported that FMR Corp. is the parent holding company of Fidelity
Management and Research Company, and that Edward C. Johnson, 3d, FMR Corp.,
through its control of Fidelity Management and Research Company, and the
Funds each have sole power to dispose of such shares. Sole power to vote
the shares resides in the Fund's Board of Trustees.
(5) The information shown is as of December 31, 1996 and is based upon
information disclosed by Prudential in its Schedule 13G filed with the
Commission. Prudential reported in its Schedule 13G that it has shared
voting and dispositive power over such shares.
(6) Includes 131,667 shares of Common Stock that Mr. Buell has the right to
acquire upon conversion of Convertible Debentures. The information shown is
as of May 28, 1997 and is based upon information disclosed by Mr. Buell in
his Schedule 13D filed with the Commission. Mr. Buell reported in his
Schedule 13D that he has sole voting and dispositive power over such shares.
7
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information, as of January 1, 1998,
concerning the ownership of Common Stock by each of the directors, each of the
Named Executive Officers, and by all directors and executive officers of the
Company as a group.
Amount and
Nature of Beneficial Percent of
Name of Beneficial Owner Ownership (1)(2) Class (3)
- ------------------------ ------------------------ -----------
Thomas R. Ferguson.................... 108,117 *
Mervyn L. Goldstein................... 110,717(4) *
Ray E. Hannah......................... 137,628 *
Roger H. Licht........................ 81,333 *
James V. Manning...................... 299,740(5) 1.67%
Bernard A. Marden..................... 400,001(10) 2.25%
Victor L. Marrero..................... 72,758 *
Charles A. Mele....................... 73,188(6) *
Herman Sarkowsky...................... 230,724(7) 1.30%
Paul C. Suthern....................... 238,500(5) 1.33%
Anthony Vuolo......................... 113,658 *
Albert M. Weis........................ 157,169(8) *
Martin J. Wygod....................... 5,396,959(5)(6)(9) 30.12%
All directors and executive officers
as a group (15 persons)............. 7,481,350 38.63%
- ----------------------
* Less than one percent.
(1) The persons named in the table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them,
unless otherwise indicated in the following footnotes.
(2) Includes the following number of shares of Common Stock that the following
persons have the right to acquire presently or within 60 days of January 1,
1998 upon exercise of stock options and the number of shares of Common
Stock that the following persons have the right to acquire upon conversion
of Convertible Debentures: Mr. Ferguson, 103,667; Dr. Goldstein, 98,667;
Mr. Hannah, 64,167; Mr. Licht, 79,333; Mr. Manning, 263,333; Mr. Marden,
83,333; Mr. Marrero, 70,833; Mr. Mele, 70,833; Mr. Sarkowsky, 127,000; Mr.
Suthern, 236,500; Mr. Vuolo, 111,833; Mr. Weis, 106,167; Mr. Wygod,
256,000; and all directors and executive officers as a group, 1,659,666.
Includes 1,461 shares of Common Stock allocated to the account of Mr.
Hannah, 100 shares of Common Stock allocated to the account of Mr. Marrero,
105 shares of Common Stock allocated to the account of Mr. Mele and 100
shares of Common Stock allocated to the account of Mr. Vuolo under the
Porex Technologies Corp. 401(k) Savings Plan as of June 30, 1997.
(3) The number of shares of Common Stock deemed outstanding includes: (i)
17,661,456 shares of Common Stock outstanding as of January 1, 1998, (ii)
the number of shares of Common Stock that the respective persons named in
the above table have the right to acquire presently or within 60 days of
January 1, 1998 upon exercise of stock options and (iii) the number of
shares of Common Stock that the respective persons named in the above table
have the right to acquire upon conversion of Convertible Debentures.
8
<PAGE>
(4) Includes 200 shares of Common Stock owned by Dr. Goldstein's spouse, as to
which Dr. Goldstein disclaims beneficial ownership.
(5) Does not include 3,500 shares of Common Stock and shares of Common Stock
issuable upon conversion of $1,500,000 principal amount of Convertible
Debentures owned by Medco Containment Services Foundation, Inc., a
charitable foundation of which Messrs. Manning, Suthern and Wygod are
trustees and share voting and dispositive power.
(6) Does not include 129,859 shares of Common Stock and shares of Common Stock
issuable upon conversion of $500,000 principal amount of Convertible
Debentures owned by the Rose Foundation, a private charitable foundation of
which Messrs. Wygod and Mele are trustees and share voting and dispositive
power.
(7) Includes 14,705 shares of Common Stock owned by a charitable foundation of
which Mr. Sarkowsky is a director.
(8) Includes 3,050 shares of Common Stock owned by a corporation of which Mr.
Weis is the sole stockholder, sole director and president and 3,200 shares
of Common Stock held in trust for Mr. Weis's children.
(9) Includes 2,000 shares of Common Stock beneficially owned by Mr. Wygod's
spouse, as to which shares Mr. Wygod disclaims beneficial ownership. See
also "Footnote 2 to Principal Stockholders Table".
(10) Includes 316,668 shares of Common Stock held in an irrevocable trust, with
respect to which Mr. Marden is trustee and holds voting and dispositive
power.
9
<PAGE>
PROPOSAL ONE:
ELECTION OF DIRECTORS
The proxy will be voted in accordance with the directions thereon with
respect to Proposal One, or, if no directions are given, FOR the election of the
nominees for director, allocating that stockholder's votes evenly among the four
nominees.
The holders of Common Stock are being asked to elect four members to the
Board. The four members who are so elected and the remaining seven directors
whose terms continue after the Meeting will be directors of the Company.
During the fiscal year ended June 30, 1997, the Board had four standing
committees: an Audit Committee, a Stock Option Committee, a Compensation
Committee and an Executive Committee. The Audit Committee is responsible for
reviewing the internal accounting controls and procedures of the Company with
management and the independent auditors, accounting principles, related party
transactions and the scope of the annual audit of the Company. The Stock Option
Committee administers the Company's stock option plans. The Board has delegated
to the Executive Committee the power to exercise, to the fullest extent
permitted by law, the powers of the entire Board. The Compensation Committee is
responsible for reviewing and approving compensation levels for the Company's
executive officers and reviewing and making recommendations to the Board with
respect to other matters relating to the compensation practices of the Company.
The Board has no nominating committee. The entire Board performs those
functions often performed by a nominating committee.
During the fiscal year ended June 30, 1997, the Board of the Company held
four meetings and also took certain actions by written consent. The Stock
Option Committee held no formal meetings during such period, but took certain
actions by written consent. The Audit Committee held two meetings. The
Executive Committee held no formal meetings during such period, but took certain
actions by written consent. Except for Per Lofberg, who resigned as a director
on June 27, 1997, each director attended more than 75% of the Board meetings and
the meetings of Board committees on which he served.
Pursuant to the terms of the Charter, the Board is divided into three
classes with staggered three-year terms, and not more than one class of
directors is elected at any annual meeting of stockholders. Under the Company's
By-laws, the nominees receiving the greatest number of votes cast shall be
elected directors of the Company.
Messrs. Marden, Hannah, Licht and Sarkowsky are the nominees, selected by
the Board, for election to serve three-year terms expiring at the Annual Meeting
of Stockholders of the Company in the year 2000. Cumulative voting will be
applicable to the election of these nominees pursuant to the Charter.
Cumulative voting means that each stockholder entitled to vote may cast votes
equal to the number of shares of Common Stock eligible to be voted by that
stockholder multiplied by the number of directors to be elected; a stockholder
may cast all of his, her or its votes for a single nominee or may allocate them
among nominees. For example, a holder of 100 shares may cast 400 votes for a
single nominee, allocate 100 votes to each of the four nominees or allocate 400
votes in any other manner. If a stockholder who signs and returns a proxy fails
to designate an allocation of votes or to withhold authority to vote, the
persons acting under the proxy will allocate that stockholder's votes evenly
among the four nominees.
In the event that Proposal Two is approved, the term of all directors will
expire at next year's annual meeting of stockholders (the "1998 Annual Meeting")
and, commencing with the 1998 Annual Meeting, stockholders will vote upon the
election of directors for one-year terms. In the event that Proposal Four is
approved, stockholders will no longer be able to cumulate their votes in the
election of directors commencing at the 1998 Annual Meeting. See "Proposal Two:
Amendment to the Charter Eliminating the Classification of the Board of
Directors" and "Proposal Four: Amendment to the Charter Eliminating Cumulative
Voting".
10
<PAGE>
If for any reason any nominee for director should become unavailable for
election, the proxies may be voted for the election of a substitute designated
by management, unless a contrary instruction is given on the proxy. Management
has no reason to believe that any of the nominees will be unable or unwilling to
serve if elected, and all nominees have expressed an intention to serve the
entire term for which election is sought.
Certain information as of January 1, 1998 concerning the directors and
nominees and concerning the officers of the Company is set forth below:
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
FOR A THREE-YEAR TERM EXPIRING AT THE 2000 ANNUAL MEETING
Name Age Director Since
---- --- --------------
Ray E. Hannah 61 1989
Roger H. Licht 43 1989
Bernard A. Marden 78 1997
Herman Sarkowsky(A)(B)(C) 72 1989
DIRECTORS WHOSE TERM EXPIRES AT THE 1999 ANNUAL MEETING*
Name Age Director Since
---- --- --------------
Thomas R. Ferguson(A)(B)(C)(D) 71 1989
Mervyn L. Goldstein, M.D. 60 1989
Paul C. Suthern 46 1993
Martin J. Wygod 57 1989
DIRECTORS WHOSE TERM EXPIRES AT THE 1998 ANNUAL MEETING*
Name Age Director Since
---- --- --------------
James V. Manning(D) 51 1989
Charles A. Mele 41 1989
Albert M. Weis(A)(B)(C)(D) 71 1989
- --------------------------
* Terms expire at the 1998 Annual Meeting if Proposal Two is approved.
11
<PAGE>
(A) Member of the Audit Committee.
(B) Member of the Stock Option Committee.
(C) Member of the Compensation Committee.
(D) Member of the Executive Committee.
--------------------
Mr. Ferguson has been a member of the law firm of Ferguson, Case, Orr,
Paterson & Cunningham for more than five years.
Dr. Goldstein has been a physician in private practice, Associate Clinical
Professor of Medicine at the Albert Einstein College of Medicine in New York
City and Attending Physician in Medicine and Oncology at Montefiore Medical
Center in New York City for more than five years.
Mr. Hannah has been Co-Chairman of the Board of Porex Corporation (together
with its subsidiaries, unless the context otherwise requires, "Porex") since
January 1998. Prior to such time, he was President and Chief Executive Officer
of Porex since its inception in November 1997. He has been President of Porex
Technologies Corp. ("PTC") since September 1987 and its Chief Executive Officer
since November 1992. Prior to becoming Chief Executive Officer of PTC, he was
Chief Operating Officer of PTC from November 1984 to November 1992. He has been
a director of the Company since May 1989, an executive officer of the Company
since June 1989 and a director of PTC since November 1984.
Mr. Licht has been a member of the law firm of Licht & Licht for more than
five years.
Mr. Manning has been Chief Executive Officer of the Company since January
1995, President of the Company since July 1996 and has been an executive officer
of the Company for more than the last five years, and was, until December 1994,
an executive officer of Medco Containment Services, Inc. ("Medco") for more than
five years. He is also Chairman of the Board of COMNET Corporation ("Comnet"), a
computer software company.
Mr. Marden has been a private investor for more than five years.
Mr. Mele has been Vice President--General Counsel of the Company since July
1995, and was an executive officer of the Company from May 1989 until December
1994 and was an executive officer of Medco for more than five years, until March
1995. Mr. Mele is also a director of Comnet and Group 1 Software, Inc., computer
software companies.
Mr. Sarkowsky has been Chairman of the Board and Chief Executive Officer of
Sarkowsky Investment Corporation, a diversified investment company, for more
than five years. Since May 1992, he has been a director of Seafirst Bank. Mr.
Sarkowsky is also a director of Eagle Hardware & Garden Inc. and Hollywood Park,
Inc.
Mr. Suthern has been Vice Chairman of the Company since July 1996, and was
the President and Chief Operating Officer of the Company from February 1993
until July 1996 and was also the Chief Executive Officer from October 1993 until
January 1995. Mr. Suthern was also President and Chief Operating Officer of
Medco from November 1992 through December 1994 and Assistant to Medco's Chairman
from December 1991 to November 1992. Prior thereto, he was Executive Vice
President--Operations of Medco for more than five years.
Mr. Weis has been President of A.M. Weis & Co., Inc., a commodities trading
corporation, for more than five years. Since August 1997, Mr. Weis has been the
Chairman of the Board of the New York Cotton Exchange. Mr. Weis is also a
member of the Board of the Commodities Clearing Corporation.
12
<PAGE>
Mr. Wygod has been Chairman of the Board of the Company since May 1989.
From May 1989 to February 1993, Mr. Wygod also served as the Company's President
and Chief Executive Officer and until May 1994 was an executive officer of the
Company. Until May 1994, Mr. Wygod was Chairman of the Board of Medco for more
than five years, and until January 1993 he also served as Chief Executive
Officer of Medco. He is also engaged in the business of racing, boarding and
breeding thoroughbred horses, and is President of River Edge Farm, Inc., which
is engaged in the business of breeding and boarding thoroughbred horses.
No family relationship exists among any of the directors or executive
officers except that Martin J. Wygod, Chairman of the Board of the Company, and
Paul C. Suthern, Vice Chairman of the Company, are brothers-in-law. No
arrangement or understanding exists between any director or executive officer
and any other person pursuant to which any director or executive officer was
selected as a director or executive officer of the Company. All executive
officers are elected annually by the Board and serve at the discretion of the
Board.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, the Company's directors,
its executive officers and any persons holding more than ten percent of the
Common Stock are required to report their respective holdings of the Common
Stock and any changes in such holdings to the Commission. Specific due dates
for these reports have been established and the Company is required to report in
this Proxy Statement any failure to file by such due dates during the fiscal
year ended June 30, 1997. To the best knowledge of the Company, these filing
requirements were timely satisfied by its directors, officers and ten percent
holders during the fiscal year ended June 30, 1997. In making these statements,
the Company has relied upon written representations of its directors, officers
and ten percent holders, and copies of the reports that have been filed with the
Commission.
DIRECTOR COMPENSATION
Those directors who are not officers or employees of the Company received
no cash compensation for serving as directors for the fiscal year ended June 30,
1997. The Company's 1991 Non-Employee Director Stock Option Plan (the "Director
Plan") provides that on the first business day of each fiscal year of the
Company, each director who is not an officer or employee of the Company then in
office will automatically be granted an option to purchase 10,000 shares of
Common Stock. In addition, each director who is not an officer or employee of
the Company automatically receives an option to purchase 10,000 shares of Common
Stock at the time such director is first elected to the Board. The Director
Plan is administered by the Board or any executive officer or officers
designated by the Board. Non-employee directors have also in the past received
options to purchase Common Stock under the Class A Plan, and the Company from
time to time has granted options to purchase Common Stock to certain of such
directors outside the Company's stock option plans on terms similar to those
contained in the Class A Plan.
EXECUTIVE COMPENSATION
Prior to the consummation of the purchase of shares of Common Stock from
Merck by the Company and SN Investors (the "Purchase") on December 14, 1994 (for
additional information regarding the Purchase, see below "Certain Relationship
and Related Transactions"), the Company bore a proportionate share of the cost
or expense in respect of Medco compensation, benefits and travel and
entertainment expenses of certain officers of the Company who were also
employees of Medco or its subsidiaries other than the Company. During the period
from July 1, 1994 through December 14, 1994, the executive officers of the
Company, other than Ray E. Hannah, did not receive any cash compensation for
services to the Company or its subsidiaries. In the case of Mr. Hannah, all
amounts shown below were paid by the Company. Following the consummation of the
Purchase, the other
13
<PAGE>
executive officers of the Company became salaried employees of the Company and
began to participate in the employee benefit plans and arrangements of the
Company and its subsidiaries.
The following table presents information concerning compensation paid for
services to the Company during the last three fiscal years to Mr. Manning, Mr.
Hannah, Mr. Mele, Mr. Vuolo and Mr. Marrero, the only other executive officers
whose combined salary and bonus during the fiscal year ended June 30, 1997
exceeded $100,000 (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
COMPEN- OPTIONS/ COMPEN-
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS($) SATION ($) SARS (#) SATION ($)
- --------------------------- ---- --------- -------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
James V. Manning............. 1997 100,000 - - - -
President and Chief 1996 100,000 - - - -
Executive Officer 1995 50,000(1) - - 150,000 -
Ray E. Hannah................ 1997 163,461 100,000 4,505 40,000 5,901(2)
Vice President 1996 160,000 74,140 - - 3,239(2)
--Porex Technologies Group 1995 160,000 - - - 4,146(2)
Charles A. Mele.............. 1997 150,000 - 12,000 195,000 2,019(3)
Vice President -- General 1996 150,000 12,460 12,000 - 1,540(3)
Counsel 1995 - - - - -
Anthony Vuolo................ 1997 150,000 - 12,000 81,000 2,019(3)
Vice President -- Chief 1996 150,000 - 12,000 - 1,419(3)
Financial Officer (since 1995 43,269(4) - 3,461 125,000 -
May 1997)
Victor L. Marrero............ 1997 150,000 - 12,000 31,000 2,019(3)
Vice President and Chief 1996 150,000 - 12,000 - 1,419(3)
Financial Officer (through 1995 75,000(5) - 6,000 125,000 -
May 1997)
</TABLE>
- ----------------------
(1) During the period beginning on July 1, 1994 and ending on December 14,
1994, the date of consummation of the Purchase, Mr. Manning was paid a
salary of $186,923 by Medco, none of which was attributed to services
rendered to the Company. During the period beginning on December 15, 1994
and ending on June 30, 1995, Mr. Manning was paid a salary of $50,000 by
the Company. Effective August 1, 1996, Mr. Manning assumed the
responsibilities of acting President of the Company.
(2) Includes Company matching contributions to the Porex 401(k) Plan and life
insurance premiums paid on behalf of Mr. Hannah of $2,043 and $2,103,
respectively, in the fiscal year ended June 30, 1995, $1,878 and $1,361,
respectively, in the fiscal year ended June 30, 1996 and $3,795 and $2,106,
respectively, in the fiscal year ended June 30, 1997.
(3) Comprised of Company matching contributions to the Porex 401(k) Plan.
14
<PAGE>
(4) During the period beginning on July 1, 1994 and ending on December 14,
1994, the date of consummation of the Purchase, Mr. Vuolo was paid a salary
of approximately $115,000 by Medco, none of which was attributed to
services rendered to the Company. During the period beginning on December
15, 1994 and ending on June 30, 1995, Mr. Vuolo was paid a salary of
$43,269 by the Company.
(5) During the period beginning on July 1, 1994 and ending on December 14,
1994, the date of consummation of the Purchase, Mr. Marrero was paid a
salary of approximately $115,000 by Medco, none of which was attributed to
services rendered to the Company. During the period beginning on December
15, 1994 and ending on June 30, 1995, Mr. Marrero was paid a salary of
$75,000 by the Company. Mr. Marrero was the Chief Financial Officer from
December 1994 until May 1997, at which time Mr. Vuolo became the Chief
Financial Officer.
--------------------
The following table presents information concerning the options granted to
the Named Executive Officers during the last fiscal year.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS/SARS EXERCISE
OPTIONS/ GRANTED TO OR BASE GRANT DATE
SARS EMPLOYEES PRICE EXPIRATION PRESENT VALUE
NAME GRANTED (#) IN FISCAL YEAR ($/SH) DATE ($)(2)
- ---- ----------- -------------- -------- ---- ------
<S> <C> <C> <C> <C> <C>
Ray E. Hannah...... 40,000(1) 1.1% 35.50 4/16/07 459,998
Victor L. Marrero.. 31,000(1) .8% 32.25 10/02/06 309,874
Charles A. Mele.... 195,000(1) 5.3% 32.25 10/02/06 1,949,204
Anthony Vuolo...... 31,000(1) .8% 32.25 10/02/06 309,874
50,000(1) 1.4% 34.88 6/23/07 575,981
</TABLE>
- ------------
(1) These options vest and become exercisable at the rate of 20% per year,
commencing on the first anniversary of the date of grant, and were granted
on the following dates: Mr. Hannah, all on April 16, 1997; Messrs. Marrero
and Mele, all on October 2, 1996; and Mr. Vuolo, 31,000 on October 2, 1996
and 50,000 on June 23, 1997. Such options are subject to stockholder
approval of the Amended Class A Plan or Amended Class B Plan, as the case
may be.
(2) The estimated grant date present value reflected in the above table is
determined using the Black-Scholes model. The material assumptions and
adjustments incorporated in the Black-Scholes model in estimating the value
of the options reflected in the above table include the following: (i)
the respective option exercise price, specified above, equal to the fair
market value of the underlying stock on the date of grant; (ii) the
exercise of options within one year of the date that they become
exercisable; (iii) a risk-free interest rate of 6.5% per annum; and (iv)
volatility of 0.2722 calculated using daily stock prices of the Company
during the period from the date of the Purchase to June 30, 1997. The
ultimate values of the options will depend on the future market price of
the Company's stock, which cannot be forecasted with reasonable accuracy.
The actual value, if any, an optionee will realize upon exercise of an
option will depend on the
15
<PAGE>
excess of the market value of the Company's Common Stock over the exercise
price on the date the option is exercised. There is no assurance that the
value realized by an optionee will be at or near the value estimated by the
Black-Scholes model or any other model applied to value the options.
--------------------
No options to purchase Common Stock were exercised by the Named Executive
Officers during the fiscal year ended June 30, 1997. Messrs. Marrero and Vuolo
realized income of $2,522,534 and $2,006,240, respectively, from the exercise of
options to purchase common stock of Merck granted prior to the closing of the
Purchase, but which continued to vest and remained exercisable thereafter as a
result of their employment by the Company. See "Certain Relationships and
Related Transactions--Purchase and Sale Agreement; Divestiture."
The following table presents information concerning the fiscal year-end
value of options to purchase Common Stock held by the Named Executive Officers.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/
OPTIONS/SARS AT FY-END (#) SARS AT FY-END ($)(1)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------- ----------- ------------- ----------- -------------
James V. Manning... 225,000 90,000 6,488,750 2,430,000
Ray E. Hannah...... 64,000 40,000 1,754,500 60,000
Victor L. Marrero.. 60,000 106,000 1,667,500 2,172,250
Charles A. Mele.... 70,000 195,000 1,945,000 926,250
Anthony Vuolo...... 86,000 164,000 2,293,000 2,482,500
- -----------------
(1) Based upon the fiscal year-end closing price of the Common Stock of $37.00.
16
<PAGE>
PLANS AND ARRANGEMENTS OF THE COMPANY
PENSION PLAN
Employees of the Company and certain of its subsidiaries who satisfy
certain age and service requirements are eligible to participate in the Pension
Plan for Employees of Porex Technologies Corp. (the "Pension Plan"), a defined
benefit plan. The Company bears the entire cost of the Pension Plan. The
Company's contributions to the Pension Plan are computed on an actuarial basis
in order to fund the defined retirement benefits.
Normal retirement benefits are payable monthly for life to a participant
upon retirement at his or her retirement date (i.e., age 65), and are equal to
1/12 of the sum of (a) 0.6% of the participant's average annual compensation for
the five consecutive calendar years that the participant's compensation was the
highest during the ten consecutive years of service immediately preceding
retirement ("Final Average Compensation"), multiplied by the participant's
credited years of service up to a maximum of 35 years, and (b) 0.6% of the
participant's Final Average Compensation in excess of the average annual Social
Security taxable wage base for the 35-year period ending with the year the
participant would reach normal retirement age, multiplied by the participant's
credited years of service up to a maximum of 35 years. A participant becomes
100% vested in his or her accrued retirement benefit after completion of five
years of service or upon attainment of normal retirement at age 65. Retirement
benefits are not subject to any deduction for Social Security or other offset
amounts.
Under a defined benefit plan such as the Pension Plan, contributions
allocable to individual participants cannot be readily and accurately
calculated. The table below shows estimated annual retirement benefits for
executives at specified levels of remuneration and years of service. The
estimates assume that benefits commence at age 65 under a straight life annuity
form. The table discloses the benefits that an individual would receive at age
65 if he participated in the Pension Plan for 15, 20, 25, 30 and 35 years.
PENSION PLAN TABLE
Years of Service
--------------------------------------
Remuneration 15 20 25 30 35
------------ -- -- -- -- --
100,000 15,363 20,484 25,604 30,725 35,864
115,000 18,063 24,084 30,104 36,125 42,146
125,000 19,863 26,484 33,104 39,725 46,346
150,000 24,363 32,484 40,604 48,725 56,846
152,000 or more 24,723 32,964 41,204 49,445 57,686
Ray E. Hannah, the only Named Executive Officer participating in the
Pension Plan, had accrued 29 credited years of service under the Pension Plan
and had annual remuneration covered by the Pension Plan of $160,000 as of
January 1, 1997. Sections 401(a)(17) and 415 of the Internal Revenue Code limit
the amount of compensation that may be considered in computing benefits under a
qualified retirement plan. For 1995 and 1996, the maximum amount of
compensation allowed for use in calculating an individual's pension benefits
under the Retirement Plan was $150,000. For 1997, the maximum amount increased
to $160,000.
17
<PAGE>
COMPARISON OF CUMULATIVE TOTAL SHAREHOLDER RETURN
AMONG SYNETIC, INC., NASDAQ U.S. COMPOSITE INDEX
AND COMPOSITE INDEXES
The following graphs compare the cumulative total shareholder return on the
Company's Common Stock for the period beginning June 30, 1992 and ending June
30, 1997 with: (a) in the case of Graph A, the cumulative total shareholder
return of the NASDAQ US Composite stock index and the Dow Jones Containers &
Packaging index and (b) in the case of Graph B, the cumulative total shareholder
return of the NASDAQ US Composite stock index and a composite index consisting
of the Dow Jones Containers & Packaging index and the Dow Jones Retailers and
Wholesalers Drug-Based index, weighted according to the distribution of the
Company's revenues in each time period between its plastics business and its
institutional pharmacy business (the "Dow Composite Index"). The comparison
assumes the investment of $100 on June 30, 1992 in Company Common Stock and in
each index and that dividends were reinvested on the ex-dividend date. The
Company is not included in the composite indexes.
[GRAPH A APPEARS HERE]
CUMULATIVE TOTAL RETURN
Based on reinvestment of $100 beginning June 30, 1992
Measurement period Dow Jones Containers
(Fiscal year Covered) Synetic Inc. NASDAQ US Composite & Packaging Index
- --------------------- ------------ ------------------- --------------------
Measurement PT - $ 100 $ 100 $ 100
06/30/92
FYE 06/30/93 $ 71 $ 126 $ 96
FYE 06/30/94 $ 76 $ 127 $ 98
FYE 06/30/95 $ 136 $ 169 $ 123
FYE 06/30/96 $ 206 $ 218 $ 122
FYE 06/30/97 $ 206 $ 265 $ 154
[GRAPH B APPEARS HERE]
CUMULATIVE TOTAL RETURN
Based on reinvestment of $100 beginning June 30, 1992
Measurement period Dow
(Fiscal year Covered) Synetic Inc. NASDAQ US Composite Composite Index
- --------------------- ------------ ------------------- ---------------
Measurement PT - $ 100 $ 100 $ 100
06/30/92
FYE 06/30/93 $ 71 $ 126 $ 108
FYE 06/30/94 $ 76 $ 127 $ 124
FYE 06/30/95 $ 136 $ 169 $ 168
FYE 06/30/96 $ 206 $ 218 $ 167
FYE 06/30/97 $ 206 $ 265 $ 211
18
<PAGE>
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee and the Stock Option Committee are composed of
three outside directors, Messrs. Ferguson, Sarkowsky and Weis. The Compensation
Committee is responsible for reviewing and approving compensation levels for the
Company's executive officers and reviewing and making recommendations to the
Board of Directors with respect to other matters relating to the compensation
practices of the Company. The Stock Option Committee is responsible for
approving the grants of options to purchase shares of Common Stock and general
administration of the Company's stock option plans.
The Company's compensation policies are intended to provide compensation
opportunities that will help attract, motivate and retain highly qualified
managers and executives and link their total compensation to increases in
shareholder value. The compensation of the Chief Executive Officer and the
other executive officers of the Company (other than Mr. Hannah) consists of base
salary and stock option grants. Stock options are generally exercisable in
annual installments over five years, reflecting the objective of the Board to
retain executives and to insure the linkage of executive compensation to
increases in shareholder value through stock appreciation. The Compensation
Committee intends to continue to use stock options as the key component of
executive compensation in order to provide long-term incentives that are aligned
to the interests of the stockholders of the Company. No specific formula is
used to determine stock option grants to any particular person (including the
Chief Executive Officer and the executive officers), but grants are generally
based upon factors such as the optionee's contribution toward Company
performance and expected contribution toward meeting long-term strategic goals
of the Company. Mr. Hannah's compensation consists of base salary, annual
incentive compensation and stock option grants. Mr. Hannah's incentive
compensation is based primarily upon the operating results of Porex and the
achievement of certain financial criteria established and communicated at the
beginning of the fiscal year.
For tax years beginning on or after January 1, 1994, Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), limits the ability of a
publicly held corporation to deduct compensation in excess of $1 million paid to
certain executive officers. In light of Section 162(m) of the Code, it is the
policy of the Stock Option Committee and the Compensation Committee to modify
where practicable the executive incentive plans so as to maximize the tax
deductibility of compensation paid to its top executive officers. Accordingly,
the proposed Amended Class A Plan, Amended Class B Plan, Amended 1991 Plan and
the Individual Option were designed to ensure that compensation attributable to
options granted thereunder will be tax deductible by the Company. It is
possible, however, that options previously granted under the Company's option
plans to certain individuals who may subsequently become subject to Section
162(m) may not be fully deductible by the Company. The Board does not anticipate
that the compensation from the Company to any executive officer during fiscal
year ending June 30, 1998 will exceed the limits on deductibility for such
period.
Thomas R. Ferguson
Herman Sarkowsky
Albert M. Weis
19
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PURCHASE AND SALE AGREEMENT; DIVESTITURE. On December 14, 1994, pursuant
to the Purchase and Sale Agreement dated as of May 24, 1994 between the Company
and Merck (the "Purchase and Sale Agreement"), the Company purchased 5,268,463
shares of the Company's Common Stock from Merck for an aggregate purchase price
of $37,764,019. At the time of the purchase by the Company, SN Investors
purchased 5,061,857 shares of the Company's Common Stock (the "Wygod Shares"
and, collectively with the shares purchased by the Company, the "Shares") from
Merck for an aggregate purchase price of $36,283,079. The purchase prices for
the Shares stated above reflect a final purchase price adjustment, pursuant to
the terms of the Purchase and Sale Agreement, in the amount of $2,331,256 that
was paid by the Company to Merck on July 31, 1996, $1,142,315 of which was
reimbursed to the Company by SN Investors. The purchase by SN Investors was
made pursuant to an assignment by the Company to Mr. Wygod of the right to
purchase the Wygod Shares pursuant to the Investment Agreement between Mr. Wygod
and the Company, dated as of September 13, 1994 (the "Investment Agreement").
Mr. Wygod, as permitted under the Investment Agreement, further assigned to SN
Investors his right to purchase the Wygod Shares. The Investment Agreement
governs the terms and conditions under which the Wygod Shares will be held by
Mr. Wygod and his permitted assignees and transferees. See "--Investment
Agreement".
Also on December 14, 1994, the Company consummated the sale (the
"Divestiture") of the subsidiaries conducting the Company's institutional
pharmacies business (the "Institutional Pharmacies Business") to Pharmacy
Corporation of America, an indirect, wholly owned subsidiary of Beverly
Enterprises, Inc. ("Beverly"), for approximately $107,300,000.
In the Purchase and Sale Agreement, the Company agreed, until May 24, 1999,
to be bound by the restrictions contained in the Consulting Agreement described
below under "--Consulting Agreement", provided that such restrictions shall be
of no further force and effect in the event of the death of Mr. Wygod, or if Mr.
Wygod ceases to be a director of the Company or any subsidiary of the Company,
ceases to have any ownership interest in the Company (provided that if the
Company is a public company he may have up to a 1% equity interest in the
Company), and is not a principal, agent or employee of or consultant to the
Company or any subsidiary of the Company, or is not otherwise rendering any
services to the Company or any subsidiary of the Company.
Pursuant to the terms of the Purchase and Sale Agreement, options to
purchase common stock of Merck and its subsidiaries (other than the Company and
its subsidiaries) previously granted to certain employees and consultants were
modified so that employment by or consulting services to the Company or its
subsidiaries (in the case of employees and consultants continuing with the
Company after the closing of the Purchase) or Beverly or its subsidiaries (in
the case of employees and consultants continuing with the Institutional
Pharmacies Business after the closing of the Divestiture) will be considered
employment by or consulting services to Merck and its subsidiaries for purposes
of vesting and continued exercisability of such options; provided that no
further vesting of such options occurred after June 1, 1996.
INVESTMENT AGREEMENT. In the Investment Agreement, the Company assigned
the rights and obligations to purchase the Wygod Shares to Mr. Wygod. The
Investment Agreement governs the terms and conditions under which the Wygod
Shares will be held by Mr. Wygod and his permitted assignees and transferees.
Mr. Wygod, as permitted under the Investment Agreement, assigned such rights and
obligations to SN Investors. Pursuant to the Investment Agreement, SN Investors
was (1) required to be a limited partnership in which Mr. Wygod or an entity
controlled by Mr. Wygod is the general partner and one or more of his family
trusts and/or partnerships (collectively, the "Wygod Entities") and/or
independent third parties are limited partners and (2) required to agree to be
bound by all of the restrictions and obligations applicable to Mr. Wygod under
the Investment Agreement. The Investment Agreement required the initial
investment of the Wygod Entities in SN Investors to be at least $20,000,000 (on
a cost basis) (the "Wygod Investment").
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The Investment Agreement provides that, until the earliest to occur of (a)
December 14, 1998, (b) the death or adjudication of incompetency of Mr. Wygod or
(c) a Change of Control (as defined in the Investment Agreement) (the
"Restriction Period"), in respect of the Wygod Investment, except to the extent
of proceeds from sales of the Wygod Shares pursuant to a tender or exchange
offer for shares of Common Stock that is not opposed by the Board, the Wygod
Entities will at all times maintain (directly and/or through SN Investors) at
least $20,000,000 (on a cost basis) in the Wygod Investment and will not cause
or allow the amount of the Wygod Investment (on a cost basis) to be less than
$20,000,000 (net of any disposition, transfer, pledge, distribution by SN
Investors or any other arrangement involving the transfer of ownership or
interests in Wygod Shares (or proceeds therefrom), but not taking into account
any reduction in the Wygod Investment by virtue of a decline in the value of
Wygod Shares).
A "Change of Control" under the Investment Agreement means: (a) the
acquisition by any person, entity or group of at least 50% of the voting power
of the voting securities of the Company other than the Wygod Shares; (b)
individuals who, as of the date of the Investment Agreement, constitute the
Board (the "Incumbent Board") ceasing for any reason to constitute at least a
majority of the Board (provided that directors whose nomination or election was
approved by the Incumbent Board are also generally deemed to be part of the
Incumbent Board); (c) a reorganization, merger or consolidation or sale or other
disposition of all or substantially all of the assets of the Company (a
"Business Combination"), excluding, however, such a Business Combination
pursuant to which (i) all or substantially all of the individuals and entities
who were the beneficial owners of the Company's voting securities immediately
prior to such Business Combination beneficially own more than 60% of,
respectively, the then-outstanding shares of common stock and the combined
voting power of the then-outstanding securities entitled to vote generally in
the election of directors of the corporation resulting from such Business
Combination, in substantially the same proportions as their ownership
immediately prior to such Business Combination of the Company's voting
securities, and (ii) at least a majority of the board of directors of the
resulting corporation were members of the Incumbent Board at the time of the
execution of the initial agreement or of the action of the Board providing for
such Business Combination; (d) a complete liquidation or dissolution of the
Company; or (e) the issuance by the Company following the closing of the
Purchase of shares of Common Stock constituting in the aggregate more than 50%
of the shares of Common Stock outstanding as of immediately following the
closing of the Purchase. As of January 1, 1998, the Company had issued
5,151,747 shares of Common Stock since the closing of the Purchase.
Accordingly, the issuance of an aggregate of 1,103,108 additional shares of
Common Stock would be a "Change of Control" as defined in clause (e) above.
Pursuant to the Investment Agreement, during the Restriction Period: (a)
Mr. Wygod and SN Investors are required to vote (or cause to be voted) the Wygod
Shares (i) with respect to election of directors, for the nominees who would
have been elected based on the vote of all shares of Common Stock, other than
the Wygod Shares, in proportion to the votes that such nominees received, and
(ii) on all other matters to come before the stockholders of the Company, in the
same manner as a majority of the outstanding shares of Common Stock (other than
the Wygod Shares) are voted; and (b) except for sales pursuant to a tender or
exchange offer for the shares of Common Stock that is not opposed by the Board,
neither Mr. Wygod nor SN Investors may transfer interests in the Wygod Shares
(except that Mr. Wygod may transfer interests in SN Investors to the extent
otherwise permitted by the Investment Agreement). Upon the expiration of the
obligations of Mr. Wygod and SN Investors described in this paragraph, Mr. Wygod
and SN Investors may be in a position to influence the election of the Board as
well as the direction and future operations of the Company.
Under the Investment Agreement, following the earlier to occur of (a)
December 14, 1998 or (b) the death or adjudication of incompetency of Mr. Wygod:
(i) to the extent the Wygod Entities and/or SN Investors retain the power to
vote Wygod Shares that have, in the aggregate, in excess of 20% of the voting
power of the Company's voting securities outstanding at the time of any vote by
stockholders of the Company, Mr. Wygod and SN Investors will vote (or cause to
be voted) the portion of such Wygod Shares representing the excess above 20% of
such voting power, (A) with respect to the election of directors, for the
nominees who would have been elected based on the vote of all shares of Common
Stock, other than the Wygod Shares, in proportion to the votes that such
nominees received, and (B) on all other matters to come before the stockholders
of the Company, in the same
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manner as a majority of the outstanding shares of Common Stock, other than the
Wygod Shares, are voted; and (ii) to the extent that Wygod Entities and/or SN
Investors retain beneficial ownership of Wygod Shares that have, in the
aggregate, in excess of 20% of the voting power of the outstanding voting
securities of the Company, the portion of such Wygod Shares representing the
excess above 20% of such voting power at the time of any proposed sale or
transfer thereof shall not be sold or transferred except (A) to transferees
reasonably acceptable to the Company (provided that, without the Company's
consent, no such transfer or series of transfers to a single person, entity or
group will involve the transfer of more than 9.9% of the voting power of the
Company's outstanding voting securities and no such transfer or series of
transfers will be made to a single person, entity or group that will own,
following such transfers, more than 50% of the voting power of the Company's
outstanding voting securities), (B) to the partners of SN Investors in
proportion to their respective interests in SN Investors (provided that, without
the Company's consent, no such transfer or series of transfers to a single
person, entity or group (other than Mr. Wygod or the Wygod Entities) will
involve the transfer of more than 9.9% of the voting power of the Company's
outstanding voting securities), (C) in ordinary open market transactions, or (D)
pursuant to an underwritten public offering.
The Investment Agreement provides that the restrictions described in the
foregoing paragraph will not apply (a) in the event there has been, or from and
after the occurrence of, a Change of Control (as defined in the Investment
Agreement) of the Company, (b) at any time after December 14, 2004 or (c) to any
person or entity, other than Mr. Wygod, the Wygod Entities or SN Investors, to
whom Wygod Shares are transferred (including by means of distributions from SN
Investors) in accordance with the provisions of the foregoing paragraph.
The Investment Agreement also provides certain demand registration rights
to Mr. Wygod at Mr. Wygod's expense that are assignable to any permitted
transferee of the Wygod Shares; provided that in no event is the Company
required to file in the aggregate more than two registration statements in
connection therewith. Mr. Wygod has not assigned such registration rights to SN
Investors. While Mr. Wygod currently intends to assign such registration rights
to SN Investors in the event the General Partner determines to sell or otherwise
transfer the Wygod Shares under circumstances in which registration would be
required, Mr. Wygod is under no obligation to do so.
Certain provisions of the Investment Agreement may have the effect of
deterring a change of control of the Company that is not supported by the Board
or Mr. Wygod. During the Restriction Period, Mr. Wygod and SN Investors are
prohibited from transferring the Wygod Shares, except pursuant to a tender or
exchange offer that is not opposed by the Board or to specified permitted
transferees. In addition, under the Investment Agreement, in the event that a
Change of Control (as defined in the Investment Agreement) were to occur during
the Restriction Period, Mr. Wygod and SN Investors would no longer be obligated
under the Investment Agreement to vote the Wygod Shares with respect to nominees
for election as directors based on the vote of shares other than the Wygod
Shares and with respect to other matters in the same manner as the majority of
the other outstanding shares of Common Stock (other than the Wygod Shares) are
voted, with the result that Mr. Wygod and SN Investors would have unrestricted
voting power with respect to the Wygod Shares. The effect of these provisions of
the Investment Agreement may be to discourage the commencement of a tender or
exchange offer opposed by the Board during the Restriction Period and to
discourage a proxy solicitation to change a majority of the Board absent the
support of Mr. Wygod.
CONSULTING AGREEMENT. In the Consulting Agreement, dated as of May 24,
1994 (the "Consulting Agreement"), by and among Mr. Wygod, Merck and Medco, Mr.
Wygod has agreed that, until May 24, 1999, absent Merck's prior written
approval, he will not (as principal, agent, employee, consultant or otherwise)
directly or indirectly engage in activities with, nor render services to, any
business engaged or about to become engaged in a Competitive Business (as
defined in the Consulting Agreement). A "Competitive Business" is defined in
the Consulting Agreement as: (a) the pharmaceutical business of Merck and its
affiliates (unless such business is subsequently disposed of and Mr. Wygod did
not have material involvement in such business during the two-year period
preceding May 24, 1994), (b) the business, as of either November 18, 1993 or May
24, 1994, of Medco
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and its subsidiaries (unless such business is subsequently disposed of and Mr.
Wygod did not have material involvement in such business during the two-year
period preceding May 24, 1994), other than the business of Porex and the other
plastic businesses of the Company as conducted as of May 24, 1994, or (c) any
other then-current business of Merck and its affiliates as to which Mr. Wygod
became materially involved following November 18, 1993; provided, however, that
the Consulting Agreement permits Mr. Wygod to have a 1% or less equity interest
in a Competitive Business that is a public corporation. In addition, the
Consulting Agreement provides that, until May 24, 1999, Mr. Wygod will not,
directly or indirectly: (i) solicit or contact any customer or prospective
customer of Medco and/or any of its affiliates as to matters that relate to a
Competitive Business in which Medco or its affiliates is then engaged or which
is in any way inconsistent or interferes therewith; (ii) induce, or attempt to
induce, any employees or agents or consultants of Medco and/or its affiliates to
do anything from which Mr. Wygod is restricted by reason of the Consulting
Agreement; or (iii) offer or aid others to offer employment to any employees of
Medco or its affiliates.
OTHER. The Company was reimbursed approximately $121,600 and $49,500 by a
corporation controlled by Mr. Wygod for the partial use of two of the Company's
office facilities and for services rendered by one Company employee during the
fiscal years ended June 30, 1997 and 1996, respectively.
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PROPOSAL TWO:
AMENDMENT TO THE CHARTER ELIMINATING
THE CLASSIFICATION OF THE BOARD OF DIRECTORS
The proxy will be voted in accordance with the directions thereon with
respect to Proposal Two, or, if no directions are indicated, FOR adoption of
Proposal Two.
The Board has determined that the Charter should be amended to eliminate
the classification of the Board and to provide for the annual election of all
directors, and has unanimously voted to recommend such amendment to the
stockholders. If the proposed amendment is approved, the classified Board will
be eliminated, the current term of office of each director will end at the 1998
Annual Meeting, which will be held after the end of the Company's fiscal year
ending June 30, 1998, and all directors will thereafter be elected for one-year
terms at each annual meeting of stockholders.
RECOMMENDATION OF THE BOARD CONCERNING THE APPROVAL OF THE CHARTER AMENDMENT
ELIMINATING THE CLASSIFICATION OF THE BOARD OF DIRECTORS
The affirmative vote of the holders of at least two-thirds of the
outstanding shares of Common Stock entitled to vote at the Meeting is required
for approval of the amendment to the Charter to eliminate the classification of
the Board and provide for the annual election of all directors. The Board
recommends that the stockholders vote FOR the proposal to amend the Charter to
provide for the annual election of directors.
ELIMINATION OF CLASSIFIED BOARD
Pursuant to the Charter, the Board is divided into three classes with
staggered three-year terms and not more than one class of directors is elected
at any annual meeting of stockholders. Under the By-laws, the nominees
receiving the greatest number of votes cast shall be elected directors of the
Company. The proposed amendment to the Charter would eliminate the three
classes and staggered three-year terms, as described above, and provide for the
annual election of all directors.
Proponents of classified boards of directors believe that a classified
board helps the board of directors maintain a greater continuity of experience
because the majority of directors at any given time will have experience with
the business affairs and operations of the company. This continuity may assist
the company in long-term strategic planning. Additionally, proponents argue
that a classified board reduces the possibility of a sudden change in majority
control of the board of directors; in the event of a hostile takeover attempt, a
classified board may encourage a person seeking control of the company to
initiate arm's-length discussions with management and the board, who are in a
position to negotiate a more favorable transaction for stockholders.
The Board believes that a classified board of directors, however, limits
the ability of stockholders to elect directors and exercise influence over the
Company. The election of directors is the primary avenue for stockholders to
influence corporate governance policies and to hold management accountable for
its implementation of those policies. The Board is of the opinion that many
potential investors are opposed to the concept of a classified board and, in
keeping with its goal of ensuring that the Company's corporate governance
policies maximize management accountability to stockholders, has determined that
eliminating the classified Board, and instead having all of the Company's
directors elected annually, would best serve the interests of the Company and
its stockholders.
If Proposal Two is adopted by the stockholders, Article Six of the Charter
will be deleted and replaced with the following:
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ARTICLE SIX
The number of directors which shall constitute the whole Board of
Directors of the Corporation shall be determined in the By-laws as
provided therein. The directors of the Corporation shall be elected
by the stockholders entitled to vote thereon at each annual meeting of
stockholders and shall hold office until the next annual meeting of
stockholders and until their respective successors shall have been
elected and qualified, subject, however, to prior death, resignation,
retirement, disqualification or removal from office. The term of
office of each director in office at the time this amendment to
Article Six of the Certificate of Incorporation of the Corporation
becomes effective shall expire at the time of the opening of the polls
for the election of directors at the next annual meeting of
stockholders of the Corporation held after the time this amendment to
Article Six becomes effective.
Section 141(d) of the Delaware General Corporation Law (the "DGCL")
requires that a corporation desiring to classify its board of directors must
expressly provide for such classification in either its certificate of
incorporation or by-laws. The deletion of the provisions of Article Six
relating to the classification of the Board is intended to remove any express
provision for the classification of the Board, thereby removing the
classification of the Board.
If Proposal Two is approved, the Company intends to file an amendment to
the Charter immediately after adjournment of the 1997 Annual Meeting with the
Secretary of State of the State of Delaware, upon which filing it will be
effective. In addition, the Board of Directors has approved certain
corresponding amendments to the By-laws that will be effective immediately upon
the filing of the amendment to the Charter.
In order to facilitate the power of stockholders to elect directors,
the Board believes that the classification of the Board should be eliminated.
The Board believes that all directors should be equally accountable at all times
for the Company's performance.
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PROPOSAL THREE:
AMENDMENT TO THE CHARTER
ELIMINATING THE SUPERMAJORITY VOTE REQUIREMENT
FOR CHARTER AMENDMENTS RELATING TO
THE CLASSIFICATION OF THE BOARD
The proxy will be voted in accordance with the directions thereon with
respect to Proposal Three, or, if no directions are indicated, FOR adoption of
Proposal Three.
The Board has determined that, if Proposal Two is approved, the Charter
should be amended to eliminate the requirement that provisions of the Charter
relating to the classification of the Board may only be amended with the
affirmative vote of the holders of two-thirds of the shares entitled to vote in
the election of directors. The Board has unanimously voted to recommend the
amendment described in this Proposal Two to the stockholders.
The effectiveness of Proposal Three is expressly conditioned upon the
adoption of Proposal Two by stockholders, and will not be effective absent such
adoption. See "Proposal Two -- Amendment to the Charter Eliminating the
Classification of the Board of Directors".
RECOMMENDATION OF THE BOARD CONCERNING THE APPROVAL OF THE CHARTER AMENDMENT
ELIMINATING THE SUPERMAJORITY VOTE REQUIREMENT FOR CHARTER AMENDMENTS RELATING
TO THE CLASSIFICATION OF THE BOARD
The affirmative vote of the holders of at least two-thirds of the
outstanding shares of Common Stock entitled to vote at the Meeting is required
for approval of Proposal Three. The Board recommends that the stockholders vote
FOR Proposal Three.
ELIMINATION OF THE SUPERMAJORITY VOTE REQUIREMENT FOR CHARTER AMENDMENTS
RELATING TO THE CLASSIFICATION OF THE BOARD
The Charter provides that any amendment to the provisions thereof relating
to the classification of the Board must be approved by the affirmative vote of
the holders of two-thirds of the shares entitled to vote in the election of
directors. This supermajority vote requirement was included in the Charter to
protect the purposes and effect of having a classified board of directors. If
stockholders approve Proposal Two, the Board will no longer be classified, all
directors will be elected annually, and the provisions that were protected by
the supermajority voting requirement relating to the classification of the Board
and the election of one-third of the Board at each annual meeting will be
deleted from the Charter. Accordingly, the supermajority vote requirement
protecting such provisions would no longer be necessary. See "Proposal Two --
Amendment to the Charter Eliminating the Classification of the Board of
Directors".
Consistent with the Board's view that it is in the best interest of the
stockholders that holders of a majority of the voting power be able to have more
control over the affairs of the Company, the Board unanimously recommends that
stockholders vote to eliminate the supermajority vote requirement for Charter
amendments relating to the classification of the Board. The text of the
amendment described in this Proposal Three is set forth below in "Proposal
Eight: Amendment to the Charter Eliminating the Supermajority Vote Requirement
for Charter Amendments Relating to the Removal of Directors -- Text of the
Charter Amendment to Eliminate Certain Supermajority Voting Requirements".
26
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PROPOSAL FOUR:
AMENDMENT TO THE CHARTER
ELIMINATING CUMULATIVE VOTING
The proxy will be voted in accordance with the directions thereon with
respect to Proposal Four, or, if no directions are indicated, FOR adoption of
Proposal Four.
The Board has determined that the Charter should be amended to eliminate
cumulative voting for the election of directors. If the proposed amendment is
approved, cumulative voting will be eliminated and each share would be entitled
to a single vote "for" or to "withhold" such vote in such respect of the
election of each nominee for director.
RECOMMENDATION OF THE BOARD CONCERNING THE APPROVAL OF THE AMENDMENT TO THE
CHARTER ELIMINATING CUMULATIVE VOTING
The affirmative vote of the holders of at least two-thirds of the
outstanding shares of the Common Stock entitled to vote at the Meeting is
required for approval of the amendment to the Charter to eliminate cumulative
voting. The Board recommends that the stockholders vote FOR the proposal to
amend the Charter to eliminate cumulative voting.
ELIMINATION OF CUMULATIVE VOTING
The Charter provides that each stockholder may cumulate his or her votes in
the election of directors. Cumulative voting entitles a stockholder to cast a
number of votes equal to the number of directors to be elected multiplied by the
number of shares of Common Stock held by such stockholder, and to cast all such
votes for one nominee or to distribute such votes among up to as many candidates
as there are positions to be filled. Nominees receiving the highest number of
votes on the foregoing basis up to the total number of directors to be elected
are elected as directors.
Cumulative voting enables a minority stockholder or group of stockholders
to elect a representative to the Board without respect to the votes of a
majority of the stockholders. For example, if eleven directors are to be
elected at an annual meeting, stockholders holding approximately 8.3% of the
voting shares could nominate and elect one director by cumulating and casting
their eleven votes per share only for their single candidate. The other
shareholders holding approximately 91.7% could not prevent the election of that
candidate under such conditions.
In the absence of cumulative voting, each share is entitled to a single
vote "for" or to "withhold" such vote in respect of the election of each nominee
for director, and, accordingly, a stockholder or group of stockholders must hold
a majority of the outstanding shares of Common Stock to be able to cause the
election of one or more directors. Furthermore, Section 141(k)(2) of the DGCL
provides that, if cumulative voting is in effect, a director may not be removed
by the stockholders if votes cast against such removal (or, if done by written
consent, the votes eligible to be cast by non-consenting stockholders) would be
sufficient to elect such director under cumulative voting under the same voting
conditions. For example, if the Board consists of eleven directors, the
affirmative vote of the holders of 91.7% of the outstanding shares entitled to
vote would be required to remove a director. Under the Charter and absent
cumulative voting, a director may be removed by the affirmative vote of the
holders of at least two-thirds of the outstanding shares of stock entitled to
vote; provided, however, if Proposal Six is approved, the Charter will be
amended to provide that a director could be removed by the affirmative vote of
the holders of a majority of the outstanding shares of stock entitled to vote.
The elimination of cumulative voting will make it more difficult for a
minority stockholder or a group of stockholders to obtain representation on the
Board without the concurrence of holders of a majority of the outstanding shares
of Common Stock, and may restrict the ability of holders of a significant number
of shares, but
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less than a majority, from influencing the management or policies of the
Company. While this proposal is not intended as a takeover-resistive device,
the elimination of cumulative voting, under certain circumstances, may have
certain takeover-resistive effects by discouraging unsolicited acquisitions of
minority interests in the Company. The amendment to eliminate cumulative voting
is not being proposed in response to any particular effort by a minority
stockholder or group of stockholders to obtain representation on the Board of
Directors, nor is the Board aware of any such effort.
As of January 1, 1998, the Wygod Shares constituted approximately 30% of
the outstanding shares; these shares would be the only minority interest in the
Company sufficient to elect a director to a classified Board by cumulating
votes. Pursuant to the provisions of the Investment Agreement, Mr. Wygod and SN
Investors have agreed to vote the Wygod Shares in favor of the nominees who
would have been elected based on the vote of all shares of Common Stock other
than themselves, in proportion to the votes that such nominees received, and,
accordingly, are contractually prevented from otherwise cumulating their votes.
This agreement with respect to voting terminates on the earlier of December 14,
1998 or the occurrence of a Change of Control (as defined below in "Certain
Relationships and Related Transactions -- Investment Agreement"). Upon
termination of these voting restrictions, and in the event that cumulative
voting is eliminated, Mr. Wygod and SN Investors would no longer have the right
to elect directors to the Board of Directors unilaterally, but require the
concurrence of an additional 20% of the outstanding shares of Common Stock to
ensure the election of any particular director. On the other hand, Mr. Wygod
and SN Investors will hold a significant percentage of the Company's stock and,
accordingly, may have significant influence over any votes for the election of
directors.
The Board believes that it is in the best interests of the Company and its
stockholders to eliminate cumulative voting so that each director represents the
interests of all stockholders. Cumulative voting permits the presence on the
Board of one or more directors representing the interests of a minority of
stockholders, even if such stockholders' interests conflict or are inconsistent
with the interests of the majority of stockholders. The elimination of
cumulative voting will help ensure that each director represents the best
interests of all stockholders, rather than the interests of any special
constituency. Moreover, the elimination of cumulative voting prevents a
minority shareholder or group of shareholders from disrupting the management of
the Company and preventing it from operating in the most effective manner. In
addition, the elimination of cumulative voting will reduce the percentage of
shares required to remove a director to 66% (or, if Proposal Six is adopted by
stockholders, to a majority), thereby increasing the accountability of each
director to stockholders.
If Proposal Four is adopted by the stockholders, paragraph (c) of Article
Four of the Charter will be amended to read as follows:
(c) At each election for directors, each holder of Common Stock
entitled to vote at such election shall be entitled to one vote in
person or by proxy for each share of stock held by such holder.
If Proposal Four is approved, the Company intends to file an amendment to
the Charter immediately after adjournment of the 1997 Annual Meeting with the
Secretary of State of the State of Delaware, upon which filing it will be
effective. If Proposal Four is approved, the election of directors at the 1998
Annual Meeting will occur after the effectiveness of such amendment and,
accordingly, there will be no cumulative voting in the election of directors at
the 1998 Annual Meeting.
By providing for majority-rule voting in the election of directors, the
Board believes that approval of the proposed amendment will ensure that the
Board represents the majority of the stockholders rather than any special
constituency.
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PROPOSAL FIVE:
AMENDMENT TO THE CHARTER
ELIMINATING THE SUPERMAJORITY VOTE REQUIREMENT
FOR CHARTER AMENDMENTS RELATING TO
CUMULATIVE VOTING
The proxy will be voted in accordance with the directions thereon with
respect to Proposal Five, or, if no directions are indicated, FOR adoption of
Proposal Five.
The Board has determined that, if Proposal Four is approved, the Charter
should also be amended to eliminate the related requirement that provisions of
the Charter relating to cumulative voting may only be amended with the
affirmative vote of the holders of two-thirds of the shares entitled to vote in
the election of directors. The Board has unanimously voted to recommend the
amendment described in this Proposal Five to the stockholders.
The effectiveness of Proposal Five is expressly conditioned upon the
adoption of Proposal Four by stockholders, and will not be effective absent such
adoption. See "Proposal Four -- Amendment to the Charter Eliminating Cumulative
Voting".
RECOMMENDATION OF THE BOARD CONCERNING THE APPROVAL OF THE CHARTER AMENDMENT
ELIMINATING THE SUPERMAJORITY VOTE REQUIREMENT FOR CHARTER AMENDMENTS RELATING
TO CUMULATIVE VOTING
The affirmative vote of the holders of at least two-thirds of the
outstanding shares of Common Stock entitled to vote at the Meeting is required
for approval of Proposal Five. The Board recommends that the stockholders vote
FOR Proposal Five.
ELIMINATION OF THE SUPERMAJORITY VOTE REQUIREMENT FOR CHARTER AMENDMENTS
RELATING TO CUMULATIVE VOTING
The Charter provides that any amendment to the provisions thereof relating
to cumulative voting must be approved by the affirmative vote of the holders of
two-thirds of the shares entitled to vote in the election of directors. This
supermajority vote requirement was included in the Charter to protect the
purposes and effect of having cumulative voting. If stockholders approve
Proposal Four, stockholders will no longer be able to cumulate their votes in
the election of directors, each share would be entitled to a single vote "for"
or to "withhold" such vote in respect of the election of each nominee for
director, and the provisions that were protected by the supermajority voting
requirement relating to cumulative voting will be deleted from the Charter.
Accordingly, the supermajority vote requirement protecting such provisions would
no longer be necessary. See "Proposal Four -- Amendment to the Charter
Eliminating Cumulative Voting".
Consistent with the Board's view that it is in the best interest of the
stockholders that holders of a majority of the voting power be able to have more
control over the affairs of the Company, the Board unanimously recommends that
stockholders vote to eliminate the supermajority vote requirement for Charter
amendments relating to cumulative voting. The text of the amendment described
in this Proposal Five is set forth below in "Proposal Eight: Amendment to the
Charter Eliminating the Supermajority Vote Requirement for Charter Amendments
Relating to the Removal of Directors -- Text of the Charter Amendment to
Eliminate Certain Supermajority Voting Requirements".
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PROPOSAL SIX:
AMENDMENT TO THE CHARTER
TO PROVIDE FOR REMOVAL OF DIRECTORS
BY A MAJORITY OF STOCKHOLDERS
The proxy will be voted in accordance with the directions thereon with
respect to Proposal Six, or, if no directions are indicated, FOR the adoption of
Proposal Six.
The Board has determined that, if Proposal Two is approved, the Charter
should be amended to provide for removal of directors, either with or without
cause, at any time, by the affirmative vote of the majority of outstanding
shares entitled to vote in the election of directors. The Board has unanimously
voted to recommend the amendment described in this Proposal Six to the
stockholders.
The effectiveness of Proposal Six is expressly conditioned upon the
adoption of Proposal Two by stockholders, and will not be effective absent such
adoption. See "Proposal Two -- Amendment to the Charter Eliminating the
Classification of the Board of Directors".
RECOMMENDATION OF THE BOARD CONCERNING THE APPROVAL OF THE CHARTER AMENDMENT TO
PROVIDE FOR REMOVAL OF DIRECTORS BY A MAJORITY OF STOCKHOLDERS
The affirmative vote of the holders of at least two-thirds of outstanding
shares of Common Stock entitled to vote at the Meeting is required for approval
of Proposal Six. The Board recommends that the stockholders vote FOR Proposal
Six.
REMOVAL OF DIRECTORS BY A MAJORITY OF STOCKHOLDERS
The Charter provides that directors may be removed, either for or without
cause, at any time, by the affirmative vote of the holders of record of at least
two-thirds of the outstanding shares of stock entitled to vote. This provision
was included in the Charter to protect the purposes and effect of having a
classified board of directors. If stockholders approve Proposal Two, the Board
will no longer be classified and all directors will be elected annually. See
"Proposal Two -- Amendment to the Charter Eliminating the Classification of the
Board of Directors". The Board believes that enabling a majority of
stockholders to remove any director increases the ability of stockholders to
exercise influence over the Company, ensuring that the Board is directly
accountable to the majority of stockholders.
If Proposal Six is approved by the stockholders, Article Ten of the Charter
will be deleted in its entirety and replaced with the following:
ARTICLE TEN
The election of directors need not be by written ballot unless
required by the By-laws of the Corporation. Any directors may be
removed, either for or without cause, at any time, by the affirmative
vote of holders of record of a majority of the outstanding shares of
stock entitled to vote, and the vacancy in the Board of Directors
caused by any such removal shall be filled as provided herein;
provided, that where the holders of any class or series of Preferred
Stock are entitled to elect one or more directors, the provisions of
the Certificate of Designation of such class or series of Preferred
Stock shall apply, in respect of removal, with or without cause, of a
director or directors so elected.
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In the event that Proposal Six is approved (assuming Proposal Two is
also approved), the holders of a majority of the outstanding shares of stock
entitled to vote will be able to remove a director.
The Board believes that empowering a majority of stockholders to
remove directors increases the accountability of the Board to stockholders,
and, accordingly recommends amending the Charter to provide for the removal of
directors by a majority of stockholders.
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PROPOSAL SEVEN:
AMENDMENT TO THE CHARTER
ELIMINATING THE SUPERMAJORITY VOTE REQUIREMENT
FOR CHARTER AMENDMENTS RELATING TO
THE REMOVAL OF DIRECTORS
The proxy will be voted in accordance with the directions thereon with
respect to Proposal Seven, or, if no directions are indicated, FOR adoption of
Proposal Seven.
The Board has determined that, if Proposal Two and Proposal Six are
approved, the Charter should be amended to eliminate the requirement that
provisions of the Charter relating to the power to remove directors or to fill
vacancies on the Board may only be amended with the affirmative vote of the
holders of two-thirds of the shares entitled to vote in the election of
directors. The Board has unanimously voted to recommend the amendment described
in this Proposal Seven to the stockholders.
The effectiveness of Proposal Seven is expressly conditioned upon the
adoption of Proposal Two and Proposal Six by stockholders, and will not be
effective absent such adoption. See "Proposal Two -- Amendment to the Charter
Eliminating the Classification of the Board of Directors" and "Proposal Six --
Amendment to the Charter to Provide for Removal of Directors by a Majority of
Stockholders".
RECOMMENDATION OF THE BOARD CONCERNING THE APPROVAL OF THE CHARTER AMENDMENT
ELIMINATING THE SUPERMAJORITY VOTE REQUIREMENT FOR CHARTER AMENDMENTS RELATING
TO THE REMOVAL OF DIRECTORS
The affirmative vote of the holders of at least two-thirds of the
outstanding shares of Common Stock entitled to vote at the Meeting is required
for approval of Proposal Seven. The Board recommends that the stockholders vote
FOR Proposal Seven.
ELIMINATION OF THE SUPERMAJORITY VOTE REQUIREMENT FOR CHARTER AMENDMENTS
RELATING TO THE REMOVAL OF DIRECTORS
The Charter provides that any amendment to the provisions thereof relating
to the removal of directors must be approved by the affirmative vote of the
holders of two-thirds of the shares entitled to vote in the election of
directors. This supermajority vote requirement was included in the Charter to
protect the purposes and effect of having a classified board of directors. If
stockholders approve Proposal Two, the Board will no longer be classified, all
directors will be elected annually, and the provisions that were protected by
the supermajority voting requirement relating to the classification of the Board
and the election of one-third of the Board at each annual meeting will be
deleted from the Charter. Accordingly, the supermajority vote requirement
protecting provisions designed to protect the classified board of directors
would no longer be necessary. See "Proposal Two -- Amendment to the Charter
Eliminating the Classification of the Board of Directors".
Consistent with the Board's view that it is in the best interest of the
stockholders that holders of a majority of the voting power be able to have more
control over the affairs of the Company, the Board unanimously recommends that
stockholders vote to eliminate the supermajority vote requirement for Charter
amendments relating to the removal of directors. The text of the amendment
described in this Proposal Seven is set forth below in "Proposal Eight:
Amendment to the Charter Eliminating the Supermajority Vote Requirement for
Charter Amendments Relating to the Removal of Directors -- Text of the Charter
Amendment to Eliminate Certain Supermajority Voting Requirements".
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PROPOSAL EIGHT:
AMENDMENT TO THE CHARTER
ELIMINATING THE SUPERMAJORITY VOTE REQUIREMENT
FOR BY-LAW AMENDMENTS SETTING THE MAXIMUM
NUMBER OF DIRECTORS
The proxy will be voted in accordance with the directions thereon with
respect to Proposal Eight, or, if no directions are indicated, FOR adoption of
Proposal Eight.
The Board has determined that the Charter should be amended to eliminate
the requirement that provisions of the By-laws setting the maximum number of
directors may only be amended with the affirmative vote of the holders of two-
thirds of the shares entitled to vote in the election of directors, and has
unanimously voted to recommend such amendment to the stockholders.
The effectiveness of Proposal Eight is expressly conditioned upon the
adoption of Proposal Two by stockholders, and will not be effective absent such
adoption. See "Proposal Two -- Amendment to the Charter Eliminating the
Classification of the Board of Directors".
RECOMMENDATION OF THE BOARD CONCERNING THE APPROVAL OF THE CHARTER AMENDMENT
ELIMINATING THE SUPERMAJORITY VOTE REQUIREMENT FOR CHARTER AMENDMENTS RELATING
TO THE CLASSIFICATION OF THE BOARD
The affirmative vote of the holders of at least two-thirds of the
outstanding shares of Common Stock entitled to vote at the Meeting is required
for approval of Proposal Eight. The Board recommends that the stockholders vote
FOR Proposal Eight.
ELIMINATION OF THE SUPERMAJORITY VOTE REQUIREMENT FOR BY-LAW AMENDMENTS SETTING
THE MAXIMUM NUMBER OF DIRECTORS
The Charter provides that any amendment to the provisions of the By-laws
that set the maximum number of directors on the Board at 12 must be approved by
the affirmative vote of the holders of two-thirds of the shares entitled to vote
in the election of directors. This supermajority vote requirement was included
in the Charter to protect the purposes and effect of having a classified board
of directors. If stockholders approve Proposal Two, the Board will no longer be
classified, all directors will be elected annually, and the provisions that were
protected by the supermajority voting requirement relating to the classification
of the Board and the election of one-third of the Board at each annual meeting
will be deleted from the Charter. Accordingly, the supermajority vote
requirement protecting provisions designed to protect the classified board of
directors would no longer be necessary. See "Proposal Two -- Amendment to the
Charter Eliminating the Classification of the Board of Directors".
If Proposal Eight is approved (assuming Proposal Two is also approved), the
holders of a majority of the outstanding shares of Common Stock will be able to
amend provisions of the By-laws that set the maximum number of directors at 12.
Consistent with the Board's view that it is in the best interest of the
stockholders that holders of a majority of the voting power be able to have more
control over the affairs of the Company, the Board unanimously recommends that
stockholders vote to eliminate the supermajority vote requirement for By-law
amendments setting the maximum number of directors.
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<PAGE>
TEXT OF THE CHARTER AMENDMENT TO ELIMINATE CERTAIN SUPERMAJORITY VOTING
REQUIREMENTS
If Proposals Three, Five, Seven and Eight are approved by the stockholders,
Article Twelve of the Charter will be deleted in its entirety and replaced with
the following:
ARTICLE TWELVE
The Corporation reserves the right to amend, alter, change or repeal any
provision in this Certificate of Incorporation or in the By-laws, in the
manner now or hereafter prescribed by statute, and all rights conferred on
stockholders herein are granted subject to this reservation.
In the event that any of Proposals Three, Five, Seven or Eight are not
approved by the stockholders, additional language will be added to the above
text of Article Twelve to provide that the applicable provision referred to in
such proposal may not be amended without the affirmative vote of the holders of
two-thirds of the outstanding shares entitled to vote in the election of
directors.
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<PAGE>
PROPOSAL NINE:
AMENDMENT TO THE CHARTER
TO INCREASE THE NUMBER OF AUTHORIZED SHARES
The proposed amendment to the Charter would increase the number of shares
of authorized shares of the Company's Common Stock from 50 million to 100
million. The proxy will be voted in accordance with the directions thereon with
respect to Proposal Nine, or if no directions are indicated, FOR adoption of
Proposal Nine.
RECOMMENDATION OF THE BOARD AND VOTE
The approval of the amendment to the Charter increasing the number of
authorized shares of Common Stock requires the affirmative vote of the holders
of a majority of the outstanding shares of the Company's Common Stock entitled
to vote at the Meeting.
The Board unanimously recommends a vote FOR approval of the proposed
amendment to the Charter.
INCREASE IN AUTHORIZED SHARES
The Board believes the increase in the number of authorized shares of
Common Stock will provide flexibility in connection with future stock dividends
or splits, financings, investment opportunities, acquisitions of other
companies, employee benefit plans and for other corporate purposes that the
Board deems advisable. The Company has announced its intention to issue shares
from time-to-time for corporate acquisitions, but there can be no assurance that
any such issuance or issuances for other purposes will be made or, if made, as
to the timing, type, or size of any issuance. The authorized but unissued
Common Stock of the Company, including the increased number of shares of Common
Stock if this proposed amendment is approved by the stockholders and made
effective, may be issued from time to time as determined by the Board without
further stockholder action (subject to any applicable stock exchange rules)
unless issued in transactions, such as certain mergers, which require
stockholder approval. The Company does not intend to seek stockholder approval
for any such corporate acquisitions or share issuances unless required by
applicable law, stock exchange rule or other regulation. The issuance of
additional shares of Common Stock may cause a dilution in the equity and
earnings of the present stockholders. No preemptive rights exist with respect
to any outstanding shares of Common Stock.
Of the 50 million shares currently authorized, as of January 1, 1998,
22,935,919 were issued, of which 5,274,463 are held in treasury and 17,661,456
are outstanding. As of the same date, there were 27,064,081 authorized but
unissued shares, 8,257,786 shares of which were reserved for issuance upon the
exercise of options under the Company's stock option plans, 2,750,000 shares of
which were reserved for issuance upon the conversion of Convertible Debentures
and 250,000 shares of which were reserved for issuance upon the exercise of the
Company's outstanding warrants.
If the amendment is adopted by the stockholders, the first sentence of
Article Four of the Charter will be amended to read as follows:
The Corporation shall have authority, to be exercised by the
Board of Directors, to issue a total of 110,000,000 shares consisting
of 100,000,000 shares of common voting stock of par value of $0.01 per
share (the "Common Stock") and 10,000,000 shares of preferred stock of
the par value of $0.01 per share (the "Preferred Stock").
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<PAGE>
PROPOSAL TEN:
AMENDED AND RESTATED
1989 CLASS A STOCK OPTION PLAN
The proxy will be voted in accordance with the directions thereon with
respect to Proposal Ten, or if no directions are indicated, FOR adoption of
Proposal Ten.
The Board has unanimously adopted, subject to stockholder approval, the
amendment and restatement of the Company's 1989 Class A Stock Option Plan (the
"Amended Class A Plan"). Stockholder approval of the Amended Class A Plan is
recommended by the Board to increase the number of shares of Common Stock that
are issuable thereunder by 1,000,000, to extend the term of the plan through the
tenth anniversary of the date on which stockholders approve the plan and to
ensure the tax deductible status of the compensation income generated upon the
exercise of options under the Amended Class A Plan by the Chief Executive
Officer and any other participating key officers who are among the other four
most highly compensated executive officers. The Amended Class A Plan contains
certain other amendments that reflect recent changes in Section 16 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and other
amendments that are described below. Since adoption of the Amended Class A Plan
may benefit the directors and executive officers of the Company, they may be
deemed to have an interest in its approval.
As of January 1, 1998, the market value of the Common Stock (based upon the
last sale price as reported on the Nasdaq National Market ("NASDAQ")) was $36.50
per share.
RECOMMENDATION OF THE BOARD CONCERNING THE APPROVAL OF THE AMENDED CLASS A PLAN
The affirmative vote of the holders of a majority of the shares of Common
Stock present or represented at the Meeting and entitled to vote is required for
approval of the Amended Class A Plan. The Board recommends that the
stockholders vote FOR the adoption of the proposed Amended Class A Plan so that,
among other things, the Company may continue to use options as a method of
compensating eligible individuals and the Company may fully deduct compensation
realized from the exercise of the options granted thereunder.
DESCRIPTION OF THE AMENDED CLASS A PLAN
The following description of the Amended Class A Plan is qualified by the
full text of the Plan, which is set forth as Exhibit A to this proxy
statement.
Subject to adjustment in accordance with its terms, the Amended Class A
Plan provides for 2,200,000 shares to be subject to purchase pursuant to options
granted thereunder, which represents an increase of 1,000,000 over the Plan
prior to its amendment and restatement. As of January 1, 1998, 1,040,000 options
have been granted under the Amended Class A Plan. In order to comply with
Section 162(m) of the Code, the Amended Class A Plan limits the number of
options that may be granted thereunder to an eligible employee in any one-year
period to no more than 250,000 (subject to adjustment in accordance with the
Amended Class A Plan).
The Amended Class A Plan is administered by the Board or a stock option
committee of the Board comprised of at least two members of the Board, and
having the authority, within limitations as set forth in the Amended Class A
Plan, to determine the persons to whom options may be granted, the number of
shares of Common Stock to be covered by each option, the time or times at which
the options may be granted or exercised and the terms and provisions of the
options to be granted. The Amended Class A Plan is currently administered by
the Stock Option Committee, all of the members of which are "non-employee
directors" and "outside directors" within the meaning of Rule 16b-3 under the
Exchange Act and Section 162(m) of the Code, respectively.
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<PAGE>
Directors, other than Thomas R. Ferguson, Herman Sarkowsky and Albert A.
Weis, the present members of the Stock Option Committee, are eligible to receive
options under the Amended Class A Plan (eight persons). Although eligible, the
Stock Option Committee has no present intention to grant options under the
Amended Class A Plan to directors who are not also employees of the Company.
Nonemployee directors receive options under the Director Plan. Only
nonqualified stock options may be granted under the Amended Class A Plan.
An option under the Amended Class A Plan may be exercised at the times
specified by the Stock Option Committee at the time of grant and specified in
the Option Agreement. Options granted under the Amended Class A Plan generally
vest in installments of 20% over a five-year period, subject to continued
employment (or consulting arrangement) with the Company and its subsidiaries. No
options may be granted under the Amended Class A Plan after the tenth
anniversary of the date on which stockholders approve the plan, and all options
expire within ten years from the date of grant. Options granted under the
Amended Class A Plan are not assignable except by will or the laws of descent
and distribution or, if the Stock Option Committee so permits, and subject to
such terms and conditions as the Stock Option Committee may specify, options may
be transferred to family members or to one or more trusts established in whole
or in part for the benefit of one or more of such family members.
Nonqualified stock options granted under the Amended Class A Plan must have
an exercise price of at least 85% (100% in the case of an optionee designated by
the Stock Option Committee whose compensation may be subject to the limit on
deductible compensation imposed by Section 162(m) of the Code (a "Section 162(m)
Optionee")) of the fair market value of the Common Stock on the date of grant.
An optionee may pay the exercise price in cash, by certified check or bank draft
or in shares of Common Stock that the optionee has owned for at least six
months, or, if the Stock Option Committee so determines, pursuant to a cashless
exercise procedure through a broker or by the Company withholding shares of
Common Stock subject to the option which have a fair market value equal to the
exercise price.
The Amended Class A Plan has standard anti-dilution provisions.
Under the Amended Class A Plan, an option becomes exercisable in full,
whether or not it is then exercisable, upon a Change in Control (as defined
below). In addition, the Stock Option Committee may determine at the time of
grant or thereafter that an option will become exercisable in full or in part
upon the occurrence of such circumstances or events as the Stock Option
Committee determines special merit consideration. A Change in Control is
generally defined as the occurrence of (i) any person (excluding Martin J. Wygod
or his affiliates, the Company and Company employee benefit plans) becoming the
beneficial owner of 50% or more of the combined voting power of the Company's
securities, (ii) during a 24-month period the individuals who, at the beginning
of such period, constituted the Company's Board (the "Incumbent Directors")
ceasing to be a majority of the Board unless such new directors were elected or
recommended by the Incumbent Directors, (iii) the approval of a merger or
consolidation of the Company or a reclassification of its voting stock without
the consent of a majority of the directors, (iv) stockholder approval of a sale
of all or substantially all of the Company's assets and (v) stockholder approval
of a plan of liquidation, dissolution or winding up.
Under the Amended Class A Plan, if the Company is merged or consolidated
with another corporation or in the event of a reorganization, separation or
liquidation of the Company, the options will be replaced by options to purchase
stock in the successor corporation.
If an optionee terminates his service as a member of the Board or as a
consultant (if retained as a consultant), he will have 30 days following his
termination (or, if earlier, until expiration of the option period) to exercise
his option to the extent it was exercisable as of his termination; provided,
however, that if the optionee retires with the consent of the Company (defined
in the Amended Class A Plan as the optionee's termination after age 65) or he
dies, the optionee (or the heirs of a deceased optionee) will have 90 days in
the case of the optionee's retirement, or one year in the case of his death, to
exercise the option, to the extent it was exercisable as of the date
37
<PAGE>
of the optionee's retirement or death. If an optionee is terminated because of
a violation of his duties, as determined by the Board or the Stock Option
Committee, his option will terminate immediately.
If at any time an optionee is indebted to the Company or any subsidiary,
the Company may in the discretion of the Stock Option Committee withhold from
the optionee (i) shares issuable upon exercise of an option, the value of which
is equal to the amount of such indebtedness, or (ii) following the sale by an
optionee of shares of Common Stock received pursuant to the exercise of an
option, amounts due to an optionee in connection with the sale up to the amount
of such indebtedness, or the Company may take any other substantially similar
action to collect such debt.
The Amended Class A Plan may be terminated and may be modified or amended
by the Board at any time; provided, however, that (i) no modification or
amendment will be effective without stockholder approval if such approval is
required by law or under the rules of NASDAQ or the stock exchange on which the
Company's Common Stock is listed, (ii) with respect to any person who was
granted an option prior to the date on which stockholder approval of the Amended
Class A Plan is obtained (the "Effective Date"), no such termination,
modification or amendment may alter or affect the terms of any of the then
outstanding options without the consent of the affected optionee and (iii) with
respect to any person who is granted an option on or after the Effective Date,
no such termination, modification or amendment of the Amended Class A Plan may
adversely alter or affect the terms of any of the then outstanding options
previously granted, without the consent of the affected optionee.
Awards under the Amended Class A Plan are determined by the Stock Option
Committee in its discretion. For this reason, it is not possible to determine
the benefits and amounts that will be received by any individual participant or
group of participants in the future. During the period from July 1, 1996 to
June 30, 1997, the grants of options shown on the table below were made subject
to stockholder approval of the Amended Class A Plan. During the period from
July 1, 1997 through January 1, 1998, no options have been granted under the
Amended Class A Plan.
NEW PLAN BENEFITS
SYNETIC, INC. AMENDED AND RESTATED 1989 CLASS A STOCK OPTION PLAN
-----------------------------------------------------------------
NAME AND POSITION NUMBER OF OPTIONS
----------------- -----------------
James V. Manning 0
President and Chief Executive Officer
Ray E. Hannah 40,000
Vice President - Porex Technologies Group
Charles A. Mele 100,000
Vice President - General Counsel
Anthony Vuolo 0
Vice President -
Chief Financial Officer
Victor L. Marrero 0
Former Vice President and
Chief Financial Officer
Executive Group 140,000
Non-Executive Director Group 0
Non-Executive Officer
Employee Group 0
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CERTAIN TAX MATTERS
Options granted under the Amended Class A Plan are nonqualified options.
An optionee will not recognize taxable income, and the Company will not be
entitled to a deduction, upon the grant of a nonqualified stock option. Upon
exercise, an optionee will recognize ordinary income in an amount equal to the
amount by which the fair market value of each share on the date of exercise
exceeds the option price, and may be required to make a withholding tax payment
to the Company at the time of exercise in an amount equal to the minimum income
tax on such income. Any delay by the optionee in making such tax payment may
result in the imputation of additional taxable income to the optionee. The
amount so recognized as income will be deductible by the Company, subject to
Section 162(m) of the Code.
Upon any subsequent sale of shares by an optionee, the optionee's basis in
the shares purchased for determining gain or loss will be their fair market
value on the date of exercise, if such shares were acquired for cash. If the
exercise of the nonqualified stock option is made by delivery of shares of
Common Stock in payment of the option price, the shares delivered are deemed to
be exchanged in a tax-free transaction for the equivalent number of new shares
of Common Stock. Such equivalent number of new shares has the same basis and
holding period as the shares exchanged. The number of shares received in excess
of the number of shares delivered is included in the optionee's income at the
fair market value thereof at the time of exercise. If the shares are capital
assets in the hands of an optionee, any gain or loss recognized upon the sale or
other disposition of these shares will be capital gain or loss, either long-term
or short-term depending upon the holding period of the shares (which begins on
the date the optionee recognizes income with respect to such shares, except for
the shares deemed to be received in a tax-free transaction as described above).
The foregoing is not to be considered as tax advice to any person who may
be an optionee, and any such persons are advised to consult their own tax
counsel.
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PROPOSAL ELEVEN:
AMENDED AND RESTATED
1989 CLASS B STOCK OPTION PLAN
The proxy will be voted in accordance with the directions thereon with
respect to Proposal Eleven, or if no directions are indicated, FOR adoption of
Proposal Eleven.
The Board has unanimously adopted, subject to stockholder approval, the
amendment and restatement of the Company's 1989 Class B Stock Option Plan (the
"Amended Class B Plan"). Stockholder approval of the Amended Class B Plan is
recommended by the Board to increase the number of shares of Common Stock that
are issuable thereunder by 2,000,000, to extend the term of the plan through the
tenth anniversary of the date on which stockholders approve the plan and to
ensure the tax deductible status of the compensation income generated upon the
exercise of options under the Amended Class B Plan by the Chief Executive
Officer and any other participating key officers who are among the other four
most highly compensated executive officers. The Amended Class B Plan contains
certain other amendments that reflect recent changes in Section 16 of the
Securities Exchange Act of 1934, as amended, and other amendments that are
described below. Since adoption of the Amended Class B Plan may benefit the
directors and executive officers of the Company, they may be deemed to have an
interest in its approval.
RECOMMENDATION OF THE BOARD CONCERNING THE AMENDED AND RESTATED CLASS B STOCK
OPTION PLAN
The affirmative vote of the holders of a majority of the shares of Common
Stock present or represented at the Meeting and entitled to vote is required for
approval of the Amended Class B Plan. The Board recommends that the
stockholders vote FOR the approval of the Amended Class B Plan so that, among
other things, the Company may continue to use options as a method of
compensating eligible individuals and the Company may fully deduct compensation
realized from the exercise of nonqualified options granted thereunder.
DESCRIPTION OF THE AMENDED CLASS B PLAN
The following description of the Amended Class B Plan is qualified by the
full text of the Plan, which is set forth as Exhibit B to this proxy
statement.
Subject to adjustment in accordance with its terms, the Amended Class B
Plan provides for 3,600,000 shares to be subject to purchase pursuant to options
granted thereunder, which represents an increase of 2,000,000 over the Plan
prior to its amendment and restatement. As of January 1, 1998, 1,848,400 options
have been granted under the Amended Class B Plan. In order to comply with
Section 162(m) of the Code, the Amended Class B Plan limits the number of
options that may be granted thereunder to an eligible employee in any one-year
period to no more than 250,000 (subject to adjustment in accordance with the
Amended Class B Plan).
The Amended Class B Plan is currently administered by the Stock Option
Committee and contains the identical provisions regarding administration as
described under "Proposal Ten: Amended and Restated 1989 Class A Stock Option
Plan".
Eligibility for the grant of options under the Amended Class B Plan is
limited to employees, officers and directors (who are also employees) of the
Company and its subsidiaries and certain key consultants and agents of the
Company and its subsidiaries (approximately 725 persons, although historically
the Company has granted options under the plan only to directors, executive
officers and officers (approximately 50 persons)). Options granted under the
Amended Class B Plan may be either incentive stock options within the meaning of
Section 422 of the Code, or nonqualified stock options, as determined by the
Stock Option Committee.
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An option under the Amended Class B Plan may be exercised at the times
specified by the Stock Option Committee at the time of grant and specified in
the Option Agreement. Options granted under the Amended Class B Plan generally
vest in installments of 20% over a five-year period, subject to continued
employment (or consulting arrangement) with the Company and its subsidiaries.
No options may be granted under the Amended Class B Plan after the tenth
anniversary of the date on which stockholders approve the plan and all options
expire within ten years from the date of grant (except that incentive stock
options granted to an optionee who owns or is deemed to own more than 10% of the
combined voting power of all classes of stock of the Company or a subsidiary
expire within five years from the date of grant). Options granted under the
Amended Class B Plan are not assignable except by will or the laws of descent
and distribution or, if the Stock Option Committee so permits, and subject to
such terms and conditions as the Stock Option Committee may specify, options may
be transferred to family members or to one or more trusts established in whole
or in part for the benefit of one or more of such family members. Incentive
stock options granted under the Amended Class B Plan are not assignable.
Under the Amended Class B Plan, the exercise price for an incentive stock
option may not be less than 100% (or 110% if the optionee owns or is deemed to
own more than 10% of the total combined voting power of all classes of stock of
the Company or a subsidiary) of the fair market value of the Company's Common
Stock on the date of grant, as determined by the Board or the Stock Option
Committee, and nonqualified stock options must have an exercise price of at
least 85% (100% in the case of a Section 162(m) Optionee) of the fair market
value of the Common Stock on the date of grant. An optionee may pay the
exercise price in cash, by certified check or bank draft or in shares of Common
Stock which the optionee has owned for at least six months, or, if the Stock
Option Committee so determines, pursuant to a cashless exercise procedure
through a broker or by the Company withholding shares of Common Stock subject to
the option which have a fair market value equal to the exercise price.
The Amended Class B Plan has standard anti-dilution provisions.
Under the Amended Class B Plan, if there is a Change in Control (as defined
in the Amended Class A Plan), the Board of Directors may provide that options
granted under the Amended Class B Plan will become exercisable in full or in
part, whether or not the options are otherwise exercisable. The Stock Option
Committee may, in its discretion, also include provisions in an option agreement
relating to a change in control of a subsidiary. In addition, the Stock Option
Committee may determine at the time of grant or thereafter that an option will
become exercisable in full or in part upon the occurrence of such circumstances
or events as the Stock Option Committee determines merit special consideration.
Under the Amended Class B Plan, if the Company is merged or consolidated
with another corporation or in the event of a reorganization, separation or
liquidation of the Company, either (i) the options will be replaced by options
to purchase stock in the successor corporation or (ii) the optionee will be
given 60 days to exercise his option before it will terminate.
If an optionee terminates his services as an employee or as a consultant
(if retained as a consultant) with the Company and its subsidiaries, he will
have 30 days following his termination (or, if earlier, until expiration of the
option period) to exercise his option to the extent it was exercisable as of his
termination; provided, however, that if the optionee retires with the consent of
the Company or he dies, the optionee (or the heirs of a deceased optionee) will
have 90 days in the case of the optionee's retirement, or one year in the case
of his death, to exercise the option, to the extent it was exercisable as of the
date of the optionee's retirement or death. If an optionee is terminated for
cause because of a violation of a duty to the Company or its subsidiaries, as
determined by the Board or the Stock Option Committee, his option will terminate
immediately.
If at any time an optionee is indebted to the Company or any subsidiary,
the Company may in the discretion of the Stock Option Committee withhold from
the optionee (i) shares issuable upon exercise of an option, the value of which
is equal to the amount of such indebtedness or (ii) following the sale by an
optionee of shares of Common
41
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Stock received pursuant to the exercise of an option, amounts due to an optionee
in connection with the sale up to the amount of such indebtedness or the Company
may take any other substantially similar action to collect such debt.
The Amended Class B Plan contains the identical amendment provisions as
described under the heading "Proposal Ten: Amended and Restated 1989 Class A
Stock Option Plan".
Awards under the Amended Class B Plan are determined by the Stock Option
Committee in its discretion. For this reason, it is not possible to determine
the benefits and amounts that will be received by any individual participant or
group of participants in the future. During the period from July 1, 1996 to June
30, 1997, the grants of options shown on the table below were made, subject to
stockholder approval of the Amended Class B Plan. During the period from July 1,
1997 through January 1, 1998, options to purchase an aggregate of 560,000 shares
have been granted under the Amended Class B Plan, subject to stockholder
approval of the Amended Class B Plan.
NEW PLAN BENEFITS
SYNETIC, INC. AMENDED AND RESTATED 1989 CLASS B STOCK OPTION PLAN
-----------------------------------------------------------------
NAME AND POSITION NUMBER OF OPTIONS
----------------- -----------------
James V. Manning 0
President and Chief Executive Officer
Ray E. Hannah 0
Vice President - Porex Technologies Group
Charles A. Mele 95,000
Vice President - General Counsel
Anthony Vuolo 81,000
Vice President - Chief Financial Officer
Victor L. Marrero 31,000
Former Vice President and Chief Financial
Officer
Executive Group 207,000
Non-Executive Director Group 0
Non-Executive Officer
Employee Group 212,000
CERTAIN TAX MATTERS
Nonqualified Stock Options. Nonqualified options granted under the Amended
Class B Plan have the identical tax consequences to those described under
"Proposal Ten: Amended and Restated 1989 Class A Stock Option Plan--Certain Tax
Matters".
Incentive Stock Options. Options granted under the Amended Class B Plan and
designated by the Stock Option Committee as incentive stock options are intended
to meet the requirements of the Code. In such event, an optionee will not
recognize taxable income, and the Company will not be entitled to a deduction,
upon the grant or exercise of an incentive stock option. The excess of the fair
market value of each share over the option price at the date of exercise is an
item of tax preference and may be subject to the alternative minimum tax. The
alternative minimum tax paid with respect to the exercise of an incentive stock
option in one year will be a credit against
42
<PAGE>
regular tax in subsequent years; and if, in the year the optionee sells the
stock acquired under an incentive stock option, the optionee is subject to the
alternative minimum tax, his basis in the stock is increased by the amount
treated as an item of a tax preference in the year the option was exercised. If
the holding period requirements of Section 422 are met by the optionee (i.e., no
disposition of the shares is made by the optionee within two years of the grant
of the option and within one year after the transfer of the shares to the
optionee), then any gain or loss recognized by the optionee upon disposition of
the shares will be treated as long-term capital gain or loss (assuming the
shares are capital assets in the hands of the optionee).
If the shares acquired on exercise of an incentive stock option are disposed
of prior to the expiration of either of the required holding periods, the
optionee will recognize ordinary income in the disposition year. The amount of
ordinary income will be the lesser of (a) the excess of the fair market value of
the shares on the date of exercise of the option over the option price, or (b)
the amount realized on the disposition of the shares over the amount paid for
such shares, so long as the disposition is by sale or exchange with respect to
which a loss, if sustained, would be recognized. The Company will receive a
deduction at the time of the disqualifying disposition in the amount equal to
the ordinary income recognized by the optionee, subject to general rules
pertaining to the reasonableness of compensation and Section 162(m) of the Code.
In addition, long-term or short-term capital gain may be recognized by the
optionee in an amount equal to the excess of the amount realized on the
disqualifying disposition over the sum of the option price and the ordinary
income recognized by the optionee.
If the exercise of an incentive stock option is made by delivery of shares
of Common Stock in payment of the option price, and such delivered shares were
not acquired upon the exercise of an incentive stock option or if so acquired
are so delivered after expiration of the holding period requirements, the shares
delivered are deemed to be exchanged in a tax-free transaction for the
equivalent number of new shares of Common Stock. Such equivalent number of new
shares has the same basis and holding period as the shares exchanged. The
number of shares received in excess of the number of shares delivered has a zero
basis. If shares so acquired are sold more than two years after the incentive
stock option was granted and more than one year after the transfer of the shares
to the optionee, the gain or loss arising from the sale based upon the amount
realized upon such sale will constitute long-term capital gain or loss (assuming
the shares are capital assets in the hands of the optionee). Proposed Treasury
regulations provide that, if an incentive stock option is exercised with
previously acquired shares, and any of the shares received on exercise are
disposed of before the holding period requirements are satisfied, such
disposition will be deemed to be a disposition of the shares with the lowest
basis acquired upon exercise of the incentive stock option. The exercise of an
incentive stock option by delivery of shares acquired upon the exercise of an
incentive stock option prior to the expiration of the holding period
requirements will be deemed to be a taxable exchange and a disqualifying
disposition of the incentive stock option so delivered; but the shares so
purchased should still be entitled to incentive stock option treatment as
described above if the applicable holding period requirements are met.
If an option is exercised by the estate of an optionee, the above-described
holding period requirements do not apply, and, when the estate disposes of the
stock acquired by exercise of the option, it will not recognize any ordinary
income. The estate, however, may recognize long-term or short-term capital gain
and any long-term capital gain may be subject to the alternative minimum tax.
The Company will receive no deduction.
The foregoing is not to be considered as tax advice to any person who may be
an optionee, and any such persons are advised to consult their own tax counsel.
43
<PAGE>
PROPOSAL TWELVE:
AMENDED AND RESTATED
1991 SPECIAL NONQUALIFIED STOCK OPTION PLAN
The proxy will be voted in accordance with the directions thereon with
respect to Proposal Twelve, or if no directions are indicated, FOR adoption of
Proposal Twelve.
The Board has unanimously adopted, subject to stockholder approval, the
amendment and restatement of the Company's 1991 Special Nonqualified Stock
Option Plan (the "Amended 1991 Plan"). Stockholder approval is recommended by
the Board to increase the number of shares of Common Stock that are issuable
thereunder by 500,000, to extend the term of the plan through the tenth
anniversary of the date on which stockholders approve the plan and to ensure the
tax deductible status of the compensation generated upon the exercise of options
granted thereunder. The Amended 1991 Plan contains certain other amendments that
are described below.
RECOMMENDATION OF THE BOARD CONCERNING THE APPROVAL OF THE AMENDED 1991 PLAN
The affirmative vote of the holders of a majority of the shares of Common
Stock present or represented at the Meeting and entitled to vote is required for
approval of the Amended 1991 Plan. The Board recommends that the stockholders
vote FOR the approval of the Amended 1991 Plan so that, among other things, the
Company may continue to use options as a method of compensating eligible
individuals and the Company may fully deduct compensation realized from the
exercise of options granted thereunder.
DESCRIPTION OF THE AMENDED 1991 PLAN
The following description of the Amended 1991 Plan is qualified by
reference to the full text of the plan, which is set forth as Exhibit C to
this proxy statement.
Subject to adjustment in accordance with its terms, the Amended 1991 Plan
provides for 2,750,000 shares to be subject to purchase pursuant to options
granted thereunder, which represents an increase of 500,000 over the Plan
prior to its amendment and restatement. As of January 1, 1998, 2,100,380
options have been granted under the Amended 1991 Plan.
The Amended 1991 Plan is currently administered by the Stock Option
Committee and contains the identical provisions regarding administration as
described under "Proposal Ten: Amended and Restated 1989 Class A Stock Option
Plan", except that under certain circumstances the Stock Option Committee may
delegate authority to grant options under the Amended 1991 Plan to certain
designated directors who are also officers of the Company.
Awards under the Amended 1991 Plan may be granted to key employees and
consultants of the Company (approximately 700 individuals); provided that no
option may be granted to an employee who at the time of such grant is an officer
or director of the Company. Although officers may not receive grants of options
under the Amended 1991 Plan, the Amended 1991 Plan is designed to comply with
Section 162(m) of the Code due to the fact that an optionee may become subject
to Section 162(m) in the future by becoming the Chief Executive Officer or one
of the four most highly compensated executive officers of the Company (e.g., at
the time the optionee exercises the option). It is, therefore, possible that
grants previously made under the Amended 1991 Plan may become subject to the
limitation on deductible compensation contained in Section 162(m) of the Code.
Only nonqualified stock options may be granted under the Amended 1991 Plan
and, in order to comply with the requirements of Section 162(m) of the Code,
optionees may be granted options under the Amended 1991 Plan for a maximum of
250,000 shares of Common Stock per calendar year. Each option granted under the
Amended 1991 Plan must be evidenced by a stock option agreement. Each stock
option agreement will specify the number of shares of Common Stock for which
options have been granted, the exercise price, the applicable vesting schedule,
the manner and time and medium of payment upon exercise and the effective term
of the option. In addition, stock option agreements may contain such other
44
<PAGE>
terms as the Stock Option Committee may prescribe. Such additional terms may
vary among the stock option agreements. No option may be granted under the
Amended 1991 Plan after the tenth anniversary of the date on which stockholders
approve the plan and all options expire within 15 years and one day from the
date of grant. Options granted under the Amended 1991 Plan are not assignable
except by will or the laws of descent and distribution or, if the Stock Option
Committee so permits, and subject to such terms and conditions as the Stock
Option Committee may specify, options may be transferred to family members or to
one or more trusts established in whole or in part for the benefit of one or
more of such family members.
Nonqualified stock options granted under the Amended 1991 Plan must have an
exercise price of at least 100% of the fair market value of the Common Stock on
the date of grant (as determined by the Board or the Stock Option Committee).
The Amended 1991 Plan contains standard antidilution provisions.
Under the Amended 1991 Plan, an option is exercisable at the times
specified by the Stock Option Committee in the applicable stock option
agreement; provided that, unless otherwise specified by the Stock Option
Committee and set forth in the stock option agreement, the option will become
exercisable during the first five years in which the option is outstanding at
the rate per year of 20% of the total number of shares of Common Stock issuable
under the option. The Stock Option Committee may also determine at the time of
grant or thereafter that an option will become exercisable in full or in part,
whether or not it is then exercisable under the stock option agreement, in other
circumstances that merit special consideration.
If at any time an optionee is indebted to the Company or any subsidiary,
the Company may in the discretion of the Stock Option Committee withhold from
the optionee (i) shares issuable upon exercise of an option, the value of which
is equal to the amount of such indebtedness or (ii) following the sale by an
optionee of shares of Common Stock received pursuant to the exercise of an
option, amounts due to an optionee in connection with the sale up to the amount
of such indebtedness or the Company may take any other substantially similar
action to collect such debt.
If the Company is merged or consolidated with another corporation or in the
event of a reorganization, separation or liquidation of the Company, the Board
or the board of directors of any corporation assuming the obligations of the
Company under the Amended 1991 Plan may either (i) make appropriate provisions
for the protection of any outstanding options by the substitution on an
equitable basis of appropriate securities of the Company, or appropriate
securities of the merged, consolidated, or otherwise reorganized corporation, or
the appropriate adjustment in the option price, or both, or (ii) give written
notice to the optionees that their options must be exercised, to the extent then
exercisable, within 60 days of the date of such notice or the options will
terminate.
In the event that the employment of an optionee who is a key employee of
the Company is terminated, all unexercised options (both vested and unvested)
held by such optionee will expire 30 days after he is terminated unless the
optionee is retained by the Company as a consultant immediately after such
termination of employment or the Stock Option Committee grants the optionee, in
writing, an extended term. Upon the retirement of an optionee from employment
with the Company, the unvested portion of any options held by the optionee will
expire on the retirement date and the portion of the options that is exercisable
on such date will remain exercisable for 90 days thereafter. If an optionee
dies while working for the Company as a key employee or contractor or within 30
days following the date of termination of the optionee's status as a key
employee or contractor (or within the 90-day period after the date of the
optionee's retirement) any unexercised portion of the options which was
otherwise exercisable on the date of death will be exercisable by the estate or
heirs of the optionee for a period of one year after the date of death.
The Amended 1991 Plan contains the identical amendment provisions as
described under the heading "Proposal Ten: Amended and Restated 1989 Class A
Stock Option Plan". During the period from July 1, 1996 to June 30, 1997, the
grants of options shown on the table below were made. Such grants were not made
subject
45
<PAGE>
to stockholder approval of the Amended 1991 Plan and, accordingly, may be
subject to Section 162(m) of the Code. During the period from July 1, 1997
through January 1, 1998, options to purchase an aggregate of 255,000 shares have
been granted under the Amended 1991 Plan, 175,000 of which were made subject to
stockholder approval of the Amended 1991 Plan.
NEW PLAN BENEFITS
SYNETIC, INC. 1991 SPECIAL NONQUALIFIED STOCK OPTION PLAN
---------------------------------------------------------
NAME AND POSITION NUMBER OF OPTIONS
----------------- -----------------
James V. Manning 0
President and Chief Executive Officer
Ray E. Hannah 0
Vice President - Porex Technologies Group
Charles A. Mele 0
Vice President - and General Counsel
Anthony Vuolo 0
Vice President -
Chief Financial Officer
Victor L. Marrero 0
Former Vice President and
Chief Financial Officer
Executive Group 0
Non-Executive Director Group 0
Non-Executive Officer
Employee Group 862,750
CERTAIN TAX MATTERS
The tax consequences applicable to the Amended 1991 Plan are identical to
the tax consequences described in "Proposal Ten: Amended and Restated 1989
Class A Stock Option Plan--Certain Tax Matters".
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PROPOSAL THIRTEEN:
APPROVAL OF THE INDIVIDUAL OPTION
The proxy will be voted in accordance with the directions thereon with
respect to Proposal Thirteen, or if no directions are indicated, FOR adoption of
Proposal Thirteen.
On June 23, 1997 (the "Grant Date") and subject to approval by the
stockholders of the Company, the Stock Option Committee granted a nonqualified
option to purchase 250,000 shares of Common Stock (the "Individual Option") to
Mr. Holstein, an officer of the Company, in order to reward Mr. Holstein for his
service to the Company and to provide him with an additional long-term incentive
in the form of an equity interest in the Company.
RECOMMENDATION OF THE BOARD CONCERNING THE APPROVAL OF THE INDIVIDUAL OPTION
The affirmative vote of the holders of a majority of the shares of Common
Stock present or represented at the Meeting and entitled to vote is required for
approval of the Individual Option. The Board recommends that the stockholders
vote FOR the adoption of the proposed Individual Option so that, among other
things, the Company may fully deduct compensation realized from the exercise of
the Individual Option.
DESCRIPTION OF THE INDIVIDUAL OPTION
The Individual Option has an exercise price of $34.875 per share. The
Individual Option was granted outside of the Company's stock option plans and is
evidenced by an individual stock option agreement (the "Individual Agreement")
between the Company and Mr. Holstein. A copy of the Individual Agreement is
attached hereto as Exhibit D to the proxy statement and this summary is
qualified in its entirety by reference thereto. The Company also granted a
nonqualified option to purchase 250,000 shares of Common Stock to Mr. Holstein
on October 2, 1996 (the "Grant Date") under the 1991 Special Nonqualified Stock
Option Plan. In the event Mr. Holstein becomes Chief Executive Officer or is one
of the four most highly compensated executive officers (as determined under
Section 162(m) of the Code) at the time of exercise of the grant made on October
2, 1996, the compensation attributable to such option may be subject to the
limitation on deductible compensation contained in Section 162(m).
The Individual Option will vest and become exercisable at the rate of 20%
per year, commencing on the first anniversary of the Grant Date and ending on
the fifth anniversary of the Grant Date at which time the Individual Option will
be fully vested. The vested portion of the Individual Option will remain
exercisable until the earlier of (i) the fifteenth anniversary of the Grant
Date, on which date the unexercised portion of the Individual Option will expire
or (ii) Mr. Holstein's termination of employment, in which case the expiration
of the unexercised portion of the Individual Option will be determined in
accordance with the reasons for such termination, as described in the following
paragraph.
If Mr. Holstein's employment is terminated by the Company for Cause (as
defined in the Individual Agreement) or Mr. Holstein resigns from his employment
with the Company without Cause, the vested and unvested portions of the
Individual Option will expire on the date of such termination. If Mr.
Holstein's employment is terminated by the Company without Cause or by Mr.
Holstein for Cause, Mr. Holstein will retain the vested portion of the
Individual Option and any portion of the Individual Option that has not vested
will continue to vest as if Mr. Holstein had remained employed by the Company
until the earlier of (i) the second anniversary of the date of termination and
(ii) the occurrence of any event that would constitute Cause for purposes of Mr.
Holstein's termination by the Company. If Mr. Holstein's employment with the
Company is terminated either (i) by Mr. Holstein upon 30 days' written notice to
the Company at any time after the first anniversary of a Change in Control, as
defined below (or a shorter period to the extent that the acquiring company does
not request Mr. Holstein's services), (ii) by the Company due to Mr. Holstein's
mental or physical incapacity to regularly perform his duties to the Company for
more than ninety consecutive days or an aggregate of one hundred and twenty days
during a
47
<PAGE>
twelve-month period, or (iii) due to Mr. Holstein's death, any portion of the
Individual Option that is not vested as of the date of such termination will
remain outstanding and continue to vest as if Mr. Holstein had remained employed
by the Company until the earlier of (i) November 6, 2002 and (ii) the occurrence
of any event that would constitute Cause for purposes of Mr. Holstein's
termination by the Company. For purposes of the Individual Option, a Change in
Control is generally the occurrence of (i) the acquisition of 50% or more of the
voting power of the Company (excluding an acquisition thereof by Martin J. Wygod
and his affiliates) or a reorganization, merger, consolidation or sale of all or
substantially all of the assets of the Company and, in each case, where
immediately following such event the Chairman of the Board ceases to hold one or
more of the following positions: Chairman of the Board, Chief Executive Officer
or a senior executive officer of the acquirer with duties and responsibilities
which are greater than or substantially equivalent to those prior to such
acquisition or business combination, or (ii) a complete liquidation or
dissolution of the Company.
In the event that Mr. Holstein is retained by the Company as a consultant
within thirty days after a termination of Mr. Holstein's employment with the
Company, he will be deemed to continue his employment with the Company for
purposes of the Individual Agreement. Accordingly, if Mr. Holstein becomes a
consultant to the Company during such thirty-day period, he will retain the
Individual Option and the Individual Option will continue to vest as if he were
an employee of the Company during the period that Mr. Holstein is retained by
the Company as a consultant and until thirty days after Mr. Holstein ceases to
be so retained.
The exercise price for the Individual Option is payable in cash or, if
shares of the Company's Common Stock are then publicly traded, in shares of
Common Stock (valued for this purpose at their then fair market value) or a
combination of the two. The Individual Option is not transferable by Mr.
Holstein other than by will or the laws of descent and distribution, except that
the Stock Option Committee may, in its sole discretion, permit the transfer of
the Individual Option to Mr. Holstein's family members or to one or more trusts
established in whole or in part for the benefit of one or more of such family
members.
In the event of any stock split or reverse split of the issued Common Stock
of the Company, or any other recapitalization of the Company, or any business
combination or other transaction involving the Company, the Board or the Stock
Option Committee will make such appropriate adjustments to the terms of the
Individual Option as deemed appropriate. However, the Board or the Stock Option
Committee will be required to make equitable adjustments if, as a result of such
event, the Common Stock is no longer publicly traded and in certain other
circumstances.
If the Company is merged or consolidated with another corporation, or in
the event of a reorganization of the Company, the Board or the board of
directors of any corporation assuming the obligations of the Company hereunder
must either (i) make appropriate provisions for the protection of any
outstanding portion of the Individual Option by the substitution on an equitable
basis of appropriate securities of the Company, or appropriate securities of the
merged, consolidated or otherwise reorganized corporation, or the appropriate
adjustment in the Individual Option price, or both, or (ii) give written notice
to Mr. Holstein that the Individual Option must be exercised, to the extent then
exercisable, within sixty days of the date of such notice or the Individual
Option will terminate, and to the extent that the Individual Option is not
exercised within such sixty-day period, it will terminate and be of no further
effect.
CERTAIN TAX MATTERS
The tax consequences applicable to the Individual Option are identical to
the tax consequences described under "Proposal Ten: Amended and Restated 1989
Class A Stock Option Plan--Certain Tax Matters".
48
<PAGE>
PROPOSAL FOURTEEN:
RATIFICATION OF INDEPENDENT AUDITORS
Upon recommendation of the Audit Committee, the Board has appointed Arthur
Andersen LLP as its independent auditors for the fiscal year ending June 30,
1998. A resolution will be submitted to stockholders at the Meeting to ratify
their appointment. The affirmative vote of the holders of a majority of the
shares of Common Stock present at the Meeting with respect to Proposal Fourteen
will be required to approve this resolution. The Board recommends a vote FOR
this resolution. The proxy will be voted in accordance with the directions
thereon with respect to Proposal Fourteen or, if no directions are indicated,
FOR ratification of the appointment of Arthur Andersen LLP. Although
stockholder approval of the Board's appointment of Arthur Andersen LLP is not
required by law, the Board believes that it is advisable to give stockholders an
opportunity to ratify this selection. If this proposal is not approved at the
Annual Meeting, the Board of Directors will reconsider its selection of Arthur
Andersen LLP.
A representative of Arthur Andersen LLP is expected to be present at the
Meeting. The representative will be afforded an opportunity to make a statement
and will be available to respond to questions by stockholders. If the
resolution ratifying the appointment of Arthur Andersen LLP as independent
auditors is approved by the stockholders, the Board of Directors nevertheless
retains the discretion to select different auditors in the future, should the
Board then deem such selection to be in the Company's best interest. Any such
selection need not be submitted to a vote of stockholders.
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Stockholders are entitled to submit proposals on matters appropriate for
stockholder action consistent with regulations of the Commission. Should a
stockholder intend to present a proposal at the Company's 1998 Annual Meeting,
which will be held after the end of the Company's fiscal year ending June 30,
1998, it must be received by the Secretary of the Company, 669 River Drive,
Elmwood Park, New Jersey 07407-1361, not later than June 30, 1998 in order to be
included in the Company's proxy statement and form of proxy relating to that
meeting.
WHERE YOU CAN FIND MORE INFORMATION
The Company files annual, quarterly and special reports, proxy statements
and other information with the Commission. A copy of the Company's Annual
Report to Stockholders for the fiscal year ended June 30, 1997 accompanies this
Proxy Statement. You may read and copy reports, statements or other information
filed by the Company at the Commission's public reference rooms in Washington,
D.C., New York City, and Chicago. Please call the Commission at 1-800-SEC-0330
for further information on these public reference rooms. The Company's filings
are also available to the public at the web site maintained by the Commission at
"http://www.sec.gov" and from commercial document retrieval services.
This Proxy Statement incorporates by reference the portions of the
documents set forth below that the Company has previously filed with the
Commission. These documents contain important information about the Company and
its finances.
. The financial statements contained in Item 14 of the Company's Annual
Report on Form 10-K for the year ended June 30, 1997.
. The financial statements contained in Part I of the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1997.
49
<PAGE>
The Company also incorporates by reference the equivalent sections of any
quarterly reports or special reports the Company files with the Commission
between the date of this Proxy Statement and the date of the Annual Meeting.
If you are a stockholder, the Company may have sent you some of the
documents incorporated by reference, but you may obtain any of them through the
Company or the Commission. Documents incorporated by reference are available
from the Company without charge, excluding all exhibits unless such exhibits
have been specifically incorporated by reference in this Proxy Statement.
Stockholders may obtain documents incorporated by reference in this Proxy
Statement by requesting them in writing or by telephone at the following
address:
Administrator of Shareholder Relations
Synetic, Inc.
River Drive Center 2
669 River Drive
Elmwood Park, New Jersey 07407-1361
(201) 703-3400
MISCELLANEOUS
Where information contained in this Proxy Statement rests particularly
within the knowledge of a person other than the Company, the Company has relied
upon information furnished by such person or contained in filings made by such
person with the Commission.
By Order of the Board of Directors
Charles A. Mele
Secretary
50
<PAGE>
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE
REVOCABLE PROXY CARD
SYNETIC, INC.
ANNUAL MEETING OF STOCKHOLDERS MARCH 25, 1998
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY. THE
DIRECTORS RECOMMEND A VOTE FOR ELECTION OF ALL NOMINEES AND FOR PROPOSALS 2
THROUGH 14.
The undersigned hereby appoints James V. Manning, Charles A. Mele and David J.
Schlanger, and each of them, as the true and lawful agents of proxies of the
undersigned, with full power of substitution, to represent the undersigned and
to vote all shares of stock that the undersigned is entitled in any capacity to
vote at the Annual Meeting of Stockholders of SYNETIC, INC. (the "Company") to
be held at the St. Regis Hotel, Two East 55th Street, New York, New York 10022
at 9:30 A.M., local time, on March 25, 1998 and at any and all adjournments or
postponements thereof, on the matters set forth below, and, in their discretion,
upon all matters incident to the conduct of the Annual Meeting and upon such
other matters as may properly be brought before the meeting. This proxy revokes
all prior proxies given by the undersigned. WHEN PROPERLY EXECUTED, THIS PROXY
WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF
NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF EACH OF THE
NOMINEES FOR DIRECTOR LISTED BELOW, ALLOCATING VOTES EVENLY AMONG THE THREE
NOMINEES, AND FOR EACH OF PROPOSALS 2 THROUGH 14.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1. The election as directors of all nominees listed below For Withhold For All
(except as marked to the contrary below) to serve a term Except
of three years:
[ ] [ ] [ ]
</TABLE>
RAY E. HANNAH, ROGER H. LICHT, BERNARD A. MARDEN
AND HERMAN SARKOWSKY.
INSTRUCTION: TO WITHHOLD AUTHORITY
TO VOTE FOR ANY INDIVIDUAL NOMINEE,
MARK "FOR ALL EXCEPT" AND WRITE THAT
NOMINEE'S NAME IN THE SPACE PROVIDED
BELOW. TO ALLOCATE VOTES AMONG
NOMINEES UNDER THE PROVISIONS FOR
CUMULATIVE VOTING DESCRIBED IN THE
ACCOMPANYING PROXY STATEMENT,
SPECIFY VOTING INSTRUCTIONS IN THE
SPACE PROVIDED BELOW.
_____________________________________
<PAGE>
2
<TABLE>
<S> <C> <C> <C>
2. Amendment to the Certificate of Incorporation to For Against Abstain
eliminate the classified Board of Directors and to
provide for the annual election of all directors [ ] [ ] [ ]
commencing at next's years Annual Meeting of
Stockholders of the Company.
3. Amendment to the Certificate of Incorporation to For Against Abstain
eliminate the requirement that provisions of the
Certificate of Incorporation relating to the classification [ ] [ ] [ ]
of the Board of Directors and the election of one-third of
the Board of Directors at each annual meeting may only
be amended with the affirmative vote of the holders of
two-thirds of the shares entitled to vote in the election of
directors. The effectiveness of Proposal Three is
expressly conditioned upon the adoption of Proposal
Two by stockholders, and will not be effective absent
such adoption.
4. Amendment to the Certificate of Incorporation to For Against Abstain
eliminate cumulative voting in the election of directors.
[ ] [ ] [ ]
5. Amendment to the Certificate of Incorporation to For Against Abstain
eliminate the requirement that provisions of the
Certificate of Incorporation relating to cumulative voting [ ] [ ] [ ]
may only be amended with the affirmative vote of the
holders of two-thirds of the shares entitled to vote in the
election of directors. The effectiveness of Proposal Five
is expressly conditioned upon the adoption of Proposal
Four by stockholders, and will not be effective absent
such adoption.
6. Amendment to the Certificate of Incorporation to For Against Abstain
provide that any director may be removed, either with
or without cause, at any time, by the affirmative vote of [ ] [ ] [ ]
a majority of the outstanding shares entitled to vote.
The effectiveness of Proposal Six is expressly
conditioned upon the adoption of Proposal Two by
stockholders, and will not be effective absent such
adoption.
</TABLE>
<PAGE>
3
<TABLE>
<S> <C> <C> <C>
7. Amendment to the Certificate of Incorporation to For Against Abstain
eliminate the requirement that provisions of the
Certificate of Incorporation relating to the power to [ ] [ ] [ ]
remove directors or to fill vacancies on the Board of
Directors may only be amended with the affirmative
vote of the holders of two-thirds of the shares entitled to
vote in the election of directors. The effectiveness of
Proposal Seven is expressly conditioned upon the
adoption of Proposal Two and Proposal Six by
stockholders, and will not be effective absent such
adoption.
8. Amendment to the Certificate of Incorporation to For Against Abstain
eliminate the requirement that the provision of the
Company's By-laws setting the maximum number of [ ] [ ] [ ]
directors may only be amended with the affirmative vote
of the holders of two-thirds of the shares entitled to vote
in the election of directors. The effectiveness of
Proposal Eight is expressly conditioned upon the
adoption of Proposal Two by stockholders, and will not
be effective absent such adoption.
9. Amendment to the Certificate of Incorporation to For Against Abstain
increase the number of authorized shares of Common
Stock from 50 million to 100 million. [ ] [ ] [ ]
10. Ratification and Approval of the Amended and Restated For Against Abstain
1989 Class A Stock Option Plan.
[ ] [ ] [ ]
11. Ratification and Approval of the Amended and Restated For Against Abstain
1989 Class B Stock Option Plan.
[ ] [ ] [ ]
12. Ratification of the Amended and Restated 1991 Special For Against Abstain
Nonqualified Stock Option Plan.
[ ] [ ] [ ]
13. Ratification of the grant on June 23, 1997 of a For Against Abstain
nonqualified option to acquire 250,000 shares of
Common Stock to an officer of the Company. [ ] [ ] [ ]
14. Ratification of the appointment of Arthur Andersen LLP For Against Abstain
as independent public auditors of the Company for the
fiscal year ending June 30, 1998. [ ] [ ] [ ]
</TABLE>
RECEIPT OF NOTICE OF SAID MEETING AND OF THE PROXY STATEMENT AND ANNUAL
REPORT OF SYNETIC, INC. IS HEREBY ACKNOWLEDGED.
<PAGE>
4
Please sign this proxy exactly as your name appears hereon. Joint owners
should each sign. Trustees, executors, administrators and others signing in a
representative capacity should indicate in which capacity they are signing. An
authorized officer may sign on behalf of a corporation and should indicate the
name of the corporation and his capacity.
Please be sure to sign and date this proxy in the box below.
Date [ ], 1998
________________________________________________________
Stockholder sign above Co-holder (if any) sign above
DETACH ABOVE CARD, SIGN, DATE AND MAIL IN POSTAGE PAID ENVELOPE PROVIDED.
SYNETIC, INC.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
<PAGE>
EXHIBIT 99(a)
SYNETIC, INC.
AMENDED AND RESTATED 1989 CLASS A
STOCK OPTION PLAN
1. Definitions. The terms below shall be defined as indicated.
-----------
1.1 Board means the Board of Directors of the Company, as
-----
constituted at any time.
1.2 Code means the Internal Revenue Code of 1986, as amended
----
from time to time.
1.3 Committee means the Committee of the Board described in
---------
Section 3.1.
1.4 Common Stock means the Company's Common Stock, par value
------------
$.0l per share.
1.5 Company means Synetic, Inc., a Delaware corporation, and any
-------
successor corporation which adopts the Plan.
1.6 Exchange Act means the Securities Exchange Act of 1934, as
------------
amended from time to time.
1.7 Fair Market Value means, on a specified date, the last sales
-----------------
price of a Share traded on the over-the-counter market as reported on the
National Association of Securities Dealers Automated Quotation System ("Nasdaq")
or the closing price for a Share on the stock exchange, if any, on which Shares
are primarily traded; provided, however, that if no Shares were traded on such
date, then on the last previous date on which a Share was so traded or, if none
of the above is applicable, the value of a Share as established by the Committee
for such date.
1.8 Option means an option granted by the Company pursuant to
------
the Plan to purchase Shares.
1.9 Option Agreement means a written agreement as described in
----------------
Section 7 hereof between the Company and Optionee evidencing an Option.
1.10 Option Period means the period from the date of the
-------------
granting of an Option to the date on which that Option can no longer be
exercised, as determined by the Committee pursuant to Section 7.4 hereof.
A-1
<PAGE>
1.11 Option Price means the price to be paid for the Shares
------------
purchased pursuant to an Option.
1.12 Optionee means any person who is granted an Option under
--------
the Plan.
1.13 Plan means the Company's Amended and Restated 1989 Class
----
A Stock Option Plan, as embodied herein and as amended from time to time.
1.14 Section 162(m) Optionee means, for a given fiscal year of
-----------------------
the Company, any Optionee designated by the Committee by not later than 90 days
following the start of such year as a Optionee (or such other time as may be
required or permitted by Section 162(m) of the Code) whose compensation for such
fiscal year may be subject to the limit on deductible compensation imposed by
Section 162(m) of the Code.
1.15 Shares means shares of Common Stock.
------
1.16 Subsidiary means a subsidiary of the Company as defined
----------
under Section 424(f) of the Code.
2. Purpose. The Plan is intended to encourage ownership of Common
-------
Stock by directors of the Company in order to increase their interest in the
Company's success and to encourage them to remain directors of the Company.
3. Administration.
--------------
3.1 Board or Committee. The Plan shall be administered by the
------------------
or, if the Board so elects, by a Committee of at least two members of the Board
to be appointed by the Board. In the event that the Board does not elect to
appoint a Committee then, for purposes of administering the Plan, the term
"Board" shall be substituted for the term "Committee" whenever it appears in the
Plan.
3.2 Determination of Option Terms. The Committee shall have
-----------------------------
authority, subject to the terms of the Plan, to determine the persons to whom
Options shall be granted, the number of Shares to be covered by each Option, the
time or times at which Options shall be granted, and the terms and provisions of
the Options, and to make all other determinations necessary or advisable for the
administration of the Plan.
3.3 Interpretation and Construction. The Committee shall have
-------------------------------
the authority to interpret and construe the provisions of the Plan or of any
Option Agreement and such interpretation or construction shall be final and
conclusive unless otherwise determined by
A-2
<PAGE>
the Board and, in any such event, the determination by the Board shall be final
and conclusive.
4. Eligible Persons. The Committee may grant Options to members of
----------------
the Board; provided, however, that members of the Committee shall not be
eligible to receive Options under the Plan.
5. Grant of Options.
----------------
5.1 Procedure. Subject to the provisions of Sections 8.1 and
---------
8.2 hereof, the Committee may grant Options (which shall not be considered
"incentive stock options", within the meaning of Section 422 of the Code)
provided that the person to whom the Option is to be granted subsequently
becomes a party to an Option Agreement.
5.2 Additional Grants. Subject to Section 8.2 hereof, nothing
-----------------
contained in the Plan shall be construed to preclude either the granting of an
Option to an Optionee to whom one or more Options have already been granted or
the simultaneous granting of more than one Option to the same Optionee.
5.3 Subject to Market or Exchange Rules. Any and all grants of
-----------------------------------
Options shall be subject to all applicable rules and regulations of Nasdaq or
any stock exchange on which the Common Stock may then be listed.
6. Expiration Date of Plan. The Plan shall be effective as of the
-----------------------
date on which stockholder approval of the Plan is obtained (the "Effective
Date"). No Option shall be granted under the Plan after the tenth anniversary
of the Effective Date.
7. Option Agreements. Option Agreements shall be in such form as
-----------------
the Committee, in its sole discretion, shall approve or determine; provided,
however, that all Option Agreements shall comply with and be subject to the
following terms and conditions:
7.1 Manner, Time, and Medium of Payment. An Option shall be
-----------------------------------
exercised in the manner set forth in the Option Agreement relating thereto, and
payment in full of the Option Price for all Shares shall be made at the time of
exercise. Payment shall be in United States dollars in the form of cash,
certified check or bank draft, by delivery to the Company of Shares which the
Optionee has owned for at least six months, or, if the Committee so determines,
by withholding Shares with respect to which the Optionee has exercised such
Option having a Fair Market Value on the date of exercise equal to the sum of
the Option Price for the withheld Shares and the remaining Shares with respect
to which the Optionee has exercised such Option, or pursuant to a "cashless"
exercise through a broker or any combination of such methods of payment. Shares
shall be valued at their Fair Market Value on the date of exercise.
A-3
<PAGE>
7.2 Number of Shares. Subject to Section 9 hereof, the Option
----------------
Agreement shall state the number of Shares to which it pertains.
7.3 Option Price. The Option Price shall be determined by the
------------
Committee, in its sole discretion; provided, however, that the Option Price
shall not be less than 85% of the Fair Market Value of a Share on the date the
Option is granted; and provided further, that in the case of an Option that is
granted to a Section 162(m), Optionee such Option Price shall not be less than
100% of the Fair Market Value of a Share as of the date the Option is granted.
7.4 Option Period. Each Option granted under the Plan shall
-------------
expire no later than ten years from the date the Option is granted. Option
Agreements shall contain provisions for the earlier expiration of the Option
in the event the Optionee's status as a director of the Company terminates, as
provided by Section 7.8 hereof.
7.5 Date of Exercise. An Option shall be exercisable at the
----------------
times specified by the Committee at the time the Option is granted;
notwithstanding the foregoing, in the event of a "Change in Control", any Option
granted under the Plan shall become exercisable in full, whether or not it is
then exercisable. For purposes of the Plan, a "Change in Control" shall be
deemed to have occurred:
(i) when any "person", as defined in Section 3(a)(9) of the Exchange
Act and as used in Sections 13(d) and 14(d) thereof, including a "group" as
defined in Section 13(d) and 14(d) thereof (but excluding Martin J. Wygod
and his affiliates, the Company (and any successor to the Company in the
transaction which did not result in a Change in Control), any Subsidiary
and any employee benefit plan sponsored or maintained by the Company or any
Subsidiary (including any trustee of such plan acting as trustee) directly
or indirectly becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act, as amended from time to time) of securities of the
Company representing 50 percent or more of the combined power of its then
outstanding securities with respect to the election of directors;
(ii) when, during any period of 24 consecutive months during the
existence of the Plan, the individuals who, at the beginning of such
period, constitute the Board (the "Incumbent Directors"), cease for any
reason other than death to constitute at least a majority thereof;
provided, however, that a director who was not a director at the beginning
of such 24-month period shall be deemed to have satisfied such 24-month
requirement (and be an Incumbent Director) if such director was elected by,
or on the recommendation of or with the approval of, at least two-thirds of
the directors of the Company who then qualified as Incumbent Directors
either actually (because they were directors at the beginning of such 24-
month period) or by prior operation of this Section
A-4
<PAGE>
7.5(ii);
(iii) when the stockholders of the Company approve a merger or
consolidation of the Company without the consent or approval of a majority
of its Incumbent Directors;
(iv) when there is a sale or disposition of all or substantially all
of the Company's assets; or
(v) when the Company adopts a plan of liquidation.
In addition, the Committee may, in its sole discretion, include
provisions in an Option Agreement relating to a change in control of a
Subsidiary. The Committee may also determine at the time of grant or thereafter
that an Option shall become exercisable in full or in part, whether or not it is
then exercisable, upon such circumstances or events as the Committee determines,
in its sole discretion, merits special consideration.
7.6 Reorganization. In case the Company is merged or
--------------
consolidated with another corporation, or in case of a reorganization,
separation or liquidation of the Company, the Board or the board of directors of
any corporation assuming the obligations of the Company hereunder shall make
appropriate provisions for the protection of any outstanding Options by the
substitution on an equitable basis of appropriate securities of the Company, or
appropriate securities of the merged consolidated, or otherwise reorganized
corporation, or the appropriate adjustment in the Option Price, or both.
7.7 Transferability; Assignability. No Option shall be
------------------------------
assignable or transferable except by will or by the laws of descent and
distribution and no Option may be exercised other than by an Optionee or, after
the death of an Optionee, by that Optionee's personal representative, heirs or
legatees; provided, however, that the Committee may, subject to such terms and
conditions as the Committee shall specify, permit the transfer of an Option to
an Optionee's family members or to one or more trusts established in whole or in
part for the benefit of one or more of such family members.
7.8 Continuation with Company.
-------------------------
7.8.1 No Option shall be exercisable by an Optionee
later than the expiration of the Option Period or 30 days after termination of
such Optionee's service as a member of the Board and as a consultant to the
Company, if retained by the Company as such a consultant, whichever occurs
first, unless such termination occurs after the Optionee attains age 65 or
because of his death. The Committee may provide in an Option Agreement that
employment with a Subsidiary shall not constitute employment with the Company
for purposes of such Option Agreement. If the Optionee's service as a member of
the Board and as a
A-5
<PAGE>
consultant to the Company is terminated because of his death or after he attains
age 65, (or if the Optionee dies within 30 days of such termination or 90 days
of his termination after age 65) the Optionee (or the representative of the
estate of the heirs or legatees of a deceased Optionee) shall have the right to
exercise the unexercised portion of the Option which the Optionee could have
exercised as of the date of his death or termination after age 65, provided that
notice of such exercise is given in writing before the expiration of the Option
Period and within 90 days of the Optionee's termination after age 65 or one year
of the Optionee's death, as the case may be. If the Optionee's service as a
member of the Board or as a consultant to the Company is terminated because of
the Optionee's violation of his duties, the existence of which violation shall
be determined by the Committee, in its sole discretion (which determination
shall be conclusive) all of the Optionee's Options shall terminate immediately
and the Optionee shall have no right after such termination to exercise any
Option he might have been able to exercise prior to his termination as a member
of the Board and as a consultant to the Company.
7.8.2 Nothing in the Plan or in any Option granted under it
shall confer (or be deemed to confer) upon an Optionee any right to continue as
a member of the Board or to be retained, or continue, as a consultant to the
Company.
7.9 Rights as a Stockholder. An Optionee shall have no rights
-----------------------
as a stockholder with respect to Shares covered by any Option until the date the
Company has issued and delivered such Shares to the Optionee, and the Optionee's
name shall have been entered as the stockholder of record on the books of the
Company and then only as to such Shares as are actually issued and delivered to
the Optionee.
7.10 Securities Laws. The Company may require each Optionee to
---------------
represent to the Company, in writing, when an Option is exercised, that such
Optionee is exercising such Option for his own account for investment only and
not with a view to distribution and that the Optionee will not make any sale,
transfer or other disposition of any Shares so purchased except (i) pursuant to
a registration statement filed under the Securities Act of 1933, as amended,
which the Securities and Exchange Commission has declared effective, (ii)
pursuant to an opinion of counsel satisfactory in form and substance to the
Company that the sale, transfer or other disposition may be made without
registration, or (iii) pursuant to a "no action" letter issued to the Optionee
by the Securities and Exchange Commission. The Company may require each share
certificate representing Shares purchased upon the exercise of an Option to bear
a legend stating that the Shares evidenced thereby may not be sold or
transferred except in compliance with the Securities Act of 1933, as amended,
and the provisions of the Plan. No Option may be granted or exercised at a time
when such Option, or the granting or exercise thereof, may result in the
violation of any law or governmental order or regulation.
7.11 Other Provisions. Option Agreements shall contain such
----------------
other terms and conditions not inconsistent with the Plan as the Committee shall
deem advisable.
A-6
<PAGE>
8. Shares Available for Option.
---------------------------
8.1 Maximum. Subject to Sections 7.6 and 9 hereof, no more than
-------
2,200,000 Shares shall be subject to purchase pursuant to Options granted under
the Plan. At all times during the term of the Plan, the Company shall have
reserved that number of Shares less an amount equal to the number of Shares
which have been issued pursuant to the exercise of Options. At all times after
termination of the Plan, the Company shall have reserved for issuance a number
of Shares equal to the aggregate number of Shares subject to outstanding
Options.
8.2 Employee Maximum. Subject to Section 7.6 and 9 hereof, no
----------------
Optionee shall receive Options with respect to an aggregate of more than 250,000
Shares in any Plan year.
8.3 Expiration or Termination. If any outstanding Option under
-------------------------
the Plan expires for any reason or is terminated prior to the expiration date of
the Plan as set forth in Section 6 hereof, the Shares allocable to any
unexercised portion of such Option may again be subject to Options under the
Plan.
9. Recapitalization or Change in Par Value of Common Stock. The
-------------------------------------------------------
aggregate number of Shares purchasable under Options pursuant to the Plan and
the number of Shares and the Option Price for Shares covered by each outstanding
Option shall all be proportionately adjusted, as deemed appropriate by the
Committee, if the Shares are split-up, converted, exchanged, reclassified, or in
any way substituted for. The Committee shall also provide for appropriate
adjustments of the number of Shares purchasable under the Plan and of
outstanding Options in the event of stock dividends or distributions of assets
or securities of other companies owned by the Company to stockholders relating
to Common Stock for which the record date is prior to the date the shares
purchased by exercise of an Option are issued, except that no such adjustment
shall be made for cash dividends or stock dividends of 10% or less (in the
aggregate). Any such adjustment to an outstanding Option may include an
adjustment of the Option Price or the number of Shares for which an Option may
be exercised, or may provide for an escrow of assets or securities so
distributed to be available upon future exercise, or any combination thereof, as
the Committee deems appropriate. In the event of a change in the Company's
presently authorized Common Stock which is limited to a change of all of its
presently authorized Shares with par value into the same number of shares
without par value, or any change of the then authorized Shares with par value
into the same number of shares with a different par value, the shares resulting
from any such change shall be deemed to be Shares as defined in Section 1
hereof, and no change in the number of Shares covered by each Option or in the
Option Price shall take place.
A-7
<PAGE>
10. Indemnification and Reliance.
----------------------------
10.1 Indemnification. Each person who is or shall have been a
---------------
member of the Board or of the Committee shall be indemnified and held harmless
by the Company against and from any and all loss, cost, liability or expense
that may be imposed upon or reasonably incurred by such person in connection
with or resulting from any claim, action, suit or proceeding to which such
person may be a party or in which such person may be involved by reason of any
action taken or failure to act under the Plan and against and from any and all
amounts paid by such person in settlement thereof (with the Company's written
approval) or paid by such person in satisfaction of a judgment in any such
action, suit or proceeding to the fullest extent permitted by the Delaware
General Corporation Law, subject, however, to the condition that upon the
institution of any such claim, action, suit or proceeding, such person shall in
writing give the Company an opportunity to intervene at its own expense on his
or her behalf. The foregoing right of indemnification shall not be exclusive of
any other right to which such person may be entitled as a matter of law or
otherwise, or any power that the Company may have to indemnify such person or
hold him harmless.
10.2 Reliance. Each member of the Board or of the Committee and
--------
each officer and employee of the Company in performing duties under the Plan
shall be entitled to rely upon information and reports furnished in connection
with the administration of this Plan by any duly authorized officer or agent of
the Company.
11. Income Tax Withholding. If the Company or a Subsidiary shall be
----------------------
required to withhold any amounts by reason of any federal, state or local tax
rules or regulations in respect of the payment of cash or the issuance or Shares
pursuant to the exercise of an Option, the Company or such Subsidiary shall be
entitled to deduct and withhold such amounts from any cash payments to be made
to the Optionee. In any event, the Optionee shall either (i) make available to
the Company or such Subsidiary, promptly when requested by the Company or such
Subsidiary, sufficient funds to meet the requirements of such withholding, or
(ii) to the extent permitted by the Committee, irrevocably authorize the Company
to withhold from the Shares otherwise issuable to the Optionee as a result of
such exercise a number of Shares having a Fair Market Value, as of the date the
withholding tax obligation arises (the "Tax Date") which alone, or when added to
funds paid to the Company or the Subsidiary by the Optionee, equal the amount of
the minimum withholding tax obligation (the "Withholding Election") and the
Company or such Subsidiary shall be entitled to take and authorize such steps as
it may deem advisable in order to have such funds made available to the Company
or such Subsidiary out of any funds or property due or to become due to the
Optionee. An Optionee's Withholding Election may only be made prior to the Tax
Date and may be disapproved by the Committee.
12. Amendment or Termination of Plan. The Board may modify, amend or
--------------------------------
terminate the Plan in whole or in part at any time; provided, however, that (i)
no modification or
A-8
<PAGE>
amendment shall be effective without stockholder approval if such approval is
required by law or under the rules of Nasdaq or the stock exchange on which the
Shares are listed, (ii) with respect to any person who is granted an Option
prior to the Effective Date, no such termination, modification or amendment of
the Plan shall alter or affect the terms of any then outstanding Options
previously granted hereunder without the consent of the Optionee and (iii) with
respect to any person who is granted an Option on or after the Effective Date,
no such termination, modification, or amendment of the Plan shall adversely
alter or affect the terms of any then outstanding Options previously granted
hereunder without the consent of the Optionee.
13. Set-off. If at any time an Optionee is indebted to the Company
-------
or any Subsidiary, the Company may in the discretion of the Board or the
Committee (a) withhold from the Optionee (i) following the exercise by the
Optionee of an Option, Shares issuable to the Optionee having a Fair Market
Value on the date of exercise up to the amount of indebtedness to the Company or
(ii) following the sale by an Optionee of Shares received pursuant to the
exercise of an Option, amounts due to such Optionee in connection with the sale
of such Shares up to the amount of indebtedness to the Company, or (b) take any
substantially similar action. The Board or the Committee may establish such
rules and procedures as it may deem necessary or advisable in connection with
the taking of any action contemplated by this Section 13.
14. Captions. Other than the definitions in Section 1 hereof, the
--------
captions are not part of this Plan and shall not be taken into account for
purposes of interpreting the Plan.
15. Governing Law. The Plan shall be construed in accordance with
-------------
the laws of the State of New Jersey without regard to the principles of
conflicts of law.
A-9
<PAGE>
EXHIBIT 99(b)
SYNETIC, INC.
AMENDED AND RESTATED 1989 CLASS B
STOCK OPTION PLAN
1. Definitions. The terms below shall be defined as indicated.
-----------
1.1 Board means the Board of Directors of the Company, as
constituted at any time.
1.2 Code means the Internal Revenue Code of 1986, as amended
from time to time.
1.3 Committee means the Committee of the Board described In
Section 3.1.
1.4 Common Stock means the Company's Common Stock, par value
$.0l.
1.5 Company means Synetic, Inc., a Delaware corporation, and any
successor corporation which adopts the Plan.
1.6 Employee means a person (including an Employee who is also
an officer or a director of the Company) employed by the Company or a Subsidiary
on a full or part time basis, who is compensated by a regular salary.
1.7 Exchange Act means the Securities Exchange Act of 1934, as
amended from time to time.
1.8 Fair Market Value means, on a specified date, the last sales
price of a Share traded on the over-the-counter market, as reported on the
National Association of Securities Dealers Automated Quotation System ("Nasdaq")
or the closing price for a Share on the stock exchange, if any, an which Shares
are primarily traded; provided, however, that if no Shares were traded on such
date, then on the last previous date on which a Share was so traded, or, if none
of the above is applicable, the value of a Share as established by the Committee
for such date, using any reasonable method of valuation.
1.9 Incentive Stock Option means an Option which is intended to
qualify as an "incentive stock option" within the meaning of Section 422 of the
Code.
1.10 Key Consultant means an individual (other than an Employee)
who is an officer or director of the Company or a Subsidiary or a consultant,
agent, or other person engaged by the Company or a Subsidiary to render services
to, or on behalf of, the
B-1
<PAGE>
Company or such Subsidiary; provided, however, that members of the Committee
shall not be eligible to receive Options under the Plan.
1.11 Non-qualified Stock Option means any Option which in not an
Incentive Stock Option.
1.12 Option means an option granted by the Company pursuant to
the Plan to purchase Shares.
1.13 Option Agreement means a written agreement, as described in
Section 7 hereof, between the Company and an Optionee evidencing an Option.
1.14 Option Period means the period from the date of the
granting of an Option to the date on which that Option can no longer be
exercised, as determined by the Committee pursuant to Section 7.4 hereof.
1.15 Option Price means the price to be paid for the Shares
purchased pursuant to an Option.
1.16 Optionee means any person who is granted an Option under
the Plan.
1.17 Plan means the Company's Amended and Restated 1989 Class B
Stock Option Plan, as embodied herein and as amended from time to time.
1.18 Section 162(m) Optionee means, for a given fiscal year of
the Company, any Optionee designated by the Committee by not later than 90 days
following the start of such year as a Optionee (or such other time as may be
required or permitted by Section 162(m) of the Code) whose compensation for such
fiscal year may be subject to the limit on deductible compensation imposed by
Section 162(m) of the Code.
1.19 Shares means shares of Common Stock.
1.20 Subsidiary means a subsidiary of the Company as defined
under Section 424(f) of the Code.
2. Purpose. The Plan is intended to encourage ownership of Common
-------
Stock by certain Employees and Key Consultants in order to increase their
interest in the Company's success and to encourage them to remain in the employ
of, or in a consultancy relationship with, the Company and its Subsidiaries.
B-2
<PAGE>
3. Administration.
--------------
3.1 Board or Committee. The Plan shall be administered by the
------------------
Board or, if the Board so elects, by a Committee of at least two members of the
Board to be appointed by the Board. In the event that the Board does not elect
to appoint a Committee then, for purposes of administering the Plan, the term
"Board" shall be substituted for the term "Committee" whenever it appears in the
Plan.
3.2 Interpretation and Construction. The Committee shall have
-------------------------------
the authority to interpret and construe the provisions of the Plan or of any
Option Agreement and such interpretation or construction shall be final and
conclusive unless otherwise determined by the Board, and in any such event the
determination by the Board shall be final and conclusive.
3.3 Determination of Option Terms. The Committee shall have
-----------------------------
authority, subject to the terms of the Plan, to determine the persons to whom
Options shall be granted, the number of Shares to be covered by each Option, the
time or times at which Options shall be granted, and the terms and provisions of
the Options, and to make all other determinations necessary or advisable for the
administration of the Plan.
4. Eligible Persons. The Committee may grant Options to any
----------------
Employee or Key Consultant; provided, however, that an Incentive Stock Option
shall not be granted to any individual who is not an Employee as of the date of
grant, and, provided further, that no Incentive Stock Option shall be granted to
any individual who, at the time such Option is granted, owns (within the meaning
of Section 422 of the Code) stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company or any Subsidiary, unless,
at the time the Incentive Stock Option is granted, the Option Price is at least
110% of the Fair Market Value of a Share and the Incentive Stock Option, by its
terms, is not exercisable after the expiration of five years from the date such
Option is granted.
5. Grant of Option.
---------------
5.1 Procedure. Subject to the provisions of Sections 8.1 and
---------
8.2 hereof, the Committee may grant Options, which may be either Incentive Stock
Options or Non-qualified Stock Options (as determined by the Committee, in its
sole discretion) provided that the person to whom the Option is granted
subsequently becomes a party to an Option Agreement. An Option granted pursuant
to the Plan shall be presumed to be a Non-qualified Stock Option, unless the
Committee specifies otherwise at the time the Option is granted.
5.2 Additional Grants. Subject to Section 8.2 hereof, nothing
-----------------
contained in the Plan shall be construed to preclude either the granting of an
Option to an
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<PAGE>
Optionee to whom one or more Options have already been granted or the
simultaneous granting of more then one Option to the same Optionee.
5.3 Subject to Market or Exchange Rules. Any and all grants of
-----------------------------------
Options shall be subject to all applicable rules and regulations of Nasdaq or
any stock exchange on which the Company's Common Stock may then be listed.
6. Effective Date and Expiration Date of Plan. The Plan shall be
------------------------------------------
effective as of the date on which stockholder approval of the Plan is obtained
(the "Effective Date"). No Option shall be granted under the Plan after the
tenth anniversary of the Effective Date.
7. Option Agreements. Option Agreements shall be in such form as
-----------------
the Committee, in its sole discretion, shall approve or determine; provided,
however, that all Option Agreements shall comply with and be subject to the
following terms and conditions:
7.1 Manner, Time, and Medium of Payment. An Option shall be
-----------------------------------
exercised in the manner set forth in the Option Agreement relating thereto and
payment in full of the Option Price for all Shares shall be made at the time of
exercise. Payment shall be in United States dollars in the form of cash,
certified check, bank draft, by delivery to the Company, Shares which the
Optionee has owned for at least six months, or, if the Committee so determines,
by withholding Shares with respect to which the Optionee has exercised such
Option or pursuant to a "cashless" exercise through a broker, or any combination
of such methods of payment. Shares shall be valued at their Fair Market Value
on the date of exercise.
7.2 Number of Shares. Subject to Section 9 hereof, the Option
----------------
Agreement shall state the number of Shares to which it pertains.
7.3 Option Price. The Option Price shall be determined by the
------------
Committee, in its sole discretion; provided, however, that in the case of a Non-
qualified Stock Option, the Option Price shall not be less than 85% of the Fair
Market Value of a Share as of the date the Option is granted, and, in the case
of an Incentive Stock Option or a Non-qualified Stock Option granted to a
Section 162(m) Optionee, shall not be less than 100% of the Fair Market Value of
a Share as of the date the Option is granted.
7.4 Option Period. Each Option granted under the Plan shall
-------------
expire no later than ten years (or five years as provided in Section 4 hereof)
from the date the Option is granted. Option Agreements shall contain provisions
for the earlier expiration of the Options in the event of the Optionee's
termination of employment as provided by Section 7.8 hereof.
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<PAGE>
7.5 Date of Exercise. An Option shall be exercisable at the
----------------
times specified by the Committee at the time the Option is granted;
notwithstanding the foregoing, in the event of a "Change in Control", the Board
may in its sole discretion, determine that any Option granted under the Plan
shall become exercisable in full or in part, whether or not it is then
exercisable. For purposes of the Plan, a "Change in Control" shall be deemed to
have occurred:
(i) when any "person", as defined in Section 3(a)(9) of the
Exchange Act and as used in Sections 13(d) and 14(d) thereof, including a
"group" as defined in Section 13(d) and 14(d) thereof (but excluding Martin
J. Wygod and his affiliates, the Company (and any successor to the Company
in the transaction which did not result in a Change in Control), any
Subsidiary and any employee benefit plan sponsored or maintained by the
Company or any Subsidiary (including any trustee of such plan acting as
trustee) directly or indirectly becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act, as amended from time to time) of
securities of the Company representing 50 percent or more of the combined
power of its then outstanding securities with respect to the election of
directors;
(ii) when, during any period of 24 consecutive months during
the existence of the Plan, the individuals who, at the beginning of such
period, constitute the Board (the "Incumbent Directors"), cease for any
reason other than death to constitute at least a majority thereof;
provided, however, that a director who was not a director at the beginning
of such 24-month period shall be deemed to have satisfied such 24-month
requirement (and be an Incumbent Director) if such director was elected by,
or on the recommendation of or with the approval of, at least two-thirds of
the directors of the Company who then qualified as Incumbent Directors
either actually (because they were directors at the beginning of such 24-
month period) or by prior operation of this Section 7.5(ii);
(iii) when the stockholders of the Company approve a merger or
consolidation of the Company without the consent or approval of a majority
of its Incumbent Directors;
(iv) when there in a sale or disposition of all or substantially
all of the Company's assets; or
(v) when the Company adopts a plan of liquidation.
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<PAGE>
In addition, the Committee may, in its sole discretion, include
provisions in an Option Agreement relating to a change in control of a
Subsidiary. The Committee may also determine at the time of grant or thereafter
that an Option shall become exercisable in full or in part, whether or not it is
then exercisable, upon such circumstances or events as the Committee determines,
in its sole discretion, merits special consideration.
7.6 Reorganization. In case the Company is merged or
--------------
consolidated with another corporation, or in case of a reorganization,
separation, or liquidation of the Company, the Board or the board of directors
of any corporation assuming the obligations of the Company hereunder shall
either (i) make appropriate provisions for the protection of any outstanding
Options by the substitution on an equitable basis of appropriate securities of
the Company, or appropriate securities of the merged, consolidated, or otherwise
reorganized corporation, or the appropriate adjustment in the Option Price, or
both, or (ii) give written notice to the Optionees that their Options must be
exercised, to the extent then exercisable after giving due effect to Section 7.5
hereof, within 60 days of the date of such notice or the Options will terminate.
7.7 Transferability; Assignability. No Option shall be
------------------------------
assignable or transferable except by will or by the laws of descent and
distribution and no Option may be exercised other than by an Optionee or, after
the death of an Optionee, by that Optionee's personal representative, heirs or
legatees; provided, however, that the Committee may, subject to such terms and
conditions as the Committee shall specify, permit the transfer of an Option that
is not an Incentive Stock Option to an Optionee's family members or to one or
more trusts established in whole or in part for the benefit of one or more of
such family members.
7.8 Continuation with Company.
-------------------------
7.8.1 No Option shall be exercisable by an Optionee
later than the expiration of the Option Period or 30 days after termination of
such Optionee's service as an Employee or a Key Consultant, whichever occurs
first, unless such termination of service occurs by reason of the Optionee's
retirement with the consent of the Company or the Subsidiary, as the case may
be, or his death. The Committee may provide in an Option Agreement that
employment with a Subsidiary shall not constitute employment with the Company
for purposes of such Option Agreement. If the Optionee's services are
terminated because of his retirement with such consent or death (or if the
Optionee dies within 30 days of such termination or 90 days of such retirement)
the Optionee (or the representative of the estate or the heirs or legatees of a
deceased Optionee) shall have the right to exercise the unexercised portion of
the Option which the Optionee could have exercised as of the date of his
retirement or death provided that notice of such exercise is given to the
Company in writing before the expiration of the Option Period and within 90 days
of the Optionee's retirement or one year of the Optionee's death, an the case
may be. If the Optionee's services with the Company or the
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<PAGE>
Subsidiary are terminated because of the Optionee's violation of his duties to
the Company or the Subsidiary as he may from time to time have, the existence of
which violation shall be determined by the Committee, in its sole discretion
(which determination shall be conclusive) all of the Optionee's Options shall
terminate immediately and the Optionee shall have no right after such
termination to exercise any Option he might have been able to exercise prior to
his termination of service.
7.8.2 Nothing in the Plan or in any Option granted under it
shall confer (or be deemed to confer) upon an Optionee any right to continue in
the employ or continue to be retained by the Company or any Subsidiary or
interfere in any way with the right of the Company or any Subsidiary to
terminate his employment or retention at any time.
7.9 Rights of Stockholder. An Optionee shall have no rights as
---------------------
a stockholder with respect to such Shares covered by any Option until the date
the Company has issued and delivered such Shares to the Optionee, and the
Optionee's name shall have been entered as the stockholder of record on the
books of the Company and then only as to such Shares as are actually issued and
delivered to the Optionee.
7.10 Securities Laws. The Company may require each Optionee to
---------------
represent to the Company, in writing, when an Option is exercised, that such
Optionee is exercising such Option for his own account for investment only and
not with a view to distribution and that the Optionee will not make any sale,
transfer, or other disposition of any Shares so purchased except (i) pursuant to
a registration statement filed under the Securities Act of 1933, as amended,
which the Securities and Exchange Commission has declared effective, (ii)
pursuant to an opinion of counsel satisfactory in form and substance to the
Company that said sale, transfer, or other disposition may be made without
registration, or (iii) pursuant to a "no action" letter issued to the Optionee
by the Securities and Exchange Commission. The Company may require each
certificate representing Shares purchased upon the exercise of an Option to bear
a legend stating that the Shares evidenced thereby may not be sold or
transferred except in compliance with the Securities Act of 1933, as amended,
and the provisions of the Plan. No Option may be granted or exercised at a time
when such Option, or the granting or exercise thereof, may result in the
violation of any law or governmental order or regulation.
7.11 Other Provisions. Option Agreements shall contain such
----------------
other term and conditions not inconsistent with the Plan as the Committee shall
deem advisable or as shall be required by Section 422 of the Code.
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<PAGE>
8. Shares Available for Option.
---------------------------
8.1 Maximum. Subject to Sections 7.6 and 9 hereof, no more than
-------
3,600,000 Shares shall be subject to purchase pursuant to Options granted under
the Plan. At all times during the term of the Plan, the Company shall have
reserved said number of Shares less an amount equal to the number of Shares
which have been issued pursuant to the exercise of Options. At all times after
termination of the Plan, the Company shall have reserved for issuance a number
of Shares equal to the aggregate number of Shares subject to outstanding
Options.
8.2 Employee Maximum. Subject to Sections 7.6 and 9 hereof, no
----------------
Optionee shall receive Options under this Plan with respect to an aggregate of
more than 250,000 Shares in any Plan year.
8.3 Expiration or Termination. If any outstanding Option under
-------------------------
the Plan expires for any reason or is terminated prior to the expiration date of
the Plan as set forth in Section 6 hereof, the Shares allocable to any
unexercised portion of such Option may again be subject to Options under the
Plan.
8.4 $l00,000 Limitation. Notwithstanding any other provision of
-------------------
this Plan to the contrary, the aggregate Fair Market Value (determined as of the
time of grant) of the sum of (a) the Shares for which any Optionee is granted
Incentive Stock Options and (b) the securities of the Company or any Subsidiary
for which such Optionee is be granted other incentive stock options (within the
meaning of Section 422 of the Code), which are exercisable for the first time by
such Optionee during any calendar year shall not exceed $100,000.
9. Recapitalization or Change in Par Value of Common Stock. The
--------------------------------------------------------
aggregate number of Shares purchasable under Options pursuant to the Plan and
the number of Shares and the Option Price for Shares covered by each outstanding
Option shall all be proportionately adjusted, as deemed appropriate by the
Committee, if the Shares are split-up, converted, exchanged, reclassified, or in
any way substituted for. The Committee shall also provide for appropriate
adjustments of the number of Shares purchasable under the Plan and of
outstanding Options in the event of stock dividends or distributions of assets
or securities of other companies owned by the Company to stockholders relating
to Common Stock for which the record date is prior to the date the shares
purchased by exercise of an Option are issued, except that no such adjustment
shall be made for cash dividends or stock dividends of 10% or less (in the
aggregate). Any such adjustment to an outstanding Option my include an
adjustment of the Option Price or the number of Shares for which an Option may
be exercised, or may provide for an escrow of assets or securities so
distributed to be available upon future exercise, or any combination thereof, as
the Committee deems appropriate. In the event of a change in the Company's
presently authorized Common Stock which is limited to a change of
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<PAGE>
all of its presently authorized Shares with par value into the same number of
shares without par value, or any change of the then authorized Shares with par
value into the same number of shares with a different par value, the shares
resulting from any such change shall be deemed to be Shares as defined in
Section 1 hereof, and no change in the number of Shares covered by each Option
or in the Option Price shall take place.
10. Indemnification and Reliance.
----------------------------
10.1 Indemnification. Each person who is or shall have been a
---------------
member of the Board or of the Committee shall be indemnified and held harmless
by the Company against and from any and all loss, cost, liability, or expense
that may be imposed upon or reasonably incurred by such person in connection
with or, resulting from any claim, action, suit, or proceeding to which such
person may be a party or in which such person may be involved by reason of any
action taken or failure to act under the Plan and against and from may and all
amounts paid by such person in settlement thereof (with the Company's written
approval) or paid by such person in satisfaction of a judgment in any such
action, suit, or proceeding to the fullest extent permitted by the Delaware
General Corporation Law, subject, however, to the condition that upon the
institution of any such claim, action, suit, or proceeding, such person shall in
writing give the Company an opportunity to intervene at its own expense on his
behalf. The foregoing right of indemnification shall not be exclusive of any
other right to which such person may be entitled as a matter of law or
otherwise, or any power that the Company may have to indemnify such person or
hold him harmless.
10.2 Reliance. Each member of the Board or of the Committee and
--------
each officer and employee of the Company in performing duties under the Plan
shall be entitled to rely upon information and reports furnished in connection
with the administration of this Plan by any duly authorized officer or agent of
the Company.
11. Income Tax Withholding. If the Company or a Subsidiary shall be
----------------------
required to withhold any amounts by reason of any federal, state or local tax
rules or regulations in respect of the payment of cash or the issuance of Shares
pursuant to the exercise of an Option, the Company or such Subsidiary shall be
entitled to deduct and withhold such amounts from any cash payments to be made
to the Optionee. In any event, the Optionee shall either (i) make available to
the Company or such Subsidiary, promptly when requested by the Company or such
Subsidiary, sufficient funds to meet the requirements of such withholding, or
(ii) to the extent permitted by the Committee, irrevocably authorize the Company
to withhold from the Shares otherwise issuable to the Optionee as a result of
such exercise a number of Shares having a Fair Market Value, as of the date the
withholding tax obligation arises (the "Tax Date") which alone, or when added to
funds paid to the Company or the Subsidiary by the Optionee, equal the amount of
the minimum withholding tax obligation (the "Withholding Election") and the
Company or such Subsidiary shall be entitled to take and authorize such
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<PAGE>
steps as it may deem advisable in order to have such funds made available to
the Company or such Subsidiary out of any funds or property due or to become due
to the Optionee. An Optionee's Withholding Election may only be made prior to
the Tax Date and may be disapproved by the Committee.
12. Amendment or Termination of Plan. The Board may modify, amend or
--------------------------------
terminate the Plan in whole or in part at any time; provided, however, that (i)
no modification or amendment shall be effective without stockholder approval if
such approval is required by law or under the rules of Nasdaq or of the stock
exchange on which the Shares are listed, (ii) with respect to any person who is
granted an Option prior to the Effective Date, no such termination,
modification, or amendment of the Plan shall alter or affect the terms of any
then outstanding Options previously granted hereunder without the consent of the
Optionee and (iii) with respect to any person who is granted an Option on or
after the Effective Date, no such termination, modification, or amendment of the
Plan shall adversely alter or affect the terms of any then outstanding Options
previously granted hereunder without the consent of the Optionee.
13. Set-off. If at any time an Optionee is indebted to the Company
-------
or any Subsidiary, the Company may in the discretion of the Board or the
Committee (a) withhold from the Optionee (i) following the exercise by the
Optionee of an Option, Shares issuable to the Optionee having a Fair Market
Value on the date of exercise up to the amount of indebtedness to the Company or
(ii) following the sale by an Optionee of Shares received pursuant to the
exercise of an Option, amounts due to such Optionee in connection with the sale
of such Shares up to the amount of indebtedness to the Company, or (b) take any
substantially similar action. The Board or the Committee may establish such
rules and procedures as it may deem necessary or advisable in connection with
the taking of any action contemplated by this Section 13.
14. Captions. Other then the definitions in Section 1 hereof, the
--------
captions are not part of this Plan and shall not be taken into account for
purposes of interpreting the Plan.
15. Governing Law. The Plan shall be construed in accordance with
-------------
the laws of the State of New Jersey without regard to the principles of
conflicts of law.
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<PAGE>
EXHIBIT 99(c)
SYNETIC, INC.
AMENDED AND RESTATED 1991 SPECIAL
NON-QUALIFIED STOCK OPTION PLAN
1. Definitions. The terms below shall be defined as indicated.
-----------
1.1 Board means the Board of Directors of the Company, as
-----
constituted from time to time.
1.2 Code means the Internal Revenue Code of 1986, as amended
----
from time to time, or any successor statute thereto.
1.3 Committee means the Committee of the Board described in
---------
Section 3.
1.4 Common Stock means the Company's common stock, par value
------------
$.01.
1.5 Company means Synetic, Inc., a Delaware corporation, and
-------
any successor corporation which adopts the Plan.
1.6 Designated Officer means any director of the Company (who is
------------------
also an officer of the Company) that the Board or the Committee may designate
pursuant to Section 3 to act on their behalf with respect to the Plan.
1.7 Exchange Act means the Securities Exchange Act of 1934, as
------------
amended from time to time, or any successor statute thereto.
1.8 Fair Market Value means, on a specified date, the last sales
-----------------
price of a Share traded on the over-the-counter market, as reported on the
National Association of Securities Dealers Automated Quotation System
("Nasdaq"), or the last closing price for a Share on the stock exchange, if any,
------
on which Shares are primarily traded (or if no Shares were traded on such date,
then on the last previous date on which any Shares were so traded), or if none
of the above is applicable, the value of a Share for such date as established by
the Committee, using any reasonable method of valuation.
1.9 Key Consultant means an individual (other than a Key
--------------
Employee) who is a consultant, agent, or other person engaged by the Company or
a Subsidiary to render services to, or on behalf of, the Company or such
Subsidiary.
1.10 Key Employee means a person employed by the Company or a
------------
Subsidiary on a full or part time basis, who is compensated by a regular salary.
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<PAGE>
1.11 Option means an option to purchase Shares granted by the
------
Company pursuant to the Plan. The Options are not intended to qualify as
"incentive stock options" within the meaning of Section 422 of the Code.
1.12 Option Agreement means a written agreement as described
----------------
in Section 7 between the Company and the Optionee evidencing an option.
1.13 Option Period means the period from the date of the
-------------
granting of an Option to the date on which that Option can no longer be
exercised.
1.14 Option Price means the price to be paid for the Shares
------------
purchased pursuant to an Option.
1.15 Optionee means any person who is granted an Option under
--------
the Plan.
1.16 Plan means the Company's Amended and Restated 1991 Special
----
Non-Qualified Stock Option Plan, as adopted by the Board in substantially the
form set forth herein and as the same may be amended or otherwise modified from
time to time.
1.17 Shares means shares of Common Stock.
------
1.18 Subsidiary means a subsidiary of the Company as defined
----------
under Section 424(f) of the Code.
2. Purpose. The Plan is intended to encourage ownership of Common
-------
Stock by Key Employees and Key Consultants, upon whose judgment and interest the
Company is dependent for its successful operation and growth, in order to
increase their proprietary interest in the Company's success and to encourage
them to remain in the employ of the Company.
3. Administration.
--------------
3.1 Board, Committee or Designated Officer. The Plan shall be
--------------------------------------
administered by the Board or, if the Board so determines, by a Committee
appointed by the Board from among its members. The Board or the Committee may
designate one or more Designated Officers, each of whom shall be authorized and
empowered to exercise such functions and make such determinations with respect
to the Plan and the administration thereof as the Board or the Committee shall
specify in the resolution designating such officer. Any provision of the Plan
to the contrary notwithstanding, (a) in the event of any inconsistency between
any action taken by a Designated Officer and any action taken by the Committee
concerning the Plan or any Options hereunder, the action taken by the Committee
shall govern,
C-2
<PAGE>
(b) in the event of any inconsistency between any action taken by a Designated
Officer or the Committee and any action taken by the Board concerning the Plan
or any Options hereunder, the action taken by the Board shall govern and (c) no
Designated Officer may take any action except to the extent authorized to do so
by a resolution of the Board or the Committee.
3.2 Determination of Option Terms. Subject to the provisions
-----------------------------
of Section 8 and Section 12, the Board, the Committee or any Designated Officer
shall have authority to determine the vesting and exercise schedule with respect
to Options, the persons to whom Options shall be granted, the number of Shares
to be covered by each Option, the time or times at which Options shall be
granted and the terms and provisions of the Options, and to make all other
determinations necessary or advisable for the administration of the Plan.
Unless otherwise determined and specified in the Option Agreement, Options shall
become exercisable during the first five years in which the option is
outstanding at the rate of 20% per year.
3.3 Interpretation and Construction. The Board, the Committee
-------------------------------
or the Designated Officer(s), as applicable, shall have the authority to
interpret and construe the provisions of the Plan or of any Option Agreement
and, subject to Section 3.1, such interpretation and construction by the Board,
the Committee or any Designated Officer shall be final and conclusive.
4. Eligible Persons. The Board, the Committee or any Designated
----------------
Officer, as the case may be, may grant Options only to Key Employees or Key
Consultants; provided, however, that no Option shall be granted to any
individual who, at the time of grant, is subject to Section 16 of the Exchange
Act.
5. Grant of Options.
----------------
5.1 Procedure. Subject to the provisions of Sections 8.1 and
---------
8.2, the Board, the Committee or any Designated Officer may (but shall not be
required to) grant Options, provided that the person to whom the Option is to be
granted subsequently becomes a party to an Option Agreement.
5.2 Additional Grants. Subject to Section 8.2 hereof, nothing
-----------------
contained in the Plan shall be construed to preclude either the granting of an
Option to an Optionee to whom one or more Options have already been granted or
the simultaneous granting of more then one Option to the same Optionee.
5.3 Subject to Exchange Rules. Any and all grants of Options
-------------------------
shall be subject to all applicable rules and regulations of Nasdaq or any stock
exchange on which the Common Stock may then be listed.
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<PAGE>
6. Effective Date and Expiration Date of Plan. The Plan shall be
------------------------------------------
effective as of the date on which stockholder approval of the Plan is obtained
(the "Effective Date"). No Option shall be granted under the Plan after the
--------------
tenth anniversary of the Effective Date.
7. Option Agreements. Option Agreements shall be in such form as
-----------------
the Board, the Committee or any Designated Officer shall approve or determine;
provided, however, that all Option Agreements shall comply with and be subject
to the following terms and conditions:
7.1 Manner, Time, and Medium of Payment. An Option shall be
-----------------------------------
exercised in the manner set forth in the Option Agreement relating thereto and
payment in full of the Option Price for all Shares shall be made at the time of
exercise. Payment shall be in United States dollars in the form of cash,
certified check or bank draft, or by delivery of fully paid Shares held for a
period of at least six months valued at their Fair Market Value on the date of
exercise, or, if the Board, the Committee or any Designated Officer so
determines, by withholding Shares with respect to which the Optionee has
exercised such Option having a Fair Market Value on the date of exercise equal
to the sum of the Option Price for the withheld Shares and the remaining Shares
with respect to which the Optionee has exercised such option, or any combination
of such methods of payment.
7.2 Number of Shares. Subject to Section 9, the Option
----------------
Agreement shall state the number of Shares to which it pertains.
7.3 Option Price. The Option Price shall be determined by the
------------
Board, the Committee or any Designated Officer. Notwithstanding the foregoing,
subject to Section 9, except for options which are given in substitution for
options of any parent, subsidiary, predecessor to or party to a merger or
reorganization with or into the Company, the Option Price shall not be less than
the Fair Market Value of a Share on the date the Option is granted.
7.4 Option Period. Each Option granted under the Plan shall
-------------
expire no later than fifteen years from the date the Option is granted. Any
Option Agreement may contain provisions for the earlier expiration of the Option
in the event of the Optionee's termination of employment, retirement or death or
in the event of a violation by an Optionee of any of such Optionee's duties to
the Company or any Subsidiary.
7.5 Date of Exercise. An Option shall be exercisable at the
----------------
times specified by the Board, the Committee or any Designated Officer, as
applicable, at the time the Option is granted; notwithstanding the foregoing, in
the event of a "Change in Control", the Board, may in its sole discretion
determine that any Option granted under the Plan shall become exercisable in
full or in part, whether or not it is then exercisable. For purposes of the
Plan, a "Change in Control" shall be deemed to have occurred:
-----------------
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<PAGE>
(i) when any "person", as defined in Section 3(a)(9) of the
Exchange Act and as used in Sections 13(d) and 14(d) thereof, including a
"group", as defined in Section 13(d) and 14(d) thereof (but excluding
Martin J. Wygod and his affiliates), the Company (and any successor to the
Company in the transaction which did not result in a change in control),
any Subsidiary and any employee benefit plan sponsored or maintained by the
Company or any Subsidiary (including any trustee of such plan acting as
trustee) directly or indirectly becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act, as amended from time to time) of
securities of the Company representing 50 percent or more of the combined
power of its then outstanding securities with respect to the election of
directors;
(ii) when, during any period of 24 consecutive months during the
existence of the Plan, the individuals who, at the beginning of such
period, constitute the Board (the "Incumbent Directors"), cease for any
-------------------
reason other than death to constitute at least a majority thereof;
provided, however, that a director who was not a director at the beginning
of such 24-month period shall be deemed to have satisfied such 24-month
requirement (and be an Incumbent Director) if such director was elected by,
or on the recommendation of or with the approval of at least two-thirds of
the directors of the Company who then qualified as Incumbent Directors,
either actually (because they were directors at the beginning of such 24-
month period) or by prior operation of this Section 7.5(ii);
(iii) when the stockholders of the Company approve a merger or
consolidation of the Company without the consent or approval of a majority
of its Incumbent Directors;
(iv) when there in a sale or disposition of all or substantially
all of the Company's assets; or
(v) when the Company adopts a plan of liquidation.
In addition, the Board or the Committee, as applicable, may, in its
sole discretion, include provisions in an Option Agreement relating to a change
in control of a Subsidiary. The Board or the Committee may also determine at
the time of grant or thereafter that an Option shall become exercisable in full
or in part, whether or not it is then exercisable, upon such circumstances or
events as the Board or the Committee, in its sole discretion, merits special
consideration.
7.6 Reorganization. In case the Company is merged or
--------------
consolidated with another corporation, or in case of a reorganization,
separation or liquidation of the
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<PAGE>
Company, the Board or the board of directors of any corporation assuming the
obligations of the Company hereunder shall either (i) make appropriate
provisions for the protection of any outstanding options by the substitution on
an equitable basis of appropriate securities of the Company, or appropriate
shares or other securities of the merged, consolidated, or otherwise reorganized
corporation, or the appropriate adjustment in the Option Price, or both, or (ii)
give written notice to Optionees that their Options must be exercised, to the
extent then exercisable after giving due effect to Section 7.5, within 60 days
of the date of such notice or they will terminate, and to the extent that such
Options are not exercised within such 60-day period they shall terminate and be
of no further effect.
7.7 Transferability; Assignability. No Option shall be
------------------------------
assignable or transferable except by will, by the laws of descent and
distribution or pursuant to a qualified domestic relations order (as such term
is defined in the Code), and no Option may be exercised other than by an
Optionee or, after the death of an Optionee, by that Optionee's personal
representatives, heirs, or legatees; provided, however, that the Committee may,
subject to such terms and conditions as the Committee shall specify, permit the
transfer of an Option to an Optionee's family members or to one or more trusts
established in whole or in part for the benefit of one or more of such family
members.
7.8 Continuation with Company. No Option shall be exercisable
-------------------------
by an Optionee after the expiration of the Option Period, or 30 days after
termination of such Optionee's service as a Key Employee or a Key Consultant,
whichever occurs first, unless such termination of service occurs by reason of
the Optionee's retirement with the consent of the Company or the Subsidiary, as
the case may be, or his death. The Board, the Committee or any Designated
Officer may provide in an Option Agreement that employment with a Subsidiary
shall not constitute employment with the Company for purposes of such Option
Agreement. If the Optionee's services are terminated because of his retirement
with such consent or death (or if the Optionee dies within 30 days of such
termination or 90 days of such retirement) the Optionee (or the representative
of the estate or the heirs or legatees of a deceased Optionee) shall have the
right to exercise the unexercised portion of the Option which the Optionee could
have exercised as of the date of his retirement or death, provided that notice
of such exercise is given to the Company in writing before the expiration of the
Option Period and within 90 days of the Optionee's retirement or one year of the
Optionee's death, an the case may be. If the Optionee's services with the
Company or the Subsidiary are terminated because of the Optionee's violation of
his duties to the Company or the Subsidiary as he may from time to time have,
the existence of which violation shall be determined by the Board, the Committee
or any Designated Officer, as applicable, in his, her or its sole discretion
(which determination shall be conclusive), all of the Optionee's Options shall
terminate immediately and the Optionee shall have no right after such
termination to exercise any Option he might have been able to exercise prior to
his termination of service. In addition, the Board, the Committee or any
Designated Officer, in his, her or its sole discretion may require that any
Option Agreement include provisions that in the
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<PAGE>
event of a violation by the Optionee of his or her duties to the Company or any
Subsidiary (whether before or after termination of the Optionee's services), the
existence of which violation shall be determined by the Board, the Committee or
any Designated Officer in his, her or its sole discretion (which determination
shall be conclusive), the Optionee shall remit to the Company all income that he
or she has realized during the twenty-four month period prior to such violation.
7.9 No Right to Continue with Company. Nothing in the Plan or
---------------------------------
in any Option granted under the Plan shall confer (or be deemed to confer) any
right on any Optionee to continue as an Officer or as an employee of the Company
or any Subsidiary or shall interfere in any way with the right of the Company or
any Subsidiary to terminate such status at any time, with or without cause and
with or without notice.
7.10 Rights as a Stockholder. An Optionee shall have no rights
-----------------------
as a stockholder with respect to Shares covered by any Option until the date the
Company has issued or delivered such Shares to the Optionee, and the Optionee's
name shall have been entered as the stockholder of record on the books of the
Company and then only as to such Shares as are actually issued and delivered to
the Optionee.
7.11 Other Provisions. Option Agreements shall contain such
----------------
other terms and conditions not inconsistent with the Plan as the Board, the
Committee or any Designated Officer shall deem advisable.
7.12 Compliance with Law. Notwithstanding any provision of the
-------------------
Plan or any Option Agreement to the contrary, no Option may be granted or
exercised at any time when such Option or the granting or exercise thereof or
payment therefor may result in the violation of any law or governmental order or
regulation.
7.13 Securities Laws. The Company may require each Optionee to
---------------
represent to the Company, in writing, when an Option is exercised that such
Optionee is exercising such Option for his own account for investment only, and
not with a view to distribution, and that the Optionee will not make any sale,
transfer, or other disposition of any Shares so purchased except (i) pursuant to
a registration statement filed under the Securities Act of 1933, as amended,
which the Securities and Exchange Commission has declared effective, (ii)
pursuant to an opinion of counsel satisfactory in form and substance to the
Company that said sale, transfer, or other disposition may be made without
registration, or (iii) pursuant to a "no action" letter issued to the Optionee
by the Securities and Exchange Commission. The Company may require each
certificate representing Shares purchased upon the exercise of an Option to bear
a legend stating that the Shares evidenced thereby may not be sold or
transferred except in compliance with the Securities Act of 1933, as amended,
and the provisions of the
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<PAGE>
Plan. No Option may be granted or exercised at a time when such Option, or the
granting or exercise thereof, may result in the violation of any law or
governmental order or regulation.
8. Share Available for Option.
--------------------------
8.1 Maximum. Subject to Sections 7.6 and 9, no more than
-------
2,750,000 Shares shall be subject to purchase pursuant to Options granted under
the Plan. At all times during the term of the Plan, the Company shall have
reserved that number of Shares less an amount equal to the number of Shares
which have been issued pursuant to the exercise of Options. At all times after
termination of the Plan, the Company shall have reserved for issuance a number
of Shares equal to the aggregate number of Shares subject to outstanding
Options.
8.2 Employee Maximum. Subject to Sections 7.6 and 9 hereof, no
----------------
Optionee shall receive Options under this Plan with respect to an aggregate of
more than 250,000 Shares in any Plan year.
8.3 Expiration or Termination. If any outstanding Option under
-------------------------
the plan expires for any reason or is terminated prior to the expiration date of
the Plan as set forth in Section 6, the Shares allocable to any unexercised
portion of such Option may again be subject to an Option.
9. Recapitalization or Change in Par Value of Common Stock. The
-------------------------------------------------------
aggregate number of Shares purchasable under Options granted and which may be
granted pursuant to the Plan and the Option Price for Shares covered by each
outstanding Option shall all be proportionately adjusted, as deemed appropriate
by the Board, the Committee or any Designated Officer if the Shares are split
up, converted, exchanged, reclassified or in any way substituted for. The
Board, the Committee or such Designated Officer shall provide for appropriate
adjustments of the numbers of shares purchasable under the Plan and of
outstanding Options in the event of stock dividends or distributions of assets
or securities of other companies owned by the Company to stockholders relating
to Common Stock for which the record date is prior to the date the Shares
purchased by exercise of an Option are issued or transferred, except that no
such adjustment shall be made for cumulative stock dividends of 10% or less (in
the aggregate) or cash dividends. Any such adjustment may include an adjustment
of the Option Price or the number of Shares for which an Option may be
exercised, or may provide for an escrow of assets or securities so distributed
to be available upon future exercise. In the event of a change in the Company's
presently authorized Common Stock which is limited to a change of all of its
presently authorized Shares of Common Stock with par value into the same number
of shares without par value, or any change of the then authorized Shares of
Common Stock with par value into the same number of shares of Common Stock with
a different par value, the shares resulting from any such change shall be deemed
to be Shares as defined in Section 1, and
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<PAGE>
no change in the number of Shares covered by each Option or in the Option Price
shall take place.
10. Indemnification; Reliance; Exculpation.
--------------------------------------
10.1 Indemnification. Each person who is or shall have been a
---------------
member of the Board or of the Committee and each Designated Officer shall be
indemnified and held harmless by the Company against and from any and all loss,
cost, liability, or expense that may be imposed upon or reasonably incurred by
such person in connection with or resulting from any claim, action, suit, or
proceeding to which such person may be a party or in wich such person may be
involved by reason of any action taken or failure to act under the Plan and
against and from any and all amounts paid by such person in settlement thereof
(with the Company's written approval) or paid by such person in satisfaction of
a judgment in any such action, suit, or proceeding to the fullest extent
permitted by the Delaware General Corporation Law, subject, however, to the
condition that upon the institution of any such claim, action, suit, or
proceeding, such person shall in writing give the Company an opportunity to
intervene at the Company's expense on his or her behalf. The foregoing right of
indemnification shall not be exclusive of any other right to which such person
may be entitled as a matter of law or otherwise, or any power that the Company
may have to indemnify such person or hold him or her harmless.
10.2 Reliance. Each member of the Board or of the Committee,
--------
each Designated Officer and each other officer and employee of the Company in
performing duties under the Plan shall be entitled to rely upon information and
reports furnished in connection with the administration of this Plan by any duly
authorized officer or agent of the Company.
10.3 Exculpation. No member of the Board or of the Committee
-----------
and no Designated Officer shall be liable for any action or determination made
in good faith with respect to the Plan or any Option granted under the Plan.
11. Income Tax Withholding. If the Board, the Committee, or any
----------------------
Designated Officer shall be required to withhold any amounts by reason of any
federal, state or local tax rules or regulations in respect of the payment of
cash or the issuance of Shares pursuant to the exercise of an Option, the
Company or such Subsidiary shall be entitled to deduct and withhold such amounts
from any cash payments to be made to the Optionee. In any event, the Optionee
shall either (i) make available to the Company or Subsidiary, promptly when
requested by the Company or such Subsidiary, sufficient funds or, if the Option
Agreement so provides, Shares (valued at Fair Market Value as of the date the
withholding tax obligation arises (the "Tax Date")), to meet the requirements of
--- ----
such withholding, or (ii) to the extent permitted by the Board, the Committee or
any Designated Officer, irrevocably authorize the Company to withhold from the
Shares otherwise issuable to the Optionee as a result of such exercise a number
of Shares having a Fair Market Value as of the Tax Date which alone, or when
added to
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<PAGE>
funds paid or Shares delivered to the Company or the Subsidiary by the Optionee,
equal the amount of the minimum withholding tax obligation (the "Withholding
-----------
Election") and the Company or such Subsidiary shall be entitled to take and
- --------
authorize such steps as it may deem advisable in order to have such funds or
Shares made available to the Company or such Subsidiary out of any funds or
property due or to become due to the Optionee. An Optionee's Withholding
Election may only be made prior to the Tax Date and may be disapproved by the
Board, the Committee or any Designated Officer. The Board, the Committee or any
Designated Officer may establish such rules and procedures as he, she or it may
deem necessary or advisable in connection with the withholding of taxes relating
to the exercise of any Option.
12. Amendment or Termination of Plan. The Board may modify, amend or
--------------------------------
terminate the Plan in whole or in part at any time; provided, however, that (i)
no modification or amendment shall be effective without stockholder approval if
such approval is required by law or under the rules of Nasdaq or of the stock
exchange on which the Shares are listed, (ii) with respect to any person who is
granted an Option prior to the Effective Date, no such termination,
modification, or amendment of the Plan shall alter or affect the terms of any
then outstanding Options previously granted hereunder without the consent of the
Optionee and (iii) with respect to any person who is granted an Option on or
after the Effective Date, no such termination, modification, or amendment of the
Plan shall adversely alter or affect the terms of any then outstanding Options
previously granted hereunder without the consent of the Optionee.
13. Set-Off. If at any time an Optionee is indebted to the Company
-------
or any Subsidiary, the Company may in the discretion of the Board, the Committee
or any Designated Officer (a) withhold from the Optionee (i) following the
exercise by the Optionee of an Option, Shares issuable to the Optionee having a
Fair Market Value on the date of exercise up to the amount of indebtedness to
the Company or (ii) following the sale by an Optionee of Shares received
pursuant to the exercise of an Option, amounts due to an Optionee in connection
with the sale of such Shares up to the amount of indebtedness to the Company, or
(b) take any substantially similar action. The Board, the Committee or any
Designated Officer may establish such rules and procedures as he, she or it may
deem necessary or advisable in connection with the taking of any action
contemplated by this Section 13.
14. Headings. The section headings contained herein have no
--------
substantive meaning or content and are not part of this Plan.
15. Governing Law. The Plan shall be construed in accordance with
-------------
the laws of the State of New Jersey without regard to the principles of
conflicts of law.
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<PAGE>
EXHIBIT 99(d)
EXECUTION COPY
--------------
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT (this "Agreement") made as of June 23, 1997, between
---------
SYNETIC, INC., a Delaware corporation (the "Company"), and ROGER C. HOLSTEIN
-------
("Optionee").
- ----------
RECITAL
-------
The Company desires to provide Optionee with an opportunity to acquire
shares of Common Stock (as defined below) of the Company, subject to stockholder
approval. As a result, the Company has elected to issue to Optionee an option
to acquire 250,000 shares of its Common Stock and intends that such option
comply with the requirements of Rule 16b-3 under the Securities Exchange Act
of 1934, as amended (the "Exchange Act") and Section 162(m) of the Internal
------------
Revenue Code of 1986, as amended.
AGREEMENTS
----------
In consideration of the Recital (which is incorporated by reference) and
the mutual covenants of this Agreement, the Company and Optionee agree as
follows:
1. Confirmation of Grant of Option. Pursuant to a determination by
-------------------------------
the Stock Option Committee of the Board of Directors of the Company (the
"Board")effective as of the date first set forth above (the "Date of Grant"),
----- -------------
the Company hereby confirms that Optionee has been granted, subject to the terms
of this Agreement and approval by the Company's stockholders at the next annual
meeting of stockholders, the right (the "Option") to purchase 250,000 shares of
------
Common Stock of the Company ("Common Stock"). All of the shares hereunder are
------------
hereinafter referred to as "Shares". Said number of Shares subject to the
------
Option may be adjusted as provided in Section 9.
As used herein, "Committee" shall mean the Stock Option Committee of the
Board (and any successor committee appointed by the Board).
2. Exercisability of Option.
------------------------
2.1. Subject to the terms and conditions of this Agreement (including
Sections 2.3, 2.4 and 2.5), the Option shall become exercisable:
2.1.1. with respect to 20% of the Shares, on and after the first
anniversary of the Date of Grant;
2.1.2. with respect to an additional 20% of the Shares, on and after the
second anniversary of the Date of Grant;
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2.1.3. with respect to an additional 20% of the Shares, on and after the
third anniversary of the Date of Grant;
2.1.4. with respect to an additional 20% of the Shares, on and after the
fourth anniversary of the Date of Grant; and
2.1.5. with respect to the remainder of the Shares, on and after the fifth
anniversary of the Date of Grant.
2.2. The unexercised portion of the Option shall automatically and
without notice terminate and become null and void at the time of the earliest to
occur of the following:
2.2.1. The fifteenth anniversary of the Date of Grant; or
2.2.2. Subject to the provisions of Sections 2.3, 2.4, 2.5, 2.6 and 2.7
below, 30 days following the date of termination of Optionee's status as an
employee of the Company for any reason in the case of the vested portion of the
Option (or the date on which a portion of the Option vests pursuant to Sections
2.5 and 2.6) and immediately following such date of termination in the case of
the unvested portion of the Option.
2.3. If Optionee's employment is terminated by the Company for Cause (as
defined in this Section 2.3), the Option (both vested and non-vested) shall
expire on the date of termination. For purposes of this section of this
Agreement, the term "Cause" shall mean any of the following:
-----
(a) A willful failure of Optionee to perform his duties in any
material respect which failure is not cured by Optionee within 30 days
following written notice from the Company detailing such failure;
(b) Any willful misconduct by Optionee relating, directly or
indirectly, to the Company or any of its affiliates, which breach, if
susceptible to cure, is not cured by Optionee within 30 days following
written notice from the Company detailing such breach;
(c) Any breach by Optionee of any material provision contained in
this Agreement or any employment or consulting agreement between the
Company and Optionee, which breach, if susceptible to cure, is not cured by
Optionee within 30 days following written notice from the Company detailing
such breach; or
(d) Optionee's conviction of a felony or crime involving moral
turpitude.
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<PAGE>
2.4. If Optionee terminates his employment for any reason other than
for Cause (as defined in this Section 2.4), the Option (both vested and non-
vested) shall expire on the date of termination. For purposes of this section
of this Agreement, the term "Cause" shall mean any of the following:
-----
(a) Any material breach by the Company of its obligations to Optionee
under this Agreement or any employment or consulting agreement between the
Company and Optionee, which, if susceptible to cure, remains uncured;
(b) A material demotion of Optionee's position with the Company; or
(c) If Optionee is required by the Company to relocate from his
present residence or is required to commute, on a regular basis, to the
Company's headquarters and such headquarters is outside of the New York
City metropolitan area.
2.5. In the event that Optionee's employment with the Company is
terminated (I) by the Company without Cause (as defined in Section 2.3) or (II)
by Optionee for Cause (as defined in Section 2.4), the Option shall remain
outstanding and continue to vest, and shall otherwise be treated for purposes of
this Agreement, as if Optionee remained in the employ of the Company through the
earlier of (a) the second anniversary of the date of termination or (b) the
occurrence of any circumstance or event that would constitute Cause under
Section 2.3 of this Agreement.
2.6. In the event that Optionee's employment with the Company is
terminated (I) by Optionee upon 30 days' written notice to the Company at any
time after a 12 month period following the occurrence of the Change of Control
(as defined below) (or such shorter period to the extent the acquiring company
does not request the services of the Optionee for such 12 month period), (II) by
the Company because Optionee shall become ill, mentally or physically disabled,
or otherwise incapacitated so as to be unable regularly to perform the duties of
his position for a period in excess of 90 consecutive days or more than 120 days
in any consecutive 12 month period, or (III) due to his death, the Option shall
remain outstanding and continue to vest, and shall otherwise be treated for the
purposes of the terms and conditions thereof, as if Optionee remained in the
employment of the Company through the earlier of (a) November 6, 2002 and (b)
the occurrence of any circumstances or events that would constitute Cause under
such Section 2.3. For purposes of this Section 2.6, a "Change of Control" shall
-----------------
be deemed to have occurred if:
(a) both (i) any person, entity or group shall have acquired at least
50% of the voting power of the outstanding voting securities of the company
("Voting Power"), excluding Martin J. Wygod and his affiliates, and (ii)
------------
following such acquisition of 50% Voting Power, Martin J. Wygod shall cease
to hold one or more of the following positions: Chairman of the Board or
Chief Executive Officer of the Company or a
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<PAGE>
senior executive office of the acquirer of 50% Voting Power, in each case
with duties and responsibilities greater than or substantially equivalent
to those prior to such acquisition of 50% Voting Power; or
(b) both (i) a reorganization, merger or consolidation or sale of
other disposition of all or substantially all of the assets of the Company
("Business Combination") shall have occurred and (ii) following such
--------------------
Business Combination, Martin J. Wygod shall cease to be Chairman of the
Board or Chief Executive Officer of, or to hold a senior executive position
in, the corporation resulting from such Business Combination, with duties
and responsibilities greater than or substantially equivalent to those
prior to such Business Combination; or
(c) a complete liquidation or dissolution of the Company shall have
occurred.
2.7. Notwithstanding any other provision of this Agreement, the
Committee may determine that the Option shall become exercisable in full or in
part, whether or not it is then exercisable, upon such circumstances or events
as the Committee determines, in its sole discretion, merits special
consideration.
2.8 Notwithstanding anything to the contrary contained herein, in no
event shall the Option be exercisable after the expiration of fifteen years from
the date of this Agreement.
3. Method of Exercise of Option. The Option may be exercised by
----------------------------
Optionee (or by Optionee's personal representatives or heirs at law, as provided
in Section 2, but by no other person) as to all or (at Optionee's election) part
of the Shares as to which the Option is then exercisable (that is, vested) under
Section 2 by giving written notice of exercise to the Company at its principal
business office, specifying the number of Shares for which the Option is
exercised, accompanied by payment in full for such Shares (as determined
pursuant to Section 4) together with any amount required for payroll withholding
tax under all applicable federal, state or local laws or regulations. The
failure to exercise the Option, in whole or in part, as to any vested exercise
rights shall not constitute a waiver of these rights. The Company shall cause
certificates for the Shares so purchased to be delivered to Optionee or
Optionee's personal representatives or heirs at law, at its principal business
office, against payment in full of the Option price for such Shares (as
determined pursuant to Section 4), as soon as practicable following receipt of
the notice of exercise and the applicable purchase price. The Option price
shall be paid in United States dollars in the form of cash, certified check or
bank draft, or (if the Shares of Common Stock of the Company are then publicly
traded) in fully paid Shares of Common Stock of the Company, that have been held
by the Optionee for a period of at least six months (valued for this purpose at
their then fair market
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<PAGE>
value determined by the Committee), consistent with practices permitted by the
Committee or a combination of the two.
4. Option Price. Subject to adjustment as provided in Section 9,
------------
the purchase price of the Shares covered by this Agreement shall be $34.875 per
Share.
5. Non-Transferability of Option. The Option is not assignable or
-----------------------------
transferable except by will or by the laws of descent and distribution and the
Option may not be exercised other than by the Optionee or, after the death of
the Optionee, by the Optionee's personal representative, heirs or legatees;
provided, however, that the Committee may, subject to such terms and conditions
as the Committee shall specify, permit the transfer of the Option to the
Optionee's family members or to one or more trusts established in whole or in
part for the benefit of one or more of such family members. Without limiting
the generality of the foregoing, the Option may not be assigned, transferred
(except as permitted in the preceding sentence), pledged or hypothecated in any
way (whether by operation of law or otherwise), and shall not be subject to
levy, attachment or similar process. Any attempt to assign, transfer, pledge or
hypothecate the Option contrary to the provisions of this Agreement, and any
levy, attachment or similar process upon the Option shall be null and void and
without effect, and the Board or the Committee may, in its discretion, upon the
happening of any such event, terminate the Option as of the date of such event.
6. No Rights Prior to Issuance of Shares. The holder of the Option
-------------------------------------
shall not have any rights to dividends nor any other rights of a shareholder
with respect to the Shares covered by the Option until the Shares have been
issued (as evidenced by the appropriate entry on the books of the transfer agent
of the Company) following exercise of the Option prior to its termination.
7. Restrictions on Exercise and on Common Stock.
--------------------------------------------
7.1. The Shares issued upon exercise of the Option shall be issued
only to Optionee or a person permitted to exercise the Option pursuant to
Section 2.3.
7.2. The Company may require the Optionee to represent to the Company,
in writing, when the Option is exercised, that the Optionee is exercising the
Option for the Optionee's own account for investment only and not with a view to
distribution and that the Optionee will not make any sale, transfer or other
disposition of any Shares purchased except (i) pursuant to a registration
statement filed under the Securities Act of 1933 as amended, which the
Securities and Exchange Commission has declared effective, (ii) pursuant to an
opinion of counsel satisfactory in form and substance to the Company that the
sale, transfer or other disposition may be made without registration, or (iii)
pursuant to a "no action" letter issued to the Optionee by the Securities and
Exchange Commission. The Company may require each share certificate
representing Shares to bear a legend stating that the Shares
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<PAGE>
evidenced thereby may not be sold or transferred except in compliance with the
Securities Act of 1933, as amended, and the provisions of this Agreement.
Notwithstanding anything contained herein to the contrary, the Option shall not
be exercisable at a time when the exercise thereof may result in the violation
of any law or governmental order or regulation.
8. Right to Terminate Employment. This Agreement does not
-----------------------------
constitute a contract of, or an implied promise to continue, Optionee's
employment or status with the Company or any subsidiary of the Company; and
nothing contained in this Agreement shall confer upon Optionee the right to
continue such employment or status; nor does this Agreement affect the right of
the Company to terminate Optionee's employment at any time. Optionee shall have
no rights in the benefits conferred by the Option or in any Shares except to the
extent the Option is exercised while vested and prior to termination.
Termination of the Option by reason of rightful termination of employment shall
give no rise for any claim for damages by Optionee under this Agreement and
shall be without prejudice to any rights or remedies which the Company or any
subsidiary of the Company may have against Optionee.
9. Adjustment.
----------
9.1. In the event of any subdivision (stock split) or consolidation
(reverse split) of the issued Common Stock of the Company, or any other
recapitalization of the Company, or any business combination or other
transaction involving the Company, which shall substantially affect the rights
of holders of Common Stock, the Board or the Committee shall make such
appropriate adjustments to the number of Shares and price per Share covered by
the Option, and any other rights under the Option, as deemed appropriate by the
Board or the Committee, as the case may be (whose good faith determination shall
be absolute and binding upon Optionee), to provide Optionee with a benefit
equivalent to that to which Optionee would have been entitled if such event had
not occurred; provided, however, that if, as a result of such event, the Common
Stock is no longer publicly traded, the Board or the Committee shall make such
appropriate adjustments to the unvested portion of the Option, as deemed
appropriate by the Board or the Committee, as the case may be (whose good faith
determination shall be absolute and binding upon Optionee), to provide Optionee
with a benefit equivalent to that to which Optionee would have been entitled if
Optionee would have had the right to exercise any unvested portion of the Option
immediately prior to such event. The Committee or the Board, as the case may
be, shall provide for appropriate adjustment of the Option in the event of stock
dividends or distributions of assets or securities of other companies owned by
the Company to stockholders relating to Common Stock for which the record date
is prior to the date the Shares purchased by exercise of the Option are issued
or transferred, except that no such adjustment shall be made for cash dividends
or stock dividends of 10% or less (cumulatively, in the aggregate).
9.2. In case the Company is merged or consolidated with another
corporation, or in case of a reorganization of the Company, the Board or the
board of directors of any
D-6
<PAGE>
corporation assuming the obligations of the Company hereunder shall either (i)
make appropriate provisions for the protection of any outstanding portion of the
Option by the substitution on an equitable basis of appropriate securities of
the Company, or appropriate securities of the merged, consolidated, or otherwise
reorganized corporation, or the appropriate adjustment in the option price, or
both, or (ii) give written notice to the Optionee that his Option must be
exercised, to the extent then exercisable, within 60 days of the date of such
notice or the Option will terminate, and to the extent that the Option is not
exercised within such 60-day period it shall terminate and be of no further
effect.
10. Taxes. If the Company shall be required to withhold any amounts
-----
by reason of any federal, state or local tax rules or regulations in respect of
the payment of cash or the issuance of Shares pursuant to the exercise of an
Option, the Company shall be entitled to deduct and withhold such amounts from
any cash payments to be made to the Optionee. In any event, the Optionee shall
either (i) make available to the Company, promptly when requested by the
Company, sufficient funds to meet the requirements of such withholding, or (ii)
to the extent permitted by the Committee, irrevocably authorize the Company to
withhold from the Shares otherwise issuable to the Optionee as a result of such
exercise a number of Shares having a fair market value, as of the date the
withholding tax obligation arises (the "Tax Date") which alone, or when added to
--------
funds paid to the Company by the Optionee, equal the amount of the minimum
withholding tax obligation (the "Withholding Election") and the Company shall be
--------------------
entitled to take and authorize such steps as it may deem advisable in order to
have such funds made available to the Company out of any funds or property due
or to become due to the Optionee. An Optionee's Withholding Election may only
be made prior to the Tax Date and may be disapproved by the Committee. The
Committee may establish such rules and procedures as it may deem necessary or
advisable in connection with the withholding of taxes relating to the exercise
of the Option.
11. Notices. Each notice relating to this Agreement shall be in
-------
writing and delivered in person or by certified mail to the proper address.
Each notice to the Company shall be addressed to it at its principal office,
attention of the Chief Financial Officer, with a copy to the Company's General
Counsel. Each notice to Optionee (or other person or persons then entitled to
exercise the Option) shall be addressed to Optionee (or such other person or
persons) at Optionee's most recent address on the books of the Company. Anyone
to whom a notice may be given under this Agreement may designate a new address
by notice to that effect. Each notice shall be deemed to have been given on the
day it is received.
12. Benefits of Agreement. This Agreement shall inure to the benefit
---------------------
of and be binding upon each successor of the Company. Rights granted to the
Company under this Agreement shall be binding upon Optionee's personal
representatives and heirs at law.
D-7
<PAGE>
13. Source of Rights. This Agreement shall be the sole and exclusive
----------------
sources of any and all rights which Optionee, and Optionee's personal
representatives or heirs at law, may have in respect of the Option as granted
hereunder.
14. Captions. The captions contained in this Agreement are for
--------
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
15. Interpretation and Construction. The Option shall be
-------------------------------
administered by the Committee. The Committee shall have authority to interpret
and construe the terms of the Option, to make all determinations necessary or
advisable for the administration of the Option (including determinations
relating to the delivery of Shares of Common Stock in payment of the purchase
price of the Shares covered by the Option and any tax withholding obligations,
subject to compliance with any applicable rules promulgated under Section 16 of
the Exchange Act). The good faith interpretation and construction by the Board
or by the Committee of any provision of this Agreement shall be final and
conclusive and binding on the parties hereto.
16. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall constitute an original, but all of which taken
together shall constitute one and the same Agreement.
17. Governing Law. This Agreement shall be construed in accordance
-------------
with and governed by the laws of the State of New Jersey without regard to any
principles of conflict of laws.
EXECUTION
---------
The parties signed this Agreement as of the day and year first above
written, whereupon it became binding in accordance with its terms.
SYNETIC, INC.
By: /s/ Anthony Vuolo
-----------------------------
Name: Anthony Vuolo
Title: Vice President and Chief
Financial Officer
/s/ Roger C. Holstein
---------------------------------
Roger C. Holstein
D-8
